The Emergence of Highly Sophisticated Lebanese Exports in the Absence of an Industrial Policy

This paper explores the experience of the Lebanese industrial sector in exporting highly sophisticated products. The analysis relies on the "product space" map for Lebanon, which shows that between 2000 and 2008, as much as 40 new highly sophisticated products that require a high level of capabilities were being exported. Literature argues that such phenomena are observed in countries that have undergone structural economic changes; however, industrial policy in Lebanon is almost non-existent. The study resorted to triangulation of primary, quantitative and qualitativeas well as secondary data in an attempt to explain the drivers behind these new exports. The conjecture was that these exports are mainly the result of a demand driven shock rather than a productivity improvement. Indeed, effort for discovery of new exports has been based on the entrepreneurial skills of industrialists and their social and business networks abroad, which have been used to cater to an increasing demand mainly on part of Arab and some African countries. The persisting low productivity observed in the sector is comparable to its status in the 1960s and beginning 1970s, before the onset of the civil war. The then booming industry was also influenced by similar external favorable conditions, but had failed to further develop namely due to lack of adequate policy. The paper argues that Lebanon could be going down the same road should industrial policy not become a national priority.