Lebanese hopes fade away

The bomb blast last week signalled the death knell for Lebanon's economy, which is now forecast to contract as unrest in Syria spills over into Beirut.

Empty streets: in what is usually a busy time in Beirut, political instability means that retailers and restaurants are suffering economically. Natalie Naccache for The National
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Nada Saab had just set up her stall at the Beirut International Exhibition & Leisure Centerwhen a bomb ripped through part of the city killing eight people and any hopes of economic growth in the country this year.

Few people turned up last Friday at the In-Shape, health, beauty and fitness conference, nor for the following three days of the fair to which Ms Nada had paid US$6,000 (Dh22,039) to exhibit her pharmaceutical distribution company, Droguerie Salud."I collected all my employees and said 'I'm not going any more. I don't want you to go'," explained Ms Saab.

"No one was going to come with what was going on."

This anecdote, alongside the complete absence of tourists to Beirut this Eid Al Adha, illustrates only the short-term effect of the explosion in the Achrafieh district that assassinated intelligence chief Brigadier General Wissam Al Hassan last Friday.

Economists, small business owners and companies all agree that the Lebanese economy has just a small chance of avoiding a contraction this year.

"Unfortunately what happened a few days ago killed any hope of growth this year," said Simon Neaime, professor of economics at the American University of Beirut and director of the Institute of Financial Economics.

At the start of the year, he expected GDP growth of about 1 per cent, but says a decline in foreign direct investment (FDI) will help ensure no growth in the economy.

FDI in Lebanon was $96.5 million in the first half of the year and accounted for just 0.5 per cent of total FDI in Arab countries, according to Ernst & Young's FDI attractiveness survey.

Experts say the economic situation is now even more dire than in the unsettled years following the assassination in 2005 of Rafiq Hariri, a previous prime minister of Lebanon credited with helping develop the country after the civil war.

In a service-based economy, tourism and consumer confidence are now key to the country's economic lifeline.

But the bomb has dealt what could be a fatal blow to some businesses struggling to stay alive as the violence and unrest in Syria has stalled confidence this year.

Last December, Beirut Waterfront Development (BWD), opened Zaitunay Bay, a scenic promenade featuring at least 17 restaurants and six retail outlets with a lavish yacht marina. BWD is a joint venture between Stow Waterfront and the property giant Solidere.

The luxury destination attracted the country's best restaurants whose rents average between $400,000 and $500,000 annually.

"These numbers were reasonable at the time, but 2012 will be the worst year the Lebanese economy has seen in decades," said Ziad Kamel, an owner of Amarres, a French restaurant on the bay.

"When writing a business plan in Lebanon, you have to put political and security issues aside; otherwise you won't move forward with anything."

Six years in the making, Zaitunay Bay was a beacon of economic prosperity and hope alongside the redeveloped downtown area.

But tourists and residents alike have not ventured to the development in larger numbers this year.

Several Zaitunay Bay tenants said they were concerned for the survival of their businesses after the year's end and are left holding out hope for a winter holiday season that might cut their losses.

"At these times, when the security situation in the country is threatened, most establishments in the tourism sector struggle to break even and there will be some that shut down," said Mr Kamel.

On a sunny autumn day this week during lunch hour, waiters stood in empty restaurants hoping the trickle of pedestrians may take a seat in one of their empty restaurants. Customers were as few as two in most establishments.

"It's a tough year to be in business with ongoing uncertainty and zero investor confidence and no plan by the government. In such times, there are few winners and many losers," said Mr Kamel.

The dip in tourism has also taken a toll on other socio-economic classes.

Emad Mortada, 52, had quit a salaried job as a private chauffeur to drive his own taxi.

"Every morning, I worry if I am going to make ends meet at the day's end," said Mr Mortada, who has two school-aged daughters.

"One evening in 2008 or 2009 is what I make in a 12-hour day now. Taxis rely on tourism as much as hotels and restaurants."

While Beirut's streets still bustle with traffic, many of its retail establishments leave their doors open, but customers do not walk through.

"It's like they don't have money or they are saving it just in case," said Hiba Sleiman, who works at a clothing store. "If I could leave this country, I would."