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by Executive Editors

United States takes bulk of Lebanese financial sector’s foreign investment

The financial sector in Lebanon had a $7 billion exposure to foreign debt and equity securities as of the end of last year, representing an 11 percent increase on 2010, according to the central bank. The bulk of the exposure was in long-term debt securities (56 percent) followed by equity securities (42 percent) and a minimal exposure to short-term debt securities (2 percent). For the investment in equities, the United States received the bulk of the flows accounting for 58 percent of the total followed by the United Kingdom at 12 percent, Bahrain at 8 percent, France at 4 percent and Saudi Arabia at 3 percent. For the long-term debt securities, the US and the UK were again in the lead accounting for 31 percent and 22 percent of the total investment respectively. They were followed by the United Arab Emirates and France at 9 percent and 4 percent, respectively. As for short-term debt securities, China accounted for the majority at 38 percent of the total investment.

Beirut most expensive Middle East city for expats

Beirut is the most expensive city for expats to live in the Middle East, according to consultancy firm Mercer’s 2012 Worldwide Cost of Living Survey, which ranks 214 cities. Beirut ranked 67th — up eight spots on last year (read more on cost of living in Lebanon in our report on page 29). Abu Dhabi, which was ranked the most expensive in last year’s survey, dropped to second spot this year. It was followed by Dubai, Amman and Riyadh. The survey took into account the prices of over 200 factors from housing to food and clothing to transport. Fuelled by a higher yen against the dollar, Tokyo was ranked the most expensive city worldwide, displacing Angola’s capital Luanda. Luanda was followed by another Japanese city, Osaka for the third spot. Moscow and Geneva came in fourth and fifth respectively. Paris, Amsterdam, Rome and London dropped in the rankings on a weaker euro, higher unemployment and falling incomes. Karachi, Pakistan’s largest city, was the cheapest for expats to live in among the 214 cities surveyed.

World Bank raising $500 million for the Middle East

The World Bank is looking to raise $500 million for a fund dedicated to the Middle East and North Africa region to take advantage of investment opportunities following the turmoil in the Arab world, according to Reuters. The International Finance Corporation (IFC), a unit of the World Bank focused on supporting the private sector in emerging economies, will set up the fund, into which it will inject $100 million. The fund’s first closing is expected in the next three months. The IFC, which has already invested $3 billion in the region since the beginning of the turmoil, is investing another $2.2 billion to $2.4 billion over the next year. The IFC intends to increase lending by 20 percent to Europe, Middle East and North Africa, to reach a total of $6 billion this year.

Lebanese loans on the rise

Outstanding loans to the private sector held by the banking sector in Lebanon reached $44 billion at the end of 2011, up 13 percent relative to 2010, according to the central bank. The bulk of the increase went toward housing loans, up 33 percent year-on-year to stand at $6 billion (see page 68). The construction sector recorded $7 billion in loans, up 13 percent on 2010. The manufacturing sector was up the same amount, standing at $5 billion. Services and trade loans increased 10 percent year on year and amounted to $15 billion. The agricultural sector accounted for a meager $426 million in loans, increasing by 16 percent relative to last year. The central bank also recently released data on the number of cleared checks for the first five months of the year that rose by $5.29 million, up from a similar rise of $5.23 million during the same period last year to come in at $28.75.

Fitch downgrades Egypt

On the eve of the presidential elections, Fitch, one of the top three global credit ratings agencies, downgraded the long-term foreign currency rating on Egypt to B+ from BB-. The outlook on the rating is negative, which implies that it could be downgraded further in the next 12 to 18 months. “The downgrade and negative outlook reflect increased uncertainties surrounding the political transition following yesterday’s ruling by the Supreme Constitutional Court to annul parliamentary elections and dissolve parliament,” said Richard Fox, head of Fitch’s Middle East and Africa sovereign ratings. Standard & Poor’s, another of the top three rating agencies, has a B rating on Egypt which is one notch lower than Fitch’s; Moody’s has a similar rating at B2. Mohamad Morsi of the Muslim Brotherhood was declared Egypt’s new president in the country’s first democratic presidential elections, gathering some 52 percent of the votes. His rival, Ahmad Shafik, Egypt’s former prime minister under deposed president Hosni Mubarak’s rule, gathered around 48 percent.

Qatar invests in French hotels, China and gold

Qatar Investment Authority (QIA), the country’s sovereign wealth fund, is continuing its spending spree, this time deploying $2 billion for a 49 percent stake of billionaire Eike Batista’s AUX gold business. The sale follows the decision by EBX Group, the holding company, to shelve plans to take the company public. Back in October, Batista, Brazil’s richest man, had claimed that AUX holds 7.2 million ounces of gold reserves following the acquisition of Vancouver based Ventana Gold for $1.05 billion in March of last year. QIA has also requested approval for a license and a $5 billion quota for investments in China under the nation’s Qualified Foreign Institutional Investor program (QFII). It aims to deploy the capital mainly into the equity markets. Qatar is also set to acquire four French hotels from American hotel group Starwood Capital, though no details on the transaction were available as Executive went to print. The hotels to be purchased include the renowned Martinez hotel in Cannes on the French Riviera and the Concorde La Fayette in Paris.

Top three winners of “Grow My Business” competition announced

A competition pitting Lebanese start-ups against each other for the best business plans to enhance growth of their companies ended with the announcement of the three winners. The top prize of LL50 million ($33,000) went to ADTech, an electronics retailer start up. The second prize, LL20 million ($13,000) went to Oliver Tree, which develops products based on olive oil. The third prize, LL10 million ($6,600), went to Wixel Studios, a developer of web games, web animations and websites. The jury was composed of members of the Beirut Traders Association (BTA), MIT Enterprise Forum-Pan Arab Region and Bank Audi. “Our aim is to create employment opportunities,” said Hala Fadel, chair of the MIT Enterprise Forum of the Pan-Arab region.  Nicolas Chammas, chairman of BTA, added that, “The purpose of this competition is to give a tangible added value to small-and-medium-sized companies, to uplift the professional standards of the commercial sector as a whole and to contribute to the sustainable development of the national economy.”

Lebanon issues $2 billion Eurobonds

Three Eurobonds worth a total of $2 billion were issued by Lebanon’s Ministry of Finance for the purpose of redeeming early and cancelling treasury bills in Lebanese lira held by the central bank. These Eurobonds will be listed on both the Beirut Stock Exchange and the Luxembourg Stock Exchange. The first Eurobond, worth $800 million with a June 2025 maturity and a 6.25 percent coupon, and the second Eurobond worth $700 million with a June 2018 maturity and a 5.15 percent coupon, will both be exchanged for five-year T-bills maturing in 2016 with a 6.18 percent coupon. The third and final $500 million Eurobond, maturing in June 2015 with a coupon of 4.1 percent, will be exchanged with five years T-bills similar to the ones of the first two Eurobonds as well as with three year T-bills maturing in 2015 with a coupon of 6.48 percent.

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Executive Editors

Executive Editors are the collective voice of the magazine. Stories written by Executive Editors are the culmination of discussions, brainstorming, research and information-gathering by our editorial team. Over decades, our editorial team has applied a blend of seasoned expertise and a discerning eye to bring you insightful and engaging and substantive reads that eschew sensationalism.

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