Former finance minister Fouad Siniora has been involved in the shaping of the country’s economic policies for the past 12 years as cabinet member and key right hand man of assassinated former Prime Minister Rafik Hariri. Although he moved to the top post at Hariri-affiliated Banque Méditerranée at the beginning of 2005, from the day of the assassination Siniora strongly lent his voice to the cause of change. EXECUTIVE asked him about the priorities of the current period, the challenges and opportunities of the future, and the succession of Hariri’s leadership in economic policy making.
Lebanon is situated at a crossroads and the atmosphere in the country is seen as tense. How do you perceive the situation?
First of all, one has to resolve the urgent political issues. This is something very important and I think the opposition made a good deal of progress over the last two weeks of March in terms of achieving the objectives that they have set. This refers [for one thing] to appointing an independent commission, where the decision is being taken by the [UN] Security Council. The government should have taken the initiative – they did not. The decision for ousting the heads of intelligence is also something that the government should have taken. Asking people to oversee the election process, this is something that is also going to happen. The government, in its behavior, has been always late. They are not taking initiative and already they are discredited. What matters now is to hold elections. This is in the interest of all concerned. It is so important to have it done and the opposition is making every effort [to do so]. The most important is to hold the elections and that is something to regenerate the democratic process and the democratic institutions.
What role does the economy play in the moment?
Political events have been shadowing the economic, financial and fiscal issues that are very important. The tragic loss of Mr. Hariri is something so important and with such deep consequences on the economy. That is in no doubt. But on the other hand, with Hariri, as a martyr from his grave, is achieving some of the objectives. Definitely, nobody wished that it would be that way but we have achieved this in terms of a Syrian withdrawal. And I think this by itself will open new windows to the Lebanese economy.
What is the way forward?
What I strongly believe is that the Lebanese economy has great potential and yet is also at great risk. The risks lie in two things. The first is that the economy is lagging behind in the process of adapting to new developments in the region and in the world. When I speak about adapting, this is on all fronts, political, economic, labor, regulations, laws, and the mindset of the people, although Lebanon used to be always a country with a high affinity for change and adaptation. The other risk is the fiscal situation and the debt, which nobody can claim is not a problem. What really matters in this regard is putting the economy on the right track. If you are putting the economy on the right track, you are putting the financial situation on the right track. Repaying the debt – no country repays the debt. What matters is being able to service the debt. This is what I believe.
Besides the risks, do you see an upside?
The opportunity is that Lebanon is a modern democracy and we must regenerate our democratic process. At the same time, the area has great growth potential. Lebanon can really benefit a great deal from that. To do that, we have to go back to a set of reforms. This is not a matter of these reforms having to be complying with ideas coming from outside, not at all. These are locally born ideas. And I think what we have already put into the budget proposal for 2005 for these reforms, is very important. These are not the only ones, they are on the economic scene, but there are political reforms that have to be done to improve accountability, have the democratic process really perform properly and ultimately, proper implementation of the Taif Agreement.
After elections, what are the priorities in economic policy that need to be addressed?
We have to address growth, employment and the fiscal situation. Fiscal stabilization has been a big responsibility of the Hariri years. Under your leadership and direction, the ministry of finance has been successful in pursuing reform, implementing VAT since 2002 and lately increasing fiscal revenue. Does the current situation endanger this progress? What really counts now is to proceed in expediting the process and moving to the next phase, which must first begin with the [Syrian] withdrawal. Mind you, my point of view personally and one I believe shared by many reasonable Lebanese in this is that we have to really be on good terms with Syria. Syria is our neighbor and no matter what happens, nobody can change geography. It is our interest to be on good terms with Syria, because Syria is our gateway to the Arab world. We also have no interest in signing any agreement like the May 17th or anything of that sort because it is not in the interest of Lebanon to do so. On the other hand, we have to really work out with Syria something that we can abide by – a very simple formula, as Hariri once said, set by Bcharra Khoury in the old days, [which held] that Lebanon is not supposed to be a place or a passage for colonialism against Syria. As Hariri said, Lebanon cannot be ruled against Syria but it also cannot be ruled from Syria. This is the arrangement that we have to respect. I think this will lead us to great potential for the development of Syria and of Lebanon.
You mentioned that the Lebanese government has been very slow to implement measures. Would disentanglement of the political processes, meaning reduction of Syrian political involvement in Lebanon and reduction or removal of MOUKHABARAT structures, help to improve public sector governance decisively in the short term?
I think this is going to be very helpful, because it means that each organization will have to concentrate on what it is supposed to do. The MOUKHABARAT, according to the Taif Agreement, should really have worked for military objectives, not against the people, taping their phone calls. They are wasting their time. It would have been a very strong message if the Syrian withdrawal from Lebanon had happened without the Hariri assassination. We would have seen the country going places.
How about the impact on Syria? Would it also bring a strong positive effect on Syria?
