Limited FDI in Lebanon for 2009
Foreign direct investment (FDI) in Lebanon remains relatively low despite a successful summer season and increasing bank deposits, according to the Investment Development Authority of Lebanon (IDAL), the Lebanese government institution that encourages development in the country.
Speaking to The Daily Star, Nabil Itani, IDAL chairman, predicted that FDI in Lebanon during 2009 will not exceed $128 million, attributing the figure to a drop in the price of oil and the corresponding lack of investment appetite from Gulf investors. “Total investments, including real-estate projects, are not expected to exceed $2.9 billion although we had a good summer season,” Itani told the newspaper.
Zain sells $13.7 billion stake
A group of Indian and Malaysian investors have successfully bid for a 46 percent stake in the regional telecom giant Zain. The share has been on offer for some time and there had been widespread speculation that it would be bought by Saudi Telecom (STC) or Etisilat telecom. Both companies denied they were seeking the stake on offer.
The group consists of the three Indian companies Vivasi, Bharat Sanchar Nigam and Mahanagar Telephone Nigam, as well as Indonesian business magnate Mokhtar al-Bukhari. The group will acquire an estimated 20 percent stake previously held by the Kuwaiti Kharafi Group, along with the shares of other smaller shareholders. The group will acquire the shares at a price of $6.97 per share, for a total value of around $13.7 billion dollars. The Vivasi group has said it will not sell-off Zain’s African assets. Zain operates in 24 countries in the Middle East and Africa.
Private Equity markets slow
A study conducted by the auditing firm Deloitte Abor Square Associates, a London-based investment consultancy, predicts a short-term decrease in activity in the regional private equity markets, but also forecasts long-term sustainability. The research compiled for the study was conducted between the summer of 2008 and the spring of 2009. The study, based on data compiled from more than 200 general partners (GPs) from various emerging markets, said that 83 percent of general partners in the Middle East and North Africa expect entry multiples to continue to decrease over the current year. Decreasing public market valuations, the global downturn and a drop in the amount of completed deals were identified as the principal drivers of this phenomenon.
Istithmar’s freeze
Dubai’s sovereign wealth fund Istithmar World, the investment arm of the government-owned Dubai World, has reportedly stated that it will halt investments as it undertakes a restructuring initiative. The fund owns several high profile companies, such as the luxury retailer Barneys — which has also been slated for sale by analysts and competing funds. Dubai World holds more than $59 billion in liabilities and is trying to persuade creditors and banks to restructure around $12 billion worth of debt. The total amount of public debt held by the emirate remains unclear due to a lack of transparency, though EFG-Hermes estimates Dubai’s total current debt at $84.7 billion.
Lebanon defense spending shoots up
Lebanon is expected to increase defense spending by 22 percent this year in light of the security incidents of the past few years, according to the Stockholm International Peace Research Institute. Total spending on defense is expected to increase to some $1.47 billion. The increase is consistent with the total increase in spending over the period from 1999 to 2008, with the largest increase registered in the 2007 budget following the July 2006 war with Israel. Figures from 2008 showed that defense spending reached a total of 5.1 percent of gross domestic product, placing Lebanon in a fifth place tie with Yemen globally in terms of military burden.
In terms of budget allocation, it is projected that the amount allotted to the Lebanese Army will increase by 20 percent to $905 million, accounting for 8.3 percent of the government’s total expenditure. Around 64 percent of the rise in the army’s budget will go to boosting salaries and wages in line with the recent increase in the national minimum wage. Lebanon currently receives the bulk of its military hardware from foreign donors.
IMF allots Lebanon funds
Lebanon received $298 million in foreign currency reserves last month under a new program established by the International Monetary Fund. The funding is part of the Special Drawing Rights (SDRs) program of the IMF which allots SDRs to member countries according to their existing quotas, which are based on their share of the global economy.
Lebanon had a total of $4.39 million in SDRs allocated to it before the decision was made. Now that the decision has been taken, Lebanon is ranked 90th and 15th in terms of cumulative SDRs globally and in the Middle East North Africa region, respectively. Lebanon’s foreign currency reserves totaled $22 billion at the beginning of August, with assets held in foreign currencies coming in at $25 billion at the start of September.
Saudis top tourist spending in Lebanon for first 8 months of 2009
Tourists from Saudi Arabia accounted for 21 percent of overall tourist spending in Lebanon for the first eight months of 2009, reported Global Refund, the value added tax refund operator. Saudi spending was followed by Kuwaiti, with 13 percent, Emirati at 12 percent, Syrian with 7 percent and Jordanian with 6 percent. 81 percent of the total spending went to Beirut, 14 percent to the Metn area, 3 percent to the Keserwan region and 1 percent to Baabda. A majority of total spending, 67 percent, was on fashion and clothing. Watches followed with 11 percent, followed by perfume, cosmetics and home and garden items with 5 percent each.
Iraq signs Diyala oil deal
The Iraqi government has granted permission for investment in the Al Mansoriya gas field in Diyala province, 57 kilometers northeast of Baghdad. The announcement comes three years earlier than anticipated, and is expected to provide additional electricity to meet burgeoning local demand. The director of the legal affairs department at Iraq’s oil ministry has also stated that a contract will soon be signed with a Japanese consortium, including Nippon Oil and Inpex, to develop the Nassiriya oil field. Total oil exports averaged 1.895 million barrels of crude oil per day during the first eight months of the year. Iraq opened its first bidding round to international investors in July. However, the bid was widely regarded as a flop with most international players put off by what they considered unfavorable terms.
Air Arabia’s Egyptian venture
The Sharjah-based low-cost carrier, Air Arabia, has announced that it will enter into a joint venture with the Egyptian travel and hospitality group Travco to launch a new budget airline with a start-up capital base of $50 million. The airline will be based in Egypt and consist of a fleet of Airbus A320s, similar to those currently in use by Air Arabia. The airline will also be managed by Air Arabia and serve the markets of Europe, the Middle East and Africa. Air Arabia has seen an increase of around 10 percent in its net profit totaling $24.5 million in the second quarter, with total revenue of $124.7 million, compared to $22.3 million in net profit in the second quarter of 2008.
