Foreign direct investment (FDI) in Lebanon

FDI in Figures

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 World Investment Report 2023 published by UNCTAD, FDI inflows were estimated at USD 458 million in 2022, down by 24.3% compared to one year earlier. Meanwhile, the stock of FDI stood at USD 70.5 billion. In the past, FDIs have 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  years, Lebanon has been hit by a series of shocks: an economic and financial crisis, followed by the COVID-19 pandemic, a political crisis, the explosion at the port of Beirut, and more recently the escalation in the attacks between Hezbollah and Israel. The unprecedented economic crisis has had large and persistent negative impacts that continued affecting the country, deterring FDI. Historically, the main foreign investors in Lebanon are France, the U.S., the UAE, Germany, the UK, the Netherlands, Jordan and Egypt; with investments oriented mainly towards real estate, financial services and tourism (the majority of which is based in or around Beirut – data IDAL). A large part of investment comes from the Lebanese diaspora (especially in the real estate sector) and takes the form of M&A (as opposed to little greenfield investment).

The serious economic and political crisis that Lebanon is going through and the sovereign default will continue to affect investors’ confidence. Other factors already hindering FDI include high unemployment, brain drain, energy supply shortages and regulatory obstacles. Furthermore, the Lebanese financial sector has imposed ad hoc capital controls, preventing most Lebanese from transferring money abroad, despite the fact that around two-thirds of accounts in Lebanese banks are denominated in dollars. According to the World Bank, Lebanon’s depression is likely to rank among the top three most severe economic crises since the 1850s, as the country’s currency has lost more than 98% of its value since 2019, contributing to record-high inflation due to Lebanon’s excessive reliance on imports. Following the 2020 default, Lebanon is unable to borrow on international capital markets. 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. Other concerns include over-regulation, arbitrary licensing, outdated legislation, ineffectual courts, high taxes and fees, poor economic infrastructure, and social unrest. As a result, Lebanon ranks 154th out of 184 countries in the 2023 Index of Economic Freedom.

What to consider if you invest in Lebanon

Strong Points

With its liberal economy, Lebanon has attracted foreign investors for many years. Advantages for FDI in Lebanon include:

• The country can represent a gateway to other countries in the Middle East and to many emerging economies thanks to its geographical location
• The relatively westernised workforce is highly skilled
• Few restrictions exist for investment and there are still important investment opportunities in the fields of reconstruction of basic and productive infrastructure, construction and supermarkets
• The large diaspora (there are more Lebanese outside the country than inside) guarantees recurrent financial flows to the country, thereby injecting liquidity into the national economy
• The discovery of offshore natural gas deposits should enable the country to reduce its energy dependence and offer numerous opportunities for related sectors.

Weak Points

Disadvantages for FDI in Lebanon:

• Exposure to geopolitical tensions in the region
• Political instability: the political landscape is divided according to religious, political and cultural criteria
• Social unrest driven by a decline in public services and growing food insecurity
• A lack of transparency in the licensing system
• Complicated customs procedures, high taxes and fees
• Since October 2019, Lebanon’s financial sector has imposed ad hoc capital controls
•  Since 2019, the local currency lost more than 95% of its value on secondary exchange markets
• The public debt level is unsustainable and the State and the Bank of Lebanon are bankrupt

Government Measures to Motivate or Restrict FDI

Lebanese business law, which is very liberal in terms of business freedom, is in principle very open to all traditional forms of investment. In addition, in order to facilitate all investor business establishment administrative formalities, law n°360 of 16 August 2001 on investment promotion formed a government agency IDAL (Investment Development Authority of Lebanon). This agency, which is under the direct authority of the Prime Minister, grants numerous tax exemptions, or offers exceptional regimes, as long as the investment is in defined sectors of activity, in named zones and start from a set investment amount. Likewise, the agency has the power to issue the necessary licenses and permits. Furthermore, IDAL established the Business Support Unit (BSU), which provides free legal, accounting, and financial advice to startups across sectors.
Lebanon’s Investment Law No. 360 introduces tailored incentives through package deals for large investment projects, including tax exemptions for up to 10 years, reductions on construction and work permit fees, and a total exemption on land registration fees.

Bilateral investment conventions signed by Lebanon

To see the list of investment treaties signed by Lebanon, consult UNCTAD's International Investment Agreements Navigator.