InsuranceSpecial Report

Tied up in risk

by Thomas Schellen
written by Thomas Schellen

Lebanese entrepreneurs traditionally have approached risks with the attitude that they prefer to carry them themselves rather than pay for risk transfer, unless there is a compelling reason to buy insurance. Companies insure their vehicle fleets and some contract medical coverage for staff as add-on benefits beyond the obligatory payments to the social security system. Larger companies are usually more insurance-aware and acquire basic asset protection, such as property, fire, and cargo insurance. But the vast majority of commercial enterprises are small ventures and their insurance blankets reveal more risks than they cover — small and medium-sized Lebanese companies are underinsured on several and perhaps even most fronts.

The only insurance that has been compulsory for Lebanese companies until now, with some level of enforcement, has been workmen’s compensation, a basic accident policy for employees. This year, the Ministry of Industry introduced a new requirement for industrial establishments, which from this summer on have to obtain a fire insurance policy in order to renew their industrial licenses.

Interestingly though, demand for fire insurance has already been on the rise before the Ministry of Industry introduced its decree. According to the quarterly statistical report of the Lebanese insurance association, ACAL, premiums in the fire business increased 14 percent to $81.7 million in 2011 and represented a 9.3 percent market share of non-life insurance.

The corresponding numbers for the first and second quarters in 2012 show continued growth at 14 percent for January to March, and 16 percent for April to June. According to the report for the second quarter, the share of fire premiums in total non-life premiums has expanded to 10.3 percent of non-life premiums in Lebanon.

One factor that insurance leaders say influenced the demand — and also the consideration to create a mandatory fire package for industrial establishments — was a $12 million industrial fire that was settled by the insurer, Arabia Insurance, with quite some public fanfare in November 2011.

An unsure fire-sale

The latest statistics on insurance sales in the first half of 2012 do not necessarily enable growth estimations for fire insurance in the coming years. On one hand, implementation of the decree requiring coverage in industrial establishments still has to be shown in practice; companies in Lebanon are noted for their inventiveness when it comes to cost avoidance. On the other hand, the insurance providers do not have market data that would reveal how many industrial establishments and of what sizes are currently lacking fire coverage.

The new requirement, which insurance companies — no surprise — are supporting enthusiastically, has already generated applications from industrial companies that never before felt the need to buy fire insurance. The application surveys of these companies have shown that many do not conform to important standards, said Fateh Bekdache, general manager of Arope Insurance.

“Every insurance company has its own strategy on this but the companies that look for fire insurance have some risks that they need to work on, a lot, in order to be insurable,” he said.

It is a different case with managerial and professional liability insurance coverage in Lebanon, where growth is not led by any new regulatory initiatives. A discussion at the Ministry of Tourism regarding the introduction of mandatory liability coverage for restaurants and hospitality enterprises, to protect patrons if they suffer an accident or a food-related illness, was recently aborted.

But some factors have sparked interest in liability covers. When judicial authorities in Mount Lebanon ordered a doctor arrested in a dispute over medical treatment in June, it was the first case where alleged negligence and malpractice by a physician resulted in such action by the public prosecutor. According to Bekdache, the doctor’s arrest triggered inquiries by medical practitioners asking for quotations on malpractice insurance.

In parallel to newly malpractice-risk aware physicians, lawyers are also asking for professional liability coverage, but do so mainly for reasons of wanting to enter international partnerships. “A month ago I got a call from a prominent law firm which asked about the price indication for this kind of professional indemnity cover,” Bekdache said.

Demand for professional liability insurance by a law firm is attractive for the insurer, but these inquiries cannot be answered with a ready-made policy, he added. “It is a big proposal,” said Bekdache. “I have to know the track record of the law firm, how many cases were lost and won, what kind of litigation they do and what their turnover is.”

D&O’s and Don’ts

Another complex need is management liability insurance. Directors and officers, or D&O in insurance-speak, are today held responsible for a growing range of risks that range from unintentional errors and omissions in delivering projects, as well as products for financial and managerial liabilities. Regulators, shareholders and stakeholders such as employees and competitors represent a pool of litigation threats for both companies and directors as individuals.

Cases, which can be both civil and criminal, are brought for issues as diverse as a violation of anti-money laundering rules, failure to fulfill duties, keep adequate records or apply regulations, harassment, wrongful termination, or abuse of power. The range is so broad that insurance covering corporate errors and wider management liabilities, subsumed under the term D&O insurance, is “a must for any large company in Lebanon,” according to Bekdache.

Against the severity and frequency of this risk, however, the number of D&O policies issued in Lebanon is falling seriously short and the market is underpowered. Chartis, a prominent name in global D&O insurance that has presence in each of the six Gulf Cooperation Council countries and Lebanon, has seen demand for D&O coverage grow in some Arab markets. The United Arab Emirates and Saudi Arabia are leading demand developments for D&O insurance, said Muhannad Abdul-Majeed, an expert on financial insurance lines with Chartis Middle East.  “Unfortunately, Lebanon is a challenging market for management liability covers.”

Roger Zaccar, business development manager of Commercial Insurance, an independent Lebanese insurer, was blunter. “There is no demand [in the Lebanese market]; you have only two or three clients who are buying [D&O]. People don’t know why they need it and insurers don’t have the volumes to create specialized departments for it” he said.

Local providers are not equipped to assess and underwrite corporate liability policies, said also Arope’s Bekdache. “Nobody has a facility on those policies so we go via international brokers. It doesn’t make sense to have facility for such a product.” Among the reasons why D&O insurance in Lebanon is a tougher sell than in the GCC is so few companies are publicly traded on the Beirut Stock Exchange and very few international investors are looking to acquire stakes in Lebanese companies, according to Abdul-Majeed.

Regional D&O growth

At Chartis Middle East, 61 percent of premiums underwritten on management liability coverage in 2011 came from first-time buyers, evidencing demand growth, he said. “The majority of buyers were companies that were publicly listed, and/or had exposure to international jurisdictions via their customers, shareholders, suppliers, and so forth.”

However, the insurer also found that regional D&O insurance demand is still mostly reactive, as companies respond to demand from international investors and business partners, or to high-profile incidents where executives and corporate officers are scrutinized.

In the UAE and other GCC countries, regulators are popularizing D&O as they are stepping up investigations of corporate managerial liabilities. Chartis observed 20 percent more notifications of claims brought against D&O in 2011 when compared with 2009 and 2010.

