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French Version

Lebanese red tape deters new business

Economy and trade minister urges patience

In Lebanon, doing business requires patience. A lot of patience. According to the World Bank, if you were opening a new firm, the start-up procedures would take you 46 days.

At that point you would have registered, but still not obtained a license before legally operating your business. Dealing with inspections, licensing and safety regulations would take you another 275 days. And we haven't spoken about the court efficiency yet. Enforcing a contract would need 721 days.

It is not surprising then that Lebanon came off very badly at the annual World Banks' report "Doing Business in 2006," issued to compare the ease of doing business in 155 countries. The report - which ranked Lebanon 95th - was discussed at a conference on "Improving Lebanon's Business Environment," held by the International Finance Corporation (IFC), the private arm of World Bank Group.

"This ranking is a shame", said Economy and Trade Minister Sami Haddad in his opening speech. "In regard to its excellent potentials, Lebanon cannot accept this." In a sideline of the conference, Haddad also blamed the media for focusing on political issues. "There is more than the Mehlis report in this country. We have to speak about the economy, too, about the budget deficit, unemployment, corruption." Asked what steps he has so far taken to solve these problems, Haddad said the new government has been office for no longer than four months, and one has to be patient.

Michael Klein, vice president for Private Sector Development at the World Bank who delivered the "Doing Business" presentation, compared Lebanon's regulatory environment with other countries in the region. Few reforms were attempted in the Middle East in 2004. Only 44 percent of the countries launched at least one reform that streamlined business regulations and taxes. Considering various aspects like paying taxes, getting credit, protecting investors or enforcing contracts, countries like Tunisia, Saudi-Arabia, Kuwait and Oman seem to be much more favorable for doing business. The data is based upon survey responses, given to businessmen, investors and lawyers in the region.

Klein said only wide-ranging reforms, including privatization and opening to foreign trade would promote growth and thus create new jobs. In his words, a government that relies on heavy regulations sees little entrepreneurial activity, high poverty and stagnant growth. Finally, the more complicated the regulations and tax system are, the more vulnerable a country becomes to corruption.

"This is our worst problem" a Lebanese businessman said. "It is an open secret that our economy is based on nepotism and bribery. But who cares? Business is going well anyway." Randa Abou Sleiman, a lawyer, listed some of the biggest - but in her opinion solvable - obstacles the private sector in Lebanon has to face. "High incorporate costs, needless stamp duties, circuitous contract enforcement procedures. Some of these reforms could be initiated immediately."

Ramzi Hafez, editor of Lebanon Opportunities, took a more optimistic tone, saying: "The World Bank report is unfair because it speaks only about the negative indicators. But in reality many business areas are developing, we have many creative founders. So let's stop with the myth that nothing works in this country."

Beirut 21-11-2005
Daniel Steinvorth
The Daily Star

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