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Instability deals blow to Lebanese consumer confidence

Zaitunay_Bay,_Downtown_Beirut,_Lebanon

BEIRUT: Retail sales dropped 7.2 percent in the first quarter of 2014 compared to the same period last year, according to the BTA-Fransabank Retail Index, which declined 14.40 percent year on year in the first quarter of 2013.

The decline in sales was attributed to lower consumer confidence, higher unemployment and declining tourism due to political and social instability despite “relatively receding security hazards” amid “the continued crisis in neighboring Syria,” the report said.

Among the sectors worst hit by the economic slowdown, liquor and tobacco sales declined 25 and 15 percent, respectively, while footwear and clothing dropped 15.5 percent and 2.5 percent respectively, “despite very heavy discounts offered in these two sectors,” the report added.

Supermarket and other food sales also fell 3 percent despite the influx of Syrian refugees and the subsequent rise in demand for basic commodities.

The lower consumer confidence was mainly blamed on political uncertainty over the presidential election and a series of recent strikes held by civil servants and public teachers, according to the report.

It added that a decrease in the number of visitors from the Gulf, “who do have an important weight in the consumption balance,” was another factor. Several Gulf governments had advised their citizens against visiting Lebanon in light of the security situation.

The Byblos Bank/AUB Consumer Confidence Index Consumer confidence hit a record low on a semi-annual basis in the second half of 2013. The index is composed of two sub-indices, the Byblos Bank/ AUB Present Situation Index and the Byblos Bank/ AUB Expectations Index. The second sub-index addresses their outlook over the coming six months.

Restaurants and snacks witnessed a 10 percent decline in sales as the unemployment rate rose to 20 percent amid a wider increase in competition from the influx of Syrian refugees, the report said.

Bookstores and stationery sales also declined 12.5 percent while electronics, electrical equipment and home accessories fell 10 percent.

Source: The Daily Star

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Harb lines up unlimited broadband in Lebanon

BEIRUT: Telecommunications Minister Boutros Harb Friday unveiled Lebanon’s first unlimited broadband plan, while cutting prices and increasing speeds on existing DSL services in addition to introducing new offers on landline, cellular and 3G services.

Harb said the monthly price of the new 2 megabits per second unlimited download plan would be LL75,000. Previously, for LL75,000, consumers could get a 2 Mbps plan with a 20 gigabyte data limit, paying LL6,000 per additional gigabyte.

“Around 330,000 subscribers will benefit from the new unlimited plan,” he said.

The entry-level DSL plan, still priced at L24,000, will be upgraded to 2 Mbps with a 40 GB cap, compared with the previous 1 Mbps and 4 GB of data.

The 4 Mbps plan will see its price drop to LL50,000, from LL75,000, and have its usage allowance increased from 25 GB to 50 GB.

The 6-8 Mbps plan will now cost LL65,000 and include 60 GB of data.

The new plans and prices have been passed in three new decrees by the council of ministers, and will go into effect on July 1, Harb said.

The minister also announced that the data limit for the 3G service would increase from 150 megabytes to 500 MB for $10, from 750 MB to 1,500 MB for $19 and from 1,500 MB to 5,000 MB for $29.

As for the cellular rates, they will be reduced from 36 cents per minute to 25 cents per minute for prepaid lines while the SMS price will drop from 9 cents to 5 cents.

Harb added that subscribers in the postpaid lines would be offered an additional free hour to make up for the $15 paid at the beginning of every month without benefitting from any additional services.

Harb has also canceled the installation fee for new landlines and reduced the fixed monthly fee paid on landlines from LL12,000 to LL9,000.

“The revenues of the Telecommunications Ministry will increase by LL23 billion annually due to the expected increase in subscribers to the landline service by 100,000 as a result of the drop in prices,” he said.

Harb said the ministry had conducted a study to assess the impact of these changes on the revenues of the Telecoms Ministry.

“We found out that the first few months following the reduction in prices of the Internet service will witness a monthly drop of only LL100 million, which could be offset by the revenues generated from the changes introduced on the landline service and which amount to LL23 billion annually,” he said.

