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Your Investment Reference
THE
LEBANON BRIEF
ISSUE 959
Week of March 07-12, 2016
ECONOMIC RESEARCH DEPARTMENT
BLOMINVEST Bank Headquarters
Bab Idriss, Beirut, Lebanon
T (01) 991 784/2 F (+961) 1 991 732
www.blom.com.lb
S A L
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
TABLE OF CONTENT
FINANCIAL MARKETS 1
Equity Market 1
Foreign Exchange Market 3
Money & Treasury Bills Markets 3
Eurobond Market 4
ECONOMIC NEWS 5
Number of Cleared Checks Declined by 2.46% in January 2016 5
Number of Payment Cards Increased by a Yearly 6.77% by September 2015 5
Lebanon Started 2016 with a $719M Deficit in its Balance of Payments 6
Lebanon’s Fiscal Deficit Broadened 7.17% by November in 2015 7
The Value of Kafalat Guarantees Grew to $17.76M by February 2016 8
Number of Registered Cars Improved 14% by February 8
USAID Granted Olive Farmers’ Cooperatives 318 Mechanical Harvesters 9
CORPORATE DEVELOPMENTS 10
4.5G Mobile Internet Service Is Expected to be completed in September 2016 10
JK Development Launches New Hotels 10
FOCUS IN BRIEF 11
Pharmaceuticals and Healthcare in Lebanon: Numerous Opportunities to Explore 11
This report is published for information purposes only. The information herein has been compiled from, or based upon sources we believe to be
reliable, but we do not guarantee or accept responsibility for its completeness or accuracy. This document should not be construed as a
solicitation to take part in any investment, or as constituting any representation or warranty on our part. The consequences of any action taken on
the basis of information contained herein are solely the responsibility of the recipient.
Page 1 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
FINANCIAL MARKETS
Equity Market
Stock Market
11/03/2016 04/03/2016 % Change
BLOM Stock Index* 1,152.69 1,149.13 0.31%
Average Traded Volume 109,815 4,138,945 -97.35%
Average Traded Value 698,106 39,347,051 -98.23%
*22 January 1996 = 1000
Lebanese equities saw improving demand this
week mimicking the rally in global stock markets
on major positive economic developments.
For the week ending March 11, 2016, the average
daily traded volume on the Beirut Stock Exchange
(BSE) declined to 109,815 shares worth $698,106,
down from last week’s average of 4.14M traded
shares worth $39.35M, when 20.07M listed BLOM
shares were traded at a price of $9.60/ per share.
Nevertheless, the BLOM Stock Index (BSI) gained
0.31% to 1,152.69 points recovering the
accumulated losses since the beginning of March.
As for the market capitalization, it jumped by
$29.33M to approach the $9.52B.
It was a positive week for emerging markets that
benefited from the rallying commodity prices and
the improving U.S. labor market. The bullish
weekly progress of several indices outpaced that
of the Lebanese gauge. In details, Morgan Stanley
Emerging Markets Index (MSCI), the S&P Pan Arab
Composite Large-Mid-Cap Index & the S&P AFE 40
Index posted respective weekly gains of 1.35%,
2.13% and 2.28%.
In the Arab world, the recovery of oil prices this
week to a third month high was good news for
most of the regional stock markets. As a matter of
fact, Dubai, Qatar and Saudi Arabia were among
the week’s top performers, registering 3.23%,
2.47% and 2.22% gains, respectively. However,
Egypt’s bourse was this week largest winner as it
recorded a 7.79% increase as investors’
welcomed the Egyptian central bank’s decision to
lift the cap on cash deposits and withdrawals in
foreign currencies in order to ease the shortage in
foreign reserves.
As for the worst performers this week, Muscat,
Bahrain and Amman were the only stock markets
to post losses. While Muscat and Bahrain bourses
revealed respective losses of 2.11% and 1.68%,
Amman stock exchange witnessed a slight 0.68%
weekly drop.
On the Beirut Stock Exchange, the banking sector
accounted for 85.19% of the week’s traded value,
while the real estate and industrial sectors
contributed to the remaining 14.05% and 0.76%,
respectively.
