* Real-estate sector helps push FDI inflows up by 11 percent
Lebanon fared well in terms of Foreign Direct Investment (FDI) flows in 2009, according to the World Investment Report for 2010.
FDI inflows to Lebanon increased by 11 percent, from $4 billion in 2008 to $5 billion in 2009, owing to a particularly buoyant real-estate sector, stated the report released on Thursday by the United Nations Conference on Trade and Development (UNCTAD).
Focusing on the West Asian region in particular, Salaheddin Abosedra, regional adviser on macroeconomics at ESCWA, showed that FDI inflows declined by 24 percent in 2009 – reversing a six-year upward trend – to $68 billion.
“The UAE and Turkey were worst affected, with cross border merger and acquisition sales in Turkey plunging from $13.2 billion to $2.8 billion and the Dubai financial crisis creating a hostile environment for FDI into the UAE,” Abosedra said.
“Kuwait replaced the UAE in 2009 as the largest outward investor of FDI, with $9 billion of foreign investments.”
However, “it was Saudi Arabia that performed best in the region with over a fourfold increase in FDI outflows, from $1.5 billion in 2008 to $6.5 billion in 2009,” he said.
Also notable from the report regarding the West Asia region were the measures taken to improve conditions for foreign investment at home and abroad. For instance, Abosedra cited how tax rates in Turkey and Oman were lowered to boost activity across certain sectors of the economy and how Qatar has worked hard to seek investment opportunities in Europe, Asia and the US for its sovereign wealth fund.
Globally, the report also highlighted the decline in manufacturing FDI in relation to the primary and services sectors, mainly due to a 34-percent fall in cross-border mergers and acquisitions. Indeed, despite the overall fall in FDI during 2009, this has not affected the upward trend in the internationalization of production, with the employment by Transnational Corporations (TNCs) rising worldwide to 80 million and the share of global output also rising to capture 11 percent of global gross domestic product (GDP).
The World Investment Report highlighted that despite a dismal situation in FDI flows at the end of 2009, the downward trend seemed to be reversing in the first half of 2010.
The report showed that during 2009, global FDI slumped across all economic sectors, with outflows declining by 43 percent over the year to $1,101 billion.
However, within developing and transition countries in particular, FDI inflows fell by 27 percent compared to a 21 percent fall in outflows, showing the important role these countries are playing in FDI recovery.
Emerging markets, in particular China, performed better than many developed countries, with the Chinese economy being the second-largest recipient of FDI globally, receiving $95 billion of FDI inflows compared with the next largest recipient which was France at $60 billion.
Optimism seemed to be greater concerning investment toward larger developing economies for the coming year, with Brazil, the Russian Federation, India and China as focal points for investment. The report stated that the majority of the FDI flows to these economies would continue to be aimed at highly labor-intensive and technology-intensive activities.
Overall though, according to the report, this year will only serve as a stepping stone in the way of full recovery.
It states that business confidence can only be restored gradually through improvements in the macroeconomic environment, with corporate profits and stock-market valuations following suit over the next few years.
Within this improvement in the overall global economic position, the report stresses the significance of the increase in cross-border mergers and acquisitions, with privatization of firms on the brink of bankruptcy during the recession creating merger and acquisitions opportunities for TNCs. Indeed, the brighter position of the global economy in 2010 is in part due to the 36 percent rise in merger and acquisitions in the first five months of this year.
Nevertheless, the report stresses that risks remain for the status of FDI particularly in developing countries, citing overspending, public debt and the risk of increased protectionist measures possibly dampening the efforts made to improve FDI flows so far this year.
* Nahhas unveils new plan to install high-speed broadband across country
Telecom Minister Charbel Nahhas unveiled a plan to install fiber optics and advanced broadband across the country within the coming 18 months on Thursday.
Speaking at a news conference at the Telecommunication Ministry, Nahhas said that turning Lebanon’s telecom sector into a mere source of tax income had caused prices to rise and the network capacity to narrow, leaving the country lagging behind most others in terms of IT and technology.
He added that once the project materialized, Lebanon would enjoy fast internet service and advanced broadband.
A 10 percent increase in the penetration of broadband capacity can generate 1.35 percent GDP growth annually, an equivalent of LL600 billion ($400 million), according to a World Bank study.
Tax revenues from this service are expected to rise by LL140 billion a year.
“The tax revenue from the broadband service can cover the cost of the entire project in one year only,” Nahhas said.
He added that the government, which is committed to expanding the broadband service, is also keen to liberalize the sector and expand the use of internet and other related services to all of the country.