Since becoming telecoms minister in February, Harb has promised to enact sweeping changes in the sector to attract new investment in Lebanon and secure lower prices for the country’s consumers.

“The economy cannot prosper and grow without modern, affordable and high quality telecom services,” he said.

Harb said there is a direct link between the modernization of a country’s telecoms sector and an increase in its GDP.

“These steps are necessary to create new job opportunities for young people in addition to putting an end to the brain drain and attracting new investments,” he added.

In his presentation, Harb criticized previous ministers for allegedly violating Law 431, which came into force in 2002 to provide a framework for governing the organization of the telecommunications sector and to set the rules for its privatization.

He claimed the new rates represented the ministry’s recommitment to Law 430.

Telecoms are the third largest source of income for the Treasury, with revenues reaching over $1.4 billion a year.

Source: The Daily Star

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Lebanese banks hope to take early lead in Iraqi market

BEIRUT: A number of Lebanese lenders are following in the footsteps of their peers and opening new branches in Iraq to service a market where state-owned banks account for 86 percent of assets and 69 percent of credits.

BLOM, Lebanon’s second largest bank in terms of assets, will kick-start operations in Iraq this week with a branch in Irbil, Kurdistan, and another to open in Baghdad a few weeks later, BLOM Chairman Saad Azhari said at a Lebanese-Iraqi banking conference held over the weekend in Beirut.

Last month, Fransabank also opened a branch in Baghdad and one in Irbil, making it the seventh Lebanese bank operating in Iraq after Byblos, BankMed, BBAC, BLF, Credit Libanais and Intercontinental bank, all of which have launched their operations over the past few years.

“Though the unstable security situation has delayed development projects in Iraq, the country enjoys great prospects with a large gap that still exists between state-owned and private banks,” Joe Sarrouh, an adviser to Fransabank’s chairman told The Daily Star.

Sarrouh added that the stable security situation in Iraqi Kurdistan has encouraged Lebanese banks to set up branches in the northern Irbil province to finance development projects across the agriculture, construction, food and beverage and oil and gas sectors.

“ Baghdad and Basra are two other locations with a big growth potential but many banks were reluctant to establish a physical presence there due to the unstable security situation,” he said.

While no major international banks have a well-established physical presence in Iraq, many are involved in trade finance and the funding of developmental projects by the private sector, Sarrouh said.

Iraqi state-owned banks had a 67 percent share of cash-credit to the private-sector as of 2011, according to a report by Sansar Capital released in 2013. Their share of credit to government is 100 percent, as government institutions can only borrow from state-owned banks.

Lebanese lenders with branches in Iraq have concentrated their operations in wholesale banking mainly trade finance and foreign currency exchange, Sarrouh said.

Private banks make profit by buying U.S. dollars from the Central Bank of Iraq’s daily dollar auctions and selling them onto the market at a higher rate of exchange.

Retail banking still lags behind due to the absence of a comprehensive regulatory framework, according to Sarrouh, who said the lack of a foreclosure process held banks back from lending to consumers.

Compared to a 55 percent average for the MENA region, private sector loans remain a small business for banks in Iraq, at a mere 6 percent of GDP as of 2012, according to a report by Byblos bank – the first Lebanese lender to establish branches in Iraq, opening in 2007.

Ayman Fatayri, head of Corporate Credit Department at BBAC bank, which has two branches in Irbil and Baghdad, told The Daily Star on the sidelines of the Lebanese-Iraqi conference that one the major challenges to consumer lending is the lack of a credit history.

BBAC, which has a loan portfolio of around $120 million in Iraq, requires collateral equivalent to over 200 percent of the loan value, he said.

“The lack of credit history requires BBAC to adopt a conservative lending strategy,” he said.

The approximately 900 bank branches that exist in Iraq serve a population of 33 million, equating to just one branch per 36,000 people.

Source: The Daily Star

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World Bank: Lebanon’s economy still in jeopardy

BEIRUT: The World Bank says enormous challenges remain for Lebanon, despite the progress made with the formation of a government.

