ECONOMY
Lebanon has a free-market economy and a strong laissez-faire commercial tradition. The Lebanese economy is service-oriented; main growth sectors include banking and tourism. According to the Central Bank of Lebanon, Lebanon posted 6% real growth in 2008, with inflation running at 8%. There are no restrictions on foreign exchange or capital movement, and bank secrecy is strictly enforced. Lebanon has legislation to combat money laundering and terrorism finance, and joined the Kimberley Process in September 2005. There are practically no restrictions on foreign investment; however, the investment climate suffers from red tape, corruption, arbitrary licensing decisions, high taxes, tariffs, and fees, archaic legislation, and a lack of adequate protection of intellectual property. There are no country-specific U.S. trade sanctions against Lebanon.
Lebanon embarked on a massive reconstruction program in 1992 to rebuild the country's physical and social infrastructure devastated by both the long civil war (1975-90) and the Israeli occupation of the south (1978-2000). In addition, the delicate social balance and the near-dissolution of central government institutions during the civil war handicapped the state as it sought to capture revenues to fund the recovery effort. Monetary stabilization coupled with high interest rate policies aggravated the debt service burden, leading to a substantial rise in budget deficits. Thus, the government accumulated significant debt, which by the end of 2008 had reached $47 billion, or 162% of GDP. Unemployment was estimated at 9.2% in 2007 by the Central Administration of Statistics.
The government has maintained a firm commitment to the Lebanese pound, which has
been pegged to the dollar since September 1999. The government passed an
Investment Development Law as well as laws for the privatization of the telecom
and the electricity sector, signed the Euro-Med Partnership Agreement with the
European Union (EU) in March 2003, and is working toward accession to the World
Trade Organization (WTO). In order to increase revenues, the government
introduced a 10% value added tax (VAT) that became applicable in February 2002
and a 5% tax on interest income that became applicable in February 2003. The
Finance Ministry has submitted additional revenue raising measures as part of
the 2009 budget.
Plagued by mounting indebtedness, Lebanon submitted a comprehensive program on its financing needs at the Paris II donors conference in November 2002 and succeeded in attracting pledges totaling $4.4 billion, including $3.1 billion to support fiscal adjustment and $1.2 billion to support economic development projects. Despite the substantial aid it had received, the government made little progress on its reform program, and by 2006, even before the war between Hizballah and Israel, the debt problem had grown worse. After the war, $940 million in relief and early reconstruction aid was pledged to Lebanon August 31, 2006 at a donors conference in Stockholm, and an additional $7.6 billion in assistance for reconstruction and economic stabilization was pledged in Paris January 25, 2007 at the International Conference for Support to Lebanon, or "Paris III". Unlike the Paris II aid, much of the Paris III aid was contingent on Lebanon's meeting agreed benchmarks in implementing its proposed five-year economic and social reform program. The International Monetary Fund (IMF) signed an Emergency Post-Conflict Assistance (EPCA) Program with Lebanon to support the Government of Lebanon's economic reform program in 2007, and a second EPCA for 2008-2009, to monitor the progress of reforms and to advise donors on the timing of aid delivery.
Lebanon, with a population of 3.8 million, is the 68th largest market for U.S. exports. U.S. exports to Lebanon increased by 81% in the first 9 months of 2008 to reach $1.1 billion, compared to $599 million during the same period in 2007, primarily due to the increase in oil prices. In 2008, the top five U.S. exports to Lebanon were vehicles, mineral fuel and oil, machinery, agricultural commodities, and medical instruments. Major competitors of U.S. companies in Lebanon include French, Italian, German, British, Korean, and Chinese companies.
The U.S. has neither a bilateral investment treaty (BIT) with Lebanon nor an agreement on the avoidance of double taxation. However, on December 1, 2006, the U.S. signed a Trade and Investment Framework Agreement (TIFA) with the Government of Lebanon to help promote an attractive investment climate, expand trade relations, and remove obstacles to trade and investment between the two countries.
GDP (2006 est.): $21.5 billion.
GDP growth rate (2006 est.): (-5%).
Per capita GDP (2006 est.): $5,500.
Natural resources: limestone, iron ore, salt.
Agriculture: Products--citrus, grapes, tomatoes, apples, vegetables, potatoes, olives, tobacco; sheep, goats. Arable land--18%.
Industry: Types--banking, tourism, food processing, jewelry, cement, textiles, mineral and chemical products, wood and furniture products, oil refining, metal fabricating.
Trade: Exports--$1.88 billion (2005 est., f.o.b.): authentic jewelry, inorganic chemicals, miscellaneous consumer goods, fruit, tobacco, construction minerals, electric power machinery and switchgear, textile fibers, paper. Major markets--Syria, U.A.E., Switzerland, Turkey, Saudi Arabia. Imports--$9.34 billion (2005 est., f.o.b.): petroleum products, cars, medicinal products, clothing, meat and live animals, consumer goods, paper, textile fabrics, tobacco. Major suppliers--Italy, Syria, France, Germany, China, U.S., U.K., Saudi Arabia.
