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CommentEconomics & Policy

Lebanon’s outlook: recovery or sliding into the abyss

by Mounir Rached February 21, 2023
written by Mounir Rached

Lebanon is facing a very challenging time, and our governments have taken no action at all and remained in a state of procrastination for the past three and a half years. This inaction and waiting for an agreement with the International Monetary Fund (IMF), clearly reveals that the government is not qualified to address the economic issues and the state of crisis Lebanon is confronting. International institutions have provided numerous reform ideas and approaches, but the crisis governments failed not only to respond to such external reforms but also failed to challenge any of the reform proposals, and has continued to be totally submissive to the proposals of international financial institutions and other potential donors, albeit without any action taken, and displayed inability to decipher what could be an optimal solution for Lebanon. Clearly, many of the so-called reform proposals by external institutions could have a deleterious impact on Lebanon.

A destructive approach

Government plans have focused on managing losses rather than focusing on a realistic recovery path. Simplicity prevailed in the governments’ solutions and the most prominent among them is the intent to cross-out deposits (nearly at a 90 percent rate) and most government foreign currency debt, which is a serious constitutional violation. This also includes the imprudent sequential reform strategy of restructuring banks as a prelude to any reform. Such an approach is very destructive to trust in the banking system and does not provide a viable solution, instead it aggravates the current crisis and exposes Lebanon to legal action by depositors and debt holders.

The government and the central bank have resorted to a multiple exchange rate system that nourished indirect subsidies, increased quasi-fiscal operations that created financial market distortions. Instead, the government should have pursued a floating exchange rate system and a rescheduling of impaired financial assets and liabilities that were brought about by the government and central bank default on their financial obligations.

It will generate the necessary liquidity that is desperately needed in the financial markets and private businesses, and restores trust and confidence in the banking system. It will revert back to the feasibility of using virtual money (foreign and domestic), promotes savings and investment, enhances competitiveness, and promotes the inflow of foreign investment into the Lebanese economy. To build a plan aiming at regaining external bilateral and multilateral financing only will result in increasing the burden of debt, and creates an additional pathway for corruption generated from increasing public spending by proven inept governments. Such targeted aid will not provide liquidity that is needed the most in the financial sector, and will not promote sustainable growth.

The absence of meaningful subsidies and monetary policies have further derailed the economy towards regressive outcomes that were revealed in large real income losses resulting from high business closures and a massive inflation exceeding one thousand percent, compared to the period preceding the crisis.

Continuation of the same

U.S. Coins and Paper Money

The current government plan failed to generate trust in the banking system. On the contrary, cash transactions became the norm, while hoarding foreign currency cash became the alternative to bank financial savings, thus resulting in a massive reduction in intermediation and a run-on the banks.

The outcome for 2023 is not expected to change, but rather to continue to face stalled economic activity and continued currency depreciation. The government is still insisting on adhering to the same failed approach in spite of massive opposition from all syndicates and most political party’s groups as well as depositors. Some sectors in the economy, particularly those that benefited from the currency depreciation in the parallel currency market, have regained competitiveness in the export markets and import substitution markets and realized real gains, but were not sufficient to compensate for the massive losses in other sectors.

To move forward, essential corrective measures need to be implemented immediately without waiting for an agreement on an IMF program. The IMF itself explicitly has shown a disregard for the rights of depositors and has raised doubt on its ability to reach a fruitful outcome based on its program. Rather, it has adopted an approach for further destruction of confidence in the banking system and the government as a whole. 

The following is a guideline for exiting from the perceived intended crisis:

  • Adopt a clean floating exchange rate without the misguided intervention by the central bank. Floating the currency has numerous advantages. It will allow the financial market to regain the real value of financial assets and liabilities and terminates the current distinction between fresh dollars and bank dollars.  
  • With floating, it is imperative to adopt tight fiscal policies as large fiscal deficits deplete reserves and threaten the free exchange rate stability. Floating will facilitate realizing the objective of reaching a balanced budget.
  • As well, it is essential to reschedule all private and public (including public debt) financial assets and liabilities. This will generate confidence and an orderly return to a normal state of financial instruments’ maturity.
  • Promoting private sector management of failed publicly owned enterprises is needed to transform them into profitable entities. Proper procedures, including an international bidding process, should be followed in contracting with competent private management companies.
  • Restructuring banks should be considered after exchange rate, fiscal and monetary reform are considered. Failed policies and government mismanagement should be tackled first. Restructuring banks by simply writing off deposits is a suicidal approach.

[inlinetweet prefix=”” tweeter=”” suffix=””]Without serious and proper reform, Lebanon will continue to move on a destructive path.[/inlinetweet] Reform should start now, waiting for the grace of the IMF and the World Bank for approval is a waste of time as negotiations with such institutions are lengthy and could also be based on a faulty premise. The Lebanese government should cease to procrastinate and should initiate sequential reform immediately. Otherwise, the economy will continue to regress, poverty will escalate, and mass exodus of human capital will remain a way out of this prevailing chaos.

February 21, 2023 0 comments
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CommentEconomics & Policy

Self-sustaining in a circular economy and crumbling state: Wakilni’s strategic roadmap

by Yusr Sabra & Omar Sabra February 21, 2023
written by Yusr Sabra & Omar Sabra

The repercussions of the ongoing crisis in Lebanon have knocked on every door, be it businesses, homes or the public sector. Whilst companies cannot ignore the crisis, there are strategies to mitigate them in order to self-sustain, achieve growth and collectively contribute to the circular economy. Wakilni, a logistics and services partner for thousands of small to medium enterprises (SMEs) in Lebanon, is well positioned to understand the core needs of businesses and tailor its offerings to support companies to grow. 

The human element is at the forefront of today’s challenges, namely talent. This is often echoed in the private sector space where the brain drain phenomenon has left businesses struggling to identify, attract and retain top talent. Younger talent specifically is rushing to leave. This comes at the cost of lost investment; searching and onboarding new talent can cause delays from an operational standpoint. In addition, when operating in times of crisis, company cultures may be impacted due to external pressures, impacting the work environment, as well as customer satisfaction.
Clients too, are keen to set up abroad, downsizing local operations, and impacting servicing and logistics companies across Lebanon. Moreover, the cost of living has become unsustainable for many – both talent and the business owners, prompting more than 4,500 people to leave Lebanon on average per month between January 2019 and mid-October 2022, based on numbers issued by the General Security.

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From a commercial aspect, challenges are prevalent when it comes to pricing and costing services. Due to the currency devaluation, and without a clear exchange rate – from the official banking rate, to the black-market rate – businesses are losing. The banking sector has taken no strides to rectify this lingering issue or provide any sort of certainty or regulatory framework for businesses to abide by. To provide context, in 2022, Wakilni’s revenue per service produced amounts to approximately one-fifth, or 20 percent of the same service provided in 2019.

The regression of public sector services has also created further difficulties for doing business, due to power cuts, resource shortages and employees disgruntled by collapsed salaries. Private sector companies now have backlogs of crucial paperwork tied up in the government’s hands, with no clear deadline for completion.

How have we adapted and grown during the crisis?

The answer is one that is layered and complex. Firstly, the importance of civil society has grown in the absence of a government and as a result, a solution-oriented mindset has been adopted. The private sector is a major part of civil society, and we find that collaborative efforts have led to sustainable solutions. 

In this case, we see our role as twofold. The first being how to self-sustain the business, and the second being our role as part of the circular economy. In the latter area, we ask ourselves often what initiatives we can lead or be a part of that will have a positive impact on civil society in general, but would also contribute to the sustainability of our operations. 

Predating the crisis, Wakilni’s strategic pillars have always been solid. With the advent of the crisis, we had to adapt how we do things to stay afloat, but also continue to identify expansion opportunities – be it through geographic growth or vertical integration. 

[inlinetweet prefix=”” tweeter=”” suffix=””]At the core of our strategic priorities, are people and communities.[/inlinetweet] We set up a Human Resources department early on; focused on talent retention, leadership pipelines, an internal education and development arm, as well as carefully studied financial facilities. We created loan facilities, subsidized medical support, summer camps, barber and manicure services, and even set up a nursery within our premises. These strategic steps have yielded positive outcomes to date, and fostered a sense of community even more. 

On the business front, we are focused on scalability, including the institutionalization of all our processes. This has enabled us to expand our services and generate foreign revenue streams. This step has also created new opportunities for the team to broaden career horizons. Wakilni’s leadership is also geared towards vertical integration, through the increase of services, based on market demand.

On the other hand, our continuous technical innovation is powering what we do. We found that if we modernize our internal processes and offer clients access to innovative features and tools, we can operate at higher levels of efficiency to get the job done. We have integrated tech features to streamline operations, such as traceability, access to full visibility on order status, as well as an overview of KPIs that are integral to businesses.

With these key foundations in place, the sustainability of our business operations comes naturally. We have recently added sustainability as one of our core pillars, although it has been embedded in our ethos from the start.

A focus on society

We are part of a grander ecosystem and it is our responsibility to give back to society and positively impact various segments where we have expertise. One such area is our impact on SMEs. In 2023, our focus is to implement strategies that allow for both service and market expansion. When we set up in new markets, the SMEs which we service can also follow suit. One example is the dark store, which enables clients to test their products or services in new markets, before making an investment. Driving this is an approach to advancement from a technological standpoint, as well as a commitment to the community. Our regional and international strategic partnerships enable clients to ship at minimal costs, store and process their orders, while maintaining full visibility on their businesses. This ultimately allows for revenues to be generated from new markets, with low exposure to risk.

Alongside enabling market expansion for others, we have also explored how to augment opportunities for our drivers – who make up the majority of our workforce – to have access to greater benefits and achieve more job security. We plan to set up mutual funds, to support our drivers to sustain their professions, and also benefit from insurance and preventive maintenance.

But despite our achievements, we still lack the fundamental basics.

We need the basics to operate

We need the proper infrastructure in place that allows for business continuity, with minimal disruption. We also demand return for the taxes that we are paying. We need guaranteed security and safety, which allows for some level of certainty to validate our mission to remain rooted in Lebanon.

