CommentEconomics & Policy

The deterioration of human capital in Lebanon

by Talal F. Salman
written by Talal F. Salman

Economic and social prosperity in a country is measured by assessing the standard of living of its people. Those born in a country with high levels of poverty and corruption have a higher risk of living in a state of deprivation and suboptimal prosperity. Those born to wealthier nations with a more equitable distribution of that wealth will, in contrast, have a more prosperous life—developing the skills, knowledge, and experience (i.e. human capital) that will allow for more economic and social productivity.

Economic theories might differ on the best approach, but all schools of economic thought agree on the importance of investing in infrastructure, education, and healthcare as prerequisites for development and advancement. These three pillars allow citizens to live a full life. Yet development efforts over the past few decades have been geared toward the infrastructure rather than the human being. 

The human link

The end result of forgetting to place human beings at the heart of development goals, according to the World Bank, is that 56 percent of all global newborns today will, at best, be 50 percent as productive as they could have been as adults, had they received the necessary education and healthcare. To counter this, the World Bank launched the Human Capital Project, creating a human capital index (HCI) for countries, and offering support in designing strategies to tackle deficiencies in education and healthcare. The project’s underlying principle is that investing in human capital—in particular in healthcare and education from a young age—is  essential for eventual adulthood success and prosperity. 

The HCI—which ranges from 0 to 1—measures the amount of human capital that a human born today is expected to accumulate given available education and healthcare. Based on 2017 metrics, the new index placed Lebanon 86th out of 157 countries with a score of 0.54, meaning Lebanese productivity is just 54 percent of what it could be. This is below the MENA average of 0.57, and it is low compared to other upper-middle income countries such as Turkey (0.63), Bulgaria (0.68), and Serbia (0.78). By this metric, Lebanon has failed to design and implement developmental policies for its own population. 

Education, education, education

On the healthcare front, the results of Lebanon were in an acceptable range, as the index by nature targets the poorest countries, which are mostly in the African continent. On the education front, however, the average Lebanese student completes just 10.5 years out of the required 14, compared to a MENA average of 11.5, and a world average of 11.2. For standardized tests—scored between 300 and 600—Lebanon’s score was 405, under the regional average of 408, and lagging behind the world average of 431.

Due to low-quality public education and limited years in school, the HCI estimates the effective school years for Lebanese students is just 6.8 years, compared to the regional average of 7.6, and world average of 7.9. In developed countries this average rises to 11 years, meaning that Lebanon suffers from an alarming learning gap of 3.7-years.

The global preliminary findings of the HCI found that the lack of quality public education and healthcare were due to two things: First, politicians think short-term by investing in infrastructure over people; second, bureaucracy tends to get in the way of transforming efficient policies to actionable implementation programs.

A future vision

Chile focused on early investment in human capital by mixing education, healthcare, and social protection programs for children; Pakistan focused on using technology to reach children in need of vaccines. This is to say that ideas are as diverse as every society is, and as diverse as every country’s capabilities are. What matters is to diagnose the problems, and then design policies with a long-term vision that increases living standards by improving the capabilities of humans, so they can become healthy and productive adults.

It is not acceptable for Lebanon to continue to boast about its past, its diaspora, and its private education, while the level of education overall has lowered and continues to worsen. What is needed is an emergency plan to diagnose the real challenges, develop our curricula, improve teaching quality, and link education to health and to an overall economic plan, because society is not a sum of the parts—it is a whole to which success is as good as that of its weakest member.

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CommentEconomics & Policy

US sanctions Hezbollah lawmakers

by Jeremy Arbid
written by Jeremy Arbid

Last month, the United States designated two elected Lebanese legislators and members of Hezbollah as terrorists. This was an escalation of the US measures targeting the party, alleging that Hezbollah smuggles drugs and launders the proceeds to finance its militia and alleged terrorism activities. Little more than two years since Lebanon’s Prime Minister Saad Hariri visited the White House, we have the Trump administration’s answer to the “menace” of Hezbollah: more of the same in America’s war on terror spanning nearly two decades over multiple American presidencies.

In July, the Office of Foreign Assets Control (OFAC) under the US treasury department, sanctioned two Hezbollah parliamentarians: Mohammad Raad, head of the party’s parliamentary bloc, and Amin Sherri. A third individual, Hezbollah’s liaison and coordination unit official, Wafiq Safa, was also listed. The three were designated for their alleged roles as “terrorists and those providing support to terrorists or acts of terrorism” through an executive order that dates back to the Bush administration.

The latest action comes as the US has ramped up pressure on Iran and looks to squeeze its economy to the point of collapsing the Iranian regime. This represents a change of direction when compared to the former US President Barack Obama’s second term. The main difference between the Obama administration and the Trump administration is that the former was pursuing Hezbollah while easing off its patron, Iran, while the latter is going full throttle after both. Under Obama, the US pursued a diplomatic solution to the prospect of an Iranian nuclear weapon, whereas now, the US is seemingly on a path toward military confrontation with Iran and its allies—if Iran does not change course in its regional influence campaign.

Ramping up the pressure

In May 2018, the Trump administration reneged on the Iran Deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). The Iran Deal was an agreement between Iran and five nations (the US, the UK, France, Russia, China, and Germany), as well as the European Union to limit and delay Iranian uranium enrichment capabilities needed to manufacture nuclear warheads in exchange for the lifting of sanctions. The US unilaterally withdrew from the deal despite evidence that Iran was in compliance. Justifying the withdrawal, US President Donald Trump cited Iranian aggression across the region, its military campaign in Syria, and the implied notion that Iran was using its economic recovery from the JCPOA sanctions relief to fund Hezbollah in Lebanon and other non-state actors and militias elsewhere in the region.

The US is pursuing Hezbollah aggressively and on all fronts. It has attempted to pressure Hezbollah financially by targeting its patron, Iran (which, according to a 2016 speech by Hezbollah Secretary General Hassan Nasrallah, funds the group exclusively). A year ago, it appeared the US might be building a case that could lead to legal actions against Hezbollah officials or their affiliates. Lebanon still remembers the forced closure of the Lebanese Canadian Bank in 2011, which was the end result of a US Drug Enforcement Administration law enforcement campaign that began in 2008, code-named Project Cassandra, to disrupt Hezbollah’s alleged global drug trafficking and money laundering network. 

Earlier this year, OFAC sanctioned two individuals and three entities it alleged were “evasion conduits for major Hizballah financiers,” and, in a separate action, designated Kassem Chams and his money service business, Chams Exchange. OFAC alleged that the money changer “launders drug proceeds throughout the world on behalf of narcotics trafficking organizations and facilitates money movements for Hizballah.” On five separate occasions in 2018, OFAC sanctioned 19 individuals and 16 entities, including Nasrallah and Hezbollah’s Deputy Secretary General Naim Qassem.

Last October, the US Department of Justice named Hezbollah one of the “transnational organized crime threats” to the US, alongside four Central American cartels, and is now looking to “reengage with our partners in the hemisphere” according to recent remarks by US Secretary of State Mike Pompeo at the July 19 Western Hemisphere Counterterrorism Ministerial Plenary. The same day OFAC sanctioned a senior member of Hezbollah’s external support organization, Salman Raouf Salman. “We are targeting Salman Raouf Salman, who coordinated a devastating attack in Buenos Aires, Argentina against the largest Jewish center in South America 25 years ago and has directed terrorist operations in the Western Hemisphere for Hizballah ever since,” according to a readout of the statement. The day before, Argentina announced it had designated Hezbollah as a terrorist organization and froze assets. Iran and Hezbollah have long denied involvement in the bombing. 

The Trump administration also brags it has set the record for “the most sanctions imposed on Hizballah in a single year,” according to a March statement declaring support for Israel (though the announcement did not count how many designations were made, or whether those actions referred only to OFAC listings or included measures by other agencies). Over the course of 2018, by Executive’s count, OFAC had designated nearly 40 entities and individuals. 

So what is to be made of the recent sanctions targeting the elected officials, and what does the Trump administration have in mind for Lebanon by targeting members of Parliament? Reading the sanctions as the targeting of the Lebanese state by the US may be an exaggeration, says Albin Szakola, an illicit finance analyst. “US policymakers have long pursued the objective of bolstering the Lebanese state and its institutions,” he says. According to data from the United States Agency for International Development, the US supported Lebanon to the tune of nearly $600 million last year, counting humanitarian, economic, and military aid, and from 2011 – 2017 provided Lebanon with aid worth nearly $2.7 billion. Szakola adds that, “The US treasury designation statement, in its language, does not fault the Lebanese state, instead painting it as a victim of the Hezbollah officials’ conduct.”

