Brand Voice

Free Zones in Lebanon… More than a need… A necessity

by Firas El Husseini
written by Firas El Husseini

Most countries in the world seek to attract investments as a dynamic driver of their economies. The establishment of free zones is one of the factors that countries, especially developing countries, resort to in order to attract and encourage foreign and national investments, due to the facilities and privileges offered by these areas such as tax and customs incentives and relatively cheap labor that enables investing companies to increase competitiveness and thus achieving a higher ROI (return on investment). The increase in the number of free zones in various countries of the world is one of the phenomena that caught the attention of researchers and specialized economic scholars to look for the motives and effects of these areas and the possibility of economic progress for the country that established them.

In the case of Lebanon, with the deteriorating economic situation that the country has never witnessed before in its history, the need is crucial for elements enabling the economy to restructure itself from within, instead of banking on the international community and entities to come up with a plan of action for the Lebanese to implement; with an appropriate vision and the decision taken, the country can regain its previous status as the Switzerland of the East.

A flashback on Free Zones

Since the time when the concept of free zones emerged, it was intended to attract part of the volume of international trade. Historically, the idea of ​​free zones dates back to about two thousand years ago, since the era of the Roman Empire. It was the first region in the Aegean Sea, where the free Delos were known islands that applied the idea of ​​re-shipment, storage and re-export of goods crossing the borders of the empire.

The countries located in the Mediterranean basin depended on commercial activity using the system of free zones in the Middle Ages, and with the emergence of colonies, European countries established small areas for them in cities with ports to facilitate the movement of trade between Europe and its colonies. Examples of the free zones that were established in that period are the Gibraltar region 1704, Singapore 1819 and Hong Kong 1842. These regions practiced re-export activities, providing shipping and establishing special warehouses for that. With the second half of the 19th century and the beginning of the 20th century, the idea of ​​free ports began to grow rapidly in Europe, and after the Second World War, when international trade began to grow again at a rapid pace in important strategic locations on the international trade lines, and the predominant use of free zones at this time was in the form of storage and re-export centers.

One of the successful examples of free zones during this period is the Colon region in Panama and in the late fifties and early sixties a new form of commercial free zones began to emerge that does not depend on commercial activity only, but depends on export industries, that is, it is part of the attraction planning for the international investment flows to industrial investment in the host country.

“Free Zones are responsible for exports worth at least 3,500 billion a year, equivalent to around 20 percent of global trade in goods”

The Shannon free zone in 1959 began to change the prevailing pattern of commercial free zones in the world from commercial activity to industrial activity, as it focused on establishing industrial projects that could absorb large numbers of workers and focused on the country’s exports to the outside world. During the sixties and the beginning of the seventies, several countries began to endorse the idea of ​​establishing industrial export zones in order to create an advanced export sector in those areas. Examples of the free zones that the Philippines and Bataan established in this period are: Bataan Malaysia, as well as Bayan Lepas and Japan Masan. Some countries have established free zones to serve both goals at the same time, to be free commercial and industrial zones, like the Egyptian free zones. Free zones have developed over time and the nature of their work has evolved. Export free zones for “exports” represent at the present time the prevailing pattern of free zones. According to the Kiel institute for the world economy, there are more than 5,000 Special Economic Zones worldwide, and the trend is rising, while the OECD (The Organisation for Economic Co-operation and Development) states that the so-called Free Zones are responsible for exports worth at least 3,500 billion a year, equivalent to around 20 percent of global trade in goods. 

The concept of Free Zones by definition

Considering the various legislations regulating the work in free zones around the world, we find that they did not set a specific definition of a free zone, but rather set a specification for its boundaries or for the customs’ procedures and regulations under which the system works within such areas, and some have designated the fields of activity that can be practiced within its boundaries. As the definitions varied according to the different “political, social and economic” goals in each country, those zones have developed along with the development of the nature of activities therein. They are a form of national and foreign investment; and from the customs’ viewpoint, they are considered an extension of the outside, but they are subject to national sovereignty from the political point of view.

Some define the free zone in a simplified definition as “the part of the state’s territory in which commercial, industrial and current operations are allowed in between countries free from customs, import and export restrictions and cash, hence the name free zone”, and it is “the closed space under guard where goods are stored, whether they are that space in a sea or airport, inland or on the coast, where goods of foreign origin are received with the intention of re-export, display, or the introduction of some additional operations therein.

“Direct job positions were estimated at 26,000 jobs in Jbeil”

The concept of Free Zones by objectives 

By establishing free zones in their territories, the host countries aim to achieve one or more of the following objectives:

1- Establishing industrial productive projects whose main objective is export.

2- Increasing the country’s foreign exchange earnings.

3- Establishing productive projects that meet the needs of local consumption instead of imports for both consumer and producer of goods.

4- Attracting foreign capital, which brings with it modern technologies in production and management.

5- Contribute to the revitalization of the internal and external trade movement.

6- Reducing the problem of population pressure in some large cities.

7- Reconstruction and development of some regions or increasing the urban growth of some relatively backward regions in order to find a kind of social and economic balance between them.

8- Finding and creating new employment opportunities, raising the level of technical and administrative skills, including modern technical knowledge and advanced technology developed by the free zone projects, and reducing the problem of unemployment.

9 – Attracting backward integration projects and creating forward linkages with the two sectors of the local economy, industrial and commercial.

10- Increasing the national income and redistributing it, increasing the net capital formation and bridging the gap between saving and investment.

11- Finding a productive industry that is a model for the local industry that is trying to join the foreign market.

12- Creating new knowledge that is fused with the skill of national institutions, i.e. management methods, financial techniques and marketing, all of this in order to improve the economic entity… 

In general, governments aim to establish free zones for economic development, and achieving these goals depends on the ability of the regions to bring some institutions onboard, on the quality of the polarized institutions and the nature of the activities they practice, and this in turn depends on the guarantees, facilities and incentives offered by those zones.

Factors controlling the success of Free Zones

The success of the free zones in attracting and encouraging foreign investments and achieving the desired goals and positive results on the economies of developing countries is associated to several basic factors, the most important of which are:

1- Carrying out preliminary studies before establishing free zones, including:

a.  Detecting potential opportunities to establish free zones in several districts;

b. Inspecting economic resources.

c. Studying global markets to find out the most important investment opportunities that can be promoted.

2- Choosing the locations of the free zones and planning them well in terms of:

a. Communication services.

b. Roads and mode of transportation.

c. Securing infrastructure.

d. The environmental and topographical suitability of the site with the type of activities intended.

e. Determining the appropriate size of the free zone, taking into account future expansions.