Moreover, when looking at expense sheets, the ledger is no longer balanced. We, as well as other businesses in Lebanon, are incurring double and triple the expenses, which is not sustainable. With the dawn of every day, a new crisis emerges. We hear this from our team, and the companies which we serve, that if only we were given the space to focus on the business and the bottom line – we would be light years ahead. 

We admire the companies that have remained committed to operate and grow from Lebanon. We are one such company. But without the proper systems in place to allow for growth, for how long is it sustainable? Our experience has taught us that what every business, individual and organization needs is a state that sets viable strategies, one that is agile in its decision-making processes to support SMEs, which are the key drivers of the Lebanese economy. Such decisions that impact businesses include the identification of sectors, services and products that should be supported through subsidization, with clarity at the expense of whom this will happen – whether through taxes or other means. We also call for a state that is held accountable – just as our businesses are, through proper governance systems.

On a national level, we call for the government to prioritize the relationships between societies on an internal level, and concurrently regulate, maintain, and foster relationships with other markets internationally. Ideally, we aspire to operate within a state that builds a sustainable economy that serves society, as opposed to the current sectarian regime that has continually proved its willingness to sacrifice society as a whole, to maintain the status quo that benefits a fraction of the population. 

February 21, 2023 0 comments
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CommentEconomics & Policy

Deep reforms to ensure the future of Lebanon’s education sector

by Maxence Duault February 21, 2023
written by Maxence Duault

With its flying faculty model, ESA Business School (ESA) is an exceptional case in the Lebanese higher education sector. In contrast to many other institutions, resorting to direct fundraising was rarely the approach adopted by the school during the current crisis. The approach was to find the right balance of activities by increasing the school’s capacity in shaping business executives in Lebanon as well as in the whole region.

Today, ESA is doing better but is still on the road to recovery. The effort deployed by its teams is matched only by that of its partners, which made it possible to weather the storm. A return to normal is looming for the end of 2024, but the school cannot recover from yet another jolt in the unprecedented crisis that the country is experiencing.

In 2023, ESA will continue to deploy a hefty plan for converting its activities that focuses on five pillars:

  • The dollarization of all its activities by the end of 2023.
  • The transition in the economic models of SmartESA incubator, ESA research center and the Institute for Finance and Governance.
  • The tracking of development in the region.
  • The increased mobilization of ESA networks around initial fundraisings.
  • The speeding up of financial savings and cost cutting in significant proportions where possible.

However, this plan would be neither meaningful nor effective without a clear positioning and deeply rooted convictions.[inlinetweet prefix=”” tweeter=”” suffix=””] ESA will never compromise on the quality of its programs and training, nor on its values which guide it and lead it to remain at the service of all and to create partnerships with local and international players for this purpose.[/inlinetweet]

ESA is much more than a business school. It is a sustainable and real ecosystem powered by team spirit, the quality of a service and values of integrity which can foreshadow the future of a dynamic and proactive Lebanon.

Although the roadmap is drafted for the country to achieve this goal, the climb there is steep. Lebanon and its main players should hedge against the danger hovering over the education sector and against improvements or glimmers of hope that would suggest that an in-depth reform would not be necessary. In this context, companies undoubtedly play a key role.

While the education system in Lebanon has made it possible to cushion the blow of the crisis in view of the number of talents trained who showed resourcefulness and resilience, nevertheless it finds itself today at a critical moment and the quality of education is facing a real threat.

Schools and universities will not necessarily disappear from the Lebanese landscape. Like companies that do not go bankrupt for lack of a law on the subject, educational establishments will survive. But let’s not be fooled. If the walls of schools and universities hold up, then safeguarding the high-level teaching body and the quality education that once made Lebanon famous, remains in serious danger. The real risk is the gradual replacement of teachers by untrained professionals from outside the academic sector. Therefore, it could only result in a drastic drop in the education level of schoolchildren and students, let alone the creation of heavy consequences on the future of the country. If there is one priority for Lebanon, it is to safeguard quality education. Let’s all remember Nelson Mandela’s famous saying: “Education is the most powerful weapon you can use to change the world.”

The business world is faced with countless paradoxes. If the crisis has seen the emergence of a “new rich” driven by more or less formal economic models, the economic health of the country and its living forces remain worrying. Despite everything, as the President of the French-Lebanese Chamber of Commerce, and while being in direct contact with business leaders, I know that confidence is essential for businesses to weather the crisis and reinvent themselves.

This is for several reasons:

  • The ease that the Lebanese have in exporting and creating original business models, as the crisis has reinforced their ability to adapt and stressed the impossibility of remaining inactive regarding the situation.
  • The emergence of new production capacities, whether industrial or agri-food, for example. This is a shy but nevertheless remarkable recovery.
  • The ability of Lebanese talents to export certain requested services, resources and skills that were made less expensive by the crisis.
  • The last point, which is often overlooked is the fact that the majority of Lebanese businesses are family businesses offering the advantage in the context of having personal roots in the country, an ability to accept the crisis and plan an economic rebound on the long run.
  • The combination of family roots and the know-how in exporting gives tools to the private sphere to withstand the crisis.

However, this glimmer of hope could quickly fade without real progress on the subject of regulation. In the continued absence of a state, Lebanon is confronted with the inability of planning coupled with logistical, fiscal, legal and ethical difficulties. Adding to the absence of a course of action to take, is the acceptance of certain practices, like the cash economy or the black market, and the absence of a coordinated and global economic policy generating a significant bonus for the informal economy. The risk of a total paralysis of the country is real, and the poorly coordinated measures taken without a global framework risk generating a widespread collapse of the formal economy and a subsequent inability to connect to the world market.

The country cannot ignore the need for in-depth reforms, and this must be integrated and understood by all. Lebanon absolutely needs leadership. The role of ESA and its General Director is not to determine who should be the leader and how the country should be led, but to fight tirelessly, at its own level, to contribute to breaking out of this slumber in an effective and sustainable manner.

February 21, 2023 0 comments
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CommentEconomics & Policy

Rebuilding trust before rebuilding Lebanon

by 100 percent February 21, 2023
written by 100 percent

Lebanon was considered for a long time “the window of the Middle East,” and that was built on the principle of individual, economic and cultural freedom, as well as freedom of expression, press, thought, belief, and enterprise. Today, Lebanon is going through one of the most devastating political crises of its century of existence, causing the collapse of our economic system: financial, social, cultural, sanitary, judicial and security.

Lebanon has a long history of political turmoil, and ongoing conflicts with neighboring countries which have led to a lack of stability and security in the country. Corruption is widespread; many government officials and politicians are accused of embezzlement and mismanagement of public funds. A complex system of religious and ethnic divisions has led to tension and conflict between different groups in the country. In addition, there has been a shortage of basic services such as electricity, water and sanitation, and healthcare which has led to a decline in living standards for many citizens. Lebanon is also facing environmental problems, including pollution, deforestation, and the over-extraction of natural resources.

The Lebanese government’s financial default in March 2021 significantly impacted Lebanon’s reputation and perception both domestically and abroad. The issue is in the lack of liquidity; they are not losses but obligations. This default decision, for the first time in the history of Lebanon, contributed to a further downgrading of Lebanon’s risk rating to a “default” level, cutting off much potential for both the government and the private sector to access international markets. The default has damaged Lebanon’s reputation as a stable and reliable country for investment and business. It is also considered a significant setback for the country’s economy – which has been struggling for years – and has raised concerns about the country’s ability to repay its debt. It has also highlighted the lack of political consensus and the inability of the government to implement effective policies. In addition, the default has also affected Lebanon’s relationship with international organizations, countries and lenders, which may be less willing to provide financial assistance in the future, given the state’s inability to repay its debt.

Business struggles

At present, Lebanon’s biggest problem is the lack of confidence among the public towards the government’s ability to effectively manage public resources and funds, as a result of longstanding failures to provide basic services like electricity and clean water, its failure to address the economic crisis or to hold officials accountable, and the failure to protect citizens from crime and violence.

Once the trust is rebuilt, then we can start rebuilding the country!

The country’s economic crisis has led to a downturn in the private sector; businesses are facing declining revenues, rising costs, and a lack of access to credit. This has led to a high rate of bankruptcies, closures and job losses in the private sector. The shortage of foreign currency is making it difficult for businesses to import raw materials, pay for labor, and service their debt, which has led to production cuts, supply chain disruptions, and reduced competitiveness. The economic crisis has also caused a fall in consumer demand as people have less disposable income to spend on goods and services which has decreased sales and revenues. Lebanon is struggling to attract foreign investment, as investors are cautious about putting their money into a country with a weak economy and high levels of political and economic instability. In addition, the crisis has led to a lack of access to credit for businesses, as banks are facing liquidity issues and are less willing to lend money, making it difficult for companies to invest and expand.

[inlinetweet prefix=”” tweeter=”” suffix=””]The government and banks need to service their liabilities rather than writing them off by creating adequate liquidity in the financial sector. [/inlinetweet]Therefore, the prominent solutions that 100% Liban believe can resolve the crisis and aim to work on in 2023, are the following:

1. Protect all deposits: assure that deposits are fully protected and that any losses incurred by liquidated banks will be compensated through proper channels including corporatization of state assets.

2. The full liberalization of the exchange rate for all transactions (banks, the government, the private sector, and exchange houses), putting an end to the “dollar” myth and instantly unifying the value of the dollar. This process eliminates the threat of writing off citizen deposits and restores trust in the national currency and banks. Liberalizing the exchange rate has a beneficial impact rather than a negative one that results in inflation or its fall. Full liberalization of the exchange rate also creates liquidity.

3. Rescheduling all banking sector deposits and liabilities in order to provide the required liquidity to restore the economy, as well as rescheduling the sovereign debts and the cost of their service, taking into account a grace period of no more than two years.

4. Balancing the budget is a key ingredient to bring stability to the exchange rate, as its well documented that fiscal deficits contribute to balance of payments deficits and could become a factor in a spiraling depreciation of the currency.

5. Corporatization of state enterprises; a practical solution envisaged could follow by first improving the governance of the public sector through privatization of its management on a case-by-case basis starting with key enterprises: the mobile phone, the power sector, Middle East Airlines, the port services, the airport, and Casino Du Liban, as well as leasing oil and gas blocks. 