Part of OFAC’s explanation for the action reaffirmed American insistence of no distinction between Hezbollah’s political and military wings, using a quote by Hezbollah’s Raad: “Hizballah itself makes no distinction between its military and political wings, as Hizballah’s own leaders have acknowledged publicly, including Muhammad Hasan Ra’d, who said in 2001, ‘Hizballah is a military resistance party … There is no separation between politics and resistance.’” However, in Szakola’s analysis, the US was only targeting the legislators and not the institution to which they were elected. “The statement was very specific and explained that the US sanctioned these individuals for taking advantage of their political positions to facilitate Hezbollah’s non-political activities, including smuggling of contraband, acquiring passports for foreign operations, and trying to maintain access to Lebanon’s financial system.”

Dangerous game

Is it possible that the US may be attempting to provoke the party into political conflict with Lebanese counterparts? Szakola does not think the OFAC sanction demonstrates a shift in US policy. “I’m very hesitant to interpret this US treasury designation statement as signifying any new policy on the part of Washington to drive a wedge between Hezbollah and the Free Patriotic Movement (FPM), or its other political allies.”

Joe Macaron, a resident fellow at the Arab Center Washington DC, however, reasons that just may be what the Trump administration is attempting. In his reading of the sanctions, the US may be trying to “weigh in on Lebanese politics” by forcing a wedge between members of its national unity government in which all major political parties in Lebanon are represented. He writes that Safa, the security official sanctioned in the most recent OFAC action, is Hezbollah’s conduit to Gebran Bassil, Lebanon’s Minister of Foreign Affairs, who also heads the FPM and is the son-in-law of the country’s president, Michel Aoun. Bassil was a key figure in negotiating the political alliance between the FPM and Hezbollah in 2006, and it was thanks to Hezbollah that Aoun reached the presidency in 2016.

If framing the sanctions as a US effort to provoke political conflict between Lebanese counterparts is accurate, what could happen to Lebanon? Macaron suggests the possible outcome of a dysfunctional or collapsed government. Such a scenario, he says, could derail American efforts to broker border negotiations between Lebanon and Israel. It might also ruin Lebanon’s efforts to unlock desperately needed infrastructure loans pledged last year at the CEDRE developmet conference, and could jeopardize other projects in Lebanon, such as reforming the electricity sector, or finding a sustainable solution for garbage management. 

It could be more damaging for Lebanon than just project failures. The country is in a very delicate position: The economy is in recession and has been for almost a decade, it is under significant financial stress due to high levels of debt and poor public finance, and it faces social upheaval from the burden of hosting Syrian refugees. Any sort of political disruption in Lebanon could—in a worst-case scenario—create a domino effect leading to a security crisis. 

It remains to be seen how the American’s heavy-handed, top-down approach to dealing with Hezbollah will play out in Lebanon politically and on the ground. But at least now we have an answer to what the Trump administration plans to do regarding Hezbollah, even if we still do not understand the White House strategy for containing any possible fallout.

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CommentEconomics & Policy

Gas sector a catalyst for further cooperation between Lebanon and Egypt

by Mona Sukkarieh
written by Mona Sukkarieh

The first six months of 2019 saw an unusual series of meetings between Lebanese and Egyptian officials, with energy cooperation at the core of these discussions. If memory serves well, the frequency is unprecedented.

The option of resuming gas imports from Egypt was discussed extensively, especially during the first meetings of 2019. Lebanon previously imported natural gas from Egypt in 2010 via the Arab Gas Pipeline (AGP) to generate electricity. But supplies were interrupted after a few months with various reasons touted (such as Egypt’s inability to pursue exports because production was barely enough to meet local demand, instability in Egypt, and attacks against the pipeline). With the formation of a new government on January 31, Lebanese officials explored the possibility of quickly resuming imports as they scrambled to find solutions to the problems plaguing the electricity sector. The dire state of Lebanon’s power sector and the burden it places on the economy propelled it to the forefront of the government’s reform agenda. Government officials examined the option of importing gas by pipeline from Egypt to generate electricity—in addition to the possibility of buying electricity from Jordan in exchange for water—as among the possible solutions that they thought could be implemented quickly.

Reasons to pause

But, importing gas from Egypt by pipeline is not without challenges:

(i) Importing gas from Egypt via the AGP would entail passing through Syria. The issue of normalizing relations with Syria is highly divisive in Lebanon and is opposed by various political actors, including Prime Minister Saad Hariri’s Future Movement. However, according to the gas supply contract previously signed between Lebanon and Egypt, negotiations with transit countries and transit fees should be handled by the supplier (i.e. Egypt). As one would expect, this is an issue with a strong political dimension and the Syrian regime, in search of legitimacy, will not hesitate to use it to get something in return.

(ii) Israel is expected to export its gas to Egypt by the end of this year. Once past the endpoint of the East Mediterranean Gas (EMG) pipeline, which connects Ashkelon in Israel to Arish in Egypt, Israeli gas is supposed to use the same stretch of the pipeline in the Sinai that Egypt uses to export its gas via the AGP northward to Jordan, and beyond, to Lebanon via Syria.

(iii) Although Jordan is currently importing gas from Egypt via the AGP, many in the industry seem to think this is only a temporary measure. In January, Egypt and Jordan amended an existing gas purchase and sale agreement, and agreed to increase supplies. According to the Egyptian petroleum ministry, gas exports toward the end of February reached about 350 million cubic feet per day (mcf/d), compared to 100 mcf/d in January. The contract with Jordan provides for exporting varying volumes of gas, depending on Jordan’s need and available quantities in Egypt. But Jordan is expected to start importing gas from Israel’s Leviathan field by early 2020, once the gas field comes on stream and the pipeline currently being built to carry the gas to Jordan is completed. This pipeline will connect to the AGP in the northern Mafraq province of Jordan, and gas will be distributed from there to the country’s power plants, which incidentally adds one more technical obstacle to Lebanon’s plans to import Egyptian gas via the AGP.

These challenges mean that it is unlikely that Lebanon is going to import Egyptian gas via the AGP on the short-term as it was initially hoped.

But some Lebanese officials seem to have other ideas in mind. Keserwan MP Neemat Frem met Minister of Energy and Water Nada Boustani on February 20. After the meeting, Frem told the press that he could contribute to resolving the electricity crisis in Lebanon in just six months, starting with the Zouk power plant in Keserwan and moving on to the Jiyeh power plant south of Beirut. The solution Frem proposed to the minister involves importing gas from Egypt in a compressed form (CNG), aboard special ships using a new technology. In 2013, when it became clear that monetizing offshore gas in the Eastern Mediterranean was harder than previously thought, this technology began to be promoted in neighboring countries by lobbyists as a potential lower-cost solution to otherwise stranded or difficult-to-exploit gas. The feasibility of this option is not clear; to date, there is only one project using this technology in Indonesia.

So then, what could justify these repeated meetings between Lebanese and Egyptian officials, much of which focuses on energy cooperation? No doubt, there is genuine interest from both sides to strengthen bilateral ties, including cooperation regarding energy. From an Egyptian perspective, strengthening cooperation makes sense on more than one level.

The Egyptian side

First, Egypt is interested in exporting natural gas to Lebanon, according to Egyptian Minister of Petroleum and Mineral Resources Tarek el-Molla, who confirmed in July that discussions to supply Lebanon with Egyptian gas, “whether through LNG shipments or others,” are ongoing.

Second, Egyptian companies are interested in investing in the various areas of Lebanon’s energy sector, as often noted by Molla, despite recent setbacks. (Egyptian companies did not make it through the technical evaluation phase in the tender to procure floating storage and regasification units, and failed to pre-qualify for Lebanon’s first offshore oil and gas licensing round.) As pointed out by the petroleum minister in remarks to the press following his June meeting with his Lebanese counterpart, and previously by Egyptian Prime Minister Madbouly at the May 2019 meeting of the Lebanese-Egyptian Joint Higher Committee, Egyptian companies are “ready to take part in tenders” and “implement projects” in Lebanon.

Third, Egypt sees itself as the main player for gas in the region and hopes to become the region’s gas export hub, thanks to its infrastructure and liquefaction facilities. This is the role it is actively pursuing by strengthening diplomatic relations and energy and economic cooperation with neighboring countries. From an Egyptian perspective, it is only natural for Cairo to pursue the same policy toward Lebanon, a fellow Arab country that is preparing to launch exploratory operations and may have significant offshore resources.

According to Madbouly, these efforts or overtures toward Lebanon are strongly supported by Egyptian President el-Sisi, who, according to comments made by the Egyptian delegation in Lebanon in May, would not hesitate to intervene personally to overcome any obstacles facing bilateral cooperation in order to advance and strengthen relations between Egypt and Lebanon.