Corporate and managerial liability insurances are just some of the protections that companies in Lebanon and the region will need more of in future if global markets are the guidepost. While no concise data on the presence of D&O insurance is available, Chartis estimates that current premium volumes invested in D&O liability protections is no more than 5 percent of non-life premiums across the GCC and Levant.

The level of coverage in the region is definitely lower than in more mature economies, Abdul-Majeed noted, even though corporate liability protection is anything but a than needless luxury.  “In terms of [a] corporation’s budget, a D&O policy is usually much cheaper than other more traditional insurances, such as property insurance or group medical, but whereas companies are prepared to pay the higher premiums for these covers, they unfortunately do not give much thought to management liability insurance.”

Circumstances could however boost adoption of some insurance policies for corporate decision makers and key persons. Besides seeing more corporate demand for insurance against terrorism, political violence and war risk, insurers in Beirut and the Middle East have been starting this year to get more calls asking about kidnap and ransom policies.

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyElectoral Reform

Blank the ballot

by Rabih El-Chaer
written by Rabih El-Chaer

Parliamentary elections in June 2013 will define both the ruling majority for the next four years and the identity of the future Lebanese president, and the Lebanese electoral law will play a crucial role in this process. But the country’s opposing political camps — the March 8 and March 14 coalitions — are not willing to risk any change in the balance between them. For this reason they are not likely to accept the proportional electoral system as it will open the door for independent candidates to take part in the elections, and this new blood would pose a serious threat to the established oligopoly in the Lebanese political system.

Prime Minister Najib Mikati’s government promised in a ministerial declaration shortly after taking office that the electoral law, which includes all the related reforms, would be effective one year before the elections. However, it was only sent to the parliament last month — 10 months before voting begins — meaning government is already in violation of this commitment. Furthermore, it is widely expected that Parliament will procrastinate in its review of the electoral law to use up time and make implementation of any reforms impossible before the election. For this reason we should not get our hopes up regarding electoral reform. Rather than presenting an opportunity for change, voting citizens will most likely be left with little choice but to reinforce the status quo.

Those of us campaigning within civil society understand the cynical game that is being played out before us and have therefore changed our strategies and priorities. There are other crucial reforms to the elections that should be implemented, whether they are instead of or in addition to the proportional electoral system.

For starters, an independent and permanent committee (IPC) that organizes and supervises elections needs to be established. It is disconcerting, but not surprising, that the draft law submitted by the Minister of Interior and Municipalities to the Council of Ministers, Lebanon’s cabinet, did not suggest the creation of an IPC. Without such a body, however, we should not accept the interior minister’s authority to conduct the elections, especially since he is a member of a monochromic government. The Civil Campaign for Electoral Reform (CCER) conducted a feasibility study that proved that there is still enough time to create the IPC if an honest will is expressed by the Council of Ministers and the Parliament.

We are also insisting on the adoption of pre-printed ballots and vote counting procedures in polling centers, instead of polling offices, in order to increase transparency and to limit bribery and vote buying, among the other various aspects of election corruption. What is more, logic dictates that the electoral law is also supposed to ensure candidates state publicly their electoral expenses in order to increase transparency and to limit electoral excesses. In reality it increases the limit candidates and parties can spend on electoral campaigning, further eroding the credibility of the political class.

We denounce this shameful behavior practiced by politicians and are increasing our lobbying efforts. However, the task at hand is not an easy one and a number of tough questions need to be addressed: How is it possible to apply pressure on a corrupted political class that regularly and successfully distracts public attention by creating alarming situations? How can we raise enough awareness to force our politicians to change when it is they who control the major media outlets? How can we persuade the silent majority of the Lebanese people to express their opinions without burning tires and blocking roads? The answers to these questions seemed far from reach before the Arab uprisings, but if our brethren in the region can overthrow their fierce dictatorships, then there is hope that we can change the Lebanese political system as well.

If civil society is to have any kind of success then it must find a common voice. If the active organizations and the potential army of thousands of volunteers can agree to submit one single list composed of 128 candidates for the parliamentary elections in 2013, or by default, one candidate for each electoral district respectively, then they will be heard by both the street and the establishment. However, if civil society as a whole is not able to unanimously reach a compromise, we will invite all those citizens who are fed up with the political class in Lebanon to cast blank votes. A blank vote, which is usually used to demonstrate dissatisfaction with the choice of candidates, would in this case be used to pressure the whole of the political class to take heed of the disenchanted masses.

 

RABIH EL-CHAER is managing director of the Lebanese Transparency Assosication

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyElectoral Reform

Linking electoral and economic reform

by Sami Atallah
written by Sami Atallah

The approval of the new electoral law based on proportional representation by the Council of Ministers, Lebanon’s cabinet, has the potential to be a historical moment but will most likely be cursed to an early grave. When it comes to a show of hands in Parliament, the Future Movement, the Progressive Socialist Party and the smaller Christian parties are likely to succeed in voting it down. This is because under such a system they would likely lose seats in the upcoming elections and see their power wane in the next Parliament.

Putting aside the zero-sum game between the two main rival political camps, voting down the proportional representation electoral law is a blow not only to better political representation, but will allow the existing majoritarian system to continue stifling Lebanon’s economic and social development, particularly in the regions. Quite simply, under the current system politicians do not need to deliver any concrete policy platform to run on, or even deliver successful reform while in office, to win seats. Under a majoritarian system, politicians with the most votes win the seat even if they don’t secure a majority. Districts where politicians are ahead of all the other candidates are considered “safe” and little effort is exerted to win them. Instead, the focus shifts to districts that are competitive or where there is a swing-voting constituency. Campaigning for votes in these areas thus becomes an essential strategy for the party. Add to this electoral system three other features — bloc voting, sectarian polarization and clientelism — and parliamentary seats are won based on a small coalition of voters within these tightly fought districts. Most political parties in Lebanon have benefited from the majoritarian electoral system, explaining why it has been in place for so many years.

The three cruxes

Bloc voting, which is common in rural Lebanon, reduces voting power to a few members of the community, that is tribal or family elders, who decide on behalf of the tribe or family members who to vote for and everyone else follows suit. Sectarian rhetoric is the cheapest political strategy to mobilize citizens to vote, but this works only in districts with an ethnically homogenous population (otherwise it can backfire). Finally, electoral clientelism is, effectively, buying votes by giving cash or services to targeted individuals, particularly in swing districts.

By expedient exploitation of these tactics in a majoritarian system elected politicians end up in parliament with the support of a relatively small but active coalition of voters. By keeping this coalition relatively content, politicians have no incentive to push for any socioeconomic development programs in the less contested regions, since they will get elected in any case and are rarely held accountable by their own constituents. 

