Feature

Can Syria go it alone

by Andrew Tabler
written by Andrew Tabler

The inclusion of President Bashar al Assad’s brother and brother in law in a confidential version of the Mehlis report leaked on October 21st has deep implications for the Syrian regime. The pressure game is now on, as the United States and France push for Security Council Resolution that demands Syrian compliance with the ongoing investigation into Rafik al Hariri’s death or face possible UN sanctions. What remains to be seen is how international pressure will function in the milieu of Syrian reform, as the globalised environment so many Syrians have been looking to for hope begins to turn against them. So far, the Syrian government has organized poorly attended popular protests against what Damascus calls an “unprofessional investigation”, and all the while the implications of the report are beginning to sink in among Syria’s business classes.

Since Hariri’s assassination in February, power in the Syrian regime has been centralized in the hands of the Assad family. The president’s brother, Maher, is commander of Syria’s Republican Guards – elite forces that have been used to, among other things, put down rioting of Kurds in the spring of 2004. On February 14, the day of Hariri’s murder, the president’s brother in law, Asef Shawkat, was appointed head of Syrian Military Intelligence (MI) – perhaps the country’s most powerful mukhabarat agency. His rise through the ranks was relatively swift: Shawkat was named second in command of MI on November 20, just as UN Security Council 1559 went into effect.  At the same time, a rival to Assad from within the ruling Alawite sect, Ghazi Kanan, was demoted from the head of a mukhabarat agency to the civilian administration as Minister of Interior.

Then in June, during the Ba’ath Party conference, most of the country’s “old guard” retired from the party, including Vice President Abdel Halim Khaddam – long rumored to be a power center in the country. Khaddam played a key role in negotiating the end of the Lebanon War through the implementation of the Ta’if Accord. With Ghazi Kanan’s death in October in what officially was determined a suicide, most if not all alternatives to an Assad family-led Syria had been eliminated.

With the Mehlis investigation now pointing its finger at members of the Assad family, and Damascus promising it will cooperate, two options seem plausible. The first, full compliance with the probe to the extent that Maher or Shawkat would be delivered to an international tribunal, would likely lead to the collapse of the Assad regime rather quickly, or at very least, the transformation of Bashar into a Juan Carlos who presides over a democratic transition. The other and most likely option is Syrian compliance falling short of delivering Assad family members for trial. As Mehlis has indicated his work is far from finished, the moment for full UN sanctions is still not at hand.

Most people in Syria are betting on the second option. Damascus will now be in full defensive mode, and will likely hunker down and hope the storm blows over. Even if it does not, many question remain over Damascus’ ability to survive a blocade similar to that inflicted in Saddam Hussein’s Iraq.

Since Syria’s currency crisis of the mid 1980s, Damascus has employed a strict foreign exchange regime designed to suck up as much hard currency into Syria and keep it there, what economists call a “safe” model. Hard currency deposited in banks in the form of cash is not allowed to leave the country. Dollars transferred into the country, however, both for personal use or investment, can be transferred back out. The result has been impressive. To date, the Central Bank of Syria and the state’s mammoth Commercial Bank of Syria hold around $18 billion in reserves, enough to finance current import levels for three years. The majority of Central Bank reserves are held in cash. Currently, some $13 billion in Central Bank deposits held by the Commercial Bank of Syria are deposited outside the country at very low interest rates.

Even under pressure, the Syrian private sector will most likely continue to finance its hard currency needs through the black market, which is partially run through Lebanon. Reigning in that system could be difficult, as its remains unclear if Banque du Liban would pursue lesser offenders as they have Lebanese and Syrian security chiefs.

Other questions remain about how Syria’s new joint-venture private banks – most of which have Lebanese involvement – will fair under increased pressure.

“Sanctions would pose a lot of challenges for the new banks,” says Bassel Hamwi, Deputy Chairman and General Manager of Bank Audi Syria. “But we still don’t know what shape sanctions might take. Regardless of what happens, having a Lebanese partner is a strength.”

The real worry among banking sector observers is that increased pressure will impact ongoing reforms to Syria’s restrictive foreign exchange laws. Over the past six months, the Central Bank and Commercial Bank have eased access to hard currency to facilitate trade and better compete with private banks that are taking in larger and larger deposits every month. Some analysts predict that Syria’s foreign exchange restrictions are likely to remain in place for the foreseeable future.

In terms of agriculture and energy, two key commodities that could keep the country running even under the harshest of measures, Syria remains self-sufficient. While oil production is in decline, the government’s recent conversion of power stations from oil to natural gas could help the regime squeeze out every last drop for domestic use. Vital foreign involvement to develop Syrian oil fields, however, could be restricted as it was in Libya following the Lockerbie bombing. Best estimates show Syria has about 10 years of oil reserves, with rapid dips in production after five.

If the UN decides to cut off oil exports, however, this could go a long way to bringing the Assad house down. Officially, oil proceeds account for about half of all state revenue. Other estimates put that percentage much higher. Over the last few years, the Ministry of Finance has reduced Syria’s tax rates in a bid to entice Syria’s business classes to forego double and triple bookkeeping. While the law was passed with the business community’s input, another law enacted the same day gave the Ministry of Finance broad powers to investigate tax evasion. Businessmen immediately protested the move, causing the ministry to back down. Just how far the state would push businesspeople to pay taxes as Syria is under the gun remains unknown.

Syria is also skillful at circumventing sanctions as well. Damascus has been under US sanctions since 1979, which were toughed up in 2004 with the implementation of the Syrian Accountability and Lebanese Sovereignty Restoration Act (SALSA). Despite both measures, US goods are still readily available in Syria. The Syrian government allows sanctioned items to be imported through third countries, with Lebanon and Dubai topping the list. As the US embassy in Damascus openly admits that it does not have the resources to enforce its sanctions in Syria, it could soon be up to US companies to acquire end-user certificates for every microchip, modem and wireless router in the Middle East.

There are concerns over the Mehlis investigation’s impact on foreign investment. Syria’s population growth rate of 2.85% per annum remains one of the highest in the Arab World. Over the last few years, the State Planning Commission has produced studies showing that hundreds of millions of dollars in foreign investment per year will be necessary to create the minimum 185,000 jobs per year to absorb new market entrants. As current capital and labor productivity rates are pitifully low (with one World Bank team reporting that Syria has the lowest Total Factor Productivity in the world), it seems certain that any dip in investment from the Arab Gulf would spell disaster for Syria. Following Hariri’s assassination, capital from Saudi Arabia – one of Syria’s main foreign investors – slowed considerably. While projects funded from Qatar, the UAE and Kuwait have filled the gap for now, it remains to be seen if the petrodollar tap will keep flowing if Mehlis finds top-level Syrian responsibility for the murder.

Interesting thus far have been popular reactions to the report. Rallies held throughout Syria on Monday were considerably smaller than those held in March. Private sector sponsors, who last time donned company t-shirts while carrying banners opposing outside intervention, were no where to be seen. Only one mobile phone company, Syriatel, which is owned by Assad’s cousin, Rami Makhlouf, sent out text messages ahead of the event calling on Syrians to come out in support for their government. Students made up the majority of protestors. Most of those carrying banners in English renouncing foreign intervention in Syria affairs openly admitted they had no idea what their placards said. And last but not least, while the rally lasted but a few hours, Syrian TV kept replaying tape of the rally’s peak the entire afternoon before iftar.

Thus far, the report has been somewhat of a wake up call for Syrians, whose nationalist sentiments seem to be growing.

“People are starting to understand that we are in big trouble,” said one accountant, who preferred to remain anonymous. “They are starting to understand that all of Syria will soon be under pressure. This will rally support around the president for sure.”

Or will it? Ahead of the Mehlis report’s release, American diplomats in Syria have openly asked Syrians how the US and UN could punish the Syrian regime without hurting the population at large. The limited impact of SALSA thus far, however, shows that Washington’s ability to come up with much promised “smart sanctions”, where a regime is pressured to change without hurting the population at large, remains to be seen.

“Worldwide experience with sanctions shows that they hit from the bottom up,” says Hamwi. “The government can wait it out, and the people with resources will survive. Twenty years ago it would have been different. The private sector is the engine of economic growth in Syria now.”

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Development

A long-due story of mismanagement

by Safa Jafari
written by Safa Jafari

This year marks the beginning of the International Water for Life Decade 2005-2015.  The United Nations, through the United Nations Environment Program (UNEP) and World Health Organization (WHO), have introduced ten critical years, which started on March 22, 2005, to focus global attention on what should be obvious: water for life and aims, not just to highlight the magnitude of the world’s water problem, but also to bring all “stakeholders” together to apply workable solutions.

Clean water is asserted by the UNICEF’s Executive Director Carol Bellamy as “an inviolable right, not a privilege.” It is the basis of all life and is recognized as a humanitarian issue and a human right, the misallocation of which becomes a breach of legal norms.  According to UNICEF, two buckets – 20 liters – of safe water a day is the bare minimum a child needs to live.  This is enough for drinking and eating, washing and basic sanitation. But around 4,000 children die every day due to lack of access to an adequate supply of clean water. 

If that were not enough, each year more than 1 billion of the world’s people have little choice but to resort to using potentially harmful sources of water. About four out of every 10 people in the world do not have access to even a simple pit latrine and nearly two in 10 have no source of safe drinking-water, thwarting progress towards achieving the Millennium Development Goals (MDGs) discussed in last month’s issue.  Within these MDGs there is a specific target: to cut by half, by 2015, the number of people without sustainable access to safe drinking-water and basic sanitation. However, the UN Millennium Project Task Force on Water and Sanitation, however, recently added that integrated development and management of water resources are crucial to the success or failure of all the MDGs, as water is central to the livelihood systems, particularly those of the world’s poor. 