The Lebanese side

For its part, Lebanon is open for Egyptian investments and looks forward to benefiting from Egypt’s experience in developing its oil and gas industry, including by training Lebanese workforce in Egypt’s training centers. Beirut is also increasingly aware that regional cooperation is required to make the most out of offshore resources. When the Eastern Mediterranean Gas Forum (EMGF) was first announced in Cairo in 2019, Lebanon scrambled to deal with a new regional configuration that left the country out. Caretaker Minister of Energy and Water Cesar Abi Khalil was dispatched to Cairo two weeks later to discuss the newly announced forum, in addition to the possible resumption of gas imports.

In a previous piece analyzing the EMGF from a Lebanese perspective published in the February 2019 issue of Executive, it was argued that Lebanon should not respond to this new regional configuration by isolating itself. On the contrary, if the presence of Israel prevents Lebanon from joining the EMGF, then Beirut should strive to make up for this by strengthening bilateral cooperation with the rest of its neighbors, starting with Egypt, or risk finding itself on the margin of developments. The article pointed out that Egypt is best placed to reassure Lebanon, stating that:

“More than any other member state, Egypt has the possibility to reach out to Lebanon. Egypt is the key player in this new configuration, and, as an Arab country that maintains close and brotherly ties with Lebanon, it can play an important role in reassuring the Lebanese about the project while also seeking to strengthen prospects for energy cooperation between the two countries.”

This is the message Molla wished to convey during his last visit to Beirut in June, where he mentioned that cooperation with Lebanon is regarded as a priority for Egypt. In an interview aired on LBCI, he insisted that Lebanon and Egypt should seek to strengthen relations “at the bilateral level, even if it is not within the forum at this stage … We can share our experience with the Lebanese on one hand, and we can, as a country or via our public or private companies—as Lebanon wishes— contribute to supplying Lebanon with gas to meet its needs in the electricity sector.”

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Budget 2019Economics & Policy

Lebanon ratifies 2019 budget

by Jeremy Arbid
written by Jeremy Arbid

More than seven months into the fiscal year, Lebanon ratified its 2019 state budget. The law’s passage comes after months of delay and deliberation over expenditure-saving and revenue-boosting measures in what is being dubbed the austerity budget, though more accurately is a reformist one. The 2019 budget is the third in three years, after more than a decade of going without, and is a necessary exercise to correct the state’s woeful finances and to unlock infrastructure loans from last year’s CEDRE infrastructure conference. At the same time, it represents the beginning of a shift in the politics over what Lebanon will spend and collect. 

Fiscal fever

In mid-July, Parliament convened to vote on the 2019 state budget. Over four days of deliberation, lawmakers voiced criticism that the projections in the budget were not based on reality and that not enough was done to enlarge the revenue base. Lawmakers also complained that expenditure cuts did not go far enough to rein in public spending, and cuts that were made were labeled as too draconian.

Since promising reforms at CEDRE 15 months ago, Lebanon overshot the spending allocation in last year’s budget by nearly $600 million. According to the fiscal performance sheets published by the Ministry of Finance (MoF), Lebanon spent almost LL24.7 trillion ($16.4 billion) in 2018 but was only authorized to spend LL23.9 trillion ($15.8 billion). The higher spending was due to an increase in the cost of servicing the debt, a higher cost of subsidizing the failing Electricité du Liban, and a higher wage bill for public sector workers after the 2017 pay raise and the wasta hiring buffet where more than 5,000 state jobs were doled out as favors during the 2018 parliamentary elections despite a hiring freeze.

Overall, Lebanon spent 17 percent more in 2018 than it did in 2017, and recorded the first primary deficit (expenditures not including debt servicing) since 2013. The total deficit for 2018 reached 11 percent of GDP, or approximately $6.5 billion. The year prior, 2017, Lebanon spent LL21.2 trillion ($14 billion) for a deficit-to-GDP ratio of 6.1 percent, according to the finance ministry’s fiscal performance sheets. Through April 2019, Lebanon had already spent LL7 trillion ($4.6 billion) and collected LL5 trillion ($3.3 billion), according to the ministry’s fiscal performance sheets. This represents a 12 percent decline in spending in the year-on-year comparison with 2018 and a 5 percent decline in revenue collection for the same period last year. The deficit reduction for the first four months of 2019 is rooted in the non-payment of government obligations to local suppliers as alleged in separate tweets by Dan Azzi, former Chairman and CEO of Standard Chartered Bank, which was sold to Cedrus Bank in 2015, and Alia Moubayad, an emerging markets economist. According to the July issue of EcoNews, a monthly economic newsletter published by local bank Societe Generale de Banque au Liban (SGBL), Lebanon “is delaying long-overdue payments to contractors, hospitals, and non-governmental organizations to reduce its borrowing needs in the first few months of the year.”

Lebanon’s pledge at CEDRE was a reduction of the debt-to-GDP ratio by 1 percentage point each year over five years. The 2018 budget was legislated in the weeks leading up to CEDRE, and there was never a deficit specified as a starting point. Instead, Lebanon made its pledge on the implied deficit-to-GDP ratio of 8-9 percent, and that promise was made long before the 2018 spending spree was realized.

What does the budget do?

The 2019 budget is now the midway point in an effort to get the country’s finances in order, according to officials. After the 2017 and 2018 budgets established that, yes, Lebanon could actually legislate a budget after a 12-year period in which it did not, the 2019 budget is meant as a first step in altering how, and on what, Lebanon spends money. Hazar Caracalla, an economic adviser to the prime minister, tweeted after the budget was ratified that the “the ratification by Parliament of the 2019 budget is a good and imperative first step in the long path of financial reform. It must be built upon in the budgets 2020, 2021, and 2022 through additional measures aimed at completing deficit reduction and reversing the dynamics of public debt and re-regularizing the public finances by approving the 2020 budget according to the constitution.” 

We are still unsure of what this long path of reform entails, and that may be because the government has not articulated the waypoints. For now, we have the high-level budgetary figures, assumptions, and the measures that have been publicized, but we will have to wait for publication of the budget law to take a full reading. 

Revenue in the 2019 budget is estimated at nearly LL19 trillion ($12.6 billion) according to reporting from L’Orient-Le Jour. The paper noted that the MoF had not given a revised spending figure after the budget had been ratified; Parliament’s finance committee had estimated spending at nearly LL23 trillion ($15.3 billion). These figures, if they hold true through the end of the year, would represent a 17 percent increase in collected revenues, and a 7 percent decrease in spending when compared to 2018 figures from MoF fiscal performance sheets. The budget projects the deficit to be 7.6 percent of GDP for 2019. 

To reduce spending, there were cuts to the budgets of institutions including the Council for Development and Reconstruction, Ogero, and the Higher Relief Council. The budget also reduced the number of yearly monthly salaries certain employees receive from 16 to 12 (see box left), reduced some benefits for different groups of retirees and state contributions to pension systems, capped public salaries at 20 times the national minimum wage, and froze hiring until 2022. On the revenue front, a number of taxes were increased or introduced, including: a 3 percent increase to 10 percent tax on the earned interest on deposits for the next three years, a new tax bracket for persons and enterprises at the rate of 25 percent for annual incomes above LL225 million ($149,254), the introduction of a 3 percent duty on imports that are subject to the VAT, excluding fuel, raw materials, and industrial equipment, and a new annual fee of between LL100,000 ($66) and LL1 million ($663) per license plate for cars with special license plate numbers (see box left).

A budget based in reality?

The 2019 budget made some lofty assumptions. The version approved by cabinet in June assumed Lebanon’s economy would grow by 1.2 percent in 2019, according to a study by Kulluna Irada (KI), a civic organization for political reform. It pointed out that government projections of economic growth in the previous two budgets missed actual year-end figures. In 2017, for example, KI says the forecasted growth rate was 2.2 percent, but the final result was only 0.6 percent, and for 2018, the budget forecast 3.43 percent economic growth but ended up at only 0.2 percent. KI concludes that “overstating growth affects the budget on two levels: it overstates the level of projected tax collection due to an overestimation of its tax base [and] it brings down the deficit to GDP ratio since it inflates the metric’s denominator.” In other words, Lebanon may be overstating the amount of money it expects to collect and inflating the size of the formal economy to make the deficit-to-GDP ratio look better.

