Robbed of Their Future – Who Will Make It Right?

The movie Capernaüm (“Chaos”) tells the story of Zain, a Lebanese boy who sues his parents for the “crime” of giving him life. Ironically, Zain is played by Zain al-Rafeea, a Syrian refugee. In the Bible, Jesus moves from Nazareth to Capernaum at the beginning of his mission because the Nazarenes attempted to stone him when he began to preach in Nazareth. He escapes, but you know how that story ends…

These bits of information carry several messages and I’ll focus on these: the Lebanese can’t separate their fate from that of the Syrian refugees – those challenges must be solved for both peoples. Jesus had good news, the gospel, but it didn’t matter, his message of urgency and change was not welcome.

And so it is as the World Bank keeps ringing the alarms on how Lebanon’s disastrous leadership is abetting the collapse of the country, but to no avail. On June 1, it released the most recent Lebanon Economic Monitor entitled, “Lebanon Sinking to the Top 3,” an ironic twist on achieving something that is far from desirable, becoming perhaps the one of the worst economic crises in more than 150 years.

The report begins with a lucid and helpful summary of the more than 90 pages of analyses, charts, and special annexes that follow, worth reading, even skimming the bold face sentences that highlight the text. The many conditions that caused the current crisis are clear: the economic collapse, the pandemic, the Beirut blast, and mismanagement by the leadership cadre. Short-term solutions are also clear: stabilize the currency, build a reliable social safety net, strengthen humanitarian relief and assistance to small businesses, and tame the oligarchs from causing further damage. Each of these requires myriad actions by Lebanon’s leaders, none of which is forthcoming. The capital controls law is languishing in Parliament. Hyperinflation is eroding the value of humanitarian, social, and health services. And the party leaders are immune to sharing responsibility for moving Lebanon forward, only to the abyss.

According to Asharq Al-Awsat, “The bankrupt state is unable to settle many of its bills and Lebanon’s own energy minister, Raymond Ghajar, has warned that electricity supply was becoming critical and that the country could be plunged into total darkness by June’s end.” Illustrative of this failure was the notice from the Central Bank to the electricity company to come up with a plan to repay the government its $25 billion in past loans (out of $42+B), just another day in the debt-ridden country.

An editorial in The National placed the blame squarely on “A leadership vacuum that has seen politicians wrangle for months on end over control of various ministries, with seemingly little interest in actual policymaking, is both a cause and an amplifier of the crisis. Compounding it is Covid-19, as well as the fallout from last summer’s Beirut blast, one of the largest non-nuclear explosions in history.” It went on: “The economic meltdown has made worse the political and sectarian fragmentation of the country, undermining an already-weak rule of law.”

This sentiment was echoed in the World Bank report which pointed out Lebanon’s status as a “Fragility, Conflict & Violence (FCV) State, and as such, the dire socio-economic conditions risk systemic national failings with regional and potentially global consequences.” Two of the consequences are obvious in the economic repercussions in Syria and the increase in extensive cross-border smuggling. The Report goes on to say, “This illustrates the magnitude of the economic depression that the country is enduring, with sadly no clear turning point on the horizon, given the disastrous deliberate policy inaction.”

It is hard to ignore how the elites are insulated from the worst of the currency manipulations. “The burden of the ongoing adjustment/deleveraging is regressive and concentrated on the smaller depositors, who lack other source of savings, the local labor force, that is paid in lira, and smaller businesses,” according to the report’s authors.

There is a section on the proposed 2021 budget that exposes the unrealistic approach being favored by the oligarchs. By ignoring that any projected savings are due to the decreased purchasing power of the currency accompanied by high inflation, its numbers are not credible. As the Report opines, “This predisposition can either (i) degrade the proposed budget’s creditability, due to expected social pressures and real costs resulting from the high inflationary environment; or, if forced through, (ii) further entrench the severe decline in purchasing power for another year.”

Regarding the need for a social safety net, the Report mentions that “The economic crisis and resulting rising in poverty raise an urgent need for social assistance. High levels of poverty can have a long-lasting impact on Lebanon’s human development and increase vulnerabilities across the lifecycle. Adequate social assistance will therefore be critical both in the short term to provide emergency relief, and in the medium-long term to improve resilience to shocks among vulnerable Lebanese.”

This lead to its conclusion that “The Government of Lebanon (GOL) needs to prioritize a comprehensive, consistent, and credible macroeconomic stabilization plan, the fiscal part of which should include a social safety net (SSN) component.” This was also one of the major points mentioned by Ambassador David Hale in his address to the MEI conference as a needed effort by the international community to stabilize Lebanon while needed reforms are implemented.

With the end of subsidies in sight, no apparent willingness to creatively stabilize the currency, and no movement to shrink the country’s budget, Lebanon’s governing class is running out of excuses. They must take needed steps toward reform or recuse themselves so that the hard work can begin.