3- Political and economic stability and appropriate investment climate:

The most prominent obstacles to attracting investments in any country are the existence of disputes, internal disturbances, labor strikes, continuous change of governments, wars, and permanent change of economic policies related to investment activity, as all of this leads to negative effects on the general economic activity and the failure to attract foreign investments and capital escape.

4- Availability of labor at low cost.

5- Linking the objectives of the licensed projects to the general objectives of the government.

6- The administrative efficiency of the management of free zones: creating the conditions for the establishment of projects, simplifying the procedures, providing the necessary services, and facilitating the trade of projects with various authorities.

7- Benefits and incentives granted: 

a. Material incentives

b. Material incentives, including customs incentives

c. Tax exemption incentives

d. Other incentives, such as the none-restrictions on dealing in foreign exchange or money transfers and profits.

Byblos and the Beqaa Valley: Two locations… Two Hubbs

Establishing two free zones, one in Byblos (Jbeil) and another in the Beqaa Valley is one of the key measures if one can foresee the opportunities in these two locations. 

Mostly, the expected positive effects if such a project takes place can be summarized in the following points:

1- Employment: direct job opportunities can be created through companies and institutions investing within the region and indirectly, due to the backend links with the national economy. Direct job positions were estimated at 26,000 jobs in Jbeil (20% of 130K inhabitants).

2- Increasing the inflow of foreign currencies, the source of which is the wages paid to workers.

3- The rent value of buildings, land, electricity, gas and communications.

4- Importing raw materials, equipment and all projects’ needs from the local markets, pre-determined at a certain rate (most of the countries adopt the 20% rate).

5- Integrating the production of national institutions with the production of local institutions.

6- The development and sustainability of services.

7- Contributing to the improvement and development of training in vocational training centers and scientific centers.

8- Developing the areas surrounding the free zones and improving the yield of local energies.

To conclude, despite the darkness seen in the current situation in Lebanon, a lot can be done to alleviate this dark cloud from above the country, with a little vision and a lot of willingness. It is true that this project is seen to be implemented in the Byblos and Beqaa regions due to the adequacy of these locations, and it can contribute to achieving the goals of social and economic development provided that these areas should be included in the priorities of the economic recovery program, and a lot of opportunities can be found on the other sides of the country; another opportunity with another vision.

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Brand VoiceQ&A

Perseverance: The Key to OLX’s Success

by Maria Nehme
written by Maria Nehme

OLX started in Lebanon in 2015 and witnessed tremendous adoption from the Lebanese population at a very quick pace. “During the early days when we first launched, OLX Lebanon was always mentioned within our group as the Star Country because the Lebanese population showed a real hunger for innovation and an adaptability to new methods of transacting more than any other country in the region”, shares Maria Nehme, OLX Lebanon’s recently appointed Country Manager when discussing with us the company’s vision for Lebanon. Because of this, the Group decided to open the office in Lebanon in 2017, in Beirut Digital District.

Since then, OLX has gone through so much, as have most of companies in the country like the flourishing of the real estate market, the growth of the cars’ market, the 2019 revolution, the COVID pandemic, the 4th of August explosion and Lebanon’s most acute economic crisis in its history. With these ups and downs, OLX Lebanon has not stopped fighting, not even for a day. “During the pandemic days, we really pushed to keep operating normally. As a team, we used to meet on a daily basis through videoconferencing in the morning for the “Daily Morning Coffee”. This helped us in keeping everyone’s spirits up and the momentum going. Some days, because of the revolution or the lockdown, our commercial team could not circulate to meet their clients; that did not stop them. They started working on long term projects to strengthen the company’s core and develop new services”, Maria tells us. 

During the pandemic and crisis, we learned that the company witnessed a very paradoxical effect: on one hand, there was a full lockdown and a lot of businesses were freezing their activities. On the other hand, the traffic on the OLX website and app almost doubled across categories, especially on the Goods categories including Mobiles, Electronics, Furniture and Fashion.

Maria continues: With consumers locked in their home for several months, we noticed a need to facilitate remote transactions. From these pain points came the idea of our new baby: OLX Store, OLX’s end-to-end E-commerce platform allowing you to order any item from the comfort of your home. 

The group noticed a lot of shifting and reinventing across industries and they couldn’t be watching the train. This is where they took control of the train across their verticals and drew the road for OLX in Lebanon. In Real Estate, they introduced Virtual Reality where they were the first platform offering users the ability to visit houses through 3D tours and from the comfort of their homes.

In Autos, they were betting on “convenience” by revolutionizing the car selling experience. Maria elaborates: “Our users now have a choice to make: they can either list their car on OLX Autos and negotiate directly with buyers or they can benefit from our free Car Selling Experts service; this service allows them to schedule an inspection for their car at home and receive an offer within 48 hours. The service also includes facilitating the entire process through the property transfer.”

In the Goods category, OLX is building an ecosystem that will create value across the economy. “First, we believe it should all start with nurturing the private sector and the businesses. At OLX, we want to be next to all businesses including start-ups, SMEs, medium and large-scale enterprises. We help businesses in creating their brands, advertising them, advocating for them and multiplying their sales. Our business services include advertising packages, sales consultancy, value-added services and so much more. At the end of the day, all we care about is creating value”, Maria explained. 

In parallel to businesses, Maria further expanded on how they want to facilitate transactions for individuals through a Circular Economy. In our vision of the future, individuals will be purchasing new items from OLX Store, once purchased and received, as a buyer and as a consumer, they will use the item and extract the most value out of it. However, when the time comes, and when they don’t need this item anymore, instead of disposing of it, they can recycle it. This is where our OLX Classifieds app would come into play: at this stage, OLX will be next to the user turning them into sellers to make sure someone else in the ecosystem can benefit from the same item that is now obsolete for one but, precious for another; “New is in the eye of the beholder”.

And with this the entire ecosystem is geared toward value creation, not to mention how meaningful this is for our environment. 

We asked Maria, “What is OLX’s Vision for Lebanon?”

“Despite all of what is happening in Lebanon,” Maria says, “we have a deep and honest belief in the country’s potential and capabilities. Our team of 70 highly educated and driven individuals is a sample of these capabilities and a real pride for us. This is why we are still investing resources in the country; we see ourselves continuing to grow across all of the industries with 3 obsessions in mind: Multiplying transactions across industries and regions, improving customers’ daily lives through technology and convenience and constantly finding new opportunities and new markets.”

