Can Lebanon Salvage Its Stability and Regional Economic Role? Prime Minister Hariri Thinks So.
A recent story on www.Naharnet.com featured an assessment of Prime Minister Saad Hariri’s recent experiences and his vision for Lebanon in the coming year. He emphasized once again that it is vital that the parties in Lebanon engage in serious and concrete dialogue as the only possible approach to moving the country forward.
The posting noted Hariri’s statement “Emphasizing that he and certain political parties will not agree on a lot of issues, especially regional matters, Hariri asked: “Without dialogue, how would the situation in the country be? We experienced the absence of dialogue prior to the Taif Accord but we ended up around the same table. The Taif Accord is doing very well because we will always defend this Constitution.”
Despite his return and the commitment of the government to observe the dissociation agreement, many questions regarding the relationship with Saudi Arabia, the role of Hezbollah as Iran’s proxy, the flailing economy, and the impact of the outcome of upcoming election on May 6, still confound most Lebanese and outside observers.
Hariri remains proactive on the economy
High on the PM’s agenda is restoring Lebanon as an investment destination for regional business. Even the latest political upheaval around his resignation/reversal has not dimmed his optimism. In a statement carried by the government media, He said that "this is the best time to invest in Lebanon because, thanks to this political stability and security in our country, we have been able to establish that the country is capable of confronting crises in a wise manner." More specifically, he hopes the government will not increase the fiscal deficit next year while meeting the financial demands of the new national budget. His remarks came during a session at the Global Business Summit organized by LIFE and Endeavor Lebanon.
Regarding the national budget, he noted that the recently passed legislation includes a number of reforms and some taxes. He was quick to emphasize that investments in the existing infrastructure program, debuted at the donors conference last year, was a viable starting point. The PM said that the government was ready to launch its efforts based on the results of the upcoming donors conference in March, which would mean raising $750 million of the $3 billion price tag. He also stressed the importance of the private sector’s role in the program with projects that could be initiated as early as February to upgrade the power infrastructure, rebuild roads, and other projects requiring the acquisition of land from existing owners.
In order to attract both domestic and international investors, however, Lebanon must adopt certain regulations and protocols that are not yet in place. Hariri said that “There are many laws that we have prepared and which are very important to encourage work. We worked on them in cooperation with several ministries and advisory bodies. They will be completed in Cabinet and then referred to Parliament, which will not delay them. With these laws, business will be much easier. There are a number of other laws that we will work on and a number of legal offices will help us in this matter in order to speed up their adoption.”
On the thorny issue of transparency, the PM pointed out how Lebanon had utilized international standards for the oil and gas awards and was now following up with the World Bank and IMF to implement similar standards for the CIP (Capital Improvement Projects) and other efforts that require international donors and participation by the private sector.
The wide-ranging discussion continued on topics such as taxes, the government deficit, support for SMEs, perceptions of political stability, relations with the Gulf States, investing in technology, and the internet in Lebanon. While it was an effective presentation by the PM, his points did not go unchallenged.
Not so fast Mr. Prime Minister
In an article posted on the UAE site www.thenational.ae, the author challenged the PM’s optimism on a number of points. The author, Michael Karam, noted that “Everyone from the IMF to the various ratings agencies knows that the country is crippled by an external funding deficit of roughly 20 per cent of GDP and a government debt running at 150 per cent of GDP.” He also noted the disproportionate importance of remittances, some 16% of GDP, which could be reduced by political actions abroad, setting off an economic crisis.
Karam wrote that “Mr Hariri should take a page out of his late father’s book and give the people he is trying to woo something worth investing in. Rafik Hariri rebuilt the whole of central Beirut into what he believed would be a retail, tourism, and commercial hub.” It was a success initially “But today, the Beirut Central District lies largely deserted, a symbol of what happens when regional politics trumps business ambition,” referring to the blockade of the BCD by Hezbollah to force the government to not interfere with its independent telecommunications network. The key point, he contends, “Is that the initiative was government-led, forming part of Hariri’s Lebanon 2000 vision, which he unveiled in the mid-90s. If only someone would give us similar hope, the business community might get behind his son. Give the private sector enough electricity, adequate clean water, and decent broadband, and it will perform miracles. And it could all be paid for with the oil and that gas that in all likelihood sits under the Lebanese coast.”
Although any realistic projection of revenues from oil and gas production is still 3-5 years away, there can still be another Lebanese “miracle” if somehow the business of reconstruction reverses the stereotype of Lebanon as a country that lacks transparency, is ruled by elites more concerned with benefiting their own constituencies rather than country as a whole, and a political system beholden to forces domestic, regional, and international forces that do not respect Lebanon’s independence.