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How Can Lebanon Benefit from the Digital Economy?

March 30, 2025
7 min read
Article

As the Lebanese crisis persists, knowledgeable individuals proposed several solutions to spur economic growth in Lebanon. Most target the physical economy, overlooking the nature of modern economies regardless of the proposed ideas and their effectiveness. While the physical economy remains dominant through industrial, agricultural, or service-based activities, the rapid adoption and expansion of the internet and telecommunication technologies caused the digitization and virtualization of economic activities in recent years. Additionally, the interplay between physical, human, and social capital is more relevant. Today, intangible assets, notably brands and intellectual property, are more relevant and valuable, and economic activity can occur in three different domains: the physical world, the digital world, and the virtual world. The following paragraphs discuss digitalization and how Lebanon can capitalize on it to achieve economic growth.

The Digital economy emerged as the internet and digital technologies became widely adopted, paving the way for online-based social and economic activities. Unlike the physical economy, where human-to-human interactions are predominant and material goods and services are exchanged, the digital economy relies less on physical existence, and more on machine-human interactions as goods, services, or business premises are digitized. Data has become a valuable commodity that can be cheaply mined from online activities, allowing new fields such as big data analytics, machine learning, and digital marketing to emerge. The increased connectivity also allowed content creation to become a valuable economic activity (creator economy) as social media became prevalent.

The virtual economy emerged as digitization became more prevalent and computational resources became cheaper and more accessible, which allowed the gaming industry to create sophisticated virtual worlds where players could exchange virtual goods and services. While digital and virtual goods might appear to be the same as both digitized, the vital distinction is that digital goods have direct value in the real world, while virtual goods are only valuable within their respective universes. Some might be tempted to dismiss virtual economic activity as the goods and services provided are only valuable within their virtual world. However, every year, human players spend billions of dollars to purchase virtual goods in various ways to the extent that black markets were set up to facilitate the exchange of digital goods among players when companies had certain restrictions. Even gaming sweatshops were set up in countries like China to produce virtual goods and sell them to wealthy players. Esports also emerged as a competitive virtual sport, where teams of professional gamers compete in international competitions and have their fan bases similar to physical sports, highlighting the relevance of virtual and digital economic activities.

Lebanon can capitalize on economic digitization by utilizing the high-skill nature of the Lebanese workforce. However, several difficulties prevent businesses and entrepreneurs from acting in that direction. Lebanon's ICT Adoption ranked 95/141 in the Global Competitiveness Report (2019), with poor electricity supply (10.4% of output) evident from frequent power cuts. With a minimal fiber optic network, Lebanon suffers from slow internet (7.67 Mbps vs. 58 Mbps global median), according to DataReportal (2022). These issues are further compounded by stakeholders' lack of awareness of the digital economy's economic potential, governmental support, and financial exclusion, especially regarding accessibility to international payment gateways. These issues existed before the crisis but were further deepened as the crisis halted infrastructure development and limited maintenance.

While it is essential to focus on the physical economy, it remains pivotal that policymakers address the economic crisis with a modern perspective. Lebanon lacks the large land area and natural resources required to establish a large agricultural or industrial base. We must diversify our economic base and tap into the digital economic sphere where these restrictions are irrelevant. Additionally, it is imperative to take note of the complex interactions between these economic spheres and the interplay between physical, human, and social forms of capital. The digital economy possesses unique characteristics that can benefit the Lebanese economy, such as zero marginal costs, scalability, and the ease of deliverability of digital products and services. This shift will require political stability to make swift decisions and dissipate investors' concerns.

Lebanon possesses a legacy in media, entertainment, and tourism with a multicultural and multilingual population. These unique selling points can be advantageous in the business of content creation. It is pivotal to establish unique tailored programs and incubators to train and sponsor individuals interested in content creation and the creator economy similar to the influencers' academies and incubators in China. Investing in dedicated coworking studios where individuals can create high-quality content without being burdened with high initial capital costs is also critical. Similar coworking spaces can be set up for designers and entrepreneurs eager to produce and sell digital or virtual products and services but cannot afford the expensive software or hardware. Modern coworking spaces and incubators are pivotal as they promote innovations as like-minded strangers interact and target all three forms of capital when well structured.

Aside from operational infrastructure, investing in infrastructure to resolve electricity and internet issues is vital. This can be done by relying on the private sector to fund projects and decentralize the network. Additionally, allowing satellite-based internet service providers to operate in the country legally will improve the quality and accessibility of the internet overnight without the need to invest in new infrastructure. Addressing the internet and electricity issues will resolve critical obstacles for businesses and entrepreneurs and allow Lebanon to capitalize on the emergence of digital emigration. With proper relocation and tax incentives, Lebanon can attract nomad workers by leveraging its reputation as a touristic destination. Moreover, the government should collaborate with international financial institutions to address the issues preventing Lebanese citizens and residents from using their services, especially the accessibility to online payment solutions. Moreover, reforming and activating the Beirut Stock Exchange is essential for businesses to raise capital through equity sales and attract new investors seeking to capitalize on innovative startups.

It is recommended that the government establish a joint venture with private investors to develop and maintain a digital industry, accelerate investment efforts, promote events and training programs, and build a city that will foster digital and technological economic activity. Upon its foundation, the company would be granted land, regulatory exemptions, and other in-kind contributions from the government while it remains organizationally and managerially independent. In-kind and financial contributions would be traded for shares, and the company should also be listed on the Beirut Stock Exchange, allowing anyone to be a shareholder. These solutions, combined with tailored regulations to enhance the ease of doing business in Lebanon, can cultivate a friendly environment fostering innovation and investments promoting economic growth, alleviating poverty, reducing unemployment, and increasing governmental revenues without increasing the tax burden on citizens. The Lebanese economy can exploit many potential avenues for growth, especially when adopting a pragmatic modern perspective, leaving popularism behind when advocating for solutions.

References

EconomicsDigital EconomyLebanon