“This new technology which transfers data in the speed of light will open new doors for the use of the internet in houses, offices and companies. It will also open the door widely [for] economic development in every part of the country,” Nahhas said.
One of the projects will involve the installation of 15 MB capacity in 42 switch boards in greater Beirut and other provinces in addition to Tyre, Jounyeh and Byblos.
The first phase of the project will focus on heavy internet users in Lebanon, estimated to be around 350 companies and institutions across the country.
The heavy users include data companies, internet providers, some public institutions and ministries, banks, the two cellular companies, universities and others.
The project will cost $60 million and involve the installation of 710 kilometers of phone wires as well as 2,750 kilometers of fiber optics.
The deadline for completion of this phase is 16 months and the ministry will give the tender before the end of July 2010.
The second phase will see the electronic equipment placed in the new network, better known as Dense Wavelength Division Multiplexer (DWDM) technology.
The ministry is currently hammering out the conditions for the project, the cost of which will be $20 million, and the tender will be offered in September.
In the third phase, 100 active cabinets will be set up to link subscribers to 15 MB internet, at a cost of $2.5 million.
The fourth phase, called Active Cabinets, will include 1,000 units, covering 75 percent of the subscribers. The cost for this phase will be $25 million.
Nahhas also discussed the deployment of local phone networks with bigger capacities in the cities.
He added that this project, which has been commissioned to a local company, will cost $4.7 million and will be completed in 18 months.
Responding to a question, the minister said that in 12 to 18 months 75 percent of the internet subscribers in Lebanon will be able to enjoy the 15 MB high speed internet.
“I am not talking about the internet only but also the TV internet which is better known as IPTV. This service is beneficial for schools, universities and public services,” he said.
* Lebanon, Iran commerce chambers ink agreement
The president of the chamber of commerce, industry and agriculture in Lebanon Mohammad Choucair signed on Friday an agreement with the vice president of the Iranian chamber of commerce Mir Mohammad Sadki aimed at facilitating investment activities between the two countries.
The agreement’s objective is to create a favorable environment for the cooperation in exchanging skills and encouraging and facilitating the signing of commercial contracts between companies of the two countries. It also aims at exchanging economic and commercial statistics between the two countries in addition to an exchange of visits between businessmen from Iran and Lebanon.
Choucair emphasized the importance of cooperation between the economies of the region, saying this would facilitate their competition in the international economy. “The Iranian-Lebanese relations are excellent and the two countries signed over 20 agreements during the past 20 years,” he said. “These agreements cover a variety of sectors including transportation, trade, protection of investments, tourism, cultural exchange, environment and many others.”
He added that a preferential trade agreement prepared by the Iranian Lebanese follow-up committee on May 31, 2010, helped create a framework for developing economic relations between the two countries.
For his part, Sadki said that the trade volume between the two countries increased remarkably over the past few years. He added that he hoped the efforts of the two chambers would lead to a further increase in this volume in the future.
He said the Iranian law pertaining to the support of investment is very efficient in attracting foreign investment. “This law offers all of the required guarantees for foreign investments in Iran. It also allows foreign investors to maintain the right to a 100 percent ownership of their businesses,” he said.
Iranian Ambassador to Lebanon Ghadanfar Abadi said the volume of bilateral trade between had reached $150 million, adding that more efforts would be needed to increase this figure. He underlined the need to involve the private sector in international fairs, especially those organized by Lebanon and Iran.
* Blom Bank quarterly profits keep it riding high in financial sector
Blom Bank was the most profitable bank in the country in the second quarter of 2010, according to its financial results.
The bank attained the highest level of profits for the period at $82.8 million, in addition to the highest return on average equity at 22.2 percent among listed banks.
These top performances in absolute and relative profitability were a result of its control over expenses and risk, as reflected in the lowest cost to income ratio at 34.7 percent and in an excellent coverage ratio for non-performing loans (including overall provisions) at 102.6 percent.
In terms of its performance for the first half ending June 2010 compared to the same period last year, Blom Bank obtained strong and balanced growth in its profits and balance sheet that takes into prime consideration control over expenses and risk.
As a result, profits reached $156.4 million, increasing by $18.1 million or 13.1 percent from the same period in 2009.
Similarly, assets totaled $21.5 billion, risking by $2.1 billion or 10.8 percent.
Deposits reached $18.7 billion, increasing by $2 billion or 11.9 percent.
Shareholders equity rose to $1.8 billion, going up by $245.6 million or 16.2 percent.
