Lebanon’s financial system is over, says economy minister

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The Lebanese Economy Minister on Tuesday admitted his department can do little to stop the country’s steep financial decline, as he discussed the decision to make supermarkets display the rate-to-the-dollar at which goods are priced.

Amin Salam said the measure was introduced to guard against rampant price manipulation, as the national currency continues to plummet in value, sometimes by the minute.

Supermarkets will also be permitted to display the price of imported supermarket goods in dollars, with domestic products still priced in the national currency.

Mr Salam said shops must make the move due to the rapid swings in the value of the Lebanese pound which meant some were repricing goods several times each day.

The move will allow for greater transparency in how goods are priced, Mr Salam said, as some supermarkets “are taking advantage of the currency crisis and setting prices on a whim”.

“This way you can go to a supermarket and see the rate products are priced in,” he said.

But he said there was not much the ministry could do about the cost of basic necessities, given the rapid devaluation of the pound to the dollar — once pegged at 1,507 to $1 but now trading at about 87,000.

“If their rate is too high, you have the option of going to a different supermarket and seeing if they have a lower rate,” he said.

The latest measure is not a solution but could at least mitigate some of the effects of the currency fluctuations by regulating prices to prevent profiteering, Mr Salam said.

“It’s not ideal, nor is it what the nation should aspire to. But in the worst of circumstances, now at least this [measure] can protect citizens — even if just by 10 per cent,” he said.

The minister highlighted the lack of solutions to stem the free-falling Lebanese currency and the corresponding economic crisis, which has declined steeply since the first signs of collapse in 2019.

The disintegration has caused national banks to impose informal capital controls that severely limit access to people’s money and have rendered the local currency nearly worthless.

Import-reliant Lebanon must now pay for goods and services in US dollars, priced in the American currency then converted into Lebanese lira. Meanwhile, public sector employees and a significant chunk of Lebanese are still paid in lira, with some making the equivalent of $50 a month.

“Our country imports everything,” Mr Salam said, summing up the crux of Lebanon’s dilemma.

“There’s no other country in the world that imports more than 90 per cent of its goods. Even our domestic products are made using primary components that are imported … everything is priced on the dollar.

“The financial regime is over. It’s done,” he said. “Now we leave the currency to its fate.”


Lebanon’s business conditions hit four-month high in February

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Business conditions in Lebanon’s private sector improved in February to a four-month high, indicating a slower pace of deterioration, amid a relative increase in new orders and output.

The country’s Blom purchasing managers’ index (PMI), a measure of the strength of its private sector, rose to 48.8 in February, from 47.7 in January, its highest level since October.

A reading above the neutral level of 50 indicates growth while one below it points to a contraction.

“Lebanon seems to be stabilising as the latest PMI index improved noticeably, though still below the 50 threshold,” said Fadi Osseiran, general manager at Blominvest Bank.

“It is obvious that cautious positivity is driving the index, but not for long as the short-term positivity is facilitating the better-than-expected demand.”

However, the country’s political problems are taking a toll on the economy, piling pressure on the banking sector and denting business confidence amid political uncertainty, the data found.

Lebanon continues to be mired in its worst economic and financial crises in decades amid a political deadlock that has blocked the formation of a new government and the enactment of reforms required to unlock billions of dollars in aid.

“The problem in the country remains political as the presidential vacuum is taking its toll on the state, economy and, most importantly, it is pressuring the banking sector,” Mr Osseiran said.

“These developments only prove the extent to which the Lebanese crisis is inherently political at its core, and the solution lies in a political settlement that paves the way to stabilise and grow the economy for the periods ahead.”

Inflation in Lebanon hit an annual rate of about 124 per cent in January, official data showed.

Hyperinflation continued for the 31st consecutive month, led by the soaring communication, education, health, restaurant and hotel prices, as well as rising food, water and energy costs, the Central Administration of Statistics’ Consumer Price Index showed last month.

The CPI increased by about 8.43 per cent from December 2022.

Earlier this week, the country began to price goods in its supermarkets in US dollars as the value of the Lebanese pound hit new lows.

The move is an attempt by the Ministry of Economy to regulate flagrant price manipulation as the pound continues to depreciate rapidly.

Business confidence was subdued in February amid political uncertainty and price volatility, according to the PMI survey.

Overall input costs rose at the quickest pace in more than two and a half years last month as survey respondents pointed to unfavourable exchange rate movements against the US dollar.