Banking Sector
Mkt 11/03/2016 04/03/2016
%
Change
BLOM (GDR) BSE $10.10 $10.05 0.50%
BLOM Listed BSE $9.65 $9.65 0.00%
BLOM (GDR) LSE $10.00 $10.00 0.00%
Audi (GDR) BSE $6.00 $6.00 0.00%
Audi Listed BSE $6.10 $6.00 1.67%
Audi (GDR) LSE $6.03 $6.00 0.50%
Byblos (C) BSE $1.67 $1.64 1.83%
Byblos (GDR) LSE $75.00 $75.00 0.00%
Bank of Beirut (C) BSE $18.80 $18.79 0.05%
BLC (C) BSE $1.69 $1.70 -0.59%
Fransabank (B) OTC $27.00 $27.00 0.00%
BEMO (C) BSE $1.55 $1.90 -18.42%
Mkt 11/03/2016 04/03/2016 % Change
Banks’ Preferred
Shares Index *
106.15 106.15 0.00%
Audi Pref. F BSE $102.70 $102.70 0.00%
Audi Pref. G BSE $100.90 $100.90 0.00%
Audi Pref. H BSE $101.50 $101.50 0.00%
Byblos Preferred 08 BSE $101.10 $101.10 0.00%
Byblos Preferred 09 BSE $101.40 $101.40 0.00%
Bank of Beirut Pref. I BSE $26.50 $26.50 0.00%
Bank of Beirut Pref. H BSE $26.50 $26.50 0.00%
Bank of Beirut Pref. J BSE $26.50 $26.50 0.00%
BLOM Preferred 2011 BSE $10.15 $10.15 0.00%
BEMO Preferred 2013 BSE $100.00 $100.00 0.00%
* 25 August 2006 = 100
1100
1120
1140
1160
1180
1200
1220
1240
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16
BLOM Stock Index
HI: 1,236.40
LO: 1,108.49
Page 2 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
Real Estate
Mkt 11/03/2016 04/03/2016 % Change
Solidere (A) BSE $9.67 $9.69 -0.21%
Solidere (B) BSE $9.68 $9.67 0.10%
Solidere (GDR) LSE $9.45 $9.51 -0.63%
In the banking sector, the listed shares of Audi,
Byblos and Bank of Beirut added 1.67% and
1.83% and 0.05% to $6.10, $1.67 and $18.80,
respectively. The Global Depository Receipts
(GDR) of BLOM also added a weekly 0.50% to
$10.10. Meanwhile, the listed shares of BLC and
BEMO dropped by 0.59% and 18.42% to end the
week at $1.69 and $1.55, respectively.
Manufacturing Sector
Mkt 11/03/2016 04/03/2016
%
Change
HOLCIM Liban BSE $14.40 $14.40 0.00%
Ciments Blancs (B) BSE $3.50 $3.50 0.00%
Ciments Blancs (N) BSE $3.10 $3.10 0.00%
On another front, the BLOM Preferred Shares
Index (BPSI) steadied at 106.15 points this
week.
On the London Stock Exchange (LSE), Audi
GDRs saw a 0.50% weekly rise to $6.03, while
Solidere GDRs lost 0.63% over the same period
to settle at $9.45.
Retail Sector
Mkt 11/03/2016 04/03/2016 %
Change
RYMCO BSE $3.23 $3.23 0.00%
ABC (New) OTC $27.00 $27.00 0.00%
The real estate sector saw mixed performance
this week as Solidere shares class “A” lost
0.21% to $9.67 while the class “B” rose 0.10%
to $9.68.
Tourism Sector
Mkt 11/03/2016 04/03/2016 % Change
Casino Du Liban OTC $323.00 $323.00 0.00%
SGHL OTC $7.00 $7.00 0.00%
In the industrial sector, HOLCIM shares went
down to $14.39 on Thursday following the trade of
1,603 shares of worth $23,071. However, the stock
price added 0.07% on Friday to close at last
week’s price of $14.40.
In the coming weeks, investors will most
probably remain on the sidelines in the absence
of any positive economic and political news.
However, any potential breakthrough in the
presidential crisis, or any positive developments
related to the diplomatic crisis with Saudi Arabia
may positively impact trading activity on the
BSE
Page 3 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
Money & Treasury Bills Markets
Money Market Rates
Treasury Yields
11/03/2016 03/03/2016 Change bps
3-M TB yield 4.39% 4.39% 0
6-M TB yield 4.87% 4.87% 0
12-M TB yield 5.08% 5.08% 0
24-M TB coupon 5.84% 5.84% 0
36-M TB coupon 6.50% 6.50% 0
60-M TB coupon 6.74% 6.74% 0
11/03/2016 03/03/2016 Change bps
Overnight Interbank 3.00% 2.75% 0
BDL 45-day CD 3.57% 3.57% 0
BDL 60-day CD 3.85% 3.85% 0
During the week ending on February 25th, broad Money M3
grew by LP 197B ($130.36M) to reach LP 185,947B
($123.35B). M3 registered a 5.24% yearly growth and a
0.35% year-to-date downtick. On the other hand, M1
regressed by LP 9B ($5.81M) over the mentioned period,
due to the decrease in money in circulation by LP 83B
($55.06M) in spite of the LP 74B ($49.09M) increase in
demand deposits. Total deposits (excluding demand
deposits) increased by LP 205.29B ($136.18M) during the
week, given the $268M expansion in deposits denominated
in foreign currencies and the LP 199B decrease in term and
saving deposits. Over the above mentioned period, the
broad money dollarization rate went up from 57.65% on the
18th of February to 57.81% on the 25th of February.