Lebanon was the first Arab country to host celebrations marking the United Nations’ World Environment Day on June 5, 2003, the theme selected was the aptly titled ‘Water – Two Billion People are Dying for It!’.  The agenda sought, “to give a human face to environmental issues, empower people to become active agents of sustainable and equitable development, promote the understanding that communities are pivotal to changing attitudes toward environmental issues, and advocate partnership among nations to allow people to enjoy a safer and more prosperous future.”

But the promotion of sustainable development entails more than just the engagement of communities.  These cannot be ‘active agents’ so long as better awareness of the problems is not coupled by effective means to tackle them, i.e. a healthy interplay amongst: grass-root action, accountable policy, and effective infrastructure. 

To what extent are these three present in Lebanon?  Let’s put it another way: the story of water in Lebanon is that a culture of mismanagement that has led to shortage and contamination.

Ironically Lebanon has a wealth of water resources in its numerous rivers, its underground aquifers, and has generous winter rains. But the country faces a perennial water shortage. It could theoretically meet all its own needs as well as export hundreds of millions of cubic meters to its more arid neighbors.  Most households suffer regular water cuts and irregular access to fresh drinking water. 

About half of the 2,600 million cubic meters of accessible surface and groundwater is wasted every year as it is left to flow into the Mediterranean.  Estimates of Lebanon’s annual water demand vary from 1.1 (Parsons study) billion to 1.4 (ESCWA) billion cubic meters. A USAID funded study by Development Alternatives in 2001 estimated that Lebanon uses 75% of its annual water supply for irrigation.  Domestic use accounts for 165 mcm and industrial use 130 mcm, according to Parsons.  However, the Parsons study concluded that real domestic demand for water is over 300 mcm.  For many Beirutis, water is rationed – or is not available at all – during summer.  Many Lebanese have to fill water bottles at public fountains or buy water from trucks.  Demand for water is expected to rise to 2.5 billion cubic meters by 2015, and perhaps as much as 4.0 billion cubic meters by 2025, according to ESCWA.

Donors have spent over $600 million since the end of the civil war on renovating the antiquated water supply networks, but a USAID-funded study estimates that more than half of the distribution systems still need to be overhauled. Irrigation systems are in equally bad shape. They use mostly inefficient flood methods and reach less than half of the potential agricultural areas. USAID has funded almost $6 million in potable water and irrigation projects in the past decade, while Japanese, French and other governments have also funded different water projects calling for privatizing the water sector, renovating potable water networks and the conducting of better water pricing schemes. 

To make matters worse, there have been disputes with Israel over accessibility of the Lebanese government to the Wazzani tributary from the Hasbani River. However, talk of building dams are still under way and Arab donors have pledged over $150 million to fund the first phase of the Litani River Project in the south.  Long-due plans for water projects are hoped to provide drinking water, irrigation and electricity.

But all that shines is not fresh water. Estimates of pollution in Lebanon’s waters vary and statistics are minimal, out of date, or faulty.  One study estimated Lebanon’s deposit of raw sewage to equal 38,095 cubic meters per day.  Another study stated the figure was as high as 500,000 cubic meters of untreated sewage. Sadly, both studies agree on two facts: sewage is untreated and deposited into Lebanon’s waters. Out of Beirut alone, there are 15 discharge points of raw sewage and a further 23 points along the Lebanese coast we bathe in.  And raw sewage is only part of what is being deposited in our waters.  Research carried out by the Greenpeace Organization in October 1997 showed the presence of ‘a high rate of heavy metal and organic bacteria in Lebanese waters’.

A study published last September in the Daily Star newspaper and another published last July in the Environment and Development magazine – showed that the Litani River has a high average discharge rate of 770 million cubic meters (mcm). Domestic wastewater is the largest pollutant in the upper basin of the Litani. And although about 50 percent of the population is connected to a sewer system, there are no wastewater treatment plants there yet. The Litani’s Qaraoun Dam, completed in 1956, holds some 220 mcms and approximately 70 percent of the damn is polluted water.  The levels of pollution vary from season to season but there are no ongoing tests being conducted on the dam. The tests that have taken place indicate high pollution in certain areas and some conclude that the upstream Litani River is microbiologically unsuitable for domestic use or bathing.

Several of the Litani’s tributaries are highly polluted due to contaminated discharge, not excluding solid waste. Most industrial facilities within the Litani area do not treat their wastewater before directly discharging it into the Litani or its tributaries. Also, the overuse and misuse of agrochemicals by farmers and farm run-off is another source of contamination.

The World Health Organization (WHO) measures the level of Fecal Coliform bacteria found in water to determine the level of its pollution. It is not recommended to swim in an area containing more than one hundred colonies of Fecal Coliform bacteria per one hundred millimeters of water.  Prolonged contact with contaminated sea water can lead to several health problems, most notably various forms of skin disease, as well as diarrhea and vomiting.  Studies carried out by Environment and Development magazine on September 14 showed that the level of Fecal Coliform bacteria found at one of Beirut’s most luxurious resorts and private beaches was drastically above international standards at 620 colonies per 100 millimeters of water.  This brings no surprise when waste from slaughterhouses is freely allowed to be tossed or flooded into nearby rivers.  

Incidentally, November 19 is World Toilet Day, an event that has been celebrated annually since 2001 on the same day.  The goal of the World Toilet Day is to educate people on sanitation issues and promote better toilets around the world.  President of the World Toilet Organization Jack Sim was quoted by Reuters as stating that 2.6 billion people, or 40% of the human population, do not have access to proper sanitation.  Ironically, to celebrate this day, countries such as Japan and others in the EU went on to compete in the design of the most luxurious and exquisite toilets while our part of the world continues to search for ways to dispose of its daily waste without severely putting human lives at risk. 

What we must understand here is that we are all stakeholders in this as we eat and drink; swim and bathe; and allow our children to play on formerly flooded riversides whose odor provides an indication of the bacteria they hold.  In addition to health and hygiene, the nation’s economic development is at stake.  Tourism is at risk as beaches and running water are declared unsuitable for human use, and Lebanese employees are naturally less productive if they end up often taking leave due to some mysterious ‘stomach virus’.

During the war much of the information about Lebanon’s sewage system was misplaced, lost or destroyed.  Water losses exceed 50% in many areas. Much of the country’s irrigation system dates from before the civil war, and cracks in canals, evaporation, and illegal use of canal water account for irrigation efficiency of only 30 to 40%.  It is also estimated that about 40% of the population uses cesspools, which consist of porous pits that receive wastewater from the toilets, showers, wash basins or other sanitary fixtures, with no proper service for sludge removal, so they are subject to overflow or contamination of groundwater.  Naturally, contamination finds its way to our potable water system through leaks from damaged networks, clogged wells, or flooding rivers. 

Due to lack of regulation, the Beirut River, as one example, has become a dump for garbage and sewage and according to Greenpeace Lebanon, if nothing significant is done before the rainy season starts, the river and underground reservoirs will be entirely polluted. 

Numerous governmental decrees have established standards for the proper disposal of pollutants. There are guidelines and “environmental limit values” set by various ministries. And there are decrees for the management of healthcare and hospital waste.  The problem, however, lies in two facts:  there is no system of accountability for those who breach the law, and there is no centralized, regular and uninterrupted monitoring of pollution quantities and qualities in Lebanon to date.

The people of Lebanon know that their country suffers a shortage and contamination of its waters; the funds have come to Lebanon, particularly to help solve the water problem; and our policy makers are well aware of the situation that has haunted them since the civil war.  Where does the problem lie?  The problem lies in the management of those three ingredients:  the people, the funds and policy. The people need to change their environmentally harmful behavior.  New and healthy infrastructure must be created to support the widening water network in the country.  And an effective policy must be put to force whereby any misconduct is monitored and its doers are held accountable.  For some reason, we seem to think that the problem of water in Lebanon yet needs to be made known to the people who today smell and taste the water they use – whenever it is available.

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State department

Investing in people’s futures is good business

by Washington Correspondent
written by Washington Correspondent

The urgency in bringing rapid relief to survivors of Pakistan’s devastating earthquake might not pass as a major business decision, but ultimately it is. Call it long-term investment in terror prevention, and file it under “insurance claims.”

In the aftermath of the catastrophe – close to 50,000 dead, maybe twice that figure once the numbers are finally in; 15,000 villages affected by the disaster, and, according to reports from international relief agencies and Pakistani government officials in the field; possibly as many as 3 million, possibly 4 million, people homeless. The numbers are astounding by any standard; it would be the equivalent of almost the entire population of Lebanon living in the street. The earthquake has destroyed more than 80 percent of structures in parts of northern Pakistan and strong aftershocks threaten buildings already damaged by the initial quake. Winter in the Himalayas is just weeks away and unless aid arrives fast, tens of thousands of people will starve and freeze to death.  The U.N. coordinator, Undersecretary General for Emergency Relief Jan Egeland, who was touring the area around Muzaffarabad described the situation on the ground as “desperate.” “With wintry conditions arriving in the higher elevations, children are facing a potentially deadly combination of cold, malnutrition and disease,” said UNICEF Executive Director Ann Veneman in New York. “Most housing has been destroyed in the hardest hit areas, so the survival of thousands of young children is now at stake. Shelter, nutrition, and health care for children must be a priority.”

And all this is taking place in a region of the world where you need only scratch the surface to discover the deep-rooted sympathy for al-Qaida.

How is this an economic affair? Simple mathematics really. Unless relief from the West arrives in the affected areas post haste, there are excellent chances for the region to turn into a vast breeding ground for potential al-Qaida conscripts. Recruiters from radical organizations seeking to refill their ranks will not waste time in signing up a new crop of jihadi fighters from among the tens of thousands of men aged 15-45 who overnight find themselves alone, homeless, jobless, penniless and ripe for the recruiter from any of the militant politicized Islamist organization, of which there is no shortage in Pakistan, will gladly join the ranks of those organizations who are willing to give them food, shelter and an AK-47.

That’s assuming they have not already started doing so. Already, the day after the disaster, reports from the quake-affected areas made mention of mujahedin fighters arriving with blankets, food and medicine to assist survivors in one village where no other help arrived.