“Despite some progress on the political front, spillovers from the Syrian conflict, outstanding political uncertainty, and the volatile security environment pose significant challenges and tilt the balance of risks to the downside,” the World Bank said Wednesday in an executive summary released to The Daily Star ahead of the publication of its full annual report on April 30.

It added that the formation of a new Cabinet in February was a positive development for the economy.

“But presidential and parliamentary elections are due later this year, and significant uncertainty prevails as to whether they will be held on time,” it warned.

The World Bank stressed that Lebanon might not be able to cope with the influx of Syrian refugees.

“Spillovers from the Syrian conflict will also continue to be a drag on growth, which is expected to remain below potential for the near term,” the report explained.

It projected Lebanon’s GDP growth in 2014 at 1.5 percent if the political uncertainty and security conditions improved slightly.

“The balance of risks to our growth projection is tilted to the downside. In this context, necessary reforms to restore fiscal sustainability, resolve infrastructure bottlenecks, promote private sector development and create jobs are significantly delayed,” the World Bank said.

It noted that the 0.9 percent GDP growth Lebanon achieved in 2013 was lower than the 1.6 percent growth in 2006, when the country fought a war with Israel.

“A 10 month vacuum period at the government level which followed the resignation of the Najib Mikati government impacted confidence and the ability of government to address pressing challenges,” it said.

It added that the balance of payments remained in deficit for the third consecutive year (2.5 percent of GDP in 2013), as the security situation reduced both tourism and investment inflows.

However, the World Bank commended the measures taken by the Central Bank.

“On the monetary front, the Banque du Liban (BdL) maintained an expansionary stance to support the economy, while succeeding to sustain the public’s confidence in the Lebanese pound. Indeed, the dollarization rate of deposits only slightly increased, by 1.3 percentage points, over 2013,” the report said.

The executive summary also commented on the prospects of gas and oil in Lebanon.

“As Lebanon contemplates prospects of sizeable hydrocarbon discoveries, the country is in the process of designing an institutional framework to manage these resources. One such issue is the establishment of a sovereign wealth fund (SWF), as required by the 2010 Hydrocarbon Law,” it said.

Source: The Daily Star

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Lebanese rank as top Arab investors in Dubai

The Dubai Land Department (DLD) reported that Lebanese citizens generated the most Arab investment (outside the GCC) in Dubai real estate, with 247 citizens creating an expenditure of $177.5mn (AED652mn).

The figures, released by DLD’s Real Estate Sector Development Department, also found that Indians were at the top spot for international investment, both in terms of the number of investors which reached 2,414, and the amount of expenditure $1.6bn (AED5.895bn).

The DLD announced that Dubai’s real estate sector’s investments stood at $9.5bn (AED35bn) during the first quarter of 2014, up by 57% from the same period last year.

“The diverse array of nationalities putting their money into Dubai’s property sector and the high value of the investments being made confirms the city’s attraction for real estate investment, especially when compared to other property markets in the region,” said Sultan Butti Bin Mejren, director general of DLD .

The government property agency also reported that the number of investors had risen significantly in the same period, with 13,279 individuals making transactions compared to the 7,339 in the first three months of last year – an increase of 81%.

Emiratis ranked as highest among all investors in terms of the value of investments which reached $1.9bn (AED7bn) in Dubai’s real estate market, while GCC states contributed $816.7mn (AED3bn).

 

Source: Construction Week Online

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S&P raises outlook of Lebanese banks

BEIRUT: International rating agency Standard & Poor’s has raised its outlook for Lebanon-based Bank Audi, BankMed and BLOM Bank to stable from negative, just a week after upgrading the outlook of Lebanon from negative to stable.

“At the same time, we affirmed our ‘B-’ long-term counterparty credit ratings on all three banks. We also affirmed our short-term counterparty credit ratings on Bank Audi and BankMed at ‘C,’” S&P said.

S&P attributed this revision to the ability of Lebanese banks to finance the public debt thanks to the steady flow of deposits the lenders receive each year.

