Society

Time to take us Seriously

by Fadi Saab
written by Fadi Saab

While the saying goes that “you can’t please all the people all the time,” it seems in our Lebanese politico-economic scene, that many ‘leaders’ and ‘leaders-to-be’ keep wishing to challenge that proverb. Is it that they are attempting to become the exception that confirms the rule in gaining a growing recognition? Or is it that they are relying on the abnormality of our system to justify their endeavors to climb the ladder of popularity?

One thing is for sure, these individuals are constantly seeking the easy way out. They are relying on the comfort of adopting the most obvious broad headlines and embracing generally accepted titles, as the basis of their ‘Program for the future’. As such they are hoping that we the people, in our entirety, will find their approach pleasing and consequently accept their proposed leadership on the basis that they unequivocally understand our views and can unmistakably solve our concerns. Of course, another common attitude to gain popular support is to constantly attack any ideas suggested by political opponents regardless of the correctness of their content. Consequently, the people are encouraged to automatically judge such programs based solely on their political loyalties or rivalries.

But do the hypotheses behind these tactics still hold true… for are the people of the new era in Lebanon whether consciously or reluctantly still willing to be so naive? Obviously not!

The time has come for leaders to adopt full transparency in presenting issues to the public in their entire complex nature, and to clearly debate the proposed solutions in their probable compounded results. Thus, being truthful with the public involves that they stop making future promises based only on reminding us of their past successes, or on recalling the past mistakes of their opponents.

It is now clear that the public expects from our leaders much less history lessons and theoretical proposals, in return for much more practical undertakings and measurable actions. Certainly the country cannot continue to pay the cost of political non-collaboration nor the resulting waste of valuable time, and definitely the people will not tolerate further squandering of limited resources on tasks lacking the benefits of cooperation.

Maybe now the concept of moving from theory to practice and from expansive promises to specific activities would finally be applied by those future leaders who are seeking to gain our confidence and support. Surely, if they succeed in adopting a functional model and in joining forces while targeting a unified national vision and strategy, then our votes of confidence will certainly go to validate the principle that “… you can please most of the people most of the time”.

TOOLS NEEDED FOR LEBANON’S ADVANCEMENT

1) “National Agenda” for the Future

• Blend the different approaches and agendas for Lebanon’s development into ONE

• Unify the Lebanese people around a single comprehensive ‘National Agenda’

• Allocate required resources to assure swift and successful execution in its entirety

• Fend-off attempts to claim individual political authorship or personal benefits

• Emphasize the importance of immediate actions & the opportunity cost of delays

• Implement a dynamic approach for active progress evaluation and review of goals

2) “Think Tank” Group

• Up to 10 people with related academic credentials & different backgrounds/views

• Shadow the Government on policy decisions and impact assessment evaluations

• Hold round-tables setting action priorities on all social/financial/economic issues

• Produce diverse position papers with updated reliable indicators & statistical data

• Liaise with the various Economic Associations/Syndicates on a proactive basis

• lobby for a valid cause-effect relationship linking politics, the economy & society

3) “Horizon 2010/2015/2020” Program

• Publish a detailed socio-economic ‘White Paper’ by end summer 2005

• Produce a series of reports on major economic/financial/social issues of concern

• Draw-up on input from the ‘Think Tank’ and the various economic associations

• Propose a short/medium/long term vision, with identifiable goals & objectives

• Offer a databank of accurate statistics on current and projected prime indicators

• Provide a yard-stick to measure the performance of politico-economic policies

4) “Confidence Restoration” Activities

• Prepare a detailed crisp presentation on the economy and its future potential

• Organize business trips to main international cities & hold networking sessions

• Seek the assistance of the Lebanese Diaspora in connecting with major investors

• Fund a broad public relations and advertising campaign on an international scale

• Invite prominent businessmen/investors to conferences/workshops in Lebanon

• Produce specialized business-economic image building programs on satellite TV

5) “Institutional” Framework

• Protect the various socio-economic associations from any political interference

• Apply proper governance to all associations & ensure regular leadership rotation

• Encourage effective working methodology/coordination among such associations

• Unify the different governmental agencies responsible for economic policies

• Establish a formal structure to maintain public-private sector expert collaboration

• Seek input from all professional groups prior to taking positions on related issues

6) “Socio-Economic” Awareness

• Expand the priority of socio-economic issues beyond specific political agendas

• Encourage local and satellite TV’s to air more specialized roundtables/talk shows

• Persuade prominent Newspapers to maintain regular socio-economic sections

• Launch Civic awareness programs to educate the population about proper actions

• Organize a series of specialized lectures/seminars open to the general public

• Distribute briefings and recommendations relating to socio-economic programs

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Business

A Unique vision of property

by William Long
written by William Long

There are a few points that thirty-six year old real estate developer and entrepreneur Karim Bassil wants to make perfectly clear to any reporter interested in untangling his rapidly growing business interests.

First, contrary to some press reports, the general contracting company La Constructa that Bassil began with partner Walid Marchi a few years ago, is but one element in a vertically integrated group of firms that services both his own development projects as well as those of other clients.

So although there is no overall holding company as yet, Bassil Real Estate Investment (BREI), not La Constructa, is more or less de facto company leader, given its role as advisor and manager on several ongoing projects.

Second, although he’s been the driving force behind the various related companies (which now number six according to his most recent business card), Bassil is insistent that he is “a very, very bad manager who just partners with great managers.” 

A traditionalist

Finally, and perfectly in line with his outward demeanor which shifts effortlessly from self-effacing modesty to sprawling aquisitiveness, Bassil is adamant that development in historic neighborhoods like Gemmayze, no matter how new in concept or how bold, must be harmonious with the surrounding area, not in contradiction to it. 

Of course, this last point stands as a rare dictum in Lebanon, where enlightened urban planning is usually a mere afterthought (if a thought at all). However, after taking one reporter on a tour of his most recent construction project, a boutique hotel cum residency in the middle of trendy Gemmayze street, one gets the sense that Bassil is indeed willing to put his money exactly where his ideals are. 

“Look at that tree,” he said, motioning to a towering Magnolia that rests in the middle of the bustling construction site. “That tree is so beautiful and old. How could we just cut it down…. Instead we’re building around it.

“You see, in general,” he continued, “if we really wanted to exploit this space fully, the only way to do it is by building a tower. But that would be completely against the character of this street, so instead of building16,000 sellable square meters, which we could, we are building 8,000 square meters.” 

Since Bassil began developing real estate for himself in Lebanon in 1998 (and launching successive affiliated companies thereafter), he’s been able to complete or initiate a total of five projects – something that has given him credentials really with which to prove both his sincerity in matters of organic building practices as well as his own prowess. 

With each one, as a perusal of relevant architectural sketches demonstrates, a sense of synergy rather than opposition really does seem to dominate; although, so too does the notion that the projects themselves will only get bigger.

“We wanted to preserve the old style of the neighborhood here,” Bassil said, referring to his three completed Gemmayze projects: Convivium One, a 4,000 square meter townhouse with five apartments valued at $4 million, Convivium Two, a $7 million two building project, and Convivium Three, a $5 million “ core and shell” project (i.e. without interior amenities or infrastructure).

“Convivium Four, where we have rehabilitated a turn of the century house into four apartment rentals, will be finished in the next six months,” he explained. “There too you have the same idea of a building that is in harmony with the surroundings… you see large ceilings, exteriors as in the neighborhood, a similar scale.” 

