July 2005. London. Applying for trade postings in British embassies in Damascus, Beirut and Amman, I am delighted to get my first choice — Beirut. Despite the instability sparked by the assassination of Rafik Hariri that year and a spate of subsequent attacks, Lebanon seems a good choice for a commercial posting. I have been visiting the country since 2003 and been impressed with Lebanese business professionalism. There is energy and dynamism in the air, and a feeling of excitement that Beirut could once again become a true business hub for the region. There is a good team at the embassy, and from my visits it is clearly also a great place to live — the nightlife, natural beauty, skiing, the food, the people. I can’t wait — I have five months to prepare for a January 2006 start.
February 2008. Beirut. July 2005 seems a long time ago. It hasn’t quite worked out as expected. I have learned new and unexpected skills — evacuating our nationals in July 2006, counselling businesspeople trapped by riots in January 2007, emergency business planning in response to cancelled events, and dealing with regular disruption to everyday life. Thankfully, my job is not to analyze Lebanese politics, but I share the frustrations of the local business community at the seemingly endless stalemate which holds them back. It affects me personally, too — I say reluctant goodbyes to Lebanese friends leaving for better paid jobs in more stable countries, and feel sorrow for those who have lost immeasurably more than just their business.
For UK companies it has also been a difficult time. Along with other western countries, Britain advises against all but essential travel to Lebanon. This affects insurance cover and is a major factor for potential visitors. Some international companies have left for more stable environments, and even mentioning the words ‘Lebanon’ or ‘Beirut’ to some people seems to awaken almost dormant fears from the bad old days. It is demoralizing for my team, so I can only imagine what it is like for those Lebanese who have worked so hard to build up their businesses only to see their hopes of success and prosperity dashed.
So what’s the point of being here at all? The surprising truth is that British exports continue to do extremely well in Lebanon and UK-Lebanon business links are growing. Although final figures are not yet available, it looks as though 2007 will be an all-time record for UK-Lebanon trade — with two-way commerce approaching $500 million (up well over 15% in 2005 — which was itself a record year). And in a complicated political and economic environment, companies making decisions about working in Lebanon need our advice more than ever. And there are still companies who have identified new opportunities and are seeking to enter the market.
Like Lebanese businesses, my section — known as UK Trade and Investment (UKTI) — has adapted to the ‘situation’. We try to ignore political and security events outside our control and concentrate on where we can make a difference. We focus less now on promoting the Lebanese market in the UK — where potential exporters have a wide choice of easier options. We have also reduced our focus on major set-piece events (trade missions, exhibitions, etc.) which we cannot say with any certainty will be able to go ahead.
Instead we have started to develop much better contacts with British companies already in the region, mainly in the Gulf. Once successfully established in the Middle East, these companies start to look at opportunities in other markets in the region. UK companies see Lebanese companies and franchises flourishing in the Gulf, and want to take a closer look at Lebanon — to see beyond the newspaper headlines. In my last trip to Dubai in late January, I had no fewer than 24 pre-arranged meetings with UK companies visiting the Arab Health exhibition who wanted to talk to me about the Lebanese healthcare market. Many of these are following up with specific requests for further information or planning to visit.
But it is not so easy for a UK company to come to Lebanon in the current circumstances. So we often find ourselves commissioned to undertake a piece of work on behalf of a British company — to find an agent or distributor, or to do a piece of research which they would normally do themselves. We have successfully linked several British companies with local partners without them needing to set foot in the country. And we are developing better links with other regional UK embassies to provide a more joined-up service to UK companies already in the region. Beyond this we are still taking key Lebanese businesspeople to the UK to meet UK suppliers. In 2007, this included delegations from the power sector, the environment (solid waste) sector, ICT, financial services and security sectors.
The bottom line is that the Lebanese consumer has, despite everything, continued to consume UK products and services — in greater quantities than ever before. This could be specialist building supplies to feed the booming real estate market, consultancy for the banking sector, security consultancy, or simply medical supplies or food and drink — nearly $20 million of Scotch whisky is exported to Lebanon each year! And the big infrastructure projects such as power stations, refineries, water and wastewater, etc., will all need to go ahead at some point, so we try to position UK companies to be ready for when these are launched.
The recent strategy devised by UKTI HQ in London has been to focus on high-growth emerging markets, moving away from the traditional European and North American areas. The big names are obvious — China, India, Brazil, etc., and in the Middle East the focus is on the UAE, Saudi Arabia and Qatar. But other smaller markets are not ignored — and the potential in markets like Lebanon is clear. Although conflict and other incidents have sometimes scuppered plans to hold normal business activities, in reality the show goes on regardless. For local businesses, despite the fact that the economic situation is extremely difficult and many have been forced to close, others have been extremely successful. We need to be here to advise British and other companies to position themselves to meet the shifting demands.
Economically, as the IMF recently pointed out, Lebanon is ‘atypical’. Such a high debt-GDP ration should, according to standard models, have produced a debt crisis years ago. But the unique factors (strength of the banking sector, the state’s record in never defaulting, and the loyalty of depositors and investors) give Lebanon an advantage. Unless something drastic breaks the equilibrium (which cannot of course be ruled out), Lebanon will continue to maintain relative stability, and investors will continue to maintain a medium to long-term view. We try to bring these factors across to UK companies who are looking at the potential of the country.
One of the fallouts from the July 2006 conflict was that it forced the postponement of a visit that month from the Lord Mayor of the City of London after months of preparation on both sides. The Lord Mayor is one of Britain’s most prominent commercial representatives, representing the financial services industry in the UK. As Lebanon’s financial sector continues to develop a key role in the region, this visit would have brought the highest profile British commercial delegation for many years to Beirut. I take comfort from that fact that London is taking a relaxed view, and that the visit has been postponed rather than cancelled. I have no doubt that it will go ahead when the timing is right. Both Beirut and London have good stories to tell as hubs for financial and insurance services, and it is right that contacts are developed at the highest levels for the commercial benefit of both countries.
We also see a good future in the development of the creative industries, where again both London and Beirut are key centres of advertising, design, media and fashion, and we are working with our colleagues in the British Council to develop a strategy to move this work forward. Already in the last few months one British graphic design company, “afishinsea”, has successfully established itself in Beirut with UKTI help, and we are looking to assist more such ventures. We are also focusing on construction, power (especially renewable energy technology), healthcare and ICT, the latter of which should offer great opportunities in future years assuming the privatization of Lebanon’s telecoms sector goes ahead.
We have good support. While our Ambassador, Frances Guy, is necessarily focused on the political arena, she is also extremely enthusiastic about commercial work. In recent months she has been 45 meters up a crane at the Beirut Container Terminal (a real success story — run by a Lebanese-British consortium), visited the offices of several major importers from the UK, and toured several factories. We also work closely with key individuals from the British Lebanon Business Group — an informal network of British and Lebanese businesspeople which includes some of Lebanon’s most influential commercial decision makers.
So, am I optimistic about the future? The answer has to be ‘yes, but…’! I was lucky enough to be here in the first-half of 2006 when Lebanon really seemed to be booming. New mega-projects were being announced on a weekly basis, and while there were problems, it was possible to imagine that Beirut could regain its pre-civil war status as a financial and trade hub for the region. Much has been lost, and whatever happens it will take time to regain that momentum. But the underlying skills, dynamism, and creativity are still here, and there is significant pent up energy from investors waiting for better times. It is not a market for the fainthearted, but the rewards could be substantial.
Dominic James is the head of Trade and Investment at the British Embassy in Lebanon.
