Let them eat cake…No government and no money – By Tracy Chamoun.

Standard

In Lebanon, we are at a major survival crossroads and I am afraid that the shell-shocked population combined with the obstinacy and deafness of the rulers is going to lead very shortly to a catastrophic outcome in the form of two major crises.

The first crisis we will confront is that there will be no more Government delivered electricity because they cannot afford the fuel, and the second crisis will be that, the Government will run out of money to pay the subsidies for goods and fuel which are keeping the Lebanese people afloat (in light of the fact that over 50% of the population has now fallen below the poverty line).

With regard to the electricity crisis, a law was submitted recently by the MPs of The Free Patriotic Movement headed by Gebran Bassil, in which they asked for a 1,500 Billion Pounds as an advance to be paid to the Electricité du Liban (EDL).

Notwithstanding that this is an outrageous request after decades of wastage, mismanagement, and corruption which caused the Electricity Company to drain 47 Billion Dollars from The Central Bank, if the government agrees to give EDL the amount it is asking for – the advance of one Billion dollars – this will be followed by the immediate cessation of all types of subsidies on other goods such as medicine, flour, fuel, and diesel and the cost will ultimately be worse for the Lebanese.

So far, The Governor of The Central Bank, Riad Salameh, and The Head of the Caretaker Government, Hassan Diab, have stated their refusal to pay this sum from the Mandatory Reserve at The Central Bank. Beginning in the last quarter of 2020, The Governor sent clear signals to the political authorities that the funds at The Central Bank being used to cover subsidies are becoming depleted. Since then, about 4 billion additional dollars have been spent, and the reserve ceiling requirement of foreign currency has fallen from 17.5 billion dollars to just over 15 billion dollars.

This means, that at best, there are only two months of funding remaining for subsidized goods before dipping into the Mandatory Reserves which are made up of the hard currency deposits of local lenders at The Central Bank. The caretaker Finance Minister, Ghazi Wazni, has also issued a statement saying that by the end of May, Lebanon will soon run out of money to fund basic imports and that subsidies are costing $500 million a month.

In the meantime, remarks about a looming end to subsidies have triggered panic buying and fears of shortages and in a few months, things will get worse and poverty, misery and unemployment will rise even more. This will be followed by complete chaos and darkness.

Although The President, in his latest speech is claiming that a forensic audit is his priority, it is obvious that he is missing the mark again about what needs to get done first to help Lebanon navigate these very hard times.

What Lebanon needs immediately is a long term strategy to overcome the shortfalls in the Treasury that are going to lead to a complete blackout (which includes no refrigeration for foods, no internet for work, no lights etc.) and hyperinflation, leading to greater poverty and famine when the Government can no longer pay for the subsidies on basic goods.

Lebanon needs other rich nations to step in with aid and loans. We cannot do this on our own anymore. For this to happen, certain politically ambitious people must move out of the way to enable the formation of a respectable government. This will give Lebanon back its international credibility, and allow the country to re-enter into negotiations with the IMF and The World Bank, and to secure lasting solutions.

However, the opposite is happening. The president’s team (meaning his son-in-law), and their supporters are unwilling to help form a Government. Their intention is to ride out the present situation even if it means spending every last dime of the country’s reserves and the remainder of the people’s savings.

They have no problem to keep asking to cover any shortfall with the money left in the Mandatory Reserves. They are calculating that this will buy them one more year of time as they wait for the situation to change in their favor. This is also why they want to get rid of the Governor of The Central Bank who is acting as a roadblock to their intentions.

The bottom line is that, this obstinate and power hoarding leadership will not provide a solution for the salvation of this nation while they still have this remaining 15 Billion Dollars to spend. They will not agree to a new Government and they will very comfortably burn through the remaining reserves to stay in power and all the while they will let the Lebanese people be damned.

What I am saying is: be warned because this is the game at play. Solutions are available but the willingness to implement them is not.

April 8, 2021

Wanted in Lebanon: An interim performance orientated transitional government for 6 months.

Standard

In the wake of Hezbollah’s visit to Russia and following the meeting between President Aoun and Prime Minister Designate Hariri yesterday to discuss the matter of the formation of the government, Sayed Hassan Nasrallah delivered a televised speech where he declared that the solution to the above issue will lie only in a Political Government and in opening up trade channels with China and Iran.

With due respect, I would like to reply to him.

With regard to his suggestion that the salvation of this country lies only with a Political Government:

1-It was political governments over decades which never worked and were the source of corrupt practices that put Lebanon in the mess it is today. In addition to which, let us not forget that it was the political class that was in power at the start of the October 17 Revolution and that they were rejected by hundreds of thousands of Lebanese who took to the streets to get rid of them.

2- We are a parliamentary system and no government proposal or project can be approved until it is passed by a law in Parliament which Hezbollah and their allies presently control. So where is the need to politicize the government?
When he says that a Government of specialists will not have any authority on the ground to control the situation if something goes wrong, then this in itself is an act of bad faith. Any Government that comes to power today consisting of experts in the field should have the complete support of all the parties in the country in order to save the country.

4- When he talks about reviving the present caretaker Government he is forgetting that this government when it was in power was called a “one color Government” and that it was unable to deliver on the aid and international support that Lebanon needed at that time. Therefore how will that be any different now? Since then, there has been the terrible explosion at the port and this caretaker Government was forced to resign by the will of the people. To bring them back would be to completely disregard the sacrifice of the martyrs of the explosion caused by the reckless presence of the Amonium Nitrate placed amidst the civilian population.

My recommendation is that a Government of non-partisan specialists be approved in the form of an interim transitional government for 6 months, pending an extension of their mandate based on a performance rating approval which Parliament can give by removing its confidence if the need may be.

As for the fluctuations of the currency there is nothing that will bring this under control except rebuilding confidence in the future of this nation. In addition to which, there is a Capital Control Law that has been waiting to be passed in Parliament for months. This must be enacted to start the process of firstly curtailing the illegal actions of the banks, and secondly normalizing the currency’s volatility, and thirdly restructuring the whole banking sector.

I do agree with the Sayed that new constitutional reforms must be put in place to establish deadlines for important events and they should encompass deadlines for the call for consultations to choose a Prime Minister, the time allocated to a Prime Minister-Designate to form a government and I would also add the time allocated for a presidential candidate to register and submit their candidacy.

With regard to future trading partners this should be part of a neutral tender process, and not driven by political preferences. In addition to which, I would like to point out that Iran is under sanctions and cannot trade with any country, and therefore it would be unwise to buy fuel from Iran at this time and this would only compound Lebanon’s problems. When Iran will have sorted out the matter of its sanctions with the USA then anything is possible if the prices are competitive.

As a final note I would like to add that the responsibility of any further delay in forming a Government that is acceptable and credible to the Lebanese people and to the rest of the world lies in the hands of both the President and the Prime Minister Designate. They can spend their time passing the blame as much as they like but the failure will be their’s. At this point concessions have to be made by both men to save the country.

WHEN A NATION MUST ASK FOR THE PRESIDENT TO BE IMPEACHED AND THE PRIME MINISTER-DESIGNATE TO BE RECUSED.

Standard

Lebanon has now entered into the phase of chaos. Today’s protests are less political and more about the social hardships confronting the poor and the newly impoverished, and they are cries of anger against the present living conditions. More and more incidents are being seen in supermarkets as people fight for what is left on the shelves. Scarcity is instilling fear everywhere. Scarcity of the Dollar, of food, gas, electricity, work, and the worst still, scarcity of hope is gripping the hearts of the Lebanese people and enraging them.

This dismay of the population is fueled by the fact that they are living under the governance of leaders who continually choose to ignore their demands, when they are also aware that there is a way out of this conundrum and that the only thing holding up a solution in Lebanon today, is the presence of this political class which is deliberately refusing to take action while playing the blame game with each other, in order to defer the responsibility of their incompetence.

What is more mind boggling, is that there are steps that can be taken immediately to redress the situation. The first of which is to form a Government of exceptional non-partisan specialists to carry out reforms in parallel with the start of the arrival of foreign aid. The second of which, is for Lebanon to restore all of its Arab relations without exception and to re-define its foreign policy and take into account the Syrian crisis and the problem of the Syrian refugees, and finally, Lebanon needs a new defense strategy which excludes the existence of two parallel armies operating on its soil.

After the riots, The President accused the black market exchangers for the collapse of the Lebanese Lira instead of firstly, forcing the immediate implementation of a Capital Control Law, (which has been talked about for over a year) and secondly, contributing to the effective formation of an independent Government.

It is the lack of a respectable Government which is causing the complete absence of confidence in the future of the country and is leading to the withholding of the inflow of Dollars that are so badly needed, to keep the exchange rate at a reasonable level.

Truthfully, the crisis is purely political and the bulk of the blame lies with the Presidency and its strange unholy dance with the self-appointed Prime Minister-Designate. Both being quite content to continue jousting in this ambiguous situation which conveniently allows them to keep holding onto their roles, even if these are empty of substance, while on the other side, the people suffer and starve.

They all oversaw the catastrophic financial engineering of The Central Bank without sounding an alarm about the impending collapse of the banking sector, they failed for years to implement the reforms called for by “The Cèdres” conference held in France, thus forfeiting 11 Billion Dollars of donor money for Lebanon, and finally, they were in charge of the Government for 4 years while the Amonium Nitrate was left in The Port of Beirut to decay and become extremely hazardous, leading to the explosion that destroyed over 300,00 homes and killed hundreds of people.

The Lebanese Pound has reached new lows and will continue to fall, The Governor of The Central Bank has issued dire warnings about the situation and will not be able to cover the subsidies for much longer and the matter of the fuel supply is threatening a complete black out of the whole nation.

What is happening now is a CRIME against the Lebanese people and is looking more and more like a deliberate and willful attempt to murder a nation as a result of personal malice, and the unlawful lack of exercise of public duty, resulting in the endangerment of people’s lives.

It is time for the PM Designate to recuse himself in order to make room for someone else after 7 wasted months of attempting to form a Government, a period which has only seen a catastrophic deterioration in the lives of the Lebanese.

Equally under similar conditions in any decent country in the world The President would be impeached on the grounds of gross misconduct and the continued failure to do his duty or he would resign.

A YEAR OF LAMENTATION IN REVIEW – LEBANON 2020 – by Tracy Chamoun.

Standard

2020 started off in Lebanon on a false note with the arrival of the fugitive, former Nissan chairman, Carlos Ghosn, after fleeing from Japan, where he was smuggled out of house arrest by a private security company. Innocent or not, upon his arrival in Lebanon, he met Lebanon’s President, defying all diplomatic taboos. This meeting took place despite Lebanon having received an Interpol warrant for his arrest, adding to the dubious activities that were becoming the trademark of Lebanon.

On a larger scale, this was followed by the assassination of Qassem Suleimani in a targeted U.S. drone strike on January 3, 2020 in Baghdad. The operation which was approved by the U.S. President, Donald Trump, sent the whole region into turmoil, as everyone waited with bated breath for Iran’s retaliation.

This action was very destabilizing for Lebanon as it impacted Hezbollah directly, who, along with Iran, have since vowed to carry out their revenge, warning everyone who was involved in the assassination that they have become targets, and setting the stage for future conflagrations.

In the meantime, the protests in Lebanon turned violent, with dozens injured after the Lebanese Security Forces used batons and tear gas and even live bullets to forcefully break up demonstrations.

Having named Hassan Diab as the next Prime Minister-Designate in 2019, it was not until January 21, 2020, that Lebanon’s new government was formed after weeks of wrangling over portfolios among Hezbollah and their allies.

On February 11th, Hassan Diab and Speaker Nabih Berri met with President Michel Aoun, and announced the new twenty-member cabinet made up of so-called technocrats. They promised to work on a new election law, to seek an independent judiciary and to return the looted public funds – none of which has happened.

The new government confronted an immediate emergency as the banks imposed random controls, making it harder and harder for people to gain access to their deposits. The Lebanese Pound began its downward spiral, and firms started shedding jobs and slashing wages.  Lebanon’s employed workforce, which had been estimated by The International Labor Organization at 1.59 million in a 2019 report, had lost more than 220,000 jobs in the private sector since mid-October when the protests erupted against the political elite.

Diab’s cabinet was supposed to be made of up of independents with no partisan or political affiliations, but this was never the case and the ministers were selected as proxies for the traditional leaders. This meant that nothing had changed in the distribution of power and this government became known as: “A ONE-COLOR GOVERNMENT”, which meant that it would have trouble winning foreign support at a time when the Gulf Arab states along with Washington had labeled Hezbollah a terrorist group and were no longer willing to provide any bail-out for Lebanon.

Back in January of 2020, Lebanon’s parliament passed the 2020 budget although its finance committee chief said that the forecast revenues might be unrealistic with the country wrestling with a major economic and financial crisis. This was a huge understatement. The budget they passed envisaged a deficit of around 7% of GDP.

Since then The World Bank has stated that real GDP is projected to decline by 19.2% in 2020, and to contract by a further 13.2% in 2021 assuming the the COVID-19 effects, the absence of macro policy responses and the limited reconstruction and recovery efforts in the aftermath of the Port of Beirut explosion, which is all being accompanied by runaway inflation.

Public debt rocketed from 131% of GDP in 2012 to an estimated 176% of GDP at the end of 2019. By August 2020, the gross public debt had widened to $94.3 billion and according to data from Lebanon’s banking association, the Eurobonds accounted for one third of that debt burden, held mostly by the Lebanese banks, who were also the government’s biggest creditors.

The government appointed Lazard and law firm Cleary Gottlieb Steen & Hamilton LLP as its financial and legal advisers on sovereign debt restructuring, to seek a way to address the payment of the debt’s maturity on time, which included a $1.2 billion Eurobond payment that was due on March 9th, and which ended up not being paid.