The private sector’s role

The private sector, with its experts, can play an important role in rebuilding the Lebanese economy by:

1. Creating jobs: The private sector can create jobs by investing in new businesses and expanding existing ones, which can help to reduce unemployment and stimulate economic growth.

2. Attracting foreign investment: The private sector can attract foreign investment by showcasing the country’s strengths and opportunities, and by working to improve the investment climate. This can help to bring new capital into the country and create new business opportunities.

3. Improving infrastructure: The private sector can invest in infrastructure projects, such as building new roads, ports, or power plants, which can help to improve the country’s overall business environment and attract new investment.

4. Supporting Small and Medium Enterprises (SMEs): The private sector can support SMEs by providing them with financing, training, and other forms of support, which can help to improve their competitiveness and contribute to the growth of the economy.

5. Improving governance: The private sector can improve governance by promoting transparency, accountability, and good governance practices in the private sector, which can create a more favorable environment for business and encourage investment.

In order to support the private sector, 100% Liban will work to strengthen it by enacting laws to protect it and working directly with the government. By joining our parliamentary committee and our various sector committees, we hope to influence Lebanese politics to revive the economy and restore trust. 

February 21, 2023 0 comments
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AnalysisEconomics & Policy

Reform needs versus policy steps on record

by Rouba Bou Khzam February 21, 2023
written by Rouba Bou Khzam

The past year has seen the nation’s top political actors in the Cabinet and Parliament regularly present themselves as being busy in the people’s interest. A budget law was debated and adopted in Parliament. The amending of the banking secrecy law was pronounced. And, importantly and strongly noted by the world, the International Monetary Fund (IMF) and the Lebanese government in early April announced a so-called staff-level agreement – a step towards a formal agreement for a $3 billion facility with immense signaling power – conditioned on a set of prior actions and reforms. 

Five pillars of action mentioned in the agreement were (a) restructuring of the financial sector, (b) fiscal reforms and debt restructuring, (c) reforming of state-owned enterprises, (d) strengthening of governance and anti-corruption frameworks, and (e) implementation of a credible monetary and foreign exchange system. 

Laws that were specifically mentioned in the staff-level agreement as being needed in connection to an IMF deal were three: approval of an “emergency bank resolution legislation,” a reformed bank secrecy law, and the adoption of the 2022 budget. A set of supplementary government-initiated measures mentioned alongside these three legislative acts by Parliament were the completion of the Central Bank’s audit, unification of the exchange rate by the Central Bank, individual evaluations of the largest 14 banks, and cabinet approvals of a medium-term debt restructuring and fiscal strategy, as well as a bank restructuring strategy. 

As already mentioned, the 2022 budget was passed. After modifications to the Ministry of Finance’s proposed budget law, Parliament approved on September 26, the 2022 budget with expenditures at 41 trillion Lebanese pounds, and a budgeted deficit of 11 trillion Lebanese pounds. 

But upon a close look, this achievement does not impress. No one, neither the critics nor the hypothetical supporters of the budget law could deny that it was horribly late, having been adopted in September, nine months past the constitutional target date. In this sense, the only argument that could be constructed as somehow positive with regard to timing might be that this 2022 budget in its discussion and adoption was a lesser case of irresponsible procrastination than many previous ones. 

Neither could anyone pretend that the budget law’s expenditure of 41 trillion Lebanese pounds as opposed to revenues of 30 trillion pounds made for a healthy, or even tolerable, deficit on grounds of a temporary emergency. Most commentating on the numbers instead saw this 2022 budget as a construct that was so rotten in its financial foundations that its assumptions were bound to crumble before the ink had dried.  

Illustrating the many questions of this emergency budget was not just hastiness and non-transparency of its provisions but that the high deficit, according to an opinion by BlomInvest Bank, would have a hugely negative impact on inflation and the exchange rate if it “was to be financed primarily by BDL through the printing of money with no sterilization operations done [in] parallel.”

The Banking Secrecy Law in historic and global contexts


Lebanon’s President Michel Aoun (C) during a meeting with the International Monetary Fund delegation at the presidential palace in Baabda on March 30, 2022. (Dalati)

While approved in 2022 in satisfaction of the promises of the staff -level agreement and standing as a fulfilled legislative action alongside the budget, the best thing that can to date be said about the banking secrecy law is that it has been needed for many years. As such, in the market and the banking sector, a new banking secrecy law has long been understood as something that is no obstacle to financial development but rather the opposite, and can unleash growth in context of the globally financialized economies. All else that can be said at the start of the year after this law’s finally found legislative acceptance is that it is potentially beneficial in reducing corruption but it has yet to prove itself. 

The law amending the provisions of banking secrecy went into force in October, denoted with its issuance in the Official Gazette. However, the history of banking secrecy in Lebanon goes back to the early days of independent statehood and the creation of the Central Bank. Lebanon Law No. 1/1956 on Bank Secrecy was adopted in 1956. 

In essence, banking secrecy is an agreement between banks and the clients by which the client’s activities and details remain confidential and private. By enshrining it in law, the state guaranteed this privacy, enabling bank clients to hide their assets from all prying eyes. Article 2 of Lebanon Law No. 1/1956 prohibited banks in Lebanon from disclosing information about their clients such as their name or their funds to anyone whether it is a private individual or a public authority.  

In the second half of the past century, [inlinetweet prefix=”” tweeter=”” suffix=””]the disadvantages of absolute banking secrecy increasingly outweighed legitimate interests of asset holders[/inlinetweet], as banking secrecy was a facilitation tool of tax evasion, illicit profits, money laundering, and terrorism finance. Banking secrecy was reviewed and sharply restrained in many jurisdictions. The banking secrecy accorded to account holders in Lebanon, however, was only modified in small ways around the turn of the millennium, in order to avoid full blacklisting of the country’s financial system by the Financial Action Task Force (FATF). It meant the law was not seriously challenged in Lebanon throughout the 2010s. 

List of proposals for legal measures in Pillar 1 of Executive’s Economic Roadmap

Fiscal policy

Measure 1.1.1  Improve deliberation and adoption of state budgets.
Measure 1.1.6 Launch work on a new, progressive tax policy and remove tax loopholes for offshore companies.
Measure 1.2.1 Unify and stabilize the exchange rate and incentivize initiatives that would increase foreign direct investment.
Measure 1.2.10 Mandate for all companies benefiting from public funds to be listed on the BSE with a 51 percent float. 
Measure 1.2.11 Legislate and incentivize companies to facilitate trading of corporate debt contracts to allow for foreign currency investments to encourage exports.

Build capacities

Measure 2.1.2 Legislate and implement a census for Lebanon.
Measure 2.4.1 Further modernize existing laws pertaining to competition, anti-dumping, intellectual property, antitrust, small and medium-sized enterprises, quality-enhancing, bankruptcy and insolvency, code of commerce, and the building code. 
Measure 2.4.2  Create legislation that would allow for small debts recovery.
Measure 2.4.4 Introduce e-government solutions and improve omni-channel access to governmental procedures, such as customs, to reduce red tape on import and export trade procedures.
Measure 2.4.6 Create a trade and finance program and restructure all trade debts. 
Measure 2.4.7 To bolster the private sector, make sure that capital control laws still allow businesses of all sizes to maintain and grow their operations, allowing for international transactions when necessary, to keep Lebanon’s industries, services, and products relevant.
Measure 2.5.1 Complete and implement PPP legislation and empower independent oversight bodies that can contribute to the efficient delivery of services of PPPs, including the judiciary, regulatory bodies, and civil society.

State institutions

Measure 3.1.1 Develop new legislation to consolidate previous draft laws for decentralization at the municipality level. 
Measure 3.1.2  Improve legislation for determining responsibilities and decentralization structures for levels beyond the municipality.
Measure 3.1.8 Ensure the implementation of whistleblower protection legislation and adequate mechanisms for reporting infractions.

Judicial reform

Measure 4.1.1 Examine all current legislation on judicial independence and transparency as a concrete measure toward building a strong judiciary.
Measure 4.2.3 Adopt laws to ensure the complete financial and administrative independence of the judiciary.

Regulatory frameworks 

Measure 5.1.6 Develop new legislation to consolidate previous draft laws for the insurance sector to promote proper competition and better protect policy-holders.
Measure 5.1.8 Fully implement Law 28 (2017) on access to information and coordinate a national plan for combating corruption. Implement the national corruption commission legislated in 2020. Design and empower regulatory frameworks that facilitate the definition and recapture of illicit gains by politically exposed persons and public servants on all levels. 
Measure 5.1.9 Enhance competitiveness in the economy by passing legislation and measures to improve the doing business environment, as per Policy Priority 2.4: Enhance the Business and Investment Climate.

A weak budget

Jinan Tfaily, a lawyer who specializes in public law, says that the liquidity crisis of 2019 was accompanied by local and international reports talking about the transfer of millions of dollars from Lebanon abroad, and all its owners benefited from the absolute banking secrecy law. Regarding the positive repercussions of lifting bank secrecy, Tfaily emphasizes that this issue constitutes a basic and pivotal starting point for the issue of inquiry and investigation in the context of operations to fight corruption and recover illegally acquired funds. 

Access to bank accounts of suspected persons to conduct an approach, comparison, and confirmation of evidence on illegal enrichment (especially in the event that they own funds that their regular resources do not enable them to own) will according to Tfaily ensure that the issue of combating corruption does not remain just a populist slogan empty of content and without effectiveness or practical implementation. 

Whereas adoption of a modified banking secrecy law works towards aligning Lebanon with international financial standards and is a step towards an IMF agreement, experience from changes in banking secrecy in European jurisdictions suggest that the process of recovering illicit gains and closing loopholes against outflows of corrupt holdings is at best arduous. Even in the best of circumstances, much time would be required to see this law’s efficacy in Lebanon. Numerous local observers furthermore consider it unfathomable that this law could in itself transform the opaque Lebanese financial system of the past, especially given the fact that the 2022 budget law, while adopted, has been put on the feet of the weakest clay. 