The proportional representation system radically changes the relationship between voters and parliamentary candidates. Under this system every vote counts and seats are allocated based on the proportion of the votes won. This encourages people to vote even in districts that are dominated by a political party not of their choosing. Having more people voting will make clientelistic strategies vastly more expensive. Parties may eventually find themselves unable to buy all the votes they need directly. It could also encourage family members to break away from bloc voting since their votes would count even when they vote for the smaller and less powerful parties.

Rather than falling back on safe seats while coopting small but active groups of voters in swing districts, the political parties would have to address the electorate as a whole. This means they would have to actually devise and deliver concrete policy programs that will provide public goods and services to the larger community. Politicians would be held to account on their ability to deliver on critical issues such as infrastructure, education, health or electricity. As such it would be an impetus for socioeconomic development, particularly in the regions.

The bigger game

Proportional representation has ramifications beyond political representation, with most of the debate surrounding reform failing to recognize the link between electoral representation and economic development. The political and economic angles are intrinsically intertwined but too often discussed and debated by stakeholders, including civil society organizations, as two separate problems.

Proponents of proportional representation seem to appreciate its political end only, while those who advocate regional development seem nostalgic for the era of President Fouad Chehab, when regional development plans were drawn but never implemented. Sadly, little thinking goes into why the Chehab program did not stick: electoral reform is key to regional development.

 

SAMI ATALLAH is executive director of the Lebanese Center for Policy Studies

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyElectoral Reform

The vice of vested interest

by Rony Al-Assaad
written by Rony Al-Assaad

If there is one thing that has become clear since the debate over electoral reform resurfaced in Lebanon, as it does every four years, it is that the main political forces in the country consider elections to be a form of leverage over the people rather than an opportunity to ensure fair and democratic representation. While the Council of Ministers, Lebanon’s cabinet, passed an electoral reform law in August, whether this passes Parliament — and if it does, how it will have been altered — is still yet to be seen. Unfortunately, the election law that governs next year’s ballot will likely resemble the previous one: Distorted legislation that comes out of an 11th hour negotiation and falls short of basic democratic standards. In short, it is unlikely that the ruling elite will allow any significant rocking of the boat.

In any case, the public should know why our so-called leaders will let us down once again, specifically with regards to adopting a system of proportional representation. An analysis of politicians’ motives and their public statements, which are constantly adapted to fit changing political and electoral interests,  reveals much.

Behind the bluff

Let’s start with the opposition, specifically the Future Movement. They consider proportional representation as an electoral “weapon” which aims to undermine their dominance and position as the main representative of the Sunni sect, given the number of independent Sunni candidates. At the same time, Future is convinced that proportional representation will not break the monopoly their main political opponents — the Amal Movement and Hezbollah — have over the Shia sect, as these parties enjoy overwhelming representative power in their districts of popular support, such as South Lebanon, the Bekaa and Hermel. Future also rejects the proportional representation system as long as Hezbollah maintains its arsenal of weapons, as it firmly believes that arms undermine democracy, freedom to run for elections and even the security of candidates if they win; an example they often cite is Hezbollah’s direct interference in the municipal elections to deter candidates from running or pressuring them to withdraw. Do, however, keep in mind that this practice is prevalent in any area in Lebanon where one political party enjoys overwhelming hegemony. Future also fails to explain how the excuse of Hezbollah’s arms does not apply in a ‘winner take all’         electoral system.

At the same time, the Future Movement is waiting for a clear position to be declared by its Christian allies, who are generally more supportive of smaller districts since they fear that larger districts may erode the share of parliamentary power allocated to them under the 1989 Taif Accord, which is 64 deputies. It is worth noting that both demographic changes and the 2008 electoral law detracted greatly from the ability of Christian voters to choose their representatives — in six out of the 12 districts where there is a Christian majority, Muslim votes determine the election results. Future Movement deputies have stated that their party might support Fouad Boutros’ draft law if it was proposed as a serious alternative; this law proposes a mixed electoral system where 70 percent of parliamentary seats are elected according to the majoritarian electoral system at the qaza (or district) level, and 30 percent of seats are filled according to the proportional representation system at the mohafaza (or governorate) level.

The Christian parties in the opposition (the Lebanese Forces, the Kataeb and independent politicians) support small districts, and through the Bkerke committee — which brought together the four main opposition and governing Christian parties — they have put forth two proposals: either a modified version of the electoral law 25/2008 where Lebanon is divided into some 50 districts of four seats each at most, or a proportional representation system in 14 to 15 districts. Many see the position of the Christian opposition parties stemming from their wish not to go against their Sunni ally, as well as the fact that proportional representation is not viewed favorably among most Christians or in Christian political circles. This latter point is somewhat odd for opposition Christian parties, however, as proportional representation could help weaken the monopoly on parliamentary representation the Free Patriotic Movement (FPM) currently enjoys in some areas in Mount Lebanon (the district with the largest concentration of Christians), as a first-past-the-post ballot renders opposition votes in these areas inert.

The government’s side

As for the parliamentary majority, they have an interest in adopting the proportional representation system based on statistics from the 2009 parliamentary elections. According to repeated public statements by some of its leading members and its own polls, Hezbollah believes its popular base is large enough to ensure positive results within any system. However, it is also possible that the proportional representation system would go against Hezbollah’s interests, for it would certainly contribute to breaking (even if initially to a small extent) the bilateral monopoly of Hezbollah and the Amal Movement over Shia representation as independent Shia candidates gain more confidence to run, given that they have a chance of winning a seat. Hezbollah’s position is also linked to the position of its main Christian ally, the FPM, as Hezbollah needs their support in the districts with a Christian majority.

The most recent FPM position called for adopting proportional representation with Lebanon as a single district. This is mainly an attempt to gather the Christian votes that are scattered across the country outside of Mount Lebanon, which the FPM believes would go to its candidates. The FPM believes that its political power could be maintained by proportional representation since it should guarantee it a number of seats despite a perceived, but unproven, decline in popularity.

Deputy Walid Joumblatt (the main representative of the Druze sect) has outright rejected the proportional representation system. This stems from his belief that it will reduce his representation in Parliament, which is “exaggerated” in the present system where he is able to ensure the election of loyal Christian and Sunni deputies through Druze votes. Hence, even though the cabinet has voted in favor of the law it is unlikely to garner sufficient support in Parliament (at least in the form passed by the cabinet), given that Joumblatt has the ability to sway the final outcome. That is unless a new political tradeoff is struck among the different political blocks, which is not uncommon for Lebanon’s opportunistic political parties.