Last but not least

It is Convivium Five though, the 8,000 square meter development in the heart of Gemmayze street, that has marked a departure of sorts for Bassil (though not from his commitment to aesthetic unity in practice).

After all, the development is Bassil’s most ambitious to date – a $17 million effort that will put a boutique hotel with 33 suites, branded under the name of an as yet undisclosed fashion figure, three residencies in the back area and a five floor clock tower all on the market by next year. 

And unlike Bassil’s earlier projects, which typically ranged from $1,100-$1,200 per square meter, Convivium Five’s residencies will start at $1,750, with every additional floor level tacking on an added $75 per square meter.

So perhaps somewhat naturally, the changes in price, cost and scale are having a direct effect on the developers bottom line strategy. 

In fact, it now seems increasingly likely that with three new projects in the offing, including a $33 million residential project in Gemmayze, Bassil may finally have to turn to outside investors instead of relying on pre-sale down payments and bridge loans from banks. 

Expanding out

It is a move that may also unfortunately mean he is unable to keep all aspects of a project under one roof, as he has in the past.

“La Constructa has acted as the General Contractor on other projects, including the Byblos Bank tower in Sassine, the New French Embassy and the University of Balamand… and it is the General Contractor on Convivium Five. But for the upcoming projects where we may have to turn to outside investors we have to be careful about any possible conflicts of interest like having the general contractor and the project manager be affiliated.” 

Of course, avoiding such conflicts of interest will not be easy: Bassil has intentionally structured his companies to work together seamlessly, sometimes in an almost a turnkey fashion all in an attempt to consolidate projects and contain costs.

Thus, there is the facilities management company MMG that currently manages over 300 sites across Lebanon. There is the property management company, PMG that handles more than a dozen high-end buildings. There is the security company, Group 4 security that started four months ago and now already has over 200 employees. And there is the concrete pouring company Stratum.

“BREI,” Bassil explained, referring to the project management company, “was structured because I decided to have a company that would service real estate developments… my own and now those of other people. 

“But in Convivium Six Stratum will have to bid for the concrete pouring contract and it will not be possible to have BREI and La Constructa functioning as project manager and General Contractor respectively… The projects are growing and the rules have changed.”

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Business

Beirut: open city

by William Long
written by William Long

Even as the journalist Samir Kassir lay dead in his car on the morning of June 2, politicians, journalists and analysts tried to make sense of a wantonly barbaric killing. And the answer many reached went to the heart of what it means to own a free mind in the Middle East, and the deep political dangers this poses for the region’s regimes.

Kassir’s death was initially regarded as an act of retribution for the journalist’s past outspokenness, particularly his denunciation of the former head of the General Security directorate, Gen. Jamil al-Sayyed. Several years ago, Sayyed ordered his men to tail and harass Kassir, after he had written an article criticizing the general. It seemed the journalist had had the last word after the Syrian withdrawal, and therefore had to pay. There were other messages in the killing, observers insisted, including a warning to opposition groups to watch out (Kassir was a leading member of the Democratic Left movement), to Al-Nahar to watch out, and to journalists in general to watch out about defying the security services.

All these explanations may well have been true, however they were all part of a more focused accusation, namely that the Syrian intelligence services had engineered Kassir’s killing to warn other Lebanese journalists, but also opposition members inside Syria, against threatening the stability of the Syrian regime. This appeared different than the subsequent killing of George Haoui, which seemed to be a backhand to the forehand of the large Hariri victory in parliamentary elections.

If respecting the durability of Syria’s regime was indeed the motive in Kassir’s death, it suggests that, since Syria dismantled its security curtain last April, it has concluded two things with respect to freedom of expression: that Lebanon must not again become, as it was in the 1950s and 1960s, a center from or through which foes of the Syrian regime might destabilize it; and that though its soldiers are gone, the margin of maneuver Syria has to punish its enemies is now, paradoxically, wider.

If that is indeed the Syrian rationale, it shows a remarkable sensitivity to the power of liberal ideas – no doubt understandable from a regime so single-mindedly fixated on denying them. But what aspect of Kassir’s exhortations so disturbed the Syrians? After all, Al-Nahar is denied entry into Syria, and while many of its articles are passed around in samizdat, those bound to read them do not pose a serious challenge to the Syrian regime, with its control over myriad apparatuses of violence.

According to a close friend of Kassir, and a careful observer of Arab media, Damascus couldn’t stomach his regular appearances on Arab satellite channels, often talking about Syria. While his articles were savage in their dismissal of the Syrian dictatorship, his television appearances reached a far larger audience. As someone who famously remarked, “The Syrian army must withdraw from Lebanon, and from Syria as well”, Kassir hit a sensitive nerve. He also reportedly planned to travel to Damascus soon to make a similar case. There was no ambiguity there: Kassir believed the Syrian regime had to go.

More broadly, this underlines the central role Lebanon is set to play in the future as a liberal command center, if it can eliminate the vestiges of the security edifice set up by Syria. The country played this role in the period before the civil war in 1975. However, idealism aside, this implied not just issuing democratic invocations; it also involved offering shelter to the political opponents of Arab regimes, so that Beirut became much more than a place of intellectual tolerance; it became a fount of prospective coups and revolutions and, therefore, a source of regional instability. In effect, it became a playing field for Arab rivalries.

The situation has changed somewhat, in that most Arab countries are not quite as murderous as they once were in carrying their conflicts elsewhere. Today, the weapons of choice might as easily be satellite channels and public relations firms as car bombs and bullets. However, Syria, among a dwindling group, remains an anachronistic exception. However, even in their modestly pacified political climate, the Lebanese must ask themselves whether they are prepared to defend their country if it resumes playing the dangerous part of liberal outlet.

As Kassir observed in an interview last year: “Yet, Beirut also has something unique – human diversity and, thanks to its history, linguistic and political diversity. Let’s hope it will keep it. If Beirut loses this diversity – and the city did not do so, despite its 15-year conflict between 1975 and 1990 – it means it would have been seen as the contradiction of the Arab city, which would represent a triumph for regression.”

Who can disagree? As Kassir’s murder showed, the only real hope for stability Lebanon will enjoy requires its being surrounded by pluralistic systems, in a region at peace. Some Arab regimes will use money and other means to fight open minds in Beirut. But for once, they are on the defensive, and changes in Lebanon are a reason. What better example of bald fear do we need than a particular regime’s need to liquidate a man who deployed only ideas, a voice and a pen against them?

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Economics & Policy

Nabil Sukkar

by Nicholas Blanford
written by Nicholas Blanford

Syria’s ruling Baath Party introduced a meager set of reforms at its June 6-9 congress, dashing hopes that the eagerly-awaited event would launch a more rapid process of economic and political liberalization. Facing unrelenting pressure from the United States and growing regional isolation, the Syrian government is attempting to bolster internal unity by establishing clear red lines for the opposition while loosening slightly its tight grip on Syrian society. But what will that entail for Syria’s struggling economy? Executive spoke to Dr Nabil Sukkar, managing director of the Syrian Consulting Bureau for Development and Investment.

Do you consider the speed of economic reform over the past five years as satisfactory? If not why not? What are the major obstacles?