Looking at this weakness of the budget from the perspective of its ability to support a fiscal reform path that is congruent with the conventional financial wisdom habitually promulgated by the IMF, and knowing that the IMF demands are still very far from being met – given how the Law for Regulating and Restricting Financial Transfers (the Capital Controls law) and the Banking Restructuring Law have not been approved by time of this writing – it could neither shock any Lebanese observers in terms of content nor should it awe anyone in terms of candor that the IMF has expressed its strong irritation with the Lebanese process. 

The evaluation of the progress made by Lebanese lawmakers in six months between the announcement of the staff-level agreement and the end of September of last year actually was a dressing down clad in diplomatic phraseology. “Progress has been made, but progress has been slow. Only few measures have been so far implemented and there is still progress on others,” Jihad Azour, director of the Middle East and Central Asia Department at the IMF, told a regional press briefing in October. Of course, since the IMF should never be mistaken for an institution that is isolated from geopolitics, this pill came with a sugar coating. “We encourage the authorities to accelerate and pursue those needed measures,” Azour added, in a manner not so different from the many reiterated, always well-intended, and persistently fruitless appeals of foreign governments and institutions for political action regarding an election, cabinet appointments, or overdue reforms. 

Moreover, since the IMF comments last October, nothing new has been said or seen on behalf of Lebanon that could change this damning assessment in the least, although similar outcries over the slowness of the Lebanese process and diplomatic admonishments for this or that political and policy action did surface in the last quarter of 2022 and at the beginning of this year. 

This means that in terms of the deal with the IMF and the urgency thereof, Lebanon is in a rolling checkpoint scenario, where it has to be asked at every hour if the legal action of 2022 was just slow, or devastatingly counterproductive. But the ultimate crack in the facade of the Lebanese state as a democratic enterprise, and deep fault-line threatening the people’s best interest requires answering the question if there were any redeeming factors that would make the Lebanese political powers that are into a reliable or calculable partner.

This question answers itself in the negative if the scope of consideration of legal omissions and lacking legislative actions is widened beyond the years of the Lebanese crisis that triggered the request for IMF assistance in 2020. 

Build and reform

It is worth recalling that the demands for budgetary discipline and fiscal fairness are key propositions of the Executive Economic Roadmap (RM) and have been so since its first edition in 2018. As a matter of fact, the very first policy measure – 1.1.1 – proposed in the first of the magazine’s RM iterations has been the demand to “improve deliberation and adoption of state budgets.” The proposition (proposed measure 1.1.12) to “Complete good-faith negotiations with the IMF to unlock technical assistance and financial support, around a credible economic recovery plan, and carry out all structural reforms that relate to the improvement of the fiscal performance of Lebanon under existing commitments,” has been an addition in response to the economic collapse. 

The Build & Reform pillar of the Economic Roadmap actually emphasizes throughout its four agenda priorities the need for administrative reform, capacity building, effective, transparent, and consistent regulations, and judiciary independence. These are needs for change that pre-existed the economic crisis by many years. Only examining the Build & Reform pillar, proposed measures in the sectors of fiscal policy, capacity building, strengthening of institutions, judicial reform, and developing regulatory frameworks, actually include almost 20 recommendations involving legislative acts. 

In conclusion, there can be no doubt that legislative actions just before and during the crisis years have been insufficient to ward off the economic crisis or deal with it in a quick and responsible manner. However, there is also no question that the track record of the Lebanese Parliament before the economic crisis was insufficient for answering the real needs of the productive sectors and steering the economy towards sustainable prosperity. These facts, which stand irrespective from the need to carefully examine any idea promoted by the IMF to Lebanon, should be reviewed carefully by anyone seeking a way out of the economic misery.  

Context of laws that were adopted in 2022

At a time when much of the debate has been focusing on the preconditions and legal measures linked to an IMF deal, it is worth noting that Lebanese Parliament has taken some legislative decisions that are not required as preconditions for an IMF deal. Some of these met emergency needs without adding to the longer-term prospects of tax fairness and development but were of peripheral relevance for negotiations with international funders, such as the laws on borrowing to finance grain and medicine importation and disbursal. Other laws carry positive implications, foremost among them the procurement law. Examples for this legislative action are the following:

Law No. 304 dated 28/10/2022

This law provides for a mechanism for opening credits and disbursement of the loan agreement provided by the World Bank at a value of $150 million to implement the emergency response project to secure wheat supplies.

With dual background in the local economic crisis and global food price inflation, the law met an emergency need. Since Lebanon relies on importing a majority of its goods, such as wheat, and the imports need to be paid in dollars, as the economic crisis has worsened, the cost of paying for these imports has drastically increased.

Law No. 287 of 12/4/2022 to support the locally produced pharmaceutical industry 

Similar to Law 304, the Law 287 was adopted in an attempt to mitigate an acute crisis that has manifested itself in the inability of private households and public health insurance providers, and the Ministry of Public Health (MoPH) as de-facto insurer of last resort, to cover the cost of healthcare, including medicines. 

After the approval of this law proposal in Parliament, a plan by the MoPH is to further increase substitution of imported medical drugs with locally produced ones. Under the plan, whenever pharmaceutical producers in Lebanon complete the process of registering a local drug as an alternative to the imported one and put it on the market, remaining subsidies for the imported substance are automatically lifted. 

The Conventional Mediation Law

The oft-lamented slowness of the Lebanese legal system in resolving commercial disputes has been exacerbated in recent years in the form of growing backlogs of court cases at times when judges and courts were not able to function normally or even paralyzed by strikes. Mediation, as an alternative method for resolving disputes, was the subject of the Conventional Mediation Law 286 which was adopted in Parliament on March 29, 2022.  

Mediation in this sense of resolving disputes between parties to a business contract is “a flexible process conducted confidentially in which a neutral person, the Mediator, actively assists the parties in working towards a negotiated agreement of a dispute or difference, with the parties in ultimate control of the decision to settle and the terms of resolution,” explains Diana Bou Ghannam, an associate at law firm El Muhtar and Associates. 

The Conventional Mediation Law of 2022, which followed after and complemented the issuance of a Judicial Mediation Law in October 2018, opened alternative dispute resolution options to litigants in various fields and use mediation in resolving their disputes away from lengthy and very costly court proceedings. The law arrived just in time to help reduce some of the pressures that have come to bear on court systems, Bou Ghannam tells Executive. 

Public Procurement Law

A law deserving of greater and lasting attention is the public procurement law. Public Procurement Law 244/2021, which Parliament had passed in June 2021 without much further debate, was published on July 19 of that year in The Official Gazette. Campaigners for this law had been pushing for it from two sides, efficiency and transparency, with arguments that a better procurement mechanism will have benefits in combating corruption and at the same time open possibilities for better serving citizens while unleashing cost advantages. The law’s guiding principles are being described as: integration, transparency, competitiveness, efficiency, accountability, integrity, professionalism, sustainability, and local development. The law went into effect on July 29, 2022.  

Legal expert Jinan Tfaily comments that the new procurement law expands the oversight of the Public Procurement Authority to include all procurement operations carried out by the state, its institutions, councils, funds, departments, independent administrative bodies, municipalities, and their federations, and courts that enjoy particular budgets, security and military wires and their units, and purchases of public utilities operating from private companies for the benefit of the state, up to the purchases carried out by the Banque du Liban ( with the exception of printing and issuing currency). She notes that several amendments of Law 244 were approved within the 2022 Budget Law, such as amendments pertaining to contracts with hospitals, medical centers, and laboratories, to vetting of municipal servants and contractors, and to appointments of receiving committees. These and other clarifications are expected to assist (especially smaller) municipalities in adhering to Law 244 to the best effect. 

February 21, 2023 0 comments
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Economics & PolicyOverview

Strategizing a small deprived country in global context

by Thomas Schellen February 21, 2023
written by Thomas Schellen

Lebanon this year did not get off to a great and happy start in policy making. Neither on the micro-level of this small country on the edge of the world’s politically most volatile region, nor as part of the larger levels of regional, geo-economic and geopolitical concerns. In the few weeks since the beginning of this year, judicial “reform” plans in Israel have shocked the peoples of this region with reminders on the human capacity to deny their fellow human’s dignity and safety in the name of “security and democracy.” A few hundred kilometers to the north, the earth itself, the vital foundation of our existence that we have proven ourselves a species capable of altering, defacing, and eroding, has reminded us that we cannot truly predict shifts and tremors, let alone control quakes and protect ourselves effectively against the mass destruction of lives and livelihoods.

In Europe, the logic of arms races and violent confrontations is kicking the collective butts of supposedly enlightened, peace loving, post-industrial knowledge societies. On the global stage, military threats, manipulation of elections, fake alien rumors, and – evidently a scourge of not just the past but all ages – real existing wars, appear more menacing and closer in early February 2023 than one year ago. And to make exception from the political litany of this generation, let’s not yak and yammer about climate risks today; it is too warm a winter for pushing out more hot air in hollow debates and impotent protests.

And the economy is…

The global economy, the collective total of scarcely productive and too often consumptive enterprise give-and-take within the species, is not independent of these risks and bad realities. Not at all. So it is only logical that the Global Economic Prospects (GEP) report of the World Bank, January 2023 issue, eloquently phrased by one or more speechwriter(s) (nowadays one has to ask, or chatbot?) on behalf of current World Bank President David Malpass, speaks of the poorer parts of the global community in the report’s Foreword: “Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates. Weakness in growth and business investment will compound the already-devastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change.”

Reading farther into the GEP, the picture does not get any rosier, especially not for the smallest players in the global economy. “The setback to global prosperity will likely persist,” reads the report’s Foreword and Executive Summary, predicting that GDP levels in emerging-market and developing economies (EMDEs) by the end of 2024 will be about 6 percent below what had been expected in more optimistic outlooks just prior to the pandemic. No convergence of income levels between developed and developing countries are expected in the next two years, and median income levels, moreover, “are being eroded significantly—by inflation, currency depreciation and under-investment in people and the private sector.” 

As gross investment in EMDEs is unlikely to suffice for maintaining capital stocks, critical financial resources will be pulled away from EMDEs because of financial market logic but also due to government demands in developed economies. Development and climate objectives will be “harder to meet” – irrespective of the questions if these objectives ever were realistic, or sufficient, or serious. It is almost reminiscent of the local scenario that the primary prescription for the malaise are reforms, reforms, and reforms. 

