Lebanese worry over Saudi halt of aid
Saudi Arabia’s “punitive” actions against Lebanon exacerbated worries in the smaller country about its faltering economy, although its private sector seems to have escaped unscathed, at least so far, officials dealing with the economy said.
Riyadh has suspended aid worth $4 billion to the Lebanese army and police in retaliation for the Beirut government’s failure to endorse condemnations of attacks against Saudi diplomatic missions in Iran in protest against the execution of a Saudi Shia cleric.
After the aid suspension, Saudi Arabia blacklisted four companies and three Lebanese men for having links to Lebanese Shia militant group Hezbollah, a close ally of Riyadh’s adversary Iran.
The moves followed the Saudi National Commercial Bank’s decision to shut its two branches in Lebanon, claiming economic infeasibility.
Amid growing worries about Lebanon’s economy, which relies heavily on investments from the Gulf, doing business with its private sector and hosting its tourists, Nabil Itani, head of the Investment Development Authority of Lebanon (IDAL), said he could not imagine economic ties between Lebanon and Saudi Arabia would collapse.
“A large number of foreign investors in Lebanon are from the Gulf and Gulf markets are important for Lebanese exports,” Itani said. “These ties are too strong to be severed.”
About 90% of Lebanese exports go to Arab markets, with 70% to Gulf markets, he explained.
“Lebanon’s trade balances suffer deficits with almost all countries it trades with. The deficits are severe except with Saudi Arabia, which is a major importer of Lebanese goods,” Itani said.
Between 2003 and mid-2015, Lebanon received $11.2 billion in greenfield foreign direct investments or foreign direct investments in projects started from scratch from Gulf Cooperation Council (GCC) states, said Nassib Ghobril, head of the Economic Research and Analysis Department and chief economist at Byblos Bank S.A.L.
“This includes $1.8 billion from Saudi Arabia, $2 billion from Kuwait and $7.3 billion from the United Arab Emirates,” Ghobril said. “Targeted sectors include tourism, commerce, information technology, services, banking and real estate. Lebanese bank deposits total to $152 billion, including $32 billion belonging to nonresidents. The majority are Lebanese working in the Gulf.”
If business ties between Lebanon and the Gulf falter “there will be trouble”, a Lebanese government source said, adding: “The Lebanese economy is very reliant on the Gulf — investments, tourism, remittances from Lebanese expats there, not to mention bank deposits. Further trouble is out of the question, but if it happens, it will be a major blow to the economy.”
Lebanon is already suffering from the war in Syria and Hezbollah’s involvement there, which brought earlier Gulf punitive measures, including travel bans to the country where tourism contributes 21% to the gross domestic product.
According to the Lebanese Tourism Ministry, Saudis constituted 80% of Gulf tourists to Lebanon in 2014. More than 1 million refugees have fled to Lebanon since the start of the Syrian conflict five years ago, placing a huge strain on the services in the small country.
Central Bank Governor Riad Salameh dismissed claims that Gulf nationals were withdrawing deposits from Lebanon in a sign of solidarity with Riyadh’s position. “The Lebanese pound is not in danger and Lebanon’s Central Bank and commercial banks have the necessary tools to protect the stability of the pound,” Salameh told Reuters, expressing hope for Beirut to mend ties with Saudi Arabia.
The International Monetary Fund (IMF) ranks Lebanon 36th among 187 countries in terms of central bank foreign reserves, which support domestic currency and cover the country’s import needs. Lebanon’s Central Bank holds $49.61 billion in foreign reserves, the IMF says.
Arab deposits at the Central Bank are $860 million, $200 million of which belong to Saudi Arabia, according to Makram Sader, secretary-general of the Association of Banks in Lebanon. Other bankers stressed that they did not record significant withdrawal of deposits since Riyadh froze military assistance to Lebanon.
Lebanese expats working in the Gulf remit around $5 billion annually, with those coming from Saudi Arabia leading the list.
“The Lebanese economy will adversely affect once the number of expats working in the Gulf begins to decrease,” warned Mohammad Shaheen, chair of the Lebanese Council for Work and Investments in the Gulf. He estimates the number of expats working there at 300,000 and their beneficiaries at 600,000.
Reports have indicated that the UAE plans to deport 20 Lebanese nationals residing in its territories while Elie Rizk, head of the Saudi- Lebanese Economic Development Committee, said 100 Lebanese working in the kingdom were scheduled for deportation. They are believed to be mostly Shias. The Lebanese government official, who spoke on condition of anonymity, explained the 100 were jobless because their contracts expired and their companies were cutting back for economic reasons.
Since 2009, more than 1,000 Lebanese, mostly Shias from southern Lebanon, have been deported from the UAE for suspected links with Hezbollah.
A Saudi official, who asked not to be named, said GCC states planned specific expulsions of Lebanese with Hezbollah ties.
“The GCC wants to pressure the Lebanese government and sanction Hezbollah. No plans are there for exerting pressure on Lebanon’s private sector or the ordinary Lebanese,” he said.