Lebanon needs restored faith in economy
There are a few who believe the economy will recover
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Most Arab investors are fed up with Lebanon’s deteriorating political and security situation and are either putting their investments on hold or simply withdrawing from the Lebanese market. Yet, there are a few who believe the economy will recover as they continue to inject cash into new business ventures or proceed as planned with projects under development despite the economic slowdown and the growing risk of spillover from the Syrian crisis.
In 2011, foreign direct investment fell to $4 billion from $4.8 billion a year earlier, according to the Investment Development Authority of Lebanon.
Among those who still have faith in Lebanon is Robert Fadel, chairman of ABC Group, one of Lebanon’s retail industry leaders, who inaugurated Tuesday the expansion of its department store in Dbayyeh, north of Beirut.
“ABC is committed to Lebanon. We don’t stop investments based on ups and downs which we witnessed during the past 30 years. We believe in the future of our country,” Fadel told The Daily Star in an interview.
When ABC was building its first department store in Dbayyeh – which has since undergone extensive renovations several times – the situation was much worse than today, Fadel recalls.
“ABC Dbayyeh’s department store was first built in the 1980s in the midst of Lebanon’s Civil War,” Fadel says. “Back then, level two and three were burned after being hit by bombs.” Today, the retail industry is facing margin pressure as Lebanon is experiencing an economic slowdown, Fadel says.
Lower consumer confidence, increased competition and a declining number of tourists – mainly from the Gulf region – are piling pressure on retailers to cut profits margins with premature sales discounts, Fadel adds.
The UAE, Kuwait, Qatar, Bahrain and recently Saudi Arabia have advised their citizens to avoid all travel to Lebanon and urged those in the country to depart given the tense security situation.
Despite the lack of official statistics, tourists from rich oil-producing Arab countries are believed to account for much of the visitor spending in Lebanon. Fadel highlights that as much as 50 percent of VAT refunds come from citizens whose countries issued travel bans.
ABC’s sales in 2011 were flat year-on-year, similar to the first half of 2012, says Fadel, who pointed out the decline in sales growth in the past two years came after several years of double-digit growth.
At the end of 2011 The Byblos Bank-American University of Beirut Consumer Confidence Index dropped to its lowest level since July 2007, according to a report issued last April.
The index posted an average monthly reading of 51.9, down by a sharp 29 percent from its 2010 average of 72.8, with the last quarter of 2011 recording the lowest result on a quarterly basis.
Fadel says ABC, which employs around 1,000 individuals, forecasts total sales at $150 million in 2012 but warns the economic situation is unsustainable over the long term.
ABC’s business is divided into two units: a retail division and a real estate business whereby ABC leases space to tenants. The real estate business accounts for three-quarters of ABC’s revenues, Fadel says, with the retail division accounting for the remaining quarter.
While he urged the government to seek political stability and implement reforms to cut rising costs such the energy bill, Fadel argues that media outlets should play a positive role by conveying a better image of Lebanon than the one being presented to Arab viewers and Lebanese expatriates.
Started in 2007 as a multiphase expansion project, ABC Dbayyeh covers a built-up area of 45,000 square meters and accommodates more than 200 tenants including key retailers such as H&M, Aizone and Virgin, among others.
The mall also comprises restaurants, an eight-screen cinema including the first VIP cinema in Lebanon and Kidsville, an 8,000 square meter fashion and entertainment area just for children.
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