Can Gulf countries help rescue Lebanon's economy?

Professionals from Kuwait, Saudi Arabia, Bahrain, and later the United Arab Emirates, relied on the Lebanese to run their businesses, as well as their commercial, industrial, and real estate companies. Back then, their national expertise was still too limited to deliver optimal results.

Lebanese flock to the Gulf

From the early 1950s, the tables began to turn.

The Lebanese began to flow to the Gulf. They worked in various fields, including medicine, engineering, education, trade, distribution of goods, and the service industry, such as restaurants, hotels, and travel agencies. They contributed to the development of the region's journalism scene, too.

Many partnered with Gulf businessmen to found specialised companies in the economic sector, while also representing Gulf businesses and properties in Lebanon.

The substantial presence of Lebanese people in the Gulf has had a positive impact on the Lebanese economy. They sent home substantial amounts of money to their families, amounting to billions of dollars. This constituted a large chunk of total remittances from Lebanese expats worldwide, who are scattered across North and South America, Europe, Africa and beyond.

The exact number of Lebanese expats around the globe hasn't been documented. In the Gulf region, there could be up to 400,000. Though this is a relatively small percentage of the total Lebanese diaspora (which is estimated to range between 4 million to 14 million), it has disproportionately contributed to the economy.

According to the United Nations Development Programme (UNDP), the total remittances from Lebanese expats in 2022 amounted to $6.8bn – accounting for 37.8% of Lebanon's Gross Domestic Product (GDP) – and Lebanese expats working in the Gulf accounted for approximately 48% of that.

This only goes to show how important the Lebanese diaspora in the Gulf has been for its own economy. A byproduct of this is has been increased disposable income, leading to higher consumer spending when visiting home over the holidays or for vacations.

Through their labour, the Lebanese have also helped boost the economies of their host countries.

Governmental support

Lebanon has benefited from governmental and institutional support in the Gulf, too. This includes the Kuwait Fund for Arab Economic Development, the Arab Fund for Economic and Social Development, The Saudi Fund, and the Abu Dhabi Development Fund.

Official data from the Kuwait Fund for Arab Economic Development reveals that it has extended 28 developmental loans to Lebanon, financing projects spanning transportation, energy, water, sewage, telecommunications, and social services, with a cumulative value of KD 286.5mn (Kuwaiti dinars), equivalent to $974.4mn. These projects have helped bolster the Lebanese economy.

Other Gulf funds have also provided consistent support throughout the decades.

For instance, the Saudi Fund for Development has provided SAR 1.02bn (Saudi riyals), equivalent to $272mn, in backing to various projects in Lebanon (as of the end of 2021).

The Arab Economic and Social Development Fund, which is headquartered in Kuwait and receives substantial contributions from Saudi Arabia and the United Arab Emirates, has also played an important role.

Current climate

Lebanon is currently facing insurmountable security and political crises that have had devastating effects on the national economy and the standards of living of the Lebanese people.

According to World Bank data, external debt has surged from $64mn in 1970 to $66.9bn at the end of 2021. At the same time, the World Bank also estimated Lebanon's Gross Domestic Product (GDP) at $23.13bn, a significant decrease from $52bn in 2019.

The deterioration is ongoing, as evidenced by a World Bank report issued in the spring of this year, which revealed a cumulative deflation of 37.2% of the GDP from 2018 to 2021, accompanied by a 2.6% decline in GDP in 2022.

Lebanese citizens are now counting on gas and oil production after agreements with Israel over maritime borders and exclusive zones. Oil companies, such as the French company Total, have started preparations for production in Lebanese fields.

Ultimately, the revitalisation of the Lebanese economy hinges on several internal factors, including a national consensus in electing a president, forming a balanced Council of Ministers with competent members, and enhancing the official security apparatus and the army independently of partisan affiliations.

Eliminating the role of sectarian militias is crucial for political stability and security, enhancing the potential for economic reform.

Rebuilding together

Lebanon must also rely on improving its economy through relations with Gulf countries. They must move towards strengthening these ties while avoiding tensions.

Once the political situation in Lebanon improves, Gulf countries can provide economic support through a dedicated developmental fund for Lebanon, supported by the existing institutional infrastructure in the Gulf.

This fund could define many relevant financing resources, aid packages, and programs that could help Lebanon get back on its feet.

Furthermore, a boost in direct investments from the Gulf's private sector could provide employment opportunities in Lebanon. This could also fuel more economically viable projects that would enhance the performance of vital sectors and improve growth rates.

It goes without saying, however, that these are not simple solutions.

Despite the history that the Gulf and Lebanon have, these undertakings will, if anything, be large, complex and formidable, particularly within Lebanon's current climate.