Beirut bourse booms after bank stock sale
Total trading volumes at the Beirut Stock Exchange (BSE) reached 102.1 million shares in the first quarter, up 66 percent on the same period last year, while aggregate turnover totaled $1.3 billion, up 448.5 percent on the first four months of 2009.
Trading was bolstered by regional investment bank EFG-Hermes’ sale of its entire stake in Bank Audi in January — with a large stake picked up by former Prime Minister Najib Mikati’s M1 Group — and the private financial arm of the World Bank, the International Finance Corporation, picking up a 47.6 million common share in Byblos Bank.
Bank stocks accounted for 95.8 percent of aggregate trading volume on the BSE in the first quarter, followed by real estate stocks with 4.1 percent.
Lebanon had one of the highest software piracy rates (total pirated units/total units installed) in the Middle East and North Africa (MENA) last year, ranking fifth in the region and 39th globally, according to a survey by American software industry group Business Software Alliance. Piracy rates reached 72 percent last year, down from 74 percent in 2008 and 73 percent in 2007. Piracy related losses have increased however, from $44 million in 2007 to $46 million last year. Lebanon’s piracy rate was higher than the global average of 43 percent, the MENA rate of 64 percent and the Arab rate of 66 percent.
The MENA region still has one of the highest software piracy rates in the world, reaching $1.18 billion in losses in 2009, but dropped 7.7 percent overall on the previous year. Saudi Arabia tops the regional list, with $304 million in losses, followed by the United Arab Emirates with $155 million, Egypt with $146 million and Iraq with $129 million. Qatar posted the highest increase last year, with piracy losses surging 92.3 percent on 2008. Yemen, which has the lowest losses at $10 million, took the top ranking in the region with a piracy rate of 90 percent.
The survey covered business application software, operating systems, consumer-orientated software and local language software.
Iran and Hezbollah in spat over finances
Iran has reportedly put Hezbollah’s security chief Wafiq Safa on probation for “extravagant spending,” according to sources at intelligence information group Stratfor. In a May 5 release, the source claimed that Safa, the maternal cousin of Hezbollah Secretary General Hassan Nasrallah, has squandered more than $3 million on personal spending. This has reportedly put strain on Iran’s willingness to continue funding Hezbollah, following the exposure last September of disgraced Lebanese businessman Salah Ezzedine, who was affiliated with the party, for running a ponzi scheme worth as much as $1 billion.
According to Stratfor, Iran’s original intention was to dismiss Safa altogether, but Nasrallah reportedly appealed to Ayatollah Ali Khamenei and threatened to resign if his cousin was dismissed. Safa was a founding member of Hezbollah and is the party’s main contact with the Islamic Revolutionary Guard Corps.
Regional exports soar
During the 18th Arab Economic Forum, which brought 800 participants from 20 countries to Beirut in May, the Secretary-General of the Arab League Amr Moussa announced that Arab exports rose 20 percent last year to reach $1.5 trillion, accounting for 7 percent of international exports. Foreign direct investment (FDI) in the region also surged, reaching $100 billion in 2009, representing some 5.7 percent of total worldwide FDI. But while exports have risen, inter-regional trade is still under-par at $85 billion, which is less than 6 percent of total Arab exports.
Economic growth and lagging infrastructure
Minister of Finance Raya Hassan stated last month that economic growth during 2008 and 2009 “did not translate into results on the ground” in relation to employment and improving social affairs. She added that Lebanon has not made any significant advances in infrastructure development since the country was ruled by the Ottomans, pointing to a lack of progress in electricity and public transport.
Hassan added that two versions of an electricity sector reform plan had been submitted by the energy minister, but indicated that around $1.5 billion budgeted to cover losses in the sector did not include expenditures pertaining to barges — planned to be brought in to cover high demand this summer — or expenditure on natural gas from Egypt to run some of Lebanon’s power plants.
She added that although she was “100 percent” behind an increase in electricity fees. She added that it would take up to two years to complete the proposed upgrade of 600 megawatts at a slated cost of $796 million.
Hassan revealed that Value Added Tax (VAT) would not be increased from 10 percent to 12 percent this year, but could be in 2011. “Next year things will be different. If we want to increase expenditures [again] we will need to increase VAT,” she said.
The issue of the approximately $3.6 billion in pledges from donors at the Paris III conference was also discussed at the conference. Hassan said that $500 million was pending deployment because of “conditions placed upon” the telecom and electricity sectors, and $850 million is held up due to Parliament’s inability to pass the laws needed to free the money up for investment.
Speaking at a presss conference, Future Movement lawmaker Nabil de Freij asked Hassan not to send any more bills to Parliament, as they were currently backed up.
World Bank allocates $500 million for Lebanon reform
The World Bank has pledged $500 million to the Lebanese government with as part of an aid package to implement economic reforms over the next four years. Details of the package were disclosed during a meeting between the World Bank’s vice president of the Middle East and North Africa (MENA), Shamshad Akhtar, and Finance Minister Raya Hassan on May 19. “We renew our support for the coalition government to implement vital programs which will help achieve growth as well as tackle the effects of the financial crisis which hit the MENA region,” said Akhtar.
The aid is intended to fund economic reform, launch investment projects, create jobs and generate more balanced economic development throughout the country. To date, Lebanon has received $4 billion of the $7.6 billion of loans and grants pledged during the Paris III conference.
Industrial exports on the up
The global economic crisis may be cautiously subsiding, but Lebanon’s industrial exports are already experiencing double-digit growth, surging 24.6 percent to $866 million in the first quarter from $695 million in the same period last year. March was a particularly good month, with exports reaching $336 million, an increase of 55 percent on March 2009, according to data released by the Ministry of Industry.
Machinery and mechanical appliances formed the core of exports, at 18.82 percent, followed by pearls at 18 percent and precious and base metals at 14.32 percent. Switzerland remains Lebanese manufacturers’ top destination, accounting for 13 percent of all export trade.
Imports of industrial machinery also spiked, up 7 percent to $57.8 million in the first three months compared to last year. Italy was the main source of imports, with a 22.86 percent market share, followed by Germany with 21 percent and China at 15 percent.
Lebanon expects growth, but how much?
The Economist Intelligence Unit (EIU) has forecast that Lebanon will achieve 5.6 percent economic growth this year, while Central Bank Governor Riad Salameh said at the Arab Economic Forum that he expects to see 7 to 8 percent growth.
“We continue to follow the policy of controlling liquidity,” said Salameh at the forum, held in Beirut in May. “The cost of liquidity in Lebanon had a good outcome on the growth rate and reduced the volume of debt in private and public sectors,” he added.
The EIU predicts 5.3 percent growth next year, and raised its growth estimate for 2009 to 6.9 percent from an earlier 5.1 percent. It added that growth is being driven by the tourism sector, investment in construction, real estate and financial services. But the London-based research company was relatively cautious over its growth forecasts, given the lack of timely data for the overall economy outside of the banking and tourism sectors.
