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The Lebanese Economy

Before the 1975 war, Lebanon developed as a free-market economy with minimal government regulations. Because the country had a stable and open economy and strict laws regarding secrecy in banking, Beirut became the banking and investment center of the Middle East. From 1975 to 1990, however, warfare severely dislocated most economic sectors and destroyed structures and infrastructures totaling an estimated $25 billion to $30 billion. As the war damaged Lebanon's economy, most of the rest of the Middle East experienced an economic boom, and businesses moved from Beirut to other Middle East economic centers. Lebanon's economy did not collapse completely during the war, however, largely because foreign aid to competing militias fueled the wartime economy.

Since 1991 Lebanon's economy has begun to revive. Annual inflation, about 500 percent in 1987, was manageable by the mid-1990s. Gross domestic product (GDP) totaled $17.2 billion in 1998, with the GDP expanding by an average of 7.7 percent annually in the period 1990-1998. Horizon 2000, a multibillion-dollar reconstruction program to rebuild Beirut's central district, is the main focus of the government's energies. The government hopes the redevelopment will encourage a broader national recovery. Services, trade, manufacturing, and agriculture are now leading sectors, and the booming construction sector is also significant. However, the government remains severely short of funds and has increasingly privatized public functions, including some official monopolies, such as the postal service.

In the mid-1990s Lebanon's annual unemployment rate was estimated at about 20 to 25 percent. An estimated 62 percent of the employment is in services, including tourism, trade, government, construction, and finance. Approximately 31 percent of the labor force work in industry, including manufacturing, construction, and mining; and 7 percent in agriculture. Wages and buying power are low, and unions are encouraged. Periodically the unions strike, sometimes in a general action, often eliciting changes from the government.

Before the war erupted in 1975, domestic, foreign, and transit trade (the re-export of products manufactured outside Lebanon but distributed through it) stimulated prosperity; these forms of trade have begun to revive since the war. Financial services such as banking, investment, and insurance-significant before the war-have also begun a slow recovery. Tourists, who support an industry of hotels, restaurants, casinos, and nightclubs, are attracted to Lebanon's scenery, climate, historical sites, and cultural activities. Before 1975 an estimated 550,000 tourists visited Lebanon annually. In 1998, there were about 631,000 visitors, mostly from Europe, the Middle East, and the Americas. In 1987 the United States government restricted its citizens from entering Lebanon due to Islamic militant activity; the United States lifted the travel ban in 1997 after the Lebanese government pledged to boost efforts against terrorism. Superior educational and medical facilities attract thousands of clients and also add an important service element.

Manufacturing constitutes the second-greatest share of GDP and is a major employer. Light industry is especially prominent and includes the production of cement, oil products, processed foods, printed material, textiles, clothing, chemicals (typically paints), and jewelry. Two cement plants near Tripoli are major installations. Oil refineries near Tripoli and ayd, badly damaged during the 1975 war, are being rebuilt. Most of the rest of Lebanon's industry is in or near Beirut.

Historically, agriculture was a key element in Lebanon's economy. In the 19th century, mountain clans built thousands of stone terraces to facilitate their farming of steep slopes. Agriculture, including forestry and fishing, employed only 7 percent of workers and contributed only 12 percent of GDP. Cultivated fields cover 18 percent of Lebanon, and 13 percent is in permanent crops (orchards and vineyards). Premium produce, especially oranges and peaches, are a valuable export. The intensively farmed coastal plain produces citrus, bananas, vegetables, melons, and strawberries, while the lower slopes of the mountainsides support vineyards and fruit orchards of olives, figs, peaches, cherries, and plums. Apples are grown at higher elevations. The Beka produces wheat, barley, sugar beets, tobacco, grapes, and fruits. Farm-raised animals include goats, sheep, cattle, pigs, and chickens.

Forestry, Fishing, and Mining
The famous cedars of the Lebanon Mountains were depleted centuries ago and only a few protected stands remain. While commercial forestry is now limited, pines and other trees are logged for local production. Commercial fishing is also minor, but it is locally important as a major source of food. Commercial mining is limited to large-scale quarrying of Lebanon's plentiful limestone and smaller-scale production of gypsum.

A major goal of postwar reconstruction is to modernize and expand electric power facilities damaged during the war. Two thermal stations, one just north of Tripoli, the other just south of Sayd, were damaged by 1996 Israeli air raids. The Ln River hydroelectric project in the Beka is Lebanon's largest power facility.

Transportation and Communications
Lebanon is rapidly restoring its essential transportation facilities. For a mountain country, the network of roads is dense, and more than four-fifths of the roads are paved. In 1975 three rail lines served Lebanon, but these deteriorated during the war and in the mid-1990s were inoperable. Beirut International Airport was formerly the main aviation hub for the Middle East but was used minimally during the war. In the mid-1990s, it served only a fraction of the number of passengers it served before the war. A $450 million reconstruction project is designed to revive airport activity and attract 6 million passengers annually. Lebanon's Middle East Airlines (MEA), once a large and efficient private company, deteriorated during the 1980s and was turned over to the government.

The formerly bustling seaport of Beirut was isolated during the war and lost its role as the transit port for nearby Syria and Jordan. A $550 million project is underway to speed up the port recovery and expand it five-fold. Tripoli is Lebanon's second most important port. The famous old Phoenician ports of Tyre (now Sr) and Sayd are now minor, but Sayd's port is scheduled for major expansion. Jniyah's port expanded greatly during the 1980s.

In the mid-1990s the government licensed the many unregulated wartime radio and television stations and reduced their number, awarding licenses to 6 television stations and 58 radio stations. Lebanese press is comparatively free of government interference. Some 15 daily newspapers are published in Arabic, French, Armenian, and English, with an similar number of weeklies and monthlies.

Foreign Trade
In addition to the very important domestic and transit trade, foreign trade plays a major role in the Lebanese economy. Traditionally, Lebanon's balance of trade has been overwhelmingly unfavorable; in 1998 exports totaled $642 million, while imports totaled $7.1 billion. Nonetheless, Lebanon maintains a total balance-of-payments surplus because it receives large inflows of money in the form of remittances from family members who live abroad, investments in postwar reconstruction, and deposits in savings accounts that take advantage of the high interest rates. In 1995 these transfers amounted to $7.5 billion, yielding a balance-of-payments surplus of more than $1 billion. Exports go mainly to the United Arab Emirates (UAE), Saudi Arabia, Kuwait, Syria, Jordan, France, Italy, and the United States. Imports come from Italy, the United States, Germany, France, Syria, the United Kingdom, and Japan. Lebanon's chief exports are food and food products, paper products, chemicals, textiles, jewelry, and metal products. Imports include automobiles, trucks, heavy equipment, communications equipment, electronic goods, appliances, machinery, and petroleum and petroleum products.

Currency and Banking
The unit of currency is the Lebanese pound or lira, consisting of 100 piastres (1,550 Lebanese pounds equal U.S.$1; 2001 average). The Banque du Liban is the central bank and the sole bank of issue. All other banks are private. Lebanon's financial laws require secrecy in banking, and there are few restrictions on the free flow of funds. These qualities attracted many foreign banks between 1956 and 1975, making Beirut the banking center of the Middle East. Beirut's financial services industry collapsed during the 1975 war but has begun a gradual recovery. A stock exchange, closed in 1983 but reopened in 1996, is located in Beirut.

Lebnaan Lebnaane - Lebanon is Lebanese - Le Liban est Libanais - لبنان لبناني
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