The speed of economic reform over the past five years has not been satisfactory even though the pace of reform has accelerated. The reason is that domestic problems are mounting and external pressures to carry out reform are also increasing. I don’t mean political pressures but the pressures of having to join the Euro-Mediterranean Association Agreement. Domestic problems are mounting tremendously. We have increasing unemployment, economic growth is running at about 3 percent a year, the oil situation is becoming more serious in the sense that we are approaching a period where Syria will become a net importer of oil. Oil, so far, has been bringing us about 70 percent of the country’s foreign exchange receipts and about 50 percent of the budget revenues. When the oil dries up, this positive contribution will come to an end and we have to prepare ourselves as of now to find alternative foreign exchange income.

There has to be much faster economic reform to cope with all these internal and external challenges.

What reforms are being planned at this stage, and what is the projected speed of implementation?

There is no specific reforms on the agenda because there is no economic reform program. This is one of the problems. Syria has been carrying out economic reform, though slowly. But it was not part of a comprehensive economic reform program. It was an ad hoc reform, responding more to crisis needs than a program prepared in advance with a clear objective strategy and timeframe. There seems to be a reform and development program being prepared at the present time which will take us from 2006 to 2010. It is being prepared by the Planning Commission and is supposed to be put into effect in January 2006. It will be a new type of planning. It will be reform plus development in one package. We don’t know the framework of this plan but it will be announced.

Is the pace of economic reform dependent more on the Baath Party issuing directives or the government’s efficiency in implementing those directives?

What’s more important are the directives that come out of the Baath Party. One of the reasons we have not been moving fast on economic reforms is that there is still an ambiguity on the identity of the Syrian economic system. Are we still a socialist economy or are we moving toward a market economy? And if we are moving toward a market economy, what’s it going to look like? Once we cross that threshold and identify [what kind of economy] we will have, then there will be more clarity to guide the government. Right now governments are caught by the ideology of the party which says Syria has a socialist economy and a centrally-planned economy. It’s that conflict that has been delaying reform, or slowing down reform.

How much of the economy is driven today by the private sector and how large is the public sector share in economic activity?

Ever since the early 1990s, the economy has been driven increasingly by the private sector. In response to Investment Law Number 10 of 1991 and various reform measures that have taken place since then, the private sector started to play a larger role and investments increased considerably in the early 1990s. But Law Number 10 was not accompanied by other measures to liberalize the economy and to create an enabling environment for private business. The private sector hesitated and by the mid 1990s, [it] started slowing down because they realized that the government seemed was just giving them some tax incentives but not undertaking a deep change in the regulatory framework of the economy. The private sector now needs more assurances that we are moving toward a market economy.

Nevertheless, right now the private sector contributes about 60 percent of GDP compared to 40 percent in 1980, so the private sector contribution has increased considerably in the past 20 years.

How much has the private sector’s ability to function been improved in the recent past and where are the current best prospects for private sector development?

I think the private sector has been able to improve better because the regulations have eased up a bit, but not sufficiently. There has been an easing up in import regulations, export regulations, tax regimes.

As far as areas of private sector investment, it’s in practically every single sector. Syria is a virgin country. It has opportunities in tourism, industry, agriculture, telecommunications, transportation, banking. Banking and financial services are important areas. Syria allowed private banks about three years ago and now we have three private banks. There’s large room for financial services and insurance. Funds for venture capital, financing small and medium industries, micro financing, you name it.

Would it at all be economically feasible for Syria to maintain continued dominance of the public sector in the national economy?

Dominance of the public sector is diminishing anyway. But at the same time I don’t think the public sector should withdraw from social services. It should increase its role in the social services, in education, in health care. Otherwise if you open up to a market economy and don’t take sufficient care of social issues you end up with poverty and this is something we want to avoid.

How important is the issue of labor and unemployment in the Syrian economy?

Unemployment is about 20 percent. Official figures are about 11 or 12 percent. Some official sources came up with a figure of 16 or 17 percent recently, but I think the figure is more likely in the region of 20 percent. There are about 300,000 new people coming onto the labor market each year and this needs a high rate of growth to absorb them into the economy. Adding to these two factors of existing unemployment and new labor force is the extent of the disguised unemployment in the public sector. If you want to reform the public sector one of the things you have to do is get rid of the excess labor in the public sector. No less than 30 percent of employment in the public sector is excess labor. That will create another pressure on the labor market.

The problem of employment and unemployment is extremely important and any economic reform has to attend to this issue very seriously otherwise economic reform will be associated with more unemployment and more poverty.

In this context, how large of a contribution to Syria’s GDP do you attribute to Syrian expatriates working abroad, and specifically in Lebanon? How has this been affected in recent months?

Not much. The remittances coming from laborers in Lebanon is not more than maybe $400 million a year. If the number of laborers in Lebanon is 500,000 and they are making $400 million a year. Assume that 20 percent of the labor has come back [to Syria], then that’s the loss. It’s not a significant issue at all. And I think the laborers will return when the situation gets back to normal. I think the loss is more to the Lebanese economy than the Syrian economy.

How do you see economic and business ties between Syria and Lebanon developing in the coming two to three years?

I expect the ties to grow. Now that there are no more Syrian troops in Lebanon, I think economic relations will improve on a more equitable basis and a more relaxed basis and we can build a more sustainable relationship. Once the elections are over in Lebanon I think the two countries can work together and intensify their trade relations, tourism, labor movements and investment flow between the two countries. I think things will improve and become based on a more sustainable basis. I’m very optimistic.

Do you anticipate any short- or long-term economic repercussions on Syria from the US drive for change in the Middle East and from UN resolution 1559 in particular?

I think [US sanctions] are having an impact, not a direct impact because they are US sanctions not UN sanctions and as a result it’s the US that’s sanctioning its own companies. We don’t have much of an economic relationship with the US. Trade volume is about $300 million a year, which is insignificant. There’s little direct foreign investment in Syria. The major [foreign] companies here are Shell and Total. And Shell is a Dutch company and Total is a French company. There are some minor US companies doing some [oil and gas] exploration. But there is a rebound impact, a psychological impact, deterring some non-US companies and other governments from dealing with Syria at the present time because they don’t want to antagonize the Americans.

Resolution 1559 brought the French and US together in rare agreement on a Mideast issue. Do you expect to see that partnership fade now that the clauses relating to Syria in 1559 have to all intents and purposes been fulfilled?

The alliance between the US and France is temporary and all will depend on the results of the investigation into [the assassination of former prime minister Rafik] Hariri. If the results clear Syria, then the EU will go ahead and sign the Association Agreement. If the results raise doubts about Syria’s role in the assassination, then I think this could complicate things and continue this present state of pressure uncertainty, unusual alliances of foreign powers against Syria. The Europeans are not signing the Association Agreement with Syria pending the result of the investigation.

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Comment

Hit list vs. reforms list

by Yasser Akkaoui
written by Yasser Akkaoui

At George Hawi¹s funeral, nearly everyone in the front pew of the church had lost a loved one to murder or assassination. The list included Giselle Khoury, Walid Jumblatt, Solange and Amine Gemayel, Saad and Bahia Hariri and Nayla Mouawad. One could not help but wonder whether each of them had been reminded once again of their personal loss. Add to that the pain suffered by the Franjiehs, the Karamis, the Chamouns, not to forget Sitrida Geagea, with her husband Samir Geagea still in jail, and the Lebanese political scene becomes one filled only with loss.

The murder of kings has been common practice in the history of nations. Next to divide et impera, the Roman method of oppression, killing leaders has been an effective way for ruthless nations to subjugate people.

