Economics and Policy
Lebanon's caretaker Prime Minister Najib Mikati has once again promised that he would send the long-delayed salary scale bill to Parliament for approval.
A cornerstone of the renewal of the Lebanese healthcare industry is a series of investments in hospitals, paradigmatic among which is the project to expand and improve the medical center at the American University of Beirut (AUBMC). First announced two years ago in April 2011, ground was broken on the project last autumn. Construction is currently in the excavation phase for the new, nine-story academic and clinical center on a corner lot once occupied by a low-rise building. Other structures will be razed in the coming years to allow for new units in the massive project.
While the excavation activities and an extensive display project the scope of the project, the plan goes significantly beyond developing several physical structures.
“The idea is to make this institution really deliver the best care and maintain an edge in education and research,” says Dr. Mohammed Sayegh, AUB’s vice president of medical affairs and dean of the Faculty of Medicine. “When we are talking about best care, we are talking about North American standard-type care because this is, after all, the American University of Beirut,” he adds.
In pursuit of this aspiration, AUBMC came up with a 10-year, six-point concept that was dubbed Vision 2020 when it became clear that its schedule would run until 2020. When viewed against other “2020 visions” that have been produced for cities, statelets, and whole countries in the Middle East and elsewhere, the AUBMC project has a rather concise feel to it.
The six components of the plan are: building new physical structures, recruiting medical faculty, improving patient care and service, establishing new clinical and research centers, redesigning the curriculum for the Faculty of Medicine, and creating a collaborative network through strategic partnerships.
Aiming for the top
The driving force behind the plan is Sayegh, a 1984 graduate from AUB medical school and recipient of numerous awards in his field. He spent most of his career at Harvard before allowing himself to be recruited back to AUB in July 2009.
An initial assessment of AUBMC at the time showed that it “provided good care but I wouldn’t classify it as the best care we can provide,” Sayegh tells Executive. This insight led to the determination “to elevate standards on all levels”, with the six components of the plan all feeding into the provision of excellent care while fulfilling the medical center’s mandate as an academic institution.
In an approach typical for such a venture in the United States, the institution is relying on fundraising to develop new physical structures.
“We value this project at around $400 [million] to $500 million for the physical structures,” Sayegh says. In addition to the hefty construction price tag, he estimates that another $100 million or so will flow into hiring, investments in new research capabilities, network building and
so forth.
Cost factors related to the concept are vast and varied, as AUBMC has a host of 500 residents and fellows in the practical extension of the medical school. This training program alone, according to Sayegh, represents an annual budget of $4 million to $7 million in costs to AUBMC. On the patient side, the facility has to wrestle with the inequities of the Lebanese healthcare compensation, just as many other providers of healthcare services do.
Unlike the US, where the government allocates funding to support residency training, the Lebanese government provides no subsidies for the training of young physicians. On top of that, AUBMC feels the relentless pinch of the “dismal” reimbursements for treatment of patients that are admitted on Ministry of Public Health and National Social Security Fund (NSSF) accounts, Sayegh says. “We have an obligation and accept these patients but they cost us money. The nice thing is that we have a nice mix of patients, where we have some insurance patients, some self-payees and some who are [covered by] government and NSSF.”
The importance of networking
AUBMC’s mix of lucrative and money-losing patients makes balancing the bottom line easier than it is for other Lebanese hospitals.
The institution additionally changed its stance from academic isolationism of sorts to increased interaction with Lebanese hospitals. According to Sayegh, this was realized by entering into affiliations with several institutions to which AUBMC can dispatch physicians to treat patients who under existing contracts with municipalities and public sector entities are not eligible for admission to AUBMC itself.
Medical provider networking is one of the lessons taken from the AUBMC dean’s US experience at Harvard. Creating such partnerships, which represents the sixth component in AUBMC’s Vision 2020, is also on the agenda of regional interaction with Arab countries.
