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

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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 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.

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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.

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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!

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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.

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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!

ABUNDANCE VS SCARCITY Strategic Thinking for Lebanon’s Emergence in this Century. By Tracy Chamoun.

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Notwithstanding the fact that Lebanon is going through one of its most perilous crises in its history, one cannot remain idle waiting for solutions to fall from the sky. The fiscal and financial sector struggles are matters which need to be resolved through very precise policies in conformity with international regulations and standards.

But it is important to counterbalance these negative trends with governance that is more positive, and proactive to paint an exit strategy for Lebanon ensuring its emergence from its present economic woes and state of impoverishment.

Unfortunately, rather than focus actively on solutions, many of the people in power are still bickering over the dried out old crumbs scattered in the empty pie dish. Therefore, I have taken the liberty of articulating some important factors and trends which need to be taken into consideration when trying to rebirth Lebanon in this century.

This exercise might be deemed premature, but planning is the key to success, and it is never too soon to think ahead, because before you know it, it becomes too late. In the light of such planning, it is important to highlight both the strengths and the weakness of Lebanon, and despite the fact that it is a small country, it is fair to say that what it does not possess in land mass, it certainly makes up for in ingenuity, flair and entrepreneurship. In addition to the quality of its people, Lebanon’s geographical position has always made it a vibrant intersection for cultures, trade, migration, and excellence through diversity.

Today however, looking at the state of affairs in the country, it would seem that all has been lost and that Lebanon is confronting a very serious breakdown. Nevertheless, breakdowns and even death are part of the process of rebirth and therefore this time of chaos and dissolution must be transformed into a breakthrough, for the sake of the population’s survival.

In order to do this, I am presenting the basic elements of a vision for the country which will pave the way for Lebanon in the future, to allow it to effectively navigate the forthcoming big trends forecasted this century which will be shaping the world.

Certainly, every sector of the economy must be treated in the same way with careful analysis and projections, but in this paper, I will be focusing only on a couple of sectors, which are very strategic for Lebanon

In the Government Recovery Plan, which was mostly centered around resolving the financial crisis, they also relied on what they called two pillars of the economy to present a recovery model, and one of these was tourism. I would just like to say that for too long, Lebanon has relied on a model of existence which originated in the 50’s and 60’s that placed tourism as the main driving force for an economy that has been lodged for more than half a century in a permanent war zone. Lebanon has also been burdened by the continuous large presence of radicalized refugees, and it is a country that is extensively polluted. On top of everything else, it is now having to deal with the fallout of the new post-Covid-19 world order, where travel and tourism will become less profitable – at least in the short term.

Because of these challenges, tourism is to be placed on the backburner. Lebanon needs solutions and does not have the luxury of time, to wait for anything which is outside of its control.

The other image of Lebanon which no longer holds validity, is its description as the Switzerland of the Middle East, based on the touting of a fiscal haven, driven by a thriving secrecy-bound banking sector. Today, the financial sector is in ruins and it will not recover in the short term and therefor can no longer be considered a pillar of the Lebanese economy.

This old model of Lebanon’s economy built on tourism and the banking sector is now defunct. For a new economic model to arise, it needs to be driven by local, regional and global imperatives. Therefore, any understanding of the future positioning of Lebanon will need to take into account four major trends that are going to shape this century and which need to be taken seriously and dovetailed into any future strategic positioning for Lebanon, in order to ensure its economic and societal survival on a global scale.

These are:

1- The move away from fossil fuels. It is believed that in the decades to come oil receipts will contract amid the inevitable global clean energy transition that will accompany climate control action and drive transition towards clean energy.

2- The increasing dependence on technology and innovation. These are creating immense transformations in the way companies and nations organize production, trade goods, invest capital, and develop new products and processes. In addition, the increase in the rate of innovation means that comparative advantage is short-lived and threatens nationalistic concerns about competitiveness.

3- The inevitable advent of climate change by 2050 (which is only 30 years away). If left unregulated, this paints a bleak future in which it is projected that, across West Africa, tropical South America, the Middle East and Southeast Asia, there will be more than 100 days a year of deadly heat, leading to over 1 billion people being displaced and some of the world’s most populous cities being partially abandoned.

4. The shortage of food on the planet. As a result of climate change, and the over-population of the planet, it is estimated that food production will be insufficient, due to weather being too hot for humans to survive in significant food-growing areas, and due to chronic water shortages. With not enough food for the world’s population, prices will sky-rocket and social upheavals will ensue.

The first trend I want to discuss in relation to Lebanon is: The move away for fossil fuels.

Fossil fuels have recently undergone a severe devaluation, as a result of surpluses that cannot be stored and utilized. In the present economic model being touted for Lebanon, it is being projected that the nation will be saved by its energy resources. However, in the event that oil and gas are discovered in sufficient quantities to be of any value, there is still concern about the cost of extraction at the present rates (which exceed the price of the sale of the commodity, giving it a zero transactional value).

The expectation that Lebanon will be saved by its energy output is dangerous because it is putting all of Lebanon’s eggs in one basket. The energy industry has very volatile price points which are, and will remain essentially, out of Lebanon’s control and which risk placing Lebanon at the mercy of the fluctuations of world markets.

Therefore, the oil and gas sector in Lebanon should be viewed as a silver lining on top of an otherwise robust economy. It should be valued, if successful, as the wellspring of security, for the Lebanese people, to be managed through the Sovereign Fund that will be set up.

Lebanon needs to build its economy not just on the future promise of oil and gas but on the substantive development of other sectors which have been left lagging in the previous century. Among them is the agricultural sector which is a natural source of wealth for Lebanon.

The world is presently witnessing an agricultural revolution. While technological innovation is not new to agriculture, emergent technologies, such as the Internet of Things, Cloud Computing, robotics, and Artificial Intelligence (AI), have the potential to change farming beyond recognition.

