New Arab investment in Lebanon reached $500 million in 2002, increasing as investors balance healthy returns against declining risk. This splurge came in the overall context of what the Arab world feels is increasing discrimination in the West after 9/11.

The capital flow into Lebanon has followed the increasing number of tourists from Arab countries, and is concentrated in the purchase of villas and apartments for personal use and in the construction of tourist projects, often in tandem with a Lebanese partner.

'Real estate and tourism comprise the majority of Arab investment here, both in the number of transactions as well as the size of each transaction,' said Karim Salameh, managing director of Saradar Investment House.

Buying villas or apartments comes naturally to Gulf visitors, who see Lebanon as a welcome chance to mix business and pleasure. Developers of most luxury residential projects consciously target Gulf buyers, who have bought many of the apartments sold in a clutch of developments, including Marina Towers, near the Phoenicia Hotel, where prices have reached a staggering top sale price of $5,900 per square meter.

'For many of these buyers, this is a second or third home,' said Jihad Ibrahim, manager of the Ahlam building on Beirut's Ain el Mreisseh seafront, where huge apartments of 900 square meters sold at $1,700-2,000 per square meter.

'With flat or falling prices in Lebanese real estate, potential buyers from the Gulf are finding things more to their liking,' said one broker. 'But the fact that these buyers have money,' he adds, 'doesn't mean they want to be taken for a ride.'

Arab investment is becoming more large-scale and more ambitious. Between January 2001 and May 2003, 80 investors from the Gulf acquired 1.8 million square meters of land, mainly in Mount Lebanon.

The figures - revealed in research by Ramco, the Lebanon-based property consultants - show that the top 23 of these investors each bought an average of 64,467 square meters of land (83 percent of the total), a size clearly indicating the intended use is commercial rather than personal.

Acquisitions of this size require an exemption from the law limiting purchase of land or property by a non-Lebanese to 3,000 square meters. But the council of ministers - led by Rafik Hariri, a prime minister with strong business connections in the Gulf - has been more than willing to grant waivers.

Tourism projects in Lebanon already lead the way in attracting multimillion-dollar Arab investment. The cost of the Movenpick resort, owned by Saudi Arabia's Prince Walid bin Talal in a prime position on the Beirut seafront, has been estimated at $120 million and the prince is also intending to open a Four Seasons hotel in downtown Beirut near the marina.

He has also recently acquired a 49 percent stake - at around $100 million - in LBC-Sat, the broadcasting arm of LBCI, the satellite television company.

Emirates-based hotel group Rotana announced in October that it plans to expand its existing Lebanon portfolio from the management of the five-star, 168-room Gefinor hotel, which opened in West Beirut three years ago, with an additional $70 million.

Rotana will open a four-star hotel in Hazmieh on the Damascus highway and a seafront development of 170 suites in Raouche, Beirut. Selim al-Zyr, the group's president, said he felt Lebanon had 'reached only the tip of the iceberg' in terms of business potential.

Another UAE group, Habtoor Properties, will soon open the $150 million second phase of its Metropolitan City Center, in the Beirut suburb of Sin el Fil. When the company opened the first phase, the Metropolitan Palace hotel, early last year, many analysts said the location was wrong for a luxury hotel. But Habtoor benefited from prices far lower than in downtown Beirut and says that the hotel's occupancy rates justify their original enthusiasm.

United Real Estate, owner of the Sheraton Heliopolis in Cairo and a subsidiary of KIPCO, Kuwait's largest private-sector company, recently announced it will join forces with Horizon Development, part of the Hariri group, to invest $250 million in two projects.

A massive seafront development will include a five-star hotel with Lebanon's biggest conference center, and a shopping center in Verdun that will target local and international retailers with 50,000 square meters of space for rent.

The influx of Arab money has led to some rumblings of discontent among the Lebanese. The municipality of Qornayel, a Druze village north of the Beirut-Damascus corridor where foreigners have bought 25 percent of the total area, has petitioned President Lahoud and Prime Minister Hariri to enforce limits on construction.

But, so far at least, the Lebanese appear to see the advantages rather than pitfalls in such investment. 'Any government led by Rafik Hariri will always keep an open door for money from the Gulf, whether it goes into banking, real estate or entertainment,' said one consultant.

Hariri has long portrayed intra-Arab investment as a means to the creation of a trading bloc. 'There is nothing to prevent us from cooperating with each other - except illusions, personal gain and the mentality of small grocers,' he said in October.

'Why is it possible to have other big and medium blocs, while it is difficult or impossible to forge a bloc among ourselves?'

Source AMEInfo