Last month’s bombing of the Iranian Embassy in Beirut will negatively affect Lebanon’s efforts to encourage foreign investment and tourism, experts told Lebanon’s The Daily Star.
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They have stated that unless another spate of deadly bombings – which killed at least 25 and wounded a further 150 – are neutralised, they could potentially capsize the country’s economy.
Nabil Itani, currently Head of the Investment Development Authority of Lebanon, noted Beirut and the wider Labnon used to attract international businesses because of its free economic system, sound regulatory frameworks and bank secrecy.
Yet now, Lebanon looks poised to lose many potential Gulf Arab investments as the security of the nation continues to deteriorate.
“[Lebanon] cannot talk about improving regulations if we do not have stable security,” he noted.
The two suicide bombers – one a motorcyclist wearing an explosives belt and the other a driver in a rigged car – are seen as a part of Lebanon’s slow descent into the 32-month war in neighboring Syria.
It was the fourth such bombing this year.
“Arabs have already minimised their tourism visits to [the country],” Itani noted.
“How are they going to invest in the country if they do not even have the courage to visit it?
Arab tourism
The resulting absence of Arab tourists and investors is weighing heavily on the Lebanese economy as investments from Gulf countries already begin to dry up.
Saudi Arabia, which has publicly condemned the attack on the embassy, in particular is “very essential to the Lebanese economy,” noted Mohammad Choukeir, currently President of the Chamber of Commerce and Industry of Beirut.
Choukeir stated Saudis constituted the cornerstone of the Lebanese economy, whether from tourism, industry, and production, and that their involvement in Lebanon has been compromised.
He added that the general lack of tourists from the Gulf after the series of car bombings has even affected the remittance from the Lebanese diaspora working in the Gulf – usually one of the most resilient means of income for a country during troubled times.
Foreign direct investment
During times of political strife, foreign direct investment is usually the first causality.
Whilst it is hard to assess the immediate repercussions of the bombings, the overall lack of security is expected to have dramatic consequences in Lebanon’s production, investments, and real estate
A month earlier, Itani had told Lebanon’s The Daily Star that he predicted Labanon’s FDI to fall rapidly over 2013 due to the political stalemate.
“Last year, FDI in Lebanon rose by 8.5% to reach USD 3.78 billion … but this year I am afraid that foreign investment could drop by as much as 21%,” he stated.
Whilst the decline is seen as normal due to the country’s instability, the 2012 figure was in fact much lower than in 2009 – when FDI was as high as USD 4.8 billion.
“In previous years,” Itani concluded “Arab investments in Lebanon’s real estate were significantly higher than investments made by Lebanese expatriates.”
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