Hezbollah’s was opposed to such a plan and to any involvement with The International Monetary Fund (IMF). They believed that the terms required by any IMF bailout package for Lebanon would spark “a popular revolution” and they called instead for a “national solution” to the economic crisis.

On March 7th the Government ended-up defaulting on this debt, citing dangerously low reserves (The government had been spending around 50% of its revenues in 2019 just to meet interest payments).

However, since defaulting on the debt, the crisis confronting Lebanon has become a toxic combination of financial and political weaknesses with no obvious economic platform on which to build a recovery. It is facing problems on all fronts including: the balance of payments crisis, the debt crisis, the bank crisis, and the political crisis.

Diab’s government did however approve a rescue plan prepared in conjunction with The World Bank. The plan aimed to pull the country out of its worst financial crisis in decades. It included interest rate cuts, the recapitalization of banks and other taxation reform, but unfortunately none of those measures materialized and have not been implemented to date.

The Government “Recovery Plan” which Diab proposed had outlined tens of billions of dollars of losses in the financial system which had helped to bankroll decades of large state budget deficits. They estimated these projected losses in the financial system using an exchange rate of 3,500 pounds to the dollar at 241 trillion Lebanese Pounds, or $69.9 billion (at the weaker rate).

The government also pledged that it would seek a contribution from those who had benefited from extremely high interest rates and from financial engineering, referring to central bank operations used to attract dollars from abroad.

This plan was immediately rejected by the Banking Syndicate. The banks objected to a central aspect of the Government’s plan which rested on covering financial sector losses of roughly $70 billion through a bank shareholder bail-in that would wipe out their capital and the cash from large depositors. The banks claimed that the government’s proposals for restructuring the banking sector would further destroy confidence in Lebanon.

Added to the economic crisis, the advent of the Covid-19 Pandemic dealt a huge blow to any chance of recovery and Lebanon confirmed its first coronavirus on February 21. Today Lebanon’s official numbers are 186K cases, 131K recoveries and 1,489 deaths although this number is expected to increase radically after the end of year celebrations.

As Lebanon sank more and more into one crisis after another, the fear of crime grew exponentially. In the first four months of 2020, murders in Lebanon doubled from the same period last year. Car thefts jumped nearly 50% and burglaries 20%, according to a report by the research firm Information International, which is based on police data.

The prices of imported foods upon which Lebanese depended were also driven up by a 70% decline in the Lebanese Pound’s value and The World Food Program reported that 50% of Lebanese, as well as 63% of Palestinians and 75% of Syrians in the country feared they would not have enough to eat.

As the currency plunged, social unrest became a source of great concernin a country with a tumultuous history, where sectarian tensions were never far from the surface.

By August, the situation had deteriorated dramatically, and The Foreign Minister, Nassif Hitti, resigned in protest on August 3rd. He blamed this decision on the lack of political will to enact reforms that could halt the financial meltdown. In his resignation statement, Hitti said that he had multiple bosses and faced contradictory interests and was frustrated at being sidelined by the Prime Minister.

On the same day as his resignation, President Michel Aoun and Prime Minister Hassan Diab appointed Charbel Wehbe, Aoun’s diplomatic adviser since 2017 and a career diplomat, as Foreign Minister.

On August 4th, The International Tribunal issued its watered-down verdict on the assassination of Former Prime Minister Rafic Hariri – a tribunal which had been in the works for 15 years and cost the Lebanese government 100’s of millions of dollars – and to everyone’s dismay, they only indicted one suspect from Hezbollah.

Then that same day, the unimaginable happened, as a massive blast ripped through Beirut, killing 200 people, injuring 6000, and destroying 300,000 homes, in the biggest non-nuclear explosion that the world has ever known.

The explosion was blamed on more than 2000 tones of Ammonium Nitrate which had been stored haphazardly in warehouse number 12 at The Port of Beirut, close to a fireworks depot that had ignited and triggered the explosion.

The chemicals that went up in flames in Beirut’s deadliest peace-time explosion had arrived in the Lebanese capital seven years ago in 2013, on a leaky Russian-leased cargo ship, The Rhosus. The ship was carrying 2,750 tons of a highly combustible chemical from Georgia to Mozambique when the order came to divert to Beirut to pick up extra cargo. There, the crew were asked to load some heavy road equipment and take it to Jordan’s Port of Aqaba before resuming their journey onto Africa, where the Ammonium Nitrate was to be delivered to an explosive manufacturer.

But the ship never left Beirut, having tried and failed to safely load the additional cargo, they damaged the vessel, forcing it to remain stranded outside The Port of Beirut for months, before becoming embroiled in a lengthy legal dispute over port fees.

It was months after that, for safety reasons, that the Ammonium Nitrate was unloaded and put in warehouse number 12 without any further action. It  was left to dangerously decompose there for 6 years – Even though, the matter had been referred to several committees and judges and nobody had done anything about moving the explosive materials to a safer location.

Following the deadly blast, the government launched an investigation into its causes, and they asked The Federal Bureau of Investigations (FBI) to provide investigative assistance. However, U.S. government sources have privately said that based on the evidence available, they believed that the explosion at the hangar where the Ammonium Nitrate was stored, was most likely due to an accident, inaction and negligence.

President Aoun, promised a full investigation, and 25 port officials were detained, without evidence, as part of the investigation. To-date nothing has been established, and the investigation process has become politicized and paralyzed. No senior Government official has been accused and no prior Government representatives questioned. None of the security agencies at The Port, including The Army which is responsible for the handling and storage of explosive materials, have been called to account for the mishandling of the dangerous chemicals and their illegal storage in a dense residential area, endangering the lives of millions.

The President himself admitted knowing about the presence of the Ammonium Nitrate and never followed up on the matter stating publicly that it was out of his jurisdiction. It would seem that all the leaders are attempting to wash their hands of this matter, and the whole investigative process is being buried under the usual sectarian rubble.

Nevertheless, in the aftermath of the blast which caused billions of Dollars in damage, the world rallied to support Lebanon, and many participated in an aid conference organized by France’s President Macron. The donors however, chose to work through local NGO’s for the distribution of their aid, fearing the history of rampant corruption prevalent in the Lebanese state’s administration.

Massive, and violent demonstrations took to the streets in the immediate aftermath of the explosion and on August 10th, angry and grieving protesters called for the removal of Lebanon’s President and other officials whom they blamed for the tragedy.

The following day, Lebanon’s Prime Minister announced his Government’s resignation, saying that the explosion that had devastated Beirut and triggered public outrage was the result of endemic corruption.

Diab accused the political elite for blocking reforms and stalling the talks with The International Monetary Fund due to a row between the Government, the banks and the politicians over the scale of the financial losses.

President Michel Aoun accepted the resignation and asked Diab’s Government to stay on as a Caretaker Government until a new Cabinet would be formed (which has still not happened).

President Aoun was then required to consult with parliamentary blocs on naming the next Prime Minister, though he seemed in no hurry to do so, despite the urgency of the situation,

In the meantime, President Macron had visited Lebanon immediately after the explosion – In the context of the celebration of The Centenary Anniversary of Greater Lebanon.

During his first visit, he was welcomed as a savior and was the only dignitary to visit The Port blast site, which the Lebanese politicians had neglected to do. However, it soon became apparent that Macron’s efforts had a contrary effect and that instead of bolstering the demands of the people and the cause of the revolution – even after such a terrible tragedy that reflected the magnitude of the corruption of the state – it appeared that his visit served the interests of the leaders and even Hezbollah. It was seen as giving them a reprieve that they no longer deserved.

As a matter of fact, after such a seminal and tragic event as The Port of Beirut explosion, which could have been a major catalyst for radical change, Macron’s visit dealt the decisive blow to the efforts of the revolutionaries by placing the legitimacy of the state back into the hands of the failed political class.

Macron promised the Lebanese leaders that if they cooperated together and formed a government within 15 days, that sanctions would not be imposed. Obviously, he had forgotten to consult with the Americans on this subject. They promptly placed two prominent political figures under sanctions, namely, the Minister of Finance, one of Nabih Berri’s acolytes, Ali Hassan Khalil, and another former Minister, Youssef Fenianos, who had ties to Frangieh and Hezbollah.

This action by the U.S. administration was visibly done to serve the interests of the Lebanese people but it undermined Macron’s efforts by showing up the limitations of his promises, especially when dealing with Hezbollah.

Macron’s second visit was viewed with great skepticism by the people who no longer saw him as a savior but as a co-conspirator with the ruling elite. This perception was only heightened when Mustafa Adeeb the Ambassador of Lebanon in Germany was plucked from obscurity to be named as the next Prime Minister-Designate, responsible for forming the Cabinet under France’s guidance.

The choice of Adeeb was unexpected. He was known as being former Prime Minister Najib Mikati’s man – An entrepreneur with a major holding in the Port of Tripoli. Therefore, when Macron returned to Lebanon in the aftermath of the tragic explosion, accompanied by French port officials and experts, his endorsement of Adeeb’s nomination was seen by many, as being instrumental to secure the contract for the future reconstruction and management of the Port of Beirut for the next 25 years.

In the meantime, the promises that Macron had extracted from the Lebanese leaders to form a Government according to specific criteria of non-partisanship and made up of experts, was sabotaged by the very people in whom he had placed his trust.

The politicians had agreed and promised Macron to have a government in place within 15 days, e.g. by mid-September, but the Shiite duo made up of Hezbollah and the Amal movement, had been spooked by the U.S. sanctions placed on the people closest to them, and they decided to entrench in their positions. They refused to concede the Ministry of Finance, falsely claiming constitutional rights to it and proceeded to block the formation of the government. This forced Adeeb to resign from his task and simultaneously dealt an embarrassing blow to Macron’s role.

Without a candidate for the Premiership and despite the severity of the situation, President Aoun continued to procrastinate over Parliamentary Consultations to nominate the next candidate.

In addition, Lebanon now faced grave difficulties in receiving the much-needed aid of more than $30 billion to rebuild its shattered economy, since the talks with the IMF had been put on hold, due to the presence of a Caretaker Government and to the lack of progress on reforms.

At this point, the expectations and notices of the international community to the Lebanese leaders were very clear – without urgent reforms that required broad political support, Lebanon could no longer count on any bailout.

With no substantial bail-out package coming in the near future, Lebanon’s reserves originally estimated at 17 Billion dollars – which had been used to cover the subsidy of fuel, medicines and wheat, were disappearing fast with no plan to replace them.

The rapid deterioration of the situation was causing sectarian violence to emerge again, with clashes between Lebanese Sunni Muslims and Shi’ites killing two people in the Khaldeh area south of Beirut, and three individuals in the northern village of Kaftoun.

On the Christian side, the old rivalry between Christian factions, supporters of Michel Aoun, (now Lebanon’s President) and Samir Geagea’s Lebanese Forces, came to a tense standoff where gunshots rang out, but no one was hurt, though the incident did renew fears of fresh unrest.

In addition, several repeated incursions in Lebanon’s airspace by the Israeli Air Force and the constant presence of their drones over land and sea, with periodic border strikes between the two parties, also fueled fears of a potential escalation of the Lebanese/Israeli conflict.

Israeli Prime Minister Benjamin Netanyahu even accused Lebanon’s Hezbollah of storing weapons near a gas company in the residential area of Jnah. This added to public concern of reliving another devastating explosion, especially as there continued to be unexplained explosions occurring at arms depots pertaining to Hezbollah in other areas.

The biggest such explosion rocked the village of Ain Qana in South Lebanon, a region that is a political stronghold of the group. Immediately after the blast, Hezbollah set up a security cordon of about 50 km around the site and journalists were prevented from approaching the area. There was no statement from the group except to say that the cause of the blast was not clear and though they admitted that there were several injuries they never released the figures. These targeted blasts were reminiscent of the explosions that also struck Iran this past year.

In the context of this increase in alarming situations in the South of Lebanon, the U.N. Security Council finally agreed to extend its mandate for its peacekeeping force for another year – however with a reduction of the number of troops due to the U.S. and Israel’s criticism over the mission’s efficiency.

The Lebanese Government decided to enter into bilateral negotiations with Israel under the auspices of The United Nations at their base in Naqoura near the boundary with Israel, known as The Blue Line. These negotiations were to be carried out with U.S. mediation and their objective was to finally delineate the maritime borders between Lebanon and Israel for the purpose of oil and gas exploration.

The talks were marred with false starts and recriminations, as both sides presented contrasting maps. Lebanon revised its original estimates extending the size of the disputed area farther south than the original border they had presented years before to The United Nations. The Lebanese President, Michel Aoun, said that the demarcation line should start from the land point of Ras Naqoura, as defined under a 1923 agreement, and extend seaward in a trajectory that expands the disputed area some 2,300 sq. km (890 sq. miles) as opposed to the original 860 sq. km claimed.

The Israeli team also presented its own map, that pushed the boundary farther north than Israel’s original claim and accused Lebanon of changing its position seven times and contradicting its own assertions.

In addition to the maritime border, the two countries disagreed over a border wall that Israel had started building in 2018, citing 13 points of contention which included the disputed area of Shebaa farms.  

These wavering tactics created much consternation and delayed any conclusive results, deferring any further talks until 2021, under the new US administration.

Ironically, these negotiations took place against the background of normalization by some of the Arab nations with Israel, as The United Arab Emirates and Bahrain agreed to establish full relations with Israel.

On the Government formation front, things appeared to be blocked due to political rivalries and factional jostling. In addition, The President kept postponing consultations for a new Prime Minister-Designate.

