Government Role in the Economy


Lebanon has traditionally enjoyed a free-market economy and a strong laissez-faire commercial tradition. The income tax rate on individuals and corporations remains low (a maximum of ten percent, and five percent on the distribution of dividends). The government's budget deficit reflects unproductive spending (mainly public sector salaries and debt service) rather than new investment or growth-creating projects. This is justifiable due to the large bill of reconstruction and rehabilitation after the end of the war and the administrative reform of the civil service. However, the government is seriously considering privatization of some public services. So far, part of the telecommunications service is operated and managed by a French and a Finnish companies. The Council of Ministers agreed in June 98 to the proposal made by a Canadian company to rehabilitate and operate postal services. The "Investment Development Authority of Lebanon" (IDAL), established by the government in 1994 to identify large-scale investment opportunities for private investors, is working assiduously to create (duty) free zones around Lebanon's ports and airports.

In June 1997, the Government issued a decree to prohibit or significantly restrict the import of many agricultural and food imports. This is unprecedented in Lebanese modern history, and is being aggressively challenged by the local and international business communities. However, this decision does not signal any change or new directions in Lebanese economic policies and represents an isolated aberration made to enforce an agricultural calendar.