According to the Central Bank, the overnight interbank rate
remained steady at December 2015’s rate of 3.25%.
In the TBs auction held on the 3rd March, 2016, the Ministry
of Finance (MoF) raised LP 183.77B ($121.90M), through the
issuance of bills and notes maturing in 1Y and 5Y. The
highest demand was achieved on the 5Y notes, which
grasped a 75.67% share of total subscriptions, while the 1Y
bills captured the remaining 23.33%. The discount rate on
the 1Y bills stood at 5.35%, while the coupon rate on the 5Y
notes registered 6.74%. New subscriptions fell behind
existing maturities by LP 271B ($179.77M).
Foreign Exchange Market
Lebanese Forex Market
11/03/2016 04/03/2016 % Change
Euro / Dollar 1.1110 1.0962 1.35%
Sterling / Dollar 1.4280 1.4138 1.00%
Dollar / Swiss Franc 1.0129 1.0074 0.55%
Dollar / Yen 113.86 113.69 0.15%
NEER Index** 167.45 168.24 -0.47%
*Close of GMT 09:00+2
**Nominal Effective Exchange Rate; Base Year Jan 2006=100
**The unadjusted weighted average value of a country’s currency relative to all major
currencies being traded within a pool of currencies. The NEER represents the approximate
relative price a consumer will pay for an imported good.
Demand for the Dollar in the Lebanese Forex Market
increased over the past week as the value of the dollar
increased from $/LP 1,513.75-1,514.25 with a mid-price
of $/LP 1,514 to $/LP 1,514-1,514.50 with a mid-price of
$/LP 1,514.25. Foreign assets (excluding gold) of the
Central Bank inched up by 0.42% by the end of February,
to $37.17B. The dollarization ratio of private sector
deposits fell from 65.71% in 2014 to 64.88% in 2015.
By Friday 11th of March, 2016, 12:30 am Beirut time, the
euro appreciated against the dollar-pegged LP as the
exchange rate increased 1.35%, over the last week, from
€/LP 1,652.52 to €/LP 1,674.83. As for the Nominal
effective Exchange Rate (NEER), it depreciated by a
weekly 0.47% to 167.45 points, with a 0.56% year-to-
date decrease.
Nominal Effective Exchange Rate (NEER)
The Euro inched up by a weekly 1.35% against the dollar as
the President of the European Central Bank (ECB), Mario
Draghi, stated that no further interest rates decrease might
be needed. The euro’s progress this week mainly occurred
after the ECB lowered interest rates and expanded its
quantitative-easing program during Thursday’s meeting. This
coincided with a weaker dollar that declined due to
concerns that a global economic slowdown would decrease
the Federal Reserve’s capacity to tighten monetary policy.
Gains in the stock markets, after the ECB meeting, curbed
investors away from safe haven assets. This pushed down
demand for gold as reflected by the decline in its price from
last week’s $1,270.06/ounce to $1,263.86/ounce this week.
