Lebanon’s outspoken Tourism Minister Fadi Abboud tells it like it is and how it should be in the country’s tourism industry as he sits down with Executive for this exclusive interview. 

• How much money is tourism expected to generate this summer?

Tourism will contribute $8 billion in 2010. It [generated] $7.2 billion in 2009.It is a fact that the kind of tourist coming to Lebanon is a high-spender. We are not geared and equipped to receive what I refer to as ‘fish and chips’ tourism. This country is not suitable for a $500 per week tourist.

The average stay is about nine days and the average [amount] spent is about $3,500. We get our numbers from Global Refund, the hotels and institutes. The numbers have been audited by the World Bank.

• You say that the Ministry of Tourism needs a bigger budget to attract more visitors from specific countries such as Spain, Germany and Russia. How would you spend the extra cash?

Promoting Lebanon is not just about TV advertisements. We have got to be present at each and every tourism exhibition, and not as the ‘poor relative,’ in comparison to our neighbors. I want to be in Madrid, Berlin, Moscow, London: in each tourism exhibition in the world, and want the Lebanese stand to be a decent stand.

Only last week we were in the New York Times, The Times of London, and the American Express travel magazine. In the last 6 months, Lebanon was probably mentioned in every decent publication in the world. It is now the destination for the connoisseur. At this moment in England, Germany, Spain, and certainly the Arab world, Lebanon is the destination. It is very difficult to get bored in this country, as my daughter who lives in London told me this morning.

• How do you plan to spread out tourism so that it’s not concentrated in the summer?

Religious tourism is very important. There is no other country in the world that has, within a radius of five kilometers, four Catholic saints. Most of these saints are 19th and 20th century saints, which is unique to Lebanon. The Vatican is only busy declaring saints from Lebanon!

We have Sunni sites and Shia sites. This is the wealth of this country. And it is the only country where you can do a new sport, which I call “skwimming;” it’s a combination of skiing and swimming [laughs].

We have one of the most sophisticated cuisines in the world. You’ve got the Lebanese people: the most cosmopolitan people on this earth. Even if you don’t speak a word of Arabic you can feel at home. We can think European — we are one of the few countries breeding international citizens.

• Can the new Miss USA, Rima Fakih, help increase tourism?

Absolutely. I’m working very hard to have her come here in September and get a lot of coverage for this. I expect this and I understand that she is ready and willing. And of course we are very proud.

• Do you feel that your reforms regarding nightlife and entertainment are being implemented? Are restaurants posting their menus outside their doors?

The law is very clear and we are working hard to enforce it. Menus should be [visible outside of premises]. There should not be a minimum charge. If there is a show, they are allowed to charge an entrance fee but to force people to spend $5,000 on a table of 10 people and pushing them to consume more alcohol is illegal. This is a country based on competition and free economy… I want the market forces to lower prices.

Some of these nightclubs are illegal, especially the ones on rooftops. They don’t even have a building permit. And certainly the owners are the son of this and the daughter of that, and every time we have to force them to behave. The music should not be that loud. People know by now that I don’t accept wassayit [influence], the Lebanese way. We are trying to bring back law and order to tourism.

• You often complain about the inefficiency of the public sector. How much time do you spend sorting out bureaucratic issues that are unrelated to tourism?

At this point it takes 80 percent of my time. I have a unit of seven people and I pay their wages, [which costs] about $15,000 to $20,000 a month. This has made things a bit better.

To be totally honest with you, what takes me a week to finalize in my company, takes me months and months and months [in the ministry]. As an example, this ministry has the right to supervise [Casino du Liban] as much as the Ministry of Finance, by law. I wanted to experience this right. It’s been now five months, I write and no one answers.

I have to go to the Ministry of Finance and beg, which is not really my character. The Minister of Finance is a friend and I have a lot of respect for her. She is transparent and straightforward. But the people running her ministry are still doing so with the Ottoman spirit, with a bit of ‘Crème Chantilly’ on top [laughs]. To be totally honest with you, the productivity of the public sector, in my opinion, is less than 10 percent of what it should be. 

• Are there any plans to build more casinos to attract gamblers from the Middle East and Europe? Can Lebanon realistically become a gambler’s destination?

