Indholdsfortegnelse for January 2020 i Lebanon Opportunities

Businesses, as well as ordinary citizens, are resorting to ingenious and often intricate ways to bypass the de facto capital controls preventing them from using their own funds deposited in bank accounts. Deals are performed at a premium, currently ranging between 20 and 30 percent. They could be concluded peer-to-peer, if the two parties to the potential transaction enjoy mutual trust ensured either by a previous friendship or a mutual friend with solid bona fides. These convoluted transactions are sometimes carried out through intermediaries who identify two unacquainted parties, and ensure that the exchange is successfully completed. These go-betweens have sharp business acumen and the ability to spot the complementary needs of two parties in a potential deal. The premium is split between the party offering a service and the…

Demand in the automobile market has changed. High end automobiles are currently in demand. Clients consider luxury cars as useful products and are willing to spend their money. Supply is limited to the stock that is available at the showrooms and each dealer manages their business differently. Luxury cars According to Cesar Aoun, General Manager at T. Gargour & Fils, agents of Mercedes Benz, the models in demand are those priced between $100,000 and $200,000. This includes demand for luxury cars, four wheel drive vehicles, and SUVs. “Demand for entry level cars such as the A plus and C class models, whose clients are of the middle-class, is almost nil,” said Aoun. The demand is limited to the current available and market supply, according to Maya Halabi, Marketing Manager at…

The World Bank, in collaboration with the Ministry of Economy and Trade, has analyzed the value chain of potato cultivation and processing to assess its potential for inclusive job creation in the North. The World Bank looked at the constraints and opportunities affecting potato farmers and producers. “The focus was on how to add value to potatoes and how this could be used as an input to other value chains,” said Elzir. The World Bank worked with two assumptions: The first speculated that if potato exports were expanded and Akkar farmers took half of an EU quota of 50,000 metric tons (versus none at present), an estimated 350 additional permanent jobs would be created, as well as 1,550 seasonal jobs. Around 70 percent of the jobs would be on farms,…

Several new examples of companies raising live animals have emerged as feasible models to be adopted by farmers. Researchers and investors have opted to develop the techniques used in rearing certain types of animals, such as aquaculture, beekeeping, and cattle. They have achieved very promising results after years of trials. International organizations have also launched several programs to financially support farmers and to provide them with the training required to scale up. These efforts have borne fruit, and after a few years of trials these initiatives have proved successful. Farmers are making fair profits, and there is potential for further accomplishments. Beekeeping Beekeepers have recently worked on developing their skills to benefit from the entire value chain of their bees. From the beehives they are extracting pollen, royal jelly, propolis,…

Farmers who have introduced new crop varieties have reaped lucrative harvests that are adaptable to various weather conditions and soil types. Trying to move away from traditional crops that bring low returns, farmers have succeeded in growing berries, leafy greens, passion fruit, and others, including crops that yield high quality produce. Several farmers have also introduced new varieties of crops to meet increasing demand. Experienced farmers are achieving high profit margins, and there is potential for further growth if these crops are planted on a larger scale. Go green Kale Farmers have spotted significant potential in kale plants, which are from the same family as broccoli and cabbage. Hadi El Solh, owner of the Paste of Life Farm, took the initiative two years ago to cultivate kale over two donums…

Some of the country’s oldest and most established wineries are re-exploring the qualities of indigenous grapes. The benefits are clear, and varieties like obeidi and merwah are proving pest resistant and bountiful, and are appreciated by wine tasters. Encouraged by the results, wineries are producing an increasing number of local wines for global and local markets every year. Homegrown vine Obeidi’s rebirth began in 2015, when Château St. Thomas released its eponymous bottle ‘Obeidy’. “We wanted to maintain some local varieties, and create a distinguished image for our wine,” said Joe Touma, Managing Partner. Other obeidis have since entered the market, such as Domaine Wardy’s ‘Obeïdeh’, and Château Musar’s blend of obeidi and merwah. “Having an indigenous grape will bring fame to our wine,” said Zafer Chaoui, Chairman of Union…