Although the six strategic items of the vision are equally important, implementation of some points does presuppose progress on other agenda items. The most pivotal point is reversing the brain drain by attracting highly qualified faculty members to Beirut. Expanding the hospital care capacity to about 360 beds in the immediate term and 600 beds later on is another facilitator required for entering into more strategic partnerships.
While a sound business model in today’s world is a must also for an academic medical center, the idea for AUBMC’s overall path forward is not commercial or profit-oriented but to financially sustain operations. “Sustainability is critical, otherwise you are losing money every year and cannot in fact have the best academic medical center,” says Sayegh.
This future will mean, however, a continued dependency on donors who support needy patients through several funds such as the Brave Heart Fund and the Neonate Fund, established in 2012. “The availability of citizens who believe in these missions is very important. You cannot sustain our operation with just pure business models, and none of the academic medical centers can do it unless [they] compromise either on training or on care,” says Sayegh.
Despite the uncertainties of the Lebanese health care system and despite anticipated dependency on the goodwill of the donor community, the leader of AUBMC and driver of Vision 2020 exhibits no shred of doubt in his return-on-investment projections. When asked how much value he expects each dollar invested in the institution’s universal upgrade project will generate, Sayegh’s answer is categorical: “hundreds, of course.”
The maxim in approaching the Lebanese healthcare “system” today appears to be simple: do not upset the patient. Keeping calm with strict bed rest can be a good short-term rule in caring for an acute heart condition or explosive backache. But for solving the Lebanese healthcare condition of ‘chronic dysfunctional systemitis’ (that disease newly discovered by Executive), not upsetting the status quo is nothing but a contraindication.
Besides overdue reforms to advance the social side of healthcare and make access equitable, the economic muscles of the healthcare industry in Lebanon need coordinated exercise. Unless these muscles are toned today, the health industry here will soon be outshone by other Arab countries and may even atrophy.
The Lebanese well know of the fragmentation of public health services and the weak supervision of commercialized private healthcare providers. Indeed, more than 90 percent of healthcare is conducted within the private sector, as Dr. Roger Sfeir, former adviser to the Ministry of Public Health (MoPH) and to several international bodies, told Executive. Meanwhile, public hospitals are underfunded, the National Social Security Fund (NSSF) is inefficient and bleeding money, and the political will for reforming the mess is lost in corruption.
Hospital operators across the quality spectrum suffer under the long delays in payment transfers from the NSSF and MoPH, and the more their patient mix is skewed against self-paying or privately insured patients, the more they are stressed, said Dr. Mohammed Sayegh, dean of the faculty of medicine and vice president of medical affairs at the AUB Medical Center. But even AUBMC, with a comparatively high share of well-compensated treatments, is impacted by the low payments coming from NSSF and MoPH. “The reimbursement is dismal and it costs the institution money, which impacts the efficiency,” he said.
From academic hospitals and diagnostic centers to plastic surgeons and specialists in stem cell medicine, stakeholders in the healthcare industry confirmed that their area of activity lacks legal frameworks and efficient collaboration with the public sector entities.
The World Health Organization (WHO) likewise said in a 2010 six-year country cooperation strategy (CCS) paper for Lebanon that “equity and fairness of the healthcare system are still far from being reached.” It also advocated a strong need to streamline and focus cooperation among key programs aiming for anything from accident prevention to tuberculosis control.
Notably, the WHO took the further view that “meaningful changes to health system expenditure will not occur without better management of the private sector.”
The CCS paper criticized competition among hospitals in acquiring costly medical machines and linked what the WHO called “the excessive use of resources and new technologies” to “perverse incentives that arise out of the way hospitals and health care providers are paid.”
Alarming medical outcomes
While the Lebanese health sector has seen massive investments in private and non-profit hospitalization facilities in recent years, including investments in high-end diagnostic machinery, the monitoring of hospitals for unintended negative patient experiences has neither a comprehensive scope nor an independent structure to report and evaluate all incidents and their causes, whether physicians’ errors, inadvertent infection, false medication, or others.
A glimpse into the issue and incident rates was offered in a recent study undertaken by GlobeMed, a healthcare payment services company affiliated with the insurance industry. Some of the findings in the study, published last November, were not pretty.