Lebanon’s resurgence means that it needs to see how to place itself at the forefront of this agricultural revolution because of: its ideal geographic location at the doorway between the East and the West, its diverse climate, the fact that almost one-fourth of Lebanon’s land is cultivable (the highest proportion in the Arab world) and that most of these 240,000 hectares are rain fed.

This sector is a natural growth sector for Lebanon to exploit, and the advent of new technology and innovation can transform this small country into a haven for agricultural prosperity through the maximization of its natural assets. To do this we need to identify the sectors for greatest growth and proceed to captivate niche markets that can offer competitive advantages. These matters will all be discussed below, but first I want to elaborate on the next global trend in relation to the economic positioning of Lebanon.

The second trend is: The increasing global dependence on technology, innovation and integration.

Lebanon is ill-positioned today to take advantage of all the innovations that are accessible through modern technology because the infrastructure is outdated and the way that the industry has been parceled, is symptomatic of the monopolistic mentality of ownership of the ruling class, which does not yield a platform for open-ended access and usage. Therefore, new anti-protectionist laws need to be introduced and the sector rendered more competitive.

The first priority of course, is to supply uninterrupted affordable electricity, to power such connectivity. This sector has been the most damaged over the years as a result of bad management, political interventionism and illegal profiteering.

The second priority is to make such connectivity a priority through improved optic fiber connections and cloud usage in the shortest time possible. Without this infrastructure in place Lebanon will remain a mendicant nation stuck in the stone age of brick and mortar.

As for innovation, Lebanon has the education system and the know-how, as well as, the intellectual capital to excel in this field, provided that, the government prioritizes, creates and subsidizes the incubators for such development and allocates resources to the sector.

However, it is not enough to just talk about technology as a broad umbrella term, when discussing Lebanon’s strategic positioning on the world stage. It is important to identify the sectors where Lebanon can excel as a function of its strategic geographic position.

Lebanon as I mentioned above is a bridge between Europe, Asia and Africa. It possesses intrinsic advantages based on its resources including the quality and fertility of its soil, its moderate climate which also benefits from mini micro-climate zones, and of course there is the inherent advantage of a relatively well-educated population.

This brings me to the two next world trends that I want to discuss and in which Lebanon can play a strategic role, and possibly impact many generations to come.

The third trend is: The inevitable advent of climate change by 2050 which is only 30 years away. In the twentieth century, climate was dominated by near universal warming. Almost all parts of the globe had temperatures at the end of the century, that were significantly higher than when it began, due in part to the increased levels of greenhouse gases.

Global warming is predicted to affect the Middle East very badly and evidence abounds that it will be one of the regions, where climate change will hit hardest. For instance, summer temperatures across the region are expected to increase more than twice the global average. Prolonged heat waves, desertification, and droughts will make parts of the Middle East and North Africa uninhabitable, fueling violent competition over diminishing resources and provoking internal and external conflicts, even rendering governments in direct competition for resources with their neighbors, specifically, with regard to climate-induced water shortages (as witnessed in the existing water wars between Jordan, Syria, Lebanon and Israel. These Middle Eastern neighbors are already wrangling over water needed for irrigation, drinking, and hydropower production).

In Lebanon, the water situation is not as good as it should be, and varying degrees of water shortages have been experienced in the last decade. These were aggravated by the rapid population growth, urbanization, industry and irrigation developments. As a result, ground water levels have fallen, springs and wetland areas have dried up, and important rivers, such as the Litany, no longer flow in the dry season. In addition, reduced vegetation cover, due to deforestation, overgrazing, and poor surface management of cultivated lands, have led to reduced infiltration rate, increased runoff, soil erosion, and a decline in groundwater recharge. This deterioration in water retention places an immediate restraint on the economic growth of the agricultural sector. Added to this degradation, is also the changes in rainfall.

The question of water is therefore a crucially strategic issue for Lebanon and needs to be prioritized in any future development plan for the country. Water must be considered a vital resource not just for Lebanon’s internal use but for its survival.

Lebanon should therefore plan to double its efforts on innovation with a specific focus on deploying technologies that would alleviate resource scarcities before they arise. It should focus on technologies which will harness water extraction, and storage and become a model nation in terms of its commitment to clean energy research, specifically with regard to water and the invention of related technologies, such as: Reduced water-intensive agricultural practices, the reuse of wastewater through green bio-technology, the use of meteorological data, which can be transmitted in real or near time to national and regional databases to facilitate the dissemination of vital weather-related information to safeguard crops and livelihoods.

The bottom line is that when confronting the inevitable and inextricable trend of global warming, Lebanon should already be positioning itself to become a major reservoir of water supply to the region and an expert in the matter.

This brings me to the fourth global trend which should be at the forefront of Lebanon’s strategic thinking and positioning for the next half century, and this is: The matter of the forthcoming shortages of food on the planet.

The recent accumulation of disastrous events which have besieged Lebanon precipitated an impoverishment of the nation and revealed the weakest link in the sustainability of the country, namely, its over-reliance on the import of raw materials and goods to support and feed the Lebanese population.

Today, because of the catastrophic economic collapse, more than half the population will be pushed beneath the poverty line and the future outlook for a famine epidemic is looming dangerously on the horizon. Though these are very real considerations, I do not want to discuss what we can do to mitigate this present situation which, I have elaborated in previous papers, but instead, what I want to discuss what Lebanon can do to capitalize on the technological advances being made in the food and agricultural sector.

For Lebanon – which is not a big country in terms of landmass – to adapt to the future demands of food, an agricultural revolution is needed to distinguish its output in the arena of trade and contribute a sizeable source of income to the bottom line of its GDP.

These changes in agricultural policy must conform to the advantages offered by the indigenous topography of Lebanon, its climate, soil, and water access. Land use must be optimized for crops that are high yielding per square meter and are competitive in terms of the nature of the goods sold and their price points worldwide.