It became evident that Hezbollah and Amal wanted the return of Saad al-Hariri. Faced with growing criticism over their perceived failure to deliver on promised reforms since winning their parliamentary majority in 2018, Hezbollah was being seen as protecting a corrupt political class that drove Lebanon into the ground. They wanted Hariri to return, as they considered him capable of galvanizing foreign support in the light of their own limitations.

Many Lebanese, including some Christians who once supported Hezbollah, were turning against the group because of the intolerable presence of their illegal arms and their classification as a terrorist group. Many blamed them for the sanctions and economic isolation of Lebanon and for having priorities that were geo-strategic and not Lebanon based.

The possibility of the return of Hariri to the Premiership initially hit resistance from several parties, including Hezbollah’s main allies, President Michel Aoun and his son-in-law, Free Patriotic Movement leader, Gebran Bassil, who had been at loggerheads with Hariri since the previous year, and had stated his outright refusal to back him.

However, having fielded all the possible Sunni candidates and with his brother Bahaa breathing down his neck for the succession of his family’s political mantel, Saad Hariri decided to nominate himself during a television appearance as the next candidate for Prime Minister – This a year after he had been violently ousted by popular demand.

Saad Hariri succeeded in getting the nomination despite the fact that the two main Christian political blocs, The Free Patriotic Movement, and its rival The Lebanese Forces, refused to back his nomination.

Hariri returned as the Prime Minister-Designate with the arduous task of implementing The French Initiative which called for a non-partisan government of specialists.

The French Initiative that Saad Hariri endorsed consisted of a draft roadmap for Lebanon’s next government. The main points and timeline in the roadmap were that in the first instance, there had to be an agenda for resuming talks with The International Monetary Fund and then within one month of the new government being formed, an IMF-approved Capital Control Law needed to be implemented, with an accompanying full audit of the central bank. Reforms of the power sector needed to be launched, including appointing an electricity regulator, and presenting tenders for new power stations, while shelving existing plans for the Selaata power plant.

To tackle graft, the Government needed to appoint members of a National Anti-Corruption Authority, to reform customs and to pass a law to reform public procurement.

Then within three months of the government being formed the plan called for a schedule for raising electricity prices, and the implementation of improved border controls to stop smuggling. By the end of 2020, a 2021 budget needed to be passed, which of course did not materialize under the Caretaker Government. The plan also stipulated that within one year of the new Government being formed, that legislative elections be held, and that the electoral law should be reformed with the participation of civil society.

Despite all these requests and Hariri’s attempts to present a reduced list of 18 names acceptable to the President and to Gebran Bassil, the sectarian and partisan rifts that obstructed any change during his last term in office looked set to plague his efforts to form this government as well.

Gebran Bassil had always stated from the outset, that if Hariri returned then so should he. He had also clarified his refusal to form a non-political government led by a political leader such as Hariri, which he believed was a contradiction in terms and discredited the process from the start.

On that basis, Bassil began to obstruct the process of Government formation, even if claiming the opposite all the while, as he called for parity and one standard for all, and insisting on the proportional representation of the parliamentary blocs in the allocation of ministers.

In early November, The United States imposed sanctions on Gebran Bassil, accusing him of ties to Hezbollah and being at the forefront of corruption in Lebanon. He was sanctioned under The Global Magnitsky Human Rights Accountability Act, which targets human rights abuses and corruption around the world. It called for a freeze on any U.S. assets and prohibited Americans from doing business with him.

Ironically, the imposition of the sanctions on Bassil did not move him out of the way, but instead seemed to complicate the efforts of Prime Minister-Designate Saad al-Hariri to assemble a Cabinet. The sanctions appeared to harden Bassil’s stance and solidify his reluctance to cooperate in the formation of a new Government that would necessarily exclude him.

This new development also prompted Bassil and the President to begin to think about ways of denying Hariri’s attempts to bring about a new Government, and instead of which, The President started seeking to revive the role of the Caretaker Government which was made up of many of their, and their allies’ ministers.

The political make-up of the Caretaker Government is as follows:

The Free Patriotic Movement of Gebran Bassil has 7 Ministers, including The Deputy Prime Minister and Minister of Defense, The Foreign Minister, The Justice Minister, The Interior Minister, The Minister for The Economy and most importantly for them, The Minister of Energy and water. Their ally, Hezbollah, as 2 Ministers, one of Industry and the other of Health, whereas The Amal Movement has The Minister of Finance and the Minister of Agriculture.

Therefore, in retrospect, it becomes obvious when looking at the above line-up of ministers that the present regime would have no desire to replace the Caretaker Government and to move ahead with a new Government based of The French Initiative which would jeopardize what they already have – and are unlikely to ever get again.

Regardless of the political proclivities, this permanent procrastination was happening against the backdrop of a worsening economic crisis in the country, with poverty rising at an alarming rate.

The international community continued to warn Lebanon of the dire consequences of their inability to reach a consensus, especially after the forensic audit debacle, where the company hired to the job, Alvarez & Marsal, quit because of their inability to gain access to the information they needed form The Central Bank .

Forced into a corner by this latest scandal and admission of failure, the leaders then passed a law to lift The Banking Secrecy Act for one year, in the hopes of convincing the auditing company to return to their task.

By the end of the year, The United Nations estimated that the proportion of Lebanon’s population living in poverty – earning less than $14 per day – had doubled in the last year to 55% and within that group, those judged to be in extreme poverty had tripled to nearly a quarter of the population – This in addition to effects of the Port blast which left even more Lebanese vulnerable.

Inflation spiraled due to the collapse of the Lebanese Pound which caused the prices of foreign consumer goods to soar in a country that relied heavily on imports and produced very little locally.

The official peg of 1,507.5 Lebanese pounds to the dollar which had been in place since 1997, became available only to importers of key goods: wheat, fuel and medicine. The Pound’s street value plummeted by nearly 80% and on the black market , the price for The Lebanese Pound varied between 7000 LPB to 10,000 LBP against the Dollar. Banks cut cash withdrawals and stopped dispensing foreign currency. They paid depositors with Dollar accounts in Lebanese Pounds at a rate of 3,900.

By June, the total number of unemployed reached 550,000 or 30% of a total labor force of 1.8 million. The port explosion alone slashed at least 100,000 jobs in the tourism sector.

The most pressing danger was the continued risk to food security. Comments about a looming end to subsidies, which had depleted the foreign currency reserves, raised fears of shortages or riots. The Caretaker Prime Minister said that Lebanon could ration the $2 billion left in the reserves to pay for subsidies for the next six months only – which was not a solution in itself and simply put a Band-Aid on a gashing wound.

In addition, the situation facing the Syrian refugees in Lebanon deteriorated steadily with the Lebanese people becoming more aggressive towards them and sometimes setting fires to their encampments and chasing them out of their villages following gunfights.

After the Port explosion, Lebanon also hit a 10-year peak in immigration. People left in the thousands with no plans to return, unable to support their families and pay for the education of their children. According to Lebanese research firm Information International, about 66,800 Lebanese emigrated in 2019 due to the financial crisis, and in 2020 there was a 36 percent increase in departures from the Beirut airport after the explosion, with nearly 90,000 people leaving at that time. An increasing number of them were doctors and surgeons, many of them at the top of their profession who took with them Beirut’s proud reputation as the medical capital of the Middle East.

Finally, to top off the worst year in Lebanese history, the pandemic reached a stage that seriously threatened Lebanese lives as hospitals were not able to provide beds. People were being turned away due to lack of foresight, mismanagement, infighting and corruption. The scenario in the country became compared to Italy with the expectation of people soon dying on mass.

Having reached the end of the year with no Government, no reforms, and no political concessions, it ended with the Lebanese drifting rudderless towards hell – just as The President declared.

Tracy Chamoun – January 2021

THE BEIRUT PORT EXPLOSION FAKE INVESTIGATION

Standard

Ignorantia juris non Excusat (ignorance of the law does not excuse)

I am not going to reiterate the disaster that happened on August 4th, 2020, at the Port of Beirut, that was caused by the explosion of 2,750 tons of ammonium nitrate which had been stored there for more than 6 years, without safety precautions, in deteriorating conditions, and with nobody questioning its presence in such a densely populated area.

But, after that terrible explosion, the President of The Republic promised a transparent investigation into its causes, even while simultaneously refusing the call by the families of the victims of the explosion for an international investigation – which no doubt for him would have circumvented a judicial process that he and his allies controlled, and which could have risked exposing them to criminal negligence.

At that time, Ghassan Oueidat, The Public Prosecutor, recommended that the Cabinet refer the case to the Higher Judicial Council. The Higher Judicial Council is a special court whose decisions are not subject to appeal, and because referrals are made to it on a discretionary basis via a Cabinet decree, it has been a vehicle for political interference for decades.

Eight of the ten members of The Higher Judicial Council are appointed by the Executive Branch of government and since the beginning of the Aoun presidency, the Free Patriotic Movement (FPM), and their allies, have played a central role in the appointment of these judges.

Therefore, right from the start, the appointment of Judge Sawan as the Judicial Investigator by the Minister of Justice, Marie-Claude Najm, was an opaque process mired in allegations of political interference.

Since the beginning of Judge Sawan’s investigation, very little information was provided to the public about his findings and almost all the information about the status of the case came through media leaks including information about tampering with evidence such as the removal of documents from the public works ministry which oversees the port. This incident was followed by two huge fires in the port on September 8th and 10th, which also prompted many allegations of tampering with the crime scene. When The High Judicial Council failed to take action against these allegations it immediately put in question the investigation’s credibility.

It is obvious that the responsibility for the Beirut explosion extends far beyond the port and customs employees and the inquiry should be addressed to any person who was in a position of responsibility over the last 6 years, to allow for the admission of the explosive material into the country, its inadequate storage and to prevent it from being moved out of harm’s way or even to veto its removal.

Then, on October 13th, local media reported that 25 people had been arrested in relation to the case, and 30 had been charged. But, to this day charges against those arrested have not been made public. The individuals who were arrested are being held in prison cells and the Lebanese authorities have failed to detail any evidence against them. This apparent attempt to make the administrative port and customs workers scapegoats for the investigation shed further doubt on the process which appeared to be attempting to shield higher ranking political officials from prosecution.

Many court records and official correspondence leaked to the media, have indicated that since 2013, a large number of high-level civil servants, including the head of the customs department, had repeatedly circulated official letters saying that the ammonium nitrate in the port posed a grave danger. Customs and security officials wrote to judges roughly every six months asking for the removal of the material. (Those Judges and customs officials have declined to comment on the matter).

In addition, most of Lebanon’s political leadership including the President and the security agencies have admitted to knowing about the stockpile of ammonium nitrate before it ignited on August 4th. On July 20th, a letter prepared by the Prosecutor General Ghassan Oueidat was delivered to Prime Minister Diab and President Aoun by the General Directorate of State Security (which oversees port security), warning them that this could destroy Beirut if it exploded.

This letter summed up the findings of a judicial investigation which had been launched in January this year, and which had concluded that the chemicals needed to be secured immediately – proving that the matter was under examination for 8 months prior to the tragedy and nothing had been done to prevent it.

Notwithstanding his prior knowledge of the impending dangers, President Aoun has denied that he was responsible for the devastating blast, saying that he had no authority over the port and had ordered that action be taken and then admitted that he had never followed up on that request.

The President also added that the previous government had known about the dangerous stockpile which had been confiscated in the port since 2013. It would seem obvious however that if that government was aware of this fact, then his son-in-law Gebran Bassil, who was the Minister of Energy at the time that the ammonium nitrate entered the country, would have also known about the presence of these explosive materials.

It is very strange therefore, that The President of The Republic after four years in office, would only find out about this matter three weeks prior to the actual explosion. He is a military man after all, and for him to publicly say to the press at a news conference, that “they said it is dangerous and I am not responsible. I don’t know where it was placed. I don’t even know the level of danger,” is hardly believable or even acceptable.

To make matters worse, now, more than three months into the investigation, not a single minister, former or sitting, has been questioned as a suspect. It was not until last week that Judge Sawan issued four indictments, which appeared random and inadequate, to the former Prime Minister Hassan Diab, and to three former Ministers including two of which who had already been placed on the US’s sanctions list for their involvement in aiding Hezbollah. They have all refused to comply and testify.

The challenge by the political class to Sawan’s latest summons goes to the crux of the matter and is rooted in the attempt to shield people in power and in the different legal interpretations over who has the authority to question ministers and heads of governments.

The High Judicial Council claims to not have the jurisdiction to prosecute sitting or former presidents and ministers. However, The Lebanese Judges’ Association has disputed this reading of the law contending that the crime of killing or causing the death of citizens is not subject to immunity, as it is not directly related to the exercise of duties in office.

The Judicial Council is claiming that this responsibility falls on “The Supreme Council to Prosecute Presidents and Ministers”. However, this body has not yet been fully decreed by Parliament. It is to consist of eight judges and seven deputies.

Last March, after years of stalling on the creation of that council, Parliament elected seven representatives, representing most of the parliamentary blocs, to the membership of “The Supreme Council to Prosecute The Presidents and Ministers”.

However, when it came to selecting the 8 judges to complete the process, Speaker Berri rejected the list of names presented to him by the former president of the High Judicial Council, Judge Jan Fahd.

The fact that these 8 judges were not selected to complete the membership of the Council completely stopped its formation in its tracks – even if it is expected that this procedure will be finished at some point in the future with the new head of the High Judicial Council, Judge Suhail Abboud.

But, in the absence of such a judicial body the responsibility befalls on the High Judicial Council to prosecute those responsible, including very high-ranking members of government.

Let us therefore discuss where the responsibility of this crime of public endangerment and gross negligence leading to the loss of lives, really lies. No matter how much the facts are blurred, and responsibility is deflected, there are some baseline truths that need to be brought to light and used in the pursuit of justice for this terrible case.