Little matter to the cost of the relief operation, it will turn out costing the international community far less in the long run.

Back to the math: working on the assumption that the lower of the estimates is correct, assuming that among the 2 million homeless only a small percentage — just half a percent — of males aged between 15 and 45 accept the offer from the Islamists. That is still a staggering 10,000 possible recruits.

Much closer to reality the numbers could well be in the tens of thousands, if not more. As a reminder, it took only 19 men to carry out the terrorist attacks on the World Trade Center and the Pentagon.

If the investment is not made today to save those left stranded on the cold, barren hills of Pakistani Kashmir, a far greater investment will have to be made to fight them later. Consider it a race between international relief organizations and Islamists groups for the hearts and minds (and bodies) of the refugees. The importance of providing for the victims cannot be stressed enough. If it means deploying NATO, U.S. and EU forces toward that end, then it should be done. Every hour wasted could mean a successful “close” for the recruiter; every recruit a potential future terrorist.

It will get far worse unless massive amounts of aid start to arrive without further delay. Many cities and villages in Pakistan-administered Kashmir and the North-West Frontier Province, the most affected areas, have been wiped out. NWFP abuts Afghanistan and is the area where Osama bin Laden is believed to be hiding. He could soon be offering many more people refuge in his cave. His fighters are believed to frequently trek back and forth across the Pakistan-Afghan frontier.

The scope of the disaster requires new thinking – thinking outside the box. Once these disaffected youths have been fed and clothed, there will be the need to keep them occupied. This is where a sort of Pakistani Peace Corps should be created and financed by the international community, so that in turn, they can help rebuild the devastated areas.  In the long run, it will prove to have been a relatively low price to pay for the dividends reaped.

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For your information

Daniel Kaufmann

by Executive Contributor
written by Executive Contributor

Daniel Kaufmann is the director of global programs at the World Bank Institute and a noted researcher on issues of governance. On the occasion of his visit to Lebanon, he talked to Executive about the World Bank’s work to enhance governance, reduce corruption and alleviate poverty.

Is your visit to Lebanon part of a regional tour, or was it purposely scheduled?

It was purposely scheduled because of excellent discussions we had with the minister of finance [Jihad Azour] during the annual meetings of the World Bank and IMF [in September]. My visit is a follow-up to that. I don’t believe in regional tours for tours’ sake, I go only to places where there is a possibility for concrete help and work.

The World Bank categorizes nations into four brackets in terms of governance indicators. Knowing that you said you are not an expert on Lebanon, which policy recommendations tend to be the most important for a country situated in the lower middle bracket of achieving good governance, as Lebanon is?

Lebanon has a set of viable institutions. This is not a failed state, of which there are some. Lebanon has institutions and human capital. The range of issues in this type of country is the following.

One, we discuss the whole regulatory framework. Are there too many excessive regulations? This is usually associated with a lack of governance, monopolistic power, capture of state, and more corruption. 

Second, procurement. What are the vulnerabilities in terms of procurement and what reforms are required in that area?

Third, and related, is transparency. In all kinds of different realms, including procurement, transparency is very important. But transparency also relates to full disclosure of assets of politicians, of judges, public officials and their dependents.

Fourth is public finance, the issue of the budget. Are all public expenditures transparent through the budget, or are a lot offline? Are there issues of governance in tax collection? These are the broad areas that apply almost everywhere in countries with this type of challenge. In terms of specific issues, more research is required.

One peculiarity that participants also were alluding to in yesterday’s discussion is that data collection in Lebanon seems very weak and that even some high-ranking decision makers treat data in a very liberal fashion.

Let me say three things about that, because it is very important. Point number one is that data needs to be treated very cautiously anywhere in the world. This is not only about governance but also about investment climate and many other issues, and applies in some cases particularly to official data. 

The second point is that precisely because we are aware of that [need to be careful about data] we use different techniques to gather data from many different organizations, including international organizations. We have reasonable confidence that this data can be used with the caveat.

The third point is that there is not always objective criticism. It is not uncommon that a minority has a vested interest in criticizing data. It is what we call shooting the messenger. Nobody complains about our numbers if one is doing okay. When we come out with our numbers on governance, we have never heard criticism from officials in a country where things are improving. It is a one-to-one correlation as to where the criticism comes from. Let me rest my case there.

You were also discussing myths to debunk when discussing anti-corruption strategies. Of the myths about fighting corruption, is there one that you consider the most important to unravel?

The most important one to get rid of at the generic level is a bullet message: one does not fight corruption by fighting corruption. Corruption is a symptom of significant weaknesses somewhere else and one has to understand the issues of governance. That is why I mentioned those policy points. The myth that one can fight corruption by fighting corruption can be unbundled into sub-myths, such as [that it is effective to] throw another institution at the problem. It is very easy to create another anti-corruption commission or adopt another decree against it, do another campaign.

Does that mean that more stringent laws and higher penalties would not be key measures?

Setting of higher penalties is fine. The problem is the incessant drafting of laws which may or may not get adopted. Obviously having tougher penalties within reasonable limits – we don’t believe in people being executed because of corruption – is important. It is the drafting and thinking that the law needs to be improved.

Most every country in the world has decent laws against corruption. The problem is that they are not implemented effectively. Getting away from a state that is monopolizing who can have the dealership of such and such company, or a radio or TV or newspaper and who cannot, those are the much more difficult issues than creating another commission.

Research into human behavior that you quoted yesterday seemed to indicate that people are more inclined to act in a moral way when they are watched then when they are not. Do you advocate monitoring as key measure for inducing governance and better behavior?

The expression is that sunshine is the best disinfectant. We are not talking about monitoring but we are talking about transparency. Transparency in my view is a much more effective tool of policy and sometimes a substitute to other regulations. Having all kinds of procedures and regulations sometimes can create even more corruption. Instead, let’s have sunshine – if for no other reason that first you start rating the cost of corruption through the reputational risk.

In some countries, where politicians and others don’t care, the question of reputation may not matter. But it increasingly matters internationally in the competitive world. It matters for investors; it matters for the electorate, and so on.

Is improvement of governance a realistic possibility or is it a dream? Is human nature per se corruptible, or do you believe that human beings could be different from the corrupted?

Of course I believe in that, otherwise I wouldn’t be doing what I do. There is no question that you will never get rid of corruption. The challenge is to move from a situation where there is a systemic, endemic or even pandemic – not here but in some other countries – corruption to another stage where corruption is still widespread but not endemic or pandemic, and then to where it becomes individual. In a country like Norway, there is corruption. But it is individualized and is the exception, and when it comes to the light, it is a real scandal and penalties may be applied.

So, although you said yesterday that improvements of governance on the whole have not been strong over the past ten years, you have seen progress.

We have seen how countries have managed to make progress. What better example than to show that some countries are doing very well, even among emerging economies? That is why I bring in my own country, Chile. Singapore and Hong Kong were extremely corrupt only 20, 25 years ago. They have contained it. England took longer. It was a very corrupt country years ago, now it is doing very well. In Eastern European countries, the evidence speaks [of governance improvements] in countries like Slovenia and even in Africa. Botswana has better ratings than some countries in southern Europe.

Between public sector corruption and petty corruption in the public sector, how important is corporate corruption on your map of problems?

It is very important. The crucial issue with corporate corruption is how corporate corruption affects public corruption. More important than fraud within a company or between two companies is the collusion between the private and the public sector. Bribery takes two to tender, a briber and a bribed. Very often we are finding out that it is not the public official who is always extorting from the private sector. Some very powerful private interests sometimes capture the politician or the public official; in that case they have an enormous responsibility.

The Middle East has many autocratic regimes. How well can autocratic methods function in defeating corruption and inducing change in governance?

On the Middle East, you are the expert. What we find on average and on balance worldwide is that a country that gives more voice and freedom of expression and has also more transparency, is better able to control corruption. Of course that is not the only thing that matters. Countries can make very significant efforts through other means, through rule of law, transparency of budget.

But there is no evidence in the data that autocratic governments do better in fighting corruption than democratic ones. On average, it is to the contrary. It has to be that the citizens become the auditors of their country. What is the probability in a place like Lebanon that big daddy can be watching everybody? The whole idea of the freedom of expression is creating millions of auditors.

In a definition of governance you described it as a set of traditions and institutions in a country. In this region, religion-based traditions and institutions play a strong role. Can you fit them into your model of governance?

We are mindful of the relevance and importance of the religious dimension. We do not enter it into the data exercise. In part, this is deliberate because we want to remain neutral vis-à-vis religious beliefs. Our approach to what constitutes good governance is a more universal approach. I must say, however, that the World Bank has made a very concerted effort over the past seven, eight years of reaching out to the faith community and to the interfaith community. In all interfaith activism, the commitment to poverty alleviation and the same objectives that we have is extremely strong.

When you presented your evaluation of Lebanon in terms of corruption control, the graph’s margin of error was very large. Why?

Because there are very few sources. The margin of error in a significant way is a function of how many surveys there are. That’s an issue, because a country like Lebanon, a financial center, is not being rated by the World Economic Forum. If a country is jumping aboard the train of globalization, the moment that the WEF, IMD and others cover them, the margins of error start coming down. The first order of business is to be on the radar of all these investment ratings agencies and other large entities. There is nothing worse than being ignored. It is much better to be rated not very well.

In assessing governance in Lebanon at the World Bank, do you find a lot of cooperation from the Lebanese side?

Lebanon is now very interested in these issues of measurement and thinking where one can go in the next stage. But one has to distinguish two things. One is a worldwide measure – the indices on governance. This is all from independent outside sources, that’s why we cover the world. The other is what is needed when a country wants to do something about the problems. There one needs an in-depth study and analysis, and I find that the Lebanese are very open.  

How important is it for you personally to believe in the improvability of governance?

