Investment in Lebanon: capital inflows depend on reforms

Security is a precondition for prosperity and trade, but there are willing partners and ample possibilities if investors are better protected and the Lebanese banking sector is strengthened.

AFP

A destroyed Lebanese bank after it was set on fire by protesters, Tripoli, June 12, 2020.

Investment in Lebanon: capital inflows depend on reforms

Souraya Chahine

last update on 25 Aug 2025

These are big moments for Lebanon. Earlier this month, the cabinet voted to disarm armed groups like Hezbollah by the end of 2025, and the national army is expected to unveil its plan to do so in the coming days. If there is genuine progress, one of the first to congratulate the Lebanese will be the United States.

US President Donald Trump has tasked his friend Tom Barrack with helping Lebanon transition towards true statehood and full sovereignty over its territory. The idea is that this will act as a gateway to economic and investment prosperity, and that US support will help Lebanon achieve that goal. Barrack links prosperity and investment to the establishment of a capable, strong state that holds the reins of power.

Trump’s envoy visited Lebanon again this month. Al Majalla understands that the aim was to give further impetus towards ensuring that all weapons are placed exclusively in the hands of the state, after the cabinet decided to do so on 5 August. Barrack wants to ensure that the Lebanese army has support and that Israel reciprocates by withdrawing from certain locations in southern Lebanon, according to sources.

Among the issues Barrack is weighing up is a possible mandate extension for the UN Interim Force in Lebanon (UNIFIL). Al Majalla understands that the UN Security Council will decide on an extension when it meets on the 25 August session, and that this will most likely be the final renewal, ending on 31 August 2026.

REUTERS/Mohamed Azakir — US Ambassador to Türkiye Tom Barrack, also special envoy to Syria, fields questions from journalists after meeting with Lebanese President Joseph Aoun at the presidential palace in Baabda, Lebanon, on August 18, 2025.

Spotting potential

Trump’s team see trade and investment as central to shaping solutions in the Middle East, a view he expressed during his Gulf tour in May, and Lebanon is seen as fertile ground, with huge potential for partnerships to revive the economy of this small Mediterranean state once known as the ‘Switzerland of the East’. The challenges are complex, however, after an economic collapse in 2019.

Barrack, a son of Lebanese immigrants, has spoken of how Lebanon has the capacity and potential for development and prosperity even greater than some of its bigger neighbours, but continues to press for Hezbollah’s disarmament, which America and others see as a prerequisite. Beirut must act swiftly before Trump’s team starts getting frustrated, he has warned, adding that this level of US attention will not last forever.

Trump’s 10% tariff on Lebanese goods, implemented earlier this year, led to a decline in Lebanese exports to the United States. In 2024, Lebanon exported goods worth $256mn to the US, but the 2025 figure is expected to be lower. Unlike many countries who have sought to agree a new trade deal with the US to lower tariffs, Lebanon has made no effort to negotiate with Washington. Its inaction has been criticised by some analysts.

According to the US Census Bureau, Lebanese exports to the US include jewellery, precious stones, oils, sweets, food, and alcohol, particularly wine and arak, while America's $536.8mn exports to Lebanon were mainly cars and cosmetics, but also oils, wheat, dried fruits, medical products, tobacco, electronics, and clothing. If it is to undertake the financial and economic reforms needed, Lebanon must urgently boost its export revenues to strengthen its national currency.

Investment is usually based on reports from US risk-analysis firms. If conditions are deemed unsuitable, investment is withheld, creating a vicious cycle

Nervous money

American investors are constantly urged to invest in Lebanon, but they typically base their decisions on reports from US risk-analysis firms. If conditions in Lebanon are deemed unsuitable (which they often are), investment is withheld, creating a vicious cycle. For investment, there needs to be security and stability, hence the focus on Hezbollah's weapons.

There is a very limited US presence in Lebanon at present. Some American pharmaceutical companies have a share of the Lebanese market, but only for exports, not for establishing manufacturing plants, while a handful of American high street chains (like McDonald's and Starbucks) have outlets there. More broadly, US tech firms offer services like WhatsApp in Lebanon, but have no real local presence.

US interest in Lebanese hydrocarbons—including its offshore gas—is tied to the expectation of stability. The government in Beirut recently opened a third exploration licensing round, running until November for international companies, and previous US envoy Amos Hochstein helped secure the 2022 maritime border agreement between Lebanon and Israel that paves the way for energy investment. But fighting between Hezbollah and Israel from 2023-24 led to companies like Total, a French energy giant, halting its operations in Lebanese waters due to increased risks.

US support for Lebanon has a history. Between 1975 and 2005, Washington gave more than $400mn in humanitarian, development, and reconstruction aid to Lebanon following wars and conflicts, and after the 2006 war with Israel, an additional $1bn was delivered to reinforce economic and security stability. Assistance focused on strengthening civil society, rural development, and infrastructure.

The aid also sought to improve Lebanon's investment climate, but problems mounted, and in 2019, a major liquidity crisis finally became visible, financial engineering at the central bank having masked the country's economic fragility for years. It precipitated one of the worst recessions anywhere in the world for almost 200 years. Over 14 months in 2023-24, the currency was devalued by 98% and inflation ran at 221%.

American investment has continued to some degree, though this is mainly through mergers and acquisitions, rather than new projects. From 2022-23, foreign investment in Lebanon dropped from $1.6bn per year to less than $700mn, before rebounding somewhat in 2024.

Room to grow

US investors say they want the Middle Eastern state to reform its business environment, strengthen investor protections, remove legal and regulatory barriers, develop a technology and renewable energy strategy, build on the maritime agreement with Israel, and enhance coordination with international institutions.

Alongside France, the United Arab Emirates, and other European countries, the United States is still one of the bigger investors in Lebanon, according to Investment Monitor, and recently, US billionaire entrepreneur Elon Musk proposed investing in Lebanon's telecoms sector through his company, Starlink, and its automotive sector through another of his companies, Tesla. Starlink offers satellite-based internet services using ground-based transmitters and receivers.

Over 14 months in 2023-24, the Lebanese pound was devalued by 98% and inflation ran at 221%

Salim Zeini, president of the American Lebanese Chamber of Commerce, said Lebanese people had invested in the United States through its extensive diaspora, but that American investments in Lebanon had been "very weak" in recent years, due to the political and security situation. "Capital is cowardly. If the economic situation is unstable, money flees."

Lebanese exports to the US had "more than doubled in the past two years," he said. "Our role is to encourage Lebanese manufacturers to comply with international standards, so that global markets remain open to Lebanese products, which can serve their country."

On investments, Zeini said conferences and forums aim to attract capital into Lebanon and create a supportive environment for business, but said more was needed. "Rebuilding the economy requires a banking platform," he said. "No economy can function without a strong banking sector. We don't support abolishing the banking sector because of mistakes. Rather, the sector must be strengthened, and those responsible for wrongdoing must be held to account."

Lebanon had long been a welcoming environment for foreign and Arab investment, he said. "The Lebanese people themselves form the true incubator, more than the laws. With the new presidency, we hope for a review of the laws and taxes that have deterred investment, and for new facilitation rules. Ministers must use wisdom and foresight to provide what's best for reviving the economy, encouraging foreign employment and investment, forging partnerships, and ensuring that companies are free to exit the Lebanese market whenever they wish."

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