But we are interested in economics and not in assassinations. Here, the mood of corporate Lebanon and among regional and worldwide investors with a heart for this country is getting restless. Much more mature than the strictly small-time political players who fail to look further than the last house in their village, are the crème of Lebanophile investors and professionals who want to see Lebanon move forward. They have a much clearer vision for Lebanon¹s recovery and know that in the end it will be the Lebanese people, not their politicians or any foreign power, which will keep this country going.

Once they regained their sovereignty, the Lebanese resumed what they do best: consuming and investing. This is what brought back the confidence of Arab and international investors to Lebanon, which manifested itself in a rally in Solidere shares to levels that had been out of reach for six years.

We need to keep this momentum going. While we have heard so much empty rhetoric from our political leaders, in light of the dire state of the country¹s economy, they must start implementing reforms immediately.

We elected the new parliament; we gave them our trust. Now they must show us what they are made of.

We are watching.

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For your information

IMF audit still shows cracks

by Executive Contributor
written by Executive Contributor

At first glance, the International Monetary Fund’s (IMF) May report on government accounting practices in Lebanon reads almost as one would expect: While the ministry of finance, and ministries in general, are making measured “progress” towards meeting internationally recognized standards, significant problem areas remain.
Thus, even as the IMF pointed to several positive steps taken in recent years – including new budget classifications that drill down on expenses, regular fiscal reports, a computerization of records and a centralization of accounts at the Treasury – the world body said flatly that Lebanon still falls short when it comes to multi-year budget projections, independents auditing and, perhaps most significantly, the inclusion of otherwise off-budget items like the Council for Development and Reconstruction.
However, as one top level ministry of finance official pointed out, despite all the bad news, it is important to note that the IMF was specifically asked by the Lebanese government to evaluate the countries finances – a move which means that the country will make the recommendations and analysis publicly available.
“Look, nobody would have expected an excellent report,” said the official. “By all means there are problems in our public expenditures.
“But you have to realize that we asked for this. We identified the problem areas for the IMF team in order to make it is clear that the MoF is disclosing a lot of things all the time and that we have the intentions to reform.”
What’s more, the official noted, the 2005 budget that was submitted a few days before the assassination of MP Rafik Hairi, actually addressed a number of problem areas identified later in the May IMF report, including the addition of CDR municipalities, tobacco revenues and Electricite du Liban to the budget framework
“We didn’t accomplish everything…. A multiyear budget and a budget process where ministers cannot easily amend the rules will both take a new law. But an external audit is in the works, as one example, and I would generally say that it was a budget which employees, for the first time, actually wanted.”

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Special Report

Freedom’s spring?

by Peter Grimsditch
written by Peter Grimsditch

In recent months, the international, particularly the American, media have stuck to a particular narrative when analyzing developments in the Middle East. Following the Iraqi elections in January, the subsequent revolt against Syrian hegemony in Lebanon after the February 14 assassination of Rafik Hariri, and, in the middle of this, the announcement by President Hosni Mubarak that Egypt would conduct a multi-candidate presidential election this year, many a media outlet posited that the region was witnessing an “Arab democratic spring.”

How true was this plot line? For the Bush administration and its supporters it provided a convenient canopy over a series of individual developments starting with the Iraqi vote. Convenient, because it suggested that the invasion of Iraq had finally started to bear democratic fruit, both inside the country and in shaping regional demands for freedom. Naturally, what ensued was a notion, perhaps even a conscious policy spin, that the transformations in the region were organically related, and that the United States was largely responsible for this.

Against this was another narrative, advanced by the Bush administration’s critics, suggesting the first narrative was poppycock. Proponents of this argument insisted that regional democratic change was no more than the reflection of indigenous and disparate Arab desires, for which the U.S. was only marginally responsible. Moreover, there was some doubt as to the authenticity of the democratic urge in each country: while the Iraqis were indeed sincere, they voted, the doubters insisted, to get the Americans out. In Lebanon, there was a desire to see the Syrians withdraw, but until March 14, when an estimated 1 million people descended on Martyrs Square, the same doubters suggested the protests were largely a Christian effort, hence vaguely illegitimate, amid palpable Shiite dissent. And in Egypt, they again averred, Mubarak’s election move was designed merely for him to stay in power or bring his son into office.

Both broad narratives were used in what became an ideological boxing match, where the reality on the ground was mostly irrelevant. Indeed, in any narrative, concocted by the media or picked up by partisan interest groups, the key is simplicity. And just as the Bush administration’s detractors sometimes legitimately mocked the “Arab spring” story line, their own riposte was equally simplistic, downplaying the mobility of cultural examples, where the democratic movements in each Arab country were deconstructed, broken off from similar manifestations elsewhere, and considered solely in mechanical terms.

Culture, particularly the capitalist culture of openness and free markets, is never easy to quantify. Events in Lebanon did not require Iraqi elections to take off: the Lebanese have been voting in relatively free (if flawed) elections since Independence. Similarly, Mubarak did not pick up on the anti-Syrian rebellion in Lebanon to plot his strategy. Hovering above each development was undoubtedly U.S. power, but it also brought pressure to bear differently in different places.

However, there was also little doubt that what happened in Iraq, Lebanon, Egypt, but also in Saudi Arabia, where municipal elections took place for the first time in decades, and in Kuwait, where women have just been given the right to vote, was part of a same regional trend. There is little doubt, too, that the impetus for this was the Bush administration’s democracy-based policies and rhetoric and the presence of U.S. soldiers in the Arab heartland. One need not agree with what Washington is doing to recognize that Arab peoples, sensing the opportunity for change around them, have precipitated – and their regimes, to avoid losing power, have pretended to precipitate – democratic change, in the latter case unintentionally opening doors to greater modifications in the future.

But more interesting is that the existence of a democracy narrative, whether accurate or not, often influences political actors in mid-action. For example, the Lebanese had never used the label “Cedar revolution” before the America media inflicted it upon them. However, it was soon picked up by demonstrators, as were the comparisons outside being made between Lebanon, Georgia and Ukraine, so that there was interaction between how Lebanon was being perceived outside and how the Lebanese used this to perceive themselves. The idea that they were participating in a “revolution”, that they were part of a wider campaign for freedom that spanned the region and globe, was soon echoing loudly in the minds of youths, whether it reflected reality or not.

That’s a surprise history, through culture, often pulls. Beyond material considerations and demonstrable realities there are unruly ideas, vaguely stated or crystal clear. Amid the clashing narratives over whether an “Arab spring” was in the making, the direct participants wrote their own story, different from the Bush administration’s or that of its critics. The media may have played a role, but only the actors themselves, protestors or voters, could (or ever will) put it to good use.

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Special Report

The Property Market

by Peter Grimsditch
written by Peter Grimsditch

There is a much-publicized belief that the whole country is being sold off to foreigners in small and not so small parcels of land, leaving ever-declining opportunities for the domestic population to get into the property market. Although it makes for spectacular headlines and provides ammunition for a political attack on the proponents of opening up ownership to non-Lebanese, it is a charge based more on envy than reality. High profile and high priced purchases in the downtown area, such as those by singer Amr Diab and a senior adviser to King Fahd, tend to distort the picture. It is certainly true that foreigners, especially Gulf Arabs, are significant buyers in the luxury market but the fact is that fewer than half the Lebanese own their own property anyway.