According to KI, the 2019 budget was pinned on “elements of confidence” that Lebanon can overcome its fiscal and economic challenges. These confidence elements include hoped-for revenues from yet undiscovered oil and gas resources, yet uncommitted pledges in the form of $11 billion in loans from CEDRE, as well as the nearly $139 billion in deposits as of April 2019 held at Banque du Liban (BDL), Lebanon’s central bank. 

Betting on such so-called confidence elements is, as the document puts it, “a starting point.” According to officials, the 2019 budget is the first on the path of long-term financial reform that must be continued in the budgets for 2020 – 2022. Will these bets pay off in this period? 

Lebanon is scheduled to drill its first offshore oil well later this year. Assuming luck is on Lebanon’s side and the results of the first well is positive, it could take several more drilling efforts to confirm commercial viability of the well. Then, infrastructure would be needed to extract the resource and a market secured to sell it. This whole process can take several years or longer and depends on internal and external factors, such as political stability, global market prices, and a calm regional security. 

As for CEDRE funding, earlier this year donors were not hiding their frustration with Lebanon’s slow progress toward approving the 2019 budget and introducing fiscal reforms. They were openly stating that the 1 percentage point reduction was no longer enough after the 2018 spending spree. Cabinet was yet to approve the budget and pass it to Parliament when the World Bank’s vice president for the region, Ferid Belhaj, visited Lebanon in March. Belhaj was less than impressed with the progress the government had made to that point: “These reforms, despite having started, do not rise to the expected level and this is what we have said with all frankness to the Lebanese government.” Belhaj also warned that, “If Lebanon wants to see any money from CEDRE soon, it needs get [sic] serious about implementing reforms … If it fails to do so, the amount will be zero—let me be very clear about that. Zero.”

In a speech at Parliament, before voting of the budget commenced, MP Salim Saadeh said of the fiscal reductions in the budget and of the reforms pledged at CEDRE, “They know we are lying to them, and we know that they know we are lying to them, this is the truth so there is no problem.”

Cherish the game of lies

Despite acknowledgement of lying to their face, the diplomatic community sent its usual congratulatory reassurances: The International Support Group, a coalition to support a stable Lebanon led by the UN with the governments of China, France, Germany, Italy, Russia, the UK, and the US, as well as the EU and the Arab League, concluded that the budget “is an urgently needed first step by Lebanon in fiscal management and towards reducing its deficit.” Likewise, the World Bank’s regional director for the Middle East, Saroj Kumar Jha, tweeted: “This is a good first step and the broad discussion, which is unique in the region, is welcomed.” Oh, to be an eternally positive emissary.

As for deposits, inflows came to a near standstill in 2018 and was the lowest rate of deposit growth since 2005, according to the International Monetary Fund (IMF)’s Article IV statement. The IMF also pointed out that reserves at BDL declined by a whopping $6 billion in 2018, that bank lending to the private sector is down, and that there has been an increase in non-performing loans. 

To protect its balance sheet the IMF recommends the central bank “should step back from government bond purchases and let the market determine yields on government debt. Buying the proposed low-interest government debt would worsen the BDL’s balance sheet and undermine its credibility. There should also not be any pressure on private banks to purchase the low-interest debt instead.” Projections in the 2019 budget had assumed BDL would purchase LL11 trillion ($7.3 billion) in Lebanese treasury bills (T-bill) at 1 percent to help the state reduce the cost of interest payments on the public debt (which stood at LL128.69 trillion, or $85.4 billion in May 2019). According to remarks published by The Daily Star, BDL governor, Riad Salameh, squashed that idea ahead of Parliament’s ratification of the budget—however, this has not been confirmed in any official statement from BDL.

It is nice that officials regard the next decade with such optimism but perhaps they are just biding time until more drastic reform measures can be introduced. At the time of writing there are indications that the US Federal Reserve will cut interest rates so it may be possible, at least by consensus of economy watchers, that the interest rate environment in the short- to medium-term will develop to Lebanon’s advantage. Lebanon now can only focus on controlling what it can, such as budgetary discipline, minimizing the public wage bill by avoiding the corrupt practice of political hiring, and responding to developments that go against budgetary projections. However, the external circumstances of war, trade wars, currency wars, or any other such force majeure may derail any forward motion set by this budget.

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EntrepreneurshipProfiles

Lebanese edtech startups carve a place alongside traditional teaching

by Lauren Holtmeier & Thomas Schellen
written by Lauren Holtmeier & Thomas Schellen

Lebanese startups focusing on education technology (edtech) have tapped into the idea that as education changes, they have a role to play in preparing the next generation for the 21st century workplace. Educators seeking to prepare children for the jobs of the future, those that rely more on coding, robotics, AI, and programming—and depend less on traditional knowledge than an ability to think critically to solve new problems—can tap into these technologies and integrate them into their classroom teaching. 

Investments in edtech are growing globally, and beyond the overarching education goal, Lebanon’s entrepreneurs see a potential market for these businesses here and in the region. In 2018, 1,087 edtech companies received funding globally, an increase from 813 in 2017, according to research from Metaari, an advanced learning technology research company. Of the six Lebanese edtech companies that Executive has profiled below, most expressed interest in expanding to other MENA markets, primarily those in Saudi Arabia, citing difficult economic times at home and better opportunities to grow their businesses abroad. Beyond better expansion opportunities in the Gulf states, Lebanon’s schools sometimes lack the technical infrastructure or cannot afford these solutions, making finding markets elsewhere not only lucrative for these startups, but in some cases necessary. 

From personalized children’s books and programs that teach kids and teens coding and robotics to an adaptive learning platform, these edtechs have one thing in common, an understanding that for children to learn best, they must be engaged with the content. “Gamified learning” and “project-based learning” seemed to be recurring buzzwords during these interviews, as the people behind these platforms see these styles to be the most engaging because children are actively involved in, and invested in, solving a problem from start to finish. These companies seek to partner with schools to give teachers another tool to use in the classroom, though they have primarily sought to tap into private schools in Lebanon, as public schools rarely have the budgets or infrastructure for these products.

Synkers

Incorporating a proprietary mobile app as a platform for interaction, Synkers is an online marketplace for tutoring services that is mostly active in Lebanon, where about 70 percent of its tutors are based. Synkers has a secondary presence in the UAE and aspirations to roll out its services in Saudi Arabia in the near term. With roots in the founders’ personal experiences as actors on the supply and demand sides of tutoring while studying in Canada about 10 years ago, Synkers was accelerated from business idea to startup venture at Beirut accelerator Speed@BDD, from which it graduated in April 2016. Seed funding came from Lebanese venture capital firm Phoenician Funds in 2017 and growth of the startup ensued on basis of strong knowledge of the Lebanese education environment. The edtech startup also is working in education markets that provide higher profit margins than tutoring by organizing classes on specific topics, such as the SATs, and also plans to provide corporate training. Its business model for intermediation between sellers and seekers of tutoring and handling of related payments is built around the charging of commissions to the buyers of tutoring (at a gross rate of 20 percent as part of which overheads, tech developments, and taxes due from tutors are covered). The startup’s concept also has accents of the sharing economy and social enterprise aspirations for contributing to the improvement of the education opportunities. Social accents include a professed vision of broadening the reach of education by making it more affordable for students from poor backgrounds to obtain peer tutoring that will give them an improved chance to complete their education and avoid dropping out of school. However, Synkers is also already contemplating exit strategies via acquisition by one of the larger edtech players in Asia or the United States who might seek to enter the Middle Eastern tutoring market (estimated by Synkers on basis of market research to worth $3.1 billion). 

Augmental

Some students are visual learners, some are auditory, and others are verbal or kinesthetic learners. With learning types this varied, the founders of Augmental, a digital learning platform, are trying to cater to an individual’s learning style. Students using the platform take an assessment that measures their skill level and learning style and an algorithm accordingly assigns material after the teacher has presented the lesson and introduced the concepts. For the teachers, there is a dashboard to monitor students. In Lebanon, Augmental is used by five schools, and Paul Barakat Diab, one of the founders, says that the team has interest from public schools in the UAE and Kuwait and is trying to penetrate Saudi markets. In Lebanon, there is currently content for STEM subjects for grades 5-9 as well as French and English. Content on the platform is made by content providers previously certified by the Ministry of Education and Higher Education or by teachers who can load their own content onto the platform. Each school subsequently has a coordinator to review the content and ensure it aligns with core competencies. For Augmental to function as intended, there are minimum infrastructure requirements a school must meet to qualify, such as a lab with enough tablets so that each student in a given class can use one. In Lebanon, because many schools—especially public schools—lack the appropriate resources, Barakat Diab says that Augmental’s future markets will mostly be outside the country. While teachers in Lebanon are aware of adaptive learning and are themselves searching for solutions, he admits the timing for such a product launch in Lebanon is not ideal because of the strained economic situation. To break even, a lot of factors must be considered he says. If they receive the requested funding, which will be used to pay increased marketing and sales efforts and the development of a marketplace for adaptive learning content, they will reach that mark in two years. 