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On the wisdom and predictability of the leading financial engineers in the world, the GEP concedes that “central banks around the world have been tightening policy faster than previously expected. Monetary policy tightening in advanced economies, a strong U.S. dollar, geopolitical tensions, and high inflation have dampened risk appetite and led to widespread capital outflows and slowing bond issuance across EMDEs,” and somewhat sheepishly admits that, given substantial uncertainty about the impact of central bank policy in terms of both magnitude and timing during the conditions of high inflation and repeated negative supply shocks: “Risks to the growth outlook are tilted to the downside.”

GEP outlooks for the Middle East and North Africa region – at 3.5 percent GDP growth projection in 2023 and 2.7 percent in 2024 – are healthy by comparison with regions such as Latin America and the Caribbean, but the World Bank warns that “spillovers from the rest of the world are a major risk to the region’s forecast.” It adds gloomily that the region is “still characterized by widely divergent economic conditions and growth paths, high levels of poverty and unemployment in many countries, low labor productivity growth, elevated vulnerabilities, and fragile political and social contexts as the global economy faces a heightened possibility of falling into recession.” On a side note of some weight, it finally deserves to be mentioned that the Global Economic Prospects report omits GDP development data projections for four MENA countries, namely Libya, Syria, Yemen, and Lebanon. 

Conventional insights into de-globalization 

Offering much advice that is easier to vocalize than realize, the GEP says that the international community needs to ramp up support to displaced populations and the millions who are affected by conflict or food insecurity. To struggling governments, it says, “In responding to food and energy shocks, governments need to avoid imposing export restrictions and instead attenuate the impact on the poor through support measures targeted at low-income groups. The international community also needs to reduce the risk of debt crises in EMDEs, including by supporting timely debt restructuring.”

Apart from underwhelming investment outlooks for EMDEs stated in the GEP, geopolitical and geo-economic shifts have moreover lately been favoring state interventionism and trade protectionism, from the search to shorten supply chains, to massive governmental finance allocation and America-first economic nationalism under the guise of inflation fighting. The cost-benefit ratios of such programs, as noted for example in a recent commentary by the Financial Times’ star economic commentator Martin Wolf, are questionable even for the developed countries that are pushing them under their self-interested agendas, while at the same time it is quite sure that the small, embattled economies of the global precariat of nations will not have any wins. 

A January 2023 paper by 12 authors at the International Monetary Fund (IMF) actually discusses this issue to moderate length. Under the inspiring title “Geo-economic Fragmentation and the future of Multilateralism,” the paper starts from the premise that in the era after the Great Recession earlier in this century, the world experienced geostrategic, political, and economic pressures that impacted the path of globalization in the 2010s. Those anti-globalization shifts were in recent years further exacerbated by the Covid-19 pandemic and Ukraine conflict. This phenomenon of geo-economic fragmentation (GEF) is presumed to be costly, with possible losses of globalization gains for consumers and workers, such as reversals in the reduction of poverty within and between countries, lower capital and investment flows, and repercussions for cross-border movements of labor.

Although the paper acknowledges that some countries may actually reap sectorial boons from economic fragmentation, writing that “fragmentation may entail strategic advantages for some countries in selected cases,” it calls fragmentation to be “very likely to involve significant economic costs in the aggregate.”  

Estimates on the costs, however, vary widely and appear to depend on modeling, economic theories, and political ideologies more than empirical knowledge. “Depending on modeling assumptions, the cost to global output from trade fragmentation could range from 0.2 percent (in a limited fragmentation/low-cost adjustment scenario) to up to 7 percent of GDP (in a severe fragmentation/high-cost adjustment scenario); with the addition of technological decoupling, the loss in output could reach 8 to 12 percent in some countries,” the paper says. 

It recommends in sight of these untested models and outlooks for geo-economic development to adapt “the rules-based multilateral system” – including the international trade and monetary systems – to the world’s changed realities. The risk of runaway fragmentation has to be averted, the authors warn, although they concede that a resurgence of the multilateral consensus of the previous era is not likely. 

Gloom to the weak

TO GO WITH AFP STORY BY NATASHA YAZBECK A Lebanese bank employee counts money at a bank in Beirut on July 21, 2009. Lebanon’s new government has yet to see the light, but its financial inheritance is already set: a public debt expected to top 50 million dollars by the end of the year. AFP PHOTO/JOSEPH BARRAK

In all these complex assumptions two things seem clear: the risks of interventionism in the current era are unknown and widely underestimated, and the downside potentials of GEF are massive. This is the case, even though historic manifestations of such downside potentials have abounded ever since the rise of the more vulgar of European mercantilist ideologies commenced in the 1500s. [inlinetweet prefix=”” tweeter=”” suffix=””]Trade protectionism and tariffs have dragged the world economy down in the past, as scholars (including the authors of the IMF GEC paper) famously and regularly point out in their studies of the Great Depression and the impact of the Smoot-Hawley Tariff Act of 1930. [/inlinetweet]

The second near-certainty – also highlighted in the conclusion of the IMF GEC paper – is that protectionism is going to penalize today’s global precariat of underdeveloped nations that desperately need freer trade and advancements of productivity in their bets to recover from the damages brought by the global impacts of pandemic, war, and self-serving interventions of powerful states. 

In this geo-economic mess, can a small and economically stressed country even hope to instigate any viable countermeasures against this confluence of downsides that are damaging it today and look to keep holding it back for the next few decades? And if the prospect of pursuing a contrarian and global power players decoupled economic policy is not already in and by itself a gamble for any small country like Lebanon, what is the value for stakeholders in the economy of such a country if they strategize for development on the level of their industry or company if there is no working support system on the national scale? 

Asking such questions is pertinent, especially based on the knowledge that efforts to strategize for better development of any Lebanese sectors in the real and services economy in more than three years have not met with the needed success. Not asking such questions in the increasingly difficult geo-economic environment of 2023 would moreover be both dishonest and disingenuous for a publication such as Executive Magazine, which has over five years advocated for many policy measures of strategic nature in the editions of our Economic Roadmap and continues to do so in this year’s. 

Contrarian answers

The first, and briefest response to such questions is that there is no alternative to wide, cross-sectorial strategizing efforts by engaged stakeholders. Lebanon has no economic strategy, a fact that is evident in state dealings with public goods since the onset of reconstruction and development in the 1990s, the intervening years of debt-funded provision of public goods, and in the failure to start working towards their provision in the three years since the collapse of state services.

The energy and electricity “file” of state failure as provider, regulator, or facilitator of the public good of electricity is the prime example.[inlinetweet prefix=”” tweeter=”” suffix=””] Lebanon cannot expect delivery of an economic strategy from its political administration even at times when such a strategy is a survival need.[/inlinetweet] [inlinetweet prefix=”” tweeter=”” suffix=””]Without more diverse and committed strategizing, Lebanon will only stumble even more desperately in the dark. [/inlinetweet]Economic and societal stakeholders need to strategize for public and private goods and for what has been described in a moral context as the universal common good of all, citizens and society, which is secured when personal rights and duties are maintained. 

The second answer is linked to the evolution of human behavior and systems. The old dichotomies of rulers and ruled, labor and capital, state and market, self-interested individual and public-minded official are fading fast. Technology, innovation, information, and knowledge are the determinants of societal, organizational, group, and individual profitability. 

Past capitalist epochs’ deterministic roles of class, gender, and age in the division of labor – one of capitalism’s enduring fundamentals – are replaced by complexification and convergence of conscientious stakeholder capitalism and responsible public governance in global organization of the necessary striving for the common good. 

There are no a priori insignificant contributions to strategy even at the smallest level. As everything impacts everything in the worldwide economic-ecological-social meta-system, constant strategizing and responding to data has become an inescapable need on all levels from the international to the hamlet.  

On the local level, as documented in a small example by this magazine’s recent investigation of Lebanon’s food sovereignty, interdependence, and security, strategizing for public goods of water, transport, and energy (priorities in the Executive Economic Roadmap under pillar 2) nowadays cannot be separated from increasing the productivity of and enabling the agro-industry and hospitality sector. This means that in the current scenario of interconnecting global and local crises and challenges, strategizing food for Lebanon means delving deeper into the entire Roadmap and intensifying the collaborative discourse over a national economic strategy. 

The third argument for the importance of more strategy efforts by Lebanese stakeholders in society and economy is that continuous improvement of the strategy and plan are imperative. The longer the collective discourse on strategy persists, the more it will ascertain what concepts are viable and what approaches are not working and have to be augmented or changed. Strategizing in continuity will embolden efforts for sustainable economic development, enhance visibility of societal needs, and allow the discovery of blind spots in previous thinking. 

Precondition for this progress in the strategy effort is that the collaborative and consultative process is intensive and regular. In this sense, the primary value of the Economic Roadmap is not the large number of recommendations. It is not the coverage of many sectors, nor the diversity of references to cognitive predilections from building to enabling, strategizing and combat. The Roadmap’s intrinsic value is its process, consistence and interactivity, with consultative openness. 

Over the past iterations of the Roadmap, it has become evident that the number of implemented policy proposals has not been substantive and the degree of continual interaction has not been perfectly intense. Yet tracking of progress, however shy, and non-ideological, affords a non-conspiracy-tainted view on the status of the country to stakeholders engaging with the Roadmap. Defunct are the previous, incomplete paradigms of Enlightenment-induced economic growth at the peril of disastrous social costs. The simple truth is that the stakeholders to the Lebanese enterprise have no recourse but to strategize the present and future from within their own mindful resources. There are no working recipes for solving humanity’s challenges to be derived from past economics theorizing and there are no ready-made recipes that can fix or even reinvent the Lebanese economy and social contract. 

February 21, 2023 0 comments
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Leaders

The strategy challenge of 2023

by Executive Editors February 21, 2023
written by Executive Editors

Usually, it is a no-brainer for a business to say that it is important to strategize for the year(s) to come. Planning for future demand shifts, organizational challenges and leadership succession, and mapping out new enterprise opportunities is essential for any longer term business venture, just as it is standard for a state to have some sort of economic vision and plan. On the level of the state, this devising of economic strategies historically has in some state systems been constructed centrally, as a multi-year planned strategy, but in market societies historic records demonstrate the superior value of having a national economic policy on principles of trust, freedom and responsibility – principles that Lebanese society has favored upon the country’s independence. 

