Channeling Arab Investments towards the Lebanese Private Sector
Michel Morkos Al Hayat - 21/07/08//
Lebanon, this small country, is trying to get past over the hot issues that have crippled it over the past two years. These issues have dried up investments, scared tourists away, squeezed income, reduced growth rates to a below-zero level and, by way of consequence, shrank the GDP. However, the current indicators are reassuring for the Lebanese themselves and for the Arabs who are eager to spend their summer vacations in Lebanon after having stayed away for years.
In parallel, the investment-seeking Arab capitals will flow back into the country. Their aim is to make profits and returns on the medium if not the short run, as the case is with other investments in the Arab countries, especially in the Arab Maghreb. These investments are mostly funneled towards the real estate sector and the stock markets. In Lebanon, though, and given the country's small area, the upcoming real estate competition will drive real estate prices up. As a matter of fact, the real estate sector represents the only quick-return generating field. Investing in other sectors, such as industry, agriculture or any other field where raw materials are imported, proves costly and does not achieve a high added value. This excludes the fields that rely on innovation, such as fashion design. However, Arab investors, in their frantic quest for real estate, overlook Lebanon's limited ability to provide the infrastructure needed for the execution of built real estate projects. The State Treasury can not provide water and electricity, let alone well-planned roads and clean environment. It can not even preserve the green areas between high-rises.
Hence, Arab investors can invest in infrastructure, just as they invest in real estate. Instead of investing in the infrastructure designed for every real estate project they own, they can develop the Lebanese government's capacity to spend on these projects, which provides their investments with a mechanism that raises the value of the improvement to these projects.
The tiny country has many channels for public investment. It has a 10-year water plan, which includes building dams and improving water resources. Lebanon intends to privatize the electricity sector and perhaps develop its energy capacities by building an oil refinery owned by more than one Arab country. It also has an environmental plan for cleanliness and regaining green areas between high-rises. In these fields, Arab investors, primarily Gulf ones, can balance between the political support that has buttressed the country institutionally and the financial support that will help it recover economically and socially.
The Gulf governments have undoubtedly stood by Lebanon, offering it money, assistance and grants. They have equally provided considerable deposits in Banque du Liban (Lebanese central bank). The Kingdom of Saudi Arabia is the largest depositor with more than $2 billion, followed by the United Arab Emirates, Kuwait, Qatar and Bahrain. The private sector too has contributed to record investments, given Lebanon's security situation over the last four decades. However, the Gulf private sector must not restrict its investments to the Lebanese private sector. It must equally invest in the public sector as a means to balance between its private investments and Lebanon's potential contributions in the form of infrastructure services and conducive environment.
Another reason for the Arab, notably the Gulf, private sector to support the Lebanese public sector is that the Arab investments - which will certainly achieve growth - will create an imbalance in the Lebanese economy. They will raise real estate prices, whether built or non-built, such that it will become impossible for the Lebanese citizens to spend as much as the Arab visitors. If the Arabs spend on infrastructure services and do not contribute to the execution of new projects, the Lebanese citizens will be short of these infrastructure services, which will be unable to meet domestic needs, let alone the requirements of potential projects. In this context, the Gulf private sector, flush with oil revenues, must help Lebanon implement infrastructure projects, even in industrial and agricultural production fields.
The efforts currently underway to direct Arab investments towards various regions in the world, as a means to secure the basic crops and grains, can also include Lebanon. With its remaining agricultural areas, Lebanon can shift to new crops that partly supply Gulf countries with their needs, within the framework of a sound rational plan to preserve fauna, poultry and fodders or industrial agriculture.
With such cooperation and support, Lebanon can overcome the deficit that plagued it for four decades to decently accommodate Arabs whether they come for business or pleasure.
|