“The outlook revision on the sovereign reflects our view that the government’s debt-service capacity is materially determined by the strength of deposit flows to the financial system. In our view, this funding source has helped stabilize the government’s financing needs during increasingly challenging times for the internal and external political environments,” it said.

Lebanese banks hold the bulk of the treasury bills and Eurobonds, increasing the risk of exposure to default. Lebanese lenders intend to roll over around $1.6 billion in Eurobonds that mature in April and May of this year.

The move comes as lawmakers consider raising the tax on interest on customer deposits from 5 to 7 percent and applying similar taxes on the banks’ investments in Lebanese securities.

This proposal prompted banks to threaten to raise interest rates on personal and housing loans if these taxes were applied.

S&P said Audi, BLOM and BankMed were still highly exposed to the high public debt risks.

“Despite the three banks’ sound geographic diversification by regional standards, and risk-control strategies since the Syrian outbreak, we believe that they are highly exposed to their domestic operating environment. This includes primarily their very large exposure to the sovereign. Consequently, our ratings on these banks do not exceed those on the sovereign,” it said.

It added that the stable outlooks on Bank Audi, BLOM Bank, and BankMed mirror S&P’s stable outlook on Lebanon.

“The stable outlook on the sovereign reflects our view that deposit inflows to the financial system will enable the government to meet its financing needs over the coming year despite the difficult internal and external political environment. Owing to the close links between Lebanese banks’ creditworthiness and that of the sovereign, specific factors relating to each of the three banks that would prompt a change in the respective ratings appear limited at this stage,” S&P said.

Last week, Audi, BLOM and Byblos distributed the dividends to the shareholders during general assembly meetings.

Bank Audi’s board of directors proposed a $0.40 for 2013 flat from last year, BLOM Bank $0.50 for 2013, up from $0.45 in 2012, and Byblos Bank’s BOD offered a $0.133 for 2013 up from $0.126 last year.

According to FFA Private Bank, at today’s listed share prices, dividend yields remain attractive at 6.5 percent, 5.5 percent and 8.0 percent for Bank Audi, BLOM Bank and Byblos Bank respectively.

Source: The Daily Star

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Proposed taxes could affect banks’ profitability: FFA

BEIRUT: Profits of Lebanese banks could drop if Parliament approves a proposal to tax lenders’ income from assets tied to sovereign bonds, FFA Private Bank said.

“The tax on interest earned on deposits could slow deposits growth, which has already seen deceleration in the first two months of 2014 while tax on income earned from financial assets could impact profitability,” FFA said in a special report issued Thursday about the projected growth of the banking sector in 2014.

Finance Minister Ali Hasan Khalil has proposed raising taxes on interest on customer deposits from 5 percent to 7 percent and applying a similar tax on banks’ investments in sovereign bonds.

This proposal has infuriated the banking sector, with banks warning that they may be compelled to raise the interest rates on personal and housing loans to make up for the drop in profits.

The advocates of this tax argue that the profits of the banking sector would only fall by $146 million each year, noting that the net profits of the lenders in 2013 were $1.7 billion.

They also dismissed the possibility that Lebanese banks would shun the country’s sovereign bonds and move investments abroad.

But observers rule out any decision about the taxes in the near future because Parliament and the major political parties are now focused on the upcoming presidential election.

“We note that since details are lacking and the law is yet to be agreed upon, we have not reflected this impact on the forecast of banks under coverage. The ongoing debate over the funding of the increase in public sector wages was put forward two weeks,” FFA said.

Citing statistics from the Association of Banks in Lebanon, FFA said Lebanese banks were still operating in a low interest environment, limiting the potential to improve yields with little room to further decrease the cost of funds.

“Spreads in USD decreased to 1.27 percent in February 2014 down from 1.57 percent one year earlier which has a substantial impact on Lebanese Bank’s profitability given that the bulk of their liquidity is in USD,” the report said.

“While it is still early to draw a conclusion for 2014e in terms of growth in balance sheet, we note a deceleration into Feb-14,” FFA said.

