News Column

Salameh calls for private Beirut bourse

June 19, 2014

Dana Halawi

BEIRUT: Central Bank Governor Riad Salameh Thursday urged the Lebanese government to privatize the Beirut Stock Exchange to improve its performance and boost the financing of the private sector.

"The privatization of the BSE would be a new initiative in the framework of encouraging the private sector to transform private companies into public companies so that people can have a stake in these firms," he said. "It would also help in securitizing consumption loans under the supervision of financial authorities to avoid negative repercussions."

Salameh's remarks came during the Arab Economic Forum held at the Phoenicia Hotel in the presence of Prime Minister Tammam Salam and a large audience of business leaders, economists and bankers from Lebanon and the Arab region.

In his speech, Salameh said the Lebanese economy was facing great challenges including reducing the indebtedness of the private sector.

"The indebtedness of this sector has reached about 100 percent of GDP and it has even exceeded this percentage," he said, adding that indebtedness in the private sector could impede investment and thus economic growth.

"It also creates a burden on households, especially with regards to consumption loans, which represent around 50 percent of the households' income."

On the other hand, Salameh gave some indicators of confidence in the Lebanese economy.

"The balance of payments until the end of last April registered a surplus of $788 million while deposits in the private sector grew between 5 percent and 6 percent," he said.

"The currency market is stable in Lebanon, and we see that the demand on Lebanese stocks has actually helped in improving their prices," he added.

"What is also worth noting is that there is a non-Lebanese interest in buying these bonds and stocks. Moreover, the Central Bank, in these difficult conditions we are going through, has declared that it will continue providing liquidity in all currencies, which will ensure the government has sufficient cash," Salameh said.

Salam, meanwhile, vowed to enact the law for partnership between the private and public sectors, which would create a legal framework to attract investments.

He also promised to take the necessary measures to encourage the Lebanese industry sector by minimizing cost of production and increasing the sector's competitiveness.

"We will also work to help the agriculture sector by attracting big investments in this field," he added.

Salam said his government would work seriously to carry out administrative reforms in order to attract investments from Lebanese expatriates and foreigners.

He added that the government was also seeking, with the help of international organizations and other Arab countries, to contain the negative repercussions of the large influx of Syrian refugees in Lebanon.

"We are also working in a very meticulous and scientific way on the oil and gas project, which is expected to create lots of investment opportunities for local, Arab and foreign private sector," he said.

Meanwhile, Francois Bassil, president of the Association of Banks in Lebanon, cited some statistics to support his argument that the economy has not been performing well under current circumstances.

"It is inexcusable to accept low growth rates of 1.5 percent to 2 percent in Lebanon compared to between 2.4 percent and 3.3 percent for the Arab countries for the years 2014 and 2015," he said.

He added that such low growth rates were not sufficient to absorb the young workforce in the Arab region.

Bassil said the Lebanese had to endure a budget deficit of $4 billion but now this figure had swollen to $5 billion, meaning it would exceed 11 percent of GDP based on the 2014 draft budget.

"We are suffering from this huge deficit without even taking into account the negative repercussions of adopting the salary scale," he said.

"We are lucky that some parliamentary parties are objecting to the chaotic financial legislations that would hurt people with limited income," he said.

Bassil added that banks' profits constituted only 11.5 percent of their capitals, stressing that the lenders had accepted such low profitability in order to preserve their liquidity in foreign currency and with the aim of protecting their deposits.

"Despite all this, we see criticism of the sector is still mounting," Bassil said.

Adnan Kassar, president of the General Union of Chambers of Commerce, Industry and Agriculture for Arab Countries, expressed his optimism about the election of a new Lebanese president, which is expected to reassure foreign investors and attract them back to Lebanon.

Kassar called on Arab businessmen and politicians to cooperate in order to establish a unified customs organization by 2015 and an Arab common market by 2020, in addition to increasing the competitiveness of Arab markets.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Daily Star, The (Lebanon)

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