LEBANON LEBANON - A MODEL FOR BUSINESS IN THE MIDDLE EAST Intervention by Rolf Holmboe, Ambassador to Lebanon, Syria and Jordan
Topics The Danish Embassy and the role of it s Trade Council The Lebanese business context and its importance for attracting business BWSC Case Lebanon Some lessons and recommendations
The Embassy of Denmark and the promotion of business relations The Danish Embassy is regional and covers since August 2013 Lebanon, Syria and Jordan: Activities within Diplomatic relations, Culture, Public Affairs, Consular Services and Trade Promotion The Embassy s Trade Council develops knowledge of local markets, bureaucratic rules and procedures develops local networks in the public and business sectors identifies potential business cooperation opportunities strives to establish partnerships between Danish and local companies helps companies to overcome non-commercial difficulties natural link of cooperation to Chambers of Commerce etc. Website: www.libanon.um.dk, Facebook Page: the Danish Embassy in Beirut
Lebanese Economy Developed, Service-based Economy: Banks, Insurance, Tourism Services and trade: 75% Industry: 20% Agriculture: 5%
Challenging, but Sustainable Economic Situation Lebanon is the only Middle East oil importer state not to have asked the IMF for support in the last two years, and the only state to have increased foreign exchange reserves since the Arab Spring (HSBC REPORT 2013) Real GDP growth: 2011: 3%, 2012: 1.8%, 2013: 1.5%, 2014: 0->3% Large reserves in banks and BNL (huge gold reserves) Inflation under control/bnl monetary policies prudent Public debt still high (120% of GDP), but decreasing Stagnating real estate market, but still stable
An Impressive Competitive Economy Ranked as 35th strongest in intensity of competition and in buyer sophistication out of 144 countries Ranked as the 29th most feasible out of 144 countries in terms of procedures to start a business Ranked as 12th out of 144 countries on "the soundness of banks" (sub-index in 2013)
Why Such a Strong and Persistent Lebanese Economy? Free Market Regime Strong laissez-faire commercial tradition Few bureaucratic restrictions very permissive environment No restrictions on foreign exchange or capital movement Very strong private sector Many well-positioned Lebanese work abroad, import knowledge and provide huge remittances
BWSC Case: A Successful Business Story From Lebanon Partnership adventure between Danish BWSC and Lebanese HETC in enlarging capacity at two power plants Three years of tug of war with a happy end Contract award worth USD 350 million in 2013 Support needed to understanding the players, the market and the unwritten rules and procedures was of paramount importance Results and benefits: Profiting two economies Positive spillover effects (jobs, increased energy supply, environmental improvements etc.)
BWSC Case: Challenges and Differences in Business Cultures The Lebanese time commitment: bukhra could be next week or next month or? Bureaucracy emerges in all its forms and shapes Heavy and non-transparent administration Personal interests can be showstopper Outdated laws impede flexibility and mobility Corruption is a showstopper Political blockages
BWSC Case: Lessons Learned Need for: Better cultural understanding Better market knowledge and expertise Involvement of local partners Understanding the Middle East way of doing business Local communicative tools Sharing knowledge of previous experiences Network Network Network is key!
Lebanon: Challenges Ahead Need for continued prudent macroeconomic policy Fiscal discipline (dilemma: need for investments) Monetary policies (keep balance between protection reserves and investments) Structural reform challenges (ref. Paris III): action, action, action Transport Energy Water Telecom Waste Management Infrastructure and IT (digitalization)
Reform Initiatives Consumer protection law Simplified custom structures Access to WTO under way Privatization and PPPs
Sectors in need = Opportunities Energy deficit = BWSC example Transportation infrastructure = Pihl & Son example Water in abundance Inefficient usage = Water management Waste in abundance Inefficient management = Waste management
Recommendations From Danish Established Businesses The window is open now, but not in five years move first and you will be successful. Find a local partner (Arla-general manager) It is possible to operate under Lebanese conditions and obtain good results (previous Pihl & Søn s chief engineer) We have had our best year ever in Lebanon and the Middle East (Bestsellers regional CEO, 2011) We managed to sign a huge contract worth USD 350 million (BWSC s general sales manager)
Networking in the Middle East Networks is an essential tool to operate the Middle East Business Associations are a perfect forum to exchange knowledge and to finding partners Potential for joint ventures and partnerships Utilize others strengths and networks in different aspects A membership at a chamber of commerce and other recognized business organisations can be very beneficial in terms of preserving diverse support to SMEs
Thank you!