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Executive speaks with UK ambassador to Lebanon, Hugo Shorter

Photo by: Greg Demarque/Executive

For relations between the UK and the European Union, 2016 was a year of total reboot. Half a year after the historic Brexit vote, details of what the actual Brexit deal will be are still unclear. However, with little impact on the relations between the UK and Lebanon, Her Majesty Queen Elizabeth II’s ambassador is envisioning big opportunities here. Executive visited the embassy to conduct an interview with Hugo Shorter, appointed to the post in September 2015.

E   Did the Brexit decision have any discernable impact on Lebanese-British relations throughout the past six months?

None, I would say. For a couple of good reasons. One is that practically everything we do in Lebanon and with the Lebanese is done bilaterally, whether it is with the Lebanese Armed Forces (LAF) and with the Internal Security Forces (ISF) or with the whole refugee file, and of course in the economic sphere. The second reason is that we are still members of the European Union and what the EU does here is partly on our behalf and is partly funded by us as well.

E   So in terms of imports from the UK, such as cars or pharmaceuticals, everything has been progressing in line with normal numbers?

It has been progressing in line with the economic situation in Lebanon, which has been relatively stagnant this year and last. Our best export numbers were in 2014, which reached a level of 500 million pounds. In 2015, we saw a decline down to 400 million pounds, and there will be a further decline this year because the economy remains flat. I don’t have figures on the effect of the Sterling’s change in the exchange rate after the Brexit vote. I would guess that this would have affected things positively but it is too early to tell.

E    One more question about trade in the past year: how were Lebanese exports to the UK?

You are talking about 40 million pounds in exports from Lebanon to the UK, which are mostly canned foods, ready-made garments and wine.

E   There was no significant increase in 2016 in these numbers, as far as one can see until now?

No.

E   Would you update us on the amounts that the UK has committed in humanitarian aid and development aid to Lebanon and to Syrian refugees in Lebanon?

Our support to Lebanon in the humanitarian file goes back several years and is not something that we started to boost after last year’s migration crisis in Europe. Over several years, we have also been the second largest bilateral donor to Lebanon, after the US. I am very proud of that because it shows that we are not just in this because we are trying to fix an immediate problem. We are in it because we think it is important to help protect Lebanese stability. To protect Lebanese stability, we need to help it cope with this huge number of refugees. To start with our financial year 2016/17 (our financial year runs from April 1 to March 31), we will allocate and spend 114 million pounds for this year. This is money that we are committing in order to implement the results of the London Conference and the agreement with the Lebanese government set out in a statement of intent.

E   How have you allocated this amount, which translates to more than $140 million at current exchange rates?

It is very hard to give exact figures on the breakdown of how this money was allocated, but it is roughly one third humanitarian. [This is] because the humanitarian situation does remain acute and we have to continue to make sure that people have the means to feed themselves, be sheltered and have minimum humanitarian standards. A very important part of what we do is on the education side, where we have been building our support for Lebanon over the past few years. We are going to spend about 40 million pounds this year on education, and we have already committed 40 million pounds every year for the next three years. This illustrates one of the things we think is important: there needs to be more predictability of which support Lebanon is going to get, and so we try to give multi-year commitments so that the Ministry of Education can plan ahead. There is also a set of actions that we do around job creation and around helping the most affected communities in Lebanon cope with stresses and strains of having a large influx of refugees. The United Nations Development Programme (UNDP) has established a system to identify the communities that are under the greatest stress. There are over 200 on their list and of these 200, we are supporting 49 this year with a series of programs to provide basic services, maintain infrastructure, etc.

E   This is bilateral or part of the EU funding for Lebanon?

All the numbers that I am giving are bilateral.

E   Is there any mechanism to account for currency fluctuations, given that the Lebanese lira is pegged to the US dollar against which the pound has dropped significantly following the Brexit vote?

There isn’t an automatic mechanism. We of course need to keep monitoring whether we are achieving the impact that we set out to achieve with the budgets that we have allocated.

E   Besides education, humanitarian aid and job creation, what other programs are you involved in?

We have a very important program on the stability and security side. We essentially have spent about 60 million pounds on equipping the army since 2011, and we have committed to continue this program until 2019. We will have trained over 10,000 soldiers by [its completion] and will have set up four land border regiments. For the first time, the LAF will control their border with Syria properly.

