Shaking off 15 years of a bloody civil war that ended in 1990, Lebanon had worked hard over the subsequent years to reclaim its reputation as the "Switzerland of the Middle East." Its efforts were starting to bear fruit, with a blossoming financial sector and an increasingly steady flow of foreign capital coming into the country, even after the 2005 assassination of Prime Minister Rafik Hariri. But then came more setbacks, including the 34-day war that erupted in the summer of 2006, when Israel invaded Lebanon to fight Shia Muslim-armed group Hezbollah.

Yet Lebanon’s resiliency isn’t to be underestimated, and having made its way through the global financial crisis relatively unscathed, its economy is getting back on track. According to the Arab Investment and Export Guarantee Corporation, FDI has been increasing at a steady clip, from US$2.68 billion in 2006 to 2009’s US$4.8 billion — the equivalent of 14% of its GDP and the highest FDI among Arab countries. As for the overall economy, real GDP grew in 2009, and is projected to grow 8% in 2010 and 7% in 2011, says the World Bank.

It’s against this backdrop that Saad Hariri, Rafik Hariri’s son and parliamentary majority leader, was elected to be Lebanon’s new prime minister in the summer of 2009, as high hopes for a new era for greater political stability ensued. On taking office, the then-39-year-old Sunni Muslim vowed to continue his father’s efforts for social, political and economic reform.

Yet leading the reform of a country wracked by years of civil war and conflict with its neighbors is a long journey. It needs to be set within the overall context of a hugely volatile region, whose peace depends on the help of the entire international community, Hariri noted during a discussion with students from Wharton in Beirut in late August. Speaking only days before U.S. President Barack Obama reopened Middle East peace talks by hosting a meeting between Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas on September 2, Hariri said he hopes Obama can use his "Yes we can" campaign motto to help resolve the decades-old conflict between Israel and Palestine. He is looking forward to turning the page. "Imagine how much the region would prosper if there were peace."

"I am afraid the region will not find stability unless there is peace," he added. "Leaders like Yitzhak Rabin understood this." That understanding is just as critical today, he noted, as tensions mount over Iran’s nuclear arms pursuit.

He said the peace process needs to stay at the top of everyone’s agendas in order to find a long-term resolution. He pointed out that meaningful peace talks with Israel haven’t taken place among regional leaders since the Arab League Summit in 2002. Describing Lebanon’s relationship with the U.S. as "outstanding," he also looked at the pivotal role of Obama’s predecessors in resolving the region’s conflicts: The peace treaties between Israel and Jordan, Egypt and other countries in the region were the result of the U.S.’s influence, and it was the U.S. that put pressure on Israel to participate in the Madrid Conference in 1991. That conference was an early attempt by the international community to start a peace process that also involved Palestine, Syria, Lebanon and Jordan.

Neighborly Relations?

Since the popular protests of the country’s Cedar Revolution led to the withdrawal of Syrian troops from Lebanon in 2005, Hariri noted how the two neighbors have been making amends. "We do not interfere in each other’s affairs," asserted the prime minister, who has been conducting talks with Damascus frequently during his first year in office, raising concerns in some circles that in his attempts to smooth frayed relations, he could be returning to old times and allowing Syria to have too much of a hand in how he runs his own country.

As a small country of just 4.2 million people, Lebanon faces security threats that are internal as much as external, the prime minister acknowledged, recalling the 2007 clash between a militant group and the army in Nahr-al Bared, a Palestinian camp in northern Lebanon. When the fighting stopped, hundreds of Lebanese soldiers, militants and civilians were dead.

Today, according to the United Nations, there are an estimated 400,000 Palestinian refugees in Lebanon. Helping them become a more important, and more fairly treated, part of the social and economic fabric of the country has been a major concern for human-rights observers. In August, the Lebanese Parliament passed a law giving these refugees the same labor rights as other foreigners in the country, including allowing Palestinians to apply for jobs in a wider array of professions, such as engineering and medicine, from which they had previously been barred. "After 62 years, we were able to give Palestinians the right to work but it came with great backlash from the public," Hariri said. "And there is only so much appetite for reform."

The Hariri Legacy

Intertwined with the politics of peace is the region’s business development, observed Hariri, a graduate of Georgetown University’s business school and one of the world’s richest men. "We could do so much if we concentrated on the business community and created jobs. If we make this our focus, a stronger economy and politics will follow," he noted.

Hariri said there are several reasons why he is bullish about Lebanon’s new growth potential. One is the country’s strong education system. His father was committed to providing education for all Lebanese, he said. That explains the country’s literacy rate of nearly 90%. Its highly educated workforce — with the ability of many Lebanese to switch effortlessly between French, English and Arabic — is an important competitive advantage in this day and age of globalization. "The real [economic and social] work starts in schools," he said.

Another reason for Hariri’s optimism involves the new efforts under way both at home and at embassies around the world to reach out to Lebanon’s entrepreneurial Diaspora. He would like to see more of them returning home to help share the business and leadership knowledge they have acquired overseas. "There has to be incentives for Lebanese to return. We hope to pass policies [to that end]," including tax breaks, Hariri said. "The Lebanese Diaspora can play a role in helping to build our country’s economy."

Meanwhile, Hariri said Lebanon has been working throughout the past year to forge bilateral free trade agreements with various neighbors, and in August, Lebanon, Syria, Turkey and Jordan announced a project to jointly set up a free trade zone. Domestically, the country has been investing heavily in rebuilding and upgrading infrastructure, but Hariri said there’s more work to do. "There are opportunities in industries, such as renewable energy, natural gas, tourism, agriculture and trade." He plans to strengthen the country’s legal framework and open more sectors up to private-sector investment.

Beyond politics and business, Hariri clearly wants to follow in his father’s footsteps as a leader who united the country’s many ethnic and religious groups — Sunnis, Shiites and Christians. Despite disagreements with politicians in Hezbollah, which is considered a terrorist group by the U.S. and Israel, Hariri insisted they are important players in the current government. "We have a diverse population and have to maintain that, and keep religion away from politics," Hariri said.

The prime minister lamented that religion is often used to promote political agendas, while the reality is that most Lebanese coexist peacefully. "You have mosques next to churches, and we are rebuilding Beirut’s historic synagogue," he said. "Despite our challenges, we are lucky to be where we are."