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AnalysisEconomyFinanceSpecial Report

Reforms and the fate of deposits

by Mounir Rached
written by Mounir Rached

A key driver of the Lebanese economic crisis has been the losses incurred by the public sector. These losses have impaired the banking sector and through it the deposits of many citizens. Banks had committed the bulk of client deposits in the central bank, Banque du Liban (BDL), which in turn had used them to finance the expenses of the government and public institutions.[inlinetweet prefix=”” tweeter=”” suffix=””] In relying on Lebanese citizens’ deposits to cover public deficits, Lebanese authorities have abused trust and failed to ensure the effective and transparent management of the economy.[/inlinetweet] Prior to the meltdown, the government had tried to placate citizens with the help of subsidies. Since 2019, citizens have borne the brunt of the crisis, reflected in rising unemployment rates, increased poverty, inflation, and degradation of deposits. With the beginning of the crisis, the politically divisive debates raged over the right strategy to address the progressing degradation of deposits. Both the subsidy policies and attempts to stop the degradation by measures forced upon the banking sector have failed in fulfilling the hopes of citizens and wishes of the government. After two years of financial disarray, priority should be given to compensating for US dollar deposits that banks have placed in BDL, as these make up more than 60 percent of total deposits and are not backed up by any guarantees.

For citizens, freeing their deposits is the top concern. The current government statement of policy in September 2021 has responded to this issue by emphasizing that the reform plan for the banking sector will be “prioritizing the safeguarding of depositor rights and funds.” The public sector is responsible for depleting the citizens’ funds and must shoulder the consequences. The private sector has endured enough. A haircut on deposits or a distribution of losses between the private and the public sectors might be the simplest, but also the worst solution. It could be challenged constitutionally and judicially. Moreover, a haircut has already been applied on depositor withdrawals. It has cost citizens an estimated $5 billion in losses. In total, measures taken by the government and BDL since the beginning of the crisis have accelerated, rather than resolved, the economic and financial freefall. The government has not even shown interest in addressing the matter. Therefore, how can the State really commit to restoring citizens’ savings and rebuilding trust?

First: Reforms

The first step to restoring trust is adopting monetary, financial, and structural reforms; namely the immediate unpegging and standardization of the exchange rate for all transactions, given the serious damage that multiple exchange rates can have on the economy.

It has been argued that unpegging of the exchange rate from the previous low rate of 1,500 Lebanese pounds on the dollar would further increase inflation. By that reasoning, [inlinetweet prefix=”” tweeter=”” suffix=””]if one believes that the added liquidity would be detrimental to the economy, one must first recognize that the damage from multiple exchange rates and the freezing of deposits has been and will be far more disastrous than the damage of adding liquidity.[/inlinetweet] Unpegging the exchange rate and operating deposit withdrawals at the unpegged rate may alone provide an important solution to the deposit access dilemma. 

Under this solution, depositors would be content with cashing their US dollar deposits in Lebanese pounds at the market rate. As such, they would cease making cash transactions that have flooded the economy with liquidity and accelerated the collapse of the Lebanese pound. Unpegging the exchange rate is inevitable. It is better to adopt it immediately rather than pay the far higher cost of delaying it. 

Second: A self-bailout by BDL

As a second step, or simultaneously, the matter of deposits in US dollars in BDL must be addressed. These deposits, without backing of guarantees, amount to around $65 billion, out of a total of $106 billion of deposits as at end June 2021. The remaining 39 percent of deposits are invested in the private sector and bonds, and are backed by guarantees.

The $106 billion deposits were deployed by banks as follows:

  * Deposits in BDL amounting to around $65 billion (an estimate, since BDL does not disclose this figure). 

 * Investments in Eurobonds payable by the Lebanese State ($8 billion).

 * Lebanese pound and US dollar denominated loans to the resident and non-resident private sector in US dollars ($23 billion).

 * Other bank assets in foreign currencies, including holdings of equity (shares) in branches abroad ($10 billion). These shares are considered foreign assets. 

To compensate depositors for their deposits that have been invested by banks in BDL, the public sector’s real and monetary assets must be used. Deposits at BDL have been drained, are supposedly unavailable, marked as losses (in the electricity sector and other dossiers), and are not guaranteed. The public sector as a whole carries the blame of squandering these funds. This devastating practice has been facilitated by the indifference or inability of oversight bodies, namely the legislative and executive authorities, to ensure effective monitoring of banking sector performance, despite decades-long warnings by experts and international financial institutions about risks of exceeding the solvency. 

The simplest and most effective method by which the public sector can take responsibility for restitution of squandered funds is first to restore depositors’ funds by using the remaining BDL cash assets in foreign currencies, similarly to when the private sector defaults on obligations. It is still possible to restore $14 billion in cash to banks from the remaining mandatory reserves.

Moreover, the government may reconsider liquidating part of the gold reserves and depositing the amount in banks in order to compensate depositors for the funds. [inlinetweet prefix=”” tweeter=”” suffix=””]Believing that gold is a bond of trust is indeed wrong. It gives false trust in economic performance. It is widely known that gold is considered worldwide as part of monetary reserves and is used as such. [/inlinetweet]

Once the exchange rate is unpegged and BDL ceases to supply foreign currency to the market, management becomes more effective and will focus by default on the management of liquidity in the national currency.

Secondly, state-owned real assets should be used through privatization to compensate depositors for the remaining $51 billion. The total value of state institutions subject to privatization as a first stage (telecommunication-OGERO, aviation-Middle East Airlines, electricity, port operation contracts, real estate companies, airport and marine blocs – gas, oil, etc.) is estimated at no less than $50 billion, based on projected profit under private administration. 

Filling the $51 billion gap

Establish individual joint stock companies for each basic public sector institution, place them under private management as soon as possible, and issue shares denominated in US dollars, similarly to other companies listed on the Beirut Stock Exchange (such as Solidere and others). This requires seeking out local and international expertise to form a commission in charge of achieving this goal and issuing new securities. These shares would be gradually offered through the Beirut Stock Exchange and be made available to those interested, including resident and non-resident depositors. A sizeable portion of these shares would be bought by depositors through their bank accounts. As a result, deposits would be replaced with real assets, thereby reducing bank balance sheets by the corresponding amount. A reminder, the 2003 government reform plan for the electricity sector was based on the privatization of the power company, Electricité du Liban (EDL).

Furthermore, shares in the privatized companies purchased through new accounts and international transfers would provide revenue in US dollars, which then would feed into the remaining bank deposits in US dollars. For depositors who do not wish to buy the new shares in the privatized companies, their deposits will remain in banks and these depositors will now have cash assets in foreign currency, proportionately to the level of subscription to these new shares by resident and non-resident investors.

In other words, the State would not be squandering public resources, but rather transferring ownership of public assets to citizens, while maintaining fair distribution by limiting individual ownership. Therefore, remaining non-liquid deposits will be exchanged for real shares from privatized state assets such as Middle East Airlines. 

