Lebanon – The Underrated Investment Gem of the World Map – Part 1

Author: Patricia I. Issa

Lebanon: You have heard of it, mostly in the context of war and consecutive crisis, but also, as

the previous Paris of the East, and in between the two images, a lot of potential lost to political

instability, internal conflict driving a deadlock decision making system, and rampant corruption.

Today, we are turning our faces from today’s “temporary” smoke and mirrors of the current war, to look into the next phase: Lebanon’s potential, opportunity and future.

In -part 1- of this article, we will go over some of the current challenges of the country, as well as six areas of promising potential with a lot of space for investment, competition and high profitability.

In -part 2-, we will go over six other areas open for investment and some of the advantages of investing in Lebanon.

As a small country strategically located on the shores of the East Mediterranean, Lebanon has many resources that remain uninvested or underinvested due (but not limited to) the following reasons:

-Political instability, hindering long term planning and long term large-scale investments in the country, coupled with a non-neutral foreign policy further isolating the country from its Arab friends to the East, and European friends to the West.

-Internal conflict, forcing most governments into a deadlock situation where not much can be achieved.

-Corruption of the inflated public sector, hindering large-scale government to government projects as well as collaborations between the private and public sectors.

-Economic instability, due to a very volatile post-civil war economy lacking key solid pillars such as modern infrastructure, agriculture, industry and technology, and based solely on services, banks and tourism. This structure ended up collapsing in 2019 leaving the country facing dwindling foreign currency reserves, depreciating currency, and a banks’ collapse.

-Brain drain, because of the aforementioned reason, many professionals are leaving Lebanon for better opportunities regionally and internationally. Yet, despite the bleak present outlook, Lebanon is one of countries with the highest chances for speedy recovery and fast growth, should political stability and serious reform take place. In the rest of this article, we will go over of some of this growth potential and investment areas capable of yielding high profitability while ushering the country in the direction of economy as a driver for peace and stability.

1- Natural Resources: Lebanon has some of the East Med’s largest gas reserves, which is a reason for the delays and border conflicts (with Syria and Israel) over this particular file. But gas is not even the most important resource in Lebanon, in effect, in a region where water will be the next challenge, Lebanon is the only country that can escape this upcoming crisis by depolluting its water sources and applying a nationwide hydro-strategy allowing it to respond to domestic demand and export to nearby countries.

2- Infrastructure & Logistics: Lebanon’s most urgent need to get its economy moving again, is investment in its infrastructure. In reality, Lebanon’s infrastructure is not only outdated, but underinvested and functioning well under capacity. Due to its strategic location (Asia’s and the Arab World’s portal to the West, Europe’s portal to the East) and hybrid nature and culture, the country is a strategic logistical gem for investors of infrastructure related to major trade routes.

The country features huge space for current upgrades, and still can handle to triple the number of its ports and airports facing the Mediterranean, some are existing but dormant and in need of further development.

3- Green Energy: Due to its resources, weather and geographic nature, Lebanon is a country capable of generating enough green energy to cover domestic consumption and export to nearby countries. In reality, this particular industry is still in its infancy in Lebanon and has enough space for a lot of new competitors in the following subsectors: solar energy, hydropower, wind energy, geothermal and biomass.

Moreover, investment in the current energy landscape of Lebanon as is (fossil fuel based), before connecting alternative sources, still features several billions in direct cost cutting and profit through grid upgrade, net metering (to account for the current market penetration of green energy), and taxation policy update and enforcement.

4- IT: The IT Industry in Lebanon is one of the industries that had been experiencing stable growth over the last ten years despite hardships. The industry is driven mainly by availability of an exceptionally skilled workforce, a vibrant startup ecosystem despite the challenging economy, and the constant push towards digitalization. In fact, Lebanon is a great candidate to become a regional IT hub. Fintech, e-commerce, cybersecurity and software development are particularly growing sub-sectors; and as the industry still has room for many players and investments, opportunity abound in the market in most areas (phase 1&2 promising startups, digitalization of the public sector, infrastructure management, services digitalization, AI, outsourcing, and many more…).

5- Local/Outsourced Industry and High Tech Production: Lebanon is the educational haven of the Middle East, it is actually the hub of the STEM field graduates of the region. With a highly skilled multilingual workforce and top universities putting over 5000 graduates in the STEM fields yearly, the potential of outsourced industry and high tech production of the country is still one of its most underrated potentials. Coupled with policy incentives and lower human capital costs, the potential of the country of hosting outsourced production is high.

6- Waste Management & Recycling: Lebanon’s 2015 waste management crisis opened the doors for many studies on the sector, specifically on the potential profitability of a decentralized waste management model, waste-to-energy and recycling. The development of this specific sector in Lebanon is a direct national interest, and recycling in Lebanon is an industry currently taking its first steps. Addressing the sector along with its many sub-sectors on a mass-scale ininvestment and geographical coverage, within a PPP framework (with the government or local authorities) is an area of high margin and profitability.

In -part 2-, to be published within a few days, 6 other fields of investment will be presented along with the advantages of investing in Lebanon and the key success factors driving the country's potential.

(In order to get out more updates, receive specific industry insights and get in touch with investment opportunities and key personnel, contact the Mediterranean Forum of Local Governments and Business through the following email: [email protected] )

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