Lebanon Lures International Finance to Pay for Reconstruction. ((Business & Finance)
Martin, Josh, The Middle East
Even as Lebanon's ambitious reconstruction plan is being finalised, Lebanese government officials and business leaders are reaching out to the international investment community to put up some of the $60bn the plan is expected to cost.
While a significant portion of international investment for Lebanon's massive reconstruction programme is expected to come from the estimated 12 million Lebanese overseas, institutional investors in Europe, the US and the Far East are also being wooed. For the first time since the civil war disrupted Beirut's financial markets in the early 1980s, American and Japanese banks are returning. High-powered Lebanese trade and investment delegations are finding Western bankers' doors opening for the first time in almost two decades.
Investors are being attracted because of high returns, and the prospects for stability offered under Lebanon's long-term development plan, known as 'Horizon 2000'. That plan calls for a series of public and private sector investments to be made between 1995 and 2007, designed to make Lebanon one of the most economically and socially advanced countries in the Middle East. The government is expected to invest $18bn in infrastructure improvements, including public education and health, a new telecommunications system, and rebuilding the nation's transport system. The private sector is expected to invest $42bn over the next 12 years, in everything from Solidere (the quasi statal company charged with the reconstruction of downtown Beirut), to transport, tourism and housing sectors.
By the year 2007, the Horizon 2000 plan forecasts a doubling of national income, with the country equipped to recapture its position as the leading centre for trade and finance in the Levant.
There remains significant opposition to Horizon 2000 within Lebanon. In particular, important economic and political blocs have been upset over the brusque manner in which Prime Minister Rafiq Hariri has exercised power to promote his vision of Lebanon, relying on a small coterie of executives from his private companies to run public institutions. Hariri forced the issue in May, by resigning and then accepting re-appointment after obtaining the support of 75 of the 128 members of Parliament. This victory should assure greater political stability, providing the prime minister can build a more consensual government.
But the Hariri manoeuvre, enabling the prime minister to remove ministers opposed to his economic programme, also demonstrates the fragility of national unity, originally achieved in 1989-90 through Syrian military intervention and Saudi Arabian diplomatic efforts.
Nevertheless, the Lebanese government can use Hariri's parliamentary support as a mandate to continue national reconstruction. That mandate will be frequently cited, as the Lebanese. are going beyond their traditional Arab and French sources to raise the capital needed to fulfil development plans.
In particular, they are now making a strong effort to attract US investors, and to lift the US State Department's travel ban to encourage tourism as well as business visitors. American response has already been favourable, spurred in part by the high returns available on Lebanese investments, and the prospects of Beirut re-emerging as the favoured venue for financial dealings in the Levant. Citibank, for one, has already announced that it will re-open its Beirut offices later this summer. And Ron Brown, the US Secretary of Commerce, has been urging the US State Department to lift the travel ban (which is up for review during the summer), or at least provide a 'business travel waiver', to facilitate commercial relations between the two countries.
Another positive sign has been the response of multilateral lending institutions, especially the World Bank and the International Finance Corporation. A high-ranking IFC official recently told a group of international investors that his institution was "very bullish" on Lebanon, where it has already extended two lines of credit to Lebanese banks. …