I think that the theme of justice, of alleviating poverty in the world, particularly in emerging economies, and empowering people to take their destiny in their own hands and improve their own welfare, is crucially important. Just giving people the opportunity and the enabling environment of not enormous regulations to be entrepreneurs, to express their views and innovations, that is what motivates me and that is why I work on governance for poverty alleviation. I feel affinity to a place like Lebanon, because I am Chilean. Chile until only about 15 years ago was considered a very troubled place. It was a country that was not living to its potential and not doing all the reforms that were needed. I feel enormous affinity to those type of challenges of the emerging world. I think it is feasible within a realistic timeframe to make enormous progress but it is very hard work, it is political leadership for governance improvement.

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For your information

Pay or else

by Executive Contributor
written by Executive Contributor

The Lebanese flag carrier MEA became embroiled in an embarrassing row over monies owed by the state to German construction firm, Walter Bau AG. A scheduled MEA flight from Istanbul to Beirut could not depart because representatives of the German firm had gained a court order impounding the plane to enforce payment of $7 million owed Walter Bau for highway construction contracts from the late 1990s.

The measure drew sharp criticism from MEA chairman Mohammed Hout who was quoted in newspapers as saying that MEA was a private sector company and not party to the dispute. MEA, one airplane short, had to ferry its stranded passengers via Athens back to Beirut.

The conflict between the German company and the Lebanese state appears to date back to 1997, when Walter Bau had been awarded a contract related to the creation of a proposed toll-based superhighway network under a Build-Operate-Transfer scheme. However, the entire project was shelved by the council of ministers, contracts were cancelled and Walter Bau soon after closed its Lebanon representative office.

The company sought recompense not unlike other international companies that claimed to have been wronged in financial dealings with Lebanon, including another German construction concern, Hochtief AG, which demanded compensation for higher costs it incurred in the rehabilitation and expansion of Beirut airport because of delays and design changes.

Walter Bau’s claim to $7 million was affirmed in arbitration and not contested by the Lebanese government, which just somehow did not get around to settling the amounts. It was only after the seizure of the MEA plane that Lebanese officials insisted that payment of the owed amount had already been authorized.  

MEA on its part would seek from Walter Bau yet to be specified compensation for damages caused by the impounding, Hout was quoted in the Beirut press. Interestingly though, the highly discourteous initiative to impound the Lebanese plane in Istanbul had not originated from Walter Bau itself.

Having fallen onto hard times, the once third-largest construction company in Germany had declared insolvency in early 2005. Much of the firm’s assets had been taken over by Austrian construction company, Strabag, while Walter Bau AG was left with debts of 3.3 billion euro owed to about 20,000 lenders and suppliers. The man who had used the bone breaker method to get Lebanon to meet its obligation was the insolvency administrator charged with satisfying the rights of Walter Bau employees and creditors. 

Banks go shopping

Lebanese banks indeed have their eyes peeled for regional buys. Market leader BLOM Bank last month advanced by a great step towards establishing its foothold in Egypt when it found consent for acquiring Misr Romanian Bank, a joint venture bank owned by Egyptian and Romanian financial institutions.

The kick-off in realizing the acquisition was the decision by Egypt’s state-owned Bank Misr to sell its 33.26% stake in Misr Romanian to BLOM Bank early in October. With a declared goal of buying Misr Romanian Bank in its entirety, BLOM reportedly has the right to withdraw from the purchase agreement if it fails to obtain at least 67% of the Egyptian bank’s shares. However, as the Romanian shareholders with their 49% stake in Misr Romanian have signaled their readiness to sell, according to BLOM general manager Saad Azhari, BLOM should be able to see the transaction, estimated at $100 million, through.  

Misr Romanian Bank had assets of $641 million at the end of the first quarter of 2005. While BLOM Bank was carrying out its due diligence for evaluating the bank in September, expansion-minded First Gulf Bank from Abu Dhabi also showed interest in Misr Romanian but later withdrew from the race.

In the meanwhile, Fransabank also seems to have thrown its heart over the fence in cross border growth. The bank announced in late October that it would be a partner in Capital Bank Sudan, a new Islamic banking venture that would start operations in early 2006, with a focus on investment banking. Fransabank, which also is working on expansion into Syria and Algeria, would own 20% of Capital Bank Sudan.

Third bank on a roll during October was Byblos, which opened a month-long subscription period for a massive rights issue that would double the bank’s share capital from $164.8 million to $329.6 million. The issue, which is open only to existing shareholders, aims to enhance Byblos’ position in achieving readiness for Basel II regulations and provide the group with funds for capital injections into various international subsidiaries, including the Algerian bank Al-Rayan, where Byblos was awaiting approval by Algerian authorities for acquiring a stake of 51%.

Beetroot gets stay of execution

Lebanon’s selective agricultural subsidies have little to do with economic policy and more to do with an antiquated view of crucial food sources, and crude political lobbying. Take beetroot for example. In 1959, a Government decree provided for the subsidization of wheat (for bread) and beetroot (for sugar) because the two were perceived as staples.

“Back then, the notion of food security was not the same as it is today,” said the ministry official, who asked not to be named because he requires permission from the Minister of Economy & Trade to talk to journalists. “The decree was designed to ensure that there was always enough bread and sugar.”

In 2001, the Government abruptly stopped the subsidies, which had reached the staggering sum of $40 million a year for 7,000 hectares of beetroot production, in an effort to cut state spending.  

In 2004, following political and social pressure, the Government agreed to subsidize beetroot production, at $3,000 per hectare for one year only. But then this year, the official said, the Government wanted to again discontinue the subsidies but was forced to eventually bow out again to political and social pressure and agreed to subsidize beetroot production from 2005-2007, reducing the total by roughly 30% each year, in a gradual phase-out. Thus, in 2006, instead of paying $3,000 per hectare, the Government will pay only $2,000, the following year $1,000, and the following year nothing at all.

The official noted that some grape growers had been asking for subsidies, but so far to no avail. “It’s not really fair,” said Salim Wardy, owner of wine producers Domaine Wardy.  “But since the Government’s policy is to stop subsidization completely in two to three years, what’s the point of trying to get them to subsidize grapes? Vines take several years to come to full fruition and only reach full production capacity in around six. If there is no long-term Government commitment to subsidies, they are of no interest to anyone.”

“I support subsidies,” noted economist Kamal Hamdan, “but a clear definition of the beneficiaries and eligibility criteria is needed so that the subsidies really do benefit the have-nots. On the ground I doubt this is happening.”

No Tamiflu for bird flu

AUB Professor of Agriculture and bird flu specialist Dr. Elie Barbour has told EXECUTIVE that Lebanon is ill–prepared for a probable outbreak of bird flu, while the director-general of Lebanon’s Ministry of Public Health, Dr. Walid Ammar, has said preparations for a human pandemic are far from perfect. It could cost the government around $10 million dollars in medicals bills. The cost to the economy and human lives would be higher.

“The Lebanese way of handling things is spontaneous,” Barbour said. “They don’t plan ahead of time. The Ministry of Agriculture doesn’t have a system of cooperation with the Ministry of Health or with the Ministry of Interior – so that the Army can play a certain role. The public sector is talking, not working.”

Barbour said a strain of H9 N2 bird flu – not the kind currently making headlines – was discovered in Lebanon last year after coming from China. “We got it here. This means that the wild bird route that passes over Lebanon has all the potential to pass on the very virulent H5 N1 bird flu strain,” he warned. “I think there is a very big chance it will happen.”

If it does, the financial damage to the poultry sector will be enormous.  Poultry sales in Lebanon are already down 50% – despite the fact that there have been no confirmed bird flu cases here. In the event of an outbreak, the cost of culling Lebanon’s roughly 60 million broiler chickens would be about $150 million, he said.

An employee in Lebanon of Roche, distributors of Tamiflu, an anti-viral drug that can treat the flu, said in mid-October that there was no Tamiflu in Lebanon but that an order had been put in and that the drug was expected by the end of October.

Meanwhile, Public Health Ministry Director-General Dr. Walid Ammar, said that although Lebanon was prepared for possible bird-to-human transmission of the virus, the country was not fully prepared for a mutation allowing human-to-human spread.

He said the Government had put in a request for enough medication to cover 10% of the population. “In rich countries they have enough for 20%-25% of the population,” he noted.

Diamonds in the rough

Lebanon’s profitable diamond industry was lent greater credibility recently when the Ministry of Economy and Trade announced its accession to the Kimberley Process Certification Scheme (KPCS), an agreement which controls world trade in rough diamonds.

The KPCS was drawn up in 2002 to prevent conflict diamonds, illegally sold by rebel groups to finance military operations, from entering the legitimate trade. It already imposes strict certification of origin rules on its 45 member countries, which account for 99.8% of global rough diamond production.

Similar import, export and transit regulations now apply to Lebanon’s rough diamond market, and, more importantly, allow it to legally trade rough diamonds with other KPCS countries – something it was previously banned from doing.

“This will raise Lebanon’s international status in the diamond trade,” said Antoine Mghanni, President of the Lebanese Jewellery Syndicate. “It allows us to compete more evenly with Dubai, the only other Arab country to be a KPCS member.”

Although the jewellery industry is Lebanon’s number one export sector, worth some $500m annually, the cutting of rough diamonds is only small-scale. There are currently only a handful of diamond polishers in Lebanon, but the KPCS will allow Lebanese traders, especially those in Antwerp, to start operations in Lebanon.

Yet despite the good news, black clouds hung over Lebanon’s membership.  In early August this year, an NGO called Global Witness complained that Lebanon was importing diamonds from the Republic of Congo (ROC), a country expelled from Kimberley last July for allegedly channeling conflict stones. According to the NGO, Lebanese customs data for February and March showed that $156m of rough diamonds were imported from the ROC. Although no customs official was currently available for comment, the ministry of economy says that the customs data on the Congo imports were overvalued due to a “technical error”, which has now been rectified.

But the affair cast doubt on Lebanon’s credibility. “By trading with a country removed for being in blatant violation of the scheme, Lebanon makes a mockery of the Kimberley Process,” said Corinna Gilfillan of Global Witness.

