Syria unrest cuts Lebanon exports 12 percent: minister

BEIRUT Mon Nov 19, 2012 5:45pm EST

BEIRUT (Reuters) - Civil war in Syria is taking its toll on several sectors of the economy of neighboring Lebanon, where exports have tumbled 12 percent, Lebanon's economy minister said on Monday.

In addition to tumbling exports, Lebanon's tourist industry has declined by as much as 15 percent.

Most Gulf countries warned their citizens this year not to visit Lebanon after clashes erupted between supporters and opponents of the Syrian uprising. Lebanon has also lost most of the 600,000 Arab tourists who usually drive into Lebanon through Syria each year.

"Exports of Lebanon through Syria have dropped between 30 to 40 percent, if not more," Lebanon Economy Minister Nicolas Nahhas told the Reuters Middle East Investment Summit.

The increasing cost of exporting through Syria has also been a burden, Nahhas said, adding that overall exports have dropped by 12 percent.

Lebanon's exports of goods and services totaled $26.2 billion last year, the International Monetary Fund said.

Tourism, meanwhile, is down between 14 and 15 percent, Nahhas said.

"Many tourists used to come by land as well, and this is all stopped. We are going through a phase of storms; political storms and security storms that are overshadowing the social and economic (situation) in Lebanon and the region."

Nahhas predicted that the Lebanese economy would grow only about 2 percent this year. The country brushed off the global downturn in 2008 and enjoyed strong annual growth of 7-9 percent for four years until last year, when growth slowed to 1.5 percent, according to IMF data.

POLICY

Poor infrastructure and erratic government policy has discouraged many investors from setting up businesses in Lebanon. The IMF said in September that the main risk to the economy was poor policymaking, not Syria.

Political divisions blocked the 2010 budget in parliament, preventing the government from spending $2 billion allocated to infrastructure projects. The cabinet has yet to approve the 2012 budget.

The loss-making electricity generation sector adds $1.5 billion a year to the budget deficit. The cost to the wider economy of poor power supply is at least $2.5 billion, government figures show.

Nahhas said that Lebanon needs to spend at least $20 billion to improve its infrastructure and that it hopes to finance this through partnerships with the private sector.

"We do not have other solutions; in all sectors, including the power sector," he said.

A law to facilitate public-private partnerships is almost ready," the minister added, though he did not elaborate on how private companies could be persuaded to participate in projects while the security and political environment remained fragile.

"Of course we are not happy, but we are not panicking (over the economic situation)," he said.

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(Editing by Andrew Torchia and David Goodman)

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