The resolution of state-owned assets would result in restoring the real monetary value of deposits that were dissipated in BDL. Deposits would either be in foreign currency, or consist of a mix of shares and deposits with long maturity dates of foreign currency and real assets. Part of the population who do not own bank deposits, would benefit from reforms, better management of the economy, and restoration of economic growth and job opportunities.

Those who oppose privatization, such as foreign consulting firms, aim at having Lebanon continue depending on foreign financing and depleting deposits, despite great risks.

Privatization and compensation for deposits are the optimal solution. Anti-privatization rationale argues that the public sector belongs to everyone, not only to depositors. This logic can be challenged by the very fact that the public sector’s administration has made everyone go bankrupt, the rich, the poor, people who own deposits and people who do not. The alternative to privatization is to let the State continue with poor management of public sector institutions or rob citizens’ deposits. 

Moreover, privatization would enhance economic performance and improve the standard of living of Lebanese people of all classes. Thinking that selling state-owned institutions in the current situation would be selling them cheap is a flawed analysis because real assets are valued based on projected potential performance. 

Accounts in banks and in BDL would be adjusted to reflect these transactions: bank deposits and the corresponding assets in BDL will decrease proportionately to the value of shares purchased in the new companies using frozen deposits. The BDL budget, meaning the BDL balance sheet, will be reduced by the parallel $14 billion, representing the reserves returned to depositors as well as by the extent of compensation for the remaining bank deposits in US dollars through privatization. To avoid bank runs on cash withdrawals from the remaining deposits, banks would restructure the deposits in a multi-term plan; over sequential short- to medium-term maturity. 

There have been previous calls for the establishment of a sovereign fund for state institutions with the aim of using its profit to compensate for deposits. This is a futile proposition considering that the fund would still be managed by the incapable State, and compensation will take generations.

Finally, with regard to deposits in Lebanese pounds, these are guaranteed by secured loans and state bonds, and must be subject to a clear restructuring. Solving the dilemma of deposits and the availability of liquidity (in addition to other reforms) is necessary to restore trust and foster economic growth. Solving the overall deposit crisis will be the cornerstone of reforms and rebuilding trust.

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BankingBusinessQ&A

Rebuilding trust with expatriates and depositors

by Thomas Schellen
written by Thomas Schellen

According to stakeholders in the renewable energy (RE) field, Lebanon’s banking sector is largely and conspicuously still absent in meeting the current needs of RE finance. At the time when we were writing our energy special report, bank BEMO drummed for a new initiative that, in the widest sense, looked relevant under the fight against deforestation. We got curious and sat down with Riad Obegi, chairman and general manager of BEMO, to talk about the cedar tree initiative, CSR, forestation, and RE finance. 

What is the purpose of the “back to our cedar roots” initiative that BEMO first announced in October? 

Many Lebanese today agree on an idea, to which I personally do not agree, that Lebanon is broke, that there is no money, and that we therefore need to ask money from outside. This is not correct. Our first idea behind this initiative was based on the conviction that, before asking somebody to do something for you, [you should] do something for her or him. To whom should I be give something first? I think these are the people who are closest to Lebanon. The people of Lebanese origin are the people who are closest to Lebanon. 

[Our wealth] is not the oil or gas that is under the Mediterranean. It is the fact that there are Lebanese people everywhere, which creates a natural network. But in order for this network to be efficient, you need to have exchanges. We are going to offer them something, so that we are not beggars. We are trying to establish a connection and this is idea number one. 

Idea number two [is based on the fact] that there is a law in Lebanon that is very old. This is the law that men can pass on the nationality but not women. Personally I feel that this is very unfair. Thus we added a little twist [to our initiative] and said we will do a lottery but we will do it for people who do not have a Lebanese father. 

Everybody agrees that the wealth of a company or a nation is the people. The capital of this nation is the people. [With the law on patrilineal nationality] you are eliminating in every generation 50 percent of your capital. This is absurd. Why would you want to eliminate 50 percent of your capital in every generation? If you consider this your capital, you want, on the contrary, to see that your capital increases. Here, by a stupid law that is outdated, we are eliminating half [of this human capital]. 

So the first idea is to offer something, with nothing asked in return, to people of Lebanese origin, because they are the closest to us. We need a relationship that is closer. And [also] we are sending a message, not being very loud about it, that we should not eliminate half of our [closest people] in every generation. 

How does this initiative work in practice? 

It is a lottery. We have to offer something that is symbolic and what is offered is a cedar tree that will be planted in Lebanon. If you win, you have a cedar planted for you somewhere and you have its location. And hopefully, if you are perhaps in Brazil, you will come to Lebanon one day and will visit your little cedar. We created a very simple website where you could enlist for the lottery that we [held on] November 22, because this is Independence Day. 

Is the financing of this initiative entirely by the bank, or is it from other private sources?

It is financed by the bank. 

At first glimpse, this sounds like planting trees, which is a PR activity that has been done before by many companies, I believe, including your bank. Is this initiative part of a wider strategy, and what activities are you pursuing under the bank’s corporate social responsibility [CSR] framework? 

Yes, we did that already before. We did several activities during the last two years that were inspired by CSR. Actually we did a lot of them. Here I want to mention something that is a little different, which is the Art Blessé, injured art.  After the explosion of Beirut Port we did this initiative because it has three elements to it. One is the artistic element. We think that the art which has been damaged (Obegi points to several paintings that are leaning against the wall in the bank’s executive conference room), can find a new life. There is an artistic aspect that we can think of as new art form, injured art, because there is injured art everywhere.

There also is the humanist aspect. If it is possible to [bring new life to] a piece of art that was damaged, then a person who has been damaged psychologically or physically can also transform themselves and become better. [Under this] humanist aspect of healing, you are telling people: “Look, if the painting can be healed in this way, you can heal yourself as well. You have to depend on someone else, or work with someone else, and you transform yourself. Become better.” This is the second aspect. 

The third aspect is a financial aspect. We bought paintings just after the blast. Because they were damaged, we bought them at perhaps 60 percent of their value. After we did the restorations, we tried to buy [more paintings], and prices went up. People told themselves that an injured piece might become more expensive than it was initially. Therefore, prices go up. 

We also intend to do a salon for humanitarian [dialog]. We think that the dialog among communities is easier in Lebanon [and] is also easier to launch from Lebanon. So we are thinking of doing those three things. 

Is art then the main focus of the bank’s various CSR activities, and does BEMO currently have other, perhaps commercial, activities that relate to renewable energy and climate issues? 