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.

A Moral Calling from the Pope to Lebanon’s Christian Leaders

And just like that, the Vatican is challenging Lebanon’s Christian leadership to do what’s best for Lebanon.

Most believe it would take a miracle, but maybe this is the beginning. After the noon prayer on Sunday, May 30, the Pope said “On July 1, I will meet in the Vatican with the main leaders of the Christian communities in Lebanon, for a day of reflection on the country’s worrying situation and to pray together for the gift of peace and stability.”

The “Christian communities” would be quite large if he includes the Orthodox and Protestant churches, other Catholics such as the Melkites, and the leader of the Maronite Catholic Church, Patriarch Bechara Boutros al-Rahi, who has been actively calling for an international conference to begin the process of reconciliation and healing in Lebanon, free from external interference.

With the subsidies due to expire sometime in June, the holdup in Parliament of a World Bank assistance package, and the continued deterioration of the country’s economy, Lebanon continues to be on the brink of extensive disruption.

The lira is in free fall at an official exchange rate on the government’s platform of 12,000 to the dollar and approaching 12,800 on the informal exchange market, while imports are still priced somewhere between the government rate of 1,500 and the bank rate at 3,900 lira to the dollar.

Confused yet? Think of how hard it is for the Lebanese to cope daily with the uncertainty of access to money to pay for essential services. Even when they will regain access to their bank deposits by the end of June, as promised by the Central Bank, it will be limited at a rate that favors the banking sector.

The story about the Pope’s initiative was reported in the 961 which noted that “Earlier this week, Pope Francis sent a letter to President Michel Aoun hoping that the ‘Spirit of Wisdom’ would support Aoun in rescuing Lebanon. It is stipulated that Pope Francis would seek to unite the Christian leaders that have been politically divided and lead them towards working together to saving Lebanon as a top priority.”

Wisdom is not in short supply, only its acceptance. The path forward is clear. The IMF and the international community are waiting for a government that will serve the people and not the interests of a few. The people of Lebanon and the resident refugee population are suffering as their health and well-being become increasingly precarious.

Other calamities and disasters are pulling the world’s attention away from a country whose leaders have lost the sense of urgency and responsibility to unite even on the basic necessities of recovery and renewal.

As the Pope said on Sunday, “the meeting with Lebanon’s Christian leaders would be an opportunity to ‘pray together for the gift of peace and stability.’”

With perhaps a hint of irony, another report mentioned that “The Argentine pontiff has also picked up the metaphor from his predecessor describing Lebanon ‘as the message’ when it comes to coexistence, tolerance, and respect among people of all faiths.”

The suffering of the Lebanese, across all sects, strengthens his message and highlights the sadness of those around the world whose hearts feel Lebanon’s sorrow.

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.

Standing Up for Lebanon – Recent US Words and Actions

It is about time the Lebanese people had a bit of good news from the international community, and this past week the US delivered. There were two letters from members of Congress and an approval of an appropriation for the Lebanese Armed Forces (LAF) to help that national institution weather the economic downturn. Much of the momentum behind these positive developments was generated by the American Task Force on Lebanon (ATFL) and other supporters of the bilateral relationship.

The first letter was generated by Chairman Gregory Meeks of the House Foreign Affairs Committee and is co-signed by Ted Deutch, chairman of the Subcommittee on the Middle East, North Africa, and Global Counterterrorism, and other members of the subcommittee.

The letter was addressed is Secretary of State Antony Blinken and said, “We urge prompt and significant US action, in coordination with key international partners, to address the suffering of the Lebanese people and prevent Lebanon from economic collapse, posing further risks to the security and stability of the broader Middle East as well as US national security.” It notes that “As conditions worsen, internal Lebanese actors such as Hezbollah, along with other militias and criminal networks, and external forces such as Iran and Russia, cynically aim to leverage the fragmentation of the Lebanese state and society for their own gain.”

The Meeks letter’s listed four recommendations: formation of an international group of friends of Lebanon to develop a plan to stabilize the economy pending formation of a government capable of implementing reforms, attacking corruption, and completing an audit of the Central Bank; building an international humanitarian assistance fund that would be channeled directly to the people; supplementary support for the Lebanese Armed Forces; and completing an independent investigation of the Beirut Port explosion of August 4.

In conclusion, the letter stated, “We support policies that advance a strong and stable US – Lebanon relationship and a just, prosperous, and independent future for the Lebanese people.”

The second letter, from the US-Lebanon Friendship Caucus, echoed many of the points made in the Chairman Meeks letter, stressing the humanitarian and security repercussions of the current status of Lebanon. The Caucus, which was recently relaunched in the 117th Congress, has more than 20 members. Its letter was sent to President Biden as well as Secretary of State Blinken. It was co-signed by the four co-chairs of the Caucus, Representatives Darin LaHood, Charlie Crist, Darrell Issa, and Debbie Dingell, and other members.
The Caucus letter made the point that “Lebanon can again be an example of a stable, independent, and sovereign democracy in the Middle East. In partnership with the US and its allies, Lebanon can overcome the challenges facing it today. Success requires the commitment to forming a transparent and representative government protected from political corruption, implementation of economic reforms, and ensuring continued access to humanitarian resources for its people.”