140
143
146
149
152
155
158
161
164
167
170
173
Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16
Page 4 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
Eurobond Market
Eurobonds Index and Yield
10/03/2016 03/03/2016 Change Year to Date
BLOM Bond Index (BBI)* 103.483 103.62 -0.132% -0.60%
Weighted Yield** 6.27% 6.23% 4 125
Weighted Spread*** 481 489 -8 51
*Base Year 2000 = 100; includes US$ sovereign bonds traded on the OTC market
** The change is in basis points ***Against US Treasuries (in basis points)
Lebanese Government Eurobonds
Maturity - Coupon
10/03/2016
Price*
03/03/2016
Price*
Weekly
Change%
10/03/2016
Yield
03/03/2016
Yield
Weekly
Change bps
2017, Mar - 9.000% 103.75 104 -0.24% 5.20% 5.03% 18
2017, Oct - 5.000% 99.5 99.63 -0.13% 5.33% 5.24% 9
2018, Jun - 5.150% 99.5 99.63 -0.13% 5.38% 5.32% 6
2018, Nov - 5.150% 99.25 99.5 -0.25% 5.45% 5.35% 10
2019, Apr - 5.500% 98.88 98.88 0.00% 5.90% 5.89% 0
2020, Mar - 6.375% 100.75 101 -0.25% 6.16% 6.09% 7
2020, Apr - 5.800% 98.63 98.75 -0.12% 6.18% 6.15% 4
2021, Apr - 8.250% 108.38 108.5 -0.11% 6.30% 6.28% 2
2022, Oct - 6.100% 97.88 98 -0.12% 6.50% 6.48% 2
2023, Jan - 6.000% 97 97.25 -0.26% 6.55% 6.50% 5
2024, Dec - 7.000% 102.25 102.25 0.00% 6.65% 6.65% 0
2025, Feb - 6.200% 96.88 96.88 0.00% 6.67% 6.67% 0
2026, Nov - 6.600% 98 98.13 -0.13% 6.86% 6.85% 2
2027, Nov - 6.750% 99 99.13 -0.13% 6.87% 6.86% 2
2030, Feb - 6.650% 97.5 97.75 -0.26% 6.93% 6.90% 3
Mid Prices ; BLOMINVEST bank
The Lebanese Eurobonds regressed over the past week with the BLOM Bond Index (BBI) decreasing 0.13% to 103.48 points. The
Lebanese gauge was outpaced by the JP Morgan Emerging Markets’ Bond Index which increased by a weekly 0.52% to 692.62
points.
Demand for both medium and long-term Lebanese Eurobonds declined as shown by the 5Y and 10Y yields that added 2 basis
points (bps) and 1 bp to 6.28% and 6.78%, respectively.
Similarly, demand for safe haven US treasuries fell over the past week as speculators expect the US Federal Reserve will increase
interest rates this year. Moreover, gains in the stock markets witnessed after the European Central Bank expanded its monetary
policy, curbed investors away from the safe haven assets. Hence, the 5 Year and 10 Year yields in the US increased from 1.33% and
1.83% to 1.45% and 1.93%, respectively.
Accordingly, the spread between the yields on the 5Y and 10Y Lebanese Eurobonds and their US comparable narrowed from 493
bps and 494 bps to 483 bps and 485 bps, respectively.
5 Year Credit Default Swaps, Mid-Prices (in basis points)
5Y CDS 10/03/2016 03/03/2016
Lebanon 473 475
KSA 166 169
Dubai 218 225
Brazil 394 433
Turkey 256 281
5.00%
5.50%
6.00%
6.50%
7.00%
Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16
Weighted Effective Yield of Eurobonds
Page 5 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
ECONOMIC NEWS
Value of Cleared Checks by January (in $M)
Source: ABL
Total Number of Outstanding Payment Cards up
to September
Source: BDL
Number of Cleared Checks Declined by 2.46% in
January 2016
In January 2016, the total number of cleared checks slid by 2.46%
year-on-year (y-o-y) to reach 1.01M, coupled with a 1.36% yearly
decline in value to $5.77B.
The number of checks denominated in Lebanese Pounds edged
down by 0.41% y-o-y to 333,676, however, their value grew by
12.39% from $1.49B in January 2015 to $1.71B in January 2016.
The number of cleared checks denominated in foreign currency
decreased by 3.44% y-o-y to stand at 677,670 in January 2016.
Similarly, their value fell from $4.33B in January 2015 to $4.06B in
January 2016.
Accordingly, the dollarization rate of cleared checks (value of
foreign currency checks as a share of total value) declined from
74.40% in January 2015 to 70.39% in January 2016.
Looking at the number of returned checks, it dropped from 23,547
in January 2015 to 19,260 in January 2016, nevertheless their value
increased by 16.10% to reach $191M in January 2016. Therefore,
the value of returned checks constituted 3.31% of total cleared
checks in January 2016, compared to a prior 2.83% recorded in
January 2015.
Number of Payment Cards Increased by a Yearly 6.77%
by September 2015
Payment cards saw progressing appetite in 2015 following the
ongoing and aggressive retail campaigns of the Lebanese banks to
boost demand for alternative noncash payment methods. As a
result, the number of outstanding payment cards increased by a
yearly 6.77% to 2.55M in the first 9 months of 2015. The share of
total cards held by foreigners grew from 2.80% by September 2014
to 2.96% by September 2015.