According to the study, one in every 143 people admitted to a hospital is going to die in what is called a “medical outcome” or negative change in the health status of a patient due to clinical intervention. Under the definition used in the study, medical outcomes also include infections, complications, readmissions and deaths.
The total rate of medical outcomes in Lebanon was 5 percent during the years 2005 to 2010, and the study only looked at patients whose accounts were managed by GlobeMed, which means large patient groups such as those on NSSF and MoPH accounts were not included. GlobeMed said the outcomes rate in Lebanon was higher than in the United States (3 to 4 percent) but lower than in Canada (7.5 percent).
Averages may be very deceiving
However, the average rate of medical outcomes at 5 percent was computed from 152,000 admissions, of which 137,000 represented a stay in hospital of one day or less. When counting the rate for the 15,000 admissions that exceed one day length-of-stay, the outcome rate more than doubles to 12 percent. Even more concerning is the timeline of incident rates: the number of outcomes advanced from less than 800 in 2005 to nearly 1,400 in 2010, and the percentage of outcomes recorded each year moved from 4 percent in 2005 to beyond 6 percent in 2010.
Shaking the picture further was that it only captured data on adverse events that occurred in the hospital, not recognizing any outcome that occurred after the patient was released.
The researchers additionally admonished the lack of legal obligations for hospitals to publish medical outcome rates and the reluctance of many doctors to completely fill in patient files. These insecurity factors on data quality notwithstanding, the reasons for the increase in adverse patient experiences in recent years need to be researched and understood. The GlobeMed study suggests that the expansion of hospitals might play a role in the rise of medical outcomes, due to hospital staff learning curves. Other possible reasons alluded to, but not further elaborated on, by the study are the increase in the average age of GlobeMed clients from 34.8 in 2005 to 36.5 years in 2010 and deficiencies in the ways adverse incidents are reported.
The study said that due to under-reporting of incidents, not enough measures will be taken to correct the underlying problems and avert repeat incidents. According to Dr. Sami Faddoul, a noted radiologist and diagnostic specialist, another factor driving the rise in incidents could be the freezing of treatment compensation that hospitals receive from public agencies and commercial insurance companies, as inflation and cost increases at hospitals have outpaced reimbursement rates that have been stuck at low levels for many years.
It was clear from the GlobeMed study that longer stays in hospital increase the probability of negative outcomes, such as contracting a dangerous hospital bug (nosocomial infection). Another clear conclusion was that the cost of a nosocomial infection is stellar. At an average cost ratio of 842 percent (!) when comparing an outcome-free hospital treatment with one involving a nosocomial infection, this type of infection is a supernova, blowing national medical expenses out of proportion.
Constructive needs
In the WHO’s view, Lebanon scores relatively well on overall health indicators, and life expectancy is above the regional and global averages for women and men.
Some of the organization’s documents on the Lebanon website cause wonderment — the CCS put its population estimate for the country at 3.4 million whereas another factsheet said 4.3 million people, for example, and the information value of regional comparisons is impeded by the fact that the WHO saw it fit to define the “Eastern Mediterranean” as a region comprising over 580 million inhabitants from Afghanistan to Somalia and from Morocco to Kuwait. Nevertheless, the WHO factsheet attests that the country has around 3.5 times the number of physicians, 35.4 per 10,000 residents, of the regional average.
The high ratio of medical doctors and the above-regional ratio of nurses point to the strengths of the Lebanese healthcare industry and its potential. The country’s healthcare sector has immense potential to be a lead supporting actor in the country’s wellbeing and economic growth.
It may not steal banking’s Oscar for gross domestic product contribution or claim the real estate sector’s function as a treasure chest, but besides education, and given that it creates a great deal of tourism, Lebanese healthcare has what it takes to be a national profit center.