On the security front, The U.S. Department of State and the Lebanese Armed Forces held their inaugural Defense Resourcing Conference on May 21, 2021. According to the State Department press release, “The delegations discussed the deteriorating economic, political, and humanitarian conditions affecting the Lebanese people and military.” As a result of the excellent cooperation between the US and Lebanon, the State Department renewed its commitment to the LAF by announcing $120 million in Foreign Military Financing (FMF) assistance to Lebanon for fiscal year 2021, subject to Congressional notification procedures, which is a $15 million increase over prior-year levels.

As importantly, the two delegations “discussed ways to leverage the full range of authorities under US law through which the United States can provide additional assistance to the LAF as it grapples with the economic crises in Lebanon.” As an example of this cooperation, the US Defense Department plans “to transfer three Protector-class patrol boats to the Lebanese Navy, which, upon delivery in 2022, will enhance the Lebanese Navy’s ability to counter external and regional threats, and protect freedom of navigation and commerce in the maritime domain.” This is in line with the latest UNIFIL reauthorization directing the LAF to upgrade its naval capability.

Edward Gabriel, ATFL President, welcomed the letters and support for the LAF pointing out “Lebanon remains a priority for US despite all the turmoil in the region. Its American educational institutions, a relationship going back more than 150 years, and the bilateral ties between the military authorities are nourished by the more than 1.5 million Lebanese Americans. Lebanon’s survival and success must continue to be a priority for the US.”

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.

Voices of Healing: the Work of the Near East Foundation to Support Business Recovery

ATFL has been gradually shifting its focus from humanitarian relief centered on medical supplies to supporting organizations involved in support efforts for small and medium sized enterprises (SMEs). We convene regular meetings to discuss opportunities, obstacles, and experiences that enrich the group’s understanding of how to most effectively support community businesses in Beirut and beyond. Several organizations in the group are well known: Anera, the Rene Moawad Foundation, the Near East Foundation, and Mercy Corps. Others are Lebanese groups that target specific community needs in mental health, the aging, and rural communities.

This series, Voices of Healing, puts a spotlight on those organizations that want to tell their stories and demonstrate that hope is still alive among the people of Lebanon. This information was provided by Andrea Crowley of the Near East Foundation (NEF).

NEAR EAST FOUNDATION – BEIRUT RAPID LIVELIHOODS RECOVERY PROGRAM

The devastating and destructive August 4, 2020 Beirut Port Explosion took lives, destroyed businesses, and displaced thousands. Critical community needs, such as hospitals, schools, businesses and homes, faced widespread damage. Eight months on from the explosion its impacts have been lost amid the overwhelming needs surrounding the health crisis, a worsening and severe economic crisis, and a protracted refuge crisis – causing a dangerous physical, psychological, and economic strain on the people of Lebanon.

Soon after the explosion, the Near East Foundation (www.neareast.org) mobilized with local partners to launch a rapid livelihoods recovery program, building onto its ongoing program in Lebanon, to provide aid to individuals and micro/small businesses in three highly impacted and vulnerable Beirut neighborhoods: Bachoura, Bourj Hammoud, and Karantina. With support from the Aurora Humanitarian Initiative, Elsa & Peter Soderberg Charitable Foundation, and private funders, the Rapid Livelihoods Recovery Project addresses the nexus of relief and recovery, supporting safe shelter rehabilitation, small business recovery, and employment.

NEF has helped 130 micro/small businesses to recover losses and resume business activities through cash assistance and guidance focused on business adaptation and recovery. This includes support for mini markets, grocery stores, a butchery, mobile phone vendors, tailors, appliance stores, a pharmacy, and salons.

The cash assistance provided is unconditional, allowing flexibility for business owners to make decisions regarding the repairs of their business, recouping assets, and meeting the needs of their families.

NEF is also supporting 130 skilled workers to recover lost materials and secure employment, linking them to repair projects of vulnerable homes and businesses in the target areas using “cash for work” to subsidize their income while providing repair services free of charge. 100% of the skilled workers supported are the sole providers for their families.

Shouwshan in her upholstery shop in Beirut. Her shop was damaged, including the front door, walls, and display stands. She received a grant from NEF to help with the needed repairs so she could safely resume business operation. Image: NEF

 

George owns a mini mart in the Bourj Hammoud neighborhood of Beirut. He used his grant to help replenish products that were lost during the explosion so he could start selling as soon as he could. Image: NEF

Due to heightened currency fluctuation in Lebanon, grant distribution was temporarily paused earlier this year. During that time, the NEF teams conducted a rapid security risk assessment to determine when it would be safe to continue financial grant support and were able to resume grant support in early April 2021. In Beirut, grants are disbursed in USD to protect against the continued devaluation of the LBP. The NEF team continues to closely monitor the currency situation and its impact on the safety of project participants and project resources.

