If I appear vague, forgive me, but looking at the document the Lebanese government was supposed to show the assembled international donors in Paris, a group that included sovereign governments, the IMF, the World Bank and other supranational institutions, one can only have a deep feeling that it was published half-cocked. Based on this, we were lucky to get the money.
The contents are undeveloped and some important parts of the economic and social reform program appear blurred and unconvincing, leaving the reader with the nagging feeling that the government is too fearful to upset certain political parties or even entire communities.
There is also a significant lack of any data projecting anticipated future economic performance. Parameters are limited in number and, wheere they do exist, they are insufficiently substantiated. Moreover, there is no executive summary that clearly itemizes the reform program.
The reader reads on and on and never sees any clear-cut proposal on how to reform the country as a whole. Instead, the reform program seems to be: Yes, we need a capital markets authority, to reduce interest rates, etc. But we never find out what is the end game.
So what does it say? The privatization section is limited, includes no details and is by and large superficial. Privatization is the key issue for donors like the World Bank and the IMF, who have insisted on it as a condition for the Paris I and II conferences. It’s as if the government has not yet learned that it needs to take the bull by the horns on the privatization issue and elaborate the privatization program in the future. Securitization is only briefly mentioned yet it is a crucial part of the process. The document does not say what will be privatized, how it will be privatized and how long the process will take. In short, the government appears not to want to commit itself.
And still the fluff appears. Governance and good practice measures are not comprehensive. These are major issues in Lebanon and although the will to tackle them is apparent in the document, the method is not clearly laid out. Transparency of the non-banking sector is not really mentioned, neither are the ways as to how it is going to be tackled. There is no description of the corporate sector’s physiognomy.
The banking section is supremely lightweight when it should have been a major focus for the government. Basel II should have been be mentioned, as should the plans to make Lebanese banks compliant and the problems of raising capital to achieve this compliance. All this would facilitate arguments with donors.
There is also no clear explanation as to how the government is going to push banks to become intermediaries in government paper and the central bank’s latest measures are nowhere to be seen. One wonders whether the BDL and the Ministry of Finance even liaised on this report.
There is an absolute need to create (or reactivate) a small claims tribunal. There are lots of private entrepreneurs in Lebanon who don’t get paid by their customers and the law is too slow and weak to enforce their claim expeditiously. This should be included in the governance and best practice section. Delays in claim payments are plaguing the economy and are slowing down GDP growth and private consumption. Given the entrepreneurial nature of the Lebanese and their economy, an efficient small claims tribunal can only contribute towards GDP growth.
The document does not mention in any detail how the government intends to develop new franchises and create diversity for the economy. This is a part the donors would be really interested in. Raising taxes and VAT (to 12% by 2008 and to 15% by 2010) is merely a partial solution to increase government revenues, and the government does not even attempt to propose innovative ways to increase revenues without affecting the purchasing power of the population. The document’s plan to increase and diversify government revenues and reduce the budget deficit is incomplete, scattered and, yes, once again, blurred.
Ordinarily, donors are in no mood to fill in the blanks. They want to see a more detailed analysis of the economic and social dynamic, as well as details on how these problems are going to be sorted. We can conclude therefore that the government relied more on its pals in the international community—French President Jacques Chirac and the majority of the European Union—to convince them to hand over the money and that the Paris III document appeared to have been drafted for cosmetic purposes only.
Michael Karam is the managing editor of EXEVUTIVE
