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Jewel of the Middle East

Lebanon holds a winning formula to re-establish its role as a regional business hub  
Lebanon holds a winning formula to re-establish
its role as a regional business hub

Lebanon, dubbed the “Jewel of the Middle East,” has regained its lustre. The turnaround is all the more remarkable given the 15-year civil war in the tiny but fertile country, and continuing political upheavals, including the recent pan-regional civil turmoil. 

Lebanon has shown economic resilience in the face of adversity, owed much to the country’s liberal economic model, robust banking system, vigorous attraction of international tourism and strong inward remittances. 

All these have helped the country avoid serious political instability beyond several large demonstrations after the “Jasmine Revolt” in Tunisia in January and the much-reported street protests in other Middle Eastern and North African countries. 

Lebanon’s economic performance is reminiscent of its past mercantile glory, with real GDP growth surpassing seven per cent over the past four years, following the end of the conflict with Israel in 2006. With little reliance on exports and a high degree of private consumption, accounting for about 80 per cent of GDP, Lebanon managed to keep its economy on a growth trajectory even at the peak of the global economic crisis and financial meltdown, which battered many export-oriented economies.

Liberal Economic Policies   

Lebanon’s success is largely the result of a highly liberal economic model, bolstered by a strong laissez-faire and commercial tradition. Among the most liberal nations in the Middle East and North African (MENA) region, Lebanon is recognised for its economic openness, low government intervention and lack of market-entry barriers. 

  High spending power is partly supported by a large population of Lebanese expatriates around the wor

Lebanon is recognised for its economic openness, low government intervention and lack
of market-entry barriers

There are no restrictions on foreign exchange or capital movements. According to the 2011 economic freedom ranking by the Heritage Foundation, Lebanon is ahead of many developing countries in Southeast Asia, including Indonesia, the Philippines, Vietnam and Cambodia. 

The Lebanese government has also spared no effort in attracting foreign investment. The government legislated in 2001 to protect foreign investments and enhance its business environment. The new investment law also removed entry barriers for foreign investors, giving them equal treatment as their local counterparts. Since 1999, the Lebanese pound has been pegged to the US dollar to keep its exchange rate stable. 

The Lebanese government reported that inward foreign direct investment (FDI) increased 20 per cent in 2009, reaching US$4.3 billion. The World Bank estimated an even richer vein of inward FDI to Lebanon, which it said stood at US$4.6 billion in 2010, equivalent to about 12 per cent of the country’s GDP. This compares well with FDI to other MENA countries, equivalent to 2.8 per cent of GDP in 2010. Lebanon was also the second largest FDI recipient in MENA after Egypt (US$6.5 billion), with inward FDI targeting the real estate and services sectors.

Unrest in the MENA region will drive some capital flight to Lebanon, which is much less affected by the Jasmine Revolution than other regional countries. Lebanon’s competitive and free market regime, together with further economic reforms and privatisation, provide a winning formula for the country to re-establish its role as a regional business hub, reminiscent of its heyday when Beirut was the “Paris of the Orient.” 

Back in the Running  

Lebanon is seeing an expanding market for fashion products  

Lebanon has an expanding market for fashion products

Lebanon’s role as the business hub of the Middle East was punctuated between 1975 and 1990 by civil war. Cessation of internal violence since 1990 has put Lebanon back on track for revival, with extensive efforts to rehabilitate its function as a regional business hub, covering banking, commerce, merchandising, as well as media and culture. 

Lebanon’s economic ascendancy has been reflected by a surge in per capita income. According to World Bank definitions, countries with per capita income of between US$3,946 and US$12,195 in 2009 were considered upper middle income countries. 

Lebanon’s per capita income was estimated at US$8,200 in 2009, more than double the level of the Chinese mainland. In 2010, per capita income in Lebanon is estimated to have reached US$10,000, which is considerably above the average of the MENA countries. 

The major cause of political instability in Lebanon has been the power shift or redistribution of power among different political factions – a natural product of democracy. Lebanese elections are generally considered fair and free. Lebanon also has the most open media in the Arab world. Despite growing concerns over the unrest sweeping through the MENA region, Lebanon appears largely unaffected, owing in no small part to its higher degree of freedom and democracy. 

Regional Banking Centre   

Lebanon’s services-oriented economy is dominated by its banking sector, which represents about eight per cent of the country’s GDP, comparable to Hong Kong’s 10 per cent. 