Spica Tech Academy

Spica Tech Academy teaches children and teens how to create their own video games through project-based learning, but perhaps more importantly for founder Reine Abbas, the program is teaching kids how to be creative, a skill she stresses is imperative. Even if children do not go on to be game developers, the skills they are learning—creativity, project management, critical thinking, coding, storytelling, and writing—will be important in nearly any future career, Abbas says. Spica Tech Academy started as a B2C platform where parents could enroll their children in week-long 20- or 30-hour coding camps, but has since evolved to include a B2B model where Spica Tech Academy instructors will teach a week-long course in schools. So far, they operate in four private schools in Lebanon and, depending on demand, Abbas says she would likely expand to 12 schools in Lebanon and is currently finalizing contracts with three schools in Dubai. The focus on project-based learning, an approach in which students work to complete a project over an extended period of time, stems from a need to have children work through a task from start to end, figuring out solutions along the way. With game creation, challenges have to be created and solutions must be invented, says Abbas, making it a good—and importantly fun—way to get children thinking critically. Teaching complex concepts like coding to children could be challenging, but scaling activities appropriately makes this possible. For younger children, visual programming languages are a way to grasp these concepts, but teenagers can create their own game from scratch using the C# language. At the advanced level, students use Unreal Engine. “We’re using the real software developers are using,” Abbas says. “So after the first course they can create their own game at home, and it’s open source software.” Beyond expanding to other regional and global markets, Abbas says the next step, currently underway, is a template that instructors can use to gamify their curriculum to follow Spica Tech Academy’s model.

Lululittle

The Arab culture is one of rich history and important discoveries, yet this is often bypassed as people delve into the West’s history, ignoring their own, says Joanna Khoury founder of lululittle, a personalized children’s book company. Khoury wanted to make Arab history accessible to youngsters in a way that puts the child at the heart of the story. “From the dawn of time, stories have been a tool to deliver a message,” Khoury says. Lululittle uses a print on demand technology based in the UK that ranges from £6 – £8 ($7.46 – $9.94 at time of writing) and book buyers can choose their avatar and insert the child’s name to be made into a soft or hardcover book printed in either French or English. Because the books are printed on demand, overhead printing costs are minimal. Lululittle has done a preliminary launch of an Arabic version, and the full launch will follow when it is fully automated, which Khoury hopes will be in the next few months. Where Khoury sees a gap in the number of quality Arabic childrens’s books, she says that getting the Arabic version automated will allow for children in the region to learn about their culture in their native tongue and will be a way for expats to bridge the gap to home. Lululittle’s primary market is the MENA region and GCC states in order to teach kids about their own culture; of the 700 books sold so far, most have been within the region. This has been achieved with very little marketing, Khoury says, and next steps include ramping up their marketing efforts within regional target market. Khoury says for Western audiences the books are a way to learn about Arab culture and they have sold a few books in these markets. 

Nooreed

At age 16, deciding what to do for the rest of one’s life can feel overwhelming. Nour Jabra, founder of Nooreed, felt this herself and wanted to help teens identify careers to which they are well-suited. What started as a series of videos with professionals from various fields has evolved to include an assessment based on the Holland Code, which refers to American psychologist John Holland’s six personality types: realistic, investigative, artistic, social, enterprising, and conventional. Nooreed’s assessment is a simplified version, which Jabra says is an attempt to make it more accessible to teens and also to help eliminate any language barriers non-native English speakers may have. When a student registers, they take the assessment and are given a breakdown by percent of which careers best match their personality; they can then watch the related videos. In the six months since the assessment has launched, around 15,000 students have signed up. In Lebanon, the business model works as a sponsorship system where universities can sponsor Nooreed in return for advertising space on Nooreed’s website; students can access Nooreed regardless of whether their university has made a sponsorship agreement. Jabra says they are currently trying to break into the Saudi market by early 2020, and in that case the business model would shift to a subscription service that would be specific to Saudi Arabia, where a different economic situation means more schools will likely be able to pay. A dismal economy and shrinking school budgets have left little room for this type of service to work as a subscription service in Lebanon. “Lebanon isn’t a very healthy place to grow a business,” Jabra says. Other plans for expansion include partnering with study abroad agencies whereby Nooreed would refer students to a specific agency and receive a fee in return. While they are in talks with one such agency, no deals have been finalized at the time of writing. 

Cherpa

A Lego factory in Hungary with no human workers on the factory floor—that is what Ibrahim Ezzeddine saw on a class trip while studying at the Lebanese American University (LAU). Ezzeddine and Basel Jalaleddine, former roommates at LAU, started thinking about how to prepare children for future job markets where robots could replace traditional human labor. Cherpa, the duo’s startup, teaches kids coding and robotics through a gamified system. Cherpa has worked with experts from NASA and Google to design educational content and also works with an educational specialist to create content tailored to student levels. Currently, there are five courses; the latest, on cyber security, launched in July. Ezzeddine said the decision to follow a B2B model was because the teacher’s presence ensures students can follow the content rather than get frustrated and walk away. Because it is a paid service where administrations buy a course for a specific number of students (e.g. one course for $399 for up to 20 students), it is easier for Cherpa to target  uppper-end private Lebanese schools. A partnership with the education ministry will have Cherpa in five public schools on a one-year pilot program this year. Cherpa is currently in 18 schools in Lebanon and 1,600 students have completed at least one course, but Ezzeddine says the plan to expand beyond Lebanon, in which schools often lack the funds, necessary infrastructure, or internet connectivity. Cherpa has successfully entered one school in Saudi Arabia and has sold courses to one after-school educational center in Spain and one in Portugal. Future targets include penetrating the Gulf markets, primarily Saudi Arabia, where they are working with a business developer to test the market.

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CodingEducationSpecial Report

Providers search for lucrative coding bootcamp models

by Lauren Holtmeier
written by Lauren Holtmeier

If anything about the future can be claimed as certain, it is this: The jobs of the future will be different from those of today, and jobs across various sectors will more heavily rely on skills such as coding and programming. This shift has already begun, and Lebanese entrepreneurs, such as the founders of SE Factory, Codi, and Torch Academy, began looking to break into the coding bootcamp market about five years ago and educate fresh job market entrants. 

Information on the size or value of the global coding bootcamp market is not readily available, but a quick scan of available camps shows, at least anecdotally, a fairly large number of these bootcamps emerging globally. One estimate from Technavio, a company that conducts market research, predicts that the global full-time coding bootcamp market will reach $331.96 million by 2021, an 11 percent growth over the five-year forecast period. The Investment and Development Authority for Lebanon (IDAL) reported in 2018 that the Lebanese ICT sector was a fast-growing sector, whose impact, whether direct or indirect, on GDP was expected to be $7 billion by 2025. Such expectations reinforce the notion that Lebanon’s knowledge economy and tech startup ecosystem are an apt destination for the funds provided under Circular 331 from Banque du Liban (BDL), Lebanon’s central bank. Even before this data was published, entrepreneurs had identified a need and began looking to fill that gap and hopefully turn a profit. 

Learning how to code is not just for tech whizzes designing the latest hit app. Working Lebanese must be prepared and equipped to move into these jobs of the future, as more traditional sources of income are lost to technology. In 2018, PwC, a global consulting company, conducted a survey of 29 countries—of which only Turkey and Israel were surveyed in the Middle East—which estimated that 3 percent of jobs were at risk of automation by the early 2020s, increasing to 30 percent by the mid-2030s and putting 44 percent of low-educated workers at risk from losing their jobs to automation. A June 2019 Oxford Economics report found that up to 20 million manufacturing jobs—or about 8.5 percent of the global manufacturing workforce—could be replaced by robots by 2030. Since 2010, the report states that the number of robots in industry has more than doubled worldwide. 

Finding the right skills

Lebanon is not immune to these pressures. Of the local labor force, 21 percent work in the industrial sector, according to IDAL, and the country hosts over 4,700 industrial firms—meaning the rise of automation and robots could impact the makeup of the Lebanese labor force. But with disruption comes opportunity, IDAL identifies gaming, e-health, adtech, software as a service, media streaming, and financial and e-payment solutions as key investment opportunities in Lebanon. Bottom line, with millions of jobs likely to be automated in the future, the living labor force must adapt to define and subsequently fill new roles. 