Our communication is based mostly on art. But we also wanted to talk about renewable energy. Here we also think that solar energy is certainly an important part for the future of Lebanon and we want to finance and we want to subsidize this financing. One problem that we have, as all banks, is the lack of “fresh” [money]. Most of our deposits, all banks, are with the central bank, and the central bank has according to the figures 15 billion dollars outside that are not used for the economy. 

For solar energy, if you want to buy [photovoltaic] panels, you have to buy them with fresh [dollars]. If you want to buy inverters, batteries; everything is in fresh. We have allocated an amount for [financing] this. Unfortunately, [this is] short term because for the time being we cannot give long-term [facilities]. But in the short term we are able.

What is the maximum tenor of the facilities?

Six months. We are giving this financing [facility] to importers. Importers have to pay their supplier, they bring the goods, install, and get the money. In this period of time they are able to bring more if you give finance. This accelerates the process. 

We are talking about importers of solar photovoltaic panels?

Solar panels, batteries, and inverters. 

Can you tell us when you started offering this financing and disclose the size of the overall envelope of this lending facility?

We are beginning now, just [a few] weeks ago, and the immediate envelope that we are putting is $3 million dollars. It is not a huge amount but we think it will increase little by little. The next stage will be to finance the [acquisition of solar PV systems by] users but this has to be longer term. If you are a user, you may have some money at home or remittances from outside, but you don’t want to pay everything immediately. 

Could lending for solar system installations by end users include mechanisms that would assure quality of the financed hardware so that systems on household level are not only bought based on low price? Industry sources tell Executive that price has recently been the main factor in solar PV purchase decisions by households but that we need higher quality systems as to avoid recurrent issues such as batteries having too short a lifespan? 

In our first step now, we are financing importers and the importers whom we are financing are of good quality. If they are selling bad things to clients, it will be felt quickly enough and [these importers] will become bad and we will stop financing them. From this angle, I don’t think that we have a big problem. 

Later on, [in financing of solar PV systems] for the users our role is not to check whether the user is making the right decision or not. Our role is to check if he is able to pay and if the supplier is a good supplier. On the day that the Banque du Liban decides that in order to [qualify for] this financing, the [solar loans] need to meet xyz [requirements], we will of course abide by whatever the central bank is going to tell us. But presently we are doing it in the way capitalist companies do. People need to decide for themselves. 

Have you already decided on a starting point of a program that will offer solar financing for end users or is this as yet undetermined?

We have plans to start it at the beginning of next year. I don’t know if we will be able to [meet this target].

Is it then correct to think that no financial envelope has yet been determined for financing solar on household level?

Not yet. It will fully depend on how much we can get from our clients. 

In our recent energy special report, Executive has a comment that proposes crowdfunding from depositors as a way in which depositors could convert their Libano-dollar bank deposits into shares of new companies in the electricity sector and ultimately renewable energy production. Do you see such a mechanism as an option for solar finance that banks could use?

We are talking [in our own program] about fresh dollars, not about local dollars. We have to find people who have money outside Lebanon and tell them: “What do you think? Would you like to put part of this money for financing of solar energy systems?” This is what we intend to do. But we have to give them reassurances. When the situation was getting bad in 2015, 16, 17, [these people] were taking money out of Lebanon or not bringing money to Lebanon, which I think was the biggest part. Now we have to ask them: “What do you say [if] we take your money and put it in[to financing of solar PV]? It is very good for Lebanon.” But they will say, “Very good for Lebanon is okay but I have to think about myself as well”. So we have to give them a few reassurances that if the end we will pay them if the bottom line does not pay. They have to trust us. At the end, we are a bank. 

What would be a good tool to attract such investments? Could it be a bond or a Special Purpose Vehicle, a SPV, where you attract investments from outside or might one perhaps dedicate such SPV to impact investing into small solar? 

I think that a bond would not fly. Who would buy a bond on a Lebanese bank today? Nobody. An SPV would fly, and we have different forms of SPVs. If you tell people that the bank would be the administering unit, which would guarantee the payment and structure all this, but that [they] are putting [their] money into a SPV and not in a bank, it might work. 

Advocates of renewable energy have talked about the International Monetary Fund’s Special Drawing Rights (SDRs) and demanded that the central bank would use SDRs to guarantee finance to lenders who would invest in solar. Would that be feasible in your eyes? 

The central bank has means that commercial banks don’t have. I don’t know exactly what the central bank wants to do, so I would not be able to comment on this. They now have $1 billion and something in SDRs. What they are going to do with this, I have no idea. 

A follow-up question from the climate angle, specifically on the subject of trees. In your press release announcing the “back to our cedar roots” initiative, you mentioned how nice it would be to have a lot of trees  around the entire Mediterranean, and that all of Lebanon and perhaps a large part of the Middle East would be covered by cedars if one were to plant one new tree for each person of Lebanese origin. But would it not take a very long time to plant trees on all the mountains in Lebanon? 

I don’t think so. Planting 10,000 trees is something you can do relatively easily. 

So you are not just planning for the 100 trees that are in the lottery this year?

No, we will do more in the next year. But it is [finding] the space that is the difficulty. How much cedars can you plant in Lebanon? You need to plant [these trees] in the mountains. 

Do you have a target number of how many trees you want to plant next year in this initiative? 

I thought it should be 10,452 because of the symbolic number but I doubt it will be possible. I don’t know if there is enough land for that. 

And what do you tell people who say, “Before you plant cedars, give us back our deposits”? 

I cannot give your deposits to you today. So should I do nothing in the meantime? 

You have emphasized the importance of trust as the essence of banking in an earlier interview with Executive and in announcing the lottery for the cedar trees, the bank also noted that 2021 is “a year of faith.” Do you see the rebuilding of trust between the Lebanese people and their banking sector as making progress? 

I have the personal experience that if I tell a client, “Would you put 500,000 dollars in ‘fresh’ with me?”, he will tell me “I am not crazy, sorry.” We still have a branch in Cyprus and at this branch we had $120 million in deposits, all in “fresh.” We decided to reduce the size of the branch and told our clients that we can transfer the funds to our bank in Lebanon. They clients told us: “We trust you and the proof is that we have our money with you, but we neither trust the government in Lebanon nor the central bank. Why would we transfer to Lebanon?” So we had to give them some assurances. The problem is the government and central bank. I think trust will come quickly if [people] come to trust the government and if they come to trust the central bank. Which is not the case today. 

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Brand Voice

Heated Tobacco products emit on average 90% lower levels of harmful chemicals compared to cigarette smoke.

by Philip Morris Management Services
written by Philip Morris Management Services

It is widely known that smoking is harmful to health, yet despite its well-known risks there are millions who decide to continue smoking. Quitting, or better yet never starting, is without a doubt the best choice. However, for those smokers who would otherwise continue to smoke, switching to scientifically substantiated smoke-free products is a better option. With an array of novel tobacco products reaching the market, there is an opportunity to make key distinctions between cigarettes and smoke free products. 