The hope is that by allowing legal trade with other KPCS countries, such trafficking can be curbed. It now looks as if the local jewellery industry – at least the legitimate one – is set to sparkle some more.

Pirates a go go!

Even by the Middle East’s generally poor standards, Lebanon is notorious for its piracy levels. According to the International Intellectual Property Association (IIPA), the country scores badly on all fronts with an average piracy rate of well over 70%. In Sabra street you pick up a copied film or CD for LL1,000, while in Hamra you enter a shop to choose a pirated computer program game from the catalogue for a mere LL 10,000. According to the IAA, cable piracy is particularly high at a level of over 80%.

However, if it is up to Fadi Makki, Director General at the Ministry of Economy (MoE), the “Beirut Spring” does not just refer to Lebanon’s political arena, but also to an economic clean sweep of the country. During the summer months, the ministry stepped up its efforts to crack down on piracy and counterfeited goods. “In some 50 to 70 raids all over the country,” said Makki, “up to 8,000 products were seized and destroyed.”

CDs, DVDs, computer programs and especially a lot of counterfeited fashion brands, such as Versace shirts and D&G bags were confiscated and destroyed. According to Makki, some 80% of pirated goods are imported, while only 20% is produced locally. “So our main battle lies at the border,” he said.

Sponsored by the international Brands Producers Group (BDG), last May a special telephone hotline, “1739” was introduced, so people can report any suspected forms of piracy. “We have hardly any manpower to perform inspections and raids,” said Makki, “so we rely heavily on incoming calls.”

 According to him, the idea that piracy hurts a country is slowly but surely gaining ground in Lebanon. “Most people argue that Lebanon’s terrible piracy record stands in the way of entering the WTO, which is true,” said Makki. “But there are a number of important reasons why we should fight piracy. It reduces tax revenues, discourages foreign investment, and perhaps most importantly, it is bad for the local industry. As soon as people realize that locally produced goods just cannot compete with cheap pirated brands – and so cracking down on piracy is good for Lebanon – I’m sure more and more calls will come in.”

EDF helps people help themselves

Its board of trustees may read as a “who is who” of the Lebanese business community, the Entrepeneurial Development Foundation (EDF) is a non-profit organization that promotes entrepeneurship among Lebanon’s poor and underprivileged, especially in the country’s rural areas. Established in 1999, the EDF offers training to improve knowledge and skills on how to start up and manage a business, as well as soft loans to graduates able to come up with a sound business plan.

“Traditionally, micro-credit programs do not offer leans worth more than $2,000, while we go up to $10,000,” said EDF’s chairman Nabil Sawabini, who is also CEO of the MENA Capital, an investment group specialized in private equities and real estate development. “What’s more, we offer not 1 year, but 3 to 4 years to pay back the loan and an effective interest rate of not 24% to 36%, but 15% per annum. So, we are not a micro-credit program in the strict sense of the word.”

Call it as you like, the EDF’s business approach of aid and the notion of helping people help themselves has so far proven extremely successful. Since April 2000, the EDF has trained 865 people and helped to establish 62 businesses, 60 of which are still operating. Some $300,000 has been disbursed, while over $100,000 is pending regarding files in process. “Less than 0,5% of the loans did not return,” said Sawabini.

Still, the EDF’s biggest challenge is funding. “We offer 8 training programs a year, of which we recently managed to reduce the cost to some $8,000,” said Sawabini. ”Our administrative costs are some 20-22% of the annual budget, which is not much, as many NGO’s go up to 35%, but that money has to come from somewhere.’

So far, the funding mainly came from international agencies such as Mercycorps, regional businesses and the trustees’ own pockets. Since the start of this year however, the EDF came up with a very original solution. “All Lebanese banks have to keep a minimal reserve at the Central Bank, an amount over which no interest is paid,” Sawabini explained. “We’ve agreed with one bank and the Central Bank that a portion of this can be used for our program.” 

The experiment started successfully with one bank early this year and will be continued with a second bank in the near future, which enabled the EDF to more than double its annual budget. “And if all things work out,” Sawabini concluded, “it will allow us to double the budget every year over the next few years, as existing bank will increase their contribution and others will be added.”

Argent comes to town

Despite continuing, often violent, political turmoil in Lebanon, and the absence, for the moment, of any clear move in the direction of telecom sector privatization, the New Zealand-based telecoms company Argent Networks, providers of billing and customer service solutions for fixed line, wireless, broadband and next generation telecommunications companies, are, in $250,000 move, setting up a regional Middle East and Africa office in Beirut, as they seek to create a foothold in the region.

“We’re looking to get a piece of the action here,” explained Argent Regional Manager Ziad Basha. “Lebanon has a good pool of technical resources which need support.”

The company has also opened a small representative office in Dubai.

Argent has just signed a deal with an Iraqi telecoms company and with Lebanese companies running operators in Africa, is in final negotiations over two other contracts, and expects to sign a few more in the coming months.

Basha said Argent hoped to acquire a 20%-25% share of the regional billing market – its core business – over the next few years.

He said competition would come mainly from similar companies in Dubai.

Telecoms observers and analysts are cautiously supportive of the move. “The telecoms sector in Lebanon and the region has huge growth potential,” said telecoms consultant Kamal Shehadi. “We’re closer to the start of the process of privatization because the Government has made it clear that’s what it wants to do, and I don’t see any opposition. But let’s be clear. This is not something that will happen at the push of a button.”

“I think it’s the right move,” said Notre Dame University Economics and Finance Professor and telecoms specialist Louis Hobeika. “It’s a good thing to be here when the situation improves. I believe it’s the right timing. You need to be here in advance. The telecoms situation here is going to pick up when tariffs are lowered and the regulatory authority is set up. But all of this has been delayed.

“I think it’s more the right time for the region than for Lebanon,” he went on. “The sector will grow fast in the region, especially in developing sectors.”

 Of Argent’s Iraq venture, he said: “Iraq has lots of problems. Not now, but when things do quiet down, it will be a good investment.”

Lebanon, too, is not free of problems acknowledged Basha. “There are problems with the political situation, with plans to liberalize and privatize the sector,” he said. But he added: “I still think it’s the right time to set up the office. And remember, we’re concentrating on the region as a whole.”

Basha said the Beirut office should be functional in early November. 

Forget Fast Food, Go Slow!
As McDonalds is to many people the ultimate symbol of globalization, it
comes perhaps as no surprise that it is the food sector that launched a
counter offensive under the name of Slow Food. Founded in 1986 in Italy,
Slow Food is an international non-profit organization in defense of
bio-diversity and “eco-gastronomy.” Among other activities, it records plant
species and animal breeds at the edge of extinction, as well as protects
outstanding food products and traditional production methods.
Recently, the first Lebanese item, the Darfiyeh cheese, was added onto the
Slow Food list of authentic food of outstanding quality. Ripened for six
months in salted goatskin, the cheese stems from the northern areas of
Mount Lebanon. The problem for the Darfiyeh, as for any other local
specialties in Lebanon or the rest of the world, is that it is extremely
difficult to compete with mass produced cheeses.
“Of course the recognition is important,” Kamal Mouzawak, Slow Food’s
representative in Lebanon and one of the founding father’s of the weekly
ecologically sound “Souk al Tayeb” in Saifi. “It is the recognition of
tradition and quality. But that’s only the beginning. With the help of Slow
Food we will bring in sponsors to preserve the cheese and bring it onto the
market. For example, by bringing in some experts in the field of marketing.
Most people do not know this cheese.”
The Rene Mouawad Foundation has started a program to help the farmers to
increase production of the cheese, as well as aid some 200 goat herders who
supply the milk.
If it’s up to Mouzawak, the Darfiyeh Cheese will not be Lebanon’s last Slow
Food listing. He has already proposed a special Chouf labneh and Baalbek
cheese which is ripened in terracotta jars. Bon appetitit!

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Cover story

Are We Safe ?

by Anthony Mills
written by Anthony Mills

If the recent spate of air crashes – Athens, Venezuela, Indonesia, Tunisia – were not enough to make us jumpy at the thought of boarding a plane, one only has to remember the brutal imprint left on out collective consciousness by the December 2003 Benin air crash in which at least 140 people – 80 of them Lebanese – lost their lives when a Beirut-bound, chartered Boeing 727 hit a building on takeoff and fell into the sea. The plane was reportedly overloaded and the pilot forced to take at the insistence of an overzealous Lebanese passenger (who, unfairly it might be added, survived the crash). Air safety, stories of badly run airlines and even more badly maintained planes have never been more in the news. However, while one aviation expert claims that safety regulations at Beirut airport are still shockingly lax, the director general of the civil aviation authority declares Lebanon to have clamped down on rogue operators.

There has never been a crash at Beirut International Airport (which receives 80 and 130 planes land a day and serves around 3.5 million passengers annually) although the country is no stranger to aviation mishaps. On 30 September 1975, a Malev (Hungarian Airlines) passenger plane en route from Budapest to Beirut ploughed into the sea six miles off Beirut, killing all 50 passengers and 10 crewmembers (the cause of the crash was never officially determined and remains shrouded in mystery. Speculators suggest the plane was shot down, by either an Israeli or Syrian fighter jet because it was believed to be carrying arms for Palestinians fighters.), while on 13 May, 1977, a Polish carrier, en route from Warsaw came down in Aramoun, 8 km southeast of Beirut, killing all nine people on board.

None of the planes involved were Lebanese. Reassuring? Maybe, but in an exclusive interview with EXECUTIVE, a certified aviation inspector who has worked extensively with Lebanese carriers, has, on condition of anonymity, revealed that there exist serious question marks about the safety of many of Lebanon’s private and charter aircraft because the country lacks the qualified manpower to carry out sufficient, effective inspections. Elsewhere, some inspectors have allegedly been intimidated, pressured or bribed into providing positive inspection results and granting new or reinstating suspended Air Operating Certificates (OACs).