In Lebanon, a 2017 skills forecasting study conducted by the national employment office in conjunction with UNESCO, the EU, and NET-MED Youth—a five-year project implemented by UNESCO and funded by the EU—identified close to a combined 13,000 jobs across the ICT sector, including systems analysts and various developers and programmers; while a 2016 UNDP labor needs assessment for the ICT sector estimated 2,000 new jobs would be created annually for new graduates. With around 800 ICT enterprises in Lebanon and approximately 2,000 university ICT graduates looking to join the workforce each year, these estimates would indicate that the sector is capable of absorbing these new graduates. However, this projected 15 percent job creation rate should be questioned with the country headed toward austere times and real GDP growth at just 0.2 percent in 2018. Even if these projections prove correct, there is still a gap in that degrees do not necessarily set students up for the workplace. 

Fadi Bizri, founder of SE Factory, a coding bootcamp for recent graduates, says there is a skills mismatch, in that universities focus on theoretical knowledge and fail to instill in students the practical knowledge needed to succeed in the field. “If there’s a supply, and there’s a demand,” Bizri asked himself. “Why isn’t it working?” The UNDP report cited a lack of “blue sky thinking” in the current collective skillset, meaning the current labor force lacks the ability to think critically and creatively.

Bizri and his co-founder Zeina Saab recognized this knowledge gap, especially for graduates coming from what he describes as second-tier universities where receiving a high-quality education is hit or miss. SE Factory, which focuses on full-stack web development, is one of multiple endeavors, alongside Torch Academy and Codi, across Lebanon that aims to provide students with this practical technical knowledge while simultaneously boosting critical thinking, but it also teaches soft skills and has career services that include CV writing and mock interviews. All three of these programs target young adults and recent university graduates, and all claim a 90 percent job placement rate of their graduates. 

Such endeavors have popped up over the last five years, and a few seem to be operating relatively healthily in their early stages. One that failed to do so though was the popular France-based Le Wagon program. Le Wagon has bootcamps in 35 cities globally, and a branch opened its doors in Lebanon in 2015, but closed after just two cycles. Malik el-Khoury, Lebanon’s Le Wagon founder, says this was for multiple reasons that included the price, the coding language taught, and the fact the teachers hired from the US and Europe were more expensive than local instructors.

The price tag for an intensive nine-week program was $4,500, and 80 percent of Le Wagon’s students came from abroad. Finding people who were willing to pay that high a price in Lebanon was difficult, and the number of Lebanese employers who use the language taught, Ruby on Rails, can be counted on one hand, Khoury says. Ruby on Rails is great for people who know little about coding, but is not exceedingly useful in a country that primarily uses PHP and Java, he says. When asked what model may be more sustainable in Lebanon, Khoury says he thinks something where students can go to school in the evenings and still be working during the day could prove more lucrative.

Finding the right model

Torch, which began in 2015 as well, is now beginning to shift to this “short course” model in which students attend classes three evenings a week and choose to learn IOS, Android, or web development, with a focus on building practical skills. Traditionally, students enrolled in a 14-week full-time program for $1,200, and while they have trained more than 350 students and have three or four courses a year, Inaam Hassoun, program coordinator at Torch, says that they are struggling to attract interest in this intensive program in which they would need 10 to 15 students to run a cycle. Hassoun believes this is because most recent graduates do not have the necessary funds and are focused on getting a job to use their recently obtained degree.

SE Factory, on the other hand, have stuck with the 14-week, full-time model since incorporation in 2016, operating three cycles annually with around 20 students in each cohort, but where they are targeting recent graduates with some background in computer science from the middle and lower socioeconomic classes, they charge just $100 for the course. In the beginning, this was achievable through grants and heavy fundraising, and now SE Factory charges a success fee for students and companies. For students, once they land a job, one month’s salary is owed that can be paid over three to 18 months. For companies, if they hire a graduate and are satisfied, SE Factory receives 1.5 times a month’s salary once the employee makes it past the probation period. Bizri, one of SE Factory’s co-founders, says that currently they have about 60 companies in their network, including employers outside Lebanon. Regarding growing SE Factory, he says that while they are on a path to sustainability, they still rely on some grants, and they have recently raised money to open two new bootcamps, one in the north and one in the south, but the exact locations are yet to be determined. 

Where SE Factory charges an, albeit very affordable, fee for their services, Codi, a similar program that targets marginalized youth, including low-income Lebanese as well as Syrian and Palestinian refugees, who must be at least 17 years old to enroll in the program, offers six-month classes for free, relying heavily on fundraising from corporate or individual donors. In operation since 2017, they tend to target members of the Lebanese diaspora for funds through cooperation with the Lebanese International Finance Executives (LIFE), a group that works to link Lebanese finance executives abroad back to their roots. 

still in demand

Joseph Atallah, director and head of operations at Codi says that they receive their physical operating space for free and only pay for utilities, helping lower operating costs. Beyond having tuition-free courses for the near 30 students each cycle, Codi partners with Al-Majmoua, a nonprofit microfinance organization, to provide microloans of $2,000 spread over the six months to students who need financial assistance. Graduates must begin paying back the loan within four to six months of graduation, assuming they find employment; if not, Codi covers the costs. 

With these four programs all emerging within a two-year window of the others, and three left standing—and where at least one, Torch, has expressed trouble attracting new students for their full-time coding bootcamp—the question arises: Has the market reached saturation? Torch’s Hassoun says she thinks it is a possibility, but SE Factory’s Bizri disagrees. With only a handful in Lebanon, and with those in operation targeting different markets (marginalized youth, lower income youth, and middle to upper class), he argues it is doubtful that the market has reached saturation. Regardless of these programs’ presence, the jobs they seek to prepare their students for will continue to emerge rather rapidly over the coming decades, and demand for skilled workers will not dwindle. In turn, the demand for coding bootcamps—unless Lebanese universities drastically alter their curriculum to ply their students with more hands-on experience—is not likely to decline. 

However, prospective students’ demand for full-time coding bootcamps, for the time being, seems to be contingent on pricing. Of course, many other factors that may affect demand could be at play, such as preference for programming language, skills taught, or offerings on teaching soft skills, but where these offerings seem to be similar across the board, price varies dramatically. Le Wagon’s failure was in part due to the Ruby on Rails programming language offered, despite it being a full-stack program, but the other three offer full-stack training on commonly used coding languages. If students have a preference for learning a certain language, this could affect the landscape as well. The experiences of Le Wagon and Torch in struggling to attract people for their relatively pricey full-time courses compared with SE Factory and Codi’s relative ease in identifying students indicates that there is at least a partial link with affordability in a country that is undergoing an economic crisis. How coding bootcamps adapt and continue to fare in stormy economic times will require identifying a model that is affordable for recent graduates that teaches the right content, or, like Torch, adapts by shifting to a model where those in the labor force already can earn a living during the day and learn in the evenings. 

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EducationSpecial educationSpecial Report

Lebanon’s education system is failing students with special needs

by Charlie Darwich-Houssami
written by Charlie Darwich-Houssami

Students with physical and cognitive disabilities in Lebanon are being put at a disadvantage by a system that, from the get-go, creates barriers—both physical and financial—toward an inclusive education. While there are signs that this could change in the future, current progress is slow, and on a structural level, the educational system in Lebanon continues to exclude and discriminate against special needs students. 

In 2000, Lebanon passed Law 220 that, among other things, guaranteed disabled individuals the right for an education free from discrimination, as well as equal opportunities within private and public educational institutions. Yet, in the near two decades since the law was passed, an implementation decree has not been developed or agreed on by relevant ministries. Human Rights Watch (HRW) carried out research between January and June 2017, in Beirut and its suburbs, Hermel, Akkar, Nabatieh, and Chouf districts, gathering information about the experiences of 105 children and young adults with disabilities, and conducting interviews with six public schools, five private educational centers, 13 Ministry of Social Affairs (MoSA)-funded institutions, 30 disability and education rights experts and advocates, and 13 government officials. Based on interviews with disabled children and their families, HRW concluded that, “children with disabilities were excluded from public schools due to discriminatory admission policies, lack of reasonable accommodations, a shortage of sufficiently trained staff, lack of inclusive curricula (including no individualized education programs), and discriminatory fees and expenses that further marginalize children with disabilities from poor families.”

Barriers to education

The first barrier children with disabilities face is direct discrimation, i.e., being denied admission into school as a result of their disability. HRW recorded 200 instances of this during its investigation. One of the cases detailed in the HRW report was that of Wael, a 10-year-old boy with autism who, according to his mother, was denied admission into 10 schools in the Beirut area with reasons given, including, “We don’t take handicap [sic],” and “We cannot accept your son because the other parents might not approve.”