Lebanon may have a long history of elections, but this has rarely translated into the creation of functioning national institutions. If we are to transform our “culture” of holding elections into a state with accountable institutions and a participatory body politic, then we need an electoral law that ensures fair representation and the secrecy of the ballot within an independent and transparent organizational structure. Sadly this looks like it will not be the case, and now we know why.

 

RONY AL-ASSAAD is director of the Civil Campaign for Electoral Reform (CCER). This article expresses the personal views of the author and does not represent the official policy of the CCER.

0 comments
0 FacebookTwitterPinterestEmail
Finance

Q&A – Mohamad Karaki

by Maya Sioufi
written by Maya Sioufi

The National Social Security Fund (NSSF) is Lebanon’s main social security program and the country’s largest insurance provider, covering approximately 30 percent of the population. Famed for its endless queues, appalling delayed payments and highly underdeveloped services — requests for this interview were required to be sent by fax machine — ‘daman’, as it is commonly known in Lebanon, provides healthcare, family allowance and end-of-service indemnity (EOSI) to 1.3 million Lebanese citizens. To discuss the issues faced by the daman, Executive sat with Mohamad Karaki, the NSSF’s director general.

E  On my way to meet with you, I heard a man on the radio complaining that the NSSF was closed at 10:30 am today and he could not get his payment….

That cannot be true. Employees of the NSSF have the same working hours as government employees [8:00 am to 2:00 pm]. But you know, it is Ramadan now and today it is Friday so they might leave earlier for Friday prayers.

E  A government draft bill called for reforming the NSSF back in 2004 and it has not been signed yet. What is delaying the implementation of this law?

From a practical point of view, we can agree over two to three sessions on the key points in the draft law and in a month it would be over. The bigger issue, however, and the one which is taking a political dimension, is whether the EOSI fund gets spun off and managed by an independent company with a separate management or whether it remains under the umbrella of the NSSF. This is the issue that keeps on delaying the implementation of the new law. Many people in the government, for no economic or practical reason, want to have an independent company running the EOSI fund. I disagree. Their arguments are that the NSSF has issues and can’t manage itself. If the government can’t improve the NSSF then where will it find the right people to run this independent company? Also, it would be duplicating jobs.

E  Why do they want to put the EOSI into a separate company? Because it is the only fund among the three funds of the NSSF that is not in a deficit?

Many people are saying that is the reason they want their hands on the funds of EOSI. I am just saying EOSI needs to be in its natural place, which is within the NSSF.

E  As of the end of last year, the sickness & maternity fund and the family allowance fund reported an accumulated deficit of $239 million and $252 million respectively. What needs to be done to stop these deficits from increasing?

Unfortunately in 2001, the contributions to the NSSF were brought down by 40 percent in one go [contributions to the NSSF were reduced from 38.5 percent to 23.5 percent by lowering the contributions to the family allowance fund from 15 percent to 6 percent and to the sickness and maternity fund from 15 percent to 9 percent]. The only solution is to increase the contributions or the ceiling of the contributions.

E  But how much would you want to see the contributions increased? 

I am not asking for an increase to 2001 levels but a few percentage points. The raise in the minimum wage this year will bring in new revenues for the NSSF and then we will see how much contributions need to be increased.

E  How are the funds of the NSSF invested and is there a way of raising the returns?

The funds of the NSSF stand at $5 billion as of the end of 2011; 70 percent of the funds are invested in treasury bills and the remaining 30 percent are placed in deposits with local commercial banks. As the sickness and maternity and family allowance funds are in deficit, the funds being invested now are from the EOSI fund. There is a committee charged with preparing how to invest these funds. There is no article in the current law allowing diversification, even within currencies. There was no political agreement in the 11 years I have been running the NSSF to diversify in other currencies, as we have to invest everything in Lebanese pounds. With the current law being discussed in parliament, it should open the possibility to invest in other currencies.

We are proposing several investment options both domestically and abroad. The [government officials] are trying to limit the options and are suggesting equities in Lebanese and foreign listed companies and investments in Lebanon’s real estate sector. We wanted to go further and have equities in all companies in Lebanon [and not just the listed ones]. Investing in other currencies is the least we can expect as the NSSF pays all contributions in Lebanese pounds but medical costs are in foreign currencies.

E  I hear that evasion of contributions is common in Lebanon. What are you doing to better control evasion from the contributions and alleviate the deficits of the funds?

We have controllers who check evasion from contributions. Now we have 100 controllers, whereas a year and a half ago we had just 30 to 40 controllers, so there will be better controlling going forward. One of the main issues that the NSSF faces is the lack of human resources. We should have 2051 employees and we have 1112 so we are working at 50 percent capacity.

E  What is the 2051 figure based on?

When the organization was founded, the law stated that the NSSF should have 2051 employees so we have 939 missing employees. The NSSF used to have its independence when it came to hiring of employees, until 2004 when the hiring process was put under the Civil Service Council. Now every time we need to hire employees, we need the approval of the government that will ask the council to conduct exams and this is delaying our hiring process. We have recently received approval for the hiring of employees and exams are starting in a month.

E  Isn’t the lack of electronic services also one of the main issues of the NSSF?

Now we have 35 offices with 1,000 PCs linked online throughout the country. So from a technological point of view, we are among the most up-to-date companies in Lebanon.

E  But you don’t offer any services online and you don’t even have an NSSF domain email?

Let me explain. The first step was to train our employees and explain PCs to them. The second step and the most important one is to link hospitals, doctors, pharmacies and all providers of services electronically to the NSSF and start electronic services. I am happy to tell you that the administration recently approved putting in place a department dedicated to electronically linking all services with the NSSF. We will start by linking pharmacies then move on to hospitals and doctors. We hope that by the end of the year we would have started to provide electronic services and that by the end of 2013, we will be providing services such as online registration and providing certificates on employee headcounts online. We also have a new website which we are working on internally and it will be made public within five to six months, allowing people to enjoy services online.

E  How about the board of directors that has expired in 2006?

There are no elections yet planned for the board and the current board members are still here and different committees meet on Tuesdays and Thursdays. We need new blood in the organization but unfortunately the current problems in the country are not allowing for elections.

E  Do you think the government should provide a private pension plan with tax incentives?