NEF conducts mid-term and endline assessments to measure impact to ensure impactful and responsive interventions that address both immediate and longer-term needs. Data collected also helps to determine if project participants under the Beirut Rapid Livelihoods Recovery project could be eligible to receive additional support from NEF’s broader livelihoods programs in Lebanon.

Critical to NEF’s approach is ensuring that coordination, complementarity, and transparency is prioritized to avoid duplication and effective use of resources. NEF’s response is closely coordinated with relevant stakeholders, working groups, and in partnership with local community organizations and other NGOs. This includes partnership and coordination with the American Task Force on Lebanon, SHIELD (a local livelihoods NGO), ANERA, ACTED, American University of Beirut – Urban Lab, Mercy Corps, the Danish Refugee Council, Bureau of Population, Refugees, and Migration (PRM), and the Bourj Hammoud Municipality in addition to the broader Referral Information Management System (RIMS).

NEF’s experience and impact in Lebanon dates back to 1918, when NEF first launched programs there focused on improving the long-term wellbeing of vulnerable Lebanese through technical and financial assistance to improve education, income, agriculture and food security, rural development, and access to finance. In recent years, NEF’s work in Lebanon has focused on providing livelihoods support for vulnerable Lebanese and refugees in poor communities (with a focus on women and youth), helping them to access the tools and resources to engage in safe ways to earn an income, support their families, and improve their lives.

NEF channels assistance through Siraj Centers, community-based livelihood hubs that offer technical training and essential resources – geared toward social and economic empowerment – for crises-affected people to recover their income and strengthen their local economies. NEF has Siraj Centers in Akkar, Tripoli, and Bekaa, and in 2021 opened a new location in northern Beirut. Last year, NEF expanded its business support services to include an accessible online learning platform – Siraj Digital (www.sirajdigital.com). Through Siraj Digital NEF will provide nonfinancial services tailored to business recovery and adaptation, addressing impacts of the Beirut port explosion and ongoing economic impacts of the health, financial, and refugee crises.

Since 2016, NEF has helped to launch 3,900 businesses and directly support over 18,000 people in Lebanon with support from Bureau of Population, Refugees, and Migration (PRM) and private funders. And while sustainable livelihood support is often seen as costly, a 2021 impact and learning assessment of NEF programs from 2016-2020 revealed a 2.6 return on investment, with revenue from project-supported businesses generating 28 billion LBP.

This video of two NEF-supported Lebanese entrepreneurs, Hanan and Hayat, provide an example of this work: https://vimeo.com/447133436

In early April 2021, the U.S. Ambassador to Lebanon, Ambassador Dorothy Shea, visited one of NEF’s Siraj Centers in Akkar in recognition of NEF’s long-time partnership with the Bureau of Population, Refugees, and Migration (PRM).

US Ambassador to Lebanon, Amb. Dorothy Shea, visits a NEF Siraj Center in April 2021. Image: NEF

NEF’s Rapid Livelihoods Recovery Project and broader program in Lebanon continues to evolve to facilitate safe pathways to livelihoods recovery, resilience, and ultimately self-reliance for vulnerable and marginalized people through inclusive, tailored, and community-driven initiatives.

For more information on NEF’s work in Lebanon, please contact Andrea Crowley, Director of Partnerships & Philanthropy, at acrowley@neareast.org.

FOCUS LEBANON: LIFE is Helping the Lebanese Help Themselves

LIFE Lebanon is not your typical professional association. In addition to its highly qualified and energetic financial, banking, technology, and consulting members, it has worked tirelessly to support Lebanon’s humanitarian and reconstruction needs through its vast network of overseas Lebanese professionals. LIFE partnered with MEI and ATFL to produce critical analyses of the rationale for strong US-Lebanon relations and is instrumental in supporting the newly launched Lebanon program at MEI. In addition, its members support scholarship programs, mentoring, training, job placement, and have raised more than $9 million in humanitarian relief for Lebanon.

As overseas Lebanese, they represent the classic emigrant dream – go overseas, do well, help your country of origin. And they continually strive to do more. This blog will focus on one of LIFE’s most recent efforts to help small businesses, the heartbeat of Lebanon’s economy, to recover and thrive. There are two programs currently being implemented.

Facebook Donation to LIFE
In February 2021, LIFE received a $300,000 donation from Facebook to support vulnerable businesses in Lebanon. Using their experience and network on the ground, LIFE will allocate the donation to 100–150 small and medium enterprises (SMEs), helping them and the economy grow in these unprecedented times. 3QA, a Lebanon-based third sector quality assurance organization, will offer support during the vetting and proposal stages and will undertake monitoring and reporting on behalf of LIFE.

