Lebanon won a rather inglorious ranking of 128 out of 176 countries in Transparency International’s 2012 Corruption Perception Index (CPI). The data collected from independent institutions specializing in governance and business climate analysis reflects the perceived degree of corruption in the public sector. In comparison to its regional neighbors, Lebanon was 14th out of 20 Arab countries, and with regards to its economic strata placed 35th among 41 upper-middle-income countries. The poor CPI ranking came on the back of another bad show in The World Justice Project’s Rule of Law Index 2012, in which Lebanon came 44th out of 97 countries. The gauge measures the implementation of the rule of law by aggregating 48 sub-factors into eight factors; limited government powers, open government, absence of corruption, regulatory enforcement, order and security, fundamental rights, civil justice and criminal justice. Perhaps the most disconcerting result was Lebanon’s ranking of 85th place in the regulatory enforcement factor, which measures the extent of fair and effective enforcement of regulations.
Remittances flat-line
Expatriate remittances to Lebanon amounted to 18 percent of gross domestic product in 2012 according to World Bank estimates. That is the ninth highest such ratio in the world behind Tajikstan, Liberia, Kyrgyz Republic, Lesotho, Moldova, Nepal, Samoa and Haiti. The nominal value of the estimated remittances for the year totaled $7.8 billion, which amounted to a marginal increase of only 0.4 percent on 2011. In comparison, remittances inflows to Arab countries are projected to have increased 8.3 percent (Egypt is the only Arab country to receive more in expatriate remittances than Lebanon). The amounts sent home from the Lebanese diaspora have been roughly flat since 2009 compared to an annual growth rate of 13.4 percent during the 2005 to 2008 period. Looking forward to 2013, the World Bank forecasts the flow of remittances to the Middle East and North Africa region to increase 5.5 percent to $50 billion, constituting the slowest growth rate among all developing regions.
Income disparity growing globally
The gap between the top and bottom earners within the global workforce is widening according to the International Labor Organization’s 2012/2013 Global Wage Report. Wage earners may also be disheartened to read that the gap between wage growth and labor productivity growth is expanding and the labor income share (as opposed to capital income) is declining. Real average wage growth has remained far below pre-financial crisis levels globally, going into the red in developed economies, although it has remained significant in emerging economies. The impact of the economic crisis has varied considerably between regions, with wages having suffered a double dip in developed economies whereas they continued to rise in Latin America and the Caribbean, and even more so in Asia. In the Middle East real average wages appear to have declined since 2008. The study found that the economic crisis has instigated widespread changes in working practices, such as shorter working weeks, work sharing and frozen or reduced hourly rates.
Inflation over 10% in October
The Consumer Price Index (CPI) increased 11.1 percent in October 2012 from October 2011, according to the most recent statistics from The Central Administration of Statistics. The increase is mainly attributed to a 44 percent adjustment of the cost of housing in July 2012, which had remained unchanged in the CPI for the previous three years. Other sectors recorded significant price increases over the past year, such as education (14.5 percent), alcoholic beverages and tobacco (9 percent), water, electricity, gas and other fuels (7.7 percent), recreation and entertainment (7.1 percent) and food & non-alcoholic beverages (6.3 percent).
Oil gets gassed
More than 330 people from 17 countries took part in the Lebanon International Oil and Gas Summit in early December. Lebanon’s fledgling hydrocarbons industry has come back into the spotlight after the long-awaited appointment of the board for the Petroleum Administration in November. A political deadlock had delayed the assignment of the six-member board, which effectively stalled development in the sector. The government can now proceed to invite companies to tender bids on exploration blocks. A ministry representative told delegates they could expect the first licensing round early in the new year. Specialists from both the government and the private sector gave speeches on a range of topics from tax regimes to international gas market dynamics. Lebanon has extensive 2D and 3D seismic surveys that indicate a high chance that there are offshore hydrocarbons to be tapped and the recent discoveries of major fields in Israeli and Cypriot waters also increase Lebanon’s prospects for recoverable finds. If Lebanon proceeds on a standard course it is unlikely that it will be producing commercial hydrocarbons in less than six to eight years. Royal Dutch Shell, Cairn Energy and Cove Energy are among firms expressing interest in bidding for a license.