In my opinion, what is missing in Lebanon is an unemployment fund so that if the citizen finds himself without a job, he does not end up on the street without an income. If the NSSF is given the human resources necessary and with the required improvements in place, it can provide all social services to the country. These plans need approval by the government and I am waiting for their approval. I want to improve the NSSF to provide better services to the population. The biggest problem for now is the lack of human resources.

0 comments
0 FacebookTwitterPinterestEmail
Feature

Lebanese in Kurdistan

by Joe Dyke
written by Joe Dyke

As you wait for your bags at the airport in Erbil, the capital of the northern region of Iraq, a large sign reads “Welcome to Kurdistan”. But the sponsor’s name plastered below is not the Kurdish Regional Government or a local firm, but Lebanon’s own Byblos Bank.

In the decade since the invasion of Iraq, no region has grown as much as the semi-autonomous Kurdish region. And the province has paved the way into the Iraqi market for many Lebanese, with more than 6,000 currently working there according to the Lebanon-Kurdistan Friendship Association. The Kurdistan Board of Investment estimates there is more than $760 million in Lebanese capital invested in the region, the second largest of any Arab country behind only Kuwait.

Banking on business

In the banking sector Byblos itself first opened a branch in Erbil in 2007 and now has expanded beyond Kurdistan to establish branches in Baghdad and Basra, while the Intercontinental Bank of Lebanon and Bank of Beirut and the Arab Countries (BBAC) are also well established.

These success stories are leading other banks to take the plunge, with Credit Libanais, Banque Libano-Francaise (BLF) and BankMed all heading to Erbil in the next year. Maurice Iskandar, head of the International Division at BLF, believes it is the perfect time to invest.

“We consider the Iraqi market as a vast and growing one… Iraq remains a primary destination for Lebanese exports and investments, having been for many years the most important export destination for Lebanese products,” he said. “It is in many ways a strategic location and a natural market for our expansion.”

Yet there are issues over the potential growth of the industry in Kurdistan — the region is already home to 14 state-owned banks and 30 private ones, while personal banking remains in its infancy. In this climate, new investors may find it difficult to develop a decent market share.

BankMed, which is unusually due to open branches both in Erbil and Baghdad simultaneously rather than using the former as a springboard for the latter, said they were hoping their strong position in neighboring Turkey, where their affiliate T-Bank has 27 branches, will help differentiate them from their rivals. “Our presence in Turkey, in particular, is a definite plus for our customers in Iraq given the significant trade flow between the two countries,” a spokesperson for BankMed said.

Too many fish in the pond?

While banking is undoubtedly still growing, there are other areas where the relatively small market may already have become overpopulated. Toufic Tasso was among the first to realize the potential for top quality private higher education in Kurdistan. The Lebanese-French University was eventually established in 2007, the first private institution of its kind in Erbil.

Yet five years on and the university is still to turn a profit, while Tasso, the university’s president, admits that the market has become heavily competitive. Ten rival private universities have set up, while the regional government has continued to subsidize growing public universities. The 800 students being taught per year is below capacity by almost 200.

“I would say for the time being (the market) is definitely saturated,” Tasso said. “It is not necessarily saturated in terms of quality offer, but it’s not a market that is now in dire need for new universities.”

He points out that the culture of private education, so prevalent elsewhere in the Middle East, is not dominant in Kurdistan, highlighting tuition fees as an example. “It’s a totally different market than, let’s say, the Lebanese and Emirati models where people are used to private education in most cases — they know that they have to pay a price and that is adjustable with time.”

“Here we have lots of trouble changing the tuition fees every year to adjust for inflation. For them, when they start those are the fees whether it’s a two year program or a four year program, whether inflation is weighing on their costs or improving their revenues.”

Servicing up services

It may be that services, an area where the Lebanese have traditionally excelled, offers the best opportunity for new investors to the market. Erbil itself is barren of much of the luxuries that are so prevalent both in Beirut and the Gulf, as economist Riad Khouri pointed out. “If we were in Erbil and we wanted a nice Lebanese lunch, there is no nice restaurant. Let’s say we wanted to go and buy a certain book or DVD, the shops don’t exist. If you want to go to a club in the evening, they are not there,” he said.

The regional government certainly plans for this to change, aiming to increase tourism exponentially in the coming years. Some 1.7 million tourists visited the Kurdistan region in 2011, the majority of whom were from other parts of Iraq. The regional government hopes this figure will rise as high as 2.5 million, necessitating growth in the hotel market.

Erbil’s Rotana Hotel became the city’s first 5-star hotel when it opened in 2010, with much of the capital behind the project Lebanese. The development, which cost $55 million, was the result of a partnership between the Lebanese group Malia and the Italian company DIVA. Malia chief Jacques Sarraf has targeted the Kurdish market heavily, holding several major assets, of which the Rotana is the most prized.

Thomas Touma, the hotel’s Lebanese manager, said the hotel had benefited from its pioneer status. “We have been profitable since we opened, the profit has grown month by month, but we started with a profit,” he said, declining to give more detailed financial numbers. “We are seeing double digit increase on occupancy rate due to increased demand and short supply,” he added.

Touma admits that the market is going to get a lot tougher in the coming years as “five or six” 5-star hotels, none of which are Lebanese-owned, are due to open. However, he is hopeful that instead of undermining Rotana’s profits, the rivals will help spur the market.

“There is a new five star hotel open next to us — they opened and we did not see any drop in our occupancy or restaurant returns,” said Touma. “This is due to the fact that demand is increasing on a daily basis.” The statistics seem to suggest he may be right, with the Kurdistan region’s investment board announcing in July that tourism in the first six months of the year was up 75 percent on the same period in 2011.

The Rotana’s success appears to be pushing others into the market. In July, Lebanese real estate company Zardman announced the launch of a 200,000 square meter project in Erbil, which will include 269 luxury apartments, a medical center, a hotel and high-end shopping and entertainment centers (slated for completion in 2015).

Looking ahead

Yet, there is one issue that continues to dog the region, and that is consistent allegations of corruption. There is a widespread perception that the duopoly of the two main political parties — the Kurdish Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK) — has organized the system to make it work for them. Diplomatic cables released by WikiLeaks showed that the United States believed corruption in the Kurdistan region was “pervasive”, and could hinder foreign investment in the oil-rich area. While few people were willing to talk on the record about the issue, Touma hinted that bureaucracy can slow down a project significantly. “Being a new country under development there are still a lot of procedures, a lot of laws that have not been communicated well,” he said. But Lebanese-French University’s Tasso denies that the only way to succeed in the region is through greasing palms.