Working with 22 project partners, SMEs are being selected based on: impact on the community; vulnerability level; geographical spread; sector diversity; and gender balance.

Accelerate Beirut
More than 10,000 SMEs were severely damaged during the Beirut explosion and many more are still suffering from its economic impact. Accelerate Beirut is an initiative launched as a collaboration between LIFE, Alia Atieh, and a team of consultants from Bain & Company. The objective is to support Lebanese SMEs by establishing connections and enabling collaborations between local SMEs and global corporations. These collaborations take the form of financial contributions, in-kind donations, partnerships and mentorship programs, or technical assistance from large companies.

Achievements to date:
• The rehabilitation of 5 restaurants in Mar Mikhael working with Nusaned through a $50,000 donation from the Accor Hotels Group
• The Sisley-d’Ornano Foundation donated $24,000 to fashion designer Sandra Mansour
• Eres donated 500 items of clothing to Stand for Women beneficiaries
• L’Oréal Levant are working on a collaboration with Sarah’s Bag
• House of Zejd and Joyau d’Olive are two other SMEs who have received $20,000 of funding

Georgy Rahayel, Founder of Le Joyau D’olive, one of the small businesses who received funding through Accelerate Beirut.
Le Joyau D’olive is a Lebanese artisanal biodegradable vegan soap made of virgin olive and essential oils.

Georgy Rahayel, founder of Le Joyau D’Olive: “Accelerate Beirut has been an eye-opening experience as it took our thought process to a new level. It has exposed us to the right people who can help us scale our venture.

 

Sarah Beydoun, founder of Sarah’s Bag at her workshop. Through Accelerate Beirut, Sarah’s Bag worked on a collaboration with L’Oréal Levant

Sarah Beydoun, founder of Sarah’s Bag: “I really think it’s a brilliant idea and a creative solution, asking big international corporations to support local businesses each in their own field of expertise.”

 

House of Zejd builds on two centuries of family heritage of pressing locally sourced olives from the northern hilly Beino landscape. This is another SME who received funding and support through Accelerate Beirut

Youssef Fares, General Manager, House of Zejd: “Thank you Accelerate Beirut for this great initiative bringing Lebanese products and know-how to the forefront and for the valuable contribution to our brand visibility in target export markets.”

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.

Subsidies Mean Survival for the Majority of Lebanese

In his latest message to the Parliament, Caretaker Prime Minister Diab emphasized the imminent danger facing Lebanon due to the lack of funds to sustain subsidies. While the Parliament sought to hobble the requirements of the $256 million pledged by the World Bank to benefit their interests and obscure distribution accountability, the lira continued to plunge in value. Now hyperinflation has set in, and the number of poor has skyrocketed.

While Hezbollah is well placed to care for many of the basic needs of its constituents, there is an overall deficit in social, health, fuel, and food for most Lebanese regardless of sect. One story reported that “Lebanon has been spending up to $7 billion a year on subsidies, including a total of $5 billion spent on subsidizing goods that benefit Lebanese families [and that] the government was looking to lower that number to $1.2 billion for subsidies.”

There are three types of subsidies in the Lebanese system. The largest by far is to the electricity company, at around $1.5-2 billion a year for the purchase of generator fuels. After this comes a list of some 300-400 (down from 600) essential food and living supplies for the people through subsidized imports. Finally, there are payments under the social security system for those who have paid into the government program.

What boggles the mind is that about 75% of the Lebanese population is now in need of financial assistance to cope with the economic catastrophe. This represents some 750,000-800,000 FAMILIES in dire straits.

The Caretaker Prime Minister’s goal is clear: “As I have mentioned, Lebanon would be cutting our spending on goods by $3.8 billion. Moreover, the money that Lebanon was depleting on subsidies and imports will be put back in the economy inside the country via the ration card as nearly 3 million Lebanese will be benefiting from it to buy goods and other material from the internal market.”

He added, “Without a government that can implement reforms, the future looks bleak. It is unacceptable to be in a political deadlock at a time when Lebanon is going through social, economic, and financial crises.”

The scope and severity of the poverty may be news, but the reality of subsidies ending this month has been known since at least early April. Caretaker Finance Minister Ghazi Wazni said he was informed at that time by the Central Bank Governor that “Lebanon’s mandatory reserves to fund basic imports” would run out by the end of May. He also warned that “delays in launching a plan to reduce subsidies are costing the country $500 million a month.”