As a result, selling charges rose at the second-fastest pace on record as companies tried to protect their margins.

The latest survey data showed a marked acceleration in overall input cost inflation, with operating expenses rising at their sharpest rate since June 2020.

The increase was mainly a result of surging purchase costs, which private companies linked to unfavourable exchange rate movements versus the US dollar.

Output prices increased during February at the second-fastest rate since data collection began in May 2013.

While new business orders fell at the softest pace in four months, weak client purchasing power continued to restrict new business wins, according to the survey.

However, private sector employment levels rose for the first time in seven months, although marginally.

Companies continued to work through their backlogs, with outstanding business volumes falling for a sixth consecutive month.


What is Lebanon’s Mecattaf case and why is Riad Salameh set to be quizzed?

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Another judicial case involving embattled Central Bank Governor Riad Salameh has recently caught public attention in Lebanon. The Mecattaf money transfer company investigation involves allegations of money laundering, corruption and influence peddling.

In the latest development, Mount Lebanon First investigating judge Nicolas Mansour has set hearings on April 3 for Mr Salameh and several others, the judge confirmed on Monday to The National.

The President of the Banking Control Commission, Maya Dabbagh; staff of Mecattaf; chief executive of the Lebanese bank SGBL, Antoun Sehnaoui; and employees of PricewaterhouseCoopers (PwC) which is Mecataff’s audit company, will also face hearings.

The case, marked by the death of Mecattaf’s chief executive from a heart attack in the midst of the proceedings, has made the headlines several times following a slew of dramatic turns of events amid strong political and judicial pressure.

SGBL, Mr Salameh and Mecattaf Group have denied any wrongdoing.

But little has been written on the actual facts.

Here is what we know so far.

How did the case start?
The case started with a lawsuit filed in September 2020 from Mouttahidoun, an association of lawyers seeking to fight corruption, against Riad Salameh, SGBL and its chief executive Antoun Sehnaoui, and four of Lebanon’s main exchangers including Mecattaf, for “money laundering crimes resulting from currency trading operations with the intent of exposure to the national currency”.

“The case kicked off with a violation of the cabinet decision to back the Lebanese pound”, said Mouttahidoun founder Rami Ollaik.

A year into the steep economic crisis, which has plunged more than 80 per cent of the Lebanese population into poverty since 2019, the central bank started to sell dollars at a preferential exchange rate, which was supposed to benefit importers and the general public, in a bid to support the national currency.

Yet, the measure had at the time little effect and failed to stop the collapse of Lebanon’s national currency, which has now lost 98 per cent of its value against the dollar.

“The Lebanese pound kept plummeting: despite the massive dollars injection in the market, there were no tangible effects, so we wondered, where did the money go?” Mr Ollaik said.

He said that after further investigation, his collective found that BDL’s dollars injections were not “benefitting the general public” but that the money was diverted in collusion with the central bank “in the hand of connected money exchangers and big banks, including SGBL”.

He said the money was then “transferred abroad via Mecattaf”, while Lebanese depositors were locked out of their savings as banks imposed drastic restrictions on transfers and withdrawals at the start of the crisis.

What are the charges?
The file was then referred to Mount Lebanon prosecutor Ghada Aoun, who investigated the case for months and ordered an audit of the company’s records.

According to the investigation’s findings, the bank SGBL allegedly transferred via Mecattaf $1.017 billion in 2019 and 2020, and its CEO $17 million “with the facilitation of (…) the Governor of the Banque du Liban, Riad Salameh”, “exploiting the information that the national currency would drop,” Ms Aoun wrote in an order seen by The National.

Riad Salameh “colluded with SGBL and the company Mecattaf to commit illicit acts as they intentionally harmed the national currency and economy,” the order sheet said.

Her investigation also uncovered alleged financial wrongdoing beyond the initial scope. From 2015 to 2019, experts could not identify the source of $4.3 billion transferred abroad by Mecattaf, over a total of $13.3 billion.

“The judiciary started its investigation with our lawsuit based on suspicions of financial wrongdoing at the beginning of the economic crisis, but ended up unveiling larger financial crimes,” said Mr Ollaik.

Ms Aoun charged Mr Salameh with money laundering as well as corruption and abuse of power; Mecattaf, SGBL and Antoun Sehnaoui, with money laundering; President of the BCC Maya Dabbagh with breach of professional duty; and PwC with false statements and concealing information.

