Market Overview

• Lebanon, with a population of about 3.8 million, is the 64th largest market for U.S. exports. In first 9 months of 2009, the United States exported $1,065 billion worth of goods to Lebanon. In 2009, the top five U.S. exports to Lebanon were vehicles ($521 million), mineral fuel and oil ($99 million), machinery ($79 million), electrical appliances ($26 million) and cereals ($26 million).

• Real GDP growth is estimated at 4% in 2010, according to the International Monetary Fund. Nominal GDP is estimated at about $35 billion in 2010, with inflation estimated at around 3.5%relative to end-2009. The Central Administration of statistics estimates Lebanon’s population in 2007 at 3.76 million, excluding Palestinians in the camps and seasonal workers.

• Lebanon’s economy is based on laissez-faire philosophy. Most of the economy is dollarized. The country has no restrictions on the movement of capital across its borders. Foreign investors are allowed to manage and hold business and private assets without any restrictions, and the Lebanese Government does not require investors to engage in any particular sector or project. The Lebanese Government’s intervention in foreign trade is minimal. Since 1999, Lebanon has observer status at the WTO, and is preparing for full membership in 2010. In 2006, Lebanon signed an Association Agreement with the European Union, Lebanon’s largest trading partner.

• In May 2000, parliament adopted a privatization law that established a framework for the privatization of state-owned enterprises. However, privatization of state institutions has been delayed because of lack of political consensus as well as due to the global financial crisis. The new Council of Ministers has recently asserted that it will proceed with privatization in accordance with prevailing regulations.- At the Paris III Donor Conference in 2007, the government’s master plan for reform included the privatization of the two mobile phone companies, the fixed line Liban Telecom, the electricity sector, the water sector, the national airline, as well as other sectors.

• According to the IMF, the impact of the global financial crisis on Lebanon has been limited so far. The effective shielding of the domestic financial sector from exposure to international financial risks, helped by prudent regulation and effective supervision, has contributed to strengthening confidence in the exchange rate peg to the dollar and the financial system. However, despite these important achievements, Lebanon is still facing challenges, notably a very high level of public debt and large external financing needs.

• Major competitors of U.S. companies in Lebanon include French, Italian, German, British, Korean, and Chinese companies.

• The U.S. has neither a bilateral investment treaty (BIT) with Lebanon nor an agreement on the avoidance of double taxation. However, on December 1, 2006, the U.S. signed a Trade and Investment Framework Agreement (TIFA) with the Government of Lebanon to help promote an attractive investment climate, expand trade relations, and remove obstacles to trade and investment between both countries.

Market Challenges

• Starting a new business in Lebanon is relatively simple and open to all, but petty corruption is an issue. Lebanon was ranked 130 in Transparency International's most recent Corruption Perception Index, despite stated efforts by the country's government to reduce graft in the public sector. According to the World Bank's Doing Business 2010 report, opening a business in Lebanon requires 9 days while in OECD countries it takes 13 days. The World Bank noted improvements in Lebanon's mechanisms for paying taxes and business start-up procedures. Also, at times, foreign companies have complained about impediments such as arbitrary licensing decisions, complex customs procedures, archaic legislation, an ineffectual judicial system, high taxes and fees, high telecommunications and power charges, varying interpretation of laws and a lack of adequate protection of intellectual property.

• In 2007, the Unites States Trade Representative (USTR) moved Lebanon from the “Priority Watch List” to “Watch List” due to improvements in intellectual property (IP) enforcement efforts by the police. More recently, the USTR commended Lebanon's efforts in dealing with cable piracy. However, problems persist with the widespread availability of pirated optical discs. Registration of copycat and counterfeit pharmaceuticals has remained problematic, although the GOL is working on increasing the protection of undisclosed information. Counterfeiting of trademarked goods continues. Furthermore, the judiciary must improve the enforcement of IP laws. A major IPR awareness campaign and a series of seminars and workshops, focusing mainly on IP enforcement, were held jointly by the public and private sector during 2009.  New IP laws and amendments to increase IP protection still await parliamentary ratification. Lebanon has not yet signed onto the latest text of the Berne Convention or ratified the WIPO Copyright Treaty or the WIPO Performances and Phonograms Treaty.

Market Opportunities

• According to the Council for Development and Reconstruction (CDR), there are 1,085 public projects in progress valued at $2.450 billion by the end of December 2008. Public infrastructure opportunities mainly lie in roads and highways, ports, electricity, education, solid waste, wastewater and water supply. CDR projects are listed at http://www.cdr.gov.lb

Best prospect sectors

• Information and Communication Technology (ICT): Lebanon has the fundamental building blocks needed to become a regional center for technology: a highly-educated and multilingual workforce, a strong private sector, world-class advertising firms, and multi-lingual media content providers and web portals.

• The Telecommunications Regulatory Authority (TRA) and the Ministry of Telecommunications     (MOT) are coordinating efforts to launch broadband for every citizen in Lebanon. TRA has plans to open the market for new broadband licenses in 2010. The MOT is considering options for the privatization of the two mobile phone carriers. Moreover, the Government of Lebanon has started to regulate and upgrade its outdated and costly ICT infrastructure. This will offer significant opportunities to foreign investors.

• Pharmaceuticals: Lebanon is a leading importer of pharmaceutical drugs in the Levant region with over 50 pharmaceutical importing firms. The pharmaceutical market generated $500 million worth of sales in 2008. The local pharmaceutical manufacturing industry is weak. Imported pharmaceuticals account for 90% of spending. IP enforcement in the pharmaceutical industry remains a problem, due to inadequate protection of undisclosed information. Market access for innovative pharmaceutical products has improved since the implementation of a new registration and importation process at the Ministry of Health in 2008. The absence of criteria to distinguish between innovative and generic medicines, and the absence of government testing facilities to validate the quality of pharmaceutical products remain ongoing areas of concern.

• Insurance: The Lebanese insurance market has always been open and liberal. The Lebanese government has never owned insurers, and private companies do not have to compete with government monopolies. This characteristic has helped the sector to respond to market forces and avoid the distortions associated with state ownership of insurers. Insurers predict that the market for all types of policies, especially health and life, will increase. Moreover, due to a large number of reconstruction projects that are already underway, policies covering construction work are also in great demand.

Market Entry Strategy

• U.S. companies interested in doing business in Lebanon are recommended to hire a Lebanese agent or distributor. Networking and lengthy investigation are necessary to find an appropriate partner. U.S. companies do not need to come to Lebanon to find the agent. The U.S. Commercial Service of the U.S. Department of Commerce can be helpful through the International Partner Search (IPS) service, which is a customized search for qualified Lebanese representatives, agents or distributors for US firms. More information on IPS can be found at http://www.buyusa.gov/lebanon/en/internationalpartnersearch.html

• The Investment Development Authority of Lebanon (IDAL), a public agency responsible for promoting investments in Lebanon, has a “One-Stop Shop” service to issue permits and licenses for investors. Further information about IDAL and its services is available at http://www.idal.com.lb  

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