European Business Interests In Lebanon: An assessment of EU private foreign direct investment in the reconstruction era

Abstract

The flow of foreign direct investment has long been regarded as the main engine of growth in developing countries. Lebanon has aimed at attracting foreign direct investment to contribute to its economic recovery in the post-civil war period. EU countries were expected to be a major source of investment inflows, partly, due to their rich historical relationship, and partly, as an expected result of the new Euro-Med approach, adopted in the 1990s.This thesis assesses the EU private business interests in Lebanon during the reconstruction period, and investigates to what extent EU business engagements involved FDI. Within this framework, this thesis examines the role of the EU in encouraging the flow of EU private investments into Lebanon. This thesis falls into two parts. The first assesses the history of economic relations between Lebanon and Europe in the modern period, and the development of these relations after the establishment of the EC, examining the role of the latter in reshaping these relations. It also assesses the development of the Lebanese economy since independence from France. In the second part of the thesis, the theoretical framework of FDI is applied to a survey of EU private businesses operating in Lebanon. This helped in answering two questions: what business activities did involve FDI, and why EU firms engagement in FDI was very shallow. The thesis concludes that the lack of FDI activities in Lebanon, whether EU or non-EU, was a result of the lack of comparative location-specific advantages. It also suggests that the Lebanese government should assume a stronger role in improving Lebanon’s comparative advantages in order to attract FDI. The EU should provide substantial help - within the Euro-Med approach - to encourage EU private business investments in the country.