“I send my investigation to Judge Mansour, who is now in charge”, confirmed Ms Aoun to The National.

Based on the questioning of the suspects, Mr Mansour can either close the case or decide to maintain charges, leading to the opening of a trial.

Why is the case sensitive?
The case turned into a tug of war between Ms Aoun and Lebanon’s top prosecutor Ghassan Oueidat, which was seen as another evidence of the high politicisation of Lebanon’s judiciary.

Ms Aoun is seen as an ally of former president and Free Patriotic Movement founder Michel Aoun, with some accusing her of serving his agenda.

She has, at least publicly, advocated for combating corruption within the financial world, and is leading several investigations into banks and charged Mr Salameh with illicit enrichment in another case in March 2022.

Mr Oueidat, on the other hand, is regarded as a being closely associated with the financial and political elites.

In April 2021, Mr Oueidat tried to remove her from the case, sparking outrage which led to clashes between supporters from both sides.

Despite the country’s highest judicial body reiterating that she abide by Ms Oueidat’s order, she dramatically forced her way into the Mecattaf’s offices in Beirut to collect evidence.

For Lebanese watchdog Legal Agenda, the political exploitation of the case, which is considered a “judicial uprising” for Ms Aoun’s supporters and a “mutiny” for her opponents, has obscured the actual facts, in an “effort by the ruling powers to suppress the case and avoid opening Pandora’s box”.


How Lebanon’s private sector is thriving amid crisis

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Much has been said about Lebanon’s manifold crisis, more specifically the implosion of the country’s economy through an ongoing financial crisis that has been exacerbated by the Beirut port explosion, Covid-19, the impact of the Ukraine war on global food prices, and the country’s ongoing political paralysis. Much more can, and should, be said on this matter, not least since Lebanon is still in the midst of a humanitarian crisis, with more than 50% of the population now living in food poverty and at risk of famine.

Despite these enormous challenges, and a very justified sense of doom and gloom, several parts of the country’s private sector have still managed to flourish, especially in tech and services.

In fact, the vast majority of the country’s economy, more generally, lives in what could be described as a parallel universe to the public sector and government, which is why Lebanon’s unofficial ‘black market’ exchange rate has almost completely replaced that of the central bank. Similarly, private energy providers and non-governmental organisations (NGOs) have replaced most areas of state provision, which is nearly non-existent.

Lebanon’s diaspora has not lost faith
The domestic crises of recent years have made Lebanon even more dependent on international money, both through remittances and direct employment. In fact, half the country’s gross domestic product is now reliant on money sent home from the millions in the Lebanese diaspora.

This level of involvement and support is evidenced by a fast-growing (and new) platform called Outerpond. Created in 2021, the company helps connect international businesses and individuals (namely among the diaspora) with Lebanon’s significant talent pool, as explained to Investment Monitor by Outerpond founder Nagi Moubarak.

“I was in Lebanon when the port explosion happened and I was shocked by the magnitude of devastation and the attitude of the political class, which did absolutely nothing except lament and find excuses for their never-ending failures,” he says. “But I was also impressed by the huge amount of help received through the diaspora, friendly countries, international NGOs and organisations.”

As an entrepreneur, Moubarak wanted to find a practical way to help the Lebanese private sector. “So I thought of creating a platform that would allow Lebanese service providers to list their companies and find projects, partnerships and investments featured on behalf of foreign-based service-seekers,” he adds.

Since launching in mid-2021, Outerpond has featured project listings in excess of $2m, has allowed for local and international entities to interact and mesh, and has helped promote Lebanon as an outsourcing option, especially among the diaspora, who understand Lebanon’s idiosyncrasies, thereby seeing the country’s very legitimate investment potential.

One of Outerpond’s success stories comes in the form of Elias Hage, a Canadian-Lebanese businessman who has created a line of sofas, called Berytus, and who met his designer on Outerpond.

“Hagecor International is pleased to announce its investment and support in the design and manufacturing of residential sofas produced in Lebanon, under the brand name Berytus,” Hage said in a press release. “This light, modular, clip-on sofa is designed and supervised by HAS Architect [a service provider from Outerpond], and produced by a furniture manufacturer in Lebanon.”

Berytus sofas are intended for sale in Canada, with the first 40ft container arriving at the port of Montreal in September 2022.

