Tomorrow’s members of parliament will have to be active participants in urgent lawmaking and they will have to be able to pursue the public benefit with great expertise. Therefore, it seemed fair to ask party leaders about the economic agendas they represent. Last month, we spoke to Michel Aoun (Free Patriotic Movement), Selim Hoss (Third Way), Ahmad Mallie (Hizbullah), Carlos Edde (National Bloc) and Nayla Mouawad (Independent). In its final installment, with the election in full swing, EXECUTIVE sought the party experts from Progressive Socialist Party (PSP), the Democratic Reform Movement (DRM), both Kataeb branches, AMAL and the Future Movement (see page XX).
While the parties we encountered ranged from the old to the new and the right to the left, it was noteworthy that their positions were generally marked more by realism than driven by ideological objectives. Radical demands and over-night revolution were on no-one’s agenda. It was also interesting to see that a good number of party strategists were more skeptical about the WTO than about Lebanon’s affiliation with the Euro-Med Association Agreement – but then again professed considerable weariness about the Greater Arab Free Trade Area because of shortcomings in regional commitments to fair trade.
No politician fundamentally opposed the presence of Syrian labor in Lebanon and every single one spoke in favor of foreign investments. Every party and every leader testified to being committed to fighting corruption and all called for fundamental reforms of the bureaucracy in Lebanon. There were still enough differences in emphasis to make good variety and choices worth comparing. More extravagant musings included scenarios to introduce a tax on polluters and to make internet cheaper for everyone by launching taxation that would pay for telecom infrastructure. No party proclaimed campaign goals of turning Lebanon into a non-smoking environment or banning politicians from double parking.
Antoine Haddad, Democratic Reform Movement
Democratic Reform Movement (DRM) official and economist, Antoine Haddad, says his party aims in its economic policy to find new comparative advantages for Lebanon in the regional economy and adapt the country to the demands of functioning under the rules of globalization. It regards all economic development to hinge on dismantling the country’s black or shadow economy, by implementing best practices, political and administrative reform, and by convincing the new political class of abandoning the culture of corruption.
Acknowledging that banking, services and the knowledge economy do not suffice as job machines for the Lebanese market, the DRM seeks to alleviate imbalances between the sectors of the economy, to which end it intends to strengthen agriculture and manufacturing. It promotes taking a different approach to taxation and employing taxes as social regulative and means for more equitable distribution of wealth. Besides emphasizing Lebanon’s strong base in human capital and potential to create new economic opportunities, Haddad made it a point that environmental protection is a priority for the DRM and predicted the problem of solid waste in densely populated Lebanon would become the next main source of social conflict in coming decade.
Beyond tried and tested means for debt reduction, the DRM calls for deep reform of the public sector and ending of wastage (but under a soft landing scenario for public sector employees) as well as downsizing the armed forces to a professional, smaller, modern military, thus cutting spending. Objective of the reform would be to achieve a sustainable primary surplus in the budget on recurrent basis.
In taxation issues, the party supports the Value-Added Tax but it would seek to maintain VAT at current levels for at least another two years until wage earners achieve real income increases. Strongly advocating a shift to incrementally raise the share of direct taxes in the revenue stream to 40%, the DRM sees the need to increase income and property taxes in the mid-term but would do so only in conjunction with a package of incentives and policies to attract investments.
Calling the non-availability of pensions for private sector employees a scandal, Haddad spoke out for shifting to a social care system with two pillars, pensions and healthcare. In relation to employment issues, the DRM stands for a proactive labor policy and revision of the labor law. The party wants to establish a functioning job matching service at the National Employment Office and make improvements in aligning the education system to labor market demand. It supports an increase in the minimum wage and strives to better protect the rights of foreign workers in Lebanon.
Antoine Chaker, Kataeb Party and Pierre Gemayel Kataeb Reform Movement
Kataeb Party politburo, Antoine Chaker, said that party supports implementation of a regional common market and sees education as a priority. The party advocates a strong consumer protection program as well as reform of all ministries and administrative bodies that stand in direct relations with the economy. Stopping the increase in the public debt and finding solutions for repayment of the debt should be the main objective of any economic policy. To better deal with the debt, Kataeb proposes to sell off deficit-making public entities, beginning with the electricity utility, and draft a plan for developing state-owned real estate properties and utilize them in repaying the debt. State-owned real estate assets could be sold without harm to the country and would procure an “important amount” towards repaying the debt, Chaker said.
In terms of fiscal revenue, Kataeb supports simplification of ministerial processes and easy and implementation of a system of low taxation that would enable all citizens to pay their dues. Aim in reforming the taxation system would be to reach all residents with a light tax burden and only minimal administrative involvement. VAT should be maintained at the 10 % level but expanded to all participants in the economy. To be competitive in regional markets, Lebanon should gradually decrease customs levies. The party is in support of international treaties and regulations.
Because it generates inbound cash flow, tourism should top the list of sectors that receive incentives for economic development. Agriculture should be the second target for incentives, third industry. Incentives should be given indirectly, in form of low taxes, low or subsidized loan interest rates, and long term debt facilities.
