EducationManagementSpecial Report

Private schools in Lebanon struggle to provide quality education at a reasonable cost

by Nabila Rahhal
written by Nabila Rahhal

This year marked the 200th anniversary of the death of al-Muallem or the master Butrus al-Bustani, a writer and scholar, who founded one of the first schools in Lebanon, Al-Madrassa al-Wataniya (the national school) in 1880. The school was based on national principles and was open to all without discrimination—a change from the religiously run schools that were the only option prior.

Before Bustani’s school—and the others which were established in buildings around the same time—schooling was common place in Lebanon, albeit under oak trees. Madrasset tahet el-sindayneh—literally translated as “the school under the oak tree,” in reference to the school grounds under the shade of a tree in the town square—were informal schools for the village’s children taught by the priest or sheikh for all ages at the same time. Topics of instruction were reading, writing, and math, and students were deemed “graduates” when they mastered those three subjects. Of course, then, as now, there was a distinction in education along class lines; the children of the village’s notable figures were not educated under the oak tree, but through private tutors. 

Regardless of their income level, Lebanese have historically valued education, seeing it as an investment in their children’s future. However, the cost of this investment is becoming increasingly restrictive given the dismal economic situation of the country. 

Executive talked to the administrators of a selection of private schools in Lebanon—largely catering to mid- and low-income students—to see how they are managing to maintain this balance between providing a quality education that meets the demands of the 21st century, and keeping their tuition within an affordable range for parents.

A numbers game

Education is perceived as a noble mission where ideally money should not be an obstacle or barrier to accessing quality schooling, but the reality is that private schools in Lebanon have costs and expenses they need to meet, and can, to an extent, end up operating like any business. According to Mohamad Hamadeh, director of the Philanthropic Islamic Amlieh Association—a non-profit that owns and operates five schools in Beirut—Law 515 (1996) obliges private schools in Lebanon to split their budget between paying teachers’ salaries, operational expenses, and curriculum development, with 65 percent locked in for the former and 35 percent left for the latter two. Based on that division and on the number of students they have, schools then calculate their tuition fees.

Nabil Rahhal (the author’s father), an educational consultant and former board member of Marjoyoun National College, explains that, in Lebanon, teachers begin at a base salary and every two years are granted an increase to this salary. The value of this pay rise (known as darajeh [step] in Arabic) is dependent on their degree and years of experience. This means that a school’s expenses are constantly increasing and accordingly, says Rahhal, schools’ tuition fees are normally increased annually by a single digit percentage.

However, Lebanon’s declining economic conditions have rendered parents unable to afford these increasing tuition fees. “The educational sector is not isolated from the rest of the country and is hit by the economic situation of the country,” Rahhal says.

A law of its own

According to Father Boutros Azar, secretary general of the General Secretariat of Catholic Schools and coordinator of the Association of Private Educational Institutions in Lebanon, schools in Lebanon had been suffering from the country’s economic situation for a long time, but the straw that broke the camel’s back was the passing of Law 46 (2017), which increased salary scales for public sector workers. The controversial law, which was protested heavily by school administrations, but also much fought for by teachers and public sector workers—who had not seen a significant wage increase since 1997—has three components. The first was an increase in the monetary value of the pay rise that teachers earn automatically every two years (from an average of LL35,000 to LL50,000). The second was adjusting and raising the wages and salary scale, so starting salaries increased. Those two components roughly amounted to a 40 percent increase for each teacher, according to Shukri Husni, chairperson of the board and director general of the Learner’s World International Schools (LWIS), which operates four schools across Lebanon. Both these components were implemented by all private schools, says Azar, despite the financial strains they inflicted. 

The law also stipulated that all teachers get six additional pay increases at once, in a one-off move (the equivalent of 12 years of pay increases). For example, a teacher who has been teaching for six years has had three increases in her salary, but will be given the additional six, amounting to a salary jump of around LL300,000.  

This situation placed private schools in a classic catch 22. “Here schools are faced with a dilemma,” Rahhal explains. “They need to increase their tuition fee to pay the increased teachers’ salaries, but if they increase their tuition drastically, parents will no longer be able to afford putting their children in that school, and so the number of students will decrease—negatively impacting the school’s budget and its ability to pay salaries.”