Indeed, we need the law to pass through parliament to allow Casino du Liban to open branches, as they have a monopoly now. I am all for it — branches, Internet gambling and virtual gambling too. I am happy to open branches and not allow Lebanese to gamble [but rather foreign tourists]. You could have three or four casino branches in Lebanon, even if they are under the same management, but the idea is to let them compete with each other. 

We have a lot of Lebanese in Las Vegas and in the gambling business all over the world. We really need to bring in the professionals… to turn Lebanon into the Las Vegas of the Middle East. As a Minister of Tourism, this is a must.

At the moment, the Casino du Liban turns over $240 million. The government gets about half of that. I am sure if they will allow me to do things the way it should be done, within three or four years, we will get a billion. I will be able to increase turnover by 20 to 30 percent per annum. We can offer the nightlife, the glamour, the nice cigars… now [the gamblers] go to gamble [in Northern Cyprus] and there is no glamour.

• Can you update us about the public-private council on tourism that you are working to create?

Still waiting. Some people in government are not convinced. We are the only touristic destination in the world without a promotion council. We had a promotional board in 1960s and I’m trying to come up with a new one for the 21st century. But I am tired of begging as if I’m begging for personal favors… if they don’t want it, so be it.

I want to bring in the spirit of the private sector but the resistance of allowing the private sector into this ministry and any other ministry is beyond me. To start with, imagine that even the first class public servants are probably earning three to four million [Lebanese] lira per annum. If we have a promotional board, we need to pay the head — if I want to attract true talent — at least $100,000 per annum. Imagine [for the public servants] someone coming and interfering and earning three times what they earn. This makes them defensive… and makes my life difficult and doesn’t allow me to have a promotional board.

• Do you think potential investors get scared off when they see large developments or hotel projects taking much longer than scheduled? The Beirut Hilton, for example, has been ready to open since 2007 but hasn’t because of legal issues.

This can happen in any country in the world… Let’s be realistic. If we compare the time it takes to build a 300-room hotel in this country in comparison to Europe, we are taking half the time. We now have more than 1,100 five-star rooms being built, some will be ready in the next few months and some will take until the end of 2011. We have more than $4 billion invested now in tourism.

From gas deals with Algeria to investment in Libyan oil exploration, Europe is increasingly looking across the Mediterranean to the Maghreb to fulfill its energy needs. In addition to holding vast untapped hydrocarbon reserves that will enable Europe to diversify its import mix, the region also has strong potential for electricity generation.

Bilateral energy trade continues to expand with Tunisia, Morocco and Algeria agreeing to integrate their electricity markets with that of the European Union. A deal was inked at the Arab Maghreb Union–EU Council of Energy Ministers in June for a five-year program to harmonize the regulatory frameworks for their electricity markets, as well as foster technology exchanges from the EU to the Maghreb and develop more renewable energy sources in Africa.

“Building a regional electricity market will form a base for fruitful cooperation between the two sides of the Mediterranean,” Algerian Energy Minister Yousef Yousfi said at the meeting.

By 2050, the EU wants to receive 20 percent of its electricity from North Africa, and is backing a massive solar energy scheme to achieve this target. Called Desertec, the $500 billion German project envisions covering 17,000 square kilometers of the Saharan desert with solar panels. Thus far, companies from Morocco, Tunisia, Spain, France and Italy have attached themselves to the initiative. The electricity will be carried to Europe via cables constructed under the Mediterranean Sea.

With sun and space in abundance, North Africa is a key component in the EU’s target to increase the percentage of renewables in its energy mix. According to the German Aerospace Center, solar power plants in the MENA region have the potential to produce 470,000 MegaWatts by 2050. The first pilot project for Desertec will be launched in Morocco later this year and could generate up to 1,000 MegaWatts, while the entire scheme is hoped to be up and running within five years.  “Desertec as a whole is a vision for the next 20 to 40 years with investment of hundreds of billions of euros,” European Energy Commissioner Guenther Oettinger said after the meeting of energy ministers. “To integrate a bigger percentage of renewables, solar and wind needs time.”

Electricity exports from North Africa to Europe are already occurring on a small-scale, with a 400-kilovolt power grid link now connecting Algeria to Spain by way of Morocco. In the third quarter of 2009, Sonelgaz began exporting traditional thermal-generated electricity to Europe via the link. The Algerian state energy company reportedly has a temporary surplus of 1,000 MegaWatts, which it would like to sell to Europe, but at higher prices than are currently on offer.