“Figures for the first two months of 2014 pointed to slower growth in key indicators at around 0.5 percent YTD (Year-To-Date), with assets, deposits and loans totaling $166 billion, $136 billion and $47 billion respectively. Non-resident deposits dropped by 4 percent in 2M-14 to $27 billion,” FFA said.

Source: The Daily Star

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Siniora: We must cut EDL deficit

BEIRUT: Former Prime Minister Fouad Siniora warned of grave consequences if Parliament passed the salary scale proposal without modifications, calling on authorities to cut waste at Electricite du Liban and other state institutions.

Addressing Parliament Tuesday, Siniora said he favored raising the value-added tax from 10 percent to 12 percent and increasing the working hours of government employees.

“We should make big cuts in the salary scale proposals and refuse the call for retroactive payments of the wage increases. This salary scale should be paid over the next three years instead of in one shot,” Siniora argued.

He even proposed cutting the wages of judges and Lebanese University professors who received a raise in 2011 without the government carrying out a decent study into the impact of the wage hike on the state’s finances and economy.

“We should also find proper revenues that will not cause a recession or high inflation. We can raise the VAT to 12 percent at least, but we can exempt some vital products from these taxes,” Siniora said.

He repeated his call to reduce the deficit at EDL, which costs the state more than $2 billion a year.

Siniora called for modest increases in electricity tariffs.

“If we apply these measures, then this will contribute to electricity conservation,” he said. “EDL’s deficit over the past years amounts to 40 percent of the total public debt.”

Siniora said that EDL’s problems would continue as long as most of the power plants relied on fuel oil, emphasizing the importance of switching to natural gas to cut the energy bill.

The former prime minister also raised the issue of the working hours of government employees.

“The public staff works 32 hours a week, and this average is far lower than most countries around the world. We need to increase the working hours to improve production and performance.”

Siniora pointed out that the GDP growth dropped to 1 percent during the past three years, from around 8.5 percent in 2007-11.

“The budget deficit exceeded a record figure of LL6.3 trillion [$4.2 billion] in 2013, which puts the financial and monetary stability in danger and places further burden on the coming generations,” he said.

He stressed that the primary deficit now amounted to LL370 billion, compared with a surplus that had been witnessed from the years 2002-2011.

“The balance of payments has also witnessed a major shift from surplus to a continuous deficit of $1 billion yearly, while foreign direct investments dropped to less than $4 billion yearly after it had reached $8 billion in the years 2007-2010 for three consecutive years,” the MP said.

He noted that the public debt had reached $64 billion with a debt-to-GDP ratio of 140 percent by the end of 2013, after it had dropped from 180 percent in 2007-2010 to 134 percent in 2011.

“Lebanon is now incapable of investing in its infrastructure, which is a prerequisite for achieving a minimum level of economic growth and development in certain areas. “

He warned that the treasury would come under increasing pressure when many of the public employees reach the retirement age.

“The number of beneficiaries from the retirement salary increased to 117,000 Lebanese retirees from only 25,000 in early 1990s,” Siniora said.

He cautioned that implementing the salary hike in its present form might induce the Finance Ministry to raise the interest rates on bonds and eurobonds to finance the wage hike, and said that this would ultimately cause the budget deficit to rise.

Source: The Daily Star

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Property owners call for sit-in near National Museum

The Syndicate of Property Owners called on Tuesday for a sit-in to reject attempts by inhabitants to block the approval of the new rent law, which was endorsed by the parliament.

A statement issued by the Syndicate stressed that the “sit-in is aimed at refuting fabrications by the tenants , who are staging suspicious demonstrations.”

The sit-in will be held on Wednesday at 5:00 p.m. near the national museum in Beirut.

The statement demanded President Michel Suleiman to ink the law, which was passed by the national assembly on April 3.

A dispute had recently emerged between owners of building and inhabitants over a controversial law endorsed by the parliament.

The law, which is opposed by renters, stipulates an increase in rents over a six-year period until they reach 5 percent of their current value.

The inhabitants argue that many won’t be able to afford it, prompting them to leave their homes.

The old rent law pertains rent contracts carried out before 1993.