Will foreign bondholders be repaid? Public finance could be made sustainable Recession has set in since 2018 At a time when negative developments and the general mood exacerbate already tough economic and financial conditions, veteran research houses point to elements of strength and resilience. In a report released in December, global investment bank Goldman Sachs said that the government’s ability to pay its debt is likely higher than perceived by markets. Challenges could, however, escalate if deposit withdrawals continue at the current pace. This is especially true considering that the recession had already started in 2018 with a 1.9 percent contraction in the gross domestic product (GDP). Debt restructuring is safe Sovereign debt will be restructured in a way that hurts neither the economy nor depositors, and foreign holders will…

The population residing in Lebanon is estimated to have grown 29 percent, over the period 2004-2018, to 4.8 million, according to a recent survey by the Central Administration of Statistics (CAS). Household size continues to shrink, which means that the demographic growth is slowing. Emigration also contributes to the decrease in the size of households. This decline is also driven by the fact that more young people are leaving home to live in separate residences. The slowing population growth is reflected in the ageing of the population with the proportion of senior citizens rising in comparison to the youth population. Growth is still within the normal range The Lebanese account for 80 percent of the total population of 4.8 million, with the remainder consisting of non-Lebanese nationals, as shown in…

The de facto capital controls present a challenge for those seeking to convert cash into real estate. Real estate is largely selling at full value and deals are hard to find. Payment in dollars is preferred, though some developers are accepting lira. Payment is mainly made via banker’s checks. Rising demand All the developers and brokers interviewed stated that demand for real estate is currently high, especially for properties with title deeds that are ready to be sold. This rise in demand started in November. The majority of sales are valued between $200,000 and $300,000, according to Nadine Keyrouz, Director of Sales at the Beit Misk project in Metn. Radwan Sleiman, Managing Director of Landmark Real Estate, said that smaller apartments are still proving popular. The majority of clients are…

Local watch and jewelry businesses have observed a notable demand in the sector. The demand is mainly for high end watches, precious stones and gold bullion. Customers are transforming their cash money, or money deposited in bank accounts, into valuables that can be easily stored and moved. Jewelry in demand Precious stones are in demand, according to Christina Khoury, Operation Manager at Rossonero Jewelry and Watches, “GIA certified diamonds priced above $50,000 are the most in demand,” said Khoury. Jewelry businesses are performing well considering the current climate, according to Joseph Himo, General Manager at Himo Jewellery. “Our sales decreased 50 percent since last October while sales of businesses of other sectors decreased 80 percent,” said Himo. Some clients are looking for specific designs, while others go to the showroom…

BUMIL ESD 105 Fire safe External: H 71.8, W 49.4, D 51.3 cm In-side: H 51.4, W 34.5, D 34.1 cm Weight 127 kg Digital, dial combination, or two key type lock system $795 DIPLOMAT 080EHK Fire safe External: H 69, W 40, D 40 cm Internal: H 87.5, W 52.5, D 57 cm Weight: 122 kg Digital locking system $1,096 SENTRY SFW205EVB Fire safe External: H 60.3, W 47.2, D 49.1 cm Internal: H 49.7, W 37.5, D 30.2 cm Weight: 57 kg Digital lock $550 EAGLE SAFE ES-065 Fire safe External: H74.3, W 54.9, D 50.7 cm Internal: H 51.9, W 39.8, D 34.6 cm Weight: 120 kg Digital and key lock $1,188…

Expertise France and Fair Trade Lebanon (FTL) analyzed the value chain of local tomatoes. The goal of the EU-funded project was to increase the competitiveness of local vegetables from farm to table. It analyzed the weaknesses and strengths of tomato cultivation and processing, and found that farmers have a lot of know-how in terms of cultivation, as well as access to equipment for harvesting and storage. But a number of significant weaknesses can be addressed. For instance, farmers are not applying pesticides in compliance with global standards, and many farmers wish to plant local seeds rather than imported seeds, even though local seeds are not immune to diseases in the region that can destroy crops. Cultivation costs are relatively high due to expenses associated with pesticides, additional power generation, and…