Investing in Kurdistan is undoubtedly a great opportunity for Lebanese businesspeople, yet there are pitfalls to be wary of. And while the service sector is undoubtedly in its infancy and the potential for growth is there, whether Kurdistan has enough attractions to become the regional business and tourism hub the government wants it to be remains to be seen.

0 comments
0 FacebookTwitterPinterestEmail
Feature

Parking against the machine

by Nabila Rahhal
written by Nabila Rahhal

How many times have you come back to your parked car to find a red surcharge ticket welcoming your overdue return? Hopefully you paid the LL10,000 ($6.6) charge within the 10-day time limit, lest it increase incrementally to a $26 fine and then $66, which you will inevitably have to pay when your car goes through the annual Motor Vehicle Inspection, or “Mecanique” as it is known. Behind those parking meters is a private company working alongside the public sector and there are substantial funds involved, and perhaps this is the reason behind their efficiency.

The beige parking ticket you get from the Ministry of Interior for parking in an illegal spot is a different story. If you forget about this ticket, the ambiguous method of collection will not soon hold you to account. And, human nature being what it is, we tend to abide by the rules when we know there is no escaping the consequences, and break them when we know we can get away with it.

Solving the parking problem

According to Rachid Ashkar, council member of the Municipality of Beirut, the decision to install parking meters as one of the solutions to the parking problem in the city was taken by the Municipality of Beirut, in collaboration with the World Bank, which loaned the funds for the project, back in 2000. In 2002, the Council for Development and Research (CDR) took on the role of consultant for the municipality and began the bidding process for an operator for the parking meters. Chafik Sinno’s Duncan-Nead won the bid for Greater Beirut and in 2004, he signed the agreement with the CDR and the Traffic Management Office (an autonomous entity under the Ministry of Interior, currently headed by Farjallah Srour). Finally, in 2009, the first parking meters were installed in Beirut.

“Four years into their installation, and with 643 parking meters in operation in Greater Beirut for 4,500 designated parking spots, phase one is complete,” says Ashkar. “We are now entering phase two, which includes installing 125 new meters, still in commercial areas and including the Corniche.”

According to Ashkar, the Corniche, due to its public appeal, will follow a different formula that will include having free parking on the weekends. Phase two will also include the introduction of different payment options through credit cards and through Short Message Services (SMS).

Pay and park all day

To ensure availability of space, the maximum parking time is set at two hours, but for those who park all day to go to work or university, there is the option of the $6.6 surcharge. “The $6.6 surcharge is not a penalty, or a punishment, it is an option to park all day against a certain fee,” says Ashkar. “This surcharge ticket can be used in different parking spots during the same day without paying a fee again. This service spares you from the valet and from the many parking charges you encounter on a typical day. To obtain this surcharge ticket, simply leave your car without paying the charge.” He adds that phase two of their project will include a media campaign promoting this surcharge ticket as people are unaware that it is not a fine. Part of this campaign, according to Ashkar, is to change the surcharge ticket’s color from the negative red to a neutral blue, and to add an explanatory sentence outlining that one can park all day anywhere using this ticket.

Fines and penalties come into play when the surcharge fees are not paid in the assigned time period. “Since everything is computerized, it is very easy to keep track of each and every misdemeanor. All outstanding charges are sent to the Mecanique Department and one pays them along with the car inspection fees,” says Ashkar. As soon as a surcharge ticket is issued and the controller takes the picture using his hand-held computer, an automatic notification is sent to the Traffic Management Office’s system and then the ticket’s charge is automatically increased if not paid in time and is finally sent to the Mecanique.

Who’s collecting?

With an average of 116 coupons sold per designated parking space per month, and with 4,500 surcharge tickets issued per month per machine in Hamra alone, it is no surprise that the total revenue from the parking meters in Greater Beirut is $60,000 per month. The obvious question which comes to mind is: where does all that money go?

“The parking meter charges are collected by Duncan-Nead and given to the Traffic Management Office, which is the operator of traffic lights and parking meters in Lebanon,” says Ashkar. “The office uses the money generated from parking meters installed in Greater Beirut for the maintenance of those machines, and also for the maintenance of traffic lights which don’t bring any revenues of their own, but use those of the parking meters.”

“After the maintenance is done and needed spare parts are bought by the Traffic Management [Department], the rest of the money goes to the treasury of the respective municipalities, which should use it to increase the capacity of the parking meter system in their area,” adds Ashkar. He is quick to point out that Duncan-Nead is merely the manager of the parking meters in Greater Beirut, and has a contract upon which it receives a monthly income from the Traffic Management Office in return for its services regardless of the meters’ output. “This fee is based upon the number machines it is operating and the number of employees it has on them and does not come out of the meters’ revenues,” says Ashkar.

Automation without wasta

Ashkar believes that the secret behind the success of this system lies in it being automated. “It has been proven that once there is no personal access to cancel or interfere in any operations, machines don’t have wasta (personal favors),” he says, and wonders why the Ministry of Interior does not equip police officers with a computerized system for the illegal parking spots. He acknowledges that traffic police officers have 10 kilometers under their supervision while the parking meter controller has only 400 meters, and so it is very difficult for the police officer to maintain control.

The antiquated system

Colonel Joseph Moussallam, head of the Media and Communications Department at the Ministry of Interior, agrees that the ministry is understaffed. He says ministry employees issue 250,000 beige tickets annually for illegal parking, and a high percentage of them are unpaid. “Just sorting the tickets out at the ministry takes time since the process is a manual one,” says Moussallam. “The purpose of the ‘no-parking’ spots is to reduce traffic jams, and in parking illegally one is effectively closing down a lane meant for drivers.”

Once a parking fine is issued, one has a period of 10 days to pay it, though it stays in the Ministry of Interior’s Traffic Management Office for a month before it is moved to the judiciary court.

“The judiciary court receives thousands of tickets per month, and because it also has no computerized system, it takes months and even years before a court decision is issued, and by that time the verdict could be for the ticket to double or triple in monetary amount,” he says.

Moussallam believes that in order for fines to be effective, they must be implemented promptly, otherwise people forget about them. As examples, he cites changes of address, and sometimes of country of residence, as reasons why people don’t hear about their parking tickets for years after they receive them.

“Judges have up to four years to issue a verdict before the ticket becomes absolute, but a lot can happen in the citizen’s life during that time,” says Moussallam.