Who’s buying expensive property

While stability is perpetually regarded as a major spending factor, even ranging down to consumer goods, let alone real estate, there appear to be very different notions about what constitutes ‘stable”. The appetite for middle and upper segments of the market among Gulf Arabs remains undiminished.

It appears that the turmoil in Lebanon of the past few months is considered almost naught when compared with the dire predictions often meted out for the future of the wealthy in parts of the Gulf. Those affected see themselves caught between the rock of no longer being welcome in a post 9-11 Europe and North America where they are seen as representatives of terror and the hard place of being surrounded with the potential for upheaval in their own backyards.

Add to that mix that the Gulf is an area awash with money, fuelled by high oil prices and withdrawal of Arab money from investments in the West, and there is little wonder that luxury properties in Lebanon are not lacking for buyers.

Much of the Gulf Arab-owned property is currently occupied for only two or three months of the year and this has tended to reinforce the idea that the purchases are simply holiday homes. Based mainly on anecdotal evidence, there is a growing belief that the buyers have longer-term ideas. Having a home in Lebanon is an insurance policy against future unknowns. Pure summer needs could be catered for within the rental market

One interesting aspect of the ‘foreign’ interest is that Lebanese buyers are tending to avoid new buildings that already have substantial ownership by Gulf Arabs. As one industry expert put it, “The Lebanese may share almost a common language but the cultural differences are so great that many prefer not to have Gulf Arabs as their immediate neighbors, especially the nouveaux-riches who are not seen as being “of the same quality” as their predecessors.

Another recent factor is the construction of buildings aimed solely at Gulf buyers. Although a little of this innovative practice was encouraged by the outdated belief that this group of people has more money than sense and nowhere else to go, in practice the Gulf Arabs are proving to be shrewd and demanding purchasers, who want both high quality and good value for money.

Expatriate and resident Lebanese

The other, perhaps less numerous but still significant, category of buyers for upscale property is Lebanese expatriates, many of whom round the world certainly have the money and the yearning for a place in the homeland. They are also slightly more cautious and have a keen awareness of Lebanon’s topsy-turvy history over the past 30 years.

Whatever level of caution is exercised by their expatriate cousins is magnified several times by those already resident in Lebanon, especially among those who buy property by relying on their earnings. The allegedly feeble prospects for the economy is most often cited for prudence in spending although generous doses of the political situation, either locally or regionally, may be added to the reluctance to splash out.

Where are they buying

In that same way that many Lebanese tend to stick to living in the areas of the country where they have strong family ties, so a parallel tradition has arisen among the Gulf Arab buyers. The attachment of Kuwaitis to the Sofar area, as well as to neighboring Bhamdoun and Aley, is so strong that it is perhaps no coincidence that money to upgrade the local road system also originated from Kuwait.

Although Saudi nationals were also initially attracted to these same areas; they have in the past few years been branching out to other regions, including predominantly Christian districts such as Broummana; Mansourieh, Ain Saadeh, Beit Mery and even Achrafieh. The firmly rejected application to build a mosque in Broummana put a temporary dampener on Saudi enthusiasm to spend their money in the mountain town, but the unofficial boycott was short-lived. One real estate expert reckons the number of transactions could increase by ten or 20-fold if the mosque ban were to be lifted. In any case Lebanese investors have been accumulating land parcels in the area of around 600m2-1,000m2 awaiting a price explosion.

What determines the price differences

Apart from the obvious criteria of size and quality of construction, especially the interiors of new homes, a view of the sea significantly bumps up the cost per square meter. Other factors include a tranquil and pollution-free neighborhood, which is becoming more of a requirement at all levels of purchase. The notion of providing extra facilities, such as shopping and leisure activities, is also increasingly being taken into account, thus reviving the thinking that gave rise to ‘model villages’ such as Rabieh. As the urban road system continues to be developed, so the lure of fresh air and less noise has made places like Hazmieh, Baabda and Yarze sought after areas. They have attracted a number of ambassadors, thus guaranteeing a high level of security in the district as well as adding the snob value of having distinguished neighbors.

Old is beautiful

Alongside the quest for a better environment at home, especially at the top end of the market, has been a renewal of interest in traditional Lebanese architecture. One wealthy Lebanese purchaser in the Chouf despaired of ever finding the home of his dreams and is having a new construction of very old design costed. But even money cannot buy everything. In Beirut, the owner of one very substantial traditional Lebanese house turned down an offer of $30 million for his property.

Old rent

At the other end of the scale, it is estimated that around half the population of Lebanon lives in rented property and, given the unresolved chaos of the rental laws, there is unlikely to be any dramatic and sudden change. The “old rent” sector of the market comprises people living in medium and even large apartments at prices varying between only one and two percent of true market value. A former minister occupies a 500m2 apartment in Beirut for just $300 a year.

Various compromise proposals over the past decade or so that sought to modernize the laws have failed to reach the statute book because of the fierce clash of entrenched interests. Tenants who spend twice as much on cigarettes as they do on rent are unlikely to cede easily their favored position. Equally, owners who have for years received an income that was far short of even basic maintenance costs feel reluctant to hand over sizeable percentages of the modern value simply to gain possession.

Getting rid of tenants

There is a mechanism for evicting tenants when the property is needed for use of the owner’s family but it is costly. Lebanese law stipulates, for example, that a brother and sister should not share the same bedroom after puberty and therefore having a son and a daughter is ground enough in itself to seek possession of a neighboring tenanted house to enable expansion of the family home.

The amount an owner has to pay to a departing tenant is assessed on several criteria, including the income of the owner. Thus financially successful people are required to pay more than those who have not done so well. Other factors include the tenant’s income, family size and the neighborhood of the property. A tenant living in a good area should not, the argument runs, have to move to a bad area simply because they are required to leave a particular home.

In one case, a retired senior civil servant used his end-of-service retirement payments to buy three apartments that would provide him with an income for the rest of his life.

One tenant’s family has occupied a 200m2 apartment, with a garden more than twice that size, since 1948 and in 1983, when the Lebanese lira was trading at around three to the dollar, was paying the equivalent of $400 a month. Rampant inflation and the collapse of the national currency between the late 1980s and the early 1990s reduced this to just $20.

Until the rental law problems are resolved, there is little prospect of a market developing of buying solely for rent on a long-term basis. There are a few signs of rent-controlled tenants volunteering to leave, collecting whatever payoff they can negotiate now in the belief – or fear – that one day the terms will get a lot worse.

Financing a home when money is tight

The government-backed scheme to aid home-buyers on limited incomes has one unique and highly attractive asset – and one enormous drawback. Its good point, apart from offering the chance of home-ownership to thousands of couples who would otherwise be outside the market all their lives, is that it provides the longest repayment period in the country: 20 years. It’s precisely because of the length of the loan, thus reducing the monthly installments, that it potentially opens up the market; Qualified applicants with a steady; if low-paid, job can find themselves the owner of a $65,000 apartment for as little as LL200,000 ($133) a month. Half the 20-year period is spent repaying the sum borrowed and the other half paying interest on the loan.

Perhaps the biggest drawback of the scheme is that, like many good government ideas, it suffers from a lack of funding when money is tight. The scheme requires buyers to find 20 percent of the purchase price as a deposit although under-the-table agreements between seller and buyer, when undiscovered, help to circumvent this obstacle. If the $50,000 selling price of an apartment is artificially inflated – on paper – to $65,000 for the loan paperwork, an 80 percent loan would actually cover the entire purchase price and cut out the need for a deposit. The ruse works only on private individual sales and where the genuine price is at the lower end of a valuation range anyway.