Without going into conspiracy theories and speculations about why such huge amounts of ammonium nitrate ended up in Lebanon under very suspicious conditions, I want to focus on how the matter was handled once the ammonium nitrate landed on Lebanese soil. This is the real question that matters when it comes to allocating responsibility for the cause of the death of more than 200 innocent civilians.

Aside from some high-level members of the port authority management, those who are responsible for this terrible act of negligence, are those, over all these years, who were in positions of power and responsibility in government and who must have known about the presence of these explosives – and if they did not know, they should have known. These include presidents and their ministers who worked in the sectors of government relevant to the incident, including: Defense, Security, Energy, Agriculture, Public Health and Safety, and Transportation.

On the Security level, the introduction of potentially explosive chemicals into Lebanon comes under the jurisdiction of the military. Therefore, the chain of command in the Army since 2013, under both General Kahwaggi and General Aoun, should be interrogated and deposed in the process of uncovering the truth about why such a volume of explosive materials was stored in a haphazard way and left to dangerously decompose in an urban area? And as to why they did not transport this hazardous material to a remote location and prevent access to it?

On the leadership level, both Presidents of the Republic since 2013, Michel Sleiman and Michel Aoun are accountable in this matter, including the four Prime Ministers which governed the country since the time that the shipment arrived in 2013 during Najib Makati’s caretaker government and then during the following government of Tammam Salam which came to power in 2014, when two whole year’s passed with nothing done about the presence of the explosive material at the Port of Beirut.

After that, in 2016 following Michel Aoun’s election as President, Saad Hariri became Prime Minister. Three years went by and nothing happened again. As for Hassan Diab’s government, he and the relevant ministers implicated in the probe also need to be interrogated.

At this point, however, it is becoming increasingly clear that the Lebanese authorities have no intention whatsoever of fulfilling their responsibilities to conduct an effective, transparent and impartial investigation that would reach the people who were in charge this whole time. Political interference coupled with the long-standing failings of the judicial system have made this investigation seemingly impossible.

Finally, after the latest much criticized and politically aggressive move by Judge Sawan to selectively only indict former Prime Minister, Hassan Diab, (when there are so many others which should also be made to carry their share of the blame), the investigation has now been halted by two of the deputies indicted who challenged Sawan’s authority. If this challenge is accepted by the families and the court, then the investigation will go back to square one until a new judge is appointed and in Lebanon that can take forever.

This ongoing political/legal battle has now muddied the inquiry into the cause of what was one of the largest non-nuclear explosions in history. But no matter how much those responsible for this crime try to weasel their way out their predicament, ignorance is not innocence, especially when one is in a position of power and has a job to protect people and keep them from harm.

Ultimately, we, the Lebanese people, don’t really need their fake investigation to know who is responsible. Every Lebanese knows in their heart who is responsible for the explosion. They are all responsible and we find them guilty as charged.

What happened in the port of Beirut on that fateful catastrophic day was the ultimate manifestation of the results of years of corruption and indifference by a political class which only sees power as a means to a self-promoting end. The only words that come to mind regarding these negligent and criminal individuals are: “Abject failures”.

In any decent self-respecting country, they would have all resigned for the sake of the people, for the sake of the souls who perished, but in Lebanon they have the indecency to think that they can get away with anything. But can they anymore?

“Ignorantia juris non excusat”.

Tracy Chamoun

December 19, 2020.

MALICIOUS INTENT AND SQUANDERED OPPORTUNITIES – WHAT TO DO…BY TRACY CHAMOUN.

Standard

To keep naming the problems confronting Lebanon falls on deaf ears, and instead it has now become necessary to spell out the ways that this country can be saved. I am not proposing to reinvent the wheel here. Indeed, France and The World Bank have done the bulk of the work for us. I just want to add a few of my own suggestion to their comprehensive proposals.

Last week, two major events happened to Lebanon’s advantage which should have been received with open arms by the Lebanese authorities, who should have put forward immediate solutions and strategies, so as not to waste such efforts.

The first event was the conference that President Macron of France hosted for a large group of international donors and contributors to obtain aid for Lebanon after the massive port explosion.

Beyond emergency assistance, all the nations and world organizations that were present at the conference declared themselves ready to support the economic and financial recovery of Lebanon, but they required, as part of a stabilization strategy, that the Lebanese authorities fully commit themselves to timely measures and the reforms expected by them and the Lebanese people.

However, instead of showing up to the meeting prepared with the list of fulfilled requirements that the French had set two months ago, the President gave a speech reiterating the same baseline nullities that placed nothing on the table except for open hands to receive aid – like beggars waiting for help.

The second event that emerged to Lebanon’s advantage last week, was the publishing of The World Bank’s Monitor Report. It sounded the alarm about where Lebanon is heading in the next year. This was very important to hear as the caretaker government keeps behaving as if there is no urgency at all.

The report frighteningly heralded increased poverty and gave negative indicators all around, but at the same time, it offered a very detailed and even technical road map for how to emerge from this crisis.

Unfortunately knowing how things (don’t) work in the Lebanese state, and the conditions of disarray and lack of performance in national governance, it is inevitable that the combined effort of France and the World Bank are both unfortunately set to vanish in the mist of the Lebanese fog of incompetence and inertia.

This leads me to the conclusion that it is not information that is lacking or good will from others, but instead, it is “malicious intent” by those in power to block any change that might endanger their self-serving structure. These leaders keep responding to every initiative to help Lebanon with the same endless diatribes. They continue to proffer pathetic attempts to form a government, while using the old formulas of sectarianism and partisanship that have been unanimously rejected by the Lebanese people and the international community. Thus, they are responsible for blocking any solution to the ongoing and worsening crisis.

Therefore, I want to go on the record and say that there is a way out of our terrible problems. There is more than one road map that we can follow and there are many solutions that we can implement if the “malicious intent” to paralyze change is removed.

I want to state clearly that what the French have offered is of paramount importance and that the initiatives outlined by The Work Bank document must be noted and acted upon with great urgency, otherwise as they have warned, “Lebanon is in the midst of mega-crises, capable of extending the current situation into a long-term catastrophe”.

As far as protecting the population from the financial sector collapse, France is asking for the implementation of capital controls and asking Parliament to finalize and vote on a law for capital control that it is approved by the IMF.

Capital controls are essential to protect the future of the financial sector but most importantly they provide a regulatory backdrop to ensure the protection of the population against the vagaries and sometimes unfair practices of the banks.

France is also asking that Lebanon immediately resume stalled negotiations with the IMF and rapidly approve measures requested by the lender, including a “full audit” of the Central Bank’s accounts, which we have seen has been countered at every turn.

Last week’s charade in Parliament revealed the degree of “malicious intent” and to-date, the crucial law for lifting the Banking Secrecy Act, so that the forensic work can be carried out unhampered, is still being avoided, thereby blocking the entire process from the outset.

France also proposed time limits for sector-specific reforms, specifically, for the electricity sector, in order to rapidly reverse the US$ 1.5 to 2 Billion yearly loss in GDP that it causes. They want the government to appoint officials to the National Electricity Regulatory Authority according to Law 462/2002 without amendments, and to provide the Authority with the resources to carry out its work.

Secondly, they are asking, to launch tenders for gas-fired power plants to fill Lebanon’s massive energy gap and to abandon the controversial Selaata power plant project in its current form (which interestingly the President and his son-in-law have insisted on keeping).

To this end, and to help the growth of the economy through the implementation of national projects, France is also asking that Parliament prepare, adopt and pass a bill for Public Procurement Reform.

Strengthening public procurement is a critical element of economic development. Public procurement is governed by the 1963 Public Accounting Law and is supplemented by several decrees. The main areas of the law that require attention are the lack of an independent regulatory body and an independent mechanism for handling procurement complaints.

Strengthening the public procurement system is a crucial move to improve transparency, accountability, and efficiency in managing public finances and future international investments. The failure to do this will have negative effects on budget transparency, debt and cash management, and public investment management.

In order to develop a well-functioning procurement system that promotes trust and accountability, Lebanon must also strengthen the independence and capacity of the Court of Accounts. Its present system of financial control is tilted in favor of pre-auditing only with little involvement in post-audit control – which is necessary to combat corruption. This must be addressed and changed.

France is pushing for judicial reforms. They want Parliament to approve a law on the independence of the judiciary. They want Lebanon to fight corruption and smuggling by appointing members of the National Anti-Corruption Commission and granting it resources to do its work and to launch the track to accede to a 1997 OECD treaty on combating corruption.

They are also asking to have customs reforms implemented with immediate effect by establishing “control gates” to strengthen the oversight at the Beirut and Tripoli ports and at the Beirut airport, as well as at other border crossings.

Very importantly, the French are calling for the preparation and the voting on a corrective finance bill that explicitly clarifies the status of the country’s budget accounts for 2020, which were passed de facto in January, without due consideration to the dramatic reversal of fortune affecting the nation and, on that basis, they are also calling for a “harmonized” budget for 2021.

According to the constitution ARTICLE 32 (As amended by the Constitutional Law of October 17, 1927, the second session of Parliament which begins in October; is reserved to the discussion and voting on the budget before any other work. However, until now nothing has been done for 2021.

President Macron’s detailed suggestions and demands are an obvious and integral part of any future remedial proposals. But instead of working towards manifesting some of these strategies which would help the Lebanese situation, the leaders have obstructed this initiative by focusing on the appearance of the government rather than its important mission – which is to save the country.

These petty despotic maneuvers have ensured that none of France’s requests or conditions related to channeling vital international aid have transpired. Lebanon as a result finds itself at the edge of a very deep precipice.

As far as, The World Bank is concerned, they also did the bulk of the work for the Lebanese government by outlining a recovery strategy and a timeline of execution in their latest report. They prepared a detailed roadmap for the implementation of many reforms, some of which are the same as those mentioned in the French rescue proposal.

Their focus is a two–pronged approach. The First Strategy includes implementing key outstanding elements of the Taef Accord, such as adopting a decentralization law and creating a lower chamber of parliament to be elected on a non-confessional basis.

Here, I would like to add that I would agree with the Word Bank suggestions that on a macro level, the two most important aspect of the recovery of the nation hinge on both the launch of fully automated “E-government” which will help fight corruption, and the implementation of “Administrative Decentralization” which will become an essential component of any future recovery plan for the nation. Decentralization will allow for the re-energizing of local economies, and thus contribute cumulatively to improving the overall national situation.

The conversion to E-government is a priority in any future rebuilding process. The objective would be to automate the government on two levels. The first is on the “Intergovernmental” level, by developing a comprehensive proprietary software for The Ministry of Finance to synchronize with every ministry for accounting, collection, disbursement and auditing purposes and to improve government efficiency. The second level is for “The Public at Large”, to develop an e-government platform for official transactions to ensure efficacy and transparency.

As far as “Administrative Decentralization” is concerned the government must look at ways of implementing reforms to empower local government through the municipalities, and to provide them with financial autonomy. The municipalities must once again be accorded their own Ministry and be removed from the Ministry of Interior, so that they can manage autonomous budgets and also become more regulated. As part of this empowerment of the municipalities, they should be given the direct ability and therefore the means for handling the Syrian refugee crisis which impacts their localities.

The second basket of proposal which The World Bank is suggesting are remedial in the immediate future. They start by saying that Lebanon needs to arrest high inflation, and stop the rapid currency depreciation, as well as the proliferation of multiple exchange rates. Resume negotiations with the IMFLebanon also needs to put in place a path to public debt sustainability based on debt restructuring and a sustainable fiscal framework through the full realization of resulting losses according to international accounting norms. We also have to restructure the banking sector through consolidations and bail-ins in order to end the disintegration of the sector.

There is an English proverb that exists which says that it is an “ill wind that blows no one any good” which means that loss or misfortune generally benefits someone. In the case of Lebanon, this ill wind is the Covid-19 pandemic which has catapulted the world economy into disarray but is also presenting an opportunity for public debts to be renegotiated and for new loans to be structured.

Therefore, Lebanon should be working on this basis, towards a debt restructuring program to achieve debt sustainability over the medium term. The government should not shirk its responsibilities by avoiding its interest payments, just so that it has enough money left in its reserves to pay for subsidies. This does not provide a lasting solution to the economic crisis, as we are now witnessing.

Many of the suggestions in the report were already mentioned in the Government Recovery Plan which was in issued back in April of this year. It was in fact prepared for them by the World Bank.

We have to ask what of those measures have been implemented 8 month later? None!

In that document, the government promised that the fiscal reform package would be accompanied by social safety net (SSN) measures to protect the most vulnerable groups. They recommended that financing an SSN program could be taken up by donors including the World Bank in the context of a full-fledged adjustment program. They revealed that the Bank and other donors had already provided support to build a poverty targeting system in Lebanon that could be immediately deployed to fund the SSN program. However, nothing has been done, since the government failed to gain the confidence of the donors and the leaders refused to make concessions and push for the reform measure that were being asked of them.

Because of the drastic deteriorating poverty situation in the country especially now that the subsidies will be removed from essential goods, I believe that we need to push for the immediate the creation of a “Poverty Relief Fund” to protect the most disenfranchised sectors of the population.

Because the situation is of extreme urgency and yet we are unable to get external aid due to internal incompetence, I propose that the government invoke special measures to levy a “Poverty Tax Contribution” to supplement the “Poverty Relief Fund”.

Instead of enforcing income tax measure this year, when there is no income tax to be had, It is better to offer tax relief and at the same time enforce this “Poverty Tax Contribution” which would be applicable to all depositors of a certain size and would be based on the value of their capital assets in their frozen bank accounts. It would be a monthly contribution paid to the “Poverty Relief Fund”.

