A year and a half ago, Lebanon’s contractors were locked
in a rough-and-tumble wrestling match with the government
over roughly $400 million worth of unpaid
bills for public sector construction projects, some of which
extended back three years. When the government finally agreed to
pay up, it did so with three-year treasury bills that carried a 5.6%
interest rate. In order to pay back their creditors, contractors were
forced to sell the T-bills to banks at discount rates – the rate that
banks charge to buy T-bills before maturity – that ranged from 8%
to 10%. Couple that with the interest lost while they waited for their
money and some contractors were lucky to walk away with just
three-quarters of the original money owed to them.
The situation is a bit better now – a bit. There remains about $50 million
in unpaid bills, says Hayyan Haidar, counselor to the contractors’
association. Most of that amount should be paid in the coming
months, he adds. Bureaucratic government procedures continue to slow
the processing of bills. “Most projects are not paid on time,” says Fouad
Khazen, president of the contractors’ association. “This has caused a
lot of inconvenience.” But government red tape is nothing new.
What’s hurting contractors today is the same thing that’s hurting
everyone – the recession. But when Israel pulled out of the South
last May, a bright light suddenly appeared. The government
devised a five-year rehabilitation plan for the region, which calls for
spending close to $900 million on infrastructure. Coming at a
time when cement deliveries and the number of construction permits
issued are at a five-year low, the news was greeted as something
of a miracle.
There was just one problem: “They don’t have any money,” says
Khazen. They, in this case, is the government and the money refers
to foreign donations. So far there’s been just a trickling of funds,
including a $20 million grant from the Kuwaiti government, a $10
million grant from the Arab Fund and a $9 million reallocated loan
from the World Bank. The Lebanese government has given $50 million
to the Council of the South for the rebuilding of homes. The
Islamic Development Bank has proposed a $100 million soft
loan, but the offer hasn’t been finalized.
The government organized a donor’s conference last month to
attract foreign assistance. At about the same time, it permitted Unifil
to deploy in the area and, more recently, the internal security forces
and the army – fulfilling a condition that many donor nations
required before the funding tap would be turned on.
But no contributions came out of the conference. No need to worry,
says Wafa Sharaf al-Din, program administrator at the council for
development and reconstruction, the conference was intended to give
an idea of the government’s development plans and the area’s needs.
“We are receiving lots of missions and they’re reviewing the projects.
In October, the picture should be clearer.” That’s when a second
conference is scheduled. But even if the money starts flowing
then, projects will not be tendered before next year at the earliest.
And there’s a lot that could derail the whole project before then. A
resurgence of violence would leave a nasty taste in the mouths of
even the boldest of donors. Despite the presence of Unifil, the ISF
and Army units in the area, there’s a continuous exchange of rocks
and occasionally bullets between Israeli soldiers and Lebanese civilians
– a potentially explosive situation.
If the South remains calm and donations come through, some contractors
aren’t so confident that projects will be awarded to the most
qualified companies. In July, representatives of the contractors’ association
met with prime minister Selim Hoss, demanding that projects
be handled by the ministry of public works and awarded through open
tenders. “We hope that it will be done through proper channels,” says
Khazen. Some contractors say privately that political considerations,
rather than competence, will probably decide who gets what.
The ministry of public works will not handle all the projects. There
is a range of government offices and ministries charged with
awarding contracts, including the ministry of electricity and water
resources and the CDR. The Council of the South, which has been
charged with overseeing some of the infrastructure work, is an
agency that many contractors particularly dread. Ablan Ablan,
the council’s president, assures that contracts will be handled in a
professional manner. But one contractor, who claims that he waited
nearly five years to be paid by the council, says: “They have a
funny way of dealing with people. Whoever works with them
does so at their own risk.”
What would help contractors now, says Haider, are more lenient
credit facilities from banks. Projects need to be thoroughly studied
before work begins so that no surprise expenses pop up later. The ministry
of finance needs to streamline payment procedures.
Contractors, says Haider, represent a valuable asset to the country,
but many are on the verge of bankruptcy: “I would consider it a pity to loose such potential