The leading cause of smoking-related diseases is cigarette smoke, which contains dozens of toxic chemicals, the majority of which are generated when the tobacco in a cigarette is burnt. When tobacco is ignited by a heat source, such as the flame from a match or a lighter, it reaches temperatures in excess of 600 C. As a consequence of the burning of the tobacco,  ash and smoke are generated. Cigarette smoke contains more than 6,000 chemicals and around 100 of them have been identified as leading causes of smoking related diseases. 

The variety of smoke free products that have reached the market share a common similarity; they are designed to eliminate the burning process and therefore generate no ash, and no smoke, therefore reducing the exposure to harmful toxicants compared to the smoke of a cigarette. When scientifically substantiated, smoke free products are a better alternative than continued smoking. 

In the specific case of heated tobacco products – a type of smoke free product – tobacco is heated at a controlled temperature without burning the tobacco, in order to release a nicotine containing aerosol. The composition of the aerosol produced by heated tobacco products is different to the smoke produced by cigarettes. In the case of cigarettes, water and glycerine form 50% of the smoke mass, together with high levels of toxicants and also solid carbon-based particles. By contrast, scientific studies show that in the aerosol of a heated tobacco product water and glycerine form approximately 90% of the aerosol mass, there are no solid particles and the levels of toxicants are reduced on average by 90% compared to cigarette smoke. It’s important to note that these products are not risk free as they contain nicotine which is addictive. 

Gizelle Baker, VP Global  Scientific Engagement for Philip Morris International states, “the best way to prevent smoking-related diseases is to quit cigarettes and nicotine completely, or to never start in the first place. However, we recognize that many adults don’t quit, and that’s where smoke-free alternatives can complement existing measures designed to discourage initiation and encourage cessation. These smoke-free alternatives are a much better choice for adult smokers who would otherwise continue smoking. That’s because although they are not risk-free, they don’t burn the tobacco. Science shows us that it’s the chemicals produced by combustion that are the primary cause of smoking-related diseases. If we want to achieve the public health breakthroughs that society demands and deserves, we must follow the science.” 

This article is brought to you by Philip Morris Management Services- Lebanon

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PodcastsSpecial Report

Financing renewable energy

by Thomas Schellen, Carol Ayat & Joe Hawi
written by Thomas Schellen, Carol Ayat & Joe Hawi

In the financial crisis, renewable energy has emerged as both a great need and important solution for Lebanese households and enterprises.

Executive Magazine talks to Carol Ayat, the energy finance expert, and to Joe Hawi, the managing director of systems supplier Nova Energia, about the challenges in the adoption of renewable energy, particularly regarding financing and quality guarantees.

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Brand Voice

A glimpse of hope…

by Firas El Husseini
written by Firas El Husseini

There is a wide debate in Lebanon about economic eform in the context of the implementation of the decisions of the CEDRE conference and the conditions set by donor countries. The economic reform program suggested by the government of former Prime Minister Hassan Diab addressed a series of measures aimed at modernizing the economy and stimulating growth, including privatization and market liberalization. The new government formed by Prime Minister Najib Mikati is promising to involve the private sector in the services previously led by the public sector, to include electricity, telecommunication, and the likes.

Privatization aims to reduce the cost of services, improve their quality, expand their scope, increase
investments, give impetus to economic growth and stimulate the participation of citizens and the private sector through ownership of shares in privatized services’ sectors.

Of course, raising the issue provokes different reactions in political, economic, trade union, and popular circles. From welcoming and supportive, to conservative and opposing. If business circles declare their absolute support for such proposals, for example, some components of civil society may openly declare their opposition and rejection of any privatization process, and demand the restoration of previously privatized economic sectors that could provide large revenues to the state, calling for absolute adherence to the role of the public sector as a pioneer and guarantor of justice and conditions necessary for economic and social advancement. What are the reasons for raising the issue of privatization in Lebanon? What are the expected results of the privatization of some sectors?

PRINCIPLES AND OBJECTIVES OF PRIVATIZATION
The main objectives of privatization go beyond providing income to the treasury to deal with the public debt and, in our present case, contribute to securing the funds needed to rebuild what was destroyed. Experts unanimously agree to position the consumer’s interest and the necessity to secure public service to its best terms at the top of the pyramid of privatization goals. Most of the countries that adopted privatization aimed, in the first place, to improve the level of services provided by a publicutility or to try to address what was tainting this utility as a result of its mismanagement by the public sector. In this context, we can cite the successful experience of LibanPost, which brought about a qualitative revolution in the field of postal services
in Lebanon, yet did not bring in any direct income to the Lebanese Treasury. A public utility has exceptional powers as it is owned by the state and managed by its institutions. In most cases, these powers are monopolistic, leaving the consumer with no choice but to comply with the conditions set by the utility. In such cases, if service delivery is insufficient or unsatisfactory, privatization comes in to allow legitimate competition in the field of those services, thus giving consumers the benefit of choosing reduced costs or improved services. In the US electricity market, for example, consumers – especially industrialists – are able to choose their electricity provider (state-owned or private) based on prices traded in the Electricity Exchange. Answering most of the questions related to privatization must be done for each utility separately, in a way that dispels the fears of both citizens and experts. The ideal approach is to examine the required legal frameworks and mechanisms in order to guarantee simultaneously the interests of the state and those of consumers, in addition to determining the economic feasibility of the privatization process.


REGULATORY AUTHORITIES

Any privatization process imposes high financial burdens on the state, especially in the preparatory stage. These expenses are often consultative and non-refundable, and aim at setting up the necessary mechanisms and legal frameworks as well as ensuring the feasibility of the privatization process. The use of some of these funds to establish regulatory bodies (a regulatory authority or committee) constitutes a smart investment for the state, whereby these bodies can advise the privatization process, in addition to monitoring the proper functioning of the public utility and taking up various other technical and administrative roles. Conferring the appropriate authority to these regulatory bodies is essential; regulators should operate according to high transparency standards and enjoy the necessary autonomy to carry out the expected work in a serious and effective manner. Therefore, securing strict legal and administrative bases are vital. These foundations should be comprehensive and cover all angles, from the mechanisms of appointing the members of these regulatory bodies to defining their powers, in order to ensure the greatest degree of impartiality and to guarantee the continuity of their operation. Protecting those bodies from any interference should start with the process of appointing its members, all the way to granting them the power of decision-making and the ability to carry out their duties in the face of opposition from partisan politics, as long as they act in compliance with the law. Determining the role of these bodies, whether advisory or supervisory, is a key factor in the stability of the privatization process and an important incentive to attract serious investors. The main role of regulatory bodies remains monitoring the operation of the privatized facilities, especially ensuring compliance with the terms of reference and securing healthy competition and preventing monopolistic activities. These bodies also help establish a financial monitoring mechanism to maintain the flow of the state’s sporadic resources. Most countries have adopted the “quality-of-service” criterion as a basis for evaluating the work of the public utility and the services provided. However, this criterion must be based on specific, clear, and precise points to avoid negligence in this area, which is often at the expense of the economically weaker party, i.e. the consumer.