For those schools run by religious bodies—around 70 percent of the schools in Lebanon—Azar says that none were able to grant their teachers the one-off increase, not because they did not believe teachers were deserving of it, but because they simply could not afford to increase their tuition fees any further. “Teachers should surely be recognized for the noble job they do educating our children, but there has to be a balance,” Azar says, stressing on the feasibility of the salary hike. “We have always said that we are [in agreement] with a balanced [between the financial abilities of parents  to pay and the financial needs of teachers to have a living wage], feasible, and fair salary scale.” 

Private schools that cater to low-middle- to middle-income households were also largely unable to finance the additional increases and were open with their teachers regarding the situation. “In our lower fees schools, we paid the new scale—which is a 40 percent increase—but could not pay the additional six increases, which would have given them another 30 percent increase,” says Husni. “If such schools pay the six increases, it will mean that school fees will be significantly raised, which may cause such schools to eventually close. Most teachers do understand this difficult situation.”  Rahhal points out, however, that oftentimes teachers reluctantly accepted not receiving the one-off increase fearing that the alternative would be school closures and losing their jobs.  

School closures

Despite most private schools that cater to low-middle- to middle-income households not providing their teachers with this one-off payment, they are still struggling financially under the current economic situation—some have even been forced to close. Since 2012, when Azar was appointed to his post, Catholic schools have lost 85,000 students from their previous total of 190,000 students. Since applying—some of—Law 46 in 2017, 20 Catholic schools have shut down, bringing the overall total of Catholic schools down to 330 (Catholic schools constitute 5 percent of the schools in Lebanon).

Amlieh’s Hamadeh says the 65/35 percent ratio no longer makes sense as teachers’ salaries are taking up the majority of the budget, leaving much less than 35 percent to cover the bare necessities, such as maintenance of school grounds. “We are in a state of constant deficit, where we have no less than LL1 billion in deficit annually, and it is adding up,” Hamadeh says.  

Closing down a school, says Azar, is never an easy decision as it leaves teachers jobless and students struggling to find alternative schooling options or dropping out of the education system all together—something that nobody wants.

– We surveyed schools that taught at all levels, from nursery until Grade 13, and had more than 250 students in total. 
– To gather information on tuition fees, we attempted to call all eligible schools in each area. Some did not answer the phone. Others told us they could not share this information over the phone—insisting that we visit the school in person—or that they were not qualified to give such “sensitive” information to us. 
– The resulting statistics in the map are based on those schools that provided us with information.

Education in tough times 

Adding to the financial woes that private schools that cater to families of mid- to low-income brackets are facing is that a lot of parents delay paying the tuition, or do not pay it in full. “There is a problem for certain, but obviously it differs from area to area and school to school. The more expensive the school is, the less of a problem it has,” LWIS’ Husni says. “This is because the 2 percent of the Lebanese who have money still have money. The people who are losing it are the middle, upper-middle, and lower-middle [classes].” He observes that their least expensive school has the highest rate of unpaid tuition fees—close to 25 percent of parents have not paid the tuition fees yet—while their most expensive school has the least amount of unpaid fees at less than 5 percent. 

It seems that the further away from Greater Beirut, the bigger the impact of the economic situation on schools. Azar says that out of all the schools under his directorate, the ones that are struggling the most are those in rural areas with a small number of students.

Persevering despite it all

In light of these conditions, schools have had to go the extra mile to make their money. When it comes to unpaid tuitions, Husni says they have several options to manage these losses, short of asking a child to leave the school—an act which he finds inhumane. He has a designated team that is in constant contact with parents who have not paid, supporting them in finding options to pay what they owe, and even allowing them to make payment installments through credit cards—although the school pays 2 percent on each transaction. “We are finding mini ways to deal with a situation that is unresolvable in the foreseen future,” Husni says.

Schools have also learned to go beyond the tuition fees to finance the education they are providing. Hamadeh explains that the Amlieh Organization owns the building that houses the Ministry of Finance and it rents it out to the ministry, thereby securing revenues that help their schools finance part of their salary expenses. 