At present Lebanon’s Agriculture sector accounts for 6 percent of its GDP, In 2019, agricultural exports reached USD 193.1 million, growing at a CAGR of 2% during the 2010-2019 period, while the decline between 2014 and 2017 was due to the closure of the border areas with Syria.

But Lebanon has fallen behind dramatically due to its lack of innovation and its use of old models of production and distribution that have not advanced with the food innovation sector, nor evolved with the changes in taste and behavior, nor competed with the competitiveness caused by the broad and easy access of goods due to globalization.

Lebanon’s agricultural model needs to be completely revamped and adapted to future needs and made to benefit from the huge technological leaps in the sector.

Lebanon is an exporter of fruit and vegetables, it is self-sufficient in poultry and produces 45% of its pulses, only 15% of its wheat and 10% of its sugar needs. Coffee grasped the largest share of total crop exports with 11.7% of the total, followed by fresh or dried grapes (7.6%) and fresh or chilled potatoes (7.6%).

The agricultural sector connects the country with the Arab region and the world, opening business opportunities in many competitive markets though Arab countries remain Lebanon’s main export markets for agricultural products, accounting for 77.8% of total exports in 2019, including KSA (22%), Qatar (17%) and Syria (12%).

However, the problem is that Lebanon is also highly dependent on the import of agricultural products, with imports amounting to USD 1.47 billion in 2019. The private agri‑business companies import most of their goods, including seeds, fertilizers, plant protection materials and feed ingredients. Lebanon imports 78 percent of its dairy and meat products and its domestic cereal production only covers, on average, less than 20 percent of its consumption needs.

Looking down the road with regard to the issues of climate change and food shortages, Lebanon needs to be thinking very seriously about how these changes are going to impact its agriculture and food security, and one of the ways that it can do this is to become a jewel in the constellation of the vegetable and food chain of the world, distinguishing itself by the introduction of green practices and technological innovation to improve efficiency and resilience and to survive in an increasingly globally competitive world where the need for constant innovation is essential.

The land of Lebanon itself, is a fruit and vegetable paradise, and this should become the trademark of the new Lebanon. To achieve this, Lebanon, must engage in a determined approach to clean up its environment and to rehabilitate the soil which has been destroyed by decades of chemical use. This effort can be led by a move towards developing a credible organic nationwide farming policy that can become a special feature for exports.

The choice to move towards becoming a world supplier of organic produce is driven by the fact that it is a rapidly growing market -The organic food and grocery retail market size was recently valued globally at USD 11.7 trillion in 2019, and is expected to grow at a compound annual growth rate (CAGR) of 5.0% from 2020 to 2027. This important shift towards natural and organic food for health reasons, is because people are realizing that the risk of many diseases can be decreased, and health can be preserved by adopting a correct diet and lifestyle.

For this to happen we need to create the “Grow Organic Agriculture in Lebanon” (GOAL) directive and make local sustainable organic agriculture a prime policy for future economic growth.

Under this high standards and quality umbrella, we can utilize the inherent assets of Lebanon in terms of its climate, topography and water access to promote new trending crops which have increasing market value, such as, medicinal plants (including cannabis) as well as, what is now being termed « Superfoods », which is an umbrella term used to refer to various varieties of food with high nutritional benefits.

The Global « Superfoods » market size is expected to reach $209.1 billion by 2026, rising at a market growth of 7.3% CAGR during the forecast period.

Increasing healthcare costs, growing geriatric population, food innovations, changing lifestyle, and medical discoveries have benefitted the demand for superfoods and consequently the overall market growth. Ascending demand for natural, nutrient-rich food containing vitamins and essential minerals is further boosting the market for superfoods. Furthermore, extensive R&D activities and the advent of new monitoring technologies are expected to drive the market for superfoods.

The superfood market has both horizontal and vertical applications and derivatives. It is segmented into fruits, herbs, roots, grains, cereals, and vegetables and its derivatives are segmented into the categories of supplements, bakery confectionery, snacks, beverages, cosmetics and medicinal formulations.

The soil in Lebanon is ideal for capitalizing on this promising market. Globally, the fruits and vegetables segment of the “superfood” classification is set to experience favorable growth driven by factors such as rising middle-class population, upsurge in disposable income, rapid urbanization, changing consumer lifestyle, and the rising popularity of veganism. statistics state that almost one out five consumers in the West consider themselves “plant-forward”, meaning that they follow a diet not necessarily vegan or vegetarian, yet they prefer approximately 70% of their meals to contain plant-based, 100% clean ingredients.

As consumer needs rapidly evolve, food companies must re-imagine the way fresh, plant-based foods are grown, prepared, delivered and ultimately brought to the table. Plant-based, non-dairy alternatives are driving big change in the sector. Plant-based is a long-term format shift that will dramatically change the choices that consumers make, and Lebanon is ideally placed to supply and become a leader in the field.

Some examples of superfoods that would be ideal for development in Lebanon are: Flax for protein and fabric, chia seeds, peas for protein production, beetroot, pomegranate, mulberries, blueberries, grape seeds, grapefruit seeds for their antioxidant properties, oregano oil, watermelon seeds, avocados and avocado oil and walnuts for oil, food and cosmetics, hemp for protein and fabric production as well as, construction materials, soy for food and protein supplements, aloe vera for cosmetics, agave cactus for its sugar and alcohol in the fabrication of tequila, Juniper berries for the manufacturing of Gin and more…

Finally, consumers are becoming more responsible in their choice of foods, and taking into account elements such as pollution deriving from production plants, the quantity of energy used in production, a preference for recycled materials, the amount of pesticides, hormones, or antibiotics used in production, as well as, the effects of Genetically Modified Crops (GMO) on their overall health. They want to know and understand what ingredients are going into their food and they are reading labels. These educated consumers are a change-maker for the industry ranging from the field to the shelf.