If I were in the Syrian shoes, yes, I think this is going to be. How are they going to take it; how they are going to deal with it? This is for the Syrians to decide. I am not going to interfere in their business, but I think this is something that can be converted into a new opening, a new opportunity.
What do you think of comparisons and calculations where people come up with numbers, how much we gave, how much they gave, how much they profited, and so forth? Do you have any view on the net balance of the Syrian-Lebanese relationship in those terms?
I think it is very difficult for anybody to say today but I can really tell you that there really is a synergy and it definitely is in the interest of Lebanon and in the interest of Syria to work together and have closer economic relations, not one overriding the other and taking advantage of the other. Syrian labor is very important to Lebanon and people are mistaken when they talk about Syrian labor. I personally have not heard of any situation under which somebody had Syrian labor imposed on him. In the agricultural sector, the basic labor force is Syrian, in the construction sector, the same thing. Lebanon imports cheap labor and Lebanon exports expensive labor.
From a fiscal perspective, does Syrian labor bring about damage to Lebanon?
They are creating value, my friend. I am not in favor of something that is the manipulation of certain things or the interference in many affairs in the country, this is definitely not productive at all; this is destructive. But when you talk about Syrian labor, why don’t you talk about the 100,000 Sri Lankan housemaids? Are you against 300,000 Syrians but not against the 100,000 from Sri Lanka?
How about taxation and work permits for the foreign workers?
If you go to Switzerland, they get labor from France, from Italy, from Spain, or from Portugal and all of them are illegal. Why would you impose taxes on Syrian labor? We can impose taxes, but who is going to eventually pay the taxes – the Lebanese will.
So from the fiscal perspective, would you impose taxation and collecting fees for work permits or would you personally favor a totally open labor environment?
If you want to organize it in terms of simple paperwork, then fine, why not. Nobody is questioning that. But why don’t you ask the same thing between Mexico and the United States? Let’s not concentrate on the side issues instead of the main issues. What we are really complaining about is the interference in political affairs and administrative affairs and everything pertaining to the functioning of the operations in the country. Here, the [Syrian] intelligence is interfering and this is counterproductive and damaging to the economy. Would this be a good time for devaluation of the Lebanese pound, given that the rate of dollarization is high?
It would be counterproductive. You are not gaining anything in terms of reducing your liabilities. You could reduce the debt by a trickle. The benefits, however, are very limited and the costs are very high. I don’t think this is helpful.
Could there be a Paris III and who would be the person to bring the international institutions and donors to the table, now that Mr. Hariri is gone?
I don’t know. It depends on who is going to be the prime minister then. If we wanted to really have a Paris III, we would have to prove to the world that we are serious and are ready to do what is really required so that we can carry on the reforms. We have committed ourselves with the world that we are going to do the reforms and what happened to the contrary was that we did nothing to carry out these reforms. It is high time to realize that the world is not going to do anything for us if we cannot do anything for ourselves. God helps those who help themselves. [Paris II] was an opportunity that was given to us and we abused it and did not take advantage of it.
How do you assess the level of confidence into Lebanon in the last six weeks, in terms of foreign direct investment and other investor sentiments?
There is a feeling of discomfort in the market but everybody is anticipating what really is going to happen in the coming period.
How far did the events of the past six weeks set the country back, one year, two years?
It depends on whether we are going to make a fresh start tomorrow from where we have reached or whether we still continue a process of declining.
Could you put a number on the losses to Lebanon’s GDP?
I don’t think anybody has done that yet. That is something we have to start working on.
You moved into banking after the Hariri government resigned last autumn. Was that an indication that you wanted to leave politics and return into the private sector? If so, are you now reversing that? Would you run for parliament or be aiming for a cabinet post after the elections?
I am not running in the elections; that’s clear.
Would you be willing to follow the call to cabinet, if there is the need for you?
That is premature to discuss now.
Is Mr. Hariri as a visionary and leader totally irreplaceable or can a concerted effort by the Lebanese make up for his loss?
He is definitely irreplaceable, because Hariri is a group of things that developed over the years. It is not something where Hariri goes and you can get somebody [else]. There is no more Hariri, which means a major loss to Lebanon and the Arab world. As a man of his stature, of his qualities and capabilities, he is definitely irreplaceable. Does this mean that we have to stay all day and night in grief? Yes, we have to really express our grief; on the other hand, life has to go on. We have to work and go on. If we can’t achieve everything that Hariri was doing, we have to do everything in our hands and expand on this day-by-day so that we can really deal with the issues in question.
So you see his vision as the basic formula for the future development of Lebanon?
You were very close to him and often traveled with him. Do you sometimes sit and think, what if I had been in his car that moment?
Honestly, I wish I had been in his place. In all honesty, I wish I was the man who was killed.
Are you optimistic?
I don’t answer this question as such. I answer it saying we have to work harder. We can achieve but we have to work harder.