This modest improvement in foreigners’ share was witnessed in
spite of the ongoing local and regional instabilities that took their
toll on non-residents’ sentiment over 2015. Debit cards remained
the most preferred amongst cardholders, accounting for 51.15% of
the total, as they were mainly destined for salaries’ domiciliation
and daily use. Credit cards came in second with a 21.65% stake,
followed by prepaid cards (21.20%) and charge cards (6.00%).
The progress of the cards’ retail market came in line with the 7.39%
yearly increase in the number of ATMs that reached 1,685 by the
end of September. Mount Lebanon saw the highest increase in the
number of new ATMs (+11.18% y-o-y) to settle at 537 in
$1,205 $1,246
$1,305 $1,479
$1,520 $1,709
$4,403
$4,663 $4,636 $4,680
$4,331
$4,063
2011 2012 2013 2014 2015 2016
Value of Local Currency Cleared Checks
Value of Foreign Currency Cleared Checks
1,778,357 1,839,782
1,979,108
2,390,507
2,552,338
Page 6 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
Balance of Payments by January (In $M)
Source: BdL
September 2015, followed by the North region that witnessed an
8.97% yearly growth in the number of cash dispensers to 170
ATMs during the first three quarters of 2015.
However, Beirut remained the most concentrated with ATMs
grasping 41.36% of the total. As for Point of Sales (POS) devices,
the number of contracts signed with merchants registered a 7.99%
yearly uptick to 39,715, while the total number of machines (manual
and electronic) grew by 4.93% y-o-y from 30,517 by September
2014, to 32,021 by September 2015.
Lebanon Started 2016 with a $719M Deficit in its
Balance of Payments
Lebanon’s Balance of payments (BoP) recorded a $718.7M deficit in
January 2016 compared to a lower deficit of $280.2M by January
2015.
The deterioration in the BoP is mainly linked to the decline in capital
inflows and Foreign Direct Investments (FDIs) as a result of the
ongoing domestic developments and the regional upheavals.
In addition, trade deficit also had an impact on the BoP’s as it
broadened by 20% in the first month of 2016. In fact, this
deterioration came about as the net foreign assets of commercial
banks declined by $763.5M beating the increase in those of the
Central Bank which added $44.8M in January 2016.
-289.8
382.5
-31.3
-280.2
-718.67
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
Page 7 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
Yearly Government Deficit by November (In $M)
Source: Ministry of Finance
Lebanon’s Fiscal Deficit Broadened 7.17% by
November in 2015
Fiscal deficit, for the first 11 months of 2015, widened by 7.17%
year-on-year (y-o-y) to $3.24B. This was attributed to the 5.63%
yearly decrease in government revenues outpacing the 2.62%
annual decline in fiscal expenditures.
However, during the same period, the total primary balance
displayed a surplus of $1.06B compared to a slightly lower primary
surplus of $1.03B by November 2014.
Total government revenues stood at $8.88B by November 2015,
compared to a higher level of $9.41B by November 2014. Tax
revenues slightly declined by 0.49% yearly to $6.42B. In details,
VAT revenues (grasping a 31.02% share of tax receipts) dropped
4.01% y-o-y to $1.99B, while custom revenues (19.57% of tax
receipts) added 1.27% to $1.26B, over the same period. As for
telecom revenues, they went down by a mere 0.67% y-o-y to
$1.17B after the Ministry of Telecommunication reduced internet
and mobile tariffs in June 2014.
Total government expenditures declined from $12.43B by
November 2014 to $12.12B in the same period of 2015. Regarding
transfers to Electricite du Liban, they dropped by 41.68% annually
to $1.06B, on the back of the continuous fall in oil prices. In
contrast, interest payments on government’s debt went up 5.80%
to $4.10B, due to the 9.24% rise in interest payments on domestic
debt to $2.60B, while interest payments on foreign debt steadied at
$1.50B.
1,950
3,484
3,982
3,024
3,241
Nov-11 Nov-12 Nov-13 Nov-14 Nov-15
Page 8 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
Value of Kafalat Guarantees by February (in $)
Source: Kafalat
Breakdown of Passenger and Commercial Cars by
February
Source: AIA
The Value of Kafalat Guarantees Grew to $17.76M by
February 2016
According to Kafalat, the number and value of issued guarantees
increased from 87 and $10.48M by February 2015 to 118 and
$17.76M by February 2016. Accordingly, the average loan value per
project increased from $120,999 by February 2015 to $150,216 in
the first 2 months of 2016.
The top benefiting sectors from Kafalat, Agriculture (47.15%),
Industry (35.04%), and Tourism (13.68%), saw their guarantees
increase from 41, 29, and 9 by February 2015 to 54, 41, and 17
guarantees, by February 2016.