Financial aid can be a way of paying for tuition when schools have the resources to run such initiatives; this typically involves reaching out to alumni and/or the community, according to Rahhal. In the LWIS school network, 12 percent of students in school are on financial aid, the money for which is collected from the four owners themselves—who have each pledged a certain amount in financial aid—and from the schools’ fundraising efforts, says Husni. He also acknowledges that his schools benefit from an economy of scale, with one school sometimes subsidizing the other, and from the money LWIS makes from educational consultancy work outside of Lebanon. “This allows us to have more of an ability to bear losses, but it is more of a cushion than a solution,” Husni explains. “If we did not have this [security], we may have had to consider the closure of the schools with lower tuition in a couple of years, I think.”

Azar says the Maronite church supports Catholic schools by not collecting rent from the schools that are on church-owned land, says Azar. Because rent is a major expense for schools, then through this cost cut, Catholic schools can still manage to keep tuition fees reasonable while paying salaries.

Given these conditions, as Husni puts it, “schools have a mentality of survival not development.” One has to wonder how much these schools are able to invest in a curriculum or infrastructure that would prepare learners for the 21st century. “When you are barely able to pay salaries, how can you develop your academic and physical infrastructure?” Rahhal says. “This is why such schools are teaching students just to pass the official exams. Schools boast that their students have all passed the official exams, but this is not an indication that they have succeeded in developing a well-rounded personality equipped with the skills needed for the digital future.”

Education these days has developed way beyond the chalkboard and textbook approach to include critical thinking and research skills, coding and smart boards, and a plethora of tools and concepts aimed at producing a well-balanced individual who will excel in jobs and fields not yet known to us. Meanwhile, a big portion of schools in Lebanon are struggling just to pay their teachers and remain in operation. Unfortunately, the price will be paid by those students who do not have access to the same quality of education their wealthier fellow citizens can afford.

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EducationOverviewSpecial Report

The Lebanese educational landscape

by Thomas Schellen
written by Thomas Schellen

Despite large variances in concepts of what constitutes a good education and the curious inconsistency which individuals tend over time to exhibit on the matter, the value of education as a public good is constant throughout history and across societies as diverse as classical Greece, imperial China, and contemporary America. In our global era of universal human standards, education is affirmed in the Sustainable Development Goals (SDGs) of the United Nations and has become elevated from a lofty but vaporous ideal to a target of nations.

But that declaration of promise for every society was 22 years ago. Although progress toward achievement of the SDGs and the predecessor Millennium Development Goals is being achieved and measured, the quest for quality education is still fraught with question marks.

In the context of globalized capitalism since the late 20th century, it has, for example, become a growing trend to glance over or ignore the development of personal values, social competency, and self-confidence that is coherent with an individual’s role in a sane society. But even if one only focuses on the “easier” target of getting a useful education in the sense of its economic utility, the world today, including Lebanon, is faced with growing problems about achieving an education with adequate economic benefits, let alone adopting new targets of education as necessitated by social and technical changes, such as the digital transition.

The financial barrier to accessing quality education applies universally to private households. 

In Lebanon, these problems are exacerbated by one particular barrier, educational financing. This barrier to accessing a quality education applies universally to private households, whether they are seeking to enroll their children in primary and secondary school, or are moving them into tertiary education, of which Lebanon has an impressive number with large variances in reputations and tuition costs.

Stratification into different tuition and quality categories across  Lebanon’s regions frequently begins with pre-school and extends through the educational system, where 70 percent of costs are covered privately by Lebanese families. The top tier of tertiary education in Lebanon generally is perceived as consisting of private universities based in Beirut, such as the American University of Beirut (AUB) and the Lebanese American University (LAU) on the English side, and Université Saint-Joseph (USJ) and École supérieure des affaires (ESA) on the French side. According to the available statistics, about one quarter of the country’s 120,000 students in a given cycle attend one of these pricey universities, as contrasted to about 37 percent that attend the public Lebanese University—an institution that is perennially battling a set of political and administrative challenges. The balance of 38 percent of students in tertiary education are distributed over the fragmented landscape of around 35 privately owned institutions of medium- to medium-high reputation (and commensurate tuition fees), which are legally not-for-profit enterprises and mostly opened in the 1990s and after.