The USAID-funded LIVCD project worked with the private sector at different levels of the honey value chain to make honey processing more efficient and innovative. The project improved the technology and beekeeping practices of over 1,700 beekeepers in more than 70 villages. The overarching goal of the program was to improve the living standards of the rural population. USAID’s assistance covered equipment provision, the introduction of innovative agricultural practices, as well as training and access to markets. For instance, it helped to establish the country’s queen bee breeding center. USAID is now phasing out the LIVCD project, and in order to keep supporting this promising sector, the UNDP agreed to support the implementation of the recommendations set by USAID. UNDP is implementing the project in partnership with the Ministry of…

Several crops have recently been trialed by research centers and farmers, and have proved their ability to adapt and succeed. There is significant potential in these crops, mainly because most of them are rain fed. “Scarcity of water is increasingly becoming a hindrance for farmers. Farmers should look for alternative agricultures that are anti-drought,” said Mustapha Haidar, Professor at the Faculty of Agriculture and Food Sciences at the American University of Beirut (AUB). These crops are also in demand globally, and are maintaining very fair prices. As result it is feasible to cultivate them commercially on a large scale. Saffron Yasmina Wakim took the initiative to grow saffron a few years ago. She established Safran du Liban for saffron cultivation and distribution in the Bekaa valley. AUB was the first…

The agri-tech sector is a new introduction to the local market. It is a promising industry as it combines two features that have the potential to create a competitive advantage for Lebanon, namely the culinary arts and technical innovation. Berytech, the startup incubator and accelerator, introduced the first agri-tech acceleration program to the country in 2017. This program is funded by grants from the Dutch government. In addition to the Agrytech accelerator, Berytech has also launched an agri-food cluster to foster innovation among existing food companies. Berytech is also participating in agri-tech programs financed by the European Union. The startups that have graduated from the Agrytech Program span a wide spectrum of subsectors in the food industry, from ready-to-eat food with zero preservatives, to a wireless sensory network that helps…

$300 million needed immediately by industrialists to prevent collapse The Central Bank (BDL) must allow manufacturers to carry out bank transfers abroad of $3 billion per year in order to finance their imports of raw materials, said Fady Gemayel Chairman of the Association of Lebanese Industrialists. Industrialists need an immediate injection of $300 million to fund their imports, otherwise the sector will drift into a perilous deterioration, he said. According to Gemayel, the Governor of BDL has agreed to take quick measures to ease the importation of industrial raw materials following consultation with the Association of Banks. He called on the Governor to extend the facilitations offered by BDL to pharmaceutical factories, to help them finance their imports of raw materials, to the entire industrial sector. For each $3 billion…

Deficit wider than planned The fiscal deficit for 2019 will be much larger than expected due to the decline in revenues and the contraction in Gross Domestic Product (GDP), said the Ministry of Finance. Revenues in the fourth quarter of this year will be 40 percent below the LL5,000 billion ($3.3 billion) projected in the budget, it said. Projected revenues for the 2020 draft budget will be revised and consequently all budget figures will be modified. The government was aiming to reduce the deficit-to-GDP ratio for 2019 to 7.6 percent from 11.2 percent realized in 2018. The International Monetary Fund (IMF) said in its Country Report on Lebanon released in October: “IMF staff’s projection is that the budget measures will reduce the [2019] cash-basis fiscal deficit to around 9.75 percent…

The economy registered negative growth of almost two percent in 2018 according to newly released figures by the Central Administration of Statistics (CAS). The National Accounts report for that year shows that it was the first time ever, since the end of the civil war, that the economy registered a retraction. It has unveiled the outbreak of a recession that is likely to have lingered in 2019, and could be a harbinger of bad omens for 2020, in light of the further deterioration of economic and financial conditions. The 2018 recession arrived simultaneously with a rise in inflation, and thus heightened the risks of stagflation. GDP shrinks “This reflects the tough conditions experienced by the Lebanese economy in 2018, driving real growth into negative territory,” the CAS said in the…

