NSSF raises coverage costs
The National Social Security Fund (NSSF) has increased its rate to cover an overnight stay in private hospitals from LL30,000 to LL90,000. The move came after private hospitals threatened to stop taking NSSF patients because the rate was too low in the face of increasing costs of care. This increase in coverage will be met with a rise in the ceiling of employees’ monthly contributions to the sickness and maternity category from LL30,000 ($20) to LL50,000 ($33). In this category, employers pay 2 percent from an employees’ salary, but this was previously capped at LL30,000 for salaries over LL1.5 million ($1,000). Under the new agreement the maximum contribution has been increased to LL50,000 by raising the salary cap to LL2.5 million ($1,666). The NSSF suffers from serious problems relating to underfunding and understaffing, with 45 percent of its positions vacant and the average age of employees exceeding 51 years old. According to the fund, the government’s accumulated obligations at the end of 2011 amounted to LL829 billion ($550 million), while they only received some LL120 billion ($80 million) from the state’s coffers that same year.
Spending in uncertainty
The Lebanese are continuing to spend, with private consumption for the first quarter of 2012 up on the same period in 2011. Investment spending is also up but at a markedly lower pace. Total spending, measured by the aggregation of cleared checks, point of sale and ATM transactions, edged up by 3.1 percent year-on-year in the first quarter of 2012, reaching $19.2 billion. This compares to the 1.5 percent increase in spending registered in the same period in 2011. The total cash withdrawals from ATMs by Lebanese residents increased by 7.9 percent annually, while point of sale purchases increased by 24.6 percent on a yearly basis. The figures show the Lebanese are continuing to increase expenditures despite the fragile economic and political environment that has prevailed, locally and regionally, since early 2011. The investment component was up at a comparatively lower pace due to uncertainty over the Lebanese and Syrian security situation. Imports of investment products went up a mere 2.3 percent year-on-year in the first quarter of 2012.
Logistical failure
Lebanon has crossed the finish line in 96th place in a global survey on logistics, slipping from its place at number 33 in the same survey in 2010. The World Bank’s Logistics Performance Index (LPI) assesses the logistics gap among 155 countries and reflects perceptions of the logistics environment of trading partner countries. Lebanon also fell from 4th place to 26th from 2010 to 2012 among the upper-middle income countries category. The results are based on a survey of operators across the world who give feedback on the logistics of “friendliness” of the countries in which they work. It assesses customs procedures, logistics costs, infrastructure quality, the ability to track and trace shipments and timeliness in reaching destinations.
Upping industry, outing taxes
The Ministry of Industry has signed a deal with the American University of Beirut (AUB), the National Council for Scientific Research and the Lebanese Industrial Research Achievements program (ILRA) to improve the quality of industrial research in Lebanon. It is hoped the agreement will contribute to helping Lebanon generate industrial high value-added products for the economy while enabling AUB students to conduct academic research relevant to industry. Elsewhere, the Ministry of Industry said that a long sought-after law to reduce taxes on industrial exports by 50 percent was approved by the cabinet but was awaiting ratification from Parliament. Industrial exports amounted to $527.1 million in the first two months of 2012, up 10.6 percent from the same period in 2011. The sector as a whole constitutes 7 percent of gross domestic product according to the most recent figures. In 2002 the sector constituted around 11.5 percent of GDP.
MEA profits crash
The nation’s flag carrier Middle East Airlines (MEA) announced a 55.9 percent drop in operating profits between 2010 and 2011. It is not possible to verify the actual financial statement of MEA as it does not publish a detailed balance sheet or income statement, but the company’s chairman Mohammad Hout said the operating profits had dropped from $90.6 million in 2010 to $40 million in 2011. He blamed rising fuel prices, increases in wages and turmoil in the Arab region. Lebanon entered into the top bracket of the open skies policy in 2002, which liberalized aviation and increased competition in and out of the country, but Hout has complained that not all countries in the region are abiding by the agreement’s rules. The ex-head of Lebanon’s civil aviation authority, Hamdi Shawk, claims the Minister of Transport and Public Works, Ghazi Aridi, and MEA are retreating from the policy of liberalization. Neither the minister nor MEA responded to Executive’s repeated requests for comment. The company is more than 99 percent owned by Lebanon’s central bank and previously mooted plans to partly privatize the carrier by listing on the Beirut Stock Exchange appear to have been shelved.
Electrified employees
The government-owned electricity provider Electricite du Liban (EDL) was wracked by open-ended strikes, protests and sit-ins by part-time and contract workers last month. As workers protested against the cabinet’s failure to endorse their full-time employment draft law. The workers have been pushing for permanent employment with full benefits, voicing fears that they will lose their work to service providers. The EDL employees association claims that there are only 1,700 full-time employees at the company while it needs more than 5,000. The Minister of Energy and Water, Gebran Bassil, told reporters that “the company cannot contain more [permanent employees] than it can bear.”
Gray days ahead
Lebanese youth have a more downbeat view of their economic prospects than their Arab counterparts, according to a new report. The ASDA’A Burston-Marsteller 2012 Arab youth survey indicated that 63 percent of Lebanese youth are very concerned about the rising cost of living, 63 percent are worried about the economy and 60 percent are worried about unemployment. While the same proportion of Arab youth are concerned about the rising cost of living, only 48 percent are worried about the economy, and 44 percent are worried about unemployment. More than half of the respondents said that they had fewer opportunities than they did 12 months earlier. The survey covered the United Arab Emirates, Oman, Qatar, Bahrain, Saudi Arabia, Kuwait, Egypt, Jordan, Lebanon, Iraq, Tunisia and Libya.
Typically below potential
Lebanon’s projected real gross domestic product growth (GDP) of 3 percent in 2012 is well below the economy’s potential, according to the International Monetary Fund (IMF). It identified the implementation of strong domestic policies as essential to stimulating confidence, which requires good fiscal discipline to reduce the debt-to-GDP ratio downwards from its current standing somewhere around 140 percent. The IMF identified the need for reforms in infrastructure, as well as improvements in the business climate to help create a dynamic economy and boost job creation. This comes on the heels of a UN study that highlights that the labor-intensive productive sectors have been marginalized in Lebanon, contributing to lower productivity, higher unemployment and the exodus of much of the nation’s young talent.
