Forum organized by:

Session 3: Session: The role of Logistics and Free and Special Economic Zones attracting FDI

Hussam Edine Kobayter26th of November 2014

Casa Llotja de Mar, Barcelona

Outline:

I.North Lebanon and Tripoli

II.Main obstacles to doing business in Tripoli

III.What is a Special Economic Zone

IV.SEZ in general and Tripoli in particular

V.Advantages of a Special Economic Economic Zone in Tripoli

VI.Possible location

VII.Conclusion

I. North Lebanon and Tripoli (1/2)

Lebanon’s history has been unfair to its Northern region. Prior to the 70s, Tripoli was playing a key economic role but the post war and all what followed from occupation and disturbances have weakened the role of the 2nd Capital of Lebanon

North Lebanon is the 2nd biggest Province in Lebanon with ≈22% of the population

Focus is normally on Beirut and Mount Lebanon in terms of FDI (Foreign Direct Investment) and domestic investment

I. North Lebanon and Tripoli (2/2)

Tripoli is densely populated and has a high unemployment rate, but

with lot of assets, potential, and a strategic position and importance for

Lebanon in terms of:

Political stability: Fragile community with weak government capacities

Transport: Major links with Syria, the Gulf and Iraq

Energy Supply: Fuel and gas pipelines coming from Syria, the Old

Refinery, the Major Electricity plant in Lebanon, etc.

II. Main obstacles to doing Business in Tripoli

1. Telecom: Weak cellular network and slow internet connection

2. Electricity: At least 8 hours/day electricity blackouts

3. Security and Political risks: The disturbances in the Middle East and in the Levant

especially, are having a direct effect on the city and its stability

4. Qualified workforce: Most of the qualified workforce is fleeing the country or

moving to Beirut where there are better opportunities.

5. Distance from Beirut: Although Lebanon is a small country, and the 85 km

distance between Tripoli and Beirut might seem short, the heavy traffic

congestions make the trip quite long from Beirut to Tripoli.

III. What is a Special Economic Zone

A Special Economic Zone (SEZ) is a geographical region that gets special fiscal and

sector policies, and freer economic and other laws than the country's national laws.

The realisation of the above mentioned means the creation of a good environment for

a SEZ.

A broad range of more specific zone types come under the 'SEZ’, including: Free

Trade Zones (FTZ), Export Processing Zones (EPZ), Industrial Estates (IE), Urban

Enterprise Zones and others.

Typically the goal of such zones is to increase foreign direct investment in the country,

by attracting foreign investors.

IV. SEZ in general and Tripoli in particular (1/2)

The number of SEZ worldwide increased dramatically from the 70s until

today

Governments used to develop these zones, but since it needs a lot of

capital expenditures it started involving the private sector in it to inject funds

and share the risk

The government is responsible for developing offsite and private sector

onsite

Expecting 3,000 jobs directly related by the SEZ

IV. SEZ in general and Tripoli in particular (2/2)

The multiplier of indirect job creation of SEZ is usually 1.5 to 2

The idea is maximising the leasing area to almost 80%

24/7 electricity is a must to attract investors so a plant or energy facility

should be built inside the zone

Investing in Lebanon doesn’t need a local partner which is an

advantage not available in the rest of the region

V. Advantages of a Special Economic Economic Zone in Tripoli

(1/2)

The Tripoli Special Economic Zone (TSEZ) will be mostly industrial with focus on: Services, logistics, storage, which has fiscal incentives. TSEZ is of a great potential to investors despite its social, political and labour issues. It has:

Flexible labour politics (1 Lebanese for every 1 foreigner and no need to register in National Security Fund)

Lots of foreign workers (50%) No custom duties except for goods not entering Lebanon

V. Advantages of a Special Economic Economic Zone in Tripoli

(2/2)

No Corporate tax or personal income tax for workers in the zone No minimum wage No taxes on issuance of shares or bonds by companies inside

the TSEZ Work permit facilitated No tax on investments greater than $300,000 Creating at least 5,000 jobs directly and indirectly

VI. Possible Locations (1/2)

1) Tripoli Port

The SEZ would be located between Tripoli Port and Nahr al Bared.

50 hectares limitation on this government owned land

Not equipped

Surrounded by polluted activities, so the environment is not clean which

limits the type of industries (no pharma, textile, etc.)

Exhibition in the Rashid Karame Int’l Fair can be held in support of the

TSEZ, because of its proximity.

Tripoli Port

TSEZ

Located at 1 km from Rashid Karame Int’l Fair

VI. Possible Locations (2/2)

2) Rene Mouawad or Kleyate Airport

Strategic location

Land is cheaper but privately owned, so needs to be purchased

Ability to expand the zone and double its size.

It is further away from the city (20 km), which reduces its chances of

succeeding (historically speaking)

Cleaner environment so more types of industries can be developed in the

zone.

Rene Mouawad Port

VII. Conclusion

There are a lot of challenges for the TSEZ, but despite all the issues that might face the creation of a SEZ in Tripoli, this project seems to solve some of the economic problems the city and country are facing:

• Creating an Industrial Zone in Lebanon• Creating jobs directly and indirectly• Attracting FDI• Might help in reducing the political tensions in the city

A zone can succeed only if there is a real governmental and political will, a concrete set of reforms, industrial and educational policies as well as support.

The existence of many SEZ around the world can help us in answering the challenges and questions surrounding this project, in order to ensure its feasibility and success.

Sources:

•“Lebanon's economic zones”, Middle East Business Intelligence (MEED), August 2013

•"The Tripoli Special Economic Zone: Piloting Public Private Partnerships for Economic Growth in Lebanon”, Sateh El-Arnaout, World Bank, November 2011

• “Tripoli Special Economic Zone Feasibility Study Project”, USAID, December 2010

•“Special Economic Zone”, Princeton University and Wikipedia, http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Special_Economic_Zone.html

Hussam Eddine KobayterPresident

Rashid Karame International Fair, Tripoli – Lebanon

Email: PRESIDENCY@LEBANON-FAIR.COM

Thank you for your attention