recent economic reforms in lebanon economic freedom and governance
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Recent Economic Reforms in Lebanon:Economic Freedom & Governance
5th Economic Freedom of the Arab World Conference
Cairo, November 1-2, 2010
Dr. Mounir Rached- Vice PresidentMr. Mario Nassar- Project Coordinator
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Contents
I. Global ranking
II. Relative ranking in MENA
III. Prominent features of the Lebanese economy
IV. Recent achievements
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I.Global rankingLebanon has espoused liberal economic policies since
independence
The public sector remained engaged in few functions
in education only 15% 0f schools are public
The state has limited interference in economic activity
Plays the role of regulator (?)
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Global cont
Lebanon, however, continues to have a relatively low ranking in the global economic freedom index
77th globally
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Global cont
Its rating is burdened by few important components
Corruption is perceived to be high-one of the highest among peers. 102nd out of 179
Corruption is well entrenched
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Global cont Property rights (enforcement of contracts) score is low
Its legal system is perceived to be politically manipulated Investment freedom score is low
Restricted licensing- cumbersome administrative procedures- multiple phases- Ceilings on certain investments No restriction ,however, on capital flows-private & enterprises
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II.Relative ranking in MENA
2002 2003 2004 2005 2006 2007 20087
7.2
7.4
7.6
7.8
8
8.2
Top Economic Freedom Achievers in the Arab World (Fraser Institute)
BahrainJordan KuwaitLebanonOman Qatar F
inal
Gra
de
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Index of Economic Freedom The index adopted by Fraser Institute Foundation
relies on Five areas:
Size of Government
Commercial & Economic Law and Security of Property Rights
Access to Sound Money
Freedom to Trade Internationally
Regulation of Credit, Labor and Business
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Lebanon- Economic freedom index
Lebanon’s Ranking in MENA (Fraser Institute):
Year 2002 : Rank 4
Year 2003 : Rank 4
Year 2004 : Rank 5
Year 2005 : Rank 4
Year 2006 : Rank 4
Year 2007 : Rank 3
Year 2008 : Rank 3
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Size of Government- Lebanon
2002 20080.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
General government consumption spending as a percentage of total consumption
Transfers and subsidies as a percentage of GDP
Government enterprises and investment
Top marginal tax rate
Year
Gra
des
Rank in the Arab World (2008): 1
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Commercial and Economic Law and Security of Property Rights- Lebanon
2002 20080.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Military interference in rule of law and the polit-ical process
Integrity of the legal system
Regulatory restrictions on the sale of real property
Legal enforcement of contracts
Year
Gra
des
Rank in the AW (2008): 15
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Access to Sound Money-Lebanon
2002 20080.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Money growth
Standard deviation of in-flation
Inflation: Most recent year
Freedom to own foreign currency bank accounts
Year
Gra
des
Rank in the AW (2008): 3
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Freedom to Trade Internationally Lebanon
2002 20080.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Taxes on international trade
Black-market exchange rates
Capital controls
Year
Gra
des
Rank in the AW (2008): 11
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Regulation of Credit, Labor & Business Lebanon
2002 20080.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Credit Market Regula-tions
Labour Market Regula-tions
Business Regulations
Year
Gra
des
Rank in the AW (2008): 3
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Lebanon’s Score Over Time2002 2008
Overall Score 7.8 7.6
Size of Government 8.7 8.4 Subsidy score
Commercial & Economic Law & Security of Property Rights
6.1 6.1
Access to Sound Money
9.6 8.8 inflation score
Freedom to Trade Internationally
7.3 6.8 capital controls score
Credit, Labor, and Business
7.2 8.0 labor market improved
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III. Prominent Features of Lebanese economy
Lebanon is by far the best performer in the size of government rating compared to the Arab World
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(Cont.)
2007 1. Gov Consumption /Total consumption =
13.82%
Arab World’s Average = 24%
Transfers & Subsidies/GDP = 7.1%
Arab World’s Average = 7.84%
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(Cont.)
2. Taxes relatively low
Tax Revenue/ GDP = 14.8%
Income Tax Rate = 20% World Average = 29.26%
Top Corporate Tax Rate = 15% World Average = 25.1%
VAT =10%
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3. Trade Freedom: one of the highest scores
8.9
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IV. Recent Achievements
Paris I, II & III and IMF agreement Ministry of Finance & Ministry of Trade &
Economy Gradual reduction of customs Introduced ASYCUDA to customs clearance Introduced VAT Developing and modernizing tax procedures Restructuring of Tax office Automate tax payment Promoting transparency and openness to the
public
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Achievements
Introduced competitiveness law
Introduced new Property rights law-WIPO based
Introduced new procurement law
Social security reform initiated
Privatization remains undecided (how to privatize)
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Achievements Free Trade Agreements were signed with Lebanon’s major
trading partners; namely:
The European Union (EU), The EFTA States (Switzerland, Lichtenstein, Norway, Iceland) and The Gulf Cooperation Countries (GCC); and A full establishment of the Greater Arab Free Trade Area
(GAFTA) was achieved in January 2005
Lebanon is also actively negotiating accession to the World Trade Organization (WTO)
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Achievements
Recapitalized banks
Improved supervision
Political impasses delay reform END