Therefore, the Lebanese agricultural sector has the potential to expand widely to global markets if local suppliers adopt international standards and follow export requirements. To do this, Lebanon has to improve its regulatory environment in the food and agricultural sector by establishing laws, creating green policies and providing incentives to guide Lebanon down this unique path by insuring the enforcement of international standards for safety and organic certification.

The government must empower and enhance the function of existing laboratories and facilities pertinent to the Ministry of Agriculture, and it must fund and grow, the Food and Drug Administration Division to monitor quality, health hazards, as well as, the over-use of pesticides. (Presently produce from the Bekaa Valley is registering dangerously high levels of nitrates at 200mg/100 as opposed to 50/100, which is the International maximum norm).

Not only can Lebanon capitalize on its agricultural bounty, but it can also position itself as a technological innovator in this field. There are technologies that should be adapted and developed today which could put Lebanon at the forefront of this field of agricultural innovation in the development of:

Mapping technology to determine the suitability of the land for farming models, automated irrigation, crop monitoring through the use of drones, climate monitoring, crop rotation to maximize growth, permaculture, biodiversity, bio-waste management, robotics, seed banks, urban and vertical planting, blockchain access to lists of information linking sourcing to end user management for global distribution and local consumption.. the list is endless.

I would like to conclude by saying that for Lebanon to be reborn all of its productive sectors need to be revitalized and the agricultural sector is chief among them. People may think when reading this paper that this matter is superfluous and that there are more pressing issues to deal with, but I insist that food and agriculture are at the forefront of the mechanism of salvation for Lebanon.

Form my position as ambassador in Jordan which is a key link in the distribution chain of Lebanese goods throughout the Middle East, even during the worst times of the Covid-19 crisis and lockdowns, Lebanese produce trucks continued to flow to the neighboring Arab countries. In Jordan alone, between 80 and 150 fruit and vegetable trucks delivered daily Lebanese produce locally and to the Gulf. Agriculture is Lebanon’s lifeblood.

We can just keep talking about deficits, loss, famine, and destitution, but on the other hand, we have to begin urgently to articulate short, and long term, solutions for the viability of the nation. In this vision for a viable future both water and agriculture which go hand in hand are deemed key resources for the future survival of Lebanon.

The cornucopia of Lebanon’s fresh fruit and vegetables have been part of its magic, and today we need that magic to help turn Lebanon’s fate around and to become its trademark of excellence worldwide.

Lebanon needs to transform itself into a high end “boutique nation” that excels in perfection, quality of service, ingenuity and craftsmanship in all its sectors, and once again strive to become the jewel in the crown of the Middle East.

Until then the future is unwritten.

Tracy Chamoun. June 2020

« LEBANON RISING » IMPERATIVES AND HOPES BY TRACY CHAMOUN MAY 2020

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Having read in depth the latest economic plan presented by the government, I have come to the conclusion that although it focuses mainly on financial and fiscal restructuring proposals, it needs to address in a more realistic manner the matter of a concise vision to lead Lebanon out of its present dilemma.

At this stage, it would have been more constructive for the government to also include a recovery timeline, outlining the different steps needed in a chronological progressive way so that people can understand what is being planned, and also what is required of them during this process. It is important to provide an idea of outcomes and deadlines which can also be markers for success and for the accountability of the government.

This document like many documents which have preceded it, is full of good suggestions and in principle if they could all be achieved, it would be tremendous. Many of the technical measures proposed are good and valid. The enactment of laws to ensure transparency, the creation of regulatory bodies to monitor different sector practices, the refinement of procedures regarding tax collection, border control and more, as well as, the introduction of incentives for environmentally friendly projects, and the financing and restructuring strategies for the banking sector, are all valid suggestions. These show a high level of technical knowledge at the Ministry of Finance to offer remedies to the complex administrative entanglements, inefficiencies and hurdles of the Lebanese public sector.

However, we cannot expect the Ministry of Finance alone to formulate a salvation strategy which encompasses far more that the fine tuning of the financial sector. It is like putting a small bandage on a hemorrhaging open wound.

These types of lists of reforms have come and gone many times before. It would be better therefore to set specific and realistic targets and once having attained these, increase the level of commitment to incorporate more and more reforms.

In addition to, not prioritizing the necessary steps that need to be taken, this particular document is qualitatively flawed, because the premises upon which it has been conceived are unfortunately outdated and unrealistic.

The 3 premises outlined by the government as essential pillars for the process of recovery are:

1. The Alleviation of Debt by Increased Taxation.

2. The CEDRE Aid Package.

3. The Dependence on Tourism

These pillars need to be rethought completely. Lebanon’s problems cannot be solved by regurgitating solutions which were defective from the outset, and which in the present context have become meaningless due to many constraining factors, including: Geopolitical pressures which are determining our access to international aid, economic and social emergency concerns related to the increased poverty levels in the country and the imminent threat of famine for a large portion of the population, and finally the whole global recession which has been catapulted, as a result of the impact of the Covid-19 pandemic, on both the micro and macro levels of every country on earth.

The first priority for Lebanon as far as I’m concerned is:

Giving access to fresh money in order to insure that basic goods are replenishing the shelves and existing business can continue to survive. For this reason, two things need to occur:

1. The stabilization of the Lebanese currency:

By exerting martial pressure on:

▪ Any illegal black-market sources by inflicting very large penalties on those who wish to take advantage of the situation.

▪ Any stores or vendors which inflate their prices beyond the legal markers.

2. The funding of essential commercial sectors to ensure access to transactional money for those industries, including:

Food

Pharmaceutical

Agriculture production

Industrial production

In the government proposal there are good recommendations to consolidate the banking sector and to establish new lines of credit, to facilitate the funding of new banks and also to license development banks. The idea being that they would supply the private sector with access to funds for business creation and development and give lines of credit for import and export. This is going to be crucial to kick start the economy. In addition, any recapitalization of the banks should result in the creation of a pool of liquidity or “fresh money” which would be utilized to boost productivity and trade.

