|Lebanon static amid spurt in MENA economic freedom
|Political impasse hampers reform legislation
Lebanon's stagnant score in an annual ranking of economic freedoms amid rising rankings for other regional counties is just the latest evidence of the country's political morass ravaging the economy, a number of economists told The Daily Star Sunday. Lebanon finished 73 out of 157 ranked countries and ninth among 17 Middle East and North African (MENA) countries, according to the Heritage Foundation/Wall Street Journal Index of Economic Freedom for 2008, released in Byblos Bank's publication Lebanon This Week. The annual study is the only survey of economic freedom that evaluates Lebanon.
The problem was not that Lebanon's level of economic freedom dropped from last year by 0.5 percent to a score of 60.9 percent, but rather that 13 of the 17 MENA nations improved in the standings, while Lebanon was only of only four MENA countries to regress. The index examined the countries on the basis of business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom.
While Lebanon spent 2007 mired in political deadlock, other countries in the region continued to free up their markets as their economies were buoyed by the cash flooding the region from record oil prices, the economists said.
Lebanon's score "has not improved," said Nassib Ghobril, head of research at Byblos Bank. "That's the more important point. The governments and authorities in other countries are working hard and
trying to improve their investment climates, trying to reduce the burden of government" in their economies. Meanwhile, in Lebanon, "the political context is not conducive to focusing on those issues," he added.
For example, proposed legislation to open the nation's financial markets has lain idle while feuding political camps squabble, said Marwan Iskandar, head of the consulting firm MI Associates. "In a country where Parliament has not met in a year, it's very difficult to introduce improvements," he said.
Countries in the Gulf, however, are welcoming financial institutions in a variety of fields such as banking, insurance and private equity, said Saad Andary, deputy general manager of the Bank of Beirut and Arab Countries (BBAC). He cited the state-sponsored Dubai International Finance Center and Qatar Financial Center as examples of the burgeoning investment atmosphere in the Gulf. In addition, BBAC has established branches in Saudi Arabia, he said.
"They're relaxing entry requirements" in the Gulf, Andary said. "You find that there is a degree of freedom of entry now. You would not have imagined a Lebanese bank to set up in Saudi Arabia two years ago.
"The problem in Lebanon is the political impasse. You cannot do much about regulation if you do not have a proper government [or] a House of Parliament operating."
The MENA region overall showed improvement in its score from the previous index, finishing with a level of economic freedom of 58.7 percent, compared to 57.2 percent the year before. However, the region's overall score still lags the world average of 60.3 percent, although MENA countries did top the regional charts in fiscal freedom with a score of 86.5 percent, compared to the global average of 74.9 percent.
Bahrain registered the top score among MENA countries with 72.2 percent freedom - ranking 19th in the world - followed in the region by Kuwait, Oman and Israel.
Lebanon should have a natural competitive advantage in economic freedoms, because of its free-market history with little state ownership and a dominant private sector, Ghobril said. "Lebanon should be the country with the most economic freedom because of history ... We are falling behind. That's something to be concerned about."
The Daily Star