BEIRUT: The head of Investment Development Authority of Lebanon projected Tuesday that foreign direct investments to the country would fall by 21 percent in 2013, as the political stalemate and spillover of the Syrian crisis were scaring off potential investors.
“Last year FDI in Lebanon rose by 8.5 percent to reach $3.78 billion, according to UNCTAD, but this year I am afraid that foreign investment could drop by as much as 21 percent in view of the situation in the region and especially in Syria,” Nabil Itani told The Daily Star.
Itani said that the decline in FDI was only normal under the current conditions prevailing in the region.
But even the $3.78 billion in FDI recorded in 2012 was far lower than that of 2009, when FDI stood at $4.8 billion.
Most of the investments this year were focused on real estate, a clear indication that properties are still the biggest attraction for investors, Itani said.
He added that most of the properties snapped up this year have been purchased by Lebanese expatriates. In previous years, Gulf Arab investments in real estate were significantly higher.
Itani admitted that the requests and inquiries processed by IDAL fell by 40 to 50 percent this year.
“We used to receive four to five requests each month, but this year the requests fell to two or three,” he said.
IDAL is the national investment promotion agency that was established in 1994 with the aim of promoting Lebanon as a key investment destination, and attracting, facilitating and retaining investments in the country.
Itani said the specter of war in Syria and the turmoil in some parts of the region were among the main reasons behind the fall in FDI and inquiries about investments in Lebanon.
The head of IDAL also said that the absence of a government affected to a great extent on the operations of the agency, adding that there were five projects with a total value of $270 million that were awaiting the approval of the Cabinet.
According to the law, the caretaker Cabinet is not authorized to approve new investment projects.
“These projects are quite vital for Lebanon. The companies have started to build their projects, but the problem is that they still could not obtain tax exemption, and this is where we play the role of facilitating the life of investors,” Itani said.
The drop in FDI in Lebanon also reflects the cautious mood of many investors who are deeply concerned about the inability of Lebanese politicians to end their differences and form a Cabinet.
Apart from the banking sector, which remains strong, most economic indicators have fallen sharply since 2012 – a trend expected to continue if the political deadlock remains.
IDAL said in a statement that the new gas discoveries in Lebanese waters along the northern maritime boundary with Cyprus and Syria offered prospects for the country to attract FDI in oil exploration.
It added that Lebanon managed to attract 7.8 percent of the total FDI inflows to the region in 2012, ranking third in terms of recipients of investment flows into the MENA region, a share that is slightly lower than the 8.1 percent of 2011.
Itani stressed that IDAL was keen to maintain contacts with potential investors and to provide all types of facilities, but said this determination by the agency might not be sufficient if the political situation in the region does not improve.
The IDAL chief added that investors have shown increasing interest in the services and trade sectors, with a notable increase of foreign companies investing in the various activities within the media sector.