Others were able to enroll their children, only for the school to then ask them to remove them later. Zahraa, a five-year-old girl from Hermel with a cognitive disability attended public school for a month before her mother received a phone call from the school’s principal who, according to the HRW report, informed her that “Zahraa had to leave because, ‘[the teachers] cannot leave all the other children and just take care of her.’”

Due to the lack of data on the overall number of children with disabilities in Lebanon, it is impossible to give a scale to this problem. By the World Bank’s estimate, worldwide at least 5 percent of children aged between one and 14 have a disability; using that metric, HRW estimates that, on the conservative side, there could be around 45,000 disabled children in Lebanon. However, the government agency charged with registering people with disabilities have just 8,558 children on file—perhaps due to the fact that Lebanon does not consider some conditions—such as high-functioning autism, misophonia, and pathological demand avoidance—as disabilities.

The second barrier to inclusive education is financial, both on the side of schools and of parents. To be accessible to children with a wide range of disabilities, schools need to make buildings physically accessible, have teachers trained in special needs education provision, and supply specialized equipment, such as braille books and hearing aids. According to Aya Majzoub, Lebanon and Bahrain researcher at HRW, both public and private schools lack materials, tools, and systems that enable children with disabilities to learn, such as sign language interpreters. In cases where schools do have these materials, they are often provided by an NGO. Given the lack of funding—made worse by this year’s budget—there is a real shortage of trained special needs staff. When HRW carried out its investigation in 2017, it found that in nearly all cases, teachers and school administrators had no training on inclusive education methods or ways to incorporate kids with disabilities into the classroom and make sure they were receiving the needed support.  

On the parents’ side, if they can enroll their children into schools, they are often required to pay extra fees. LWIS Hazmieh is a school focused on inclusivity for students with special educational needs. Shukri Husni, chairperson of LWIS’ education committee, emphasizes to Executive the importance of an integrated approach at his school, where students with and without special needs learn in similar environments with adjustments made to accommodate the former. LWIS includes one special needs student per class, with each class averaging six – 10 students. In addition to regular school fees, students with special educational needs pay an extra of $5,000 – $8,000 per year, depending on the student’s needs. According to Husni, this is cheaper than in comparison to most private schools, which would require these students to pay double the regular school fees. 

A third barrier to a quality education for physically disabled students is the lack of accessibility in these educational institutions. A 2013 UNESCO report concluded that only five public schools in Lebanon met accessibility requirements for those with physical disabilities, such as having a wheelchair accessible entrance, ramps, elevators, disabled parking, and wheelchair accessible bathrooms. 

For students who do manage to enroll in schooling, and whose families can afford the added costs imposed on them, there is an additional barrier to face: the lack of accommodation in the Lebanese national curriculum for special needs students. It is up to the schools themselves to adapt the curriculum to suit specific needs. Even in schools with accommodating internal systems, this results in being forced to teach a curriculum that is unfairly difficult for special needs students. “It is especially difficult for learners with special education needs who follow the Lebanese program to thrive and get an equal opportunity as their peers,” Husni explains. “To move forward, a major shift in the educational system at the national level is needed. If this does not happen, then many learners with special education needs will not make it past 9th grade.”

Integrate, not segregate

One way around these issues is for children with special needs to be sent instead to specialized segregated institutions funded by MoSA, which are designed to serve as educational alternatives. However, these centers came under heavy criticism in the HRW investigation; one disability expert described most of these institutions to HRW as “day care centers—nothing more.”

In the draft budget sent to Parliament, funding cuts will make it hard to prioritize inclusion over segregation. The draft budget called for the Ministry of Education and Higher Education (MoEHE) to cut their funding for equipping primary and secondary schools with technical and other equipment for people with disabilities by $138,000, down 30 percent from 2018. At the time of writing, the budget had been passed by Parliament but was not yet signed by President Aoun, so Executive was not able to confirm if these cuts remained the same. 

Hope for the future?

While the current capacity of schools for special needs students in Lebanon is severely lacking, there are positive signals for the future. The MoEHE ran a pilot program last year, which provided 30 public schools in Lebanon with full-time, specially-trained teachers, and made these schools physically accessible to children with physical disabilities. It also included a mobile teams of paraprofessionals (speech therapist, psychomotor therapist, and psychologist), which was deployed to provide support when necessary.  According to the ministry, one outcome of this project, in particular the awareness sessions they have run at schools, has been the “shift from resistance to inclusion towards acceptance and readiness to support” from staff, students, and parents. Over 100 newly-built schools were built disabled-friendly, with a plan to build 25 – 30 more over the next five years. Another 170 schools (including the 30 in the above project) have been rennovated to include disabled-access. The MoEHE is also working on a new curriculum that  “will take into consideration students with special needs.”

Several universities in Lebanon, meanwhile, have taken the step of including training on inclusivity as part of their courses for soon-to-be educators. Anies al-Hroub, coordinator of the special education program at the American University of Beirut, tells Executive that the university offers a diploma specifically designed to teach its students how to cope with the special education needs and learning disabilities of their future students. The diploma covers all aspects of special education, including behavioral modification, teaching both theory and practice. Hroub also notes that the number of students taking this path has increased recently, which he attributes to a professional demand for special needs educators and growing interest in such courses, even among students not pursuing a degree in education. 

Despite these steps, it is clear that special needs students in Lebanon continue to face social, financial, and physical barriers to education. Changing this is important, as investment into special education leads to positive spillovers, through job creation and increasing the opportunity for children with special needs to reach their full potential as adults. All in all, greater efforts should be made to promote an inclusive education system for all children in Lebanon. 

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CommentEducationSpecial Report

Behind the Lebanese University strikes

by Kanj Hamade
written by Kanj Hamade

My father returned to Lebanon in 1994, 10 years after the civil war forcibly exiled him to France. He thought that his PhD from Sorbonne University, coupled with extensive academic publications, would be sufficient for him to find a decent teaching job at the Lebanese University (LU). He soon realized the error in his assumption when he was told that due to his past political affiliations, “only Ghazi Kanaan or Nabih Berri can get you in.” It was only in 2008, after 14 years of teaching under contractual working hours, that he eventually got a full-time position. My father’s case, however, is not an exception. A five to seven year wait for a full-time contract is the standard period; others have even waited for as long as 15 years.

The full-time employment of contractual professors and the tenure position for full-time professors was one of the demands of the spring strikes. However, this has been a recurring demand that, since the early 1990s, has led to yearly sporadic strikes and long-term sustained strikes. The fragmentation of faculty between contractual (paid per hour), full-time (paid monthly based on yearly automatically renewable contracts), and tenure track professors (open-ended contracts) reflects the system of dependency and control that the Lebanese political class has imposed on LU’s professors since the end of the post-civil war period in the 1990s.

Political pressures

 This system, based on political affiliations and sectarian balance, has come to determine people’s job stability, academic achievements, research grants, and access to managerial and academic responsibilities. It has subsequently created, in the Marxist sense, a dynamic of alienation, i.e. a loss of essence and self because of the stratification imposed by the political class, and its constant and continuous loyalty checks at each step of the way. Certainly, as an institution, LU is constantly occupied by protests and demands related to the status of university professors, who are new and highly-qualified while job and income insecure.

The Lebanese political ruling class puts the university under constant pressure through the control and alienation of its faculty and through the fragmentation of the university’s regional branches. Beyond the idea to open branches in major cities (e.g., Tripoli, Saida, and Zahle), the regional branching extended starting in the early 2000s to a long list of towns that do not facilitate the mix of students from different backgrounds, such as Baalbek, Rashaya, Aley, and Nabatieh. This policy has put extreme pressure on the university’s budget and, by doing so, has reduced the quality of education and the student life experience.  

 A key element of the strike was the focus on the importance of keeping the university budget, and potentially increasing it to further allow advancement of research and improvement. It was clear for the leaders of the spring strikes that further budget cuts meant the end of LU and the subsequent privatization of higher education in Lebanon.

Shaking the establishment

Another demand, which strikers were set on, related to the privileges provided to LU’s professors through their mutual fund, namely better health coverage than other state employees, as well as tax-exempted higher education funding for professors’ children ranging from LL5 million ($3,333) – LL10 million ($6,666) per year, depending on the age of the child. By my own estimate, payment from the fund can range from 10 percent of the yearly salary for professors with one child in kindergarten, to 40 percent of the total salary for professors with three children enrolled at university level. The issue of the mutual funds also raises questions about the overall health and education policies of the Lebanese government that aim at unifying all health and education payments for state employees, as per reforms detailed under Law 46 (2017) on salary scales. A sound policy reform should ensure universal health coverage and improvement of public school, but these remain far away from the policy agenda. University professors are incentivized to remain mainly to ensure a proper education for their children because of the mutual fund’s education subsidy. 