As evidenced in Executive’s discussions with sector stakeholders and its research on healthcare, the industry provides jobs and services that can earn massive revenues on three levels: income from treatment seekers who come as “medical tourists” for anything ranging from oncology to a elective plastic surgery; as a source of remittances and financial giving by Lebanese who work as doctors abroad and support their preferred causes with generous amounts; and a source of revenue for companies that provide healthcare-related services from Lebanon across the Middle East.
All these economic potentials deserve to be fostered by a sound national strategy that begins with proper laws, regulation and oversight of the sector. It should provide efficient and equitable access to healthcare to all residents, and proceeds to extend support for the quality and regional growth of the Lebanese healthcare industry.
The potential of the Lebanese healthcare industry to generate revenues needs to be understood and quantified. The industry is seen today as a drag on GDP thanks to ballooning medical costs, but an alternative perspective can be realized through research and reform.
Executive’s special features on plastic surgery, radiology and stem cell banking show that physicians in each of these disciplines have taken the individual initiative to export Lebanon’s health services to the region.
Meanwhile, incentives for investment in the industry have only recently been extended by the Investment Development Authority of Lebanon, Lebanon’s national investment promotion agency, through investment assistance for pharmaceutical manufacturers and medical centers. Results of and potential for this investment support are still too early to gauge thoroughly, as the trade balance of pharmaceuticals in the past few years was ambiguous.
One difficulty in assessing the role of the healthcare industry is that the expenditure on GDP in a country’s balance sheet is perceived less as an economic activity than it is a social expense.
This perspective may be worthy of realignment in the context of the increasing globalization of healthcare, whereby medical capacity building, accumulation of specializations and preventive care and wellness environments can be seen as assets for an economy.
In the liabilities column of the healthcare balance sheet, challenges will continue to mount as a result of the increase in lifestyle diseases and of medical needs that go hand in hand with an aging Lebanese population. But both these health risks entail expanding economic opportunities in healthcare and thus need to be managed. Here is where the public sector’s limitations on devising a long-term health and healthcare industry strategy can be decisive.
The most disconcerting insight from our examination of health care provision in Lebanon is that so much is known about what is wrong and so much is agreed about what needs to happen to fix it, yet so little is done.
Economics and Policy
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Companies and Business
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Hassan Rouhani’s entry into June’s Iranian presidential race adds a new ingredient. In a crowded field of ‘principle-ists’, Rouhani offers a hardheaded option for voters seeking less populist economic management and a more nuanced handling of talks with world powers over the nuclear program.
Best described as a pragmatic conservative, Rouhani is a man “of the system”, a 64-year-old cleric who has since 1989 sat on the Supreme National Security Council (SNSC) as an appointee of the rahbar (leader), Ayatollah Ali Khamenei. Rouhani’s record as the lead negotiator in nuclear talks with the European Union in 2003-2005 — when the reformist Shargh newspaper dubbed him the “diplomatic sheikh” — suggests his victory would increase the chance of a diplomatic breakthrough to ease Iran back from punitive sanctions and the United States and Israel back from attack.
His experience is rooted in the Islamic Revolution and Republic, but Rouhani has also looked outwards in a way that can unnerve ideologues. Born near Semnan, north of the central desert, he began jurisprudence studies at age 12, rising to the rank of hojjat al-Islam, one below ayatollah. After a degree at Tehran University, he began a Ph.D. in law in Glasgow in the 1970s but left to join Ayatollah Ruhollah Khomeini in Paris as the 1979 Revolution loomed.
Rouhani was at one point in the 1980-1988 Iraq conflict deputy to the war commander — and later president — Akbar Hashemi Rafsanjani. He remains close to Rafsanjani, and shares the wily 79-year-old conservative’s belief that dialogue with the United States can serve Iran’s interests. Two of Rafsanjani’s children, Yasir and Fatemeh, attended last month’s press conference when Rouhani announced his candidacy.
There is a hint of déjà vu to his candidacy. In the run-up to the 2005 election, ultimately won by Mahmoud Ahmadinejad, Rouhani was seen as a frontrunner, a man who could not only manage nuclear talks with Europe but also deliver cautious domestic reform.
