A curb on oil exploration
The King of Saudi Arabia has made a royal decision to halt further exploration of oil and gas in the world’s largest crude exporting nation. The announcement was reported in early July by the official Saudi Press Agency and quoted King Abdullah bin Abdul Aziz on his way to a cabinet meeting as saying: “I told them that I have ordered a halt to all oil explorations so part of this wealth is left for our sons and successors, God willing.” A senior ministry official quoted by Zawya Dow Jones later explained that the statement was not an outright ban on further exploration, but rather was intended to express that future exploration would be carried out more “wisely.” Saudi Arabian oil reserves are the largest in the world and stood at 260.1 billion barrels at the end of 2009, according to the state-run Saudi Aramco.
IFF blasts Lebanon’s budget
The Institute of International Finance (IIF), the global association of financial institutions, has criticized the 2010 budget proposal and suggested that Lebanon has missed an opportunity to improve its public finances. “The 2010 budget does not aim for a significant primary surplus that could have been achieved under the continued strong economic growth and implementation of the long-delayed reforms. Avoiding complacency and building consensus on reforms combined with continued stable political environment could sustain rapid growth beyond 2010 and bring down government debt to more sustainable levels,” the IIF stated in a country report on Lebanon. The report cautioned that the favorable economic conditions of rapid growth, low global interest rates and abundant liquidity in the banking sector were not likely to continue in the medium term. The IIF also advocated raising the Value Added Tax (VAT) from 10 percent to 12 percent, as well as removing exemptions on precious and semiprecious stones, and on yachts and other excursion or sports sailboats that currently do not pay VAT.
Consumer confidence confusion
The three most trusted indices measuring consumer confidence in Lebanon show differing results for the second quarter of 2010, according to BLOM Bank. The first of the these studies, conducted by Bayt.com, reported that Lebanon’s consumer confidence index (CCI) increased by 7.6 points in quarter two of 2010, leading the region in growth. According to the same survey, consumers in the UAE, Kuwait, Saudi Arabia, Egypt and Bahrain are losing confidence in their countries’ economies and their own earning and spending futures. Qatar and Morocco showed modest growth in their indices. The other two surveys, conducted by Ara’a Research and MasterCard, both showed a drop in consumer confidence in Lebanon. Ara’a’s index saw Lebanon drop 15 basis points to hit its lowest level since October 2009. MasterCard’s study showed an even more dramatic plunge, with a 30.74 percent year-on-year drop in consumer confidence for the first half of 2009. MasterCard’s index also demonstrated pessimism in the other Middle East and North Africa countries, with the regional index dropping 7.11 percent. BLOM’s analysis of these contradictions led to the conclusion that CCI studies are highly subjective and should be observed with caution, as the size and socio-economic makeup of the sample can have a significant affect on the outcome.
Lebanon tops FDI-to-GDP table
Lebanon attained the highest ratio of Foreign Direct Investment (FDI) to GDP in the Arab world last year, according to recent figures issued by the Arab Investment and Export Guarantee Corporation, a body that provides insurance coverage and export credit. The figures show that FDI to (estimated) GDP in Lebanon in 2009 reached 14.3 percent, up from 12.2 percent in 2008. The total value of FDI in Lebanon during 2009 also increased 33 percent on 2008, coming in at $4.8 billion. The figure also constitutes the fifth highest FDI by value in the Arab world during 2009, in contrast to aggregate figures that saw FDI in the Arab world experience a 15 percent year-on-year decline. FDI inflows to Lebanon accounted for 6 percent of the total $80.7 billion dollars registered. Saudi Arabia took the lion’s share of FDI last year, making up 43 percent of the total at $35.5 billion dollars.
No national future for pipe firm
Future Pipe Industries sal, the Lebanese subsidiary of the Dubai-based Future Pipe Industries group, announced that it had closed its operations in Lebanon. The company, which produced pipes and rubber gaskets, was established in 1995 by Lebanese businessman Fouad Makhzoumi and had an annual turnover of $830 million in 2008. Future Pipe Industries was the largest private sector employer in the Akkar region with hundreds of employees. The company attributed its decision to close up shop to adverse operating conditions in Lebanon. The firm still has 10 other plants on five continents and employs some 4,500 people. It derives 76 percent of its sales from the Gulf Cooperation Council.
Lebanon and Syria’s bilateral bonanza
In another chapter of the Treaty of Brotherhood, Cooperation and Coordination signed in 1991 under then president Elias Herawi, Lebanon and Syria have embarked on a new set of agreements that come on the back of Lebanese Prime Minister Saad Hariri’s most recent visit to Damascus. The 18 agreements also took place amid the backdrop of heightened tensions over the Special Tribunal for Lebanon, which according to Hezbollah’s Secretary General will implicate members of the party and not, as was originally expected, Syria. Hariri’s Syrian counterpart Mohammed Naji Otary stated: “What links Syria and Lebanon is stronger than bets of enemies and conspirators.” Hariri was quoted by the agency as saying: “The interest of Syria and Lebanon comes before everything…. we have to prepare for the next stage through achieving economic rapprochement to strengthen our economy in the face of the global financial crisis and other future challenges.” The agreements themselves are comprised formal economic sector cooperation documents, memorandums of understanding, executive programs and protocols and cover the fields of economy, trade, education, agriculture and tourism among others, and are signed on the ministerial level, according to the Syrian state-run news agency SANA.
The countries’ respective finance ministers inked a protocol agreement on avoiding double taxation between the two nations, which also covered ways to address tax evasion in relation to income taxes. The ministers also signed an agreement on encouraging investment and memorandum of understanding on customer protection along with their counterparts from the respective ministries of economics and trade. A total of four agreements were also signed by the agriculture ministers of the two nations, which will unify regulations for licensing and importing of veterinary medicines and agricultural pesticides, as well as covering animal and plant protection. In addition, the two education ministers signed an executive program and two agreements covering various levels of education and research. The ministers of culture and tourism also followed suit, inking a three-year executive program and a further cooperation agreement respectively. Not to be outdone, the ministers of health, transport, justice, interior and environment also approved several agreements. Minutes of the meetings of the joint ministerial and technical committees who met after the accords had been signed show that they agreed to establish mechanisms to form a joint committee for foreign and economic affairs, implement a future security and defense agreement, link the two countries by rail through a Tripoli-Homs-Riyaq-Damascus railways and establish a joint border industrial zone, in addition to demarcating borders between the two nations, and the creation of a Syrian-Lebanese Business Council. The Syrian premier also stressed that the establishment of a high-level “cooperation committee” tasked with overseeing the implementation of a free trade agreement between Lebanon, Syria, Jordan and Turkey, was of the utmost importance. “We want the Syrian-Lebanese relationship to be an example for the joint Arab market, aiming to widen this cooperation to include other Arab countries,” Hariri added.
