Lebanon and Luxembourg: two gateways speaking the same language
Beirut, the capital of Lebanon, was the fourth and last stop of the Luxembourg financial sector road show, organised by Luxembourg for Finance and led by the Crown Prince Guillaume of Luxembourg and the Minister of Finance Luc Frieden. Luxembourg and its host have something in common: Luxembourg is considered as a gateway to Europe, Lebanon as Europe’s gateway to the East and Asia’s gateway to the Western world. After the financial seminar, attended by more than 250 people, LFF spoke to three Lebanese experts about the future of their country.
Lebanon is a country of 10,500 square kilometres with a population of 4 million, but also 12 million Lebanese living abroad. Many still dream about coming back to Lebanon one day to retire and to invest in their country of origin. Dr Salim Chahine, Associate Professor at Olayan School of Business in Beirut, speaks about the optimism of his fellow countrymen.
“Despite political and military instability, people remain hopeful about the future of the country and they come back from Africa, Latin America, the US and Europe, but mainly from the Gulf region. Our connections with the Gulf States have allowed us to build a reputation as intermediaries, traders, business men and mainly people from the finance industry.”
Dr Makram Sader is the Secretary General of the Association of banks in Lebanon. He explains where this optimism comes from and why political instability is not a big deal for banks. “We really do cope well with political instability and complex situations. Our banks are very liquid, because over the decades they have built up a large part of foreign currencies.”
This measure has been taken in order to avoid massive capital outflows in times of crisis and political turmoil. There is another point worth mentioning. “Relationships between clients and their banks are very tight and built on trust. So people are certain about the fact that they can get money at any time they want.”
Amine-Elie Bechara is Director of BEMO Europe Banque Privée, based in Luxembourg. He says that Lebanese people always have money on bank accounts abroad, so local banks follow their clients when they go international. “Since we are in Luxembourg, we continue to offer the same quality of service to our customers as in Lebanon. We chose Luxembourg, because like Lebanon, it is a small country with a multilingual perspective.”
Another reason brought forward is the professionalism of the actors working in the Luxembourg financial sector. Furthermore, Luxembourg is a member of the European Union and a jurisdiction that transposes all the EU Directives and is thus in line with international standards.
There is money going out, but there are also important capital flows into the Lebanon. According to Professor Chahine, money comes back to the country when the interest rates in Lebanon are higher than in the US or in Europe. But there is more to it: “Lebanese who want to return to their country usually bring their friends with them, meaning that a lot of Arabs, in particular, also come to invest their money in the Lebanese economy.”
Historically speaking, political instability has never deterred Lebanese people from believing in their banking system. As Professor Chahine testifies: “When the government borrows money, it has the choice of financing it via the international markets or the Lebanese markets. Since we are cash rich due to the money coming back from abroad, Lebanese banks have constantly supported their governments.”
This results in a situation where the government has always borrowed money from the Lebanese people, whether they live at home or abroad. This has led to a certain degree of stability because no one would want to fail their government and their country.
Despite international pressure on countries with banking secrecy, Lebanese people are very proud of this instrument, which plays a very important role. “Banking secrecy is there to protect citizens’ right against the abuse of power by regional or national government”, Dr Makram Sader of the Banking association underlines. “We are trying to balance the relationship between combating money laundering on the one hand and protecting investors’ interests on the other, and we are succeeding in doing this quite well”, Professor Chahine adds.
BEMO Europe Banque Privée’s Director Amine-Elie Bechara contends that banking secrecy is certainly not the first reason why Lebanese people transfer money to the Grand Duchy. “The professionalism of the actors plus a stability that people don’t find in their own countries are the keys.”
He concludes that banking secrecy is in any case less an issue to Lebanese abroad than to European clients in Luxembourg, because there is no tax being paid on their money invested abroad.
After Qatar, Abu Dhabi and Saudi-Arabia, Lebanon was thus the last stop ofthe Luxembourg financial sector road show, organised by Luxembourg for Finance and led by the Crown Prince Guillaume of Luxembourg and the Minister of Finance Luc Frieden. CW