“Safety is not measured by the number of accidents you have,” he said, “but by how often you come close to an accident. Just because we haven’t had any accidents doesn’t mean we are safe. We’ve been lucky so far. The problem lies with those aircraft registered here in Lebanon. Our controls are not done properly. I have worked with a couple of Lebanese airlines. It was a mess. They get their certificates and then nothing is done. No one is doing the oversights, no one is doing the audits. Firstly, there isn’t the manpower and secondly they don’t know how to do it.”

The inspector’s concerns were echoed, albeit in a more general fashion, by a former Lebanese pilot, who when asked if he thought Lebanon’s small private charter airlines were safe, said: “As a retired pilot, I have two fears: dying in a car crash and dying in a charter plane. I fly MEA. I trust them.” He has a point. Air crash statistics bear out the suggestion that flying with an obscure charter company is likely to be far more dangerous than hopping on a “recognized” carrier.

One of the problems with Lebanon’s aviation sector, critics say, is that the Directorate-General of Civil Aviation (DGCA) is still run by the Government, which has blocked any additional inspector recruitment, citing lack of funds. The International Civil Aviation Organization (ICAO) – whose inspectors are now working at Beirut Airport – suggested after an audit a couple of years ago that the country’s civil aviation authority be fully independent.

“In Lebanon politicians interfere in the issue,” the expert charged. “I know of a case in which a minister was using a private Lebanese airplane which didn’t have a valid license after the DGCA issued a report. It then received a phone call from the minister saying: if you touch this plane, you touch me.

“The company I worked with was the same. We’d do an inspection. There’d be a problem. The certificate would be taken away. Then a couple of months later there would be a call from a minister and the certificate would be reinstated. I think issues like this are why the ICAO recommended that the DGCA be fully independent.”

Low salaries offer little incentive to work professionally and, in some instances, make offers of bribes hard to turn down, he said. “When you see them making $700 or $800 a month, with all that work, then you can expect some of them to get bribed,” he said. He said he had heard of inspectors being bribed and on one occasion, when he grounded an aircraft, had been offered a bribe himself. “It was about $15,000,” he said, “to cover up the report.” Another inspector had confided in him that he had been intimidated after he had grounded an aircraft. “They put quite a bit of pressure on him,” he said. “That’s how it works here – political pressure, intimidation and bribery.”

The same problem, the inspector said, bedevils the AOC acquirement process. “It’s the same issue. People with backup can get their certificate with minimum requirements. People working by the book find it difficult to get their certificate because they have to meet all the requirements.”

Lebanon’s Civil Aviation Authority Director-General for the past three years, Dr. Hamdi Chaouk, strongly denied the suggestion that the DGCA was being pressured to cover up inspections or reinstate certificates.

“No way on earth,” he stated, although he acknowledged that early in his tenure at least one attempt had been made to influence a DGCA decision.

“In the beginning, about two years ago, they tried it once, at least to ring me, to ask if our rules were flexible. I said: ‘ No way.’ And this has never happened since then. No one has even dared to approach the matter from the safety side at all. Otherwise I would not be in my job. You would not see me here. You would not see me here one day if I had to change anything as far as licenses or inspections of aircraft – anything to do with safety.”

He conceded that in other domains political pressure might play a role. “For the reallocation of people I can be flexible and political pressure may have a certain influence because I have to live with the real world,” he said.

“But when it comes to safety and security,” he reiterated, “there are no compromises whatsoever. I challenge anyone to suggest that I have ever compromised on this issue.”

Asked if it was possible that inspectors were being pressured or bribed without his knowledge, he responded: “Truthfully, when I first came to this job, I heard that some of the inspectors were influenced by the operators themselves. They were put under pressure financially or were offered assistance, like tickets for their families. They could overlook certain things.”

It was precisely this revelation, in 2003, Chaouk explained, which prompted him to totally overhaul the flight safety department and bring in ICAO staff. “They are well-paid. They cannot be influenced politically. They cannot be influenced socially.” Chaouk said that ICAO staff is now present for every aircraft inspection conducted at Beirut Airport. As a consequence, he added, the possibility of a cover-up was “almost zero.”

For its part, the ICAO’s headquarters in Canada did not immediately respond to Executive’s request for a comment on the matter, while an ICAO staff member working in Lebanon said he could only speak to EXECUTIVE with the permission of Dr. Chaouk, who declined to grant it.

Dr. Chaouk said that the assistance of ICAO staff working at Beirut Airport, two $1.2 million ICAO programs funded by the Lebanese government, and a two-year-old law giving him greater powers to suspend AOCs had made Beirut Airport tougher on air safety than any other airport in the region.

He admitted that his efforts to tighten the screws had created political friction. “Have they caused political problems? Yes. I have stopped the aircrafts of many influential people. Sometimes it does cause problems,” he said.

And yes the DGCA is not yet fully independent, although giant strides in that direction have been made, he conceded. The law, he explained, has been approved by parliament. However, one final approval is needed by the Council of Ministers. “But because of what has been happening in the country, they are waiting for the right moment.”

Dr. Chaouk also acknowledged that he was in need of additional qualified manpower. “If we don’t do that, we’re going to come up short in that domain and we won’t be able to implement everything.” But the manpower shortage will not ease until the DGCA is fully autonomous and the embargo on new talent is lifted. “Under the current law we are not allowed to recruit, among other reasons for financial reasons. It’s a problem. The new law will solve it. We’ll be able to advertise.”

Chaouk conceded the ICAO presence had compensated for the Lebanese manpower shortfall so that aircraft safety and the inspection process were no longer being jeopardized. Meanwhile, Chaouk stressed, no one should doubt his department’s commitment to air safety.

“We prevent unsatisfactory aircraft from even flying over Lebanon,” he noted. “We are known to be the toughest in the Middle East. We even have a list of aircraft [Tupolev and Antonov] that we don’t allow to land here anymore. We inspected so many of them in the past and they all failed. Many European countries still let these aircraft land.”

As part of the Lebanese civil aviation restructuring program, Chaouk will soon publish a blacklist (see box) of countries and airlines that are banned from flying to Lebanon and claims that with the help of the ICAO staff currently in Lebanon, the DGCA has checked “almost every” aircraft using Beirut Airport.

“We may be seen as extreme. But this is the only way to clean up the whole market,” the he declared.

In an indication of the stringency of DGCA supervision, he said, over the last two years, the DGCA has granted AOCs to a total of only five out of 25 Lebanese charter applicants – menajet; Flying Carpet; ASAS; Executive Aircraft Services; and BERYTOS airlines. He said another five charter airlines were currently applying for AOCs.

“We inspect the charter aircraft currently operating,” he went on. “We are continually monitoring. Whenever there is any problem, we immediately stop the aircraft or airline from operating,”

And what the DGCA giveth, it also taketh away. Chaouk said that as many as 12 Lebanese AOCs had been suspended over the last two years – again an indication of how serious his department is about ensuring aircraft airworthiness. About half have since been reinstated.

The DCGA has also withdrawn, over the last two years, more than 10 AOCs belonging to foreign companies. None has been reinstated. Some of those banned, such as Egypt’s Lotus Air, have since had accidents.

Chaouk’s efforts appear to be paying off: “Beirut Airport has been audited by the ICAO and by European institutions. I have been told by Great Britain that they have audited a lot of countries in the Middle East and Beirut scores the highest grades in safety and security.” He has also won praise from Lebanese air industry insiders.

The inspector who warned about the safety issues at Beirut Airport and Dr. Chaouk do agree on one thing – Lebanon’s Middle East Airlines (MEA) and newly-established Lebanese charter airline menajet are as safe as any airline in the world, in great part because their aircraft must pass regular French aviation inspections.

In fact, MEA has a French AOC and its only crashes had nothing to do with safety. Back on 1 February 1963 an MEA Vickers Viscount 754D collided in midair over Ankara, Turkey, with a Turkish air force Douglas C-47. All 17 occupants of the planes were killed, as well as 87 people on the ground. Then on 1 January 1976, a bomb exploded on an MEA Boeing 727 over northeast Saudi Arabia, killing all 81 passengers and crew.

(BOX)

Almost two years the Benin crash, the  Directorate-General of Civil Aviation (DGCA) is about to publish its aviation blacklists. There are in fact three lists: one of airlines, one of countries, and one of brands. They were drawn up following a DGCA survey, carried out in conjunction with International Civil Aviation Organisation (ICAO) staff working at Beirut Airport, of almost all aircraft using the airport.

The airlines affected have been banned either for technical reasons, or because they have not been audited by the ICAO or are not an ICAO-contracting state.

“I am about to publish the list, like the rest of the world,” Chaouk, said. “I didn’t want to publish it before because I didn’t want to get into diplomatic questions, but safety cannot be compromised.” He said, admitting that he nonetheless expected diplomatic problems between Lebanon and some of the countries blacklisted.

Asked if the Lebanese Government – which has ties to a number of the countries listed, and still holds sway over the DGCA – was likely to bring pressure to bear on him, he said: “Even bilateral agreements state that each country has sovereignty over its security…it’s not because Lebanon has diplomatic relations with certain countries that I have to accept any planes landing here, because, believe me, when something happens here it’s going to affect the economy of the whole country, not to mention create diplomatic, political and financial consequences.”

“We are known as the toughest in the Middle East,” he said. “We are the only country in the Middle East and maybe world-wide to draw up a blacklist by country.”

Of the decision to ban the Russian aircraft brands Antonov and Tupolev, Chaouk said: “We inspected so many of them and more than 90% failed.

The countries whose airlines are banned from Beirut Airport are: Afghanistan; Antigua & Barbados; Benin [site of the December 2003 Beirut-bound chartered Boeing 727 crash]; the Democratic Republic of Congo; Ecuador; Gambia; Guinea; Grenada; Micronesia; Saint Vincent & The Grenadines; Swaziland; Sierra Leone; Somalia; Saint Lucia; Equatorial Guinea; Togo; Aruba; Angola; Liberia; the Virgin Islands; the Cayman Islands; the Solomon Islands.

