World Bank: Bad marks
For ease of doing business

Prevailing paralysis will lead

to deterioration of services

Lebanon’s effort to improve the business climate has not been serious lately, according to the ‘Doing Business 2016’ report issued by the World Bank Group, which ranked it 123 out of 189 among countries, in terms of ease of doing business.

The country had a score of 56.39 out of 100 in the 2016 ranking compared to 56.50 in 2015. The report noted the absence of any reforms for the two consecutive years.

“The political process is in deep paralysis, which has been hampering reforms,” said Wissam Harake, Economist at the World Bank-Lebanon. “The country is not only at risk of losing projects financed by international institutions, including the ones by the World Bank, by the end of this year, but will also increasingly face in the upcoming years a deterioration in its services and activities of its institutions, a cycle that already started three years ago,” he said.

In terms of starting a business, Lebanon ranked 114, with a score of 82.68 over 100. The procedures number is six, the days needed are 15. The cost as percentage of income per capita is 34 percent and the minimum capital as percentage of income per capita is 33.2 percent.

“Lebanon did not make any efforts to reduce bureaucracy,” said Harake. “Investors suffer from high business costs, uncertainty and a lack of transparency in doing formalities,” he said.

According to the report, the mandatory use of legal services in the company registration process also adds to the financial burden of starting a business, in addition to the use of notary services. For instance, each newly formed company must retain an attorney. The annual retainer fee, increased in 2012 by the Beirut Bar Association, can be as high as 20 percent of income per capita.

Dealing with construction permits is another burden for doing business. The country ranked 130 with a score of 62.44 over 100. The procedures number increased to 18 and the days to receive the permit to 244. “Lebanon made transferring property more complex by increasing the time required for property registration,” the report said. The number of days required for this formality is 34.

“Although the real estate sector is attractive for investors, the Government should create incentives to promote investments in other sectors like industrial manufacturing and agriculture,” said Harake.

The investor needs at least 75 days to get electricity, with five procedures. The report noted the high initial cost of electricity subscription as percentage of income per capita (93.9 percent).

“The electricity sector problem is not technical, as many solutions were suggested by some governments, but is subject to political conflicts,” said Harake. “The electricity crisis , similarly to the water and waste crises, is an indicator of the deterioration of governance in the country,” he said.