This “Poverty Tax Contribution”, which resorts to an internal and sustainable solution would be a way for all Lebanese to pull together and help each other without putting Lebanon under further international obligations.

The World Bank report is full of many detailed technical suggestions that any government would dream of obtaining as a framework of reference to move this country forward and out of starvation and poverty. However, nothing is being done and time is being squandered in relativistic disputes and the splitting hairs over seats of power which are temporary at best.

In addition, to all these practical, important, vital, suggestions and recommendations to lift Lebanon out of its catastrophic collision with destruction, there is a whole economic development plan that the government should be working on immediately and concurrently and which would address every productive sector of the economy. They should be evaluating services, industry and agriculture to see how to avert the present hardships and how to maximize on the new developments. These could include advantages due to relatively cheap labor, affordable real estate prices because of the currency devaluation, as well as cheap raw materials for locally manufactured goods.

I have my own ideas about how to transform Lebanon into a prosperous nation again, but that in itself requires a whole presentation. However, speaking of squandered opportunities, in 2019, the global management firm McKinsey & Company delivered a 1,000-plus page macroeconomic report to the government of Lebanon which is said to have commanded a $1.3 million fee (at almost exactly $1,000 per page). It offered a focus on short-term economic gains to steady a faltering local economy, which included ‘quick wins’ in the areas of wealth management, construction and tourism.

At the time, the government did nothing and remained mired as usual in their political stalemate marked by factional fighting. The report recommendations numbered some 160 core initiatives in total and identified five sectors as carrying the greatest potential to jump-start the economy including Agriculture, Industry, Tourism, Financial Services and the Knowledge Economy. Obviously, it has become outdated, but what I am trying to emphasize is that we have had so many helpful suggestions over the years from professional people that have just gone to waste. This trend is continuing because there is nobody competent at the helm of this country to guide it through its troubles.

Therefore, it is important to keep reiterating that the people in charge, whoever they may be, the Former Prime Ministers, the Speaker of Parliament, and the President and no longer deserve the right to say what is best for Lebanon. They all contributed to its demise and there are no excuses and no exceptions. As a matter of fact, they are the ones who are directly to blame for the worsening situation under their present watch. They should admit failure and work towards providing solution to fix what is left. One of those solutions, is to endorse the formation of a government that is made up of experts and non-partisan ministers, even if it means that they have to take a backseat role in order to save the country. 

I shall briefly now repeat what is wrong with the system that most of us already know: The existence of confessional cartels, the mentality of cheating the law, the zaim culture, the nepotism and the profiteering mentality. These have all been our downfall and for a New Republic to emerge, good people must be allowed and helped to come to the fore.

I could not agree more with The World’s Bank’s conclusion about the root of the problem in Lebanon, which they called a “Deliberate Depression”. This joins my interpretation of “Malicious Intent” as being the main obstacle in lifting this country up from the depth of its despair.

They attribute a reason for the “Deliberate Depression” of Lebanon as being caused by “an “elite capture” behind the veil of confessionalism and confessional governance, which served to block reform and development when it did not benefit all confessional leaders. This led over decades, to a dysfunctional political system with weak institutions and very little effective regulatory framework”.

In conclusion, I would like to say that this does not have to be a prolonged dark period for our country as The World Bank warns. We have the skills to fix the problems, we have the advice and recommendations from friendly nations to guide our efforts and we have the international support to remedy our debt crisis if we can shift the inertia of the threatened leaders into active and positive change.

Regardless however, this change will come about one day, either by the will of God, by constitutional deadlines, or by the will of the people, but it will come. Nothing is insurmountable, we just have to keep the faith and the vision of salvation for this once celebrated and prosperous nation.

 I summary what to do:

Short term:

• Parliament to finalize and vote on a law on capital control that it is approved by the IMF.

• Implement Capital controls.

• Resume negotiations with the IMF

• Restructure the banking system through consolidation and bail-ins.

• Revoke the Banking Secrecy Act to allow for the forensic audits in order to be compliant with international standards.

• Arrest high inflation by fixing an amended legitimate exchange rate for the Dollar, and stop the rapid currency depreciation, as well as the proliferation of multiple exchange rates.

• Put in place a path to public debt sustainability based on debt restructuring and a sustainable fiscal framework through the full realization of resulting losses according to international accounting norms.

• Create a “Poverty Relief Fund” to protect the most disenfranchised sectors of the population.

• Invoke special measures to levy a “Poverty Tax Contribution” to supplement a “Poverty Relief Fund”.

• Provide tax relief by not enforcing income tax measure this year, when there is no income tax to be had with the economy at a standstill.

• Have Parliament prepare, adopt and pass a bill for Public Procurement Reform.

• Create an independent regulatory body and independent mechanism for handling procurement complaints.

• Prepare and vote on a corrective finance bill that explicitly clarifies the status of the country’s accounts for 2020,

• Create a “harmonized” budget for 2021.

Medium Term:

• Strengthen the independence and capacity of the Court of Accounts.

• Amend its powers of financial control to be more involved in post-audit control to help combat corruption.

• Appointing members of the National Anti-Corruption Commission.

• Granting the National Anti-Corruption Commission, the resources to launch its work and to launch the track to accede to a 1997 OECD treaty on combating corruption.

• Implement customs reforms with immediate effect by establishing “control gates” to strengthen the oversight at the Beirut and Tripoli ports and at the Beirut airport, as well as at other border crossings.

• Appoint officials to the National Electricity Regulatory Authority according to Law 462/2002 without amendments.

• Provide The Authority with the resources to carry out its work.

• Launch tenders for gas-fired power plants to fill Lebanon’s massive energy gap.

• Launch a fully automated “E-government” to increase productivity and help fight corruption.

• Implement “Administrative Decentralization” to re-energize local economies.

This is what to do.

Thank you

Tracy

CRITICAL MASS DESTRUCTION – An Economy in Disarray, by Tracy Chamoun.

Standard

In these times of great confusion and bewilderment, I felt compelled after much reflection to get clarity over the financial conundrum we are facing, which is characterized by deliberate obscurantism to say the least. I also wanted to reflect on some constructive ideas about this very difficult subject.

By nature, I am compelled to seek the crux of a problem and think only in terms of solutions. I also wanted to understand how this affliction came about.

I tend to look at situations in a holistic manner beyond the outward manifestations of symptoms, which in this case are the bankruptcy of the financial institutions and the failed state of Lebanon.

The deeper underlying cause can be summed up by saying that extreme negligence, recklessness and self-serving narrow public policies driven by private big money agendas have contaminated our country for decades, and that the current crisis conditions are the product of policy and not of circumstance.

They are the joint product of long-standing monetary policies by The Central Bank, and fiscal policies by successive Lebanese Governments who were responsible for budgets and government expenditures in particular.

The reality that we must now face is that the Lebanese government, the commercial banks and The Central Bank are all insolvent and worse still, The Central Bank has negative net reserves, i.e. more foreign exchange liabilities than foreign exchange reserve assets, even after accounting for the gold assets.

Today The Central Bank’s debt is the money that it needs to pay back to depositor’s and to the local banks. The Central Bank governor claims that the reserves are now down to less than 30 billion dollars, (though this number is anyone’s guess, since it is shrouded in (unlawful) secrecy and it is estimated more realistically, that it is in the region of 5 billion dollars), which is set against the more-than 110 billion in dollar deposits.

All the stakeholders, the depositors, the banks, and the government, need to be paid out of that unknown small amount remaining, including the servicing of the debt. There is a large 1.2 billion dollar bond interest payment due also by the government, (which it has decided not to pay), followed by another payment to service the debt in June of this year.

These bonds have tumbled below $17.5 cents on the dollar as worries about a protracted dispute with the creditors is feared. The Central Bank, owns about $5.5 billion of this debt. The local banks, hold almost $14 billion of the notes, and this decision to default, if not countered by an alternative proposal and the willingness to negotiate on the part of the creditors, could put Lebanon on course for a sovereign default. This will inevitably place all the national assets at risk, force hefty losses on the banks, and even risk rendering some of them insolvent. As it is, irreparable damage has been done to the reputation of the once lauded Lebanon banking sector, that may last for decades.

Nevertheless, with not enough dollars to pay all those obligations, whatever policy is adopted to handle this situation, it must take into account the need to set aside a portion of the few dollars reserves that are left for critical imports, like wheat, fuel, and urgent medical supplies.

A priority, looking into the near and long term, should be to set up an “Emergency Fund” for these basic needs and to work urgently on getting international support and aid for this fund, so that Lebanon does not plunge into chaos as the country heads towards extreme poverty, dangerous food shortages and even hunger.

Based on my analysis of the situation, and for people like me who are not financial experts I am offering a general history of how Lebanon arrived at this situation after the civil war.

My conclusion is that the present crisis conditions are essentially due to mismanagement by the present governor of The Central Bank and the political directives which protected, covered up and sanctioned his activities and which led to the collapse that characterizes Lebanon’s economy today.

The problems stemming from the policies of The Central bank are:

  • The mismanagement of The Governor of the Central Bank and his political immunity form accountability by the ruling class.
  • No oversight by the government of his monetary policies.
  • The practice of unregulated renegade governance.
  • No accountability of the actions of the governor of The Central Bank and no checks and balances.
  • Lack of transparency as The Central Bank does not publish any data on $-deposits it receives from banks, which take the form of $-CDs or various short and long-term deposits, nor on the interest rates it offers on these deposits.
  • Extreme secrecy of the governor’s operations with local banks, particularly $-operations. The pricing of these operations, and losses, are handled in secrecy and are not available to the public.
  • The Governor has engineered dangerous and unregulated interest rate policies and hikes – The Central Bank’s high interest rates paid to banks for their $-deposits, significantly exceeded the international interest rates it received when placing the $-funds received from banks and this resulted in mounting losses incurred by The Central Bank.
  • Non-disclosure of the Central Bank’s losses. These continuous losses are the reason for the Central banks discontinuing the publication of its Annual Report since 2003.
  • The lack of publication of the mandatory Annual Report, since its first publication in 1964, and which includes The Central Bank’s Profit & Loss statement leading to a total lack of disclosure of full balance sheet by the central Bank.
  • Lack of transparency about The Central Bank activities and “financial engineering” strategies.
  • Conducting “financial engineering” motivated by political cronyism. In 2016 The Central Bank opted to bail out two banks which were struggling with bad investments, namely Bank Med and Audi. The Central Bank injected more than $5 billion into their capital not through loans, nor against a share in the banks’ capital as standard practice requires, but just as pure profits given to select banks. This $5 billion corresponds to about 10% of GDP or 30% of all the banks’ combined capital.

The problems stemming from the policies of the government are:

  • The lack of regulation of The Central Bank even though the technical and legal structure is in place to do so.
  • The mismanagement by the government of its fiscal and monetary responsibilities. There is no adequate fiscal policy and no enforcement thereof.
  • Rising fiscal deficits and government debt resulting from unrestrained spending by government on current items (interest on debt, wages and various transfers) rather than on capital projects.
  • The lack of an operational national budget for 15 years and the irresponsible re-approving of last years’ budget without the necessary adjustments in the light of the present financial crisis.
  • The politicization of the public sector and the over inflation of the size its employees, including the 5000 employees that were injected for political reasons after the 2018 elections.
  • The mismanagement of the electricity sector and the cost of servicing that deficit.
  • The lack of policies regarding trade and the balance of trade.
  • The lack of control over the collection of taxes and duty from the ports of entry and the loss of that large national income due to illegal trade.
  • The lack of policies regarding the development of productive sectors such as Industry, agriculture and Services.

In the light of these grave difficulties I have ventured to put some ideas forward, as this should be a time of swift action and not delays, and of radical solutions and not the deferment of problems, which is the standard practice to-date.

These are my recommendations and a few action points:

For The Central Bank and its Governor:

  • The Central Bank policy should be closely investigated and not eschewed under the outrageous pretext that the governor is “protected by a foreign nation”.
  • Place The Central Bank under a separate auditing jurisdiction.
  • Do a forensic audit of The Central Bank to establish exactly the reserves available
  • The standard regulatory processes of the government and parliament should be activated to restrain The Central Bank’s unaccountable behavior.
  • Calling to account The Central Bank’s policy, as required by law concerning its interest rate policy, because presently The Central Bank does not publish data on the amounts of its deposits or on the interest rates it pays
  • Holding the governor accountable for the mismanagement and endangerment of national funds.

For The Government:

  • Find a way to appease the creditors and restructure the interest payment debt, as soon as possible, while deferring these payments with a realistic and realizable schedule.
  • Revising the national budget completely based on the present economic situation.
  • Defining the emergency requirements of the country over the next three years and setting aside an emergency fund for fuel, wheat, gasoline, and medical needs.
  • Providing an announcement by the Council of Ministers of a revised fiscal plan over a number of years to give the IMF and local and international markets confidence in the future financial situation in Lebanon.
  • Re-incentivizing growth in the sectors of industry agriculture and services.
  • Offering immediate tax benefits to foreign private sector investors to enter the present economy.
  • Opening up tenders for development projects including waste management and a variety of national projects.
  • Revising a national agricultural strategy geared towards self-sufficiency and sustainability to combat food shortages.
  • Stop the volume of illegal trade, and the tax and duty fraud at the points of entry into the country.

The following is a simple historical analysis of the financial sector collapse for people like me who are not financial experts:

Since the beginning of independence, Lebanon had a very long tradition of having a floating exchange rate, but then in the early 1990’s, when the civil war ended after 15 years of struggle, and Prime Minister Rafic Hariri, who had made his fortune in construction in the Gulf came to power, he implemented an economic plan that was essentially centered on brick and mortar and less on creating solid infrastructure and economic development.