At this point, Lebanon is some 50 months past the moment when a prudent government would have revised economic policy, instituted such things as a capital controls law, or perhaps have tried imposing something as counterintuitive to free trade and historic laissez-faire practices as adopting an ultra-hard, currency board regime in conjunction with an interventionist regime of economic dirigisme. 

None of that has happened. Instead, all that has been embedded more deeply in Lebanon in these years – and increasingly so in the past eight months since the 2022 institution of new political blockages by a process mistakenly portrayed as democratic – has been the despicable rule of corruption, the long-term detrimental power of informality, and triple political diseases of virulent depreciation, galloping inflation, and overall economic depression. 

[inlinetweet prefix=”” tweeter=”” suffix=””]2023 has already been shaped into Lebanon’s fourth year of suffering  – targeted misery and deliberate indecisions – complete and continued uncertainty.[/inlinetweet] If the physical principle of increasing entropy in an isolated system were to apply to this polity’s existence, this system would be on a predictable trajectory to an end-state where available energy has vanished and information is lost. 

But the law of Lebanese economic energy does not appear to be subservient to the model of maximum entropy. As the track record of living in an impossible system suggests, the human mind’s irrepressible power can manifest in such a closed, dead-end system as an accelerating process of combination, complexification, and convergence of energies. The economically expressed reflective and projective consciousness – when one defines economic energy as the irresistible impulse to create, initiate, and be industrious in the interest of an economic systems evolution – reveals itself most impressively in the fact that the functional vacuum in the realm of political decision making draws out new emanations of private sector economic energy. It has been said that the optimum result in the development of consciousness is increasing altruism, collaboration, complexification, and convergence.

One necessity that arises from the shift to – metaphysical and even very physical – private energy flows in Lebanon’s economic transition is a vast increase in the role and contribution of private planning for what have traditionally been public goods that were presumed to be under the care of the state. To illuminate this necessity and seek evidence for this trend, Executive invited 25 business and thought leaders to outline their strategies for the economy, business organizations, and provision of public goods in Lebanon in the coming year. With a response rate of 45 percent, we have gathered an impressive array expressing strategy leadership in this issue of the magazine, with a very important strong showing from education thought leaders at the leading business schools and universities. 

However, in wider terms, the shift of thought leadership and initiative from a dysfunctional provision of public goods and reforms towards private sector initiative has yet to accelerate by one or several degrees of magnitude. If one supposes with a perturbingly high degree of confidence – on the basis of the data on governmental action in response to long-standing public sector reform needs and last year’s IMF requirements (see story by Rouba Bou Khzam) – that governmental action in response to reform needs will remain stuck in partial and small legislative measures that supply a single-digit rate of return to urgent needs, the rate of private sector and civil society strategizing needs to ramp up towards 100 percent of ethical, even if state-defying and technically disobedient, response actions that will incentivize the state to do its job in terms of legislating, strategizing, and being the counterparty to the polity’s rightful demands. 

In light of this huge need, Executive will continually highlight our Economic Roadmap 6.0 throughout this year. Dispatching weekly alerts of highlighting specific and timely Agenda Priorities via social media channels, we will do our best to draw your attention, intervention, and action to each week’s most pertinent Roadmap propositions.  

The question which Executive has asked thought leaders and avid business minds at the beginning of 2023 is how they will strategize for this year. It is vital that all of us answer this question and contribute to the implementation of the best answers as they arise from the continual process of poring our minds and energy into action. 

February 21, 2023 0 comments
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Editorial

Laisser Faire

by Yasser Akkaoui February 21, 2023
written by Yasser Akkaoui

It’s time to stop beating around the bush and address the elephant in the room. The economic situation in Lebanon is an absurdity, and the political class’ inaptitude to commit to anything that resembles a recovery plan is beyond comprehension. Three years are more than enough to confirm our impression that the only plan they seem to have is to cling to power and protect their hidden agendas.

The discussions with the International Monetary Fund (IMF) regarding the reform requirements have been nothing short of a farce. The Lebanese people have witnessed this first in 2020 and then again last year. The Lebanese political class continues to treat the IMF’s demands with the same level of disdain they have for their citizens. Those who thrive in corruption have no intention or are even interested in implementing a plan that could lead to an economic recovery. They just want to strengthen their grip on Lebanon and continue molding it to their blood-stained ambitions.

This is where Executive Magazine’s 6th iteration of our Economic Roadmap comes in. This edition takes a hard look at the situation and acknowledges that the delivery of public goods such as water, energy, healthcare, and education cannot be trusted to public entities in any way. After years of categorical destruction of public institutions, the development of public goods has gone from legal and dysfunctional to illegal and protected by the political mafia.

The informal market has prevailed in a manner that is convenient to the extractive ambition of the political mafia. Against this trend, private initiatives are providing solutions which are inclusive and hold value potential. Thus we are increasingly witnessing private initiatives that are finding illegal yet ethical solutions to provide public goods that are inclusive and can capture value. 

The question that needs to be asked is, how can these solutions become legal?

The problem is that the Lebanese citizen is on their own amid this madness. They are misinformed and deceived, manipulated in their choices of the system that will best serve their needs.

But it is time to stop believing the lies saying that the political class is going to do anything to fix the situation. It’s up to us as citizens to take action and drive the change. It’s time to support private initiatives that are providing solutions which are functional, ethical, and inclusive. It’s time to discount the system from the equation and drive the change we deserve.

February 21, 2023 0 comments
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CommentEconomics & Policy

Strong plans to face numerous challenges at USJ

by Salim Daccache February 19, 2023
written by Salim Daccache

In fact, the year 2023 for Saint Joseph University of Beirut (USJ) is a continuation of the implementation of a financial and social plan decided in 2022. It consists of a three-year partial recovery plan (up to 80 percent if it is possible) of the value of schooling of the 2018/2019 academic year, which is the bare minimum to make the university function properly.

This is considering that the average in 2018/19 was about $12-13,000 per year with some 12,000 students. Some students, in light of the crisis, have not been taking the maximum credits because of commitments like jobs, or others do not have the means to pay the full tuition. This policy was decided by the Board of Trustees together with the university’s Financial and Academic Management. 

In addition to the financial measures, the plan has the following objectives:

1. To retain teaching and administrative staff by paying a portion of salaries in US dollars. In addition, the entire community was offered benefits in the form of medical insurance and transportation bonuses, either by increasing their allowances or by offering vouchers. 

2. Retain students who are willing and able to study at USJ. This will help deter emigration and grow confidence in the higher education system, and by enrolling those who lack financial means through social or academic scholarships. More than half of the students are financially assisted by the university.

3. This plan includes an important component for the granting of scholarships. It also includes an activation of the USJ/Hôtel-Dieu de France Foundation projects in charge of fund raising and collecting cash scholarships for students of the university, as well as for patients of the Hôtel-Dieu de France hospital who are not able to honor the required payments. If 5,500 students benefited from $3.5 million “fresh” in 2021-22, this figure will be multiplied nearly three times in 2022-23:  a budget of $11 million will be devoted to financial aid.

2023 Expectations against the past two years 

It should be noted that USJ practiced a modest policy of collecting tuition fees for the year 2022. We have taken 20 percent of the tuition fees in US dollars, and the other 80 percent at a rate of 6,000 Lebanese pounds to the dollar, which has handicapped our real financial possibilities. We do not have an endowment like other quality universities, nor do we have the possibility of getting money from embassies. Our reserve assets in Lebanese pounds and US dollars, for assisting students, are blocked in Lebanese banks and it is unlikely that we can get anything from them. The cost of fuel oil to generate electricity for 24 hours a day to serve students and teachers has easily quadrupled over the last year, and with it the price of internet. We have timidly resumed the budgets of scientific research and the movement of our laboratories, but this is very expensive. All of this made 2022 a difficult year to balance – vital otherwise a deficit will be declared by our external auditor. 

Forecasting and aligning strategies

Looking at our future plan, there is a main priority to ensure a good presence alongside the activity of our faculty, especially young teachers, administrative staff at USJ and at the hospital, so that the level of our academic training and our diplomas handed over to the students will always have the same value and level as always. 

Wherever I go in the world, I meet USJ alumni and we are really proud of them; they are good ambassadors of USJ in their professional skills and moral values.  We want to preserve this aspect of our mission. On the other hand, in order to carry out our academic policy, we need to raise our tuition from the 2022 level (average tuition of $5,000 to a global level of $8,500 tuition to balance the 2023 budget, and allow the replacement of some computer and technological equipment for the laboratories). Continuous professional and psychological training plans are set in motion to help our teams to face realities with will and foresight. This applies equally to the Hôtel-Dieu de France hospital, knowing that their budget is completely separate. It should also be known that USJ, in addition to the Hôtel-Dieu de France, manages three hospitals: Saint Charles in Fayadieh 120 beds, with 100 beds under construction, Bishop Cortbawi with 85 beds and school and university buildings, and the Tel Chiha Hospital in Zahle. Today the challenges are numerous as we know and it will be a real test to succeed.

February 19, 2023 0 comments
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Food EntrepreneurshipProfilesSpecial Report

Lebanon’s agro startup scene

by Rouba Bou Khzam January 1, 2023
written by Rouba Bou Khzam

Dry and Raw

Dry and Raw is a boutique food idea, inspired by nature and with the hope to provide local and international customers with up-market natural and organic food products from Lebanon. Dry and Raw is not only an idea, but a lifestyle lived by brothers Nabil and Dani Khoury. “Being in the West allowed me to go and learn more about food and alcohol,” Nabil Khoury tells Executive, alluding to the time he lived abroad. “I got all this knowledge and I have been using it for myself and friends at home for more than 30 years.” 

After time away, Nabil returned to Lebanon at the start of 2019 with a career change in mind. “I saw that I was really ready to jump into this food and beverage business because I have been practicing for so long, and I have got all the training and trials to master what I do,” he says. The brothers then sought to share their “food experience” with the public. 

