1 LEBANESE ENTERPRISES DIAGNOSIS: LEBANESE ENTERPRISES DIAGNOSIS: LACK OF FINANCIAL LOANS OR LACK OF LACK OF FINANCIAL LOANS OR LACK OF FINANCIAL OPPORTUNITIES FINANCIAL OPPORTUNITIES 10 April 2006 10 April 2006 Crown Plaza Hotel Crown Plaza Hotel Beirut - Lebanon Beirut - Lebanon WORKING MEETING ON WORKING MEETING ON WHICH SOCIO-ECONOMIC PROGRAM WHICH SOCIO-ECONOMIC PROGRAM FOR LEBANON ? FOR LEBANON ? by by Dr Makram Sader Dr Makram Sader Secretary General Secretary General Association of Banks Association of Banks in Lebanon in Lebanon
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1 LEBANESE ENTERPRISES DIAGNOSIS: LACK OF FINANCIAL LOANS OR LACK OF FINANCIAL OPPORTUNITIES 10 April 2006 Crown Plaza Hotel Beirut - Lebanon WORKING MEETING.
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LEBANESE ENTERPRISES DIAGNOSIS:LEBANESE ENTERPRISES DIAGNOSIS:LACK OF FINANCIAL LOANS OR LACK OF LACK OF FINANCIAL LOANS OR LACK OF
FINANCIAL OPPORTUNITIESFINANCIAL OPPORTUNITIES
10 April 200610 April 2006Crown Plaza HotelCrown Plaza HotelBeirut - LebanonBeirut - Lebanon
WORKING MEETING ONWORKING MEETING ONWHICH SOCIO-ECONOMIC PROGRAMWHICH SOCIO-ECONOMIC PROGRAM
FOR LEBANON ?FOR LEBANON ?
byby
Dr Makram SaderDr Makram SaderSecretary GeneralSecretary General
Association of Banks in Association of Banks in LebanonLebanon
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O- Economic BackgroundO- Economic Background
I- Corporate Sector: A DiagnosisI- Corporate Sector: A Diagnosis
Real GDP growth rate (%) 7.0 8.0 6.5 4.0 4.0 3.0 1.0 0.0 2.0 2.9 5.0 6.0 0.0
1010
2- Lebanese Corporate Sector: Demand side: 2- Lebanese Corporate Sector: Demand side: Earnings and debt servicingEarnings and debt servicing
Bank credit / Bonds & Equities : High debt / equityBank credit / Bonds & Equities : High debt / equity(negative debt leverage)(negative debt leverage) EBITDA / Debt service < 2:EBITDA / Debt service < 2:
– [E] Non performing Loans: Settlements’ efforts[E] Non performing Loans: Settlements’ efforts– [T] Law of tax settlements and installments[T] Law of tax settlements and installments– [D&A] CNSS: Charges on salaries[D&A] CNSS: Charges on salaries
ROIC < WACC (weighted average cost of capital) = cost of ROIC < WACC (weighted average cost of capital) = cost of debtdebt
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Total Loans to private sector Total Loans to private sector Problem Loans (NPL'S)Problem Loans (NPL'S)
Do these structural imbalances require structural changes/ reforms??
The sustainability of such a structure is costly
(Subsidies, protection, social transfers, debt…)
1616
The structural adjustment requires:The structural adjustment requires:
- Reallocation of resources (capital, human, land, etc…) job creation, exports of goods & services generation
- It’s a time consuming process (10/20/30 years)
- How to manage the transitional period?
Do we need an IMF program??
1717
III- What to do?III- What to do?
11 – At the Financial Intermediation level– At the Financial Intermediation level Strategic position of the banking sector to initiate the Strategic position of the banking sector to initiate the
reallocation processreallocation process-Modern , well endowment in capital funds, human -Modern , well endowment in capital funds, human resources, management, IT, procedures, local and resources, management, IT, procedures, local and external networks, large deposit base….external networks, large deposit base….-Catalyst, financier, advisor-Catalyst, financier, advisor
Commercial Bank Credit policies to be revisitedCommercial Bank Credit policies to be revisited- From real estate guarantees to cash flow, corporate - From real estate guarantees to cash flow, corporate finance and project finance based credit assessment finance and project finance based credit assessment
and and guaranteesguarantees-Basle II requirements-Basle II requirements
IPP)– Subsidies, public enterprises– Private monopolies
Administrative burden– Corruption, red tape, contract enforcement– Business entry/exit, bankruptcy laws
2020
Costs of utilities (transport, energy, ICT), public infrastructure– Privatization– Public investment planning, sectoral, regional clusters
Access to finance– subsidies– Prudential regulations
Development of capital markets– Establish an independent regulatory authority– Enhance stock market activities– Promote the development of new products– Attract well-seasoned human capital– Attract multinationals to use Lebanon as a platform for their regional expansion