As for the regional breakdown, Mount Lebanon kept grasping the
majority of guarantees with a 39.32% share, followed by Bekaa
(28.21%) and the South (10.26%). The number of guarantees in
these regions went up from 40, 16 and 11 guarantees to 46, 33 and
12 guarantees, respectively.
In the month of February alone, Kafalat issued 64 guarantees worth
$9.83M this year compared to 47 guarantees worth $5.34M in
February 2015. Accordingly, the average value per project increased
from $113,625 in February 2015 to $153,655 in February 2016.
Number of Registered Cars Improved 14% by February
According to the Association of Lebanese Car Importers, the
number of newly registered commercial and passenger cars
improved during the first 2 months of 2016 by 14.23% year-on-year
(y-o-y) to 5,586 cars. This was triggered by the 13.7% yearly
increase in the number of newly registered passenger cars to 5,204
and the 22% rise in newly registered commercial vehicles to 382.
The global developments related to lower oil prices and
depreciating currencies against the dollar, mostly the Japanese Yen
and the Euro, led to a noticeable shift in car buyers’ demand in
Lebanon in favor of the Japanese cars. As a result, Japanese cars
were the most demanded cars in Lebanon in the first 2 months of
2016, grasping a 37.18% share of the total market. Meanwhile,
Korean cars saw their share, going up from 30.48% in 2015 to
33.80% in 2016. European cars maintained their third rank, however
with a lower market share of 23.94%, compared to 24.62% by
February 2015.
However and in terms of brands, Kia kept on holding the largest
share of the total newly registered passenger cars (20.47%),
followed by a 15.74% stake for Toyota. Nissan and Hyundai came
next in the ranking, as Hyundai grasped 13.12% of newly registered
passenger cars, while Nissan held 7.24%.
21,042,607
15,788,152
18,468,823
10,475,322
17,759,900
Feb-12 Feb-13 Feb-14 Feb-15 Feb-16
4,467 4,723 4930 4,577
5,204
372 315 375
313
382
2012 2013 2014 2015 2016
Passenger Cars Commercial Cars
Page 9 of 15
The Lebanon Brief ISSUE 959 Week March 07-12, 2016
S A L
LIVCD Selected Activities
Increase rural incomes, support rural employment, and
expand export sales in processed foods, rural tourism,
floriculture, grapes, olive oil, apples, pears, avocados,
cherries, and a basket of rural agricultural products
including thyme, pine nuts, honey, and free range eggs.
Build linkages between farmers, producers, input suppliers,
processors, service providers, traders, transporters,
retailers, packers, distributors, exporters, and ending with
consumers.
Strengthen coalition of local actors to ensure that economic
benefits from rural tourism remain in those communities.
Facilitate access to markets and to financing opportunities
for rural actors through public-private partnerships and co-
investments in order to increase income of the rural
population and promote rural wealth creation.
Provide technical assistance to disseminate innovative
agricultural practices and technologies and build capacities
through customized training for micro, small, and medium
enterprises, and farmers.
Source: Business News
In terms of sales per importer, Natco acquired the biggest bulk with
a 19.07% of the total, followed by BUMC (16.09%), Century Motors
(12.39%) and Bassoul-Heneine (11.76%).
USAID Granted Olive Farmers’ Cooperatives 318
Mechanical Harvesters
As part of the Lebanon Industry Value Chain Development (LIVCD)
project, the United States Agency for International Development
(USAID) granted olive farmers 318 mechanical harvesters that run
on batteries. These mechanical harvesters, save time, decrease
harvest costs by 50%, and guarantee stable production throughout
the years. They protect olive trees from damage that occurs with
traditional harvesting methods.
Olive oil cooperatives are leasing the mechanical harvesters to olive
farmers for $20/day. The Chairman of the Olive Cooperative in
Nabatieh, Hassan Salameh, said that each 1,000 sqm costs $360 if
harvested by workers. This cost does not exceed $150 when
harvested mechanically.
LIVCD, a $42M USAID-funded project, aims at improving economic
stability, generating business opportunities, and creating jobs for
the rural population, in particular for women and youth.
