Foreign Direct Investment

Lebanon has traditionally been open to foreign direct investment, although recent political instability, macroeconomic imbalances and a foreign currency crisis have dampened the country's attractiveness. According to the 2021 World Investment Report published by the UNCTAD, FDI inflows were estimated at USD 3 billion in 2020. The stock of FDI reached only USD 18 billion in 2020.The stock of FDI reached only USD 18 billion in 2020. In the past, FDI has fuelled job creation and boosted the information, technology and industrial sectors, but regulatory and institutional bottlenecks affected the prospects for FDI diversification. In the last two years Lebanon has been hit by a series of shocks: an economic and financial crisis, followed by the COVID-19 pandemic, a political crisis and finally, the explosion at the port of Beirut on 4 August 2020. The unprecedented economic crisis has had large and persistent negative impacts that continued affecting the country in 2021 and deterred FDI. The main investors are France, the United Arab Emirates, the United States, Germany, the United Kingdom, the Netherlands, Jordan and Egypt. FDI are mainly oriented towards trade, real estate, services, tourism and agriculture.
The serious economic and political crisis that Lebanon is going through, the sovereign default and the effects of the Syrian crisis will continue affecting investor confidence. Other factors already impeded FDI including high unemployment, brain drain, energy supply shortages and regulatory obstacles (UNCTAD Investment Policy Review, 2018). The country is ranked 143rd out of 190 economies by the World Bank in its Doing Business 2020 report (down 1 position compared to the previous report, in which Lebanon had already lost 9), one of the lowest rankings in the Middle East. Since October 2019, the Lebanese financial sector has imposed ad hoc capital controls, preventing most Lebanese from transferring money abroad, despite the fact that 75% of accounts in Lebanese banks are denominated in dollars. On 7 March 2020, Lebanon announced its intention to default and restructure its nearly $31 billion of dollar-denominated debt.  Despite the economic plan implemented by the government to restructure its financial sector, Lebanon has signed an official request for IMF assistance.  Most analysts see Lebanon's short to medium-term economic future as bleak, with probable fiscal austerity, persistent capital controls, further devaluation, and potential impairment applied to wealthy depositors to recapitalise the banking sector. These developments will affect Lebanon's potential as a destination for foreign investment, degrading its position in the years to come.