Lebanon’s economy must avoid falling into the trap of allowing banks to be driven by their bottom line internal profitability factor – through the abuse of money engineering tactics – and instead, they should be require by law, in order to retain their licenses, to allocate a large part of their lending to the commercial sector.

The government’s emphasis should therefore be directed towards identifying the vital sectors which can yield inherent and rapid economic growth – inherent and rapid being key denominators in the choice. Many such sectors have been outlined in a recent study done by McKinsey which was paid for by the Lebanese government. However, the government should not take that document at face value since it was written under different economic pressures and timelines, but it should conduct a re-evaluation of its suggestions and identify the sectors for growth based on present needs and resulting from the complete collapse of the economy, and the effects of the pandemic.

Having re-analyzed the needs of the country and taken into consideration the short, medium, and long-term objectives, the government should allocate resources to the identified sectors and provide these with both, tax incentives and capital injections for business development and growth.

In other words, funding shouldn’t be allocated in an ad hoc manner, but should be part of an overall strategy for the country which, would focus by priority on the sectors that promise the highest yields and the most competitive edge for the reinvigoration of the economy and the re-creation of a prosperous middle class. In this way, a vision for Lebanon in the future, where it is going, and how it will get there would become the driving force behind any economic recovery plan.

This brings me to the first pillar in the document which is flawed, and which is the matter of increased taxation and the projections of supplementing GDP through aggressive tax strategies which is claimed would yield up to 3.7% of GDP by 2014.

Realistically, it is blatantly obvious that until a series of productive economic – not fiscal – policies are put in place, the proposed taxation measures presented in the government’s proposal are at best optimistic. As the saying goes: you cannot get blood from a stone.

Tax is a function of productivity and until it is raised to levels where there is surplus income, taxes just add insult to injury on a population that is drowning under the weight of the complete economic collapse of the economy and the volatility of the devaluation of the Lebanese pound. People are living in a world of hyperinflation and dealing everyday with the impossible rise of the cost of living. This has rapidly pushed the majority of them under the poverty line.

Therefore, when it comes to tax reform and taxation, there are two things that need to be taken into consideration. I do agree that the document addresses in a professional manner the technical matters of tax collection and reform, but it fails to contextualize these objectives in the present social dimension of great distress and hardship that the population is experiencing, and therefore, it will also fail in the corollary dimension of tax enforcement and collection.

Firstly, I propose as a priority, on a technical level, regarding the future effectiveness of the national tax system, that the government should obtain financing through PPP tenders, to engage immediately in the process of shifting towards a tailor-made, functional, nationwide, integrated electronic e-government project. This should be completed over the next year. It would incorporate all public transactions and would in essence, by its very nature, curtail petty government corruption.

Converting to e-government is a priority along with the improvement of fiber optic access and the bolstering of the telecom sector. These would make Lebanon more efficiently competitive in the international business arena, more administratively competent internally, and more able to professionally manage the logistics of future investments and the revenue generated from the taxation on such income.

Equally, rather than push for draconian tax measures in this very delicate phase which needs alleviating solutions rather than further obligations, the government should put a moratorium on tax increases for a year, and in the process implement the e-government transition which, would in itself engender future tax reforms in an effective, but delayed manner, and would give the economy time to recover as a result of other driving incentives.

In the meantime, as an alternative to income taxation, I propose that the government invoke special measures to levy a “Poverty Tax Contribution” and that they set up a national “Poverty Tax Fund”.

Whereas the government is proposing in the document to borrow more money from the World Bank and other international donors to fuel such a “Poverty Fund”, this is not optimal in the light of Lebanon’s existing large debt which as of December 2019, was at 175.6% of GDP or 90.2 Billion US$, and which we ultimately have to find a way of servicing.

This “Poverty Tax Contribution” I am suggesting, would be applicable to all depositors, and it would be based on the value of their capital assets in their frozen bank accounts. A fair pro-rated percentage amount would be taxed based on the wealth of the contributors. It would be a monthly contribution paid to the “Poverty Tax Fund”.

The amount of deposits held in the banks is valued today at more than US$ 67 Billion, (based on the old valuation of the Lebanese Pound at US$ 1,500). If one per cent of this sum was paid as a “Poverty Subsidy Tax” it would yield US$ 67 million Dollars for a population of 4.5 million.

As an incentive to encourage the payment of this tax, the capital control measures could be tailored to allow the matching of the monthly tax payment amounts with the granting of the equivalent access to the contributors of the amount taxed, either via direct access to their cash or the ability to make transfers in the equal amount of the taxed contribution.

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 and indebting future generations.

This fund would provide for disbursements to cover temporary unemployment, health, and education and food for all Lebanese in need. It would be distributed by allocation through a form of decentralized administration by the municipalities, based on the size of their local populations in need. This “Poverty Tax Fund” could sustain the population through this very precarious period of transition, increased poverty and even starvation.

As we continue the analysis of the government financial recovery plan, I would like to discuss the second pillar in the document that is flawed, and that is the over-reliance on the CEDRE funding plan.

The entire proposal of the government relies pivotally on the implementation of the CEDRE loan/aid agreement which was concluded last year in France. The total contribution that the government is expecting to receive to jump start the economy are the 11 Billion Dollars that were pledged through CEDRE.

However, today, as a result of the impact of the pandemic on their economies, all the countries that promised to contribute to CEDRE are confronting huge economic hurdles in their own lands. It looks improbable that following the collapse of the global economy and the significant drop in oil prices that these donor countries will be able to spare any sizeable funds to support Lebanon, which, to-date, has failed to comply with any of the regulatory standards imposed by such aid. Therefore, the over-emphasized reliance on financial aid from those countries, in order to bolster the Lebanese economy, is unrealistic and optimistic.