A second European-African interconnection is planned between Tunisia and Italy. A $2.56 billion joint venture between the Tunisian Gas and Electricity Company (Societé Tunisienne de l’Electricité et du Gaz) and Italy’s Terna will see the construction of a 1,000 MegaWatt high-voltage direct current submarine cable.

A tender for this project is expected this year, though Tunisia needs to create a profitable financial model for the concession. Slim Kchouk, the director of Siemens in Tunisia, said: “The challenge is to find a company that will negotiate in advance with Italy an advantageous price per kilowatt hour over the lifespan of the concession so that the project can be profitable.” 

Rising local demand poses a perhaps greater threat to the viability of African electricity exports prior to the completion of Desertec. According to Sonelgaz, Algerian demand is growing at 6 percent annually and projected to reach 20,000 MegaWatts by 2015, up from 11,000 MegaWatts this year. In the long term, Africa could very well wind up powering Europe, but at the moment the greater impetus will be to meet its own needs.

Gebran Bassil is the minister of energy and water and the former minister of telecoms. In June, the cabinet unanimously approved Bassil’s five-year plan to reform the energy sector. Executive sat down with the minister for an exclusive interview to discuss  how he plans to deal with the private sector, corruption and political interests.

• You are looking for a large investment from the private sector, around $2.3 billion as a start, but how are you going to strike a balance between your commitment to not increasing tariffs for another three years, and asking the private sector to build a number of power installations before that?

The tariff structure will be fixed in a way to serve two targets: first, to relieve the government’s subsidy of the electrical sector, and second, to take into consideration the poor people and productive sectors. Buying electricity from the private sector [independent power providers] has a direct effect on the final cost of providing power [to the consumer], because the cost [of producing power] changes.

 It will not affect the private sector because the government will buy the electricity from the private sector for an agreed upon price [which accounts for costs]. This will only constitute 1,500 megawatts out of the 4,000 planned, and will affect the total cost the government pays by 35 percent.

• But what about the distribution side? The concessions [private electricity distributors] are saying they want to be service providers but without the ability to change prices, are they going to be willing to make the investments?

The distribution side is not taking a risk and this is not fair. We are not asking them to pay us for the quantity of electricity production. We are asking them to pay us what they are collecting on the end-user side, not on the generation side. This is a major guarantee for them but the state also needs a guarantee that they should pay us what we have been collecting, plus a certain margin, plus an incentive for any margins they would add to us. This should give them enough will to rehabilitate the distribution sector and to speed up the installation of the ‘smart grid’ [which distributes power more efficiently].

• Are you asking them to enter into a four-year partnership regardless of the cost structure?

Of course. But this four-year partnership will, later on, allow them to be real partners in the distribution sector. Because later if we decide to sell the network or to license it out, then they will be the most adapted to bid.

• So you are looking to annul their concession agreements and move them into service providers. How are you hoping to achieve this?

Yes, we will give [existing concessions] the chance to enter. But there will be other companies that will be willing and they will have to compete. If we can give them enough incentives or a priority, in return they would give up on the concessions. We will see, in a fair way, how we can help them. We are looking to solve a problem that is costing the state a lot of money. We cannot afford it. They are making money, so they can make a little bit less. This situation will not go on as is.

• There are a lot of public administrations and politicians that are not paying their bills. You said you would publish their names. Are you going to do this? When is the accountability going to come?

We have already cut the power to 50 percent of them and we made the others pay. This is something that is 90 percent done, we are still closing the file on the other 10 percent because they claimed other rights and protested in front of the courts. Now we have another problem between regions and villages, where in some of them we have a high rate of collection and on others we have a very low one.

In the technical losses we also have a large discrepancy where in some places we have 15 percent losses and in others we have 78 percent. We are trying to achieve a certain level of equality between all regions and people. This will be a real sign of reform and send the right message to the people that they should pay because the state cannot pay anymore. We are asking them to contribute in exchange for relieving them from the private generators.

• Unbilled electricity is estimated by some experts at as much as 40 percent of the total. Are you looking to re-enact a principle set by former president Lahoud to allow police to accompany search teams and collectors?

