Lebanon has hailed the formation of a new national unity government, ending months of political deadlock that had destabilised the economy and provoked civil unrest. One of the biggest losers in the turmoil has been the country's tourism industry.

On July 11, Prime Minister Fouad Siniora announced the list of 30 ministers that make up his new government, with a number of established cabinet members being replaced to accommodate opposition nominees.

One of those replaced was long-standing Tourism Minister Joseph Sarkis, who had held the post since 2005. His replacement, Elie Marouni, a member of the Christian Phalangist Kataeb Party, inherits a portfolio in turmoil.

The minister will have to deal with a number of issues, including the perception of strife in his country.

Many countries, including those in the vital Arab market and in Europe, are still warning citizens against traveling to Lebanon unless strictly necessary. The British Foreign Office's travel advisory note for Lebanon, updated the day before the new cabinet was announced, warned of a high threat of terrorism in the country, saying that attacks could be indiscriminate, including in places frequented by expatriates and foreign travellers such as hotels and restaurants.

Although peace appears to have broken out in Lebanon, it will be some time before foreign governments downgrade their travel alerts, wanting to assess the situation before recommending Lebanon as a holiday destination. The fact that Islamist group Hizbullah and its allies are back in the cabinet may not encourage some Western governments to reduce the threat levels on their advisories.

Marouni himself struck a positive note after being named the new tourism minister, laying down concerns that the various factions in the coalition would be at odds. The minister said he and his party would work for Lebanon and its people.

"We are willing to open a new page to work and cooperate with each other, let them judge us through our works and help us to reach the achievements," he said on July 11.

Whether or not foreign travel warnings have been heeded, the numbers of foreign arrivals are down on last year's figures, with the May total being particularly alarming for the tourism industry.

According to figures released by the ministry of tourism on July 8, 336,721 people visited Lebanon in the first five months of 2008, 1.8% down on the total for the same period last year. For May, the number of overseas arrivals was just 59,667, 17.9% lower than the same period in 2007 and 45.5% down on the figure for the same month of 2006, just before Israel launched its cross border operation. The fall in the number of Arab visitors has also caused alarm. This number plunged by 14.1% in the first four months of the year.

As recently as late June, Sarkis was predicting at least 1.6m foreign visitors would come to Lebanon this year, compared to the approximately 1m for the previous two years. The tourism sector could contribute more than $2bn to the economy, around 10% of gross domestic product, he said.

Despite his optimism, Sarkis said that it would take years of calm and stability for the tourism sector to fully recover.

"We don't have industry that can compete and we don't have agriculture. We have services," he told international press on June 26.

Another problem Marouni will have to deal with is falling levels of investment in the tourism sector. According to his predecessor, up to $800m worth of new projects were put on hold last year and the first five months of 2008 due to political instability.

A forecast issued by ratings agency Capital Intelligence, released just before the new cabinet was named, said Lebanon's economy would expand by 4% this year. It also said that a return to political stability should help revitalise investment and the tourism industry, as well as improve the country's trade.

Nevertheless, the report warned that the Hizbullah-led factions' right of veto in the cabinet could pose a major obstacle to economic reforms and undermine government unity.

Any disunity, return to violence or further stagnating of reforms will be highly damaging to the Lebanese economy, with the tourist sector vulnerable to negative perceptions, let alone adverse realities. With arrival numbers thin and investment down, it could be a cool summer for Lebanon's tourism industry.

Source: Oxford Business Group