The airlines on a provisional list are: Africa Lines-Central African Republic; Air Memphis-Egypt; Air Van Airlines-Armenia; Central Air Express-Democratic Republic of Congo; ICTTPW-Libya; International Air Tours Limited-Nigeria; Johnsons Air Limited-Ghana; Silverback Cargo Freighters-Rwanda; South Airlines-Ukraine.

Dr. Chaouk said this list would grow.

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Feature

The New Lira

by Michael Karam
written by Michael Karam

Have you ever been annoyed when your old LL100,000 note wont fit snugly into your wallet? But are you also put off by the toy money appearance of Lebanon’s new look paper money? If the answer to both questions is yes, it is worth reminding you that the latter is a solution to the former and part of Lebanon’s drive to be in monetary harmony with Europe and the US.

Abdo Ayoub, Lebanon’s leading bank note collector (or notaphilist) and author of Lebanon: paper money and coins, stands up and pulls out his wallet. He folds a crisp new LL50,000 and slips it inside. “You see? It fits,” he explains flashing the wallet from side to side like a conjurer.  “Wallets are smaller because notes are smaller. Our notes are now too big, so we have to be in step with today’s trends.”

So for all of you who thought this was example of legendary Lebanese wastage – another case of “it isn’t broke and yet we are still fixing it with money we can’t afford” – it is in fact one of the rare instances when the public sector (in this case the central bank) is actually doing its job.

So sadly no conspiracy theory. “It was the natural time to print new money and it offered the central bank a window of opportunity to make new, user-friendly notes. They are not changing all at once but waiting till each note runs out of stock before they print new ones,” explains Ayoub.

The first three new notes appeared in June (LL5,000) and mid-July (LL50,000 and LL100,000). It is totally dependent on what is in circulation and what is demanded by the central bank. “There is no need to renew for the sake of it,” explains Ayoub, who cites the LL1,000 as a case in point. “It will probably only appear in 2007 as there are possibly as much as 200 million old notes still in their packet.” This extraordinary surplus is a hangover from the heady days of inflation when the government went bonkers and printed 960 million LL1,000 notes. “It was too much for one country,” says Ayoub. “It means that everyone can have in his pocket 250,000 in single notes. It will take time to use up. They are of a highest quality because they were printed by Thomas de la Rue, arguably the best quality notes in the world.”

Ayoub is sitting in his vast library cum office at his home in Bhannes. On the floor are notes and coins and bits of old notes. Albums full of series of Lebanese banks notes line the shelves, a testament to his hobby and passion of the past 15 years.  He claims he has always been a habitual collector. “If you don’t leave your country during war, you need something to do.”

Back to the new money. “We needed a model. It was either the Euro or the [US] Dollar. There are 400 million people using the Euro. That is a lot of people. Money is used less and credit cards more. Therefore the money that is used should be more practical. Governor Salameh is a cosmopolitan man and he must have spotted this trend.” According to Ayoub, the Central Bank did consider making its new notes according to the same dimensions as the Dollar with all denominations the same size. “It just wasn’t practical, especially for old people who might get confused or make mistakes.”

So they went with the Euro model. The new notes have been shrunk to a similar, but not exact, size to the Euro, what Ayoub calls “the same spirit of the euro”. The idea was to correspond Lebanon’s six notes to the closet Euro denomination. Thus the LL1,000 (the only note that will receive a totally new design) is sized according to the current  5 euro; the LL5,000 with the 10 euro; the LL10,000 with the 20 euro, the LL20,000 with the 50 euro, the LL50,000 with the 100 euro and the LL100,000 with the 200 euro. There is no Lebanese equivalent to the either 500 euro note or the 1 and 2 euro coins. “The cost was negligible,” explains Ayoub. “We are constantly reprinting, so it would just be [the cost of] the design, which is not much if you divide it by the number of notes.”

So why does a government decide to renew it’s money? According to Ayoub, the lifespan of a particular design is about 15 years. Since 1920 till today Lebanon has had six different designs, the longest lasting being the 1964-to 88, which depicted Lebanon’s, historical and tourist sights and which was virtually worthless by wartime inflation. “It is now considered among the most beautiful series in the world, but you would need 1000 of these,” he opens an album of LL1 notes, “to buy a manouche today.”

In, 1988 the LL1,000 (printed again in 1991 and 1992) was introduced as was the single-issue LL500. Further inflation made the LL1,000 increasingly cumbersome (remember having to pay for dinner with big wads of bills?) and so between 1993 and 1994 the LL5,000, LL10,000, LL20,000, LL50,000 and LL100,000 notes appeared.

“That series is now roughly ten years old. These new notes are not strictly a new design, but they should be around until 2020, although who knows, we might have a new governor who decides to change everything and say ‘I don’t like this’ and he can do it because provided he does it at the right time, it doesn’t cost anything.”

And the paper is better too by all accounts. “With the first new notes, we were coming out of war and we did not have the money to spend like we did before, when we would go to Thomas de la Rue & Co in London or Banque de France,” remembers Ayoub. “In 1992, it was a case of just do it they put out the tender and got the cheapest price from the Canadian printer B.A.Banknote.”

This time the government has gone to German company Giesecke & Devrient (LL1,000, LL5,000 and the LL10,000 and the Austrian Œbs (LL20,000, LL50,000 and LL100,000). And how long will the notes last in circulation last? “The cheapest notes, say from India or Pakistan, last about six months in circulation while the best can survive for around ten years,” explains Ayoub. “In my opinion, ours will probably last somewhere in between.”

Ayoub wanders off and comes back with a ultraviolet light. It puts a new LL50,000 note under its beams. It lights up like a Christmas tree. “You see we have a lot more security features. Printing has become more advanced. A new printer costs $10 million.”

According to Ayoub, both old and new notes will be in circulation for the next two of three years and even when the old are withdrawn, the central bank is still obliged to exchange it. “You can take any more from any period, even this,” he says holding up a LL250 note, “and they will give you a coin.” He pulls an album off the shelf and flick through the pages. “In fact you can do more. You can do this.” He opens an album and shows me a beautiful 250 lira note from (year?)XXXX.  “If you take it to the central bank they will give you a coin but to collectors it is worth $10-12,000.”

Lebanon: paper money and coins is available from XXXX

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State department

Those crazy days of summer

by Washington Correspondent
written by Washington Correspondent

As the center of the universe, politically speaking of course, the pace in Washington never abates, despite the harsh summer heat beating down on the banks of the Potomac. Now, not only Democrats, but former government officials, mothers and rock stars are going after President Bush’s Mideast politics.
 
Paul Craig Roberts, who served as assistant secretary of the Treasury in the Reagan administration, wrote in Counterpunch an article assailing the president. Roberts blames Bush for making America less safe by attacking Iraq. “Now,” he writes, “the White House moron proposes to start another war by attacking Iran.”

Indeed, there have been several media reports alleging that Vice President Dick Cheney has ordered the U.S. Strategic Command to prepare plans to strike Iran with tactical nuclear weapons if Iran does not renege on its nuclear policy, or if the U.S. is the target of another major terrorist attack.

Roberts claims that Bush’s policy is leaving the United States without allies, or practically none. “Likudnik Israel is Bush’s last remaining ally, or egger-on, in his war against “Islamic terrorism.”

 Meanwhile, as the president is spending a “working vacation” on his ranch in Crawford, Texas, he continues to refuse to meet with Cindy Sheenan, a young mother of a slain U.S. soldier in Iraq. The woman who remains encamped in a ditch near the presidential ranch, in temperatures close to 45 degrees Centigrade, has become the focus of the international media. Cindy Sheehan has a simple question for Bush: What noble cause is being served by all this suffering and destruction? But Bush is adamant; he will not talk to Sheenan. As Roberts points out, the president “(is) using his vacation time at the Crawford ranch to talk war with Israeli television. In a recent interview with Israeli TV, Bush said regarding Iran: “All options are on the table.”

Roberts blames the Democratic Party, which he says has “completely collapsed as an opposition party,” which is why Bush “can ignore the American public.” The only thing holding back Bush from declaring total war on everything and everyone he dislikes is “the lack of U.S. troops.

 “Gentle reader,” writes the former Reagan associate, “do you realize the danger of having a president so disconnected from reality that he plots to attack Iran — a country three times the size of Iraq — when he lacks sufficient forces to occupy Baghdad and to protect the road from Baghdad to the airport?”

Roberts continues: “The Bush administration is insane. If the American people do not decapitate it by demanding Bush’s impeachment, the Bush administration will bring about Armageddon. This may please some Christian evangelicals conned by Rapture predictions, but World War III will please no one else.”
 
Them are fighting words…
 
And if that was not enough trouble for the president, here comes the Rolling Stones, that eternal rock band, with their new album. How does that concern the president, you may ask? Ah.
 
“A Bigger Bang” due to be released Sept. 6, includes a song called “My Sweet Neo Con,” in which the British band chides Washington’s foreign policy gurus, accusing them of getting it all wrong on Iraq. Makes you wonder that despite decades of drugs and alcohol abuse, the Stones somehow still managed to have kept a few grey cells in good working order.
 
The controversial track seems to target Bush and Cheney in particular, as well as the group of neo-conservative advisers and architects of the Iraq war.
 
But Jagger, the Stones’ lead singer, denies his new song is directed at the president. “It is not really aimed at anyone,” Jagger said on a TV show. “It’s not aimed, personally aimed, at President Bush. It wouldn’t be called Sweet Neo Con if it was,” he added.
 
In fact, the song makes no mention of Bush or Iraq, though it does mention Halliburton, the Texas-based corporation previously run by Cheney.
 
“How come you’re so wrong? My sweet neo-con, where’s the money gone, in the Pentagon,” goes one line from the song.
 
“It’s liberty for all, democracy’s our style, unless you are against us, then it’s prison without trial,” goes another line.
 