Dry and Raw – the business name touches upon their style of products – is currently producing more than 600 food items in-house, using organic and naturally grown products from its farm in southern Lebanon. They are considered one of the first food boutiques in Lebanon to produce seeds, nut oils, and foreign-style cheeses. For more than two years, the business has been producing over 36 types of European, British, and American cheese.

Dry and Raw has offered new food trends to Lebanese clientele and provided better quality with affordable prices as a substitute for many costly imported foods. Their products are distributed to more than 25 markets in Beirut, Matn, Jounieh, Batroun, Tripoli, and Chouf, while 30 restaurants and hotels are fond of their European cheese range.  

The brothers also organize education sessions and awareness for customers to learn more about the food they are producing. In addition, they hold summer internships for food science students at university, including at the Lebanese University and Saint-Joseph University, to teach how cheese is made and to spotlight the practice of food theory.

Dry and Raw are environmentally conscious. They refrain from using plastic bags and instead use paper bags. They work on recycling all the jars and glass bottles that they use, while their clients also collect the jars and bottles to return them for recycling. “It is in our culture to preserve nature,” Nabil says. 

The business was not exempt from the economic turmoil of the past few years in Lebanon.  In 2020, their first year of trade, they incurred losses resulting from the economic impact of the Covid-19 pandemic, and now power outages are causing new problems. Long power cuts are impacting refrigeration for food, especially during the summer temperatures, increasing the risk of food deterioration, loss of quality, and a reduction of shelf-life. “In summer, we had to stop some production lines, such as ice cream sorbet and dried vegetables and fruits. And we are no longer storing fresh dairy products at our boutique,” Nabil says.  

Despite Lebanon’s declining economy and volatile politics, he is hopeful about their future as entrepreneurs. “The odds are not in our favor, but we’re Lebanese, so we’ll figure it out. The resilience is what makes us special, the positivity almost looks naïve, but it isn’t. It’s hunger, it’s the will to continue and make a difference.”

Balsam Jbalna

Umeboshi, pickled or fermented Japanese plums, is a rare and expensive delicacy with macrobiotic health benefits which is now being cultivated, produced, and packaged in Lebanon. Since October 2020, one local company has picked the wild plums that grow 1,400 meters above sea level on Mount Lebanon, to create the Japanese snack.

Hanan Bou Najm, a macrobiotic nutritionist and founder of Balsam Jbalna, the company that makes Lebanese umeboshi, started her business as a response to a gap in the local market for umeboshi. The delicacy is an essential part of the macrobiotic dietary lifestyle. In Japanese, “ume” means plum, while “boshi” means fermented.

“Due to the Lebanese economy’s deterioration, I decided to start the first umeboshi project in Lebanon,” Bou Najm says. “During the Covid-19 pandemic we couldn’t find umeboshi from Japan locally,” so we asked around in villages and among the farming community, and found that Lebanon had a very well-kept secret.”

After conducting research, [inlinetweet prefix=”” tweeter=”” suffix=””]Bou Najm found that Lebanon naturally has a lot of wild plum trees, with the mountainous regions the best source for this particular type of plum[/inlinetweet], which is part of the prune family. Farmers used to cook and ferment the fruit over 500 years ago, for a paste similar in style to a tomato paste, Bou Najm explains.

At first, Bou Najm tried cooking the plums and pickling them, but found that fermentation worked better. The intense sour and salty notes make Umeboshi a perfect condiment for Lebanese cuisine, she says, adding that the plums and berries can be added to salads like tabbouleh or fattoush, as well as with cooked beans and vegetables, or rice balls wrapped in seaweed, salad dressings, dips, and spread. 

Knowing that pollution is a major problem in Lebanon, particularly among the coastal regions which are hit by traffic and under the smog of power plant fumes, Bou Najm made a point to forage in the highest mountain areas and valleys, in the hope that the produce there would be least impacted by the pollution.  “We would park our cars and walk up for two hours. We were ten men and women, and we would collect the plums as well as other wild berries, which we mixed in with our fermented plums.”

In addition to creating a value-added product that is in high demand worldwide, Bou Najm has created a locally affordable alternative of a specialty Japanese product that is within Lebanese consumers’ reach, selling it for a fraction of the price of imported varieties. “This product was imported from Japan through the following companies: Nabat, Clear Spring, and Naturalia [and] were sold for $15-$20, while Balsam Jbalna is sold for $2-$3,” Bou Najm says.  

Exports of plums, paste, and vinegar could help bring in much-needed hard currency to the country during the current tough economic situation, although exporting remains a challenge, Bou Najm says. “Balsam Jbalna product is not exported, although there are large quantities of it. This is mainly due to a legal fact; the product is made at home; I don’t have yet a healthy kitchen that has a certificate of origin registered in the Ministry of Economy.”

Like many residents, she is struggling with the high rent prices and Bou Najm says she is not yet financially stable enough to rent a working kitchen space. And like many other Lebanese entrepreneurs, she is looking for investment to develop her business.

Gudtolli

Gudtolli started in 2020 when three women Leila Khalife, Reine Khalife, and Najwa Youssef met and decided to start a business, after carrying out a study and discovering a lack of fresh pasta in the local market. So, they decided to produce a new Lebanese product to substitute an imported one.

Gudtolli produces fresh pasta, naturally made and colored from vegetables, like beetroot, basil, spinach, carrot, pumpkin, and turmeric. Their mission is to provide healthy, natural, and great-tasting pasta in a variety of traditional Italian shapes like fusilli, macaroni, and conchiglie. 

“What makes our pasta special is the combination of Lebanese culture and Italian cuisine that portrays a small festival on your plate. Gudtolli brings the garden to your table along with its natural colors, nutrients, fibers, and vitamins. It is full of benefits with no additives or preservatives,” Leila Khalife tells Executive Magazine.  

In February 2021, the company was legally registered and later in September the products began to be distributed in retail markets in Mount Lebanon, Keserwan, Jbeil, and Beirut. The company and its 20 female employees are located in Safra in the Keserwan district. “We believe that the best way to preserve our culture is to keep it alive. Empowering women and Lebanese farmers and increasing their participation in economic growth are among our utmost goals,” Leila says.

As well as selling pasta, Gudtolli holds monthly pasta making workshops, so participants can learn the art of making pasta and accompanying sauces. The women see it as an opportunity to learn and share knowledge about pasta history and Italian cuisine. The menu includes tagliatelle, spaghetti, ravioli mushroom, tortellini Cheese, pappardelle, farfalle, and farganelli, fully decorated with vegetables and herbs. 

Today, Lebanese entrepreneurs and small businesses are operating in a highly volatile environment with almost no state support. “The crisis is affecting our ability to operate and our ability to work,” Leila says. She adds that[inlinetweet prefix=”” tweeter=”” suffix=””] the ability to transfer money or pay internationally is a big hurdle for startups. [/inlinetweet]In addition, the dollar to Lebanese pound exchange rate is increasing every day, which increases the payment of their goods. At the moment a bag of Gudtolli pasta sells for around 80 cents, while the jar version, with its reusable aspect, is one dollar.

Despite all the country’s circumstances, Leila and her team are taking responsibility seriously. They are aware of their strengths and weaknesses. As a team, they participate in different competitions and exhibitions. Months ago, they won an award from Bloom, a local non-profit which supports entrepreneurs through various programs, among other awards. They also won a place on Berytech’s Basatine Program, a four-year consortium program which supports farmers and related value chain actors in the cereals, legumes, and vegetables in Bekaa and Akkar regions.  

Olive bio

As the olive harvesting season gets under way, people across the villages of Lebanon are dusting off their jars and bottles to fill up with this year’s bounty, following an annual tradition which commemorates the richness of Lebanon’s lands. The natural and ancient foods cultivated in Lebanon are important to daily life and the country’s heritage and culture. A Lebanese kitchen would not be complete without olives and its oil.

Even though many young and educated Lebanese have emigrated in search of better opportunities since jobs and business dried up during the crisis, there are still young energies to be found who are working hard to reap the rewards of Lebanon’s fertile land. This is the case for Sarah Joseph, the co-founder of Olive Bio, who in January 2021 returned from France to her family’s land in El Qattine, in the Keserwan district, to become involved in farming and agricultural activities. Since 1515, her family have existed on the land.

“After specializing in food quality, I decided to take an interest in going from farm to fork. My journey started in the hope of giving others a taste of nature,” Joseph tells Executive. “It’s a long road yet a rewarding one.” 

Wanting to produce in a traditional way and directly from her farmland, last year, Joseph created a range of products to bring some diversity to Lebanon’s existing olive variety. Here is where Olive Bio was born. Along with her parents and some laborers, Joseph works with top quality Italian olives cultivated on their land.

They produce olive oil, olive soap, and five different flavors of olive tapenade: green tapenade with almond or with basil, black tapenade with walnut, chili, or caper. Their tapenade mixes are adapted for each recipe, so the freshness and natural taste of the ingredients in the recipe remain.

Many entrepreneurs and startups in Lebanon struggle due to their lack of access to finance, lack of human capital and resources, and expertise to help plan growth and expand further. [inlinetweet prefix=”” tweeter=”” suffix=””]For Joseph, it was integral to her startup journey to learn more about what it takes to run a business;[/inlinetweet] though she holds a degree in food engineering, she felt it was not enough.

Since launching her startup, she has attended training and workshops to improve her skills and capabilities. She says this helped her learn that the following characteristics and skills: confidence, perseverance, patience, communication skills, and risk tolerance, are some of the main tools’ entrepreneurs need in order to succeed.

All ingredients and raw materials are manufactured and produced in their production facility in El Qattine, their olives are a mixture of Lebanese and Italian, and each 300g jar sells in a competitive price range from $6.50 to $7.50. Olive Bio aims to be environmentally friendly; they happily take back empty jars customers return with a discount on their next purchase. “By doing so people will be helping small businesses and our environment,” Joseph says.

In view of Lebanon’s long-term structural challenges and the profound effects that subsequent crises are having on its economy, Olive Bio is facing a lack of access to finance with banks no longer providing loans, and a lack of access to funds and grants. “There is no help from the government and the NGOs have high requirements.”

