Speech
Dr. Joseph Torbey
Chairman
Association of Banks in Lebanon
Arab Hungarian Economic Forum
“Cooperation in Banking & Financial Fields”
12/11/2012
Excellencies,
Ladies and Gentlemen,
It is a great honor for me to participate in this “Arab-Hungarian Economic Forum”. Thanks to his H.E. President Adnan Kassar for this invitation which is a stepping stone into bridging economic ties between Hungary, Lebanon, and the Arab world in the years to come. I would like to express my deepest appreciation to His Excellency Prime Minister Dr. Viktor Orban for hosting this valuable business forum. Said initiative is of key importance, notably amid the escalating sovereign debt crisis in Europe on the one hand, and the wave of uprisings that swept the Arab region since early 2011, on the other.
Ladies & Gentlemen,
Lebanon’s strategic location at the heart of the Middle East has adorned its land with a rich history and cultural mosaic, and has shaped a unique financial identity, crowning Beirut as the region’s financial hub since the year 1950 and prior to the eruption of the war, labeling Lebanon as such as the Switzerland of the Middle East. By the end of the devastating civil war in the year 1990, Beirut has succeeded at healing from 15 years of violence and destruction to regain its position as a center of tourism, commerce, and banking in the region. Ever since, the Lebanese economy has demonstrated a strong ability to cope with and overcome the various local and international shocks, the latest being the 2008 crippling global financial crisis which stroke major economies and financial systems across the globe. Lebanon, as such, became the subject of praise for its strong resilience in the face of endogenous and exogenous shocks, not to mention the stellar performances of the economy at a time when developed economies were crumbling. More specifically, the Lebanese economy has registered an average annual growth rate of 8.3% over the period extending between the year 2008 and 2010 and has seen an unprecedented influx of capital and foreign direct investment, particularly in the real estate sector.
Lebanon enjoys an investment environment that fosters a free-market economy, lack of paralyzing regulations and red tape, liberal policies for investment and commerce, absence of capping on foreign ownership, and free mobility and repatriation of invested capital into and out of the country, in addition to a moderate taxation system where the income tax rate is capped at 20%, dividend withholding tax rate is set at 10%, and corporate income tax rate is fixed at 15%. Ease and speed of entrepreneurial activities in Lebanon are mirrored by an average time interval of 9 days to start a business compared to the world’s average of 30 days according to the World Bank 2013 Doing Business report.
Lebanon stands, as such, as a free-enterprise country offering a business environment that embraces advantages and incentives to foreign investors, and is perceived as one of the strong financial, commercial, communications, education and healthcare players in the region. This has resulted in a service-driven economy, with the tertiary sector contributing to over 65% of the country’s GDP. Despite the scarcity of natural resources, Lebanon remains widely renowned for its highly educated and multi-lingual human capital that enjoys strong entrepreneurial skills.
The astounding performance of the Lebanese economy owes to a great extent to its wisely regulated banking sector which is characterized by an efficient banking secrecy law, a law that combats money laundering, a strong correspondent banking network and an increasing regional and global presence. The Lebanese banking system, which comprises today 71 banks (including Islamic & Investment banks) spread over some 963 domestic branches, has been the subject of praise by the various international institutions and rating agencies for its pivotal role in spurring growth and restoring investors’ confidence in the economy during the various periods of instability. Banking regulatory authorities have always been keen on maintaining the sector’s sound reputation and credibility in the eyes of the international community through the abidance by international standards and best banking practices, including the Basel requirements. With a rating equivalent to that of the Lebanese government and a balance sheet size nearing 3.6 times GDP, the banking system remains unarguably the backbone of the Lebanese economy, growing exponentially over the past decades to enjoy at present a total balance sheet in excess of $147 billion. In parallel, Lebanese remain eager to foster economic activity through prudent lending policies that emphasize on the important role of Small & Medium Size Enterprises. The consolidated loans’ portfolio reached $41.72 billion as at end of August 2012 and is funded by an ever-increasing customers’ deposit base that surpassed $123 billion.
A major contributor to the aforementioned growth resides in the banking sector’s adopted outward and inward openness strategy, with an oversees network comprising over 322 branches and 111 correspondent banks as at year-end 2011 serving the four corners of the world. The sector also hosts 12 foreign banks with a domestic network of over 31 branches.
Lebanese banks have established over the years a strong foothold in Europe, including France, Switzerland, Belgium, the United Kingdom and Romania. In this context, building strategic alliances with Hungary would further enhance the long history of cultural, economic and commercial ties between Lebanon and
Europe.
The various similarities drawn between Lebanon and Hungary, both being service-driven economies and enjoying an approximately similar banking sector size, should be a starting point for the promising cooperation between both countries. In fact, opening the door for collaboration in the commerce, banking, cultural, and tourism spheres through the promotion of mutual investments and through facilitating bilateral trade and encouraging tourism activities, would undoubtedly add value to both economies. In addition, opportunities in the banking industry can be exploited and real benefits can be achieved mainly by reinforcing correspondent banking relations between Lebanon and Hungary.
Finally, and in this critical stage of complex and interrelated crises around the globe, multiplied efforts are required to promote European-Arab joint action in an endeavor to exploit any potential opportunities at a time when cross-border cooperation is vital for overcoming the recessionary echoes threatening the global economy.
Thank you for your attention and I wish you all a great benefit from this forum.
