Monthly Editorial  
Economic Letter
Free subscription

December 2016

Contract, but the new economic era! ...

(*) original text edited in Arabic

 

The Head of IMF mission to Lebanon Mrs  Annalisa Fedelino wrote an article on Lebanon in Executive magazine in December  2016 issue entitled “It is All Possible”, in which she envisioned Lebanon in the next 10 years, or 2026.

The author envisioned the number of tourists visiting Lebanon to top three million whom  are lured by the country’s historical sites, great food and social scene, as well as by their curiosity to experience the multicultural milieu that makes Lebanon such a unique place, not only for the Middle East, but the entire world.

The IMF official also anticipated a radical solution to the chronic traffic and communications crisis in Lebanon as traffic jam in the streets which was a common site in previous years have now become nonexistent and which relieved the motorists from the agony of time consuming drive and the emissions of pollution.

The piles of trash in the streets have been collected and effective solutions to the garbage crisis was found, which helped make Beirut one of the livable cities on the Mediterranean.  She also envisioned Lebanon is able to achieve an average GDP growth of five percent (5%) within five years 2022-2026 thanks to the political and economic accomplishments:

1-    The parliamentary elections are now taking place according to their constitutional deadlines and under new and modern electoral laws.

2-   More jobs being created every year, especially for new university graduates who now increasingly prefer to remain in Lebanon rather than emigrate abroad. Opportunities abound in the ever growing service sector (tourism and health care are just two examples), the technology sector and agribusiness.

The article said that Lebanon has climbed up the rankings of countries defined by their openness, ease of doing business and innovation thanks to the range of groundbreaking legislation approved by the government that has modernized public administration and created a proper pension system and post-retirement health service for all its citizens, and to infrastructure projects including a rehabilitated railway system, new bridges and overpasses, a new road network to better connect Lebanon to the rest of the Arab region (and beyond), as well as waste treatment facilities and electricity power plants. All of that has successfully matched the private sector’s ingenuity and managerial skills with the public sector’s vision for improved service delivery.

Internet speed and costs are among the most competitive regionally, and electricity is efficiently produced and now partly exported to neighboring countries.

After an unsteady start, the offshore gas and oil sector is now properly regulated and transparently managed.  And after years of investment, proceeds from Lebanon’s natural resources have now started to flow into the government’s coffers. They will partly be used to fund additional capital projects, and partly to reduce the government’s public debt – creating a virtual circle of lower budget deficits, lower debt and interest rates, which means a better environment where the private sector can flourish, boosting growth and job creation.   The low cost of gas & oil allowed increasing a tax structure on petroleum with the ratio of Public Debt/GDP declining again after having attained 150% especially with the Syrian refugees flux. In parallel, the financial and fiscal policies taken unanimously by the government has helped to strengthen the climate of confidence from investors, notably after passing the Public Private Partnership law PPP between private and public sectors. This confidence has led the international community to provide large and reliable multi-year funding to cover the long-term costs of hosting the refugees.

In our opinion, the realization of this vision in which the IMF official foresees the entrances and exits of the desired and potential developments for the political economy in Lebanon in the next ten years must begin now and not tomorrow.

In other words this process should start at the beginning of 2017 and in the era of the new presidency which the Lebanese pinned high hopes on for a better future for their country and their families.

The President of the country is entrusted constitutionally, politically and nationally, to push for the elaboration of an economic, financial and social vision for Lebanon for the next 10 years and to guarantee that this vision is turned into working plan drawn and executed by the successive governments within the coming years.

The head of IMF mission assumes that the plans, policies and procedures that will be decided and implemented over the first five years (2017 - 2021) represent the bedrock and frameworks which are conducive to the return of the country's economy to growth during the last five years (2022 - 2026).

This means that the accomplishments of the current era, with the exception of one year, will be reaped by the successive presidents and governments. The Lebanese will definitely benefit from these accomplishments individuals and companies as well as workers and cadres.

Of course, the crystallization of these plans and programs will be the responsibilities of the state constitutional institutions as well as the executive authorities and legislative alone. But following the directions of the International Monetary Fund and the World Bank would increase the chances of accepting and endorsing these programs by the donor parties, on the level of countries or development funds or the European Investment Bank or others.

The economic and social rehabilitation of infrastructure workshop in the country is inherently slow, difficult and complex and no one should take it lightly.

Our experience with the plans and programs of reconstruction for the years 1978 - 2016, or nearly four decades, is not encouraging enough. These failures are not due to the lack of funding for these projects and programs. Actually, funds were available in the past era and $5.2 billion worth of contracts are still under execution, as shown by the latest report published by CDR. These projects include infrastructure and basic services (health, education ... waste). Also, it indicates that external funding sources amounted to more than 40% of the total contracts with a total value exceeding $13.2 billion.

Apart from funding, the delay in implementing these projects is due to the capacity of the Lebanese economy in infrastructure and human resources to absorb the required quantity of programs within a limited time frame.

Delays are also due to the limited capacity of the state to administer the reconstruction and rehabilitation and modernization projects.

The decay, lack of reform and accountability has hit the work systems and procedures in all departments and public institutions mechanisms, despite the presence of tens of thousands of employees, contractors and part time staff who were hired at random thanks to rampant nepotism and favoritism over the past quarter of the century.

The failure to complete the infrastructure projects are also due to the rampant corruption based on quotas that are also based on the narrow interests and abhorrent sectarianism and costly, regionally and nationally.

With the bill creating the National Commission against corruption under discussion by a parliamentary Committee, and with the establishment of the Ministry of State for corruption, with public financial auditing for the period 1996 – 2010 and possibly beyond and after that period, which the Finance Ministry is about to accomplish, it is hoped that the first nail is placed in the coffin of chronic corruption.

The ruling political class today has an opportunity not to embellish its modern history (ie after Taef Agreement) but to put the country and the people on the new track that could save some of the system which it established for nearly three decades.

But certainly such a course makes Lebanon qualified to deal with a minimum of competence with a world of governed by the trilogy of ICT, economic globalization and climate change.

The election of Donald Trump may be a positive element for us as this president will try to slowdown during the next four years the globalization track and this may give us a chance to catch or join the globalization train.

We should not regret this outcome. Who knows? It may work for our advantage.



***********



Last Updated on February 27, 2017
 
 
Copyright © 2012 abl.org.lb. All Rights Reserved
Saifi, Gouraud Street - PO Box 976 Beirut, Lebanon
ASSOCIATION OF BANKS IN LEBANON
Beirut, Saifi, Gouraud street, ABL Bldg
Postal Code: Beirut 2028 1212 Lebanon
P.O.Box: 976 Beirut, Lebanon
Tel/Fax: (961) (1) 970500/1