Kaaju

Kaaju is a family-run enterprise that makes nut snacks, inspired by rich culinary cultures from South East Asia, West Asia, Africa and South America. Their products are 100 percent natural, gluten-free, paleo-friendly, small-batch, and vegan.

The father-daughter duo, Hassan and Alia Fattouh, were inspired to found Kaaju from the rich and varied meals of their home life. Alia’s mother would often cook cuisines ranging from Asian, Middle Eastern, to African or European. Before dinner was served, the family would gather round for drinks and nibbles – always a selection of nuts. 

Once, when Alia was on a trip to New York city, she struggled to find nuts which tasted as good as those of her family gatherings. From then on, she set out to begin producing her own roasted nuts, firstly with a mix of cashews and fresh curry leaves – a hark to a previous trip to Sri Lanka. She perfected the recipe and adopted it as a staple in her menus at every brunch, gathering, barbeque, or dinner party she hosted. It was met with success and so the idea was born to launch Kaaju, an environmentally and socially conscious social enterprise.

[inlinetweet prefix=”” tweeter=”” suffix=””]Kaaju was created in 2016, and it barely had a few years to grow before being hit by a wave of instability[/inlinetweet] as Lebanon’s economy began to teeter in 2019. Then, in 2020, the Covid-19 pandemic caused major economic setbacks for businesses everywhere. “We had to stop our business for a period of time, we couldn’t distribute due to the blockage of the roads,” Hassan says to Executive, referring to the road blocks resulting from anti-government demonstrations, as well as various pandemic lockdowns. “Also, these compounded crises led to an estimated drop in real GDP which made us stop importing for a while because of the high prices.” 

At the beginning, the co-founders started to participate in different food events in Lebanon; they presented their business idea and offered people tasters of their cashew mix. While Lebanon grows almonds and walnuts, nuts like pistachios or cashews are not locally grown.

In 2020, they began to develop their mix of flavors. Today they have five to six nut mixes: cashews with fresh curry leaves, wild lime or thyme, and almond or pistachios with rosemary. “Recently we released a new product which is a delicious blend of dry roasted seeds, nuts, and spices. We received great feedback on it,” Hassan adds. “Every six months, we try our best to create a new flavor, but we work carefully because we are always keen to create a very special new delicious flavor.”

Kaaju makes sure their product is healthy and true to its roots. Cashews are rich in copper, magnesium, protein, minerals, and antioxidants, while curry leaves are believed to support diabetes control and reduce bad cholesterol. Rosemary is believed to hold anti-aging properties, boost memory, and help reduce stress. The relationship between Kaaju and nature is strong, especially in mind when they create their recipes. The pair says they draw inspiration from the natural beauty of the country. Kaaju is now available in around 15 stores in Beirut, Matn, Keserouan, and north Lebanon, and online.

Habka

We no longer talk in Lebanon about normal life in all its aspects.  The economic and financial crisis has radically changed priorities; as people limit their food choices, putting health at risk as quality levels drop and safety specifications are ignored. 

 Organic agriculture is a production method that aims to achieve better food safety and security, as well as environmental sustainability. Nowadays, many people are choosing organic food in order to avoid chemicals used in farming, and to feel confident about the source of their food. Eating organically also means helping to create a healthier food system for everyone, from farm to table. 

 Hakba is a homemade basil-based pasta sauce, made by Nisreen Jaafar from her home in southern Lebanon. Under the mantra “Your health is your wealth”, Jaafar created the product in memory of her late mother and touching upon the Arabic meaning of a basil leaf: “habka”. The first half of the word means “love”, and Jaafar says it is with love that the food is made.

 Jaafar makes the product with organically grown basil to ensure its 100 percent naturally sourced, and so she can confidently label the product gluten and dairy free, though she admits homemade production is slow and demanding, but worth it.  “Next time you’re in the supermarket,” she says,“pick a sauce jar and [look at] its label. You may be surprised by the few ingredients…Habka delivers on its promise of clean eating by skipping the additives, preservatives, and emulsifiers.” 

 She makes four pasta sauces including a spicy sauce, as well as the classic pesto. In addition to the food lines, the product is eco-friendly, and Jaafar takes care to reduce her plastic usage. As part of the products sustainability promise, Jaafar designed a deal to offer cotton tote bags and basil seed bags, which helps to reduce single-use plastic, while the basil seeds help encourage people to plant at home. The sauces are contained in glass jars, for its recyclable quality. “Using glass reduces emissions and usage of raw materials – it can be turned into a new recycled glass object at any point.  From a health standpoint, glass also wins over many other options as it does not absorb smells or flavors, and it does not leak any toxic substances into foods or drinks.”

 Like all startups, Habka is facing difficulties in the current economic climate. She says [inlinetweet prefix=”” tweeter=”” suffix=””]clients are limited on their ability to buy artisanal products, and have a tendency to prioritize commercial items to save money. [/inlinetweet]“Delivery to points of sale or to individual clients has been very expensive and the business is not yet making much profit from having to spend so much on transportation,” Jaafar says.

 Pricing was the most challenging aspect for Jaafar when she began. First, when she started the currency rate was incredibly volatile so she could not properly estimate the value of her supply chain against the value of her product in its finished form. She wanted to position Habka as an artisanal product, yet an affordable one.  After much deliberation and many consultations, she priced the items in Lebanese pounds, though the prices are revised periodically. “Eventually, I will want Habka to survive [but] without an acceptable profit margin, no business can survive,” she says.  

Hydrek

Hydroponic planting is the process of cultivating seeds without using soil, but instead using nutrient rich substances, oxygen, and water to grow herbs, plants, and flowers. It is an increasingly popular way to plant, and in Lebanon, more are turning towards hydroponic systems, as one young company Hydrek, has been discovering.

Hydrek was founded two years ago by Nabil Nehme, and the business provides hydroponic systems for households, farmers, plus customized systems for NGOs, and municipalities. They focus on home-scale hydroponic systems, green fodders, livestock farms, supermarkets, and groceries by providing solutions for individuals, companies, and governments. 

“We are the first company leading climate control and hydroponic solution provider for corporates. Our turnkey solutions are unparalleled, from efficient installation to streamlined commissioning processes to superior or input supplies and grower management, [we are] bringing the future of sustainable growth within your reach,” Nehme tells Executive.  

It was over ten years ago that Nehme first considered the concept. “I’m from a village and I like planting. When we moved to Beirut, I didn’t have enough space or a big investment so we started searching for options for planting on the balcony. While researching, I found that hydroponics is customized on a large scale (including big investment and space).” The discovery led him to found the start-up to offer home-scale hydroponics.

Nehme’s approach also includes consultancy services, farm design, hydroponic feasibility studies, and agronomy training. The company also hopes that this type of horticulture will help mitigate the impact of climate change, as well as provide better food security, an issue Lebanon is currently battling with.

“The outbreaks we are experiencing recently in Lebanon and the high cost of food has prompted several Lebanese to contact us,” Nehme says. “For example, by buying one unit from Hydrek, anyone can plant hundreds of cups of vegetables with limited water and without the need for electricity. Accordingly, he or she can meet their needs for a longer period at a lower cost.”

Hydrek won a place on the Investmed project, an European Union funded program to support startups in the Mediterranean region, including in Egypt and Tunisia, as well as Lebanon. The businesses targeted should be working on economic and environmental challenges, with sustainability, facilitating access to new markets, and generating increased economic opportunities for men and women.

Nehme says the project will help train and coach Hydrek to become more competitive, and protect intellectual property rights. The team is made up of professionals experienced in working on greenhouse and automation technology projects, with a mixture of women, men and recent graduates, mainly agriculture engineers. Hydrek is located in the village of Kaa, in the Bekaa Valley, with the head office in Mkalles.

Jamra Plus

In light of soaring black market fuel prices for heating, many Lebanese are no longer hesitating to chop down trees in nearby woods and forests, sometimes including those in nature reserves. With the onset of winter, people in both urban and rural areas are turning to firewood and charcoal to heat their homes. Cutting down logs for firewood is not a new trend in Lebanon, but it has been gaining momentum since the surging price of diesel. 

Under the title “It is time to save the earth”, a team of ambitious chemical environmental experts in the Bekaa Valley have created a startup, Jamra Plus, to sustainably innovate through coffee waste. After years of researching, trying and testing, Fatima Kanaan, Safa Ayoub, Houssein Ayoub, and Hosni Abdelghini Ismail, were able to start their business in January 2022 and create Jamra Plus. The company produces briquette charcoal products from coffee waste. Their business is in the Bekaa but they are keen to be present all over Lebanon. 

“Thousands of trees are cut yearly in Lebanon for heat and food preparation, so we decided that from people drinking coffee, we could convert it into charcoal in order to protect and save our trees,” says Fatima to Executive. They are currently working on opening a factory and purchasing equipment as well. In addition, they will be manufacturing their own machine in which their product can be used for cooking and preparation. At the moment, however, they are making do with their hands. First, they collect the coffee grounds and sawdust; next, they add some ingredients and mix them all together. Then they melt the briquettes which makes them ready for use. The charcoal can be used for more than one purpose, like to prepare food, to keep warm, for barbecues or for camping. 

“Our charcoal is so beneficial to the refugees who live in unfitted tents and suffer from severe cold in winter, especially children,” Safa mentions. Their charcoal also has environmental benefits, as well as humanitarian. It has 30 percent less carbon monoxide than standard types, and it burns fast with a strong flame. Since it is made of used and organic raw materials, it is price competitive too.

Jamra Plus has participated in different competitions, they ranked second place in the Hult Prize competition, which is a global, year-long competition that crowd-sources ideas from university-level students to challenge them to solve pressing social issues around topics such as food security, water access, energy, and education. They also ranked second place during the Lebanese-MED Researcher’s Night event, which is an event to give researchers the opportunity to showcase science’s impact on daily life, for projects focused around the Water, Food and Energy Nexus. Both Fatima and Safa stressed how a healthy environment was a priority for them, so much so they specify a part of their profit to plant trees in Lebanon.

January 1, 2023 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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