I am an avid reader of “Lebanon This Week,” a weekly, English-language report published by the Byblos Bank Economic Research and Analysis Department headed by our colleague Nassib Ghobril. Focused on a higher level of detail concerning the Lebanese banking and financial sectors, the report is meant to be read by watchers of Lebanon seeking clarity on what’s going on; it is not meant to gloss over the challenges.
There are several items of interest from the November 27, 2021 edition that are worth sharing and analyzing, given what it tells us about the state of ‘resilience’ in the Lebanese economy and whether or not that descriptor is even appropriate. The first note comes from the Milken Institute’s Global Opportunities Index (GOI) which identified the investment climate in 143 countries to help foreign investors decide on where to place their money. In 2021, Lebanon has slid down 19 places, from 87th to 106th worldwide, as well as down two places among Arab countries, now in 10th place.
This may not sound that worrisome given the state of the global economy, but when you note that its ranking puts Lebanon ahead of Zambia, Uganda, and the Gambia, and behind Laos, Nepal, and Guyana, then you can imagine how investment dollars flow away from Lebanon without hesitation. Within the Arab world, Lebanon only placed ahead of Algeria, Sudan, Mauritania, and Yemen. This ranking speaks for itself.
The Index is made up of 96 variables ranked in five categories, and Lebanon did not do well in any of them. In fact, in the category measuring how well the government supports business,Lebanon only placed ahead of these same four countries in the Arab world. It was the highest ranking it received among Arab countries, which equated to 71st globally: ahead of Guinea, Bangladesh, and Lesotho, and behind Sierra Leone, Belize, and Uganda.
The bottom line is that the reforms being called for by international donors are not extreme, as Lebanon is competing globally for investment dollars which respond positively to a supportive business environment, sound judicial and legal structures, and national capacity for innovation and development.
This challenging assessment and current economic malaise were also mentioned by the Consultative Group (CG) made up of the EU, UN, the Lebanese government, and civil society organizations to support the implementation of the Reform, Recovery, and Reconstruction Framework (3RF). Grounded in the initiative of French President Macron, it called on the government to adopt the reforms outlined in an IMF framework and to maximize the benefits of the Special Drawing Rights (SDR) received from the IMF in September.
Among specific sectors receiving attention were housing recovery, post-Port explosion reconstruction, the need for a transparent national budget, strengthening the social safety net, strategies for the recovery of micro and small business enterprises, enactment of laws that support business competition and debt issues, drafting of laws related to enabling the new public procurement law, and other initiatives aimed at supporting rebuilding and recovery following the Beirut Port explosion. The CG, using World Bank figures, puts the physical costs at some $4.6 billion.
On a more positive note, the Association of Banks in Lebanon (ABL) reached an agreement with the military and security services to grant a one year grace period to all members of the security services on their housing loan payments. This covers servicemembers in the LAF, ISF, and General Security and State Security personnel, totalling almost $1.2 billion in mortgages.
A second licensing round for offshore oil and gas explorationhas been opened with a closing date of June 15, 2022. The deadline has been extended three times since January 2020 as investors are looking for Lebanon and Israel to settle their maritime boundary before venturing into the bidding.
Finally, the UN issued a report that only 29% of the funds needed by the Lebanon Crisis Response Plan have been received through September 2021. Although $1.2 billion has been received, the appeal goal was for $2.75 billion in assistanceto vulnerable Syrian refugee and Lebanese communities. Part of the shortfall is being made up by $351.8 million carried over from 2020. One must wonder why such a sizeable sum was not expended as designed. The plan is a joint initiative between the Lebanese government and international and national partners to address challenges related to the large presence of Syrian refugees. The top three categories of disbursements wereeducation (17.3%), food security (16%), and healthcare (14%).
To subscribe to this weekly summary, contact nghobril@byblosbank.com.lb .
The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.