Hisham and Ali

Irrespective of the specific institution and education level, it is easy to get testimonies from parents on the financial challenges. Hisham and Ali are two 40-something fathers. Ali owns a  taxi. Hisham owns a hair salon. Both men are retired from the Lebanese Armed Forces, and both belong culturally and economically to the Lebanese middle class—which today means, primarily, that each of them passionately laments how the leaders in the nation’s political theater cannot be trusted.

In further parallels, both their families include two working parents and children in education and both struggle financially. Ali, who has two kids aged five and 12, is clear on his next major expenses: $2,800 of school tuition for his younger and $3,200 for his older child. “My wife is working full-time. I bought this license and taxi company to be able to give our income an extra push so that I can pay [for] school,” he says, adding with exasperation: “All that I work for is to pay for schooling. It is the same with me as for so many people in Lebanon.”

Hisham is looking at a new level of tuition stress; two of his children will soon enroll in a highly reputed university that will cost around $16,000 of tuition for the year starting this fall, and jump to $33,000 of tuition for both his children one year from now. “I have talked with the bank, and they will give a loan that covers about 30 or 35 percent of total tuition. But how can I pay tens of thousands of dollars each year? I have put a ‘for-sale’ sign on my house,” he exclaims, while the flat screen TV in his hair salon shows live pictures from the budget debate in Parliament. Hisham turns up the volume. Just now, two MPs are haranguing over who should talk for how long. 

The two faces of Lebanese education

As it is with practically all public goods in Lebanon, except for security, the allocation of public funding to education is rather low in international comparison when expressed as a share of GDP. Described in a 2017 education public expenditure review (PER) of Lebanon by the World Bank Group, the government expenditure in the first half of the 2010s was equal to 2.45 percent of estimated GDP and 6.4 percent of all expenditure. According to the researchers, total government expenditure on education was about $1.2 billion annually and slightly below out-of-pocket annual education expenditure of private households of estimated $1.3 billion. Bank loans and structured savings instruments for building up education reserves are available from banks and insurances, but not used extensively in the country (see box below).

When private allocations of funding in Lebanon are taken into the equation, the country’s total expenditure on education reaches a comparable level to what in many other nations is managed under paradigms of progressive taxation, transfer payments to weaker income groups, and public administration.

Moreover, the share of education in total government expenditures has fluctuated rather extensively.  By World Bank data collections, public expenditure on education—consisting of government spending on public and private education institutions, education administration, as well as subsidies for households and other private entities—reached 8.58 percent of all government expenditure in 2013, but in previous years had vacillated between 5.5 percent in 2009 and 2010, less than 6 percent in 11, and a bit over 7 percent in 2016. And the fiscal commitments to education are not encouraging. “While government expenditure in absolute terms has gone up since 2005, the percentage share of education expenditure as a percentage of total expenditure has decreased by 17 points during the last decade,” the PER noted.

The deeper one looks, the greater the disequilibrium between public investment in education and private households’ burden of education expenditures appears. Additionally, whereas investment in education in Lebanon has “high returns” according to the World Bank—when comparing the income levels of people with a university degree against those of less-educated individuals—the opportunity cost, speed, and degree of certainty of labor market returns on investments in tertiary education in the domestic economy of Lebanon are factors of significant concern that are not mentioned in the report. These factors include the high unemployment of labor market entrants, and a high likelihood of university graduates will have to accept jobs that are socially, skill-wise, and geographically distant from their area of study.

Furthermore, the overall level of entry-level remunerations in Lebanon’s difficult economy is at increasing disparity to the growing cost of education. Kim Issa, director of advancement and alumni relations at the International College (IC) in Beirut, teaches undergraduate students at LAU in their final year before graduation. In Issa’s experience, students predominantly have no illusions about what salaries they can ask for if they enter the domestic labor market. If fresh graduates receive salaries of $1,000, or even $8,000 from the more desirable local employers—a reasonable expectation based on the career options offered by major Lebanese banks—the existing dichotomy between domestic salary prospects and education costs at top universities is not abating.