 While the 2019 spring strike put forward a long list of demands, the main political constraints that hamper the development of LU and the improvement of its program and infrastructure remain issues related to the control of the ruling class over faculty, the fragmentation of the university branches and its pressure on the budget, and the system of incentives proposed to the professors. This system is typical of the Lebanese administration’s approach that provides indirect subsidies to the private sector of what should be essential rights, such as health and education, while trying to reduce long-term pension indemnity costs that are calculated based on basic salaries. (By reducing basic salaries and increasing extra benefits—such as daily transportation stipends or school payments, for example—a package can seem acceptable to an employee in the short term, but with pensions only calculated on basic salaries, this will have negative consequences for them in the long term.)

 The 2019 spring strike is different from previous strikes because it directly tackled the key issue that constitutes the backbone of LU—the political ruling class. By shaking the establishment, the leaders of the strike have been able to force Parliament and the government to amend the budget law, and meet all the demands made of them—with the exception of an additional five years of pension, and full-time posts for contract teachers (making it highly probable these professors will strike again early in the next academic year). More importantly, by refusing to follow political parties calls and instructions to stop the strike, protesters have inspired hundreds of professors out of their alienation for the first time since the end of the civil war.

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Academia, the public, and policy-making in Lebanon

by Rayan el-Amine
written by Rayan el-Amine

There has never been a better time to critically assess how and where we get our news and information than these times when social media has become the main source of news for many, and “fake news” not only informs policy-making, but has become a tool for some politicians. Healthy democracies require informed citizens capable of critical thinking, an engaged civil society positioned to propose solutions and influence policy-makers, and universities committed to the transformation of society. Academia is an often overlooked prerequisite for democratic and informed policy-making through its education and research functions as well as its role as a site for public discourse. 

Bridging the gap between policy-makers and academia is not easy, especially in the Arab world. The spaces for interaction are limited, and the policy-making process is rarely systematic. Even when policy-makers and academics do interact, they might find out they do not even speak the same language. A 2018 study by the Lebanese Center for Policy Studies on Lebanese parliamentarians found that 63 percent of MPs could not accurately estimate the unemployment rate, and while socioeconomic concerns were priorities for the majority of citizens polled, only 30 percent of MPs shared these concerns. Academics, on the other hand, can be too theoretical in their studies and too “long-winded” when addressing these issues.

Resolving this disconnect does not remove all of the barriers to formulating good policies, but it can go a long way toward envisioning longer-term solutions to everyday problems. At the Issam Fares Institute for Public Policy and International Affairs (IFI) we have focused on: providing a space for policy-related dialogue between academics, civil society, and policy-makers; supporting and facilitating high-quality policy research by professors; and, most importantly,  disseminating academic policy-relevant research as accessible publications with clear recommendations.

In highly politicized countries like Lebanon, there is limited public space for a healthy, non-partisan, well-informed debate.

The reality in the Arab world, however, is that almost 80 percent of Arab nationals are on social media, and around 70 percent report that social media is an important source of news. The internet and social media have made it easy to publish and reach thousands of people at the click of a button. Access to information through the internet has been both liberating and disorienting due to the sheer volume available. Often, it is hard to know the legitimacy of the information unless one is willing to dig deeper and research the source. In this context, distorted and biased information, sometimes referred to as “fake news,” can be easily instrumentalized by politicians and pundits through powerful tools of social media at times leading to a highly misinformed society. 

The nefarious use of “fake news” for political campaigns has been on the increase worldwide. Of particular concern is its use by populist parties that depend on scapegoating immigrants and refugees for their societies’ problems. The use of false or fabricated information to rally a xenophobic political “base” is not history, but an ongoing 21st century blight on developed, liberal democracies across the globe. Here in Lebanon, there is a politicized narrative around refugees that is not very different from Western anti-immigrant discourse by right wing and populist parties in the US or Europe. At IFI, we seek to counter inaccurate information used by politicians and media through a social media campaign that uses everyday language and data visualisation to disseminate facts about the Syrian refugee crisis. 

In highly politicized countries like Lebanon, there is limited public space for a healthy non-partisan, well-informed debate on the critical issues of the day. It is difficult to find a non-partisan and independent space for the exchange of ideas, but it is even more difficult to have the convening power to bring all the concerned parties together. Building credible institutions, whether academic or civic, to engage in the policy-making process is of paramount importance. Henry Giroux, a leading public intellectual on the societal obligations of educational institutions, argues that, “A democracy cannot exist without informed citizens and public spheres and educational apparatuses that uphold standards of truth, honesty, evidence, facts and justice.” Many in this region do not live in a democracy, but these are certainly principles that educators and researchers can and should strive to uphold.

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LAU study a model for solving the problem of data scarcity

by Diane Nauffal
written by Diane Nauffal

The impacts of universities on the surrounding environment go far beyond their gates. Their contribution to the local economy—understood as both direct and indirect effects on employment and overall economic development—is visible to the naked eye. Classic examples include Oxford, England, or Cambridge, Massachusetts, which are unthinkable without Oxford and Harvard universities. In Lebanon, the neighborhoods of Hamra and Jbeil teem with students and faculty from some of the country’s most prominent universities.

As a university whose history and mission are directly linked to contributing to the development of its communities, the Lebanese American University (LAU) undertook an economic study to assess its own impact on the local economy. One of the first challenges to address this question quickly surfaced, given the scarcity of significant data and quantitative information to capture the typically complex relationships between investments/expenditures and national economic impact. Because of this data scarcity, the study used an input–output model that permits the use of gross domestic product (GDP) deflators to portray the economy of years following a year for which a complete national accounts data set is possible. Using commonly available administrative data, the model not only allows for the calculation of monetary multipliers, but also employment multipliers that play a major role in the educational sector.

The total economic impact of LAU on the Lebanese economy is greater than the total of the university’s direct spending on payroll, goods and services, construction, renovation, and capital expenditure. It is comprised of direct, indirect, and induced impacts. The indirect impacts are the jobs, salaries, and sales generated by the businesses’ spending that LAU directly purchases its goods and services from. Subsequently, the jobs, salaries, and other spending of the successive levels of recipient businesses evidence this indirect impact. Induced impact is also demonstrated by the jobs, salaries, and sales supported by employee household spending.

The indirect and induced effect—or alternatively, the multiplier effect—is measured by what is known as Leontieff’s input–output economic model, which uses a series of multipliers to provide estimates of the number of times each dollar of input, or direct spending, cycles through the economy with regard to indirect and induced output, or additional spending. 

Using the IMPLAN model, the study analyzed 2015 data from the Beirut and Byblos campuses and demonstrated that LAU’s total economic impact accounted for the creation of 9,570 employment opportunities, $209 million in labor income, and $897 million in total economic output; the total economic impact of LAU on the Lebanese economy equated to 1.8 percent of Lebanon’s GDP for that year.

Aggregated within LAU’s total economic impact is the university’s out-of-country spending. Lebanon has long been a destination for higher education, attracting students from beyond its borders through its reputation for high-quality education provision. In 2015, approximately 11 percent of the LAU student population originated from outside of Lebanon. Their expenditures within Lebanon are included in this analysis, as they would potentially have attended other institutions outside the country.

Beyond the direct economic impact, the study touched lightly on the broader range of secondary economic impacts that highlight a university’s role in enhancing human capital, fostering technological innovation, and promoting business creation in Lebanon. Even without the secondary economic effects, the examination of the impact of one university, in this case LAU, reveals the importance universities bring to the local economy and serves to underscore their critical role in developing the human capital in our country.

This was an unprecedented study in Lebanon, and the lack of general economic data was the motivation for which it was conducted. A satisfactory and generalizable solution to the dilemma of lack of data, in the simultaneous context of a wide range of unanswered questions that would rely on such quantitative information, has yet to be discovered. This study suggests one way out of the dilemma: the application of models that allow for a combination of broad macroeconomic data from national accounts, which is generally available even in countries with poor data provision (and in Lebanon’s case can be accessed online), and microeconomic data, from institutions with data collection and statistical documentation standards, implementation of which is required by law from all private institutions of higher education in Lebanon. Internationally-oriented universities, multinational companies, and stock market listed companies, subject to the reporting requirements of the securities markets where they are listed (in Lebanon, the Beirut Stock Exchange and soon the new Electronic Trading Platform), serve as such institutions. The combination of these two available data sources in the context of severe data scarcity, with models that allow them to be combined, allow for unprecedented conclusions in much needed areas.

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