In addition: the content of the CEDRE proposal which was submitted by the previous government is a reflection of the very dysfunctionality of that government. It is a reiteration of all the mistakes of the past, where a “contractor mentality” has governed the economic development of the country. This contractor mentality has also been the source-feeder for the practice of local clientelism, corruption and the funneling of funds into private pockets through fake subsidiaries and offshore shell companies.

The projects put forward in CEDRE are a regurgitation of shelved concepts by the CDR and appear to be completely disconnected from Lebanon’s present social and economic realities.

Although the idea behind them, is that they would create jobs which would alleviate short-term unemployment problems, they do not yield long term income generating solutions for the vulnerable income groups in the country.

If infrastructure development is to lead to economic growth, it has to be preceded by a development strategy that would give the guidelines for project selection based on improvements that target the basic standards of living and provide long-lasting economic growth.

The whole CEDRE proposal needs to be re-analyzed, and certainly not presented at face value! The elements within it, need to be re-prioritized based on actual necessities that have arisen from the collapse of the banking sector, the foreclosures, and the new world order imposed by the Covid-19 pandemic.

These new contextual criteria should drive the prioritization of infrastructure development and not the other way around. In its present form, The CEDRE proposal lists infrastructure development as a collection of big-ticket items that have been ranked first according to the completion of tender documents and their readiness for execution, and secondly according to “socio-economic impact” and their ability to “mitigate the effects of the Syrian refugee crisis”. These criteria in themselves do not offer a sustainable development program.

Therefore, to base the crux of the government recovery proposal on the outdated and mechanistic schematics of CEDER is unproductive.

After having reassessed the value of CEDRE, a selection of projects within the CEDRE proposal could be retained, such as for instance, the improvement of Lebanon’s access to optic fiber, which would be essential to the vision outlined above of the shift towards the establishment of a full e-government.

Finally, I would like to discuss the third pillar of recovery that the government is banking on to lift Lebanon out of its present misery, and this is Tourism. I have to say that I am tired of economic policies for Lebanon being driven by “Tourism”. Tourism should be the icing on the cake of any economic system.

Firstly, a country which is reliant on imports – 80% of all goods bought or manufactured are imported into Lebanon – is a country that is not sustainable from the point of view of productivity and employment.

We need to forget about tourism for a while. Covid-19 is only a confirmation of this since the mobility of the whole world has now come into question and the future of the services industry form travel to hotels, to restaurants, needs to be reconceived and refueled with confidence before it can recover, and nobody knows how long this will take. Therefore, to make tourism a cornerstone of recovery at a time when the country needs fast solutions for creating wealth is not logical.

In addition, the suggestion to hire an outside and no doubt expensive PR firm to market Lebanon’s image at this time is also not feasible, neither from the budgetary point of view nor from the realization aspect. Lebanon has extensive in-house talent and knowledge in this field and any government spending should be directed towards Lebanese citizens first.

The state of dilapidation of the nation, the endemic waste management problem, the objectionable pollution of the sea with wastewater overflow, the lack of health standards leading to contaminated food, the abuse of pesticides in agriculture, added to the capital control problems which are not likely to disappear for at least another year and which severely hamper the food supply chain, make tourism a dim prospect for prosperity.

The government should focus instead on three sectors. These are:

Agriculture

Industry

Technology and Innovation

Agriculture: Lebanon is blessed with fertile soil and with microclimates. It has a huge range of growing possibilities, including a very mature wine industry. All these should be redefined and leveraged to create a food supply chain that is both internally sustainable and internationally appealing and sought after.

However to achieve this, Lebanon needs to develop a nationwide policy regarding the modernization of its agriculture sector to service both, the internal needs of the population with an indigenous food supply source that would mitigate famine in times of hardship, and also to deliver produce that is derived from the evolving needs of export efficiencies to different countries.

Lebanon cannot continue to sell the same type of produce to countries that have developed their own production and no longer require what Lebanon has to offer. This is a grave problem for the balance of trade where the past income producing staple export products, such as potatoes, onions, apples are no longer competitive regionally or internationally. The updated contents of any export basket of Lebanese products needs to be at the basis of a new agricultural schematic for the country.

In additional, a national policy of improving the soil, of protecting it and treating it like a national heritage, is also vital to the sustainability of the agricultural sector for generations to come. A policy of moving towards environmentally sound practices like organic growing, permaculture, biodiversity, and fair trade have to become the trademark of the quality for future Lebanese goods to make Lebanon stand out and have a competitive edge.

Industry: Every dark cloud has a silver lining, and provided that the government makes available the funds necessary for the industrial sector to function in this capital restricted climate, so that companies can get access to raw materials from abroad, then the devaluation of the Lebanese currency should make Lebanese products more competitive on the international market.

However, international standards of production should be raised to improve the export potential of Lebanese goods. In addition, this sector needs to become more dovetailed to the regional opportunities offered through the different trade agreements that are already in place.

Boosting the industrial sector should also be part of the government’s strategy to formulate a sustainable vision for that sector and should be accompanied with the provision of policies to offer subsidies, tax cuts and incentives to promote such development and growth.

Technology and innovation: Lebanon has a very high level of education; however, it has remained stagnant and has not evolved to take into account the new skill sets required for this century. Beginning with the education system, policies and directives should be developed with leading universities to determine the future needs and directions of the world. Based on this, the government should set aside a development fund to help support technological research and startups.

Not that I like to make comparisons, especially with Israel, but it is necessary to be brutally direct in these matters. They have become a leading force in the field of technological innovation which is giving them a competitive advantage in the world today. This did not happen by chance. They have a dedicated Ministry of Science and Technology that is responsible for the state’s investment in scientific research with a direct link that connects academic research with industrial development.