We are approaching it in a quiet way. I know there is a lot to be done and I am following up with judges, the police and everyone involved. Arrears are now paid in installments that reach 72 months. We are facilitating this in order to encourage people to pay their dues. The smartest thing is to have a ‘smart grid’, because this is where you are unbeatable. Now they beat you, and we cannot make the police walk with every collector, it is not possible. In order to have 99 percent efficiency we have to have a system that is controlled by us and not by the consumer.

• You have stated that you would like to change Law 462 [the electricity law] in order to accommodate for the new plan, In your opinion what needs to change with regards to Law 462?

This is not the place to specify all the amendments that need to take place. But in principle, do we need to unbundle transmission from distribution? Is it possible in a small country like Lebanon? Are we able to liberalize the distribution sector? In some places we cannot reach more than a 5 percent rate of collection, so how will the private sector come in? There are major strategic questions that need answers.

We will have to look at the law after reading the results of the experience that we will go through during the next four years, where we will see if it is possible to have Electricité du Liban (EDL) as three companies or as one. What is more important is that, as it is now, the law is not applicable. If you want to apply it you have to wait a few years. It’s already been eight years and we have done nothing. The law itself talks of a transition period, so we consider this as the transition period: we work according to the law and amend it, taking what is good from our experience and putting it in the law. We need to give it a high priority because it relates to the future of the sector.

• Are you for the creation of an Electricity Regulatory Authority (ERA), as stipulated in the law?

It depends on what are our choices in the sector. If the private sector is involved it would need to be regulated by an ERA. So are we able to appoint it now, then wait two to three years until it has its structure and its bylaws?

• You seem like you are describing the Telecom Regulatory Authority now.

We don’t want the same thing to happen. We would be mixed up with two sets of prerogatives and have EDL still working and fixing prices. We need to prepare the ground for the ERA to come in later on and see what it will need in terms of regulation, then we will decide when to launch it. Do you think that anyone can take the decision now to change tariffs?

• Well, the Council of Ministers could do it.

Of course. But this is a major political and social decision that you cannot take when you have a sector that is completely paralyzed. You need to bring it up, restructure it, and then you might say ‘this is what we need and this is what we don’t need.’

• In your plan you note that many of EDL’s employees are “political appointees and unqualified workers.” Which political parties are you talking about and how are you going to make sure that these parties will not block the corporatization of EDL?

You can never be sure in Lebanon, and you need to be strong enough to forbid them from doing this. It’s much better to have a consensus on the issue just as we had with the plan. Because we cannot be sure, we are not relating everything to the corporatization or unbundling. If someone wants to hinder the process of corporatization, politically they can because it is mostly related to the employees. Once we have all actions moving together, definitely we will have problems and obstacles that stop some, but the other actions will be moving ahead.

• If there is political interference, will you move to expose who is responsible by name?

Yes of course. Now I have a plan that is approved and I am accountable for implementing it.

• One of the three zoning scenarios you have outlined has caused concern among many people, including the European Union, because it seems to break up the country into sectarian pieces to be split up between the power brokers of Lebanon. Are we planning the sectarianization of electricity in Lebanon?

Is it the job of the EU to determine how we want to distribute electricity? This was based, only, on the electrical distribution that is adopted now in EDL; it has nothing to do with other issues. You have to work based on what you already have. I cannot decompose them and recompose them now.

• The fear is that if you use independent power production (IPP) and the large sectarian influences get involved in each area, they will control electricity provisioning to their respective populations.

For me, when I work in a transparent way, I don’t see things in that way. I don’t see a problem once we create a transparent tender for a company to win. If it is politically backed or not; it is not my problem. My problem is to get the best price, and if we don’t get the best price I won’t accept to proceed with IPP.

• Why did you forego the option of coal, seeing as it is the cheapest option and it can be cleaned to limit some of its environmental impact?

I did not exclude it. In a sense it can always be adopted if it proves to be possible. First of all, the main pillar of this policy paper is gas, because we will need gas not only for electricity, we will need it later on for industry, transport and domestic use. Once we expand investment on building infrastructure for gas, we will have the power plants working on them as well. It’s complementary. This is what makes the paper not only a policy paper for electricity but also for energy. Gas is not expensive, and it is the least pollutant, which is not the case with coal. Coal has so many complexities in affording the coal and storing it in a country where you don’t have good monitoring on environmental issues. Another issue is that a coal factory is expensive to build and very long term.