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CORPORATE DEVELOPMENTS
4G Service V/S 4.5G Service
4G Service 4.5G Service
Grid's Speed 150 Mbps 300 Mbps
Data
Consumption
15,000
terabits 80,000 terabits
Source: Business News
Selected JKD Projects
Built-up Area
(sqm) Cost($)
Majestic Hotel 20,000 20M
Villa John 1,300 2M
Source: Business News
4.5G Mobile Internet Service Is Expected to be
completed in September 2016
As part of the Lebanese Ministry of Telecommunication’s 2020 5-
year plan, the mobile network Alfa, managed by Egypt’s Orascom
Telecom, has signed contracts with Ericsson and Nokia to set up
the 4.5G service all over the country. This will boost the grid’s speed
from the current 150 megabits per second (Mbps) to 300 Mbps. The
project will cost over $600M but it will be fully covered by the
budget of the Telecommunications Ministry. Worth mentioning that
according to the Telecom Minister, the cost to upgrade the
country’s mobile network to 4G ranged between $120M and
$130M.
The service will be established by September instead of the end of
2016, earlier than the previously mentioned deadline of end-2016.
According to the CEO of Alfa, Marwan Hayek, more than 30
companies, involving 5,500 individuals, will be working on this
project. Hayek also stated that 1,300 stations will be installed all
over the country and that annual data consumption will increase to
80,000 terabits by 2020, up from the current 15,000 terabits. The
new Internet speeds will allow the use of HD voice and HD video
streaming applications, in addition to other applications.
JK Development Launches New Hotels
Jean El Khoury, owner and partner in several hotels in Jbeil, has
launched new construction projects in Byblos and Laklouk to be
completed by 2017.
The Majestic Hotel is a four-star property to be built in Blat, Jbeil. It
will have a built-up area of 20,000 square meters (sqm). The project
will consist of 140 rooms, swimming pool, a gym and a spa.
Investment in the hotel is estimated to be around $20M.
Similarly, the development company had previously launched the
“Villa John” project, a furnished apartment hotel in Laklouk, built on
a 2,000 sqm land plot, with a built-up area of 1,300 m2. Investment
in the project was worth $2M, excluding the cost of the land.
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FOCUS IN BRIEF
Pharmaceuticals and Healthcare in Lebanon: Numerous Opportunities to Explore
In its most recent Pharmaceuticals and Healthcare report for Lebanon, Business Monitor International (BMI) issued
a “cautiously optimistic” outlook for the market over the coming years. BMI believes that demand for high-value
prescription drugs is driven by 3 factors: the government’s focus on facilitating access to healthcare services
across the country, the rising disease burden (defined as the number of disability- adjusted life years lost to a
disease in a particular country), and the high per capita healthcare spending. However, the upbeat outlook is
hindered by the heavy influx of Syrian refugees, by rising violence in the region and by the political stagnation in
the country.
According to BMI estimations, pharmaceutical sales in Lebanon reached $1.63B in 2015 and are expected to grow
to $1.75B in 2016. Healthcare spending was estimated at $3.59B in 2015 and is also expected to rise to $3.91B in
2016.
Lebanon’s Pharmaceutical Sector
The largely urbanized Lebanese population spends a lot on pharmaceuticals. BMI projects pharmaceutical per
capita spending to increase further from $279 in 2015 to $374 in 2016. Lebanon is likely to continue to disburse a
large portion of its GDP (3.22% by 2020) on pharmaceuticals over the medium term. This portion is the largest in
the MENA Region.
In its report, BMI identified four key reasons that explain why pharmaceutical and healthcare spending is so
sizeable in Lebanon. First, the private sector represents around 90% of Lebanon’s hospitals and pharmacies which
in turn facilitates the prescription of high-value pharmaceuticals. Second, prices are not competitive since the
more than 50 pharmaceutical importers operating in Lebanon are not sufficiently consolidated and operate with
fixed mark-ups. Third, Lebanon’s medical tourism segment is highly developed and fourth, Lebanon is highly
dependent on high-value imported pharmaceuticals.
However, BMI believes that the government is likely to continue to practice cost containment on drug prices,
therefore limiting the profit margins of multinational drug makers in Lebanon. In March 2015, the prices of 60
generic and 30 branded drugs were reduced. Also in 2015, Lebanon introduced a unified medical prescription form
in order to alleviate the cost of healthcare spending on consumers. The form, which is the same for patients,
pharmacists and healthcare providers alike, allows consumers to purchase the generic and cheaper version of the
patented drug they are looking to buy.
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However, much controversy has surrounded the release of this form. Some stakeholders in the sector believe that
doctors are prescribing original brand- drugs for which it is difficult to find a generic and more affordable
substitute. On the other hand, government officials hope that this form will prevent restricted medicines from
being sold without a prescription and will allow the consumer to sign a legal consent for their wish to switch from
a brand medicine to its generic twin.