Pre-purchase checks

Though house purchase constitutes the biggest buy in most people’s lives there is at times an almost cavalier attitude at times about checking whether the home constitutes value for money, or even whether it’s in danger of falling down the day after moving in. It seems, according to real estate industry insiders, there is a reluctance to shell out a substantial fee, perhaps several thousand dollars depending on the purchase price, to have a survey carried out. Amazingly, it is not uncommon to leave this somewhat crucial task to a friend or relative “who knows about building”.

The cost of a pre-purchase survey carried out by a qualified engineer is calculated as a percentage of the purchase price that can start as low as three percent but range all the way up to 15 percent. Most new buildings carry a guarantee against faulty construction. The actual value of this depends almost entirely on the builder’s reputation.

For old property – anything constructed before 1975 – it is automatically considered that the plumbing and wiring ought to be replaced, even if the purchaser can’t afford it at the time. The rule of thumb dictates that an old apartment, whose purchase price is around $100,000, needs another $30,000-$40,000 on renovation and decoration.

Problems with build quality are less prevalent today than they were in the early 1990s, when the construction industry was infected with get-rich-quick cowboys putting up substandard buildings. Although specifications in the pre-sale publicity may have specified a particular type of tile or sanitary fitting, these were often substituted for cheaper products. Even nowadays the industry is not without its rogues.

Service charges

With so much of an apartment building falling into the category of “common usage” – such as stairwells, elevators and the roof – building maintenance expenses are a necessary evil and also a source of potential friction among the residents of a block; The inhabitants of a ground-floor apartment feel less inclined to contribute substantially to maintaining the elevator than those on the upper floors. For this reason, modern co-proprietory agreements stipulate in detail what percentage of the shared costs should be shouldered by the various apartments; In a further bid to prevent squabbles among neighbors over who should pay how much external management companies are becoming more preferred to the building committees that once comprised all the owners and were constituted to run the block. However, older and smaller buildings still depend on such gatherings – and good neighborliness.

A highway in the back garden

While the French have been blamed for many of the woes affecting the country, at least they can take credit for instituting an efficient system of land registry. Having inherited an Ottoman system that was established mainly to aid tax collection, the French authorities of the Mandate era updated and upgraded the land registration system to a level not even used in France itself. Standard inspections carried out by lawyers handling property transactions include examining the life history of a property, which is held at the Land Registry and includes a note of all relevant events, including any loans for which the property was used as a guarantee and a record of taxes. Any anticipated public works, such as road construction, or the planned erection of nearby buildings are revealed in pre-purchase checks with the municipality or other agencies. In theory, the government is compelled by law to inform the Land Registry of all planned use of land. It does but in practice the information is not always up to date. Nor does it take account of the kind of one-off, 24-hour change in the planning regulations that allowed the Cap sur Ville complex overlooking Sin El Fil to become the only multi-story development on the entire mountain.

Peter Grimsditch is ME correspondent for the London Daily Express and a former editor of The Daily Star

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Economy & Finance

A Sclerotic System

by Andrew Tabler
written by Andrew Tabler

In the aftermath of Rafik Hariri’s assassination, newspapers in Syria were filled with stories of Syrian capital fleeing Lebanese banks for the safety of Damascus and Amman, leading to renewed speculation about just how much Syrian money was deposited in Lebanese institutions.

It always was a hazy number. When the UN Security Council passed Security Council Resolution 1559, Hariri’s money man, Fouad Siniora stated on national television that Syrian-related deposits amounted up to 50% of those in Lebanese banks. This figure stood in sharp contrast to “official” estimates by Lebanese bankers, which put Syrian deposits anywhere between 8 and 13%.

Whatever the true number is, it a reflection of the inability of Syria’s five new banks –the  Bank of Syria and Overseas (BSO), the International Finance Corporation (IFC), Banque Bemo Saudi Fransi (BBSF), Banque Européene pour le Moyen-Orient (BEMO),  and the International Bank for Trade and Finance (IBTF) – to move easily through the basic banking functions and despite fanfare surrounding the opening of private banks in Syria, these institutions have remained pinned back by Syria’s decrepit regulatory environment.

It is a system defined by tight margins, due to Syria’s complicated interest rate system, high “stamp duties” – fiscal charges on common financial or commercial transactions – and perhaps most importantly, the lack of a Central Bank interest bearing facility for banks’ excess liquidity – standard anywhere else in the world – are squeezing Syria’s private sector banks. Both factors are also complicating common banking practices and the scope of services private banks can offer their customers. Lebanese institutions, therefore, are likely to keep their Syrian depositors – whatever their size – for the moment.

Modern banking is a complicated business, but its basis is simple. Depositors entrust their money with the bank in return for the best interest rates and services available. In Syria, however, the process is not so easy.

Before the opening of private banks, the country’s premier public sector bank, the Commercial Bank of Syria, was successful in attracting depositors by offering high interest rates, around 7% on savings and 3% on current accounts. It became one of the largest banks in the Arab World in terms of assets through very stringent lending policies based on “official paper” – income individuals or business could demonstrate in writing. This suited many but not all Syrian borrowers and many looked to the private banks as an easier source of financing.

In anticipation of privatisation, Syria ‘s Credit and Monetary Council (CMC), the body responsible for setting interest rates for public banks, cut rates on savings to 4% in December 2003 in order to allow the new banks to compete.

As interest rates had not changed in 22 years and with the private banks not yet open, Syrians quite rationally began pulling their deposits en masse out of the Commercial Bank. Alarmed by the move, the CMC readjusted savings rates to 5%, with a possible additional margin of 1%.

Thus when the private banks finally opened their doors, they were forced to offer deposit rates of 5-6% in order to attract customers away from the Commercial Bank. And it worked. Syrians quickly opened accounts with private banks in the hope of getting a balance of better services and easier terms on loans.

Customers say they find the services at private banks markedly better, including efficient teller windows and ATM machines, but in terms of loans, the private banks are legally and professionally bound by international risk management criteria. Risk, or the quantifiable likelihood of loss or less-than-expected returns, among other things, is offset by a variety of factors, including charging borrowers a higher interest rate. In Syria, however, civil code forbids lending at over 9%, leaving margins tight and forcing the private banks to look elsewhere – factories, real estate, and other personal property – to secure loans.

While bankers indicate most Syrians were willing to put a lien (a charge upon real or personal assets to satisfy a creditor) on their property, they were much more reluctant to pay the “stamp duties,” or transactional taxes assessed by the Ministry of Finance, that go along with it. Duty on mortgages, constitution and release, is around 6 per thousand. Stamp duty on promissory notes is 6.24 per thousand, three times that of Lebanon. Even personal guarantees, which are not subject to duty anywhere in the world, are assessed a rate 6.24 per thousand in Syria.

Comparatively high stamp duty is not only affecting customers, but also the private bank’s willingness to increase their paid-in capital – or capital received from investors for stock, equal to capital stock plus paid-in capital. When entering the Syrian market, each private sector bank was required to form with an initial minimum capitalisation of $30m, which was assessed a stamp tax rate of 1%.

When BSO announced in May 2004 that it would increase its capitalisation by another $30m, the bank was surprised to find the second capitalisation would be assessed a much higher rate – 3.12%.