The Ministry of Science and Technology has positioned Israel at the forefront of science and technology, and it has boosted Israel’s economic growth, and Israel’s international status. The percentage of Israelis engaged in scientific and technological inquiry, and the amount spent on research and development (R&D) in relation to gross domestic product (GDP), is among the highest in the world. In Israel 200 start-ups are created annually and more than 2500 start-up companies are operating throughout the country. Exports of Hi-tech products comprise about 50% of all Industrial Exports, and totalled 51.4B$ in 2018.

Israel ranked number 15 in this year’s Networked Readiness Index, published in the Global Information Technology Report by the World Economic Forum. By contrast, out of 148 listed in that index Lebanon was not even mentioned!

We need to wake up from our internal petty squabbles and find a way of putting Lebanon back on its feet. But to do this, Lebanon needs to return to the drawing board. The government should create an emergency think tank composed of a selection of the highest quality experts in each sector and together they should formulate a vision for “Lebanon Rising”. This responsibility cannot be left to the Ministry of Finance alone.

However, in the meantime the government must first formulate a strategy based on the timeliest of imperatives:

1-Helping the poor survive this very difficult period.

2-Boosting the productive sectors of the existing economy to start jobs again

3-Modernizing government to transition into the digital age

4-Prioritizing sectors with rapid yield and planning their funding and development based on long term vision and objectives.

My advice: success will be a function of taking the proper time to think things through, as well as, not being reactive but acting purposefully to rebuild something that will have meaning for future generations, and guide Lebanon out of these dark times.

We are confronting our destiny – Lebanon needs to rise better, stronger and above all wiser!

Tracy Chamoun

Tsunami Tsuennemi

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Many of you have mentioned to me that I have been rather silent lately. That is because I am literally speechless. There are things that are happening in the political arena which I find absolutely confounding, not to mention revolting.

Words don’t count, actions are for nothing, protests are wasted, reason doesn’t matter, common sense is ignored, foresight is neglected, decency eradicated and honor exists only among thieves.

Four years ago I returned with energy and hope to be part of a process of change for the better, only to find that during this period, things have changed dramatically for the worse. Of course the neighboring war in Syrian has contributed greatly to this decline, but mainly it has been due to the rigid behavior of the leading political figures and groups and their disrespect for the constitution and the exercise of their own responsibilities. All these elements have led to a failing state, a flat and dangerously declining economy and non-existent social welfare.

In addition, most of the institution are functioning on life support aside from some mitigated upward ticks of the functionality barometer, such as the recent municipal elections where voter turn out was only on average at 40%. This tells us that the majority of the results obtained are partial at best, and not representative of the whole population as some claim. In fact, the only thing that such a low turn-out represents is the overall disappointment and rejection of the population of the existing leadership whether Sunni, Christian, Chia or Druze, and though it was refreshing to see new movements of dissension arise, it was equally depressing to see them overcome everywhere by the habitual format of political outcomes.

The worst therefor is not what is happening but the sense of inability to change anything, and for the last four years we have witnessed this imposition of inertia dominate the political scene especially in the failure to elect a President. This inertia is the symptom of a greater cause which is the ruling classes’ entrenchment and reluctance to change anything, even when confronted with revolt, as during the summer of last year, when the waste management crisis was at its peak.

So not only is there no recourse but lately there has been a complete degradation of affairs with our leading political figures all dancing to the tune of their own drum and creating such a cacophony that nothing is worth hearing anymore.

I personally feel that we have descended to a new level of political and moral decrepitude. Politics is supposed to be built on convictions and the belief in a social perspective that shapes the visions and leadership of politicians.

Based on this definition can we call many of our leader figures politicians? Or are they just mavericks acting on their survival instincts with no regard for the nation nor the cohesiveness of our society as they make volatile choices based on their sense of opportunism?

How redeemable is the latest reconciliation among the Christian Juntas? How stable and lasting is it or can it be when it is wrapped up in the personas themselves? Has it helped matters? Or just muddied the waters?

It seems that what it has done is create a lot of confusion and disorientation embellished by the warm and fuzzy propaganda of reconciliation, which is like oil floating on the surface of a glass of dirty water.

In the municipal elections it was easy for Aoun and Geagea to appear to share the pie, and they made the battles appear to be about politics, when in fact, all they did was create more divisiveness even within families, and this has left a lot of negative sentiment towards both men on a very local level.

However, when it comes to Parliamentary elections where the seats are limited and confessionally specified, it remains to be seen how eager these two players will be to pander to each other and share those precious positions. After all, parliamentary blocs are not to be relinquished easily.

Samir Geagea will be forced to poach from the Christian independents in his own Future camp where the latest municipal elections have polarized his previous allies against him, and though weakened some, they have strengthened others.

As for the promised Christian Tsunami, it seems that the two concerned parties have conducted themselves in the community in such a way that their “tsunami” is everyone elses’ “tsunennemi” and they have disturbed the waters in the Lebanese pond, where many have now lost their moral and ideological compass.

The only thing that these individualistic leaders, will agree on today will be to proceed with Parliamentary elections based on the law of 1960 which guarantees that their hold will continue.

The danger therefore is not them, but the electoral law which will perpetuate them!

If Lebanon is ever allowed to emerge from the stagnation it is facing it will only be through the arrival to power of a new political class. I believe that are three ways to do this:

1-) Make elections mandatory for all Lebanese between the age of 18 and 80 in order to force people out of their lethargy and resignation.

2-) Bring back the number of deputies to 108 as specified in Taef and remove the 20 deputies added during the Syrian occupation which are not representative of their constituents.

3-) Enact an electoral law based on proportional representation with one large district to break the geographic and confessional hegemony of the za’ims and make the election nationals and not local, reflecting the more accurate role of legislators.

