Middle East Airlines (MEA) has finalized an agreement to purchase 10 new planes worth $1 billion from Airbus. The national carrier is purchasing five A321neo and five A320neo aircraft, which are slated to enter service in 2015 and will primarily phase out older planes in the fleet, which currently include four A330-200s, four A321s and 10 A320s. The new aircraft are more efficient than their predecessors and the company says they will save them up to 15 percent on fuel costs annually, or around 1.4 million liters of fuel. With more than 1,600 firm orders since its launch in 2010, the A320neo family has proven to be the fastest-ever selling commercial aircraft program. Although MEA is a private entity, it is 99 percent owned by Banque du Liban, Lebanon’s central bank. In September 2012 its exclusive rights as the only domestic commercial passenger carrier were extended for another 12 years. The final agreement for the planes follows signing of a the memorandum of understanding in June 2012.
Telecoms industry restructuring
Lebanon’s Ministry of Tele- communications unveiled a plan to restructure the mobile phone sector, which would merge the mobile network infrastructure of the existing state-owned operators Touch and Alfa Telecom into a single platform and then license three to five private firms to operate as Mobile Virtual Network Operators (MVNOs) that offer retail services to customers. The single network infrastructure will remain under the ownership of the government, with the possibility of floating 3 percent on the stock market. Touch and Alfa Telecom posted total revenues of about $1.6 billion in 2011, of which $1.4 billion was directly transferred to the government; this amount, along with revenue from the state-owned incumbent operator in the fixed-line and Internet markets, accounted for about 40 percent of public revenues in 2011. A report by Business Monitor International concluded that the proposals would likely meet the government’s revenue targets but would be unlikely to stimulate innovation or raise the usage of telecom services in the country. Among the main reservations raised were that the new structure would do little to encourage investment and increase competition at the network operator level.
holes in state’s social safety net
More than three quarters of the Lebanese population consider their government to be ineffective in providing social protection and nine out of 10 support subsidy reform, according to a report by the consulting and opinion polling firm Gallup. Despite the poor show of faith in their government, 83 percent of survey respondents said the government has the most responsibility to help the poor in the country. The survey showed that 84 percent of respondents feel that social safety net programs should target the poor in the country, while 16 percent would prefer them to focus on specific target groups such as widows, orphans or the disabled. Just under seven-tenths of those questioned were in favor of cash-based social safety net programs, while the remainder prefer programs based on the distribution of goods and services. The study was commissioned by the World Bank as part of its assessment of social safety nets and subsidy programs in the Middle East and North Africa region.
EDL’s burden ever-heavier
The drain on the public purse of the state-owned electricity utility, Électricité du Liban (EDL), increased by 62 percent in the first eight months of 2012 compared to the same period in 2011. Payments to the Kuwait Petroleum Corporation (KPC) and to Algerian energy conglomerate Sonatrach — which provide EDL its fuel — totaled $1.39 billion, or 96.5 percent of the transfers, while the remaining 3.5 percent went toward servicing EDL’s debt. A primary reason for the hike in payments to Sonatrach and KPC was due to a significant rise in international oil prices, which were on average 33 percent higher than over the corresponding period in 2011. Government transfers to the dysfunctional EDL account for roughly one quarter of primary expenditures and are the third largest expenditure item, after servicing the national debt and paying public sector salaries and wages. Industrial disputes between the workforce and the management continue to plague EDL, with this round of protests focusing on cuts in bonuses and allowances proposed in the 2013 EDL budget in mid-January. The EDL employees union postponed their strikes due to the severe damage wrecked upon the country’s electricity infrastructure during harsh storms in January, but threatened further industrial action.
LEbanon officially mediocre
Lebanon came in just ahead of the middle of the pack in a global ranking on economic freedom. The index compiled by The Heritage Foundation and The Wall Street Journal is based on 10 broad factors of economic freedom: business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. Out of 177 countries Lebanon came in 91st place, and was ninth out of 15 Arab countries. A slight fall in economic freedom was reported compared to last year’s score, mainly due to a decline in property rights, business freedom and labor freedom. The report also noted that Lebanon’s judiciary is weak and vulnerable to political interference and, especially in commercial cases, trials can drag on for years. Lebanon scored relatively well on fiscal freedom (27th) and financial freedom (40th) but came in much further down the rankings in business freedom (142nd) and property rights (141st).
more storm relief
Heavy storms across the country claimed at least five lives and extensive damage to infrastructure and buildings. The government came under fire for failed infrastructure developments and corruption in the planning process, which critics say compounded the flooding and hindered the emergency response (see comment page 24). Illegal construction on flood plains and badly maintained sewage systems were blamed in several areas for exacerbating the extent and speed of the flooding. The Minister of Public Works and Transport Ghazi Aridi criticized illegal construction and also blamed a lack of political will in passing the budget and allowing certain infrastructure developments. However, both building permits and construction regulation fall under the Directorate General of Urban Planning, which answers to Aridi’s own ministry. After several days of being under attack for a poor response to the crisis, the cabinet approved $2 million in additional spending for the Higher Relief Council.