But the lack of progress with the Europeans led to domestic criticism of the negotiators. When Iran suspended uranium enrichment as a “goodwill” gesture, the Europeans demanded the suspension be extended and offered in return only mild assurances of economic and diplomatic benefits. This impasse undermined Rouhani, who decided not to stand in the 2005 poll, and led to his removal as lead nuclear negotiator when Ahmadinejad won.
Eight years later, Rouhani still serves on the SNSC and is an elected member of the Assembly of Experts, the clerical body that monitors the Supreme Leader and when necessary chooses a successor. But this has hardly put him in the public eye, and if he is to fare well in the election, Rouhani will need to make the economy and the international situation the prominent themes of his campaign.
Firstly, he will need to project himself as a competent manager with a technocratic approach to an economy lacking productive investment. This means exposing Ahmadinejad’s populist and inflationary policies — including his cash handouts to most Iranians. As Rouhani put it: “We need a new management…through unity, consensus and attracting honest and efficient people.”
With sanctions halving Iran’s oil exports in the last year, prospects for growth are bound up with the nuclear program, which means relations with the US will be some kind of election issue. Rouhani can turn this to his advantage. In a recent interview, he said nuclear strategy was the responsibility of Ayatollah Khamenei, but that government could “greatly influence the tactics and the method of execution.” Clearly Rouhani believes that with “strategy” not an election issue, he can portray himself as a trustworthy executive. This may work. Rouhani is respected as a tough operator both in Iran and by European diplomats who dealt with him in 2003-2005.
How will such realism play with voters? Three of the past four presidential elections — the exception being Mohammad Khatami’s second victory in 2001 — have thrown up surprises. This is due in part to a volatile public mood and Iran’s lack of political parties.
The field of around 12 ‘principle-ist’ candidates will thin out as frontrunners emerge. Ahmadinejad’s ally Efsandiar Rahim Mashaei may be the man to beat, if the Guardian Council allows him to run.
Rouhani’s advantage over his opponents, however, is his potential to woo reformists who might otherwise ignore the election. With election season heating up and a new era of Iranian politics set to begin, Rouhani’s addition to the ballot should offer Iranians a clear break from Ahmadinejad’s two terms in office.
Gareth Smyth has reported from around the Middle East for nearly two decades and is the former Financial Times correspondent in Tehran
The Lebanese might be excused for laughing at the suggestion that their country is set to become a regional telecommunications hub. But while farcical Internet speeds, unreliable service and inflated prices justify such cynicism, the man at the helm of the sector, Minister of Telecommunications Nicolas Sehnaoui, insists that this is indeed the path on which Lebanon is set.
In an effort to improve the country’s state of connectivity, the Ministry of Telecommunications (MoT) and the Cyprus Telecommunications Authority (Cyta) entered into an agreement in early March to share capacity on Cyta’s Alexandros submarine cable, of which Lebanon will use 24 percent. Designs are also under way to construct a new submarine cable, dubbed “Europa,” that will link Cyprus to Lebanon.
Lebanon today relies primarily on two international cables for its Internet connection: IMEWE (India-Middle East-Western Europe) and Cadmos. Beginning construction on the new Europa cable is critical, as it is meant to replace the Cadmos line, which is scheduled to ‘die’ in five years. According to a June 2012 MoT market report, Lebanon’s contribution to the construction of the cable will be less than $10 million, excluding the cost of the equipment.
“I am very proud to say that this step is a historical step for Lebanon [and] Cyprus,” said Sehnaoui in a press conference in Sassine Square to announce the deal. “It gives us the redundancy we badly need because no regional hub can claim it is a regional hub if it doesn’t have redundancy.”
Related article: 'Lebanon has almost no cyber security'
The need for redundancy was stressed last summer when Lebanon’s connection to IMEWE was damaged. A country-wide Internet blackout lasted for several days, and the MoT estimated $11 million per day in economic losses.