E   One often sees that media coverage puts emphasis on aid to Syrian refugees. But, from what you are saying, you are seeking to strike a balance between humanitarian support of Syrian refugees and support for Lebanon?

Yes, we are striking a balance both in our program with the LAF and the ISF. We have a big program with the ISF that is worth 13 million pounds over three years [starting in 2016], as we announced in March. Also, when it comes to refugees, we ensure that our programs, whether in education or in economic opportunities, are nationality blind in the sense that we are not saying “this is only for Syrians” or “this is only for Lebanese.”

E   Any comments on the thought that it would be beneficial, with view to the reconstruction of Syria one day, to train Syrians now while they are still outside of their country, as one British expert suggested at a recent event at the Issam Fares Institute?

Well, I think the thing to remember is that Lebanese law already allows Syrians to work in certain sectors such as construction, agriculture, cleaning and so on. In those areas, there is no need to change the law or even to provide work permits. Those are important areas for reconstruction in Syria in the future. Sure, there has been some ambiguity on the Lebanese side over where and in what sectors Syrians are allowed to work. We would certainly like to see some understanding of the value for Lebanon, as well as Syria, of Syrians being able to work rather than being idle and not able to supplement their family incomes, having all the risks of people whose position in society is undermined by their inability to work. But we are not asking the Lebanese to change their laws as to which sectors Syrians are allowed to work in.

E   Any other policy expectations that you have from the Lebanese side?

We are not making our assistance for refugees conditional on anything. There never is a position where we would say “if you don’t do this, we will stop doing that.” Lebanon is coping with a huge refugee crisis and is doing a fantastic job in many respects. We owe Lebanon the support that it needs and it is also in our interest to support Lebanon. There are of course areas where we think Lebanon can do more for both Lebanon’s benefit and for the benefit of handling the crisis. To give a couple of examples, one is when donor countries decide where to put their money, they want to find programs that will deliver results which they can then explain to their parliaments saying, “this is what our money has achieved.” The educational field is a good example where the [concerned ministry] has delivered education to thousands of Syrian children, and this is a success story which donors are happy to finance. The other thing that we talk to the Lebanese about is the question of refugees being registered and having residence permits. This is not about refugees being told they can stay forever, but about registering every person over the age of fourteen at a cost of $200 per person, which they are finding very expensive.

E    Are you encouraging the Lebanese government to address this issue?

At the London Conference the Lebanese government agreed to look at ways to address this issue. The other important aspect of this, which illustrates how addressing this is in Lebanon’s own interest, is that a lot of refugees are not fully documented either by the UNHCR or by the Lebanese and have fallen off the radar. To do something about their ability to have residency permits would bring them back on the radar, and it is in everyone’s interest to know who these people are and what their situation is. The day will come when refugees can return to Syria, and having the full number documented ensures that Lebanon will get all the support it needs and that we are able to plan for the right numbers to return and make their return easier, because you can bet that the Syrian state will ask for their documentation.

E   Are there any ideal scenarios under which you would envision companies from the UK to be more enticed to invest in Lebanon in 2017?

That scenario includes the Lebanese economy picking up. An ideal scenario would see growth rates that are a lot better than in the last 18 months. The second aspect concerns the regulatory environment around the ease of doing business here, the cost of doing business here and internet [speed], all things where Lebanon is rated very low if you look at the World Economic Forum ratings. I think a new government should be working to move Lebanon up in these rankings. Another thing is, maybe not for 2017, the prospect of Syrian reconstruction. It is a major economic opportunity for Lebanon, but one for which the government needs to make some preparations on things such as [removing] infrastructure bottlenecks and [implementing] some regulatory issues like the ease of moving goods across the border.   

E   Are you having this conversation already with the Lebanese government?

It is not an organized conversation yet because we are in a transition period. But it is something that I mentioned to the prime minister designate and to others. Also to be mentioned is the oil and gas sector, where we hope for the legislative framework to finally be unblocked. That will represent an opportunity for both Lebanese and foreigners.