The jewel in the crown of Hariri’s plan, was to seize land in the center of Beirut and rebuild the city center by giving it a new development corporation named Solidère. It was a complicated public/private entity that became dependent on huge infusions of state capital and public revenues, which might have otherwise serviced other sectors of the economy.

In 1993, Prime Minister Hariri appointed Riad Salameh as the Governor of Lebanon’s Central Bank, where for the last 27 years he has concocted single-handedly all the monetary policies of the country. Together, their primary objective was to attract big foreign investment to Lebanon, and in the process, they landed the country with debts of around 38$ billion which was 184% of GDP making Lebanon one of the most indebted countries in the world.

In this climate of rampant capitalism, it became necessary to reduce the risk to foreign investors. Hariri and his newly appointed governor of The Central Bank decided to peg the lira to the dollar and to fix the exchange rate against the US dollar at about 1500, where it has remained until the recent collapse. This policy is where the current crisis finds its origin.

From that point on there was a lot of foreign investment in Lebanon and the US dollar became the coveted currency for a Central Bank that built its entire monetary policy on an insatiable hunger for attracting US dollars by any means.

While Rafic Hariri was still alive, Lebanon received a lot of help from the Gulf Arab countries who would make big deposits into the Lebanese banking system, in addition to which, many wealthy donor nations would bail Lebanon out with development projects loans. These unfortunately did not help the economy since no reforms were adopted by the Lebanese government which was also characterized by excessive corruption and greed.

Having pegged the currency to the US dollar, Lebanon was therefor always in need of dollars. The local currency and the dollar became interchangeable and because Lebanon is a big importing country with very little domestic product to export – 80% of goods are imported, the main currency needed for importing goods was the dollar, so the central bank was always on a mission to expand its dollar reserves to be able to meet that demand. In addition, most big investments which relied on imported raw materials were also transacted in dollars.

Luckily for Lebanon a few things played into its favor until recently. Lebanon has a very large and successful diaspora living abroad including in the Gulf, the Americas, Canada, Australia and Europe and they tend to be very successful and very attached to their country. They send money to Lebanon to support their families and opened accounts in Lebanese banks which were offering relatively high interest rates of between 5 and 7 % on savings in Lebanon versus in the last few years the less than 1% that the US and Europe were offering.

These dollars filled the coffers of The Central Bank and helped it maintain the fixed exchange rate. Then importantly, in 2008 after the global financial crisis caused by the overexposure of banks to derivatives – From which Lebanon was insulated because its banks were not exposed to investments outside the country – people lost their trust in western banks and many ended up taking their money out of foreign banks and sending it to Lebanese banks, which they thought were safe.

In 2008, millions of dollars flowed into the country and this artificially inflated the economy. However, this did not benefit Lebanon fundamentally because the abundance of dollars induced inertia in the government which did not implement any economic reforms. Equally, the pegging of the Lebanese pound to the dollar caused the currency to be artificially strong. This made local goods less competitive compared to foreign goods. It also made our exports less competitive with cheaper foreign goods.

As a result, after 2008, imports increased exponentially and so did our current account deficit which is around 25% of GDP. (Countries which have a 6 to 10% current account deficit are considered to be in crisis territory, and Lebanon was already at 25%).

Lebanon was only able to sustain this level of deficit because there were so many dollars flowing into the country from the Lebanese diaspora, which ultimately served to sustain the import habit.

A few years later, the tide began to turn for Lebanon and by 2010. The global economy recovered and interest rates in the US started going back up and oil prices came down. Oil prices collapsed from the July 2008 high of $147 to a December 2008 low of $32. (They still never recovered their highs).

In parallel, the political landscape of the region became compromised with the rise of the so-called “Arab Spring”, the civil war in Syria began, Isis took hold, and the war in Yemen was launched and as a result the economies of the Gulf became much weaker and they stopped being able to support Lebanon.

The cost of all these wars, as well as, the US imposition of sanctions on some Lebanese banks, and the legal entanglements of a large number of the banks in the court system in the USA, as well as, the physical closure of Syria’s border with its neighboring countries which blocked traditional trade routes, followed by the ban on working with Syria, all began to extract a huge toll on the state of the Lebanese economy and the flow of dollars to and from Lebanon.

In addition, the conflict between Iran and Saudi Arabia also exacerbated the economic conditions in Lebanon and for political reasons related to Hezbollah, Saudi and Emirati dollars stopped flowing into The Central Bank. This was accompanied by travel bans imposed on their nationals leading to an overall drop in tourism.

At that time, Lebanon also witnessed unprecedented hostility towards the Lebanese government with the attempted forced resignation of the Lebanese Prime Minister which, shook the stability of the currency and the banking system.

All these factors combined to create the perfect storm, and the flight of the dollar began out of the country, with no indication for any possible remedy in sight. The final blow was dealt when the house of cards came tumbling down after the October 2019 revolt when people scrambled to recover their deposits, only to find that the banks had closed their doors in their faces and their money was no longer their own.

Instead of launching a broad economic reform plan for Lebanon to reduce its reliance on imports and tourism by increasing exports and building an infrastructure with power and connectivity which could encourage foreign investment and get the economy into a sustainable position, the government did nothing.

With this sudden reversal of fortune over the last 4 years which caused the access to dollars to cease, and with no alternative policies, the governor of The Central Bank was forced to adopt drastic measures to get more depositors to send their money to Lebanon.

Aiming to secure this dollar inflow, The Central Bank and the state (through the Ministry of Finance) offered interest rates well above international market rates to local banks in return for the banks’ investment in government debt and to cover interest payments on the public debt.

These high interests rate had a very adverse effect on the economy and instead of providing a stimulus they increased the inertia. Local banks who would get dollars from abroad would deposit these with The Central Bank to benefit from the high interest rate, and to effortlessly improve their bottom line, instead of using that money to invest in the country, in the private sector and to extend loans.

In addition, the final blow to the stability of the reserves was in 2016 when the governor of The Central Bank conducted a “financial engineering” operation which was initially motivated by political cronyism, in order to bail out two banks, namely Bank Med and Audi who had made bad investments abroad. They received an infusion of 5 Billion dollars. This operation vastly increased the country’s exposure to debt and was not meant to become public. After this daring operation, interest rates were out of control and were determined on a random case by case basis by the governor, and they climbed higher and higher sometimes reaching 25%.

To top it all off, the country also faced “terrible” mismanagement in the public sector because of the easy, unregulated spending and financing of The Central Bank.

The government had been functioning for 15 years without a budget or a record of government spending. The state spends considerably more than it receives in revenues from taxes and other income. In 2018, the state revenue amounted to the Lira equivalent of $11.5 billion—around two thirds of its total expenditures ($17.73 billion equivalent). Apart from the debt, the state’s main expenditure includes personnel costs of $6.44 billion equivalent, and the state-run Electricite du Liban which cost the government $1.76 billion equal to 11% of its budget.

Even in 2017, the state budget had ordered a hiring freeze in public institutions, yet it was revealed that around 5,000 people were hired in the run-up to the 2018 elections. An estimated 35 percent of the budget goes toward public sector salaries which at that level had become a liability for the economy.

Coupled with this situation was very little to no economic growth, no job creation, and a huge twin deficit (fiscal and current account) due to tax evasion, which is estimated to cost Lebanon about $4.8 billion per year.

There has also been a balance of payments problem and The Central Bank had to hold dollars in reserve to pay for the import of vital goods such as fuel, medication, and wheat, and to maintain the peg, all of which had to be purchased in foreign currency.

The Central Bank also has to pay high interest rates on those billions of dollar deposits for the local banks. The only viable way it could do this without other income was by obtaining more dollar deposits to pay the interest on the old dollar deposits.

This, along with all the other factors is how the Lebanese banking system became a very clear Ponzi scheme, especially once the dollars stopped flowing into the country and the massive dollar interest costs on the deposits were being paid from the reserves until these became depleted. They say that the governor had been banking on the yield of the oil and gas sector to supplement the reserves, but also for political reasons and corrupt motives, this took much longer to manifest and the Ponzi scheme ran out of money leading to the present desperate insolvency of the country.

Tracy Chamoun

March 7, 2020

Policy Paper by Tracy Chamoun – Addressing the Covid-19 Strategy for Containment in Lebanon.

Standard

The Covid-19 strategy in Lebanon needs to be decentralized in order, to cope with the small size of the population and to have a less negative impact on the lives of its citizens and the economy.

The municipalities need to be empowered to make local determinations in order to avoid complete “shutdowns” and “lock downs,” which have a profound negative impact on individuals, communities, and societies by bringing social and economic life to a near stop. Such measures also disproportionately affect disadvantaged groups, including people in poverty, migrants, internally displaced people and refugees, who most often live in overcrowded and under resourced settings, and depend on daily labor for subsistence.

The municipalities must be the main arbiter of such decisions as these impact their communities. They will also be held accountable and responsible for their choices which they will have to make with regular reviews and approval from the Ministry of Interior, based on a specific and agreed set of criteria to contain the spread of the virus.

In order to avoid such a negative downturn in the future, it is important to be able to segregate the affected communities from the safer ones, and handle the needs of any increased level of cases at the local level, where there is a better understanding of the consequences of the needed corrective actions required.

In addition, the Municipalities must be empowered by the Ministry of Health to offer daily testing facilities and have local testing stations wherever possible. They will be responsible for collecting data on the rate of the spread of Covid-19. This will be calculated using a method developed by the Harvard Global Health Institute, who have created a unified set of metrics for the coronavirus pandemic, including a shared definition of risk levels and the needed tools for communities to fight the virus.

These tools include a new classification method for risk-assessment based upon the number of new daily cases per 100,000 people. However, in the case of Lebanon, due to the small size of its overall population and the need to deal with the spread on a local level, these risk assessment ratios must be adapted to accommodate the number of new daily cases based on the size of the populations in the different areas governed by the municipalities .

As a result, the metrics need to be tailor-made for each municipality. We will give an unscientific example below (because the ratios are still unknown) and the measures offered to deal with the different stages of the outbreak which are progressive. For instance:


• A community that has only 1 new daily case per X population is classified as Green and requires no general containment although testing must continue with contact tracing and isolation to suppress outbreaks.
• A community that has 1 to 5 new daily cases per X population is considered Yellow with potential community spread. Testing must continue and social distancing must be enforced, with mask wearing becoming mandatory and social gatherings not to exceed 8 people. Outdoor eating will continue to be permitted with a limited capacity of 50% and tables of no more than 8 people. Businesses can stay open in conformity with mask regulations and social distancing measures.
• A community that has between 5 and 10 new daily cases per X population is Orange and means escalating community spread. It requires curfews with stay-at-home orders and increased testing, no social gatherings permitted, no religious services. Businesses stay open with mandatory masks and social distancing. Restaurants stay open for delivery only.
• A community which has 10 new daily cases and above per X population is considered red and indicates unchecked community spread whereby stay-at-home orders are necessary and 14 day quarantine measures with testing and lockdowns come into effect.

This strategy of customized metrics allows municipalities to gage the response level for their community and at the same time helps to keep the economy going by applying the correct response measures to the level of the crisis. It addresses the rapid spread and contains the virus in an “a la carte” fashion which permits life to go on in other parts of the country. The same criteria apply to local schools in those districts which will conform to the same color coding and their determined restrictions.

The way to deal with the Covid-19 virus which will be with us for some time, is to develop strategies that can remain fluid and are based on the rate of spread and the measures needed for its containment.

Calculating the numbers of new COVID-19 cases per day, per number of the population, is a good indicator to show the current picture of outbreaks and compare them in a consistent way. It’s a standard way to measure the risk against the total population. Also, by sticking with a standard, core metric it is possible to compare trends over time.

For local policymakers, the risk levels are also meant to signal the intensity of the effort needed to control COVID-19 and to trigger specific interventions rather than wait for the central government to give, often wrong guidance, to those operating at a local level, as has been witnessed recently by the multiple random shutdowns which have severely endangered the livelihood of hundreds of thousands of people in Lebanon.

The technology for these shared metrics and guidance is available today and the Government should make use of them and adapt them immediately to Lebanon’s needs by empowering the municipalities to take the necessary measures to contain the virus in their towns and villages.

The existing technology must be adapted to Lebanon’s needs. It is offered by Covidlocal.org, which is led by a group of disease outbreak experts and former public health officials,and CovidActNow, led by former technology executives and a group of academics who both want to see this strategy adapted more widely and used by local government.

Troubled Politicians Block Government Formation in Lebanon Again!

Standard

Aside from the fake constitutional horse trading going on, why is there such a huge fight over the Ministry of Finance?

This recent debacle which sabotaged the attempt to put the country on the right track after the terrible explosion that devastated the nation, just confirms the citizen’s worse fears about the self-serving motives of all the corrupt politicians!

One has to ask though, what is The Speaker Nabih Berri’s adamance about controlling the Ministry of Finance? What does he have to hide and protect?

Does this includes protecting the 30,000 fake employment jobs in the government that he institutionalized? As well as, the more than 5000 fictional positions he created? What about all the illegal daily employees that he also hired in the public sector?

Just as seriously, how can the same people responsible for years of corruption oversee the forensic audit that is supposed to expose the truth behind the national fraud that has cost every lebanese their financial security? and not be accused of intervening to hide facts from the public?

Note: Nabih Berri’s finance minister Ghazi Wazni has already tainted the process by signing an amended contract without prior consultation, to limit the scope of the forensic audit. He excluding the participation of an international organization that facilitates the investigation and prevention of money laundering and terrorist financing!