The Alexandros cable can potentially provide up to 700 gigabytes per second (gbps) of additional Internet throughput to Lebanon. This may rise with future technological advancements. This augments the 200 gbps of capacity currently available on IMEWE and 79 gbps on Cadmos. Lebanon’s actual in-service capacity, however, is closer to around 30 gbps today – a significant increase from 3 gbps in mid-2011. This figure represents the rented capacity on the submarine cables as well as the local fiber-optic transmission capacity in place to handle the bandwidth to-and-from the international Internet gateways.
“Eventually, we want to be able to sell capacity. We have now a cable that connects Lebanon to Syria,” said Ministry Adviser Firas Abi-Nassif. “We can sell on any cable such as IMEWE or Beritar [an Internet cable connecting to Syria].”
Abi-Nassif remained vague on how much bandwidth will be distributed domestically versus sold regionally, but he maintained that the first priority is to distribute the additional throughput to Lebanese consumers. He noted that the current political situation in Syria might dampen plans to distribute excess capacity.
Unused bandwidth is necessary for future upgrades and unforeseen connection problems, making it integral for development in the sector. However, while more international bandwidth should translate into faster speeds and lower costs, the ministry still needs to overcome several obstacles if they are to capitalize on all of the additional capacity that they have purchased.
Beset by in-fighting
“Delays have hit the utilization of increased international broadband bandwidth, with the finger of blame pointed both at the government and Ogero,” said Tom Shepherd, research analyst at TeleGeography. “Political squabbles continue to beset the [telecommunications] sector.”
Ogero is the cornerstone of Lebanon’s telecoms sector, responsible for connecting the telecoms network internationally as well as internally. Although in theory Ogero is government-owned and operates under the supervision of the MoT, it has often acted against MoT policies, leading to confusion in the industry and delayed Internet access for users.
When the IMEWE cable was first opened in December 2010, Ogero and the MoT clashed publicly, with more than eight months passing before the international bandwidth was distributed to consumers in July 2011. The conflicting political affiliations and agendas of the MoT and Ogero are likely to remain a deadweight on the industry’s advancement in the foreseeable future.
Ogero has also been accused of not distributing bandwidth packages to Internet service providers (ISPs), akin to choking competition in the supply of Internet. These packages, known as E1s, are what allow ISPs to deliver Internet to consumers. By restricting their supply, Ogero is inhibiting private ISPs from competing with the state.
Ministry Adviser Abi-Nassif confirmed that ISPs claim to have not received their mandated E1 allocations from Ogero and maintained that “there should be absolutely no reason why, for other than technical reasons, there should be problems giving [out] bandwidth.”
Falling at the final hurdle
Another hurdle facing the MoT is modernizing the ‘last mile’ connection of the delivery network, where speeds bottleneck in Lebanon. If infrastructure between ISPs and consumers remains outdated, end-users will not enjoy higher Internet speeds despite the additional bandwidth from abroad. ISPs are not legally allowed to install these ‘last mile’ connections; they must rely on Ogero and the MoT, instead.
“Before IMEWE, there was no reason to do a proper network so there was almost no fiber optic network,” said Denys Fedoryshchenko, information technology consultant at Virtual ISP, a local service provider.
The ministry’s plans include rolling out a fiber-to-home project in select areas as well as upgrading current connections that use older technology such as DSL. The ministry aims to have 100 percent ‘last mile’ coverage from these two initiatives. Ogero, however, recently announced that they had not received funding from the MoT for their projects over the past two years. Abi-Nassif acknowledged this and said that whatever funding Ogero needed for the ‘last mile’ connection, “the ministry is happy to provide it.” He declined to comment on where funding for the fiber-to-home project would come from.
Minister Sehnaoui also announced in December his plan for “delayering” or restructuring the industry, aiming to decrease the government’s presence and allow privatization in certain areas. Most of the press on the new plan has focused on what this means for mobile, but the MoT confirmed to Executive that the delayering plan applies to the whole industry. The plan has come under considerable scrutiny as it does little to encourage meaningful private sector involvement and is likely to only superficially increase competition or incentivize infrastructure investment.
In a global ranking of Internet download speeds, Lebanon ranks number 153 out of 184 according to NetIndex.com, fairing worse than Afghanistan and Zimbabwe.