Some may view the establishment of regulatory bodies for all sectors intended to be privatized as a costly and futile endeavor, since the advisory role can be assigned to private bodies, and over- sight remains in the hands of the guardianship authority, i.e. the responsible ministry. The role of control as part of tasks inserted to the regulatory body has several benefits, whether in terms of the experience of its members, or in terms of ensuring the integrity of the institution, with all due respect to successive ministers. Virtually all the necessary paperwork and studies have been prepared to establish three essential regulatory bodies for Lebanon (See box ), yet partisan political interference still prevent them from starting operations or engaging in the process of appointing members.

In order to reduce expenses, several countries have adopted the so-called “unified regulatory authority”, meaning that the regulatory powers of different sectors are entrusted to a single administration. In the case of Lebanon, however, the best solution seems to lie in the establishment of three regulatory bodies:
A Telecommunications Regulatory Authority will supervise any privatization step in the telecommunications sector, including cellular and international communications.
An Energy Regulatory Authority, whose powers include electricity, water and oil, will draw the main lines for privatizing electricity production, including electricity from renewable energies.
A Transportation Regulatory Authority, whose mandate includes transport, roads, and public works. This authority is entitled to look into the feasibility of constructing some highways or bypasses, regulate shared transportation, and study the possibility of privatizing the Beirut Port and other ports in whole or in part.

There can be no privatization without the appropriate regulatory body. The Lebanese have paid the price of haste and demagoguery in the telecommunications sector twice, the first time when cell phone licenses were granted in Lebanon, and the second time when these licenses were with- drawn. The management contracts in that case lacked any vision for the future and did not solve the problem of the monopoly of telecommunications by a few players who dictated their conditions to the Lebanese for almost two decades and wasted large amounts of money that our economy desperately needed.

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Roundtable on renewable energy in Lebanon

by Executive Editors
written by Executive Editors

A discussion with experts in electricity, fuel, and renewable energy organized by Executive Magazine In partnership with Konrad-Adenauer-Stiftung. The roundtable focused on Lebanon’s energy crisis, sustainable solutions and recommendations to reform the sector and achieve national commitments to reduce emissions.

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Dreaming a bright (lit) future

by Thomas Schellen
written by Thomas Schellen

In the most optimistic view (please note: a rarer commodity than real money), there will be a future in Lebanon that is powered up by utility-scale wind farms and solar photovoltaic installations. There also will be smart cities, Internet of Things, Real Intelligence (artificial or other) and yet-to-be-discovered grand innovative green technologies that harness the powers of the sun, wind, water, and earth. There will be decentralized and well-regulated industrial, commercial, and agrisolar projects that are sustainable, social, and profitable.

 There will be communal universities, public hospitals, free schools and digitized infrastructures that rely on renewable energy (RE). There will be governance in municipalities that cherish public goods, and households that contribute to the nation’s energy safety and are at the same time energy efficient and almost self-sufficient. Everything electric will be highly energy efficient and fully integrated into the stabilized national power grid with diversified, professional, fair, and corruption proved administrative structures in generation, transmission, distribution, and collection.

 The electricity bill will come to me on time, be detailed and explicit for its climate balance, and affordable. The country will be part of a responsible world powered by RE. Net-zero will be a forgotten term, as will be carbon trading. There will be no COP Summits, nationally determined commitments (NDCs), and other irksome and meaningless code words that obfuscate the insufficiency of polit-babblers, technocrats, and bureaucrats of all nations. There will be no deforestation and no heavy methane emissions. Hashish will globally be legal and consumed responsibly. There will be cedars on all hills and mountain ranges of Lebanon.

 The only remaining question will be if this Lebanon will be a village built by our talented expats in the Kingdom of Far, Far Away or on a planet where people from this country have settled in a galaxy far, far away.   

 It is November, not April Fool’s. Ergo, while we dream distant dreams of stable electricity and have visions of prosperity and peace, the balance sheet of the Lebanese struggle for renewable energy presents a mixed bag of nice and ugly. There are unmistakable upsides to the ongoing adoption of RE and a massive argument in the realization that renewable energy is not a green choice or nice sustainable opportunity for the people in this country. Passionate World Bank observers and Lebanese experts are in agreement that the people and government of Lebanon have no choice but learn to trust RE (and each other). In this sense of trusting RE, Lebanon by sheer lack of alternatives, is now proceeding on a path to climate sanity and sustainable energy safety that the world at large seems to be hesitant to walk, taking, as shown again this month at a key global climate debate, three or more fast steps back for every five slow steps forward.

 Good steps announced at the Glasgow COP 26 UN summit presumably were pledges to stop deforestation and reduce methane emissions significantly by end of 2030 end rein in coal by 2050. These mesh positively with plans for gigawatt offshore wind island projects and many innovative RE applications in national strategies in Europe as well as net-zero goals by nations and corporations.

 On the side of hesitancy to act as fast as rational calculations on climate threats suggest, however, are the estimates that the global target for keeping the temperature increase below the 1.5 degree threshold looks to be missed badly. These are coupled with the clinging to coal and oil by countries that benefit from exploitation of fossil resources, the historic knowledge that past climate risk mitigation pledges have rarely been fulfilled and that the increase of temperatures has not been slowing, and the fact that the targets against deforestation and methane output that countries just pledged to for 2030 would better be achieved by 2025.

But additionally it seems warranted to account for some unrecognized assets and overlooked advantages that Lebanese RE plays have going for them. 

 ALL EQUAL UNDER THE SUN?

Renewable energy has been a passion of leading minds in local academia and private sector for forty years, as the Lebanese Solar Energy Society proudly testifies. Abundant tomes on the role and potential of RE have been written in Lebanon.

 RE is not only for the rich. In the currently overheated retail market for solar PV, the top ten percent of households with the right combination of quality awareness and financial means are seen by quality-focused providers as the addressable market for sustainable home systems. Those who opt in are going to be long-term winners of the new reality where no sane person on earth, however socially privileged, can afford waste of energy.

