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 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
2. 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.
3. 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.
4. 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.
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:
- Simplifying the qualification procedure.
- Making the preferential vote “One Man One Vote” not tied to any list.
- Basing the preferential vote on a large district namely The Mohafaza.
- 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 REVAMP
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 eight).
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.
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, it is also important to introduce 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 addition, the Constitution does not make any provisions for the 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 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.
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 HIGHER 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!