Ample anecdotal evidence from the current student cohorts, therefore, point strongly to the long-standing propensity of bright young Lebanese with top education accomplishments to search for careers almost anywhere else in the world, because the home market has no viable offers for them. 

The quality education at these private schools comes at prices that exceed average private school tuitions up to four times. At IC (pictured) the average elementary school tuition is $11,464 per year.

Thus overall, the aggregate investment that private households in Lebanon make in their education seems to stand in direct inverse relation to the investment made by the public sector and, in an economic sense, to the domestic return on education investments. In this sense, the lack of information on the education sector’s current and expected contributions to the economy and total factor productivity is just the beginning of the opacity on what education means for the GDP of Lebanon.

Assessing the return potentials of education investments in the Lebanese context is made additionally difficult by the extreme long-term character of education investments, and the vagaries of having to make these investment decisions at a time when the aspirations of young students are immensely lacking visibility on the side of sustainable personal occupational inclinations, and on the side of future market demands for their expensive skills and the assessment of how much the education sector contributes to the country’s total factor productivity and GDP.

Even more opaque is the potential of the Lebanese education system when approached under the question if the system will be able to fuel the human capital formation in Lebanon in the near- to medium-term to a similar extent as in the past 50 years, when brains were widely perceived (by the Lebanese and by Arab and other alert employers outside of the country) as the single exportable and internationally most competitive asset. A hint on the questionability of this potential already by existing metrics comes from a barely average standing of Lebanon in the World Bank’s new human capital index.

Placing bets on Lebanese virtues

In Lebanon, there is a definite suggestion that wealth inequality contributes to differences in educational attainment, and also a view that such gaps are not shrinking. With regard to the former issue, the World Bank’s PER highlighted the gap in education attainment between students coming from high-income households and low-income households as very high. The PER said, “Significant wealth inequality exists in the performance of students,” and added “inaccessibility of private schools to the poorest implies that private schools are hindering equity rather than promoting it.”  

Having to agree fundamentally with the analysis that top private schools are not doing enough to promote equity of education in Lebanon, IC’s Issa, nonetheless points to pull-on effects that highly reputed private schools can bring to the education landscape by positively interacting with underprivileged schools. Top schools, which have a survival need to provide prime education methods to their clients, according to Issa, can convey ideas and methodologies such as professional fundraising from their successful alumni to financially less fortunate schools, just as underprivileged schools can be inspired to emulate new methods introduced in top schools such as creation of leadership centers and progressive teacher evaluations.  

In Lebanon, there is a definite suggestion that wealth inequality contributes to differences in educational attainment.

Another field where Lebanon’s education providers can open new ways are related to adoption of future-oriented pedagogical tools and courses. There is a new draft law in this regard that in some minor Lebanese miracle was sponsored by MPs and drafted with a preamble that highlights how important tech education today is for development of the global economy. The draft substantially proposes, to noteworthy detail, adding to the national curriculum lectures that cover subjects such as online ethics, robotics, programming, and artificial intelligence. There are furthermore practical examples from several years of coding programs that give good indications of what works in Lebanon in this regard and noteworthy edtech startups, several of which profess to more than just their next venture-capital raising and economic growth targets.  

In the unlikely event that reform of Lebanon’s public sector thinking would result in a marked shift from the current reliance on more or less clandestine savings and tax avoidance of the upper-third of income earners, with the implied need for out-of-pocket finance of health, education, and retirement by these relatively affluent families to the detriment of those who cannot accrue such savings and who would, in a more redistributive system, be net beneficiaries of financial transfer payments, Lebanon could shift to more active functioning of public administration units in managing education.

The skills, passion, and vision needed for such a radical transformation are in existence, and the required processes are not impossible to fathom for the performance leaders in the Ministry of Education and Higher Education. However, the odds for such a transformation of the Lebanese political DNA seems today nearly as low as the chances for a kid from a one-room village school in the extreme south of Lebanon to receive a scholarship at a top private school with US affiliations.   