• What about the potential of local gas, as we have extraction legislation now that is current being considered?

This is another reason we should rely on gas. If we have gas in our seas, let’s take it out and use it. The law will be adopted the way we are presenting it with minor changes. But we will adopt the law and we will stick to two main rules that can be described as political.

First is to have a committee that is under the minister and reports to the minister, who will report to the Council of Ministers. The decisions will be formed technically and transformed politically through institutional means. This will give a guarantee to both the state and the investor that it is a fair, well controlled and monitored process. Secondly, the revenues coming from gas will be put in a sovereign fund to secure its value.

• The plan has been approved by the Council of Ministers but parliament has not yet voted on the new laws to be passed. When do you think this will happen?

What we need now is only one law — and we might not even need it — for the production of energy. For this we prepared a small draft. Or we wait for the public-private partnership (PPP) law, which might include this inside it.

Promoting one’s own vested interests has always been the mantra of Lebanese policy makers, and we’ve become accustomed to seeing them endlessly tie up progress in legislative knots to protect their turf. So alarm bells ring when our leaders finally agree on something.

On the surface the announcement that our cabinet agreed to Energy Minister Gebran Bassil’s 5-year electricity plan looks like a step toward reform. Ostensibly, the plan aims to end the country’s chronic blackouts and relieve the sector’s deficit burden from the government, which amounted to $1.5 billion last year.

But it is likely intended to preserve the minsters’ own interests — such as reinforcing the pillars of the sectarian system through which they secure their influence — before it serves the needs of their constituents.

What needs to be done is obvious. In production, transmission and generation the sector needs a complete overhaul, and there needs to be a purging of the political patronage systems endemic at Électricité du Liban, Lebanon’s state-owned electricity provider. To his credit, Bassil’s plan addresses these elements in detail and proposes fixes that, according to most experts, could alleviate our short-circuited sector. But before we start to borrow and spend $4.8 billion, we should ask ourselves if this time we do it by the book, or ‘a la Libanaise’.

The convoluted and dysfunctional process by which decisions in the electricity sector are currently made — or more accurately, not made — between the cabinet, the ministry and parliament, is not going to produce decisions that are free from political and sectarian influence.

For all the positive elements of Bassil’s plan, he is advocating against setting up a regulatory body to oversee the overhaul of the system until many of the changes have been implemented. Without the proper checks and balances we risk repeating the same type of ‘sector suicide’ we experienced with telecommunications, which now plagues our economic competitiveness and makes us the laughing stock of the regional telecom industry.

Allowing government to regulate the sector cannot  continue, and yet the cabinet has approved the plan in question, provided that it also has the authority to oversee it.

Aside from the opaque manner in which public borrowing and spending of $2.5 billion to reform electricity is being carried out, if the cabinet is allowed to chaperone implementation, the other $2.3 billion being requested from the private sector will also likely be farmed out to sectarian interests, effectively slicing up our electrical pie. Without conflict of interest legislation and a truly independent regulatory body (not one that is also appointed through sectarian patronage,) the provisioning of electrical production and distribution will be subject to the same nepotistic tendering and distribution of power that typifies our existing institutions.

What’s more, if the practice of local distribution is adopted without ensuring that regional leaders do not monopolize the provisioning of electricity to local populations, there will be nothing to stop them from subjugating the people through greater dependency on them for basic services.

Some have suggested that sectarian loyalties are the only way to guarantee customers actually pay their power bill, but if the cost of tariff collection is strengthening an institution that tore this country to shreds and continues to stunt its potential, then I would personally prefer to live in the dark.  

With new legislation covering public-private partnerships (PPP) now making the rounds to include the private sector in electrical reform, we have the opportunity to start protecting our economy from conflicts of interest, not just the “principles of transparency and equality among participants,” as the new PPP draft is proposing. 

If we are to take the long strides we need to in order to solve our structural problems, such as electricity, once and for all, we cannot do so while ignoring what produced our predicament in the first place — unless of course we want to protect the candle-makers. 

Sami Halabi is deputy editor of Executive Magazine