By Meir Javedanfar

Syria's choke hold on Lebanon's economy since 1975 provided it with many advantages. These included $2 billion remittances sent by Syrian workers working in Lebanon to Syria, plus another $5 billion earned yearly by corrupt Syrian officials through their holdings in Lebanon's ports, publicly owned companies as well as private dealings.

Upon Syria's expulsion this year, many Syrian labourers lost their jobs, and so did many Syrian officials who held business interests in Lebanon. Nevertheless Syria was not going to make things easy for Lebanon. Looking for an excuse to punish Beirut Syria started introducing new "security checks" at its borders with Lebanon which meant that Lebanese trucks had to wait weeks before they could cross the border. This meant millions of dollars worth of damage caused to Lebanese products which perished during to the extra waiting period. This strategy was a continuation of Syria's attempt to choke Lebanon's sovereignty and control over its own economy, as Lebanon depends on Syria as its only open land access (apart from Israel) to its major markets in the Arab world.

Although Damascus was successful in its efforts to punish Lebanon its strategy did have unexpected and undesirable results. At the height of the border blockade, the US Secretary of State Condoleeza Rice unexpectedly added Beirut to her list of destinations whilst visiting the region. This was a clear message to Damascus that Lebanon now had US support - at least publicly, therefore caution is recommended. Another unexpected consequence of the Syrian blockade was shift of attention to Lebanon's other industries which do not depend on land access to Syria. Such industries include Banking, Construction as well as the Lebanon's rapidly growing Information Technology (IT) sector. The aforementioned sector is the rising star of the Lebanese economy where according to a recent research report from Madar Inc, the Lebanese domestic IT industry is set to grow exponentially over the next four years from an estimated US$316 million in 2004 to US$480 million in 2008.

The Lebanese shift to high value technology and servicing products mirrors that of Israel in the early in 1970s as Israel much like Lebanon of today also had problems with land access for the export of its goods.

The rise of this sector is expected to continue as Lebanon's reputable higher education institutes continue to produce some of the Arab world's most talented IT specialist who apart from IT skills they also speak English/French as well as the Middle East's most popular language Arabic. This combination equips Lebanon with the potential to become the region's software powerhouse. Strengths in software are noteworthy as in today's IT market return on investment on software products are higher, especially in areas where Indian companies are unable to enter which include the Arabic language market.

Leaving the potentials of the IT market aside, it is the opinion of meepas that the Lebanese economy as a whole is set for major take off within the next four years. Although the throttles have not been released yet, Syria's diminishing role in Lebanon is enabling the Lebanese economy to free itself from the tangles of Syrian induced corruption and transfer of capital outside of Lebanon.

The other factors which will serve as added high quality fuel for the engines of the Lebanese economy are the continued involvement and support of rich Persian Gulf states, especially Saudi Arabia. As well as economic interests, Riyadh has long considered Lebanon as a sphere of its influence in the region. To that end it has formed a strong alliance with Lebanon's Sunni minority, with the wealthy Hariri family being at the helm of Lebanese - Saudi economic and political relations. It is no secret that much like his late father Saad Hariri has a very strong connection to Riyadh which is where his father made his billions. Consequently it is no surprise that he is currently seeking refuge there.

Therefore with Syria's diminishing damaging influence, Saudi Arabia with its multi billion surplus budget is ready to move in with new investments whilst providing support to its existing investments there, especially in the Banking and Construction sector. As with the popular Middle East trend, where Saudis go, other Persian Gulf states follow. This is especially true in the case of Kuwait and UAE which are both looking for investment in non oil industries, preferably in the Middle East due to the language commonalities and the post September 11 difficulties in investing in the US market.

With all such good news that is not to say that there are no turbulences ahead. Lack of competition in major sectors, excessive regulation, high external debt plus internal corruption are issues which must be addressed. However in this case with the IMF and the Paris donors club demanding progress from Lebanon as a precondition for any future loans, such factors can no longer be ignored by the Lebanese authorities.

By looking at Fouad Siniora (Lebanese PM pictured right)'s background and statements one can see that at long last Lebanon has a man who is committed to pushing reforms. More importantly Siniora as well as other members of his cabinet are aware of the important fact that Lebanon is enjoying international support and consensus and this is one opportunity which can't and shouldn't be missed. The successful sale of the $750 million Eurobonds by the Lebanese government this year which was snapped up be local banks and foreign investments funds is a sign of the growing confidence by the international community and the Lebanese government itself in its ability to finance its debts.

Lebanese businessmen abroad have already proven to be some of the savviest and successful businessmen in every industry they have entered, be it the West African diamond market, Latin American Telecom market ( Telemex ) or even the Swiss watch market ( Swatch ). With political consensus increasing and hostile foreign influence decreasing in Lebanon, such businessmen are going to look for new opportunities in their beloved "La patrie".

The trick here is to enter the market when prices are low and the time for that is now before the multibillionaires return home to buy. The market value gained on the Beirut Stock Exchange has already risen by 133% this year compared to last year, however there is still much more room for improvement, especially before the 2006 meeting of the Paris Club of donors.

Upon the return of Lebanese money plus major foreign investment from Persian Gulf countries it is forecasted that by 2009 prices in the Ashrafiya district of Beirut will be unrecognisable compared to their current levels. Growth is also expected in the Banking sector, especially since the Lebanese Banking Association has recently agreed to adhere to Basel II banking standards which will mean that the operating standard of Lebanese banks will be on par with leading global banks. The Tourism sector is also expected to grow due to forecasted government investments in this sector, plus the expected return of calm to the country.

For those searching for a bargain with a high potential, Lebanon certainly offers very lucrative prospects.

___________________________________

Meir Javedanfar is an Iranian born and educated Israeli Middle East Analyst and the Director of the Middle East Economic and Political Analysis Company - www.meepas.com

To contact Mr Javedanfar e-mail: analysis@meepas.com