“Outerpond was key in making this transaction a success by facilitating contact with reputable Lebanese service providers such as HAS Architect that otherwise Hagecor would never have discovered,” adds Hage.

Lebanon supplies Apple, Meta and Space X
Given how many ‘bad news’ stories come out of Lebanon, it is safe to say that the country’s achievements are often underrepresented.

One such success story is MultiLane, a leading producer of high-speed I/O test and measurement solutions that design and manufacture the instruments that validate the physical layer of the internet’s infrastructure – from servers and switches to cables and transceivers.

Put more simply, MultiLane makes the things that make the things that make the internet work. Apple, Cisco, Juniper, Meta, Nokia and SpaceX are among the household names that use the company’s equipment and expertise to build and test their networks. In short, MultiLane is spearheading Lebanon’s high-tech development and manufacturing sector.

“Despite worldwide [and domestic] uncertainty [over the past three years], MultiLane has done well during this period, outperforming the global industry metrics on all fronts,” says MultiLane founder and CEO Fadi Daou. “Thriving as a business in Lebanon requires expertise in crisis management, enabling us to navigate both local and global complications and remain the dynamic, first-to-market industry force we are known to be.”

As most of MultiLane’s business is conducted with foreign partners, it can mitigate the worst of Lebanon’s financial crisis. The company saw 65% growth from 2021 to 2022, while product shipment has doubled since 2020 to reach 10,000 products shipped internationally per week.

MultiLane, like much of the Lebanese private sector, has had to create its own ecosystem beyond the constraints and neglect of the Lebanese public sector. It is worth noting that the country gets, on average, several hours of publicly provided electricity a day, ranking it among the worst national energy sectors in the world.

Lebanon’s tale of two infrastructures
This aforementioned ‘ecosystem’ can be taken very literally. As part of its initiative to develop Lebanon’s high-tech sector, MultiLane founded Houmal Technology Park (HTP), its international headquarters. HTP is a high-tech campus with office spaces, engineering labs, clean rooms and manufacturing capabilities, all housed in LEED-certified buildings and nestled among the ancient olive trees of Houmal in Mount Lebanon.

HTP is intended both as a foundation for MultiLane, but also as an incubator for Lebanon’s high-tech sector more broadly, and has been built from the ground up to be significantly resistant to the challenges posed by the country.

The campus is entirely self-reliant for its power, with a generator system in place, and a 500kW solar plant being deployed – in fact, solar energy uptake is booming across the country as a DIY solution to the national energy crisis.

“We are entirely off the grid,” says Fadi. Its location, in Houmal, is close enough to Beirut for easy commuting – about a 25-minute drive – but far enough away that it is insulated from the bustle and crowds of a large city. The company runs a free bus service for its employees to and from Beirut to help them manage the fuel crisis.

“We have earned a black belt in crisis management,” says Fadi. “The fact that we have survived and grown, it is in our DNA, the people of Lebanon.”

Designed to address the social infrastructure and fabric of the Lebanese community, MultiLane has become a primary creator of high-end technical jobs that are sorely needed in a country suffering from one of the greatest brain drains in modern times.

“Lebanon’s current crises means many people have lost their jobs,” says Fadi. “We see the need and feel a responsibility to fill the gaps today. Where we go others can follow.”

This is why MultiLane set up a non-profit educational initiative, the HTP Academy, aimed at complementing Lebanon’s strong science, technology, engineering and mathematics (STEM) education programmes, supplementing the theoretical focus of school and university with practical, hands-on courses and career guidance in one of the most advanced engineering fields in the world.

The HTP Academy also serves to boost secondary education in the country, providing a strong support platform for secondary school students, with major sponsorships, career guidance from MultiLane engineers, and hands-on experience programmes.

“Education in Lebanon is excellent at every level,” says Fadi. “[It has a] strong focus on STEM fields. University-level education is excellent from a theoretical point of view. What is missing is a much-needed modernisation of university education to reflect the needs of a global tech industry.”

MultiLane’s success stands as a shining testament that Lebanon can still host a thriving private sector even in the midst of its current crises.


Lebanon’s industry carries falling national economy on its shoulders

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The industrial sector in Lebanon, despite the falling national economy, continues to solider on in order to revive the market and create new business opportunities especially with the increasing demands for Lebanese products.

