“Lebanon Debate” – Basma Atwi
The Kingdom of Saudi Arabia’s announcement of the resumption of Lebanese exports to the Kingdom may be the only positive respite that Lebanon experiences in times of war and its economic repercussions. After about five years of stopping Lebanese exports to the Gulf market, the decision is considered one of the most important economic developments that Lebanon has witnessed in recent years, not only because of the size of the Saudi market, but because it may constitute an entry point for Lebanon’s return to the Gulf markets in general.
According to the official statement of the Saudi Ministry of Foreign Affairs, “The decision is the result of the positive steps taken by the Lebanese government towards rebuilding state institutions, and the cooperation shown by Beirut and the provision of the required pledges.”
The direct benefit of this decision is to increase exports, the inflow of foreign currencies, and to support agriculture and industry. The greatest benefit may be political and economic, as the decision constitutes an indication of the return of Gulf confidence in Lebanon, and may be the beginning of a new phase of economic and investment cooperation between Lebanon and the Gulf states.
The positive repercussions are not limited to the movement of exports, but also extend to the logistical aspects associated with the transit of Lebanese goods towards Gulf markets. Facilitating transit movement and reducing operational costs will contribute to improving the export environment, which will reflect positively on the industrial and agricultural sectors, which are counting on this step to restore economic momentum and open new horizons for growth during the current stage.
As a reminder, the Kingdom stopped all imports from Lebanon in October 2021 after a diplomatic crisis against the backdrop of statements by the then Lebanese Minister of Information, George Qardahi, about the feasibility of the war in Yemen. In April 2021, Riyadh imposed a ban on the import of Lebanese agricultural products under the pretext of “using them in drug smuggling.”
What does the decision of the Kingdom of Saudi Arabia to lift the ban on importing Lebanese products mean for the economic balance?
First: Increasing Lebanese exports
The Saudi market was one of the most prominent destinations for Lebanese exports, especially agricultural, food and industrial products. With the reopening of the market, Lebanese companies will be able to recover part of their export share that they lost since 2021. The value of Lebanese industrial exports to the Saudi market before the decision to stop exports was approximately $200 million, and the industrial sector suddenly lost this amount. Therefore, reopening the Saudi market to Lebanese products will gradually contribute to restoring these revenues, although this will not be achieved immediately as a result of the entry of products and industries from other countries into the Saudi market during the period of absence of Lebanese products. Food products will be most affected, given that their marketing depends largely on their presence in major stores, especially since these stores adopt special marketing policies that require fees known in the retail sector as (Listing Fees), which are amounts paid in exchange for listing products and displaying them on store shelves.
As for non-consumer industries, they may be able to restore their activity at a relatively faster pace, but they, in turn, need intensive marketing and commercial efforts. Hard work and effective marketing are sufficient to address the various challenges they face.
Second: The entry of more foreign currencies
Any increase in exports means the influx of new dollars into the Lebanese economy, which is vital in light of the foreign currency scarcity crisis that Lebanon has been suffering from since 2019.
Third: Supporting the agricultural sector
The agricultural sector is one of the biggest beneficiaries, because Saudi Arabia and the Gulf used to absorb a large proportion of Lebanese fruit and vegetable exports. Reopening these markets will relieve pressure on farmers, help dispose of production, and improve prices. The state of recession that the agricultural sector is suffering from today, in addition to the decline witnessed in the prices of some agricultural crops, will begin to recede with the reopening of Saudi markets to Lebanese products, which would restore the value to many crops, especially lettuce and fruits of various types.
It should be noted that the Saudi market used to account for about 50 percent of the total Lebanese agricultural exports to Arab countries.
Fourth: Creating job opportunities
The high demand for Lebanese products will stimulate the agriculture, industry, transportation, packaging and storage sectors, which may contribute to creating new jobs or maintaining existing jobs.
Fifth: A message of political and economic confidence
The importance is not limited to trade. The Saudi decision is also seen as a message of support for the new Lebanese government and an indication of improved relations between Beirut and Riyadh, which may encourage Gulf and Arab investors to reconsider investing in Lebanon.