A group of ministers, prominent business people, and economists has presented a plan to President Aoun that would eliminate general subsidies and replace them with cash cards to be targeted to specific families based on transparent criteria. According to Aoun’s media office, the paper suggested two strategies. It said the government should “enforce a number of urgent measures for 12 months, addressing gasoline, fuel oil, gas, medicine, wheat, electricity, and the rest of products; as well as working on reducing the public sector’s expenditures in dollars and shifting the current subsidy policy into providing direct cash assistance, in line with the measures to gradually lift subsidies.” They said that if subsidies are lifted and the ration cards adopted, $6 billion will be saved from the annual expenditure.

What is quite sad is that under the formula being proposed, which deviates a bit from the World Bank estimates, is that the annual subsidy for a family of four is $1645, hardly a significant amount, which is indicative of the disastrous condition of the economy. The ration card is considered an alternative to the subsidies for basic commodities that the Central Bank provides today.

Diab has asked that the Central Bank or the Parliament fund the rationing card project rather than going through the government as printing more money would add to inflationary pressures since the lira lacks a fixed value. Another consequential factor is that the Ministry of Social Affairs has yet to develop a database of potential recipients, meaning that many people will not receive the card at all.

It’s time for the Parliament to recall that next spring there will be an election, and people will remember who came to their aid at the most depressing period in their lives.

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.

The Future of the Bekaa Valley, Up and Coming CBD Capital

https://upload.wikimedia.org/wikipedia/commons/9/90/Beqaa_valley_12.jpg

A recent special by VICE News highlighted the potential future of cannabis production in Lebanon. Anyone who visited the Bekaa Valley before the Civil War quickly discovered that hashish, an Arabic word, was liberally handed out to sample as you walked in the area. It was 1972 with my brother Roger and we couldn’t turn a corner without someone saying, “You Amreekee? Want some really good bad stuff? Try, free, come back when you are ready to buy, cheap…”

Since then, these mom and pop (and uncles and cousins) shops have morphed into around a dozen family-based mafias who harvest and export the hash throughout the region and beyond. If you use the metric of illegal drugs confiscated by governments around the world, “Morocco remains the country most reported by governments as the source of seized ‘cannabis resin’ (hashish), followed by Afghanistan and, more distantly, by Lebanon, India, and Pakistan.” So as the world’s third largest producer, Lebanon is slowly shifting its business model to one based on production for CBD medicinal-quality products. From drops and gummies to pills and sachets to ease pain, relieve stress, and promote a general sense of well-being – all this without even having to smoke something and worry about that distinctive odor.

This past year, Parliament finally passed legislation legalizing cannabis for medical purposes, which means most anything except resin and grass for smoking. The industry is projected to grow with “the global market for cannabidiol (CBD), valued at $9.3 billion in 2020 and forecasted to reach $23.6 billion in revenue by 2025. With an expected compound annual growth rate of 22.2% from 2019 to 2025, the future is looking incredibly promising for businesses tapping into CBD’s explosive popularity.”

It is this angle that is at the center of the VICE report. VICE follows a Lebanese-American entrepreneur to a meeting with one of the main family producers in the Bekaa to make the business case for shifting from exporting the base commodity of grass to refined oil that has a much higher, more lucrative, and legal future. Along the way, near the Syrian border, they also encounter smugglers, check points (both legal and local), and indicators of the vast wealth disparity between these rural areas and their overlords.

The story is engaging from a number of perspectives. First of all, the family spokesperson is young, firmly against the government interference in their business, and quite articulate about how their operations benefit the local people. Contrary to the usual image of the Bekaa, he repeats the claim that nothing of value can grow in the area except hashish, or as Ben Hubbard in the New York Times reported, “In a Lebanese farming village of rocky soil and stone villas, cannabis grows everywhere.” But the industry has fallen on bad times as part of the overall decline of Lebanon’s economy. “The costs of imported fuel and fertilizer needed to grow the crop have soared, while the Lebanese pounds that growers earn by selling their hash are worth less and less,” according to Hubbard.

To the locals, the passage of the recent law means government overreach into their lives and livelihood to enrich corrupt officials and their cronies rather than benefit the people. They claim that the government has done nothing in concrete terms to provide legal farming options despite government reports to the contrary. When the government has stepped in, the result has usually been the destruction of crops to extort money from the farmers, reported Hubbard. And it is to the cartels that the farmers turn to for relief.

As a recent Brookings article reported, “Lebanon legalized the cultivation of medical cannabis production (though not any form of consumption) in the spring of 2020. Legalization proposals languished for years, caught up in tensions between the two main Shia forces, Hezbollah and Amal, over the design of any legal regulation and, especially, the control of production.” On a national level, more than 40 warrants have been issued for leaders of the families, despite the promise of an amnesty some 20 years ago. It is this lack of a carrot and stick approach that most upsets the young producer who cannot even consider switching to legal hashish pursuits with a warrant hanging over him.