In spring 2004, private bank managers say they collectively met with the Central Bank of Syria on the problem of Law 1 of 1981, which governs stamp tax assessment. Little progress was made until after Hariri’s assassination, when Syrian financial institutions had to deal at least with the spectre of Syrian deposits flooding into Syria from Lebanese institutions. On May 8, Law No. 42 was passed, which reportedly reduces stamp duties “significantly”. Today, the Syrian market is waiting for the Ministry of Finance to issue its executive instructions, which will outline specific fees for each transaction. According to banking sources, stamp duties on capital increases will be around 1%.

By summer 2004, the problems facing private banks began to compound. Most banks realised deposits in the first year would far exceed their expectations. For example, one private bank that estimated deposits in year one at $80m attracted $290 million.

While this came as great news for those promoting Syria ‘s economic “potential”, massive deposits were a mixed blessing to the private banks, in part because of their short-term nature. In Syria, most deposits are for only between three and six month. As liquidity piled up, the banks ability to “match” deposit periods with loans became more difficult.

Then, in January 2005, things got a bit more complicated. The CMC issued Decree 101, which stated all banks in Syria could not loan more than 20% of their equity to more than one entity. The decree was designed to help bring Syrian banks into compliance with the International Convergence of Capital Measurement and Capital Standards, otherwise known as Basel II. The accord is being adopted by banks throughout the world as part of the Bank of International Settlement’s effort to improve credit and operational risk.

While Decree 101 limited the bank’s exposure to risk, it also constrained their ability to loan to larger and viable Syrian business concerns. In the case of BBSF and BSO, which are partially owned by Lebanese banks, this meant expanding their lending activities beyond their Syrian clients with whom they had a long history in Lebanon. Suddenly, the credit departments of both banks were thrust into a much more uncertain environment where the International Bank for Trade and Finance (IBTF), which has no Lebanese involvement, had found itself for most of 2004.

Liquidity problems: As deposits have continued to pour into private banks, lending opportunities remained restricted or slow going. Thus, dealing with excess liquidity quickly became the major issue confronting Syrian banking.

Most countries have facilities where banks can entrust excess liquidity, including Central Bank interest bearing facilities or Treasury Bills. Both are non-existent in Syria , however, albeit for “Investment Certificates” – a treasury bill issued by the Public Credit Bank on behalf of the Syrian Treasury – which banks do not have access to. In the first few months of operation, private banks placed their excess liquidity in interest bearing accounts with the Commercial Bank of Syria (CBoS). After a few months, however, the CBoS stopped paying interest because private bank deposits in the CboS surpassed their “quota”. The government said it did not want to turn the CboS into the treasurer for private banks to store their excess liquidity. Instead, the private banks were instructed to place their liquidity with the Central Bank.

The problem is that the money is simply placed in a vault and gains no interest. Given inflation and other factors, the deposits therefore actually depreciate in value, which are in turn recorded as losses for the private banks.

The private banks lobbied the Central Bank to ease restrictions or open facilities to deal with the worsening excess liquidity issue, but with limited success. An early, major concern dealt with regulations governing the banks use of foreign currency deposits. Syria’s foreign currency regulations discriminate between “investment dollars” – hard currency that is transferred into the country and can be transferred back out again – and “cash dollars” – hard currency deposited in Syrian banks that cannot leave the country.

By early 2004, the private banks were struggling to deal with hard currency “cash dollar” deposits, as private banks were forbidden from transferring the hard currency outside Syria. After extensive lobbying by private banks, the CMC issued Decision 65MNB4, which permitted private banks to transfer “excess foreign currency banknotes” to correspondent accounts in Lebanon and Jordan, where they could make money but following Hariri’s assassination, Syrian private sector banks reportedly withdrew their hard currency deposits in correspondent accounts in Lebanon. The exact amounts of these withdrawals are unknown.

In terms of Syrian Pound deposits, the prospects for solving the excess liquidity issue remain unclear. Analysts say the Central Bank is a long way off from introducing modern monetary policy, where its interest rate on deposits would determine interest rates in Syria; like the Federal Funds Rate used in the United States .

Recent changes in Syria’s stamp duty law promise to be a major shot in the arm for the country’s private sector banks. Nevertheless, just how long it will take the Ministry of Finance to issue its executive instructions remains unclear. Defining other reform legislation has taken up to six months. Given the slow pace of reform in Syria, it will be years before Syrian institutions are able to break even while servicing the needs of its clients. For the time being, Lebanon remains Syria’s piggy bank. If there is a silver lining for Syrian money it is that with financial services expanding in neighbouring Jordan, Syria’s cash rich economy should options like never before.

Andrew Tabler is currently a fellow with the Institute of Current World Affairs, and consulting editor for Syria Today.

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Economy & Finance

Talking Economics

by Executive Contributor
written by Executive Contributor

Tomorrow’s members of parliament will have to be active participants in urgent lawmaking and they will have to be able to pursue the public benefit with great expertise. Therefore, it seemed fair to ask party leaders about the economic agendas they represent. Last month, we spoke to Michel Aoun (Free Patriotic Movement), Selim Hoss (Third Way), Ahmad Mallie (Hizbullah), Carlos Edde (National Bloc) and Nayla Mouawad (Independent). In its final installment, with the election in full swing, EXECUTIVE sought the party experts from Progressive Socialist Party (PSP), the Democratic Reform Movement (DRM), both Kataeb branches, AMAL and the Future Movement (see page XX).

While the parties we encountered ranged from the old to the new and the right to the left, it was noteworthy that their positions were generally marked more by realism than driven by ideological objectives. Radical demands and over-night revolution were on no-one’s agenda. It was also interesting to see that a good number of party strategists were more skeptical about the WTO than about Lebanon’s affiliation with the Euro-Med Association Agreement – but then again professed considerable weariness about the Greater Arab Free Trade Area because of shortcomings in regional commitments to fair trade.

No politician fundamentally opposed the presence of Syrian labor in Lebanon and every single one spoke in favor of foreign investments. Every party and every leader testified to being committed to fighting corruption and all called for fundamental reforms of the bureaucracy in Lebanon. There were still enough differences in emphasis to make good variety and choices worth comparing. More extravagant musings included scenarios to introduce a tax on polluters and to make internet cheaper for everyone by launching taxation that would pay for telecom infrastructure. No party proclaimed campaign goals of turning Lebanon into a non-smoking environment or banning politicians from double parking.

Antoine Haddad, Democratic Reform Movement

Democratic Reform Movement (DRM) official and economist, Antoine Haddad, says his party aims in its economic policy to find new comparative advantages for Lebanon in the regional economy and adapt the country to the demands of functioning under the rules of globalization. It regards all economic development to hinge on dismantling the country’s black or shadow economy, by implementing best practices, political and administrative reform, and by convincing the new political class of abandoning the culture of corruption.

Acknowledging that banking, services and the knowledge economy do not suffice as job machines for the Lebanese market, the DRM seeks to alleviate imbalances between the sectors of the economy, to which end it intends to strengthen agriculture and manufacturing. It promotes taking a different approach to taxation and employing taxes as social regulative and means for more equitable distribution of wealth. Besides emphasizing Lebanon’s strong base in human capital and potential to create new economic opportunities, Haddad made it a point that environmental protection is a priority for the DRM and predicted the problem of solid waste in densely populated Lebanon would become the next main source of social conflict in coming decade. 