The remoteness of a quick change in the public management of the Lebanese education sector under the existing political paradigms is demonstrated by the issue of special education needs. It is as depressing as it is instructive. As MoEHE clarified upon request by Executive, the Law 220 (2000) has not been adequately empowered through issuance of the requisite implementation decrees. Implementation decrees are still outstanding as they need to be “developed and agreed upon by several ministries including the Ministry of Social Affairs, Ministry of Health, Ministry of Internal Affairs, and Ministry of Labor,” MoEHE said.

The skills, passion, and vision needed for such a radical transformation are in existence.

The ministry explained that implementation of education for children with special needs is being pursued in terms of construction or upgrades of school buildings with disabled-accessible infrastructures, in terms of academics, teacher and staff employment, as well as education planning. 

Under the circumstances, the most feasible option of the education system in Lebanon and all aspiring students and parents might be to trust in the national heritage of education as a springboard to the future and reignite or further develop informal, perhaps even wasta-driven linkages that allow underprivileged schools to emulate or inherit some of the advancements that the institutions at the top of the performance ladders in primary, secondary, and tertiary education have adopted.  

As the PER also notes, Lebanon’s education sector was able to cope much better than the country’s habitual internal naysayers and external critics might have expected (resilience in dealing with the refugee crises of the last seven years is another parallel between the public goods of health and education, besides their under-provisioning with fiscal resources).   

The latest reference for the changing story of education is digital. This is the biggest education game changer for the generations that have journeyed through the second half of the 20th century and into the current era—it is possibly even the biggest game changer in the history of education. As Issa says it, “If you do not invest, you will be falling behind, and in the age of digitalization you can become outdated very fast.”

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LeadersOpinion

Lebanon’s budget: One hurdle is passed, many more remain to be overcome

by Executive Editors
written by Executive Editors

Three months is not a long time, depending on one’s perspective. If you are a rock that has had Mediterranean waves washing up against you for the last 11,000 years, three months are almost nothing. A blink. On the other hand, if you are a silk moth eager to feast on mulberry leaves, three months is more than you can expect to live under any circumstances. And if you are an annual budget, three months are 25 percent of your shelf life.

For the Lebanese political process, it was a sort of qualified success to see the 2019 budget move over the course of three months through three stages of its life cycle. Beginning with intense cabinet deliberations throughout May, the draft budget endured scrutiny by Parliament’s finance and budget committee in June. It then underwent a purported final metamorphosis into a veritable law in the second half of July, albeit with extremely assiduous expenditure of hot air over three days of debate on the floor of Parliament with voting on the fourth day and achievement of a solid majority of almost 65 percent of votes.

The success of the budget process at the end of July must nonetheless be seen as limited or even very limited. This is not only because the 2019 process was late in commencing. What raises the bigger questions is that firstly, the process was kidnapped time and again by competing practitioners of political brinkmanship. Cabinet leaders, stakeholders, and members of Parliament all underperformed in emitting signals of real and traceable reforms. Secondly, the political class failed to send signals of their will to make meaningful sacrifices, such as forgoing part of their own wealth for the sake of the country.

Most of what is known about the budget’s removal of privileges from holders of political offices is a rectification of non-productive privileges that should never have existed in the first place, such as the right of MPs and highest officials to import a, however luxurious or showy, car per year and not pay customs excise tax for it. In contrast to sending convincing signals of personal sacrifice as role models that citizens can emulate, the members of the supposedly reform-eager Lebanese cabinet and Parliament have, judging by conversations on the streets of Beirut and squares of outlying villages, excelled only in increasing the Lebanese people’s already ample levels of doubts about political sincerity among MPs, their disaffection with the leaders of political parties, and the outright deep systemic distrust that most Lebanese people express, sometimes explosively, when you ask them about their government. 

What comes next?