Lebanon’s sound banking system and strictly enforced banking secrecy law suggest to many that Lebanon is an even stricter guardian of secrecy than its Swiss counterparts. Over the past decade, Lebanon has continued to record rapid growth in bank deposits. In terms of the size of deposits, Lebanon ranks fourth in the MENA region, behind the UAE, Saudi Arabia and Egypt. Lebanon has substantially increased its foreign exchange holdings over the past two decades, thus helping the central bank maintain stability of the Lebanese currency. 

Small Country, Big Market Potential

One of several successful Hong Kong brands on the Lebanese market  

One of several successful
Hong Kong brands in the
Lebanese market

Lebanon is becoming an attractive consumer market, with international fashion brands such as Louis Vuitton and H&M opening new stores in the past two years. Despite a small population of just over four million, Lebanon’s potential as a market for lifestyle and fashion products is good, given its high average income, strong spending power, lavish consumer culture and robust tourism sector.

  Lebanon’s Flourishing Market
for Hong Kong

Hong Kong has built cordial trade relations with Lebanon over decades, with Lebanese business people using the city as a sourcing platform for products made on the Chinese mainland. Such companies have high regard for products sourced through Hong Kong operations, due to their excellent design and value-for-money. 

In the five years to 2010, Hong Kong exports to Lebanon posted an average annual growth of 17 per cent, and more than 60 per cent of these were for consumer goods. Exports of fashion products exhibited amazing growth, with footwear and jewellery showing respective annual growth rates of 36 per cent and 17 per cent over the same period. Clothing and accessories, the largest segment of consumer goods exports to Lebanon, amounted to US$15 million in 2010, with an average annual growth rate of 11 per cent from 2005-2010. 

Toys, however, haven’t done especially well in the Lebanese market compared with other Hong Kong exports. According to one Lebanese toy retailer, the market is the most sensitive to political stability, making it recover much slower than others. 

Lebanon has attracted many Western brands. In the high-end segment, Hong Kong brands face keen competition from established international ones such as Burberry and Dolce & Gabbana. However, successful Hong Kong brands on the Lebanese market include Giordano and Bossini, which target the younger generation at the mid-end market. Esprit has opened stores in some top shopping malls, tapping the upper mid-end market. As a fashion and lifestyle centre, Lebanon is very much a showcase for Hong Kong products targeting the MENA market.


Without official statistics on the country’s wealth distribution, some market researchers believe that about five per cent of the Lebanese population is extremely wealthy, able to afford luxury products and lavish lifestyles. It’s also believed that between 30 per cent and 40 per cent of Lebanese people belong to the middle income class, which spends more on second-tier brands such as Mango and Zara. 

High spending power is partly supported by a large population of Lebanese expatriates living around the world. Aside from those in the Middle East, many Lebanese expatriates live in the United States and Brazil, estimated to be well over 10 million, or more than twice the population of Lebanon. 

Many Lebanese expatriates are successful business people and professionals, including Tony Fadell, the creator of the iPod, and Joseph J Jacobs, the founder of a US-listed international engineering group. Many Lebanese expatriates remit money back to their home country to support families and relatives, while part of the inward remittances has been diverted to investment, taking advantage of Lebanon’s improving economic conditions. 

“Diaspora remittances” are hefty in Lebanon, making it the sixth largest inward remittance-to-GDP country. Aside from the high and middle income groups, the rest of Lebanon’s four million population will be a fertile market for products that are mostly “non-branded” and not famous, yet fashionable and are value-for-money. This mid-market segment pays more attention to price, as well as style and quality, with no particular loyalty to any existing products. These products are mostly manufactured in Eastern Europe, Turkey, Egypt and China. 

Fashion and Trend-conscious

Beirut, Lebanon’s capital, has attracted international designers to set up shop there. Many world-famous fashion designers have been nurtured in Lebanon. As a crossroads of East and West, Beirut is considered the fashion and lifestyle trendsetter in the Middle East. Compared with many Middle East neighbours like Saudi Arabia and Qatar, Lebanon is more open and liberal, with Beirut viewed as a fashion capital for the young generation in Arab countries. 

For more details, see the forthcoming HKTDC Research report: “Lebanon: re-emerging business centre in the Middle East," which can be ordered at http:// bookshop.hktdc.com.

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