Investment funds may soon provide a new and much-welcomed dimension to Lebanon's reconstruction efforts. To date, reconstruction has been largely financed by issues of high interest Eurobonds and treasury bills, which have substantially increased the state's debt burden: Eurobond issues have raised Lebanon's foreign debt to some $1.4bn, while T-bills have helped expand the net domestic debt to almost L£9,296bn. The first fund to be announced was the $100m Lebanon Invest fund, mandated by the Investment Development Authority of Lebanon (IDAL) and marketed by SBC Warburg of London.[1]

The second fund, the $30m-$50m Lebanon Fund, was announced in January at the end of an international presentation tour which took in New York, Boston, London, Paris and Geneva. The Lebanon Fund is described as a fixed-capital closed-ended fund designed for the portfolio investor. It will be initially floated on the Dublin Stock Exchange and will eventually be listed on the Beirut Stock Exchange. The fund is to be managed by Beirut Investment Management, headed by the economist Samir Nasr, and will have input from an investment committee staffed by several Lebanese bankers. Billed as the first investment fund for Lebanon, the Lebanon Fund will cover investments predominantly in Lebanon and Syria, but also other Arab countries. The actual contributors are expected to be evenly divided between Lebanese, Arab, and international investors all willing to take advantage of the expected rewards of regional peace.

Despite initial confidence, the lower-than-expected response to the fund has forced managers to temporarily put it on hold. With shares at $25 each and a minimum subscription of $100,000 per entity (an individual or conglomerate), the fund's managers had hoped to realize an initial total contribution of $30m. However, investors have been wary of domestic and regional political uncertainties, including the potential uncertainties surrounding parliamentary elections later this year and a regional peace settlement.

Officials at the Lebanon Fund say that they are as yet undecided whether they will seek a listing on the Beirut Secondary Market as an interim step before moving to the Beirut Stock Exchange. Privately, one source thought it probable that the fund would be listed directly on the exchange. Investment funds provide a useful method of attracting companies to the stock exchange, and one source at the Beirut stock exchange expressed alarm that the fund may not appear on the market at all.

Notes 1. See the Lebanon Report, Number 4, Winter 1995, pages 17-18.