Trade with Syria flips on its head
Lebanon’s trade dynamic with its neighbor has reversed since the start of the Syrian uprising in March 2011, according to research by international economic analysis provider IHS Global Insight. In the first quarter of 2012 exports from Lebanon to Syria were valued at LL189 billion ($126 million), which amounts to an 18 percent increase on the same period last year. This is most likely due to a shortage in Syria of consumer, agricultural and energy products as a result of the continuing internal conflict. This reverses a downward trend of such exports over recent years. Conversely, there has been a drop in the value of imports from Syria to Lebanon by 8 percent, comparing the first quarter of 2012 to the same period last year. Lebanon still has a trade deficit with Syria but this has been significantly reduced in comparison to recent years. The report also notes a surge in the smuggling of fuel from Lebanon to Syria, reversing a historic trend of such smuggling in the opposite direction. The analysis also suggests that the growth in illegal smuggling and black market trading means the official trade figures understate the changes in the trade dynamic between Lebanon and Syria.
First, and perhaps last, step toward electoral reform
The Council of Ministers, Lebanon’s cabinet, approved a highly contentious electoral reform law that is based on proportional representation and would divide Lebanon into 13 districts in the upcoming 2013 elections. The law passed through the cabinet despite opposition from three ministers from Walid Joumblatt’s Progressive Socialist Party (PSP) and Minister of State Ali Qanso. In the proposed law the electoral districts are divided with two for Beirut, two for the south, three for the Bekaa, three for North Lebanon and three for Mount Lebanon. The proposed legislation would see an additional three Christian seats and an additional three Muslim seats for expatriates. The law will have to pass in Parliament where there is considerable opposition, most notably from the Future Movement, the PSP, the Lebanese Forces and the Kataeb. [see page 80]
EU aid for agriculture
The European Union (EU) has committed 1.8 million euros ($2.2 million) in technical assistance for Lebanon’s agricultural sector and local development projects. The aid is intended to strengthen the Ministry of Agriculture’s capacities to design, implement and monitor agricultural policies; improve quality and competitiveness of agricultural produce; and increase the economic development of farmers and agricultural cooperatives through easier access to credit. The EU is also extending 2.5 million euros ($3.1 million) in grants to nine municipality clusters in northern Lebanon for local development projects, tackling issues such as education, water and sanitation, health, irrigation, agriculture and waste management. The money comes as part of an 8 million euro ($10 million) development program for the region. Elsewhere, the Islamic Development Bank signed a loan agreement for $26.8 million to finance the second phase of the West Bekaa Wastewater Project, and extended $180,000 toward technical assistance for the project’s implementation. Finally, recent figures show that the L’Agence Francaise de Development’s (AFD) commitments to Lebanon in 2011 totaled 71.4 million euros ($89.3 million), constituting a 54 percent increase on 2010. Lebanon accounted for 6.4 percent of AFD’s aggregate commitments of 1.1 billion euros ($1.37 billion) to the Middle East and North Africa last year, making it the fourth largest recipient in the region.
2011 on the books
The Ministry of Finance published its annual review for 2011, which showed a contraction in the fiscal deficit, a fall in the debt-to-gross domestic product ratio and a fall in tax revenues in comparison to 2010. The total fiscal balance registered a deficit of LL3.53 trillion ($2.35 billion), or 5.9 percent of GDP, in 2011, down 19 percent from LL4.36 trillion ($2.91 billion), or 7.8 percent of GDP, in 2010. A 70 percent increase in non-tax revenues helped offset a minor decrease in tax revenues, resulting in an overall increase in revenues by 11 percent to LL14.07 trillion ($9.38 billion). The significant rise in non-tax revenues was primarily a result of a 136 percent increase in transfers from the telecommunications surplus, which reached LL2.26 trillion ($1.5 billion) in 2011 against LL957 billion ($638 million) the year before. The decline of around 1 percent in tax revenues was likely due to a slowdown in economic activity, less growth of private sector bank deposits and the decision in February 2011 to reduce the excise on gasoline by LL5,000 ($3.33) per 20 liters, which reduced revenue from this tax by LL498 billion ($332 million) from 2010 to 2011. Total expenditures rose a slight 3 percent from the 2010 level to reach LL17.6 trillion ($11.73 billion), amounting to 29.4 percent of GDP. This was due to a 7 percent increase in primary expenditures and a 4 percent decrease in interest payments stemming from the low international interest rate environment.
Numbers behind the wheel
The number of newly registered cars in the first six months of 2012 stood at 16,850, an increase of 10.8 percent on the same period last year, according to the Association of Car Importers in Lebanon. The breakdown by region of origin shows Korean cars came top of the pops with 7,707 registrations, amounting to an 18.5 percent increase on the previous year. This was followed by Japanese cars with 4,688, European autos with 3,280 registrations and American rides with 1,023. Korean cars’ continued strong performance in Lebanon was based on the success of Kia and Hyundai, who came first and third, respectively, in terms of the registration of cars for different manufacturers. Japan’s big sellers were Nissan and Toyota, coming in second and fourth, respectively. In the top 10 brands the only American name was Chevrolet, which came in fifth, with the rest being European makes Renault, Volkswagen, Mercedes, BMW and Peugeot.
Oil, precious gems, skew trade figures
The trade deficit reached LL13.1 trillion ($8.7 billion) in the first half of 2012, up 18 percent on the same period in 2011. The deficit was the highest in five years in terms of both value and volume, and was caused by a rise of LL2.4 trillion ($1.6 billion) in imports and an increase of just LL82.5 billion ($55 million) in exports year-on-year. The rise in imports was mainly for oil and mineral fuels, which increased by 89 percent year-on-year to LL4.8 trillion ($3.2 billion), while non-hydrocarbon imports grew by 1.8 percent to LL11.6 trillion ($7.7 billion). The increase in exports was mostly driven by the rise in international gold and silver prices, with exports of unwrought gold, unmounted diamonds and precious metals increasing in value by 23 percent, or LL237 billion ($158 million), and decreasing by 2 percent in volume in the first half of the year. Excluding these items, exports dropped in value by 7 percent, or by LL153 billion ($102 million). Exports to Arab countries increased by 10 percent, largely due to a rise in exports to Syria by 33 percent, and to Saudi Arabia and the United Arab Emirates by 18 percent each. But the increase was patially offset with a 32 percent year-on-year drop in exports to Iraq, mainly due to political unrest in Syria, which represents Lebanon’s only overland trade route for exports. Re-exports totaled LL289.5 billion ($193 million) in the first half of 2012, compared to LL568.5 billion ($379 million) in the same period last year.
