Interview with Nabil Itani, Chairman – GM of IDAL
Give us your outlook for FDI. We know that despite a continuous decrease in foreign investment flow to the MENA region, Lebanon managed to maintain a steady level of FDI, registering an increase of 6.6% year on year. What are the expectations for 2015? Will the FDI inflow record another year on year growth? Which sectors do you expect to see the most FDI?
The situation in the region since 2011 has affected investors’ willingness to invest in the region. That is why we noticed recently that from 2011 until now the amount of FDI to the region has decreased by around 50%. Lebanon is part of this region and it is suffering from some aspects of these conflicts. There are a lot of conflicts, and particularly the Syrian conflict, that are affecting the Lebanese economy; but despite all, Lebanon has maintained some kind of stability in security, economics and also socially. Subsequently, Lebanon has succeeded in achieving more positive signals in foreign investment, not only due to the security but also due to its diversified economy. The economy of Lebanon depends on a variety of sectors. We noticed that some countries in the world which depend on oil are suffering from the effect of the decrease in the price of oil for example. Lebanon has a diversity of sectors.
For 2016 our expectations mainly depend on the situation itself. I hope that it will settle down and we can return to highlight the advantages of this region. We think that if we maintain the stability of Lebanon we will achieve the same results we achieved in 2014 and the same progress. I don’t think the region will increase their FDI because the situation for the time being is not positive. For Lebanon, I think we will achieve some increase but not necessarily our targets because we are working on several strategies that all depend on the situation. Our 2015 to 2016 strategy has to take the situation into account.
The main selling point of Lebanon is its human resources.
What are the major targeted sectors?
The targeted sectors are the traditional productive sectors but we are seeing a lot of investments coming to Lebanon for industries that use technologies, therefore high tech industries are becoming one of the major sectors. The main selling point of Lebanon is its human resources; that is why any industry or any business that has a component of IT finds the infrastructure ready here for a good investment, additionally the market in the Middle East is also ready. Investors can benefit from our highly skilled human resources and an easy access to finance. We have four times our GDP as banks deposits. So the access for any investor to finance due to the oil programs and the other programs from the Central Bank of Lebanon and the government programs, is facilitated. It is easy to access the market here and so all of these factors lead to more investment in the manufacturing sector particularly industries that depend on IT. We noticed that many of our investments in 2014 were in this sector.
In early 2015 IDAL and the Ministry of Industry announced a plan to create industrial zones outside of Beirut and offer certain incentives for companies to invest in these zones. At what execution stage is this plan at the moment? What are the incentives?
As I mentioned before, the manufacturing and industrial sectors are encouraging investments from our potential investors and mainly from our Lebanese diaspora and from the Lebanese who invested in the region and are suffering now from the repercussions. Many of the Lebanese investors, despite the fact that Lebanon is not an oil country, are competing with people from outside of Lebanon. After what has happened from 2011 to 2015 in the region, in Iraq, Egypt, Tunisia, and Libya etc. many Lebanese have returned to invest in Lebanon and mainly in manufacturing. That is why the demand on the economic industrial zones is so big. We did some activities to encourage the private sector to invest in preparing the ground in the industrial sector. We are going to have two zones in the Beqaa Valley and two in the south. We are now in the process of encouraging some investors to establish their investments in these areas.
Let’s discuss the Lebanese Exports Maritime Bridge program which Lebanon has officially launched. It is a bridge to the Gulf States to ship Lebanese made goods and IDAL played a major role in this program. Maritime exports increased by 87% in the second half of this year. How have the exporters responded so far? In your personal opinion to what extent will the program boost the competitiveness of the Lebanese made products?
This is due to the effects of the Syrian conflict on Lebanon. The border between Syria and Jordan were closed. Most of our exports went through this road to our traditional markets which are mainly in the Gulf area. That is why when these borders were blocked it really affected our exports. We had to look at other possibilities to be able to maintain our position in this market. We had to look at how our exports could reach these markets without difficulties and how we could maintain the trust of our partners in these areas regarding the producers in Lebanon. All of these things made us think deeply about preparing this program. This program intends on subsidising the difference between the cost of exporting via land and exporting via the sea. The private sector is so motivated in Lebanon. At IDAL we have prepared things to simplify their efforts. As you mentioned 80% of exports are now maritime and that is because many of our exporters depend on containers being shipped whilst others now use air freight. Still some goods have to depend on land transport. The Maritime Bridge is going to take all of these trucks with Lebanese goods from the Lebanese ports to the Gulf lands through the port of Dhuba in Saudi Arabia or the port of Aqaba in Jordan, where from there the trucks can go on to all of our traditional markets. This step will strengthen the markets in terms of trust in our goods and will help the competitiveness of our goods in these markets.
How about IDAL’s cooperation with the European Union, or European Commission in particular, on the level of migration and development? What is the strategy in terms of boosting trade?
As you noticed, all of these countries, not only Lebanon, are doing their best to encourage investment or to build a business link between their homeland and the diaspora living outside. Lebanon has a good diaspora, there are about 14 million Lebanese living outside of Lebanon. This is a very big asset for Lebanon. That is why we are willing to make a strong case for this business linkage between our diaspora and our economy in Lebanon. This is what IDAL is doing now, to put forward this national strategy to approach the capabilities of our diaspora or of our migrants and to link them with our companies through three main axis. The first is to encourage capital investment in Lebanon in our target sectors and our competitive sectors. Secondly, we want to encourage the diaspora to expand their trade relations with the Lebanese companies. You know that some goods have niche markets and we could depend on these markets or products to develop, such as olive oil and wine. Thirdly, we want to encourage companies owned by Lebanese people or managed by Lebanese people to have some components or services outside. With these three main axes I think we can help the Lebanese economy to achieve more and we can help our diaspora benefit more from our competitive advantages.
What is your overall vision for IDAL and for investments in Lebanon in the medium term?
Despite all of the conflicts that we have in this area, Lebanon is still achieving increases and growth. I would encourage investors or anyone who wants to link with the Middle Eastern area and to the huge markets here to connect with Lebanon because from Lebanon you can easily access these markets and the raw materials we have here. We have good human resources and competitive prices and fees. We also have easy access to financing from our banking sector. IDAL is ready to host anybody who wants to know about this and will give market intelligence to support investors in Lebanon. We are ready to take care of investors and their investments.