Beyond tried and tested means for debt reduction, the DRM calls for deep reform of the public sector and ending of wastage (but under a soft landing scenario for public sector employees) as well as downsizing the armed forces to a professional, smaller, modern military, thus cutting spending. Objective of the reform would be to achieve a sustainable primary surplus in the budget on recurrent basis.

In taxation issues, the party supports the Value-Added Tax but it would seek to maintain VAT at current levels for at least another two years until wage earners achieve real income increases. Strongly advocating a shift to incrementally raise the share of direct taxes in the revenue stream to 40%, the DRM sees the need to increase income and property taxes in the mid-term but would do so only in conjunction with a package of incentives and policies to attract investments.

Calling the non-availability of pensions for private sector employees a scandal, Haddad spoke out for shifting to a social care system with two pillars, pensions and healthcare. In relation to employment issues, the DRM stands for a proactive labor policy and revision of the labor law. The party wants to establish a functioning job matching service at the National Employment Office and make improvements in aligning the education system to labor market demand. It supports an increase in the minimum wage and strives to better protect the rights of foreign workers in Lebanon.

Antoine Chaker, Kataeb Party and Pierre Gemayel Kataeb Reform Movement

Kataeb Party politburo, Antoine Chaker, said that party supports implementation of a regional common market and sees education as a priority. The party advocates a strong consumer protection program as well as reform of all ministries and administrative bodies that stand in direct relations with the economy. Stopping the increase in the public debt and finding solutions for repayment of the debt should be the main objective of any economic policy. To better deal with the debt, Kataeb proposes to sell off deficit-making public entities, beginning with the electricity utility, and draft a plan for developing state-owned real estate properties and utilize them in repaying the debt. State-owned real estate assets could be sold without harm to the country and would procure an “important amount” towards repaying the debt, Chaker said. 

In terms of fiscal revenue, Kataeb supports simplification of ministerial processes and easy and implementation of a system of low taxation that would enable all citizens to pay their dues. Aim in reforming the taxation system would be to reach all residents with a light tax burden and only minimal administrative involvement. VAT should be maintained at the 10 % level but expanded to all participants in the economy. To be competitive in regional markets, Lebanon should gradually decrease customs levies. The party is in support of international treaties and regulations.

Because it generates inbound cash flow, tourism should top the list of sectors that receive incentives for economic development. Agriculture should be the second target for incentives, third industry. Incentives should be given indirectly, in form of low taxes, low or subsidized loan interest rates, and long term debt facilities.

Pierre Gemayel of the Kataeb Reform Movement [KRM] told Executive that as well as exploiting Lebanon’s tourism potential, the KRM believes that, as non-oil producing country without heavy industry, Lebanon should rely in its economic development on the services industry and boost also agricultural exports, says the KRM. According to Gemayel, an extensive taxation regime would not be beneficial for attracting companies and the country instead should offer initial advantages and legal protection to companies and tax them later on. The party supports the Value-Added Tax but opposes the simultaneous application of VAT and customs duties. It would not increase taxes on real estate transactions.

[Note: The Kataeb party and the Kataeb Reform Movement mutually deny each other’s legitimacy. Representatives of both sides expressed that they expect the other grouping to diminish or be assimilated into their branch.]

Rami Rayess, Progressive Socialist Party

As, according to PSP officials, party head Walid Jumblat does not consider himself expert on economic issues, the editor of the party’s official magazine and chief media officer, Rami Rayess, conveyed the organization’s economic vision and policy perspectives to EXECUTIVE.    

In its basic assessment, the PSP supports preserving the role of government in the economic sphere. It does not regard it suitable in human affairs to let the logic of the market rule all spheres of life, because it regards market forces as being insufficient for addressing social and economic imbalances. Government should play the role of regulating the market without necessarily owning the means of production. The fundamental governance model behind the PSP’s economic program is that of a free market with the government as regulator.

Proclaiming an agenda of social justice as one of its objectives, the PSP sees governmental planning for the economy as necessity, without which it would be unlikely to achieve the following targets: development of rural areas, a decrease in inflation, a decrease in urban migration, a decrease in social and class differences, and creation of new job opportunities. The PSP considers these targets as important under its party philosophy, in which the human being has the capacity and right to live his life in liberty and dignity and the state’s role is to create an environment conducive to the development of citizens through equal opportunities.

The party is in support of administrative decentralization as a key tool in facilitating social justice through equitable development of rural areas. It acknowledges the importance of administrative reform. Another point of strong PSP emphasis is protection of the environment.

Rayess said the party regards the national debt as manageable, provided that the political will to do so is secured. Attempts should be made to halt further growth of the debt in a first phase of addressing the problem and longer-term measures could be deployed for reducing it in a second phase.

Indirect taxes are favored by the PSP as easier in application than direct taxes but the party preferably would see the VAT lowered, provided that alternatives can be found. The party does not regard elimination of customs duties as desirable per se and would concede to a gradual phasing out if unavoidable under international treaties.

The party agrees to GAFTA and Euro-Med, Rayess said, also expressing unrestrained support for IPR protection and the fight against money laundering. Further changes to the banking secrecy law are not necessary in the party’s view. Industry, agriculture, tourism and ICT are the sectors that the PSP would address first in providing special development incentives. The PSP advocates lowering the costs of production and doing business for industry, by such means as lowering electricity tariffs and port fees.

Dr. Mustafa Yaghi, AMAL Movement

Confirming the need for new economic strategies, the policy-making agenda of the AMAL movement prioritizes controlling of public expenditures, improvements of productivity in the private sector economy, increased development of rural areas, and stronger vocational training of the labor force, along with administrative reform and privatization of public sector entities in an environment of eliminating “political sectarianism”. Amal politburo member, Dr. Mustafa Yaghi, outlined the party’s economic perspectives to Executive.

The party’s approach to the public debt would seek to reduce the debt by way of a reduction in public spending, mainly capital spending, along with which it would address privatization problems, and reign in subsidies, specifically the fuel oil subsidies to electricity utility EDL. In managing the existing debt, Amal would encourage a gradual move towards longer-term debt. Aiming to devise a schedule for servicing the debt and starting to repay the principal, the party furthermore emphasizes the creation of an economic climate conducive to attracting investments, the enhancement of competitiveness of the productive sector including a reduction of costs on production, and swapping some debt against goods or assets.

On the fiscal revenue side, Yaghi said that the country’s current ratio of 37% direct and 63% indirect taxes needs to be reversed, with an aim to achieve a contribution to the treasury from direct taxes at or near 55% based on progressive taxation scales, versus a contribution of indirect taxes at around 45%. While the VAT has been implemented at levels close to other developing countries with an active tax regime, income tax is still low especially for high earners. In light of the current economic and fiscal situation, the party sees it justified to maintain or increase customs on imported goods, in particular goods that do not have an equivalent in Lebanon, regardless of international agreements. Bilateral agreements could regulate the trade in such goods between Lebanon and the countries of origin.

With much attention to rural development and specific factors such as irrigation programs, agriculture, industry and crafts are clear priorities for Amal in sectors to be promoted for economic development. The party has a substantial list of recommendations for encouraging of sector development also extending to ICT and services. Its policy guidelines for investment promotion emphasize support for local investors and projects, such as contributing to the capital of mixed public and private sector companies in food processing. For foreign investors, Amal would devise investment support measures that are similar to those for local investors and provide special tax facilities inasmuch they would not impact national producers negatively. It supports further development of IDAL as investment facilitator.

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