No growth without reform

Implementing CEDRE and Brussels II requires good housekeeping

Within a period of six weeks last spring, Lebanon received an attentive treatment from the international community. On March 15 in Rome, an international meeting was held to support Lebanon’s armed and security forces. Afterwards in Paris on April 6, world leaders convened to offer Lebanon substantial foreign aid to bolster its economy at the CEDRE conference. Then on April 24-25, the international community reiterated its support for Lebanon’s efforts in hosting more than 1 million Syrian refugees at the Brussels II conference on “Supporting the future of Syria and the region.” These three occasions signal the world’s commitment to maintain Lebanon’s stability, but also signify the weak state of the country’s security and economy.

Lebanon’s economy has experienced a slowdown since 2011due to the eruption of crises in Syria and the region, and a resultant domestic political deadlock. Real economic growth has been subdued for the past six years while public debt has been on the rise with its share to GDP surging to reach a disconcerting 150 percent in 2017, according to the International Monetary Fund. Unemployment has been growing, and in refugee-hosting communities a noticeable and sharp increase in mostly low-skilled laborers has led to an approximate annual doubling of new entrants into the workforce. In the same vein, risks of spillover from regional turmoil, particularly in Syria but also in Yemen, are not far-fetched. Adding to this, the country is under strain from Syrian refugees, the vast majority of whom are destitute and reside in dire conditions among the poorest Lebanese communities in under-resourced and under-served cities and districts.

Despite recognizing the effects of regional turmoil and intense demographic pressures on society and the economy, as well as the need for international support and foreign aid to weather any potential storm, Lebanon is in urgent need of serious housekeeping.

Systematic challenges

Reforms are pressing, and have to go hand-in-hand with the plans to boost the economy—such as the Capital Investment Program (CIP) that was proposed at CEDRE. The Lebanese state needs to build a high-level political consensus for genuine reform, with commitments to tackle the systemic nature of corruption at all levels. New policies are needed to minimize graft and criminalize it. Implementing the Access to Information law, enacting policies to protect whistleblowers, and strengthening an independent judiciary are key in this reform drive. It is also clear that to stop the siphoning of state resources it is time to move away from the current clientelistic practice of using public sector employment to expand the electoral capital of politicians in office.

Equally pressing is the need to reduce inequalities. With 50 percent of population sharing only 5 percent of the country’s wealth, 10 percent of population sharing 70 percent, and just 1 percent sharing 35 percent, Lebanon has among the highest levels of unequal wealth distribution in the world. This necessitates an open, inclusive, and careful revision of current social and economic policies, which may lead to a new and comprehensive social and welfare strategy that could shift the focus toward more productive sectors in the economy, the integration of current social welfare and social protection programs, and more importantly, a high-level political commitment to reverse the increasing geographic disparities in Lebanon. This should be in alignment with Lebanon’s commitment to the UN’s Sustainable Development Goals (SDGs), specifically SDG 1, to end poverty in all its forms everywhere, and SGD 10, to reduce inequality within and among countries.

Inclusive development

Implementation of the proposed development programs and projects at CEDRE and Brussels II needs to be inclusive, in particular of women, the youth, and refugees. It is crucial that this should move from basic levels of participation to having the programs and projects attuned to the needs of women in society (including women in businesses), to the youth (particularly in refugee-hosting communities), and to the refugees themselves, both Palestinian and Syrian. Implementing an all-inclusive approach for development programs and projects would require new or modified government directives such as a quota system, a simpler work permit regime, and coherent and accessible ways for refugees to acquire residency papers.

It is also essential to have the planned programs locally-grounded, where municipalities can partner together in the design, implementation, monitoring, and later maintenance of development projects and initiatives. It is also key to prioritize areas and regions hosting highest numbers of refugees, and in particular the 251 most vulnerable localities (kadas) that host 87 percent of Syrian refugees while at same time encompass 67 percent of the most economically vulnerable Lebanese. Here, development projects would generate a social stability dividend with improved social relations and cohesion between hosts and refugee communities.

On May 17, a small event took place at the Beirut Port. Although not as grandiose as having world leaders gather around the table in Paris or Rome to show public support for Lebanon’s stability or pledge to boost its economy, it was a moment to celebrate as 20 tons of potatoes farmed in the plains of Akkar were exported to the Netherlands. A modest size of export yet a momentous improvement following painstaking efforts to revamp farming practices and enhance the quality of produce to make it eligible for EU markets. Lebanon can definitely benefit from more trade. Indeed, it needs to start reversing its trade deficit, which soared to $20.3 billion in 2017. Trade creates employment, particularly if it is geared toward boosting productive sectors in the country’s peripheral regions where agriculture (e.g. Akkar and Bekaa) and manufacturing (e.g. Tripoli) are predominant, as well as toward the export of services, such as those found in the budding tech-hubs in Beirut. Given the centrality of reforms, aid and trade should go hand-in-hand to put Lebanon’s economy on sustainable track.

Nasser Yassin is the director of research at the Issam Fares Institute for Public Policy and International Affairs, and assistant professor of policy and planning at the health management and policy department at the American University of Beirut.

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