 But solar technology for simple needs is becoming more technically capacious and much cheaper. Systems have already been implemented in several thousand poor homes where they run lighting and phone chargers; a new generation system will be powering a small fridge. Solar PV in Lebanon is viable part of social safety net development.

Not to mention that the empowerment of institutions and the public goods infrastructure of Lebanon, oft neglected in the past, is being sped up. According to the Lebanese Center for Energy Conservation, 122 public schools have active plans to go solar. Soldiers guarding the Lebanese border against smuggling and intrusion from isolated posts in the no-man’s-land are beneficiaries of solar PV installations. Our hospitals, schools, universities, and our military are on their way to install RE with the help of international partners and global organizations.

 Our SMEs can benefit from energy efficiency and RE programs to leave behind a wasteful pattern where they faced reduced international competitiveness because they were hooked on subsidized state power with a costly overlap with private generators while being deprived of the knowledge and incentives to become as energy efficient as they could be. Our industries, agro-industry and agricultural producers have in recent years learned many new things about RE. They have been prepared by these painful lessons and now stand eager to tap into new efficiencies and new income streams whether through industry-scale installations, net-metering, or wheeling options. 

Preventing the melting

At this time of the greatest need for renewable electricity and indeed any electricity, it is finally to note that Lebanon has not only lost billions in electricity subsidies and payments for inefficient fuel that have amounted to, literally, burnt money. We have also incurred massive opportunity costs.

 These costs are visible when one talks to RE companies and individual practitioners in the fields of solar PV and energy conservation. It is not only that Lebanese RE companies in the past two years, those firms that did not vanish from the market in everything except perhaps for their name, website, and listing in an un-vetted registry of RE providers, have relied for their economic survival on incomes from projects in Egypt, Ghana, and elsewhere in the region. As everyone in this industry confirmed to Executive when asked, Lebanese RE companies are able to compete outside of Lebanon, sometimes in very crowded markets. Especially when noting that Lebanese engineers are familiar with complex challenges in design and execution of electricity solutions from the smallest to the industrial scale and beyond – perhaps among the world’s most adapted to intermittent supply and multiple and changing electricity supply challenges. This competitive advantage might have been leveraged into a much stronger RE industry on regional scale.

 Also, as a more recent opportunity cost, the RE sector has seen the outmigration of talented engineers and experienced technicians, “en masse” as one industry insider says, while the supply of new talent, the addition to national human capital, is hampered by the problems that the tertiary education sector is confronted with. 

Finally, we cannot but emphasize that all steps toward RE and energy safety are, to a large or even critical extent, contingent on people’s behavior changes, the political will of elected (presumed) servants of the people, and restoration of the financial system. 

 Executive calls for speedy adoption of the relevant laws (Updated Law No. 462 and the draft Distributed Renewable Energy), the establishment of a functioning regulatory authority, and the incentivization of industrial and commercial scale solar PV projects. We support initiatives and plans to create new structures for transmission and distribution of electricity, and join with all the loudness that we can muster in calls for the creation of energy safety and affordable RE all over the country without opportunities for theft, extortion, and corrupt profiteering in the electricity sector to the detriment of the public good.

 And while we make every effort to rescue the Lebanese economy and install incremental units of RE for next year’s electricity need, with the full use of our considerable talents and great networks of friends and diaspora, our human and social capital, let us remember that we humans need to dream. We can function without money and electricity for a week because we find a way to do so, but we cannot function without working towards our dreams. 

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Left in the wind for now

by Salah M. Tabbara
written by Salah M. Tabbara

In February 2018, the Ministry of Energy and Water, representing the Government of Lebanon, had signed Power Purchasing Agreements with three wind farm developers for the development, installation, and operation of wind power generators in the Akkar region with a cumulative capacity of wind power of 226 MW. According to the terms of the agreement, the first units of power produced by these projects were supposed to be injected into the national electricity grid, and not a moment too soon, considering the current state of the electricity sector in the country.

 Sadly, the project was delayed and has not seriously kicked off to date. The present financing difficulties make it unlikely it will resume unless outside funding is secured.

 If the project were to be carried out, it would generate more than 800 million kWh of power annually, enough to power 200,000 Lebanese homes, operating over the hills and ridges of Akkar. It would employ in excess of 600 people during the construction period, mostly comprising local talents and skills, and provide stable rent incomes to dozens of landowners and several municipalities over the 20-year period of the agreement.

A VISION BLOWN IN THE WIND

Against all odds, the plan was, and still is, to build a state-of-the-art power generation project in one of the most pristine areas in Lebanon: Akkar. We, as developers, dreamt big. In addition to the wind farm, our vision includes an eco-tourism attraction that celebrates the history of the region and integrates hopes for the future. This consists of a leisure and educational hub that brings people from all over the country. A learning center offers resources to schools and community groups, as well as educational activities. The site also includes 40 kilometers of biking trails, as well as multi-purpose graded trails built from the recycled waste generated during construction are intended for picnics, sightseeing, and events planning.

 Yes, it is a mega infrastructure project but one with a clear and beneficial social and environmental footprint.

 Unfortunately, that did not happen. By end 2019, and after the project had secured early on letters of intent from international supporting financing parties, the abrupt financial meltdown occurred, with its devastating consequences on all levels, consequences with which we are all too familiar.

Where do we go from here? Shall we, as private sector investors call it quits? Shall we give up after preparing all the necessary studies and investing vast amounts of money to de-risk the electricity sector in Lebanon, to secure the necessary land for the wind farm project and keep them secured even up to this day?

ACTION NOW

There is no question about it: Lebanon needs power desperately. We are ready to resume our enterprise. Give us stability and the wind farms will be up and running in 18 months.

What is needed for this?

Immediate action and at a large scale. We need to move ahead with renewable energy projects. This is not limited to wind farms but also includes solar power projects.

Ideas for financing are always available if we think collectively outside of the box. Carol Ayat, a respected energy finance professional and investment banker, has presented an innovative plan in that regard (see story page 40). Her paper on a new funding model to finance electricity projects across generation, transmission, and distribution deserves serious stakeholder discussion. Her win-win proposal opens up the possibility for depositors in the Lebanese banking sector to invest their “lollars” in such projects. The central bank Banque du Liban (BDL) would swap these “lollars” with part of the remaining hard currency it still holds to finance these projects.

 Another idea worth considering is for the Government of Lebanon to explore the possibility of using part of the International Monetary Fund’s newly allocated Special Drawing Rights to Lebanon to provide either soft loans and/or the necessary guarantees for such projects to get financed. By that scheme, the Government would invest this money and achieve returns on it.

We need to vamp up renewable energy. We need to start and finish the wind farm project we started eight years ago.

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