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Lebanon’s grass not so green

Lebanon’s grass not so green

A year ago it held us all captivated, but as other markets begin to recover Lebanon’s allure is not so strong. Kipp takes a look.

January 4, 2011 3:11 by

Lack of money constrains efforts to upgrade the creaking infrastructure; in much of Lebanon residents and businesses still experience regular power cuts (by regular, we mean daily). As we wrote earlier in the year, Lebanon produces less than 1,600 MW of electricity but the actual need exceeds 2,300 MW. Before last summer, the government warned of daily power cuts totaling as much as 12-16 hours. Many buildings and companies rely on generators during these inevitable cuts – not exactly good for trade and industry.

And like power, stability is still not a given in the country. Internal tensions continue to simmer, as do regional ones. The border clash in August, where three Lebanese soldiers, a Lebanese journalist and an Israeli officer were killed, exposed exactly how close to the edge the country is. Hezbollah leader Sheikh Hassan Nasrallah said at the time, “From now on, if the army is attacked in any area where the resistance has a presence or a say, the resistance will not stand by idly. We will cut off the Israeli hand that reaches out to attack the Lebanese army.”

“The region has enough tension as it is,” said US state department spokesman PJ Crowley. “The last thing that we want to see is that this incident expand into something more significant.”

Don’t get Kipp wrong, Lebanon still has much to offer. A predicted budget deficit of 7 percent for 2010 is well below the official target (11 percent), and a large chunk of revenue from the Telecoms sector is reportedly still to be transferred to the treasury (although that is not necessarily a good thing – the delay seems to be down to politics, which belies the internal strife that still has a major bearing on the economy). But a trustworthy banking system, an educated population, and a liberal outlook combine to make it an attractive place of business in the region.

Provided the delicate peace internally and externally can hold, Lebanon’s economy will continue to grow, and Kipp will be glad to see that happen. But as countries like the UAE once again find their feet, and begin a surer recovery, we think it’s likely that both interest and investment in Lebanon will fade.

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