A deep-felt sense of relief descended on Lebanon as soon as Lebanese politicians inked the Doha Agreement on May 21, ending nearly 18 months of political deadlock. It was remarkable to see what a simple signature can do for life on the ground. Within hours, the opposition’s makeshift camping that had paralyzed downtown Beirut was dismantled and the army removed most of the checkpoints, which had emphasized the war-like mood in the Lebanese capital.
In tune with the sudden upbeat mood, bubbly pop diva Haifa Wehbe’s concert one day later launched the rebirth of downtown Beirut, which in the following weeks gradually regained some of its former glory. If one were to stroll through the city today, seeing the bustling restaurants and terraces, one can hardly imagine that only weeks ago barbed wire separated soldiers from demonstrators.
Although by late June Lebanon’s politicians had still not agreed upon the make-up of the new cabinet, the sense of relief following Doha was rapidly translated into a variety of positive economic indicators. Not only did shops and restaurants in the downtown see the return of some clientele, but stock prices soared, over one million tourists are expected in summer, while the banking and real estate sectors, which suffered the least during the past three years of political turmoil, are likely to pick up pace.
Even the World Bank is upbeat. In its latest Global Development Finance Report, the financial watchdog predicted Lebanon’s GDP to grow by 3.5% in 2008. The report pointed out that Lebanon recorded a meager 1% growth in 2007, while the average growth rate in the MENA- region amounted to 5.7%. However, if Lebanon is able to maintain political stability, growth could amount to 4.5% and 5% in 2009 and 2010 respectively.
Solidere stocks swing upward
One immediate winner of the Doha Agreement was the Beirut Stock Exchange (BSE), and especially Solidere. Most recent trading at the BSE concerned Solidere shares, which should not come as a surprise, as Lebanon’s largest property firm manages part of downtown Beirut.
While the price of Solidere shares amounted to some $22 in early May, it climbed to over $31 within hours of signing the Doha Agreement. On June 20, the price of Solidere A and B shares closed at $37 and $36.7 respectively. There was more good news regarding Solidere, as the firm in June announced a net profit of $155.9 million in 2007, up 18% compared to just a year earlier.
If the Doha Agreement holds, and downtown Beirut remains open to the public, Solidere share prices are likely to climb further, certainly seeing the upcoming opening of the Beirut Souks, which is to add some 100,000 square meters of retail space to the Beirut market. In the near future, it will also embark upon sale of the reclaimed lands at the Normandy Bay.
Solidere was not the only firm to fare well on the sudden wave of optimism. Hot on the heels of the Doha Agreement, Audi shares increased by 5.4% to $96.95, Bank Audi GDR shares by 10% to $101.80, Byblos Bank shares by 10% to $2.76 and Blom Bank GDR by 7.7% to $106.20. By the end of June, Bank Audi shares still stood at $95, while Byblos Bank shares traded at $2.80.
Although the Doha Agreement and political stability will surely do it no harm, the Lebanese banking sector has proven quite resilient in recent years. In 2007, combined assets increased by some 10% to $82.3 billion, while deposits amounted to $67.3 billion. Foreign currency and gold reserves also increased. In fact, a recent report by investment bank EFG Hermes ranked Lebanese banks among the least risky and most attractive in terms of growth forecasts in the Arab world. Admittedly, EFG Hermes may not be entirely impartial, as it is in merger talks with Bank Audi, which has been the main cause of the recent price hike.
Property prices forge on
Likewise, the real estate sector has so far held its ground. According to Ramco real estate advisers, prices increased by some 30% in 2007 and 25% in the first quarter of 2008. Although no major new projects were announced, numerous residential buildings are being constructed in and around Beirut. The ongoing construction activities may be illustrated by the fact that, according to the Lebanese Central Bank, cement deliveries in 2007 went up by 8% and construction permits rose by 24% — although, putting this in context, the area under construction only increased by 4% to 9 million sq. meters.
Again, if political stability will prevail, the construction and real estate sectors are likely to expand. Situated in downtown Beirut, the Landmark Tower and Beirut Gate, two projects with a combined value of some $2 billion that were halted due to the political deadlock, are likely to restart in the coming weeks.
Illustrative of the gradual return of investor confidence was arguably the return of Khalaf Habtoor, founding father and chairman of the Emirati Habtoor Group, who invested hundreds of millions in two hotels and an amusement park. Last year, Habtoor publicly slammed Lebanese politicians and authorities for failing to provide security. This June however, he was all smiles again during an animated re-opening of one of the hotel’s restaurants.
Yet it is not just the region’s business elite that has returned, or may do so in the future. Lebanon’s Tourism Minister Joseph Sarkis announced to expect between 1.3 million and 1.6 million visitors to flock to Lebanon this year, compared to some 1 million in the previous two years combined. His positive outlook for the summer was confirmed by the Lebanese Hotel Owners Association, which claimed an increase of 30% in hotel bookings by the end of June compared to the previous year.
“As soon as the Doha Agreement was signed, the phone started ringing and the summer looks very promising,” said Rita Chbat, communications executive of Mövenpick Hotel & Resort Beirut. Chbat defined 2005 as “difficult yet healthy,” 2006 as “staggering” and 2007 as “somewhat challenging.” Chbat’s tempered optimism was shared by her counterpart at the Phoenicia InterContinental Hotel, Michelle Mallat, who confirmed that the phone had not stopped ringing and many reservations were made, though could not give any occupancy rates.
Return of the tourists
Figures collected by Lebanon’s Ministry of Tourism indicate that the number of tourists to Lebanon totaled 277,054 in the first quarter of 2008, up by 2.6% from the same period of 2007. It should be noted that 2007 recorded a 20% dip compared to the first four months of 2006 when the number of tourist arrivals had significantly picked up compared to 2005, the year Rafik Hariri was killed. The number of Arab tourists amounted to 90,394 in the first quarter of 2008.
According to Nizar Khoury, commercial manager at Lebanon’s carrier Middle East Airlines (MEA), reservations were picking up fast. Khoury said to expect a 20% increase in passengers to Lebanon from last year’s 450,000 to 500,000. As reservation numbers are picking up even day-to-day, it could even be a 30-40% increase over the summer.
The bulk of tourists coming to Lebanon not only consist of Gulf nationals but also Lebanese expatriates, who like to spend the summer on their home turf. At times, they have a second nationality and may be registered as being French or American. The majority of tourists in 2007 were in fact Lebanese. While tourism accounted for up to 20% of Lebanon’s GDP before the Civil War, it is thought the sector could contribute up to 12% of GDP, again, if the country is able to maintain calm and stability.
With an eye on the expected rise in tourist arrivals, car rental companies are have witnessed a surge in demand. Milad Hanna, marketing manager of City Car Rental, said that 90% of their some 300 rental cars had already been booked for the summer, which was a significant increase compared to last summer.
The expected wave of tourists will no doubt be welcomed by shops and restaurants in the downtown area, as they arguably suffered the most from the 18-month political blockade. While there are over 100 restaurants in downtown Beirut; some 30 to 40 have reportedly closed in the past few years. Likewise, the cultural festivals of Baalbek and Beiteddine will be delighted by the increased stability.
For two consecutive years, the famous summer festivals were cancelled, yet this year they are firmly back on the agenda. The season will be opened in downtown Beirut on July 27 by the high-pitched voice and happy tunes of Mika, an internationally acclaimed pop idol of Lebanese descent. And so the Doha message may be clear: after three failed summers, the Lebanese will be celebrating this one and, honestly, who can blame them?