“All the suspicious endeavors by those who claim to represent tenants should be investigated by the prosecution and we reserve the right to file charges against them,” the Syndicate’s statement pointed out.

“They are outlaws and impersonating needy and poor people while they are rich,” the statement considered.

The Syndicate called on inhabitants “to abide by the law.”

 

Source: Naharnet

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Milan expo to showcase Lebanese cuisine

BEIRUT: Lebanese government officials and the Italian Embassy called Tuesday for food industry experts to participate in the 2015 World Expo in Milan, where Lebanon will highlight its local food.

“We have the pleasure to officially launch a common Lebanese-Italian economic event that will provide Lebanon with a historical opportunity to bolster its entry to new European markets,” Economy and Trade Minister Alain Hakim announced Tuesday during a news conference at the Grand Serail.

Hakim said a group of experts from the Economy Ministry were working to assure a positive outcome for Lebanese food and drink products represented at the huge expo.

“The Economy Ministry will dedicate each week of the exhibition to a specific Lebanese food industry including wine and olive oil and its derivatives,” he said.

“Accordingly, we call upon the Syndicate of Food Industries to join its efforts and coordinate with the ministry in order to specify the nature of its participation in the expo and the activities that will be used to showcase its products,” Hakim added.

He said a committee comprising public and private institutions would be formed in order to secure Lebanon’s successful participation in the event and ensure the companies’ full use of the available opportunities and resources.

He also added that Lebanon’s involvement in the expo would include artistic performances aimed at attracting visitors to the Lebanese booth and increasing the visibility of its products.

The minister has praised the Italian government for providing Lebanon with logistics and customs incentives to facilitate its participation in the event.

Expo Milano opens May 1, 2015, and will continue for six months under a theme of sustainable food production. The focus on food is fitting for Italy, a country revered for its pasta, pizza, gelato and Nutella.

Lebanon’s contribution will likewise center on food, and will be presented under the slogan “Cuisine, the Lebanese Art and Soul.”

“Taste is knowledge,” Simon Jabbour, Lebanon’s commissioner-general in the Economy and Trade Ministry told The Daily Star, explaining that cuisine may well be the best window into Lebanon’s culture, a country whose social and culinary heritage are closely connected.

Lebanon will have a 125-square-meter exhibition space in the Bio-Med Cluster, a pavilion at Expo Milano devoted to countries from around the Mediterranean. Nearby stands will host Tunisia, Libya and Egypt, as well as Croatia, Serbia, Albania and Montenegro.

Participation at the expo is free, Jabbour said, adding: “Those who are interested will be invited to cooperate on creating a concept of presence that will serve them as well as the Lebanese image. This is a call to all the syndicates and chambers to take part.”

The space dedicated to Lebanese cuisine will offer an interactive experience, where visitors can learn about and taste typical handmade food and beverages.

Lebanon’s participation in the expo comes at a desperate time, as the country’s food and hospitality industries struggle to draw tourists in the face of concerns over security.

Expo Milano is expected to draw millions of visitors to the northern Italian city over six months, and it is hoped that Lebanon’s presence will offer an essential platform for promoting local culture and tourism.

“The cuisine of this antique land is rich and is part of the history; it is easy to find Oriental and Western influences. Even if Lebanon is not a big country, it succeeded in contributing very much to modern Middle Eastern cuisine,” Jabbour said in a statement.

“We will explain how, in terms of art, literature, history and sociology, the cuisine could be a way to present our traditions and our culture and how they are related to our style of living.”

Lebanese and Italian food traditions both emphasize local, in-season ingredients like olives and olive oil, citrus, tomatoes, eggplant and other fresh produce.

The placement of food and family at the center of social life in both countries makes them natural partners, Giuseppe Morabito, Italy’s ambassador to Lebanon, told The Daily Star.

Marabito had hinted about the culinary and cultural links between Italy and Lebanon during the HORECA food and beverage trade show, which took place in Beirut earlier this month.

“Food is, how can I say, something in common,” he said. “Food is part of the family. It’s a dialogue.”

Source: The Daily Star

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