Some people recount receiving tickets for cars they had already sold or having to pay exuberant amounts for tickets they don’t recall receiving. Others boast about years of not paying parking tickets and never hearing about them again.  The longer one waits to pay the beige tickets, the higher the fine usually gets and it seems the main beneficiary from the increased fines is the judiciary court.

“If a ticket is paid on time, 20 percent of the amount goes to the security forces, 20 percent to the municipalities’ treasury and 60 percent to the Ministry of Finance. However, if payment is late and it goes to the judiciary court, then 55 percent of the charges, including the late penalty, go to the judges’ treasury and the remaining 45 percent is distributed among the aforementioned factions,” says Moussallam.

Yet he is optimistic about the future, mainly because of the new traffic laws which are now in the process of being decreed. “The new laws will be modernized, especially the ones involving the radars for the speeding tickets,” says Moussallam. “We will also be sterner with higher fines, and increasing the scale on penalties for not paying on time. For example, the charge for illegal parking is going to increase to $33.” The system will remain un-automated however, as the budget cannot accommodate the expense.

Man vs Machine

In this battle of man against machine, it is clear that the machine is the winner. The Ministry of Interior and the judiciary court need to have an automated system for their parking tickets, similar to the parking meters’ system, or risk being drowned in paper work — that is, if they are still able to find a spot to park their car and make it to the office.

0 comments
0 FacebookTwitterPinterestEmail
Comment

Aleppo out of work

by Jihad Yazigi
written by Jihad Yazigi

It took almost a full year before Aleppo, Syria’s second largest city by population, became an active part of the popular uprising that began engulfing the country in March 2011; but when it did, events very quickly took a violent turn. This summer has seen thousands killed in armed clashes and bombings, more than 200,000 inhabitants are estimated to have fled the city and several districts are being levelled under daily bombardment. ‘Normal life’ is at an almost total standstill throughout the metropolis.

Aleppo is also Syria’s manufacturing hub, and according to the head of the Aleppo Chamber of Industry, Fares Shihabi, by mid-August all the plants located in the industrial area of Sheikh Najjar, a large complex located outside the city’s boundaries, had stopped production because of the rising insecurity. Factories could not be protected and employees feared going to their workplace, while the supply of inputs and the distribution of finished products became almost impossible — that equals more than 600 factories and 40,000 workers in the industrial city that are estimated to be out of work. Should the violence last it is likely that shortages of all kinds of products will occur across the country. Already, medical supplies are threatened and the World Health Organization has warned of drugs shortages — with some 20 companies producing a wide range of medicines, Aleppo is a major center for pharmaceutical production in Syria.

Until the recent rise in violence, Aleppo had managed to escape some of the worst economic consequences of the uprising. Its manufacturers, in particular, benefitted from a number of favorable circumstances. The suspension of the free trade area with Turkey, which was decided after Syria’s northern neighbor imposed sanctions last December, and the increase in customs tariffs decided by the government earlier this year, helped reduce competition in the local market. Likewise, depreciation of the Syrian pound, which has lost some 50 percent of its value compared to the United States dollar in the last year and a half, temporarily spurred increased exports to neighboring Iraq.

Though it has fallen well behind Damascus in terms of overall wealth, Aleppo had long been Syria’s economic capital. Its gradual decline began in the early 1920s when the demarcation of the country’s borders cut its links with its Turkish hinterland, followed by the nationalizations of the late 1950s and early 1960s that stripped the Syrian bourgeoisie, then mainly based in Aleppo, of its land and other assets.

However, it was only in the early 1970s that the balance tipped clearly in favor of Damascus with the increasing centralization of the Syrian state and the growing state capitalism imposed by then President Hafez al-Assad. From then on, the closer investors were to the center of power in Damascus, the luckier they were in winning large government contracts, which represented a large source of revenues and profits for both them and the middlemen/bureaucrats that helped them conclude the deals.

It is therefore no surprise that in the late 1970s, when protests demanding more political freedoms and democratic change began across the country, Aleppo rose — only to see its protest movement and that of neighboring Hama ferociously crushed by the government — while Damascus watched. Only when two decades later Bashar al-Assad reached power and began a policy of economic and trade liberalization, did the city regain some of its lost wealth. The improvement of ties with neighboring Turkey, in particular, helped boost trade, tourism and investment. After decades of marginalization, Aleppo saw its businesses thrive again and sought stability, calm and order. This was not, however, to last, and the city, as most other parts of the country, is now engulfed in an uprising that is unlikely to end anytime soon.

The profound economic, social and political changes likely to emerge from the revolution will force a redefinition of the country’s economic model and the role of the state, of the links between the center and the periphery and of the balance between trade and production. Whether Aleppo will lose again from these changes, as it has with most other dramatic turns of the last century, or whether it will adapt successfully to the situation as it evolves, remains to be seen.

 

JIHAD YAZIGI is editor-in-chief of The Syria Report

0 comments
0 FacebookTwitterPinterestEmail
Finance

Q&A – Christos Papadopoulos

by Maya Sioufi
written by Maya Sioufi

Continuing with their investigations of banks involved with Iran, United States authorities went after Standard Chartered Bank (SCB) last month, accusing the British bank of helping Iranian banks and corporates hide around 60,000 transactions worth at least $250 billion between 2001 and 2010. To settle these accusations and avoid seeing its New York license revoked, SCB agreed to pay a $340 million penalty. Prior to this scandal, with Asia as its core market, SCB had recorded its 10th straight year of record profits, standing at $3.95 billion as of the end of June 2012, up 9 percent year-on-year. The bank also announced plans to add as many as 1,500 jobs in the second half of the year. To shed light on the bank’s performance in the Middle East and North Africa region, Executive sat with Christos Papadopoulos, SCB’s head of MENA and Pakistan.

E  Standard Chartered has agreed to pay $340 million to settle the American accusations of working with Iran. Is this the price to pay to resolve a public relations headache and avoid seeing the New York license revoked?

We are continuing to have discussions with a number of other regulators in the US and it would be inappropriate for me to comment on when the discussions will be completed. We have an agreement to settle with the New York regulator. 

E  With respect to clients from the MENA region, have some of your clients stopped doing business with Standard Chartered? How has this issue affected your business?

Our clients in the MENA region have been very supportive and it is business as usual.  We remain open for business. Given the sensitivity of the issue, I cannot comment further.

E  Have we seen the worst in Europe yet?

I definitely think it is not over. I believe Greece will go out of [the euro] with a possibility that this will happen by the year’s end. When that happens, we will go through a significantly stressed situation, a bit like when Lehman Brothers went under. The hope is that by then the European Union would have the firepower to contain the contagion from Greece. I don’t expect more bailouts for Spain, Cyprus, etcetera, beyond what we have already had.

