MFA: Strategic opportunities for foreign exporters
For more than a year, Lebanon has been struggling with a combined crisis – financial and economic, a deepening crisis linked to the covid-19 pandemic and subsequently exacerbated by the August explosion in the port of Beirut.
In October 2019, the Lebanese economy found itself in a financial crisis associated with the sudden suspension of capital inflows from Arab countries (oil and gas sellers), due to a significant drop in the prices of energy commodities on world markets. This crisis precipitated systemic failure across the banking and debt sectors and affected the USD/LBP exchange rate. Pegged to the US dollar at a fixed rate of 1,507 LBP/USD since the end of the civil war in 1990, the Lebanese pound has lost all of its value over the past year, hitting a record high of 15,000 LBP/USD on the parallel market (15/03/2021).
The collapse of the Lebanese economy was fully manifested in March 2020 (even before the outbreak of the pandemic) with the inability to repay approximately USD 38 billion in government bonds, and was subsequently exacerbated by the devastating explosion of ammonium nitrate in the port of Beirut in August 2020.
The lack of freely convertible foreign currency on the market, state-restricted withdrawals and domestic and foreign transfers resulted in further decline in purchasing power, growth in unemployment, uncontrolled increase in retail prices of goods and services, and impossibility for importers to finance imported purchases.
The weakness of the Lebanese economy is its strong dependence on imports (approx. 80% of goods are imported) and minimal domestic production (outdated infrastructure and lack of production investment). In connection with the slowdown in economic growth, the drop in exports, the lack of domestic production and the drop in significant financial transfers from the Lebanese diaspora, one of the largest national debts has increased even more (today more than 170% of GDP).
The impact of the explosion is particularly severe in key sectors essential to economic growth, including finance, housing, tourism and trade. In 2021, reconstruction costs are expected to be between and billion USD. In addition to the negative effects of the explosion on economic activity, lower tax revenues, higher inflation and a further increase in poverty can also be expected.
In connection with the covid-19 pandemic and as a result of the catastrophic explosion in Beirut in August 2020, Czech export opportunities in the field of medical equipment and technology will be strengthened. Another important sector that is gaining importance is the area of production with a focus on fire protection and fire detection.
Agricultural engineering is another promising area as Lebanon focuses on achieving greater self-sufficiency in the agricultural sector. The serviceability of this sector is closely related to the energy sector, which is insufficient in Lebanon and needs rehabilitation. In connection with the explosion in the port and the number of destroyed buildings, the demand for modern construction materials and new technologies in the construction industry is growing.
In connection with the ongoing complex security and military situation in the country (the state of war between Lebanon and Israel applies), there is still great potential for Czech exporters of special equipment.
According to allcountrylist, the government’s priority is the rehabilitation and modernization of Lebanon’s existing energy network, including the privatization of key state-owned enterprises led by Électricité du Liban (similar to ČEZ). The goal is to increase electricity production, build renewable energy sources, including the installation of new transmission systems and the planned construction of water sources of electricity.
The ongoing state of war with Israel and the overall tense security situation in the country provide an opportunity for Czech manufacturers of special equipment, which has a very good reputation in the area. Demand continues for security scanners, drones, explosives detectors and basic equipment for military and police forces. Historically, personal and hunting weapons and ammunition have also been imported into Lebanon.
An explosion in August 2020 at the port of Beirut caused more than $4 billion in damage. A huge number of residential buildings were destroyed and need reconstruction. In this context, we see potential for Czech exporters of modern construction technologies and new construction materials or manufacturers of various building envelopes.
Healthcare and pharmaceutical industry
The ongoing economic crisis, the covid-19 pandemic and the consequences of last August’s explosion in the port of Beirut have further accentuated the need to improve the quality of health care in state health facilities, so that their level is as close as possible to the level of private health facilities, which are unaffordable for the majority of the population.
The government has a program to support the provision of access to quality healthcare for all citizens and to increase the quality of services provided in state healthcare facilities, including the free provision of basic medicines for acute and chronic patients. The need to import quality medical technology, equipment and medicines to Lebanon will continue to increase.
Agricultural and food industry
In the field of agricultural commodities, Lebanon lacks large-capacity silos and the associated transport services. An important segment for Czech exports is the field of agricultural engineering. The Lebanese government has adopted a program to increase self-sufficiency in agricultural production, focusing on the construction of canneries, treatment plants and mineral water bottling plants, packaging technology, production and distribution of soft drinks and beer.
In 2021, it is planned to issue a tender for the new construction of large-capacity grain silos, both in the port of Beirut and in Tripoli.