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	Lebanon		Info-Prod Country Guide
CHARACTERISTICS   INDICATORS   ECONOMIC SECTORS   INVESTMENT ISSUES   PROJECTS   PROSPECTS

Current and Projected Projects General The Council for Development and Reconstruction (CDR) currently has US$ 1.6 billion in projects underway, including the Beirut Airport project, the beltway road system around Beirut, modernization of the telephone system and improvements to the energy sector. International funding for these projects is vital to the success of the program. Of the grants and loans committed thus far about 85 percent come from Arab or European sources and the World Bank, with Italy being the major individual source of foreign financing. Thus, for example, the US$ 190 million contract for the new Beirut University, to be undertaken by a consortium comprising Ed Zueblin of Germany, Turkey's Tekser, the local Arabian Construction Company and Milne & Nicholls of Canada, will be financed by Saudi Arabia and Oman. Direct US financing is negligible. European firms such as Ansaldo and Siemens, and American corporations such as Motorola and MCI Communication are already deeply involved in Lebanese reconstruction projects. Nevertheless, US hesitation to invest in Lebanon has given Europe a distinct edge in the Lebanese market. The undeveloped relationship and commercial obstacles, manifested, for example, by restrictions on direct flights between the US and Lebanon, is reflected in mutual trade figures; the US imports less than 10 percent of all Lebanese exports. The reconstruction of Beirut's City Center is being undertaken by Solidere, which is listed on the Beirut Stock Exchange. Work on infrastructure, which includes office and housing projects as well as land reclamation and archaeological parks, began in the Summer of 1994. As part of its reconstruction program, the Lebanese government has plans to build five free trade zones in several locations throughout the country. These areas include Beirut, Beka'a, and north and south Lebanon. The first of these locations, the Beirut Port Free Trade Zone, was inaugurated in late 1995. This zone, which will eventually encompass approximately 100,000 square meters, replaces the former free trade zone which was destroyed during Lebanon's civil war. The government is implementing a US$ 130 million project to upgrade Beirut's port facilities in an effort to recapture its pre-civil war status as one of the main ports of the eastern Mediterranean. So far, two buildings with a total area of 24,000 square meters have been constructed at a cost of US$ 6.5 million. Four more buildings are to be constructed before the end of 1998. With regard to other free trade zones, the government commissioned a British company to conduct research and to assist in the establishment and operation of free trade zones in Lebanon. The purpose of the research is to determine suitable locations and to provide appropriate recommendations for management and operation of the zones. The government intends to develop the infrastructure and to build large storage facilities in the zone areas. It does not intend to sell areas in the zones but, rather, to lease them to companies for a period of twenty-five years. In an effort to restore confidence in Lebanon, US President Clinton sponsored the Friends of Lebanon Conference. The conference concluded with attendees pledging US$ 1 billion in financial assistance to all sectors in Lebanon for 1997 and a total of US$ 2.2 billion to be delivered by the year 2000. Other conference participants announced immediate contributions while some countries pledged to send technical delegations to Lebanon to work on specific programs and projects Build Operate Transfer The lack of reserves available for the financing of Lebanon's development, reduction in foreign aid and the hesitation shown by international financial institutions to finance projects in the face of the country's increasing debt have meant that Lebanon is increasingly turning to private funding and, particularly, at BOT's to promote large infrastructure projects. Nevertheless, the BOT arrangement is still rare in Lebanon, and only few such projects have been implemented. One of the main BOT projects to be implemented in Lebanon is the "Arab Highway", a sixty kilometer toll road which will link Beirut to the Syrian border. This road will be constructed by the French companies Dumez (51 percent) and Bouygues (49 percent) under a thirty year concession, at an expected cost of US$ 650 million. A second, twenty-three kilometer, US$ 350 million road forming the southern section of the Beirut ring road will be built by a predominantly German consortium comprising Walterbau (40 percent), Dyckerhoff & Widmann (40 percent), and Bouygues (20 percent). Following traffic rate studies that showed that the developers could not recover their investment and make a profit, the Lebanese government agreed to help finance the first project with a US$ 200 million subsidy, and a partial risk guarantee will also be provided by the World Bank. Government aid for the second project has not yet been secured. Another BOT project under consideration would supply water from the Awali river in the south of the country to Beirut. Two BOT franchises pertaining to global standard for mobiles (GSM) networks were awarded in August 1994. This type of financing is unusual in this sector because of its sophisticated high-tech nature, which is subject to rapid change and to difficulty in predicting prices. Three companies, France Telecom, Mobile Liban and LibanCell (FTML) have already begun operating the network under twelve year concessions. Mobile Liban is 67 percent owned by France Telecom and 33 percent owned by the local company Mikati, and already has over 56,000 subscribers since starting services at the end of January 1995. LibanCell, which is owned by a group of local companies, and Telecom Finland (14 percent), has attracted over 50,000 customers since launching operations in April 1995. Both digital cellular operators plan to increase their network capacity beyond the current 85,000 subscribers to keep up with demand. FTML has already signed a US$ 43 million contract with Ericsson for this purpose and LibanCell is considering a similar contract with Motorola and Siemens. Additionally, Alcatel of France, Siemens of Germany and Ericsson of Sweden are due to install a modern telephone system of 1.2 million lines by September 1997 under conventional contracts worth just over US$ 500 million. Other large BOT construction projects include a shopping center, parking lot and a free transit zone at Beirut International Airport, covering 300,000 square meters with a fifteen year concession. Other free transit zones will be constructed at Rayak airport in the east of the country and Al-Quleaat airport in the north, both covering 500,000 square meters with twenty five year concessions. The expected cost of these free transit zones is approximately US$ 42 million, US$ 22 million and US$ 24 million respectively. are expected to recover their investment through rental and service charges. Franchising Commercial representation companies are subject to law number 34/67 on exclusive rights for commercial representation, distributorship and franchising. Such companies can be either limited partnerships or joint-stock corporations. Two thirds of the board of directors must be Lebanese. Both types of companies must have a majority of Lebanese partners or shareholders holding capital and a Lebanese manager. Previous Chapter Contents Menu Next Chapter

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