So the future remains unclear. With cannabis a main source of revenue for Hezbollah and Amal, and the continuing efforts to turn this into an industry that can contribute directly to Lebanon’s economy, the resolution will be another test of the country’s capacity to seize opportunities for growth that genuinely make a difference is the lives of the people in the poor part of the Bekaa.

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.

Tracking Volatility – Is Lebanon’s Collapse Inevitable?

Well, I suppose it depends on who you listen to. From the State Department, the word is that it’s getting worse. From a panel at Haigazian University the same day, there was optimism that the phoenix will rise, resilience will win out, reforms will come incrementally but in time to save the country. From here in Washington, DC, looking at the region and the priorities of the Biden administration it is a challenge to make predictions. The leading decision-makers know Lebanon and have compassion for the Lebanese people and Syrian refugees, but there is no sympathy for the leadership who are content to watch the country collapse. It’s hard to understand the gap between what ought to be done to move in the right direction, and the virtual nothing that is being done besides a bit of angst about subsidies. But since it doesn’t affect the officials, they can continue to hold off the World Bank and the international community.

The latest dose of bad news is that the State Department on April 21 issued a Level 4 travel advisory for Lebanon – DO NOT TRAVEL. The statement said, “Do not travel to Lebanon due to COVID-19. Reconsider travel to Lebanon due to crime, terrorism, armed conflict, civil unrest, kidnapping and Embassy Beirut’s limited capacity to provide support to US citizens. Some areas have increased risk.” It went on to detail specific restrictions and possible risks to US travelers, emphasizing that the US Embassy may not be able to provide any assistance. Considering that it’s very difficult to even get an appointment to visit the Embassy, that’s an understatement.

Of course the border areas are mentioned as areas to avoid, and the streets, and driving, and visiting, and… You can’t blame the US Government. It’s their job to give us their best advice, even if it’s not what we want to hear. I remember the last travel ban on Lebanon. It was a major campaign issue for ATFL in its formative years and a great achievement when it was lifted by then Secretary of State Madeline Albright. This time around, not even loquacious Lebanese Americans can gloss over what’s going on in Lebanon, and it hurts us deeply.

On April 13, the US Intelligence Community released its Annual Threat Assessment, which gives us some insights into how the Administration identifies conditions around the globe that threaten US interests and stability in general. According to a regional summary in Al-Monitor, “In addition to vaccinating their populations, the immediate priorities for post-COVID economies should be expanding social and public health infrastructure to mitigate the impact of the pandemic and future crisis, and doing so while pursuing reforms which create jobs, reduce poverty, attract foreign investment and reduce government debt.”

Once again, the deficiencies apply to Lebanon, without even pointing the finger: adequate vaccination programs, expanding infrastructure to serve the needs of the people, and undertaking reforms to fix their economies. As the Al-Monitor article when on, “More broadly, the Annual Threat Assessment of the US Intelligence Community notes that throughout the region “domestic volatility will persist as popular discontent and socioeconomic grievances continue to rise … and its leaders struggle to meet public expectations for political and economic reform. … As a result, some states are likely to experience destabilizing conditions that may push them close to collapse.”

So where is the hope? Always in the people, in civil society, in NGOs, among the young and old who refuse to accept that their country is being snatched from them and auctioned off to non-Lebanese interests and their corrupt local partners. It’s what we must believe if we are to continue, each in our own way, to work for Lebanon’s recovery. It will take time. But in this 100th anniversary year of Lebanon’s emergence as a country, we can remind US decision-makers that Lebanon is worth the investment. And, our support for those who will bring change is the key to the country’s survival and resurrection.

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.

Let’s Imagine – A Fantasy about Lebanon’s Resurrection 1.0

Broadcaster:

We are coming to you tonight from Beirut, Lebanon, a country that was once the Nigeria of the Levant. We are talking with people on the street, actually Hamra Street, about the shocking news released today. What we want to know is:

What does Lebanon need to recover its former glory?

What kind of leader will have the experience to overcome government mismanagement and bring new standards of efficiency and effectiveness?

How will any leader manage the quagmire of Lebanon’s domestic and regional political challenges?

Who is this leader – a visionary, wizard, competitor, and deal-maker par excellence? The world wants to know…

BREAKING NEWS:

Press Release
(Sin el Fil) From the Headquarters of the Free Patriotic Movement (FPM)

After more than 15 years of great success as the leading Christian party and coalition builder in Lebanon, the FPM finds itself in distress. The elections are only a year away, and the polls are showing erosion of support for the party. Even the esteemed founders and leaders are facing challenges in their districts.

Aware that when His August General Michel Aoun founded this party in 2005, our success was due to a detailed political program of economic and political reform plans, none of which has been realized. So rather than repeat these promises, we need a new formula for success – more promises, more tahini, more khobz in every furn, and less discussion about human rights and bank transfers.

Today the world is different, there are fewer Lebanese Christians voting here and overseas. We don’t know their problems, so what can we do? WE WILL STOP DEPENDING ON OTHERS TO SOLVE OUR PROBLEMS!