With their savings trapped in bank accounts without an exit strategy, depositors have been scrambling to outsmart the capital controls system by transforming their funds into valuable assets, movable or fixed. They have used a number of ways, none of them comes cheap. Asides from a straight cash-out in banknotes or transfer abroad, all other mechanisms are suitable only for long term asset preservation, and should not be used by those in need of immediate liquidity. Turning deposits into valuable goods is not for everyone. It should be used by those who have a good understanding of the market conditions governing the transformed-to assets.…

Fine art is a true-and-tried alternative for asset preservation and ease of transport. Throughout the ages it has been used by collectors to preserve value and transfer wealth to their heirs. But it is an alternative only to those who know what they are doing. Resorting to fine art is good for those looking for long term conservation. It is not a good scheme for short term convertibility or financial speculation. Demand is stable “We have seen a flurry in demand for fine art,” said Nada Boulos, an art auctioneer and dealer. At Saleh Barakat’s two galleries, activity has remained stable. “We are not encouraging people to buy unless they are genuinely interest in the arts,” said Barakat. “One should buy art because of the interest in the works, not…

Demand for fine and antique carpets has increased. They are considered to be a work of art and a great investment for future generations. It is considered an investment. Caucasian carpets are the most in demand. High end carpet retailers offer a large stock in response to this new demand. There are few downsides to investing in high end carpets. However, the carpets do need to be properly cleaned on a regular basis and maintained. There is a good supply of carpets on the local market. Sales of mid-level carpets have not increased dramatically and discounts are available. Carpets can be stored and moved with relative ease. For clients seeking to make large investments, high end antique Caucasian carpets offer an interesting opportunity. Antique in demand “Demand for Caucasian carpets…

Demand for safes, used to secure cash and valuables, has increased dramatically in both residential and commercial settings. Buyers need to consider a number of alternatives, depending on the type of valuables the safe is intended to protect. Increasing demand According to Khalil Chehab, CEO at Chehab Security, the company’s sales of safes have increased 40 percent since November 2019. The company sells around 20 safes per week. Similarly, the sales of safes at Zod Security increased by 50 percent, according to Elie Chidiac, Senior Security Adviser at the company. Zod is selling three to five safe boxes on average daily since last month. “The majority of the customers want buy a safe to keep their cash at home,” Chidiac said. Sufficient supply Safes dealers were ready for the emerging…

At the end of 2019, the number of new apartments available for sale within Beirut, and the four surrounding cazas, fell, according to studies undertaken by InfoPro Research. Metn registered the highest number of sales, with Administrative Beirut recording the least. According to a comprehensive survey of the largest 100 developers in the country toward the end of January, demand spiked in December and January due to fears surrounding capital controls and a potential ‘haircut’. Developers reported strong sales during this period, which is supported by figures from the General Directorate of Land Registry and Cadastre (Cadastre). The Cadastre reported that these figures, which include all registered real estate transactions, represent the lowest level of sales since 2004. Beirut Beirut holds the largest stock of new apartments, and levels have…

Increasing competition in the agricultural sector has forced a number of non-profit organizations and enterprises to closely examine the way they do business and bring goods to market. By undertaking value chain analysis through several non-profit organizations, such as United Nations Development Programme (UNDP), United Nations Industrial Development Organization (UNIDO) and United States Agency for International Development (USAID), many industrial and agricultural institutions have managed to work more efficiently, reduce costs, generate larger revenues, and employ more people. Why value chain Value chain analysis is a significant tool that helps a company understand how it can add value to its products or services, thereby generating a wider profit margin. Several non-profit organizations have been analyzing the value chains of some products to identify the gaps and strengths of a specific…

UNIDO is working on a project, funded by the Italian government, to support the dairy sector and beekeepers across the country. UNIDO assessed the products’ market and the current challenges faced by dairy farmers and processors, and beekeepers working in cooperatives. It also assessed the support they need. The assessment pointed out the importance of product development for these producers. “We found a huge need for working with dairy processors to develop their products, and to integrate honey with dairy,” said Nada Barakat, Project Coordinator at UNIDO. Most refrigerators in supermarkets are filled with products from large companies. UNIDO also realized that most of the small factories are producing products that they inherited from their original founders. “Small processors need to differentiate their products to compete with large dairy companies,”…