Although the ministry has made some commendable headway, such as through the Alexandros cable deal, major political and technical obstacles remain. There is still a long way to go before we are even close to the minister’s stated goal of Lebanon becoming a regional telecommunications hub.
To discuss the state of telecommunications in Lebanon, Executive sat down with Telecommunications Regulatory Authority (TRA) Chairman and Chief Executive Imad Hoballah. He also serves as president of the Pan Arab Observatory for Cyber Security and Safety.
A few years ago, the TRA was mandated to collect quality of service data. What is happening now?
We have it [new equipment, applications and technology to monitor services]. It has been about a month since the TRA became fully equipped and we are going through quality of service measurements throughout the country and in about three to four weeks, maximum, we will have a new quality of service report that should help with further improvements.
Will the quality of service data be published on the website or available to the Ministry of Telecommunications?
We hope that we will have good output to make available to the public. We are working towards it.
In terms of protecting against cyber attacks, what is the role of the TRA, what is the role of the ministry and what is the role of Internet service providers?
Cyber security for Lebanon is a big failure.
Related article: Lebanon as a telecommunications hub?
And who do you think is responsible for cyber security?
We are keeping our cyberspace, telecom networks, information and communications technology networks completely open to all kinds of terrorism attacks, pedophilia, all kinds of safety issues related to children. Our cyberspace is open and if anybody minces words about the state of our cyberspace, they are committing a crime as far as Lebanon is concerned. This is the biggest problem that we have.
So do you believe it is the responsibility of the government?
No, our belief is that there needs to be a body between the private sector and the government with civil society, a multi-stakeholder environment that works on cyber security. The government cannot give up responsibility for cyber security and as such it needs to pull these people together eventually. This is a national and social security issue above all. This is a security issue.
And you believe it is the government’s role to protect citizens against cyber attacks as a security issue?
It is everybody’s responsibility and the government has a big role to play in that.
How can the Lebanon telecoms sector make itself more attractive to foreign direct investment (FDI)?
The policy cannot change with every minister that comes. It is not something that changes every six months. The people need to have consistency — predictable and consistent regulatory framework with a consistent policy. It should work. But Lebanon in general has not provided that to our investors, [nor] to our potential investors.
Isn’t that, in theory, why the TRA was created?
Yes.
What is different today than when the TRA was first created that would make it more easy to attract FDI to Lebanese telecoms?
A new board needs to be given the authority, at least as it was mandated in Law 431. We are working and pushing for that with the minister.
What has been your proudest moment since you became the chairman of the TRA?
After the decision of the Shura Council [in 2011] to basically cut our feet from under us as a TRA, holding the TRA together has been the biggest accomplishment. The second biggest accomplishment has been related to cyber security and what we were able to accomplish related to the condemnation of Israel for its action against the Lebanese telecommunications network. Lastly, working with the Ministry of Telecommunications on the expansion of networks and services and the inclusion of the private sector in providing the services.
When you look to the future, how can the TRA continue to try to regulate after the decision of the Shura Council to suspend the TRA’s powers?
Whenever the government and the country are ready for independent bodies, the TRA should be an independent body financially and administratively and it should not be part of any other organization.
Do you think the country is ready for that?
It hasn’t acted as if it is ready so far.
Economics and Policy
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Where else can I renew my Lebanese passport, pay my cellphone bills, pay that parking ticket from the time I was late to a meeting, and send my brother in London the pair of shoes he left at home? LibanPost, Lebanon’s postal service operator, does more than just drop letters in mailboxes.
With 82 post offices throughout the country — with plans to reach 100 by the end of the year — and 950 employees, LibanPost has been diversifying its services since 2002.
That year, after attempting to run the postal service company for four years following its privatization in 1998, the Canadian postal operators and several Canadian investors threw in the towel. Due to the Lebanese Civil War, Lebanon had been without postal services for 20 years, leaving a whole generation accustomed to living without them, so a change of culture was critical to revive the use of postal services. The Lebanese government had promised the Canadian operators that they would provide them with all the support they needed, from delivering municipality bills to telephone and electricity bills. It was a series of promises that it failed to deliver on.
