Jointly published by the United States Committee for a Free Lebanon and the Middle East Forum
| Vol. 2 No. 1 | January 2000 |
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For Lebanese Economy, Bad News Keeps Getting Worse
by Ziad K. Abdelnour
In a recently released ranking of living standards in 218 cities around the world, Beirut finished 158th, lagging well behind the capitals of such impoverished countries as Pakistan, Bolivia, and Ghana (see list). The annual survey, conducted by William M. Mercer, a global consulting firm, ranks the cities according to thirty-nine criteria that "international executives feel are the standards by which cities should be compared," including the level of political stability, degree of public freedoms, availability of social services, and crime rate.1
The ranking, which made the headlines of several Lebanese newspapers, underscores the harsh reality that Beirut is most certainly not on track to become a major business center of the Middle East in the twenty-first century. While some have complained that the survey is biased against cities in nondemocratic countries such as Lebanon, Syria, and Iraq, it is nevertheless true that Beirut is not perceived internationally as a healthy business environment.
According to Middle East Economic Digest, the Beirut Stock Exchange (BSE) "had a depressing year in 1999." Both the Banque du Liban & d'Outre Mer (BLOM) index and the Lebanon Invest Share Price Index (LIPSI) steadily declined. "Falling by a further 21 per cent, Lebanon was the worst performing market in the Middle East in 1999," the report said. Trading volumes also declined by 73% from the previous year.2
According to statistics published by the Economist, the growth of Lebanon's GDP slowed to 0.5% last year, well behind that of other Mideast countries such as Egypt (5.6%), Turkey (5.0%), Israel (3.6%), and even Iran (2.1%).3 Due in part to sluggish economic growth, the Lebanese government failed to limit its budget deficit to the target of 40.6% (it is now estimated to be at least 45%). The total national debt now towers at over $20 billion--around 120% of Lebanon's GDP. Promises to cut expenditures by reducing the public payroll have not even begun to be implemented.
The multi-billion dollar reconstruction program launched by the Lebanese government since the early 1990's was supposed to bring in much-needed foreign direct investment that would jump-start the economy. Not only has this investment not materialized, but now the reconstruction program itself has come to a standstill. Instead of debating over which infrastructure projects to complete next, government ministers are haggling over which projects must be put on hold.
Even the construction industry, which has chugged along at full steam for nearly a decade, is feeling the effects of dismal economic growth. Solidere, the real estate development giant owned by former prime minister Rafiq Hariri recorded its first-ever losses for the first half of 1999. Many Lebanese find this very disturbing, and for good reason: If Solidere, which enjoys preferential treatment from Lebanese and Syrian authorities, can't make money in Lebanon, why would anyone else invest here?
1 Press release by William M. Mercer Companies LLC, 13 January 2000.
2 MEED Weekly Special Report, 14 January 1999
3 The Economist Group, The World in 2000, December 1999, pp. 77, 82.
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