Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
Lebanon has the legal underpinnings of a free-market economy, a highly-educated labor force, and limited restrictions on investors. But Lebanon’s economic crisis, which is likely to be long and painful, represents a huge market challenge. Insolvent banks have banned most overseas transfers, meaning that U.S. and other international firms cannot transfer any profits earned overseas. Many U.S. companies have complained about millions of dollars stuck in the local financial system. A lack of hard currency means that contracts once paid in U.S. dollars are now fulfilled in a devalued and volatile local currency. The local currency’s continued deprecation has resulted in a year-on-year increase in inflation of 90 percent, which has hurt consumers and driven an increasing number of Lebanese below the poverty line. Businesses have been forced to close or change prices on a near daily basis to keep up with the fluctuating currency. According to research from InfoPro, as of July 2020, 550,000 out of 1.8 million workers have lost their jobs; nearly 20 percent of companies closed their doors from January 2019 to July 2020. Recovery can only be accelerated through quick but careful implementation of reforms. If Lebanon is able to reform its business environment – a likely condition as part of an overarching IMF program – it may one day regain its role as a hub for foreign investment in the Middle East. The potential for social unrest in the wake of this crisis, however, remains high.
Corruption and a lack of transparency have continued to cause frustration among local and foreign businesses. According to the 2019 Transparency International’s Corruption Perception Index (CPI), Lebanon ranked 137 of 180 countries worldwide, making Lebanon among the 50 most corrupt countries in the world. Foreign and local companies have complained about numerous impediments, namely institutionalized corruption, bureaucratic over-regulation, arbitrary licensing, complex customs procedures, outdated legislation, an ineffectual judicial system, high taxes and fees, high telecommunication charges, slow internet speeds, poor electricity provision, inconsistent interpretation of laws, and inadequate protection of intellectual property. Lebanon also has fragmented and opaque tendering and procurement processes, which has deterred foreign investment.
Lebanon adheres to the Arab League Boycott of Israel. The Arab League’s Central Boycott Office maintains a blacklist of firms that are believed to contribute to Israel’s military or economic development. As of August 2020, the U.S. Embassy in Beirut is not aware of any U.S. firms on this list. As per U.S anti-boycott regulations, U.S. companies must refrain from certifying that their products do not come from Israel. If there appears to be any request that might be in support of boycotts, companies should contact the Bureau of Industrial Security (BIS) at the U.S. Department of Commerce. Finally, international companies should be mindful about sanctioned individuals and entities when conducting business in Lebanon.