“You call yourself a Christian, I call you a hypocrite,” Jagger rebukes members of the Bush administration in the title track to his new album. He admits his song is critical of the Bush administration, but waves it off as “so what!”
 
“Lots of people are critical,” of the administration, Jagger said. A representative of the British rock band said the group had no further comment about the song. The Rolling Stones U.S. tour kicked off in Boston Aug. 21. It will no doubt be controversial as Sir Mick and the Stones tour the heartland.

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Economics & Policy

What Lebanon can Learn from the Turkish Experience

by Faysal Badran
written by Faysal Badran

The end game for developing countries, in this day and age, is the ability to attract and maintain capital investment. The catalyst to this inflow is, broadly speaking, a mix of infrastructure rehabilitation and reform. There are numerous trajectories in the developed world, but in many instances reform is slow, and the corollary of sustainable economic growth suffers. Most developing countries, dragged down by decades, sometimes centuries, of corruption and inefficiencies built into the system, see their economic fortunes stutter. Key to shifting gears into higher growth, higher employment, and better overall development has been countries’ ability and willingness to embark on reforms and business promotion.

Turkey’s turn

In this respect, Lebanon may have quite a few lessons to learn from Turkey. As Turkey has made headway into strengthening and revitalizing its public sector and improving its efficiency, it has become, within the span of three decades, a regional economic powerhouse that is close to joining Europe. This has reshaped its image. Obviously, integrating with Europe is not a Lebanese objective, but the mechanisms of change and reform to enter are ones that are applicable to a lot of countries.

Turkey is at a crossroads. After hitting the most severe crisis of its recent history over 2000 to 2001, the economy bounced back and is now among one of the fastest growing economies in the Organization for Economic Cooperation and Development (OECD). A new institutional framework for monetary and fiscal policies, as well as for product, labor and financial markets, infrastructure, industries, and agricultural support, has opened a window of opportunity to escape from the triple evils of low confidence, weak governance and high informality, which underpinned the boom and bust cycle of the past – so as to embark upon on a path of growth. Success will depend on fully implementing and completing the new policy framework, but at least the path has been laid down.

Following the crisis of 2000-2001 which saw multiple currency collapses coupled with a run on Turkish bonds, the effort to reform, based on EU convergence criteria as well as strong pressure from the IMF, has led to a purge of sorts on the political landscape, and has led to an overall effort to overhaul the macroeconomic platform of the government. While Turkey still suffers from many “growing pains,” it has set itself in an international straight jacket of change. This would be an ideal situation for Lebanon. Since organic change remains highly doubtful with ongoing political bickering and the eternal sectarian debate, international economic pressure or other incentives would be highly beneficial. High unemployment and poverty are typically mirror images of the same sequence of symptom and cause. The experience of the past decade in developing economies has demonstrated that the high priority of economic reform and privatization of inefficient public entities is key to long-term efficiency and job creation. Yet this effort, which initially leads to job cuts, is frustrated by the absence of alternative job-creating mechanisms, which creates a vicious circle that does not augur well for the future. What is needed is a private sector framework with public sector support and participation to inculcate a culture of venture capital as an effective means for job creation, accelerated growth, and enhanced innovation and competitiveness in emerging economies. Turkey has been able to promote a private venture culture, which has not only offset some contraction-related aspects of tighter fiscal policy, but has also increased multinational interest in Turkey and has seen the GDP of Turkey rise dramatically over the last five years.

Taking up the mantle

An area of which Lebanon would do well to emulate Turkey, is in gathering and building political consensus on the economic and fiscal imperatives. For now, much of the politics in Lebanon revolves around feudal/tribal issues, and while the fiscal time bomb is ticking away, there is little effort, bar those of the prime minister and his cabinet, to ring the budgetary and macroeconomic alarm bell. Much like in Lebanon, the level and growth rate of public debt became the primary source of macroeconomic vulnerability in Turkey following the 2001 crisis, which saw a public net debt to GNP ratio of around 90% while raising concerns in domestic and international markets about its sustainability. The debt stock’s short maturity and the large share of foreign-currency linked securities implied particularly high rates of rollover on domestic and international markets, increasing the vulnerability to interest rate and currency rate shocks. Although Turkey has made remarkable progress in restoring debt sustainability with high primary surpluses, lower borrowing costs, currency appreciation and high growth – which all helped reduce the public net debt to GNP ratio to about 70% at the end of 2003 – risk factors remain, albeit to a lesser extent.

Turkey, in its drive to enter an economic order and deliver the EU criteria, has forced itself into drastic reform on the way the public sector operates, and while it did resort to privatization, it is not clear that privatization alone will do the trick in Lebanon as many pundits seem to think.

Proceeding with caution

Privatization, without the fostering of private venture capital is tantamount to a fire sale of state assets, and Lebanon would do well to emulate Turkey’s efforts to promote the incubation of many private businesses, offering tax breaks and facilitating their access to capital markets. So, while Turkey did lower the burden of the public sector through reform and privatization, it also nurtured private enterprise, and created an environment of trust for Turkish nationals wishing to set up shop in Turkey.

Please don’t write in to point out the differences between Turkey and Lebanon; they are obvious. Turkey is bigger, more industrialized and more ethnically homogenous, but in a lot of ways, its transition into a more liberal, more vibrant and more globalization-friendly place is replicable in many emerging countries including Lebanon.

Perhaps the most delicate but relevant aspect of modern Turkey, in my opinion, is the secular nature of its system. Turkey has made a clear separation between state and religion, and while Islamists have made significant headway into the political arena, the overall functioning of the state is unperturbed by religion. We could learn a lot from this experience, for to become a genuinely open system and to integrate the international community; a transparent and strong civil society needs to flourish. There is no alternative. Turkey and its youth, much like in Lebanon, is clearly immersed in Western culture, but the difference is, Lebanon’s elite is cosmopolitan but its political system and its corresponding social fabric remains archaic and racist to a large extent. Yes, the make up of Turkish society is truly homogenous, with Muslims representing 99% of the population, but the society is quite secular and the political lines are drawn based on ideas and platforms.

Turkey has reoriented its priorities towards business and growth areas, and has continued to shrink the public sector. While this has caused some dislocations, it has been the pillar of the revival of Turkey. More importantly, and in order to continue receiving aid and easy access to the global debt market, Turkey has forced itself into a long introspection of its economic raison d’etre, something badly needed in Lebanon. Turkey has understood that in order to prosper, it must comply with a path of reform set out by the IMF, OECD and World Bank. There is simply no other way, and rather than dump its state assets in an ad hoc way, it has gradually improved their operating efficacy before privatizing.

Getting with the program

Turkey has grasped and implemented the notion that there is no debt solution without reform, and Lebanon should get in that frame of mind. Any thought of debt relief by the international community is ludicrous in Lebanon, because most of the debt is held by Lebanese banks. So there is no short cut. Turkey also realized that there is no sense in maintaining a large government when instead, it could rely on private business to be the engine of growth. It attracted strong minded and educated Turks back into Turkey to create businesses and jobs. We, in Lebanon, because of the rot in our system due to corruption and sleaze politics, are hardly an ad for Lebanese wanting to create businesses here.

Surely, we have a lot to learn from Turkey. Built on the weak remnants of the Ottoman Empire, this country has placed itself in a position of strength, built important alliances, and promoted a culture of change and sustainable development. Lebanon would do well to copy, in spirit, the approach of Turkey in prioritizing the economy over politics, in promoting private enterprise, and in embracing globalization by acting in the national interest in forging a strong working relationship with the industrialized world and its institutions.
Turkey has come a long way from its depiction of a dictatorship with little economic hope simply by adhering to the global economic textbook and by strengthening its institutions. Turkey has quadrupled its revenues from tourism in ten years as well as becoming one of the top Mediterranean destinations by assisting tourist projects and emphasizing a clean tourism environment.

In its bid to enter the European process, Turkey has had to make many tough concessions in order to fit in. When we hear of Saudi Arabia entering the WTO, one wonders how ready is Lebanon? As Turkey integrates an economic bloc, it has had to shape up.

We can only hope that Lebanon, driven by a desire to enter any kind of economic entity, will make significant changes to its modus vivendi, both economically and politically. It would therefore be beneficial to shoot for a similar path to Turkey, especially by realizing that deep structural and institutional change is the only way out. A strong banking sector, a piece meal tourism plan, and lip service to demands for change will not cut it this time around.
 

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Comment

Heaven via hell

by Yasser Akkaoui
written by Yasser Akkaoui

They say the people know best. It is possibly why we have the concept of democracy.

When the extension of the presidential mandate was bullied through parliament and the UN passed Resolution 1559, the word on the street was that things did not look bright for Mr. Hariri. The Syrians will get him, people whispered. And they had a point. The people had seen it all before. We even hinted at it in our February 2005 editorial, two weeks earlier. So when it came, the shock and horror was coated with déjà vu.

One month later, it was the same gut feeling that pushed 1.3 million people onto the streets. Enough was enough. We knew it was time for Damascus to go and the people told it to.

Then, in the run up to the release of the UN Mehlis report, came the same whispers, this time predictions of a “suicide” or “accident” in Syria; for there would have to be a fall guy. And so it came to pass. Ghazi Kanaan was, as the people said, “suicided.”

And when Herr Mehlis showed us what he found, it merely confirmed what we already knew, a knowledge accrued over years of witnessing first hand the activities of what one interviewee in the report described as “Murder Inc.”

And economically we can see our own destiny. We can see a gleaming world of skyscrapers and prosperity. The word is out and the Lebanese trading genes are limbering up for the biggest boom in years. The real estate investment in Solidere and elsewhere in Beirut and other tourism and retail projects all herald what is most certainly likely to be a bonanza, one that will free the nation from the shackles of mediocrity, sell off state burdens and fly the flag of private enterprise. If there is one force that shapes the Lebanese instinct, it is that which drives it to trade, to deal, to sell and to build. It is a force that even when knocked down, will rebuild because it knows nothing else.

We know who we are and we know where we live. We trust our own instincts. We should go by them.

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