As such, budget-making was far from immune to the self-interests of political dons and their influence blocs in cabinet and Parliament; the budget that was voted on in Parliament on July 19, moreover, remained questionable as to its actual capacity to bring achievements for fiscal health and more than questionable as far as the budget’s projected net fiscal benefits when juxtaposed with its real economic impacts on enterprises in fragile Lebanon. On top of that, even three months proved not enough time to arrive at a law that could be published in the Official Gazette by the end of July. That was the moment when the sudden, and perhaps not even the last, strange twist in the tale came in the form of the revelation that disputed formulations in one article in the 2019 budget, article 80 containing a provision about specific ranking civil servants and their hiring, was holding up President Aoun’s signature.  

The resulting pupa of a budget is filled with a body of law of which no one can be sure if it will emerge as a nocturnal moth that just sucks money and is as scary as many in the business community perceive it, or take flight as a butterfly whose scintillating flutter lures investors into committing funds to Lebanon’s flowery bouquet of infrastructure, public-private partnerships, Capital Investment Plan, and Lebanese Economic Vision propositions.

Another looming question is even if the budget law will be able to fly; in the most adverse speculation, it might be too heavy to lift off the ground or yet be annihilated by some unforeseen factor. Even if it flies like a butterfly and produces some numerical results of revenue enhancements and cost reductions—albeit no one can predict which ones—and turns out to be the most prolific of all of history’s budgetary butterflies in the art of seducing multilateral lenders with the Lebanese scintillation under the CEDRE plan, all that such success will hatch with certainty is an increased national debt.

That running up debts is anything but risk-free and increases a debtor country’s dependency on the goodwill of multilateral agencies, such as the World Bank and the International Monetary Fund (IMF) is self-explanatory, but this truth was also made specifically clear last month. Running on this track, there were the various structural reform recommendations by the IMF in its July 2 Staff Concluding Statement of the Article IV Mission. These were recommendations that were on one side formulated as a long list of “authorities should” statements down to detailed and very precise demands, for example that reforms should include “incorporating Council for Development and Reconstruction (CDR) spending in the budget and passing a public procurement law.”    

Then there were the fiscal recommendations. Calling it “critically important for debt sustainability,” the IMF advised Lebanon in no uncertain terms to implement a fiscal plan “based on credible and permanent measures” able to yield a substantial primary surplus over the medium term. The hints that followed were not subtle. Increase VAT. Stop tax exemptions of diesel and increase fuel excises. Make the temporary interest tax hike into a permanent one. Improve tax collection. 

These measures make perfect economic, and in case of proper tax collection, social sense, if the latter is linked to progressive taxation and comes with transfers to the poor but avoids creating poverty traps and barriers to seeking employment. But measures such as the ones so strongly proposed by the IMF that it feels like an imposition and intrusion into the political realm—tilting it further away from democratic processes where social and economic goods should be negotiated inside a polity—can only remind of the fact that the economic thinking of the IMF has no companion of social wisdom. This realization has forced itself upon clearheaded observers time and again in the interventions that the IMF has historically dictated and imposed on states in need of bailouts.

Funnily enough in this context, the IMF, at the end of July, launched its search for its next managing director (and successor of departing Christine Lagarde) with the top two requirements stipulating a “distinguished record in economic policy making” and an “outstanding professional background” with proven managerial and diplomatic skills. Terms like social competency or social policy-making do not feature in the job description.

In Lebanon’s case, where there is no request to have a bailout program under IMF tutelage, the fund should restrain itself from prescribing any fiscal measures that would come with crippling impacts on far too many families and entire regions whose social realities no IMF delegation has diligently explored. The social needs of the Lebanese polity with its many fragmentations and insular communities are something no international assessment has ever fully comprehended, let alone addressed.   

Need for credible signals

It is a different matter if central bankers consult with the IMF and ask them for monetary and financial advice, which the IMF has expertly delivered, including repeated acknowledgements of the economically counterintuitive, but in Lebanon’s case prudent, dollar peg of the Lebanese lira (the 2019 Article IV statement says nothing about floating the lira, but offers instead reassuring sentences such as “The BdL has been the linchpin of financial stability and the guardian of the peg”).