According to BMI, the Lebanese pharmaceutical market is 95% dependent on finished pharmaceuticals. In fact,
the poor quality of intellectual property rights, the loose regulatory and legislation frameworks deter international
pharmaceutical companies from investing in direct manufacturing in Lebanon. Rather, multinational
pharmaceutical companies simply enter the Lebanese market by signing licensing agreements with local drug
makers. In BMI’s view, multinationals are also hesitant to launch the latest drugs on the market as “Lebanese
companies are allowed to register and market unauthorized copies of original innovative products, owing to the
lack of effective data exclusivity and patent linkage systems.”
As the large spending and prioritization of medicine in Lebanon is likely to drive market growth, some hindering
elements might come into play. BMI highlights that Lebanon’s proximity to war-plagued Syria will negatively affect
pharmaceutical trade relations. Moreover, the poor regulatory environment and the loose enforcement of rules are
also likely to limit growth prospects.
Lebanon’s Healthcare Market
Spending on medications constitutes over 40% of total healthcare expenditures which renders the healthcare
sector inextricably linked to the pharmaceutical market. As the Lebanese government seeks to put a cap on drug
prices, the growth of the healthcare sector is expected to slow over BMI’s 10 Years forecast period of 2015-2020.
The growth in health spending will likely experience a gradual drop from 8.91% in 2015 to 7.03% in 2020.
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The government is seeking to reduce the price of medication not only to allow higher access for the population
but also to alleviate the burden on public finances. Private healthcare is subsidized by the government through the
National Social Security Fund (NSSF) with government expenditure on healthcare expected to increase from
$1.83B in 2015 or 51.1% of total health expenditure to $2.71B in 2020 or 52% of total health expenditure.
However, that subsidizing process is problematic given that the NSSF has been suffering from a chronic deficit
and its future revenues are jeopardized by the aging of the population. As the government looks to increase private
sector contribution to the national social security scheme, BMI believes that it could lead to individuals favoring
private insurance programs.
Lebanon’s Patented Drug Market
The campaign promoting the use of generic drugs is fairly recent in Lebanon, therefore patented drug sales are
still dominant on the Lebanese market. In 2015, sales of patented drugs reached $800M and as such accounted
for 61.8% of prescription drug sales and 49% of the total market. BMI believes that the generic drugs are
perceived as inferior to patented drugs which leads to the estimate that patented drugs will still represent 51% of
total medicine sales in 2020 and 52.2% by 2025.
Lebanon’s Generic Drug Market
For the time being, generic drugs are marginalized on the market. In 2015, spending on generic drugs totaled
$494M or only 30.3% of the total market and 38.2% of total prescription drug sales. In 2016, the generic drugs
sector is expected to grow to $539M and will register a compounded annual growth rate (CAGR) of 8.2% over the
forecast period to reach $734M in 2020. According to the Health Ministry and BMI, 21% of generic medicines are
available and manufactured in Lebanon. In spite of this, consumer demand for generic drugs remains low for the
time being. However, that is likely to change when awareness campaigns take full effect and when consumers
realize that they could be saving significant amounts of money.
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Lebanon’s OTC Market
According to BMI, Over the Counter medicines are largely under promoted in Lebanon and their share in the total
market is expected to drastically decline for two main reasons: the first is the fact that prescription drugs are
taking over most of the market and the second is the enforcement of stricter manufacturing and promotional
requirements of herbal and nutritional products. Moreover, the Lebanese consumer is not one to seek self-
medication but would rather consult a doctor and get a prescription instead.
In 2015, the spending on OTCs amounted to $339M or 20.8% of the total market and will grow slightly to $343M
in 2016. Through 2020, the OTC market is expected to register a meager CAGR of 1% to reach $346M in 2020 and
will register only 15.7% of the total market.
The best-selling categories in the OTC segment are analgesics in first place and cough and cold treatments in
second place. BMI notes that Lebanon has the capacity to produce most of the basic OTCs domestically but
imports are still the consumers’ favorites. Most Lebanese opt for the painkiller Panadol from GlaxoSmithKline
instead of a local equivalent.
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Market Summary
According to BMI, Lebanon’s reliance on imports and lack of large-scale local pharmaceutical production is not in
favor of the patient in terms of healthcare costs. The promotion of generic drugs should be developed further and
the respect and protection of intellectual property rights ought to be established in order to attract foreign direct
investment in the country. For now, multinationals are cautious given the local and surrounding political turmoil.
Your Investment Reference
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Research Department:
Sobhi Chatila [email protected]
Lana Saadeh [email protected]
Riwa Daou [email protected]
Myrna Chami [email protected]
Marwan Mikhael [email protected]