We have reached deep into the heart of Lebanon for answers and today are pleased to announce a new leader for the FPM, Carlos Ghosn, well-known to all of you as a great business leader, innovator, escape artist, and true Lebanese with a global stature who commands the attention of authorities all over the world.

We are so excited by his agreement, that we are petitioning the current president to step down so that Parliament can elect Mr. Ghosn immediately to replace him. Who better understands the demands of building a successful entity? Who has more experience in building mergers and partnerships among competitors? Who is a mastermind of financial transactions that protect one’s wealth while serving a bottom line?

CARLOS GHOSN, that’s who. HE is Lebanon’s future, not part of its past. Just as Rafic Hariri presided over Lebanon’s first renaissance, President Ghosn, with his partners, the Prime Minister and Speaker, will bring Lebanon from one brink, of despair, to another brink, of success. That’s his promise. And you can take that to the bank…

And, as President, he will have immunity while in office…which could be a very long time.

Viva Lebanon.

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The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.

No Government, No Reforms, No Recovery for Lebanon

As Jihad Azour, director of the IMF’s Middle East and Central Asia Department told Reuters last week, “The change of direction [in Lebanon] cannot be done on a piecemeal basis. It requires a comprehensive approach.” He added that, “Reforms should focus on the financial sector, public finance, governance, corruption, and loss-making utilities that have contributed to a surge in debt.” His point was recently reinforced by the Lebanese International Finance Executives (LIFE) in a joint paper with MEI and ATFL to the Biden Administration, that a forensic audit of the Central Bank, obstructed by various Lebanese power centers, is required before IMF negotiations can begin.

This sequence is critical because it short-circuits ploys by the political elite to make minimal efforts at reform, say at the electricity company, betting that international assistance will begin. Lebanon lost that option some time ago when the oligarchy passed face-saving legislation or made commitments that were never implemented. Lacking credibility, the government cannot now go back to its smoke and mirrors policy-making and assume international acquiesce. The Middle East is full of hardship cases – the Syrian people next door and Yemen can also legitimately call for support, but the answer is the same: put in a reform government that has the power to implement changes; revise how the government operates, transparently and away from expanding national debt; and make rigorous efforts to support an expanded social safety net that targets poor families and the failing economy.

Not one policy maker or international NGO has said that the international community wants Lebanon to fail. Rather, as has been stated time and again, Lebanon must begin the process of recovery by making the necessary reforms. Ironically, the fault is not the caretaker government which has several well-qualified ministers. It is the same cadre of power brokers that is either actively stripping Lebanon of its dignity or acquiescing to arrangements that favor the few over the people. Parliament’s handicaps are obvious.

An eloquent voice who knows the political oligarchy in Lebanon well is Tracy Chamoun (yes that Chamoun family) who resigned as Lebanon’s ambassador to Jordan to protest the government’s failure to deal with the consequences of the August 4th Beirut Port explosions. In her latest blog, she notes that “Lebanon needs other rich nations to step in with aid and loans. We cannot do this on our own anymore. For this to happen, certain politically ambitious people must move out of the way to enable the formation of a respectable government. This will give Lebanon back its international credibility, and allow the country to re-enter into negotiations with the IMF and The World Bank, and to secure lasting solutions.”

But the international community and the International Financial Institutions (IFIs) including the World Bank Group will not be satisfied with fresh faces if they do not carry out the forensic audit of the Central Bank to determine the actual status of government debt and the banking sector. Think of it this way – if you want a mortgage on your home, the bank starts by determining what you can afford to pay, not what you claim you can handle, or your good intentions, or your pretty eyes. Believe me, I have tried it…doesn’t work.

The truth is that the banks in Lebanon hold Lebanese bank bonds that they received from the Central Bank in exchange for their foreign currency. This means that the Central Bank owes Lebanese banks hundreds of millions of dollars that it cannot repay because it has been funding government deficits. So the banks will not give up what they have on hand to their depositors and risk insolvency. Vicious circle.

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

Can the Lebanese people hold on until the new elections in Spring 2022? Will the opposition develop alternative voices who can appeal to voters to change their habit of voting along confessional lines? Or will Lebanon collapse under the burden of inaction imposed by its leaders? Even Hezbollah is calling for a new government, whatever that means to them…while they open supermarkets and issue cash cards to their constituents to have access to essential products brought in from Iran (wonder if they paid custom duties?) and Syria. Hezbollah understands constituent services and how to count votes.

Seems the majority of the Lebanese people are still waiting for their leaders to restrain their greedy interests and reclaim credibility by letting a new empowered coalition take over in Lebanon to move it to recovery. There is no time to wait any longer. The forensic audit is on the table, ready to go. Time to start to free Lebanon from its historic burden of power sharing that only takes power from the people.

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.