E  How has the turmoil in the MENA region affected demand for banking services?

The turmoil has affected the appetite for credit, but we have seen counterbalance in the significant stimulus provided by the governments such as in Saudi Arabia and Qatar. As banking services are correlated to economic activity, we went through a phase of subdued activity and we are still in that phase as there is no clarity. In the medium term, I am very optimistic; some classes of assets appear to be gaining more momentum, like Islamic banking, and I expect [this momentum] to accelerate in the medium term in markets such as Egypt.

E  Why Egypt?

We couldn’t do Islamic banking in Egypt before. Now with the Muslim Brotherhood in power, we expect a regulatory framework that allows for Islamic banking and we expect the population would want to buy [Islamic banking products]. We are increasingly developing solutions to offer the whole stream of products, both conventional and Islamic.

E  Where do you see the highest opportunity for growth for the banking sector in the region?

Saudi Arabia, Egypt and Iraq are the markets of tomorrow as they are enjoying a lot of economic activity. But I also see a strong opportunity in Lebanon where we want to focus on non-resident clients. Lebanon has a massive diaspora in markets like Africa and the Gulf and this becomes a much bigger proposition.

E  Which of the following will see the most significant growth in the coming years: retail banking, private banking or investment banking?

The retail banking business will reflect the demographics and in this region, as the youth come into employment, there will be an appetite for consumer products and therefore consumer banking — so we see a big opportunity in this space. We also see a big opportunity in private banking because there are big wallets in the Middle East. As for investment banking, the need will always be there but in the medium term, I expect consumer and private banking to gain more momentum.

E  With increased scrutiny on Swiss private banks, do you sense that big wallets in the Middle East will increasingly look for bankers in the region as opposed to developed economies?

The coverage was always done both in the Organization for Economic Co-operation and Development (OECD) countries and in the [MENA] region with bankers flying in and out. The main issue is where the assets are booked: Switzerland vs. Singapore vs. Dubai. As the OECD region becomes hostile to some of the clients, they are looking for solutions in different locations. In my view, it is increasingly in Dubai and Singapore, which is why we are seeing many private banks moving and rebalancing their resources into the Middle East. Bankers are booking their clients’ assets in the Middle East. A private bank client books his assets where he feels comfortable.

E  Once the dust settles, do you expect other banks to come back to the region?

It is a mixed picture. On one hand, European banks are pulling out from the region. They are reducing their assets not just in the Middle East and Asia but also in the US. On the other hand, American and Japanese banks are looking for growth opportunities. We have seen Japanese banks as big buyers of European banks’ Middle Eastern assets. It shows appetite [for assets in the region].

0 comments
0 FacebookTwitterPinterestEmail
Finance

Executive Insight – A fund for the future

by Ibrahim Muhanna
written by Ibrahim Muhanna

“Pending the institution of an old-age insurance scheme, an end-of-service indemnity (EOSI) Fund shall be set up.” So begins article 49 of the 1963 Social Security Law. Run by Lebanon’s National Social Security Fund (NSSF), the public provider of insurance for the private sector, the EOSI still pays retirees a lump-sum payment upon retirement but its conversion into a pension — with regular payments during retirement guaranteeing social security for old age — has not yet seen the light of day.

With developed countries and even developing countries establishing functional old-age pension schemes, Lebanon’s lack of reforms is alarming. Over the past four decades, several draft bills were put forth to the Lebanese Parliament aiming to reform the current retirement system and adopt a pension scheme, yet none have passed. The majority of the proposed reforms aimed to address the numerous drawbacks of the EOSI system, such as the large one-time payment as opposed to much smaller regular monthly payments, the lack of social security coverage for the self-employed and workers of the informal sector and the low employer contribution to the EOSI fund, which currently stands at 8 percent of the employee’s monthly salary.

Two paths through retirement

When designing any social security scheme, there are essentially two polarized approaches. The first is to define the benefits of the scheme — such as the payments during retirement — and subsequently determine the cost of those benefits, paid in the form of contributions by the employer, the employee and the government. These are known as defined benefit (DB) schemes. The second is to set the contributions to be paid by the participants of the scheme, which ultimately determine the level of benefits at the point of retirement. These are known as defined contribution (DC) schemes. Recent history has seen hybrid plans that combine both DC and DB schemes.

Back in 2004, the World Bank initiated a project supported by former Prime Minister Rafiq Hariri to implement a DC pension scheme.  The cabinet voted in favor of it, but it was shelved after Hariri’s 2005 assassination and has since been collecting dust.

The folder is now being discussed again and amendments are being considered, following the 2008 financial crisis that significantly hit DC schemes. As pension funds witnessed their asset values dwindle, their benefits, which are not guaranteed, plummeted.

The proposal

Parliament is currently considering either implementing the 2004 law with some caveats or implementing a proposal crafted by my actuary services firm calling for the establishment of two major funds at the NSSF to care for old age: ‘Fund A’, providing old-age pension coverage that would replace the EOSI and a new fund, ‘Fund B’, providing health care coverage for retirees.

Fund A combines the characteristics of a DC and a DB scheme by setting a level of financing to be paid to the NSSF by employers and employees. The employer contributes 12.5 percent and the employee contributes 4 percent of the employee’s monthly salary. The fund also guarantees a one percent accrual rate for every year of contribution as a minimum level of benefits for retirees, which ensures a decent standard of living. The design of Fund A aims to facilitate the NSSF’s work by linking the level of minimum benefits, contributions and the ceiling on contributable salaries to the average wage of covered employees.

It is worth noting that currently, the EOSI contribution is applied based on the full salary. In the current law, contributions to the health indemnity and the family allowance fund are capped to a percentage of a fixed salary that does not take into account rising wages.

Fund A would also accommodate a gradual expansion of coverage to all informal sector employees and employers, as well as self-employed persons who currently do not benefit from NSSF coverage.

The introduction of Fund B aims to provide healthcare to those most in need of it in our society: the elderly.

It calls on the government, employers and employees to contribute 2.5 percent, 0.5 percent and 0.4 percent, respectively, of the employee’s monthly salary. It also calls on the retirees to pitch in, through their pension, by providing 0.6 percent of their last monthly salary.

This proposal, currently being discussed in Parliament, aims to alleviate the burden on the Lebanese through a just social protection scheme.

0 comments
0 FacebookTwitterPinterestEmail