The C.D.R.’s epoch of building
The Council for Development and Reconstruction (CDR) sealed contracts for a total value of $10.7 billion from 1992 to 2011, and $7.4 billion worth of the projects have been completed while $3.3 billion of them are still to be implemented. The CDR was created in 1977 and is engaged in all phases of project implementation on most public facilities on behalf of the government. The solid waste sector attracted $1.6 billion of signed contracts during the covered period, followed by the electricity sector with $1.4 billion, education with $1.1 billion, potable water with $832.6 million, post and telecommunications with $789.5 million, sanitary water systems with $604 million and public health with $313.1 million. The lion’s share of the realized financing over this period was external, which amounted to $9.4 billion; $6.6 billion in soft loans and $2.8 billion in grants. The biggest sources of financing for CDR projects were the Arab Fund for Economic and Social Development (14 percent), the Facility for Euro-Mediterranean Investment and Partnership (11 percent) and the Kuwait Fund for Arab Economic Development and the Kuwaiti government (11 percent each).
Strikes in absence of wage hike
Teachers and public sector employees continued to stage strikes and street protests into late December as the government stalled on referring a public sector wage pay scale to the Parliament. In September the cabinet agreed on the wage hike without first determining how it would cover the anticipated $1.5 billion extra burden on the treasury [see page 54]. The cabinet has considered a number of different tax schemes but has been met with fierce criticism from the banking and private sector on the presumption that the new scale would push up inflation and the tax hikes would hobble an already embattled economy. The proposed pay scale would see category one employees (such as general directors of public departments) receive an increase of LL2.9 million ($1,933) a month; category two employees will get a LL1.7 million ($1,133) hike; category three employees will get a LL940,000 ($626) increase; and the state’s lowest-ranking clerks will receive a LL210,000 ($140) hike. Public highschool teachers, the main advocates of the new scale, will receive around LL1 million ($667) in raises, while public elementary school teachers will receive LL789,000 ($526).
Industrial exports down, planning up
Industrial exports, which are the most reliable indicator of the vitality of the sector, totaled $2.2 billion in the first nine months of 2012, amounting to a 11.3 percent decrease on the same period in 2011. Machinery and mechanical appliances accounted for $364.4 million, or 16.6 percent of total industrial exports in the first nine months of last year, followed by pearls and precious or semi-precious stones with $351.6 million (16 percent), and base metals and articles of base metals with $326.1 million (14.8 percent). While the sector’s exports have fallen on 2011’s performance, the value of industrial imports increased over the same period by 25 percent, totaling $220.2 million. However, the value of imports of industrial equipment and machinery, which can be seen as an indicator of planning for industrial activity, reached $18.8 million in September, an increase of 12.3 percent year on year.
E.U. aid for economic, social development
The European Commission has extended 32 million euros worth of grants to the Lebanese government to fund three programs focusing on improving the quality of the public sector, vocational training and education and the promotion of social justice. The Annual Action Program 2012 Part II for Lebanon builds on past commitments, with the new projects complementing existing European Union-supported initiatives. Some 12 million euros will go toward programs intended to stimulate sustainable job growth, the same amount again has been earmarked for projects promoting social justice through democracy, human rights and social dialogue, while 8 million will be spent on education reform programs targeting community and labor orientated schemes.
Lebanese privacy partially maintained
The cabinet refused a request by the Internal Security Forces (ISF) to access all telecoms data for the entire population, but it approved access to data from “suspicious telephone numbers”. It is reported that as part of the compromise the intelligence bureau will be handed text message data over two stages. At the first stage they will provide the movement of the text messages in Beirut and Mount Lebanon, but not the content of the texts, whereas in the second stage the ministry will provide the content of text messages between “suspicious” numbers. The ISF had also requested the passwords for Lebanese email accounts and other social media sites, but this request was both rejected by Minister of Telecommunications Nicolas Sehnaoui and likely unfeasible anyway, given that it would require the cooperation of Facebook, Google and other multinational Internet companies. The dispute over the level of access to be accorded to intelligence services has pitted the rival March 14 and March 8 coalitions against each other since the assassination of intelligence chief Brigadier General Wissam al-Hassan. The opposition March 14 has broadly supported the ISF requests while leading members of the ruling March 8 have resisted the calls; Sehnaoui has rallied against them, saying they are a violation of privacy and constitutional rights. Minister of Interior Marwan Charbel has been at the heart of the negotiations between the ISF and the Ministry of Telecommunications.