Over several years, we have also been the second largest bilateral donor to Lebanon, after the US

E   Do you have a strategic vision to build something that will last a little bit longer? What are some of the areas where you hope to make a lasting impact beyond assisting in times of the Syrian crisis?

There are three areas to mention. First, in education, we have not just been doing numbers. We have been doing quality in a big way and that of course is something we want to see last beyond the refugee crisis and benefit Lebanese children today and tomorrow. [Second], infrastructure is designed to last, so that local infrastructure around water and so on will leave a long-term positive legacy for the Lebanese. [Third], there is the question of national level infrastructure. One of the perhaps less noticed breakthroughs this year around the London Conference was that we managed to change the rules about concessional finance for middle income countries. Lebanon, which previously didn’t benefit from concessional finance, thus became eligible for concessional finance, effectively meaning finance where donors pay a large chunk of the interest.

This means Lebanon can get very low-interest loans, and we have set up a concessional finance fund that is managed by the World Bank to build new infrastructure in Lebanon and in Jordan. This spring, Lebanon developed a strategy with a prioritized list of projects and by July the [Lebanese] government agreed on three top priority projects. Those projects are now going through the pipeline of decision making in the concessional finance facility. That is, in my view, the beginning of a big opportunity for Lebanon. We will now want to see these projects start quickly and start delivering jobs in the first instance, as they will require a lot of work to deliver better infrastructure in the end.

E   What are these projects?

The three projects at the top of the list [include a project for building] secondary roads across the country, which are very important in local transport, getting goods to markets, etc. The other two projects are centered around Tripoli: the Tripoli port and building a railway line into Syria. That is very interesting from a lot of perspectives, not least from the Syria reconstruction perspective and also because Tripoli is underinvested in. There are big opportunities.

E   Is this about investment into expanding port capacity or merely about upgrading of existing facilities?

I don’t know all the details, but the project is about enabling Tripoli port to handle bigger volumes. This shows that the international community wants to do projects that will have a lasting effect on Lebanon’s economic prospects, but we need the Lebanese side to show that it can deliver those projects in an effective and timely way.

E   Is corruption an obstacle to that?

Corruption is a concern, but we designed these projects in such a way to ensure that we have all the guarantees we need on how the money is spent. The international community spends a lot of money in Lebanon, over a billion dollars a year. I am not saying that there is zero corruption, but the main donors – who are held very strictly to account on these issues – are confident about the way that our money is being spent here.

E   The UK supported the UK-Lebanon Tech Hub. Are you are going to do more in entrepreneurship going forward and will the Tech Hub actually help create jobs, given that entrepreneurship is generally thought to have low job creation?

We are going to do more with the Tech Hub and are going to put more money into it. We have not announced the amount, but we will do more. For entrepreneurship this is the main vehicle. It is very attractive because it is an arrangement model with mutual benefits and one of the reasons that we do want to support it is that the Tech Hub has a plan to generate a considerable number of jobs between now and 2025; they are talking of 25,000 jobs, but this will be dependent on the amount of investment that they can generate and how much we can support it. Each of those jobs, according to research, generates four other jobs in the economy at large. So we are not talking about insignificant numbers at all.

E    How do you judge the efficacy of most of what you do, given that there is no direct research on the impact of the amount of funding and no real data on the Lebanese economy?

As you know there is no data and it’s hard to judge the impact on the Lebanese economy. But, if you think of the actual money that is being spent here, it’s got to have an economic effect. We are spending over a billion dollars a year and that’s upwards of two percent of Lebanese GDP and that has to have an effect as it is largely being spent in the country.

E   Are there other projects besides entrepreneurship that the embassy wants to focus on in the economic direction?

Not directly. We have a few other ideas in the pipeline. We will tender a pilot project in social enterprise, in which Lebanon is pretty strong, and in which the UK is a world leader. But these are early days. 

E   Is it correct to say that you are overall not pessimistic about Lebanon’s future?

I think Lebanon has an ability to exceed expectations. I hope we are at a turning point with a president and a new government. If the new leaders are able to seize the opportunities that present themselves, then I am very optimistic.

Matt Nash

Matt is Executive's Economics & Policy Editor. He has been reporting on Lebanon since 2007 with a focus on oil and gas, policy and legal matters.

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.

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