Pierre Gemayel of the Kataeb Reform Movement [KRM] told Executive that as well as exploiting Lebanon’s tourism potential, the KRM believes that, as non-oil producing country without heavy industry, Lebanon should rely in its economic development on the services industry and boost also agricultural exports, says the KRM. According to Gemayel, an extensive taxation regime would not be beneficial for attracting companies and the country instead should offer initial advantages and legal protection to companies and tax them later on. The party supports the Value-Added Tax but opposes the simultaneous application of VAT and customs duties. It would not increase taxes on real estate transactions.
[Note: The Kataeb party and the Kataeb Reform Movement mutually deny each other’s legitimacy. Representatives of both sides expressed that they expect the other grouping to diminish or be assimilated into their branch.]
Rami Rayess, Progressive Socialist Party
As, according to PSP officials, party head Walid Jumblat does not consider himself expert on economic issues, the editor of the party’s official magazine and chief media officer, Rami Rayess, conveyed the organization’s economic vision and policy perspectives to EXECUTIVE.
In its basic assessment, the PSP supports preserving the role of government in the economic sphere. It does not regard it suitable in human affairs to let the logic of the market rule all spheres of life, because it regards market forces as being insufficient for addressing social and economic imbalances. Government should play the role of regulating the market without necessarily owning the means of production. The fundamental governance model behind the PSP’s economic program is that of a free market with the government as regulator.
Proclaiming an agenda of social justice as one of its objectives, the PSP sees governmental planning for the economy as necessity, without which it would be unlikely to achieve the following targets: development of rural areas, a decrease in inflation, a decrease in urban migration, a decrease in social and class differences, and creation of new job opportunities. The PSP considers these targets as important under its party philosophy, in which the human being has the capacity and right to live his life in liberty and dignity and the state’s role is to create an environment conducive to the development of citizens through equal opportunities.
The party is in support of administrative decentralization as a key tool in facilitating social justice through equitable development of rural areas. It acknowledges the importance of administrative reform. Another point of strong PSP emphasis is protection of the environment.
Rayess said the party regards the national debt as manageable, provided that the political will to do so is secured. Attempts should be made to halt further growth of the debt in a first phase of addressing the problem and longer-term measures could be deployed for reducing it in a second phase.
Indirect taxes are favored by the PSP as easier in application than direct taxes but the party preferably would see the VAT lowered, provided that alternatives can be found. The party does not regard elimination of customs duties as desirable per se and would concede to a gradual phasing out if unavoidable under international treaties.
The party agrees to GAFTA and Euro-Med, Rayess said, also expressing unrestrained support for IPR protection and the fight against money laundering. Further changes to the banking secrecy law are not necessary in the party’s view. Industry, agriculture, tourism and ICT are the sectors that the PSP would address first in providing special development incentives. The PSP advocates lowering the costs of production and doing business for industry, by such means as lowering electricity tariffs and port fees.
Dr. Mustafa Yaghi, AMAL Movement
Confirming the need for new economic strategies, the policy-making agenda of the AMAL movement prioritizes controlling of public expenditures, improvements of productivity in the private sector economy, increased development of rural areas, and stronger vocational training of the labor force, along with administrative reform and privatization of public sector entities in an environment of eliminating “political sectarianism”. Amal politburo member, Dr. Mustafa Yaghi, outlined the party’s economic perspectives to Executive.
The party’s approach to the public debt would seek to reduce the debt by way of a reduction in public spending, mainly capital spending, along with which it would address privatization problems, and reign in subsidies, specifically the fuel oil subsidies to electricity utility EDL. In managing the existing debt, Amal would encourage a gradual move towards longer-term debt. Aiming to devise a schedule for servicing the debt and starting to repay the principal, the party furthermore emphasizes the creation of an economic climate conducive to attracting investments, the enhancement of competitiveness of the productive sector including a reduction of costs on production, and swapping some debt against goods or assets.
On the fiscal revenue side, Yaghi said that the country’s current ratio of 37% direct and 63% indirect taxes needs to be reversed, with an aim to achieve a contribution to the treasury from direct taxes at or near 55% based on progressive taxation scales, versus a contribution of indirect taxes at around 45%. While the VAT has been implemented at levels close to other developing countries with an active tax regime, income tax is still low especially for high earners. In light of the current economic and fiscal situation, the party sees it justified to maintain or increase customs on imported goods, in particular goods that do not have an equivalent in Lebanon, regardless of international agreements. Bilateral agreements could regulate the trade in such goods between Lebanon and the countries of origin.
With much attention to rural development and specific factors such as irrigation programs, agriculture, industry and crafts are clear priorities for Amal in sectors to be promoted for economic development. The party has a substantial list of recommendations for encouraging of sector development also extending to ICT and services. Its policy guidelines for investment promotion emphasize support for local investors and projects, such as contributing to the capital of mixed public and private sector companies in food processing. For foreign investors, Amal would devise investment support measures that are similar to those for local investors and provide special tax facilities inasmuch they would not impact national producers negatively. It supports further development of IDAL as investment facilitator.