If the present rulers are allowed to proceed with the law of 1960 I guarantee you that the inertia will persist and there will be no recourse to bring about change. This means that the country itself will just deteriorate further, and with all the uncertainty around and the dangerous security matters we are confronting I do not recommend that this be allowed to happen.

The big battle ahead of us now is to say no to the majority law and to fight for the three solutions outlined above.

The State of the Dis-Union in Lebanon

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When ministers refuse to attend a cabinet meeting because they are pushing for their parochial issues at a time when the country is on its knees begging for help, the economy is tanking, unemployment is devastating, future prospects are bleak, virulent epidemics are clamoring and decisions are essential for survival – This is a state of disunion.

When the ministers cannot agree on how to handle the waste management crisis, first by refusing bids month ago for less than half the price that they were prepared to ship it out for, and also with different factions refusing to accept each other’s waste in their regions on confessional grounds, when modern incinerators are vindictively prevented from leaving the port at a time when the country is drowning in garbage and disease is spreading like wildfire – This as state of disunion.

When the leaders cannot agree amongst themselves on a President with allies turning against each other and uniting with their worst enemies to prevent others from occupying the presidential seat and the country is facing nearly a two year long vacuum in the Presidency – This is a state of disunion.

When an electoral law cannot be drafted because it has to serve many masters and guarantee a certain outcome for each and is therefor impossible and there cannot be fair elections without it – This is a state of disunion.

When disunion rules, stalemates prevail and neglect follows. Disunion means no change, no progress because these require consensus at the very least. They say that the only thing that does not change is change itself. We need to add to this adage in Lebanon that the only thing that does not change is the state of disunion. When the disunion becomes so great only the abyss remains. On the ledge of this abyss will there will be anything left to catch if the nation falls?

This is the state of the disunion address…

Analysis – The Lebanese Presidential Candidacy Confusion December 2015

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The recent nomination of the deputy Sleiman Frangieh took everyone by surprise because of the seeming ripple of movement that it generated in an otherwise stifled environment surrounding the election of a President in Lebanon.

Let us start in the beginning where suddenly out of nowhere, rumors began circulating about a secret visit between Frangieh and former Prime Minister Saad Harriri in Paris. As is the case in Lebanon, there is very rarely smoke without fire and the rumor finally emerged as being correct.

There has been much speculation about how this meeting came about; Whether the meeting was planned or spontaneous and whether Frangieh communicated the relevant information of this encounter to his strongest ally Hezbollah ahead of time is still debatable, but what is clear is that after the meeting he certainly informed them about the discussions that were held and the seriousness of Hariri’s proposal.

The talks between the men covered the details of his presidency including the matter of an electoral law which would be vital in the formulation of the overall package.

The news of the meeting triggered a flurry of reactions and the shock waves of this Parisian encounter spread out into the Lebanese political pond.

While some navigated the news eagerly, including the international community who saw an acceptable opportunity to resolve the political vacuum, others were rocked at their core by the implications of such a possibility.

The outcome of all the deliberations is that the only clear thing about Frangieh’s candidacy to-date is that it is unclear. It is unclear for many reasons including:

1- General Aoun firm rebuttal:

The validity of Frangieh’s candidacy is being rebuffed with the “silent treatment” by the General with the belief that if a candidate with Frangieh’s affiliations are acceptable then the preference goes to General Aoun.

2- Saad Hariri’s slowness to declare:

The delay in the Announcement by Hariri has fueled the belief by his contesters that he does not have the means of his politics. This remains to be seen.

This lack of any declaration by Saad Harirri to-date can lead to believe that he has not received the reassurances he needs, both financial or otherwise, to push this deal through at this time. The Prime Ministership would bring with it financial rewards and it is fair to note that with the change of leadership in Saudi Arabia, the question begs to be asked: How much favor does Hariri really carry today with the King and specifically with the Crown Prince?

On the other hand the postponement of Hariri’s visit to Lebanon seems to be linked to the larger implications surrounding the continuing matter of his security.

3- Hezbollah’s silence:

This is a reflection of their own conundrum confronted with one of their favored candidates becoming problematic. This dilemma was brought about because of their engagement with General Aoun and the fear of his retaliation and retrenchment into a Christian-only front if challenged by Frangieh’s accession to the presidency.

For Hezbollah, this would lead to their loss of a powerful ally on the ground and create a dangerous confessional polarization at a time when Lebanon can least afford such antagonistic stances. In Parliament this would also fragment their voting coalition and leave them without Christian representation. If they are to reconsider Frangieh’s candidacy it would certainly be tied into their insistence on a new electoral law which would not perpetuate the existing parliamentary balance of power.

3- Samir Geagea’s isolation:

Geagea is certainly not a proponent of Frangieh’s candidacy in light of their bloody history and they rivalry in the North of the country. Frangieh’s nomination has left Geagea publicly isolated from his own political bloc confronted with the uncoordinated nomination of a candidate from “the other side” by Saad Hariri, the leader of his block.

This attempt has also revealed tensions that had been suspected for some time between Geagea and Hariri. This has forced Geagea into a retaliatory stance where he is measuring the consequences of displeasing his Saudi sponsors and gambling with the option of nominating General Aoun to avoid Frangieh.

To sum up why things are so unclear, it is because the usual lines of identification have been crisscrossed. The leader of the March 14 movement proposed a March 8th candidate unilaterally, and the allies of each group lost their points of reference in the process. It would seem therefore that the hard sell for both Frangieh and Hariri is from their own camps as they are in fact being undermined mostly by their allies.

On the scale of Lebanon, Interestingly this latest attempt has placed the March duality into the mixer and whatever will come out now in the next week or so, will never be the same. Expectations have been shattered and feathers ruffled on all sides.

It will take some time for this dust to settle but if it does settle into nothing again then the matter of the election of a President will also turn to dust, which would be a lost opportunity for Lebanon to resolve the vacuum and safeguard the State’s institutions.

Tracy Chamoun

Baabda –