The sector was one of the few offering hard foreign currency in Lebanon, which is still suffering from the decrease in the value of the national currency in times when the US Dollar was in high demand.

Speaking to KUNA on the issue, Lebanon’s Industry Minister George Boujikian stressed that the steadfastness of the industrial sector was one of the main factors in helping the national economy to “stay afloat”.

The sector is witnessing increasing investments, issuing of permits, and market expansion, which led to the exporting of products to some 110 countries worldwide, added the minister.

The Lebanese industry includes 21 sectors with the manufacturing of food products and furniture leading the way, he revealed.

Boujikian stressed the importance of keeping Lebanese products up to standards to succeed both locally and internationally.

On the Ministry’s plans, the minister indicated that there was a focus on developing three sectors namely the use of Artificial Intelligence, recycling, and cinema production.

Similarly, Vice President of the Association of Lebanese Industrialists Ziad Bekdache affirmed that the era of the Lebanese industrial sector had arrived; revealing that numbers currently exceeded those in 2019 prior to the Lebanese economic crisis.

Locally produced products now were rivaling those products abroad, he claimed, pointing out that factories had increased by 20 to 25 percent with clothing and an assortment of other products exported.

Bekdache said that the prices of locally made products and export ones varied between 30 to 60 percent, noting that due to the high quality of Lebanese products, local consumption had jumped by 60 percent.

The Lebanese Industry exported $4 billion worth of products and produced around $10 million worth of commodities for the local market.

Providing further input, Dr. Marwan Barakat, assistant general manager at Bank Audi, said that the decrease in value for the national currency contributed to the lowering of manufacturing costs especially for industrial and agricultural exports.

Increasing the customs dollar at a rate of Lebanese Pound 15,000 per US dollar had protected the Lebanese industry and encouraged competitiveness against foreign products, he said.


Egypt, Lebanon discuss launching ro-ro line to boost trade

Egypt and Lebanon discussed Monday launching a ro-ro (roll-on/roll-off) line with the aim of increasing import/export trade between the two countries.

The proposal was tabled during a meeting between Egyptian Minister of Transport Kamel El-Wazir and Lebanese Minister of Public Works and Transport Ali Hamieh on the sideline of the 69th session of the Executive Office of the Council of Arab Transport Ministers in Alexandria.

Ro-ro cargo shipping describes a vessel transporting wheeled cargo, including cars, trucks, buses, trailers or industrial vehicles.

These kind of ships have built-in ramps on their bow or stern to make the loading and unloading of the wheeled cargo much easier than if it was done with a crane.

Both ministers agreed to hold intensive meetings in the near future between specialists from both countries to study the proposal, according to a statement by the Egyptian Ministry of Transport.

Monday’s meeting also tackled means of bolstering cooperation between the two sides in the various transport sectors.

Hamieh expressed his country’s interest in cooperation with Egyptian construction companies to execute infrastructure projects, underlining the Egyptian experience in the field.

El-Wazir emphasised that all Egyptian companies “are fully prepared to carry out all the work required by the Lebanese side as per the international quality standards,” the statement noted.

Lebanon ranked seventh among Arab countries as a destination for Egyptian exports in the first half of FY2022/23, according the Egyptian Central Agency for Public Mobilisation and Statistics (CAPMAS).

Egypt’s exports to the Arab country hit $220 million while its imports stood at $108.4 million during the six-month period.


Al-Asoumi praises Saudi Arabia’s human rights achievements under Vision 2030

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The Arab Observatory for Human Rights of the Arab Parliament hailed the remarkable achievements made by Saudi Arabia to develop human rights as part of its development vision for 2030.

The vision’s main focus is on the citizen and the human being, under the prudent vision of Custodian of the Two Holy Mosques King Salman and Crown Prince and Prime Minister Mohammed Bin Salman.

The praise came during the 8th meeting of the Observatory’s Board of Trustees held here Wednesday, chaired by the president of the Arab Parliament and chairman of the Board of Trustees of the Observatory, Adel Al-Asoumi.

In his speech, Al-Asoumi stressed the importance of enhancing cooperation and coordinating efforts of the four arms of human rights within the framework of the Arab League system.

He met with participants and expressed solidarity with Syria and Turkey after the humanitarian catastrophe that befell the two countries as a result of the devastating earthquakes that left many dead and injured.

They expressed thanks and appreciation of the Arab aid provided in the crisis.