“We were promised more or less the same support as the Canadians, but, being Lebanese, our expectations were lower,” says Khalil Daoud, LibanPost’s chief executive since 2002, the year it was taken over by a consortium of Lebanese investors including the Mikati family, Bank Audi and affiliates of Bank Audi. In 2011, Bank Audi and its affiliates left their place to the Saradar group which now shares the ownership of the postal operator with the Mikatis’ M1 Capital.
From the onset of Daoud’s helm at LibanPost, he initiated a more commercial-oriented direction for the postal operator, realizing that the company would not be financially viable if it relied on the government as a client or failed to diversify its services.
Khalil Daoud has been chief executive of LibanPost since 2002
From government-related services such as renewing passports and facilitating papers of foreign workers, to vehicle services such as checking the amount due on a car’s annual motor inspection, to financial services such as paying phone bills, depositing money at certain banks and settling parking fines, LibanPost is continuously adding services. Today, 55 percent of their revenues come from non-postal related services. As for the government, it contributes to just 5 percent of revenues.
While Daoud refused to disclose the total revenues of the company, he revealed that the country’s postal operator has been averaging 13 to 14 percent annual growth in revenues since 2002 and started generating profits in 2006. With a lot of debt that piled up during its earlier years, LibanPost still has cumulative losses, but Daoud says “they are declining as we grow and we hope to be [phasing] those out and making a few bucks,” before their contract with the government expires in 2016. “We still have a few years,” he says.
As for the impact of the ongoing turmoil in neighboring Syria on the company’s performance, distribution and delivery of mail between the two countries was only stopped in March of this year. The suspension was without precedent. Even during the 2006 war with Israel, services, which were suspended for just 48 hours, transited through Syria for international mail, and domestic mail was still being dispatched. The Universal Postal Union, a United Nations agency, sets postal rules and instructions for its member nations and, according to Daoud, “It asked us to stop sending mail to Syria until a practical solution is identified. Things are getting more difficult now.”
Getting the right directions
Another difficulty that the company faces is homegrown and simple: addresses. “Close to the hospital”, “after the school”, “the building of the supermarket”, “take a left after the petrol station”, and other inexact directions are often used to locate an address in Lebanon. To complete their deliveries, LibanPost places its postmen to service the neighborhoods they are from. “Is it scientific? No. Is it reliable? To a certain extent. Is it legal? No … It could be a divorce case or a lawsuit and we can’t play with people’s lives like that,” Daoud says.
Having worked with public committees for over 10 years trying to establish an address system in Lebanon, Daoud finally gave up. “The problem is that within the municipality council, they fight to name the street after their late father or late uncle. In New York, streets are given numbers. What is wrong in giving numbers to our streets?” says Daoud.
But Daoud points to another solution. Google, using its global positioning system, can translate an exact location into a 36 to 38-sequenced number. Working with a Canadian company, LibanPost is developing an algorithm that transforms this sequence number into a more manageable 8 to 10 character code and plans to offer the application for free to the public by the end of the year. “At a later stage, we will see if the government wants to adopt it,” says Daoud.
With the Saradar group on board and following their acquisition of a majority stake in the Swiss-owned Near East Commercial Bank at the beginning of the year, is LibanPost going to start offering banking products similar to its French counterpart, La Banque Postale? “Why not?” says Daoud as he explains that most of the growth in the future is likely to come from basic banking products catered to low- to mid-income citizens. “If a taxi driver needs $1,000 for his engine, there is no possibility for this support,” he says and this is an opportunity that the postal operator eventually strives to tap into.
LibanPost has come a long way since its reestablishment in 1998, and it has big plans ahead. Its diversified and efficient services are realizing many benefits for citizens. It serves as an example to the government of how putting public companies in the right hands within the private sector could reduce debts, increase efficiency and, most importantly, help facilitate some of its citizens’ cumbersome chores.