It defies all logic and the national interest of the nation that the political group refered to as the “Shiite Duo” is adamant about retaining The Finance Ministry”, the most important ministry in the next phase of Lebanon’s economic and financial rescue, when they are undoubtedly responsible for the sanctions and the economic embargo on Lebanon as a result of their classification as a world terrorist organization! How could they hope to secure the international aid that Lebanon needs to survive?

It is just ridiculous! Or maybe that is the point? To block the role of the IMF in Lebanon and keep the country squarely lodged in another axis!

It is analogous to putting a person with a contagious disease in charge of cooking the food for everyone in the home!

If they cared for their family members (Lebanon) they would understand that they need to step aside from that particular ministry at this delicate time, until a broader solution is found!

In addition, it is astounding that this “Duo” also demanded conditionally to have the one third “blocking” votes in the new government! How can anyone today, under the present dire circumstances, even talk about “blocking measures” and use this argument to prevent the formation of a government that is the lifeline of a dying country? A country that needs more than ever to implement positive solutions!

It just shows that they are only thinking protecting their narrow interests!

Finally, The Ministry of Finance is not a religious bargaining chip! The argument by all the politicians of the “confessional ownership” of a ministerial portfolio is pure fiction!

It is completely misplaced! After Taif, confessional repartition was only only attributed to the three «presidencies» and not the cabinet!

The French initiative called for the exclusion of all religious and partisan considerations from the formation of the cabinet. Everyone said “Yes Sir” to President Macron’s face and did the complete opposite! They blatantly lied!

In the space of 15 days the political leaders sabotaged the initiative for their own gain again!

Shameful! They cannot be trusted! Ever!

For a just, fair and effective cabinet to be formed the process should be free of confessional identities and partisan affiliation. The cabinet should be selected purely based on the professional résumés that are submitted!

They must all go! كلن يعني كلن

PRIORITIES AND POSSIBILITIES.

Standard

A FUTURE TO REBUILD TOGETHER

BY TRACY CHAMOUN – AUGUST 2020

In October of 2019 a “revolt” was launched that started as a wave of popular rejection directed at the extreme levels of corruption that have plagued the traditional political system since the civil war.

I am not calling this episode in our history a revolution yet, because so far nothing much has changed. As this spontaneous and massive revolt progressed, it was overcome with bigger issues, including the usurpation of the movement by the traditional political parties who had a vested interest in maintaining their crony-based status quo – which had allowed them, from the privileged positions of their power perches, to profit massively and obscenely for decades.

As soon as the revolt exposed the level of falsehood that had been sustaining the nation, it was inevitably followed by the complete and rapid economic collapse of the country. This was then compounded by a world pandemic that has effectively brought Lebanon to its knees.

Today, even the most ardent of those who had initially been engaged in the struggle to change things seem thwarted by the threat of violence from the traditional parties, and from the negative chain of events that has assailed the country since last fall. There is presently a general feeling of exhaustion that is stifling, and it is made worse by the crippling austerity measures that are being experienced all around.

The October 2019 revolt came at a time in Lebanon’s history when we could not continue the way we were going and insults aside, some of the demands of the people really struck with me as positive demands for necessary change. These included the call for professionalism in the government through the establishment of a meritocracy, the rejection of sectarianism as a pedigree for the eligibility to govern, the separation of powers between the executive and legislative branches of government, and the elevation of the status of women to governance.

In reality however, the October Revolt, is presently running the risk of turning out to be more like a glitch in the system. It looks as though it has been temporarily patched over by using the same sectarian band aids that the leadership of the country has always used to cover the nation’s wounds.

Let us remember that back in October, the initial groundswell forced the existing government to resign, but it did not secure their complete removal. As a matter of fact, the different powerbrokers slid reluctantly into the background only to continue leading by proxy and it soon became obvious that the new government which emerged, fundamentally used the same old sectarian framework to form their cabinet and then masked their sleight of hand with a politically-correct peppering of women. Equally, all the ministers were not all chosen based on merit and the promise to exclude party affiliations was also ignored keeping the sectarian partisan process intact.

However, it has been months since the disintegration of the country began and so far, despite all the good intentions, there has not been any improvement in the situation and the country is drifting without any specific direction. As a result, it is fair to assume, that nothing will be done to precipitate any future constructive transformation.

This would require taking ownership for past mistakes and consequently risk revealing decades-long abuses of power.

Now, nearly a year later, we still do not have an actionable plan to resurrect the country and the situation is getting worse by the day.

Lebanon’s Public debt is projected to reach 184% of GDP in 2020—the third-highest ratio in the world. Informal capital controls and payment restrictions are squeezing credit and liquidity so much that it has halted international trade. Internally, the volatile currency fluctuations have forced many domestic businesses to shut down.

To put it simply, Lebanon is in the throes of multiple simultaneous crises, including public health, a banking sector collapse, depreciating currency, frozen trade, scarcity of fuel, no electricity, hyperinflation, increased poverty, food shortages, price gauging, multiple commercial bankruptcies, as well as, spiking unemployment rates. Notwithstanding all that, and worse still, is the rapid increase of the budget deficit due to the drastic reduction in government revenues. This is putting the country further at risk of more defaults and threatening the solvency of the country for generations to come.

Lebanon’s prospects are very precarious unless a comprehensive RE-STABILIZATION PACKAGE is implemented which must not only focus on fiscal proposal but also on reforming the public sector and amending some problematic constitutional omissions. Nothing short of this will end the cycle of bad governance which created this dire predicament in the first place.

In this paper I will therefore address the matter of prioritization and the simultaneous necessity to restructure the public sector which needs a systemic purge. This includes looking at the faults and lacunae, which we inherited from the founders and which persist to this day to undermine the fundamental structure and administration of the government.

What we have is a chronically weak state that needs healing. I have tried to highlight many of these fissures in the establishment, and to offer remedies for them. The analysis that I give is purely pragmatic and gained from years dedicated to wanting to improve the performance of my country.

There will be many reasons put forward as to why we cannot do what I propose, which is why this document comes with a warning: these changes that I am discussing may create visceral responses for or against, and I ask that for every reaction we experience, we need to examine within ourselves where is it coming from? Are these reactions stemming from fear of change? From sectarian prejudices? If so? Are we not just perpetuating the same limited beliefs which nearly destroyed the country more than once? And finally, are we capable of exploring the question of nation building from a truly functional point of view?

The solutions I am discussing are simple. It’s more a matter of tweaking, refining and improving what already exists. We do not have to reinvent the wheel! We have to use our present failure and the lessons learned from it to evolve into a better version of ourselves.

Therefore, I believe that, in order to emerge from the pit of darkness in which the country has fallen, there are some immediate priorities which need to be tackled and also some political and structural concerns which must be resolved to secure lasting change.

You will find below the schematics of such priorities and possibilities. I will obviously start with the matters that need immediate action.

SECTION ONE – PRIORITIES

FINANCIAL AND FISCAL

Due to the immense pressure being exerted on the nation by the financial collapse of the banking system, and the collusion of that sector in the defilement of the country, it is very important to redress that sector as a priority for all concerned.

DEMAND A PARALLEL CIVIL FORENSIC AUDIT

It is vital for the Judiciary and The Court of Accounts to demand a PARALLEL FORENSIC AUDIT to the Government’s work being carried out in the coming audit of The Banque Du Liban (BDL). Until all those numbers have been exposed and revealed, there cannot be any justice and no point of departure going forward. This parallel audit must be made public in its entirety to prevent any cover-up.

Allow the Auditing procedure to follow leads and extend its jurisdiction over all the Ministries

PASS A LAW TO STANDARDIZE BANKING MEASURES TO PROTECT THE PUBLIC

The country is presently in a financial meltdown which is being handled in an ad hoc manner with the banks calling the shots and determining, often cruelly, the fate of its creditors. The priority is therefore to stop this daily abuse and press for a law to be passed which standardizes the practices of the banks to give people legal protection. This law is being obstructed in parliament because of the cronyism of the ruling elite and their natural inclination to protect each other and their mutual self-serving interests. To pass this law would inevitably be admitting to the incompetence of those banks.

NEGOTIATE A SETTLEMENT WITH THE IMF

Before any settlement with the IMF can be discussed, the people responsible for the financial disaster need to be coaxed into coming clean by any means necessary. The nation needs to obtain the full disclosure of the country’s financial balance sheet of remaining assets and losses. To this day here are 3 numbers in circulation:

The BDL’s, The Ministry of Finance and The banks. This is just another blurring tactic by those targeted in this meltdown to further fudge the reality of the situation and to protect themselves. However, from a constructive point of view, their procrastination is hampering any progress, as the matter needs to tackled head on, to come up with a definitive strategy to save the country.

Solutions today, should not just focus on debt and loss and cash but also recognize the potential value of the country’s assets, even though, to-date, the mediocrity of the management of these government assets has only squandered domestic and foreign investment, and further damaged national productivity and economic growth. This can however, be part of a plan to re-infuse the economy with fresh money in the form of semi-privatizations and capital improvements.

The government must also propose a fiscal policy which is not capital gains and earning driven, since this would be useless at this time when the economy is at a standstill. It should take into account the hardships facing the nation by deferring certain payments and collecting others in a judicious manner so as not to add to the calamitous financial situation strangling the population.

In order to comply in the short term with the IMF regulations and in the long term with the proper management of the fiscal requirements of the country, The Ministry of Finance (MOF) will need to focus on creating a MODERN TAX ADMINISTRATION SYSTEM by developing its own proprietary software specifically designed for Lebanon’s monetary and fiscal needs. This system will have to meet the requirements of a modern 21st century administration and be the launchpad for taxpayer e-services, to enable people to file and finalize their tax transactions electronically.

The Ministry of Finance has been talking for years about Implement a Global Income Tax (GIT) system to help in the overall tax administration, and payment and creating a Treasury Single Account (TSA) to streamline payments and receipts and improve cash management across government entities. The ministry should speed up these innovations and apply International Public Sector Accounting Standards (IPSAS) for use by public sector entities around the world in the preparation of financial statements. This will bring Lebanon more efficiently in compliance with the IMF’s standards and other international regulations. If engaged in correctly this period can be seen as an opportunity to implement all the changes that the Ministry of Finance has been promising for years.

Indeed, THE MINISTRY OF FINANCE should be the strongest ministry in the Government. It is the platform for the formulation of economic reform and policy, fiscal policy, and debt management in alignment with national priorities. It must become the role model of transparency, and accountability, in order to project good governance. The Ministry of Finance is like the command center for the whole Government and presently it is facing serious problems, because it has not been steered by clear policies for decades, due to political interference.

The Ministry of Finance has been negligent for decades, its lack of a budget and its lack of supervision of THE CENTRAL BANK’S activities have contributed largely to the present crisis.

Today The BANQUE DU LIBAN is in default and facing cataclysmic bankruptcy. It has severe handicaps in that has no auditing regulations for The Central Bank and The Governor can set interest rates and monetary policies without accountability, acting in complete secrecy about the financial transactions in which he engages. The Governor reports to no-one and cannot be fired!

In the future, the Government must set yearly parameters for performance on The Governor of The Central Bank, with benchmarks and have the option of his dismissal relative to performance. The Ministry of Finance must force the Central Bank to disclose its monetary policies regarding interest rate values and parameters and insist on the publication of an Annual Report (which has been shelved for ears).

Many of these guidelines will be the determining factors for whether Lebanon will receive any official cooperation and help from the IMF and other lenders to help it get out of its tragic situation. Part of that process will also be to consolidate the number of banks in Lebanon and to recapitalize the remaining banks.

As far as the BUDGET is concerned, the nation remained for 15 years without a national budget, and when the final budget was done and adopted for 2019 it was reused without any modifications for 2020. This was reckless and clueless in light of the financial chaos that ensued.

Going forwards the MOF must enlarge the scope of the budget coverage by incorporating the finances of rogue institutions such as The Council for Development Reconstruction (CDR) and The Higher Relief Commission (HRC).

In light of the complicated financial situation of the country it would also be wise if the MOF prepared the next budget in a three-year framework to break the cycle of basing the new budget on the previous year’s allocations.

SET UP A POVERTY RELIEF FUND

The huge rate of business closures, unemployment and poverty confronting Lebanon have only been compounded by the Covid-19 imperatives. These have precipitated the decline and created an emergency situation which must be acted on and resolved, as soon as possible, to prevent Lebanon from descending into complete chaos.

Lebanon must establish a POVERTY RELIEF FUND to be supplemented by a new fiscal law that would allocate a percentage of any dividend transferred to the Government to pay for services that help alleviate human suffering, including the supply of food and medical help. The Fund should be based on core principles including transparency, limitation of scope, and political insulation.

In addition, with the “shortages of dollars” impacting the Lebanese economy that is based

on an 80% import rate model, it is very important to set up a FOOD SECURITY PROGRAM for the next two years until the currency stabilizes and credit transactions become feasible again.

The reform of the public PENSION SYSTEM is an equal priority at this time because of its social economic and fiscal impacts. There are currently three pension schemes (none of which has any funds remaining!), one for the private sector (The End of Service Indemnity scheme) and two public sector schemes for the army and civil servants. However, in light of the recent events this is an opportunity for the Government to create a new Social Security Investment Authority by integrating these three systems into one Fully Funded Defined Contribution (FFDC) scheme. This will promote equity among contributors, provide social protection for a wider segment of population, pave the way for a more flexible labor market.

POLITICAL

It is not enough to make the above changes, one must not lose track of the objective of creating a new political climate for the country, that is why the next two years are crucial and during this time we need to AMEND THE EXISTING ELECTORAL LAW

Thus, going forward, another priority to focus on is to change the existing electoral law and allow for the election of independents candidates to parliament. This will obviously meet a lot of resistance but, if this is not done, there will not be any substantive gains from the October Revolt and the same representatives will return to power.

In point of fact, the amendment of the 2017 Electoral Law is not brain surgery and a simple modification would secure a different outcome. The present law is twofold and operates with both a majority system with electoral lists, and on the basis of proportional representation through a preferential vote tied to lists and the small district of the Caza. A proposed solution would be to amend the 2017 law by:

1. Simplifying the qualification procedure.

2. Basing the preferential vote on a large district namely The Mohafaza.

3. Introducing a “one-time” Quota of 30% for the representation of Women in Parliament.

In addition, the present Parliament must not be allowed to extend its own mandate in the forthcoming elections in 2022, (which they will be very tempted to do, to retain the majority votes) because it will be that parliament that elects the next President.

SECTION TWO – PUBLIC SECTOR

Having laid out these priorities as being of extreme national importance at this time, I have over the last years formulated ideas which I will describe next and which can be a roadmap for the process of resurrecting the nation related directly to the constitutional and administrative weaknesses within the

Government, which have led to continuous problems and the lack of good governance. However, I would like to stress that any successful change in Lebanon has to be done first from an ethical perspective to restore human dignity and provide prosperity to all Lebanese. It must come from a model of enlightened leadership by example, whereby the value system and the respect for the individual emanates from the top down and reflects an image of society where the common good is based on equality.

One of the few notable achievements in the formation of this post revolt government was the practice of the SEPARATION OF POWERS for the first time between the executive and the legislative branches of government whereby, their respective members cannot be present in both branches simultaneously. This ensures that the whole government functions with a proper system of checks and balances.

Having said that, it is important to examine each branch of the Government separately because there are serious flaws which hamper their functioning. In THE LEGISLATIVE BRANCH, parliamentary procedures must be improved by installing ELECTRONIC VOTING SYSTEMS to prevent irregularities in parliamentary ballots. In addition, it has become painfully obvious that many elected members of Parliament do not take their legislative roles seriously and are frequently absent. Therefore, A RECORD OF ATTENDANCE OF MPS to parliamentary sessions must be applied to keep them accountable to their constituencies. Equally the government should ABOLISH LIFELONG SALARY FOR RETIRED MPs which the country can no longer afford to sustain.

For too long, THE JUDICIARY has been victimized by politicians and used to serve their interests. It must become more independent to avoid political meddling. The Members of The Supreme Judicial Council should be ELECTED THROUGH DIRECT ELECTIONS by all levels of judges. The Government should not be involved in this process, as governments come and go and do not act impartially. (Currently, the Council elects two only, and the Government appoints all remaining ten).

When it comes to THE EXECUTIVE BRANCH, after Ta’ef THE PRESIDENCY suffered a big decline in its prerogatives in favor of the role of the Prime Minister and the Government.

This has caused constitutional and administrative problems, the chief of which, is the abuse of power of the legislative branch.

This was evident when Parliament extended its own mandate of four years after successively and unconstitutionally cancelling democratic elections.

Therefore, I am proposing to restore to the President, THE RIGHT TO DISSOLVE PARLIAMENT only in the event that members of Parliament attempt to extend their mandate and violate the most sacred principles of a democracy.

With regard to Presidential powers, it is important to amend the clause regarding presidential vetoes and to grant the President a REAL POWER OF VETO that can only be reversed by a majority vote in Parliament. (This can be done by amending clause 3 under The President of The Republic Section, in the section on “Political Reforms of the Amended Lebanese Constitution” which states that: “Should the cabinet insist on adopting a resolution after the rejection of the president or should the grace period pass without issuing and returning the decree, the decree of the resolution shall be valid anyway”.

One of the main problems that has hampered the governance of the country, and which without doubt, contributed to the lack of confidence in the Lebanese economy is the repeated VACUUMS IN GOVERNANCE at the Executive level.

It has taken the nation sometimes two years to form a Government and to elect a President. This happens because in the Lebanese Constitution there are no deadlines for these events. Therefore, it is only logical to propose that the matter of deadlines be revisited, in order to prevent such vacuums from re-occurring, as they handicap the nation on a regular basis.

A DEADLINE FOR THE ELECTION OF A PRESIDENT must be set at 90 days from the time that the Parliament becomes an Electoral Body, and in order to ensure the presence of eligible candidates during that timeframe.

A DEADLINE FOR THE REGISTRATION OF CANDIDATES for the presidency – at 30 days prior to the election deadline. Furthermore, it is recommended in this day and age that a person should at least have a university degree to be eligible for the post of President of the Republic.

IN THE EVENT OF THE DEATH OF A PRESIDENT OR THEIR RESIGNATION: The Constitution does not make any provisions for the re-election of a president in the event of the death of the incumbent president.

THE RE-ELECTION OF A PRESIDENT: In which case it should also be 30 days following the 40day morning period from the time of death. At which time, Parliament would also convert into an Electoral Body. In the interim, the Government, as a whole, would assume Executive Privileges.

In addition, the Constitution does not make any provisions for the re-election of a president in the event of the death of the incumbent president, in which case it should also be 90 days as above from the time of death, at which time, Parliament would also convert into an Electoral Body. In the meantime, the Government as a whole, would assume Executive Privileges.

As for the Government, it has also suffered the same fate as the Presidency because of a lack of deadlines in the constitution, therefore, in order to avoid a paralysis in the Executive Branch of Government it is important to introduce:

A DEADLINE TO CALL FOR CONSULTATION TO NAME A NEW PRIME MINISTER – 1 week or The President will be in breach if his Constitutional Duties.

A DEADLINE TO FORM A GOVERNMENT – of 40 days -by a nominated and parliament-approved Prime Minister. If the deadline expires then the Prime Minister designate will have to withdraw to be replaced by another.

I really believe that these administrative Constitutional amendments would make a world of difference in the smooth transition of power in the Executive Branch and they would add much-needed confidence in the continuity of governance in Lebanon and yield positive economic repercussions.

On a more general level, as far as the Government is concerned, there are some ADMINISTRATIVE AMENDMENTS which could be considered priorities at this time.

The first consideration for the nation is its MODERNIZATION. Lebanon’s administration dates back to the fifties and it is full of redundancies, expired paper-driven transactions and defunct information storage systems. It suffers from the lack of intra-departmental communication and the necessary follow up. It is a wasteland of incompetence. There is no automation or standardization for internal operations and across the government. The Minister of Finance for instance, is overburdened with administrative functions – he has to sign every financial transaction in the country which also has to be stamped manually!

This is why one of the essential pillars for transforming Lebanon in the immediate future, is to launch a nationwide E-GOVERNMENT INITIATIVE which would function on two levels: the first being intergovernmental, to improve communication and efficiency, and the second to streamline public transactions and prevent corruption in the civil service.

In addition to modernizing the government, there are some ADDITIONAL GOVERNMENT INSTITUTIONS which should be considered to help the country at this time, these would include:

• A MINISTRY OF PLANNING (THE RE-ESTABLISHMENT THEREOF) – This ministry would replace the CDR in the government. The CDR has always been a para-governmental body which has eluded accountability and at the same time creamed the establishment. The CDR should be privatized.

• A COMMISSION FOR INTERNATIONAL AID – It should be established to focus exclusively on the refugee crises which drain the resources of the nation. This commission by its nature would report directly to The President of the Republic. It would deal with both the affairs of the Palestinian refugees, their status, and the funding of UNWRA and other aid services, and also with the affairs of the displaced Syrians regarding their return. It would be responsible for budgeting and securing the continuity of international aid for all refugees on Lebanese soil.

• A COMMISSION FOR POVERTY RELIEF – This commission would be created as a watchdog organization to oversee the management of THE POVERTY RELIEF FUND, including its allocations and disbursements to the most disenfranchised sectors of the population. It would report to the Government.

Furthermore, as a way of countering the collapse of the Lebanese economy it is very important to fractionalize the impact of the effects of such a collapse on the whole nation. This kind of mitigation can be done by increasing the economic independence of regions through the Municipalities.

One of the hardest hit sectors of the economy has been the Municipalities which have had their funds decimated by the losses in the financial sector. Due to past political corruption, the municipalities have also accumulated huge debts over which they did not have any previous oversight or control.

In light of the depleted municipal funds, it is imperative to give more autonomy to the municipalities to manage the affairs of their citizens in their localities, and that is why it is important in the next government that is formed, to RESTORE THE MINISTRY FOR MUNICIPAL AFFAIRS and separate it from the Ministry of Interior. This Ministry will handle the decentralization and allocation of resources to the Municipalities, giving them the financial autonomy to administer their budgets. This decentralization strategy can mitigate the pressure of the national economic crisis on a local basis by creating job opportunities and infrastructure development.

Equally, it will be important to pass laws to allow municipalities the fiscal authority to implement reasonable community taxes. This will be more efficient in the present economic climate, as the tax ratios could be tailored to the affluence and prosperity of the districts. This policy of empowering the municipalities is a way for the Government to begin to propose a fiscal policy that is less draconian and more impactful.

One of the main problems which led to the high level of government corruption over the last decades, is that the Control Agencies were rendered impotent by various administration. These include The Constitutional Council, The Court of Accounts, The Civil Service Board, The General Disciplinary Council and The Central Inspection. They are supposed to protect and regulate the public sector. During Rafic Hariri’s premiership, these control agencies were brought directly under his personal management. Since then, they have suffered from political commandeering and obstruction and they have been systematically weakened for political reasons. These CONTROL AGENCIES must be empowered again. They must also be DEPOLITICIZED and led by specialists in their field.

THE CONSTITUTIONAL COUNCIL is completely politicized with leaders promoting judges to positions on the Council and thus invalidating their impartiality. Because they are subjected to political pressure, the Council members often abstain from attendance. Their presence when convened should be enforced to limit political interventionism. These judges must also be given the right to review the constitutionality of laws on their own initiative without depending on the politicized demands of executive or legislative members.

THE COURT OF ACCOUNTS which is supposed to be a system of financial control is tilted in favor of pre-audits with little involvement in post-auditing. This has allowed for a lot of corrupt transactions in the public sector to go unmonitored.

Because of this, the organization has also struggled in its relationship with the Ministry of Finance because of a duplication of financial pre-audits between them. This is unjustified and causes serious delays in governmental work.

The court of Accounts should be transformed it into a post-audit authority ONLY so that its actions do not conflict with the role of the Ministry of Finance. After all, what matters in monitoring corruption, is to verify how budgets are allocated during and after the completion of projects.

More importantly, the Court of Accounts has no jurisdiction over many of so called “State Institutions’ which have been accused of the biggest corruption practices and which unanimously act independently of any auditing by either Government or Parliament.

These are:

The Council for Development and Reconstruction (CDR)

The Council of South Lebanon

The Fund for the Return of the Displaced and Refugees

The Higher Commission for Relief

It would seem wise therefore, to propose that The Court of Accounts be given jurisdiction over all government-funded projects and that it obtains its independence as a watchdog body by having its own budget so that it can exercise impartiality in its mechanism of controlling the public sector. This would also include auditing The Central Bank, which it must do yearly. It is also important from a professional standpoint that the members of the Court of Accounts have a professional finance background and not only a legal one.

Most of the regulatory bodies in Lebanon have suffered from lack of funding, resources, and authority. These include THE CIVIL SERVICE BOARD, THE GENERAL DISCIPLINARY COUNCIL and THE CENTRAL INSPECTION. They have all suffered from political interventionism in one way or another.

The Civil Service Board has had a very bad relationship with the political leadership for years. Its members have had their immunity abolished, making it difficult for them to exercise their functions without fear of political reprisals since part of their job is to monitor the personnel policies and practices of Ministers and ministries.

During these last decades many political leaders have abused their positions in government to place civil servants in office as political favors. Successive governments have bypassed the rules of The Civil Service Board. For example, a large number of The Ministry of Finance’ s staff is not hired through The Civil Service Board but illegally through organizations like the UNDP.

This and other practices have expanded the number of government employees, known as “Unclassified Casual Workers”. The number of such employees in the public service is actually larger than the number of regular civil servants! These need to be progressively eliminated. Under the present law the large group of “Unclassified Casual Workers” are excluded from the jurisdiction of The General Disciplinary Council. The result of these malpractices is that the existence of such an unduly large public sector in such a small country places a very costly burden on the government’s GDP.

All the above shortfalls, the encumbrances, the defunct and dysfunctional elements of the government need to be remedied rapidly and replaced by new strategies and methods that are in the best interest of the nation.

After all is said and done, and these various suggestions have been offered as a correctional roadmap, there is only one conclusion I can advance and it is simple: We have to fix our nation because it is broken, and more importantly, there is no more time for procrastination!!

Finally, I would like to draw an analogy with the film “The Matrix”. Just as in the film, the false façade of Lebanon’ prosperity, camouflaged by a fake exterior of glamor and flashiness has now been revealed and exposed as a lie, what we have been left with, is a nation struggling, divided, corrupt and failed as a state. I know that this new harsh version of Lebanon is shocking, but at least we know it is real.

In contrast, I honestly believe that the progressive elimination of all that is fake and superficial, the natural curtailing of greed, the submission and admission of our vulnerability can all be turned into strength and resilience going forward.

Equally, as in the film, we were given the choice to take a red pill and become part of the resistance and push for change or take a blue pill and forget everything and return to be the blind “supporters” of the “Zaims” and their personality driven political parties.

In the film, the hero, Neo, takes the red pill and sees for the first time the Manichean evil face of the reality that he must overthrow. He chooses to join the resistance. Just like Neo, for us Lebanese, there is no turning back. We have collectively taken the red pill and we can only look ahead, as scary as that may be!

YOU CHOOSE!