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The service sector in Lebanon, including SCT, contributes with 72% to the country GDP. The Lebanese ICT sector is characterised by relatively small scale but highly adaptive firms. It also enjoys many advantages, including skilled workforce, outstanding advertising firms, media content providers and web portals, competitive Internet service providers, and well developed GSM cellular networks. Software programmers and designers in the Lebanese ICT sector are considered among the best in the Middle East. The Lebanese government has recently joined the private sector to develop e-government services in the country, though it has not yet developed adequate legal infrastructure for the sector.
Market indicators:
The average growth rate of the Lebanese ICT sector is around 13-15% annually. The annual turnover is estimated at USD 400 mio. in the private sector and the annual revenues coming from the sector to the state budget are USD 1.2 bn. In 2005, the sector included some five hundred companies that employed more than 5,000 qualified persons. Some 1200 new ICT university graduates join the sector every year. Furthermore, There are two collective institutions; Professional Computer Association of Lebanon (PCA) and The Association of the Lebanese Software Industry (ALSI), that help foster IT specialists in the country. In 2004, the Lebanese government initiated “Berytech”, Beirut Emerging Technology Zone (BETZ), which is a technology park area where local ICT entrepreneurs can either independently or in alliance with international organizations setup offices for the creation of new or value added ICT products or services.
Lebanon enjoys a modern network of fixed telecommunication lines, which has recently gone through major upgrades. The network offers the possibility of connecting some 1.3 million lines to a fibre optic backbone. Furthermore, there are five(1) licensed Integrated Services Digital Network (ISDN) companies in the country.
In accordance with a recent study conducted by the newspaper “The Daily Star” in July 2006, Lebanon played an important role in the 1990s in setting the regional pace for Internet penetration. Over the next 6 years (2000-2005) however, the IT sector grew by 2% only, compared with 50% in average in other Arab countries. This slow rate has mainly been due to the slow process of decontrolling the sector. According to the study, Lebanon ranks eighth out of 12 Arab countries in terms of Internet penetration. There are five(2) Internet service providers (ISP) in Lebanon and all purchase bandwidth from the state-owned telecom firm, which offers two dial-up Internet connection speeds, a 33-56 kilobyte minimum capacity and a 128 kilobytes maximum capacity.
Two operators acting under management contracts provide mobile phone services in Lebanon; Mobile Telecommunications Company MTC) and Fal Dete Telecommunications (FDT). Both are privately owned and share the market almost equally with a 50.2% for MTC and 49.8% for FDT. In 2005, the number of subscribers was 1.01 mio. with a growth rate of 18.3%. The penetration rate for Lebanon (defined as mobile subscribers divided by total country population) was 28.1% in 2005.
Software development has grown steadily in Lebanon in the past few years. Most firms develop expertise in specific areas, such as banking, insurance, hospital and healthcare packages and offer installation and customisation of software up to the clients' specific needs.
E-business is currently in practice in Lebanon, through online shopping, auctions, content publishing, services and preparation for m-commerce. E-payment is in constant development. A number of local banks offer this card service to around 1 million clients, which corresponds to 25% of the population.
Most major international IT hardware manufacturers are represented in the country by local agents and distributors. In addition, a number of Lebanese companies locally assemble IT products, mainly PCs.
The national ICT standards guidelines and operating procedures have been developed for the main ICT categories based on international best practice, such as hardware networks and cabling, telecommunications, database systems, operating systems, buildings, rooms and environment, quality management, software applications, selection and evaluation framework, information integrity and security, data definition and exchange, risk management, and configuration management.
The country’s imports and exports of ICT equipment and software were in 2005 around USD 135 mio. (1.5% of total imports) and USD 9 mio. (0.5% of total exports) respectively.
Per 1000 of population (2005)
Growth rate
(2002-2005)
Telephone landlines
199
0%
Cellular Telephone subscribers
277
18%
Internet users
169
44%
Market trends:
Telecommunications in Lebanon are a monopoly of the Lebanese Government (Ministry of Telecommunications MOT) that owns and/or licenses all fixed, mobile, and wireless networks. There is no public entity in charge of ICT development and coordination in the country. Beside MOT, there are many players in the public sector such as The Ministerial ICT Committee, Ministry of Economy and Trade, Ministry of Administrative Development, Investment Development Authority of Lebanon, Central Bank, The Parliamentary ICT Committee, Ministry of Finance, and Ministry of Justice. OGERO (Organisme de Gestion et d'Exploitation de l'ex Radio Orient) was established in 1972 and 100% owned by the government (Ministry of Telecommunications) is the only entity in Lebanon responsible for the operations, maintenance, sales, marketing, billing and management of the fixed telecom network in the country.
In 2002, a new law was issued for the privatization of the ICT sector. The new law has not been applied to date. However, it has now been decided in the country that privatization of telecom is imperative, also clearly indicated to the international community during the Paris III conference and must be completed within a period of time not exceeding 5 years. The Lebanese Ministry of Telecom has been asked in many occasions to speed up the privatization process, which seems to be more difficult than expected since 38% of the state budget comes from telecom revenues. However, the Ministry of Economy & Trade and Ministry of Finance, being the main players, have been making all possible efforts to complete the privatization process of “Liban Telecom” and fixed lines by mid 2007.
Despite the destruction in Lebanon during the war in summer 2006, and the fact that the valuation of the telecom sector in Lebanon may have slightly been affected after the war, the government still expects to negotiate a good price, when it - as planned - privatizes the mobile telecom sector later this year. According to the Lebanese Higher Privatization Council, the war has delayed the privatization process, but not disrupted it. The Council’s experts trust that privatization of the telecom sector will boost investments and create many jobs. The value of each of the existing two mobile networks, being the most important elements, of the sector is between USD1.5 - 3 billion, according to recent estimates by international investment banks.
Two new GSM companies are expected to enter the market at a later stage. Lebanon's government is expecting to earn between USD 2 - 3 billion for each cellular license. Studies by various international banks have estimated up to USD 3 bn for each of the two licenses. The Lebanese imports from Denmark to the ICT sector amounted to DKK 9.4 mio. in 2005.
Market assessment:
Lebanon is a country open to foreign direct investment by tradition. “The Investment Development Law” authorizes the “Investment Development Authority of Lebanon”(IDAL), to award licenses and permits for new investments as well as to grant special incentives, exemptions and facilities to larger enterprises. In an attempt to attract foreign investments, IDAL launched in 2003 the "Investors Matching Service" to facilitate the creation of strategic international-local partnerships through joint venture, equity participation, acquisition, and others. The country has many forces that have encouraged foreign companies to set up offices in recent years. The major key advantages include a free market economy, the absence of control on the movement of capital and foreign exchange, a highly educated labour force, good quality of life, limited restrictions on investors and its location at a crossroad of three continents. According to statistics from the Lebanese Ministry of Economy and Trade 45 foreign companies launched offices, representative offices or branches in Lebanon in 2005.
New ICT development projects in Lebanon can enjoy the general business climate in the country, where trade is open, taxation is reasonable, and related commercial policies compare favourably to other countries in the Middle East. The “LOCO Monitor”(3) tracked 71 foreign direct investment projects (FDI) in Lebanon since 2002 to date, of which 12 was in the ICT sector. A survey conducted by “Connexus”, a local consultancy firm, asserts that investors are still interested in the telecom sector in Lebanon despite the war and that the value of the telecom equipment such as satellites and antennas that were destroyed during the war is a small portion of the equation. Although Lebanon's telecom infrastructure suffered hits in the war, mobile-phone service was only interrupted in few areas.
Danish companies may benefit from the favourable business atmosphere and the relatively cheap human resources in Lebanon to set off software production facilities or outsource software development.The Lebanese market of software development and services is generally promising for foreign investors and exporters. Specialized Danish companies can also provide consulting for the IT new projects and to the expansion and renovation projects of the existing infrastructure. Local expertise is limited, when it comes to especially the design of infrastructure for broadband, security and physical connectivity and network management. Local development of telecom and computer consulting services may lead to additional purchases of computers, peripherals and communication equipment related to switching, routing, hubs and nodes.
As mentioned earlier, the penetration rate of mobile telephony in Lebanon is 28,1%. Economic wise, when this rate is less than 50%, the mobile market is said promising and offers investment opportunities.High tech computer and telecom trade fairs in Lebanon also offer many opportunities for Danish firms to expose their products to a wider audience in the region.
Lebanon is still in the process of accession to WTO, despite that it was one of the founders of the General Agreement on Tariffs and Trade (GATT) in 1945. Lebanon has been an observer in WTO since January 1999, where the Law of Intellectual Property Rights was also issued in Lebanon in preparation for the country’s accession to the WTO. More recently a number of related laws have been revised at ministerial levels with the support of the World Intellectual Property Organisation (WIPO), which have noticeably reduced software piracy. More efforts are being set forth in that direction.
The import customs tariff for the ICT apparatuses and equipment ranges from 5% to 10%.
Relevant links:State Telecom Authority of LebanonProfessional Computer Association of LebanonThe Association of the Lebanese Software IndustryBerytech, Technological Pole (Beirut Emerging Technology Zone) (BETZ)
(1) GlobalCom Data Services sal, Pesco Telecom sal, Cable One sal, CedarCom sal, and Sodetel.(2) Cyberia, Inconet-Data Management, Terranet, New Com, and Moscanet.(3) “LOCO Monitor” is a web market research and tracking tool that was developed by the Irish consulting company “OCO Consulting” for tracking and forecasting direct investment projects (FDI), worldwide. For more information, see LOCO Monitor