This runs up to the conclusion that the only reasonable way fiscal recipes would conceivably be near-imposed on Lebanon’s politicians by an institution like the IMF is that the Lebanese political class has failed to do two core jobs, the first being the job of sending signals that the citizenry sees positively and that generate a demonstrable level of mutual confidence between government and people of Lebanon. Moreover, the political class, despite all the efforts invested into the 2019 budget creation process, has secondly not delivered a law nor formula that emits trustworthy structural reform signals.

Executive, therefore, calls for the political class of Lebanon to start understanding the people and their social conditions, to send credible signals of personal sacrifices and commitment to the country’s public goods, and to legislate socioeconomically sustainable policies—not waiting until the increasing indebtedness and global financialization of the country gives the voting blocs of multilateral institutions, investors, and financial market players control over the social affairs of the Lebanese. 

Furthermore, our law and policy-makers need to exponentially increase their efforts to understand the interdependency between structural reforms and economic rebirth. Our political class would need to start sending convincing messages showing that Lebanon’s power groups can forget their adolescent fantasies of omnipotence, control their jealousies of their co-religionist peers in the next village, and actually get their hands clean by doing constructive legislative work and implementing reforms.  

Just like cultivation of the humble silkworm enabled enterprising people in hillside villages to spin silken threads into a pillar of economic prosperity in the period during which the Lebanese polity was still a pupa enclosed by the Ottoman Empire, the 2019 budget still could, in a very unlikely, but almost ideal, scenario of structural reforms and reconstruction of trust, give birth to a reality of political sanity, administrative efficiency, and more sustainable economic prosperity in Lebanon.

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LeadersOpinion

The Lebanese government needs to do more to improve the education sector

by Executive Editors
written by Executive Editors

“Education is the most powerful weapon which you can use to change the world,” so said Nelson Mandela in a 2003 speech. Indeed, the impact of quality education—the kind that expands the learner’s mind and aids in the development of a well-rounded personality—resonates long after the optimal 18 – 20 years of formal education (15 years of school, followed by at least three years of tertiary education for some). This form of education would make one much more competitive in the job market—and more likely to perform well and grow in a chosen career path—ultimately benefiting the economy. An educated mind can also develop innovative solutions for social or environmental problems plaguing the country or launch businesses that would benefit the country as a whole. 

Lebanese families have traditionally valued education, seeing it as an investment into their children’s future. Of Lebanon’s students, 70 percent go to private schools, which are perceived to be of better quality than public schools, yet they can vary significantly in price and quality. It is sad then that high-quality schools in Lebanon are becoming increasingly inaccessible to the majority of Lebanese who simply cannot afford them. We all remember the story of George Zreik, who died earlier this year after setting himself on fire in protest over being unable to afford tuition at his child’s private school. Increasingly higher tuition rates, coupled with a dire economic situation and a higher cost of living, are making quality private schools an impossible dream for more and more parents. Meanwhile, private schools that cater to mid- to low-income families are themselves struggling under the toll of paying teachers’ salaries, which were finally increased by Law 46 (2017). Oftentimes this comes at the expense of curriculum development and school enhancement. Quality education in Lebanon is, therefore, becoming increasingly segregated between the wealthy—who can afford to pay the tuition fees in the top-tier private schools or universities—and the middle- to low-income families. Those families constitute the majority of the population in Lebanon, and unfortunately their children are largely not receiving the kind of education needed to equip them with skills needed for the jobs of the future. 

It is infuriating that despite the proven value of quality education and its impact on the economy—and despite the bleak state of the education sector in Lebanon these days—the Lebanese government still prefers to invest in bricks and mortar, meaning infrastructure,  rather than investing in the development of its own people. Prime Minister Hariri’s big win prior to the 2018 elections was to secure pledges for $11 billion in loans and grants at the April CEDRE investment conference—and since then the focus has been on how to implement the fiscal reforms needed to unlock these loans so that urgently needed Capital Investiment Plan (CIP) projects can be tackled. But what is the share of education projects in the CIP list? None. Why is education not a priority for this government? Education is a sector that will have a higher return on investment in the long-term and create more jobs than any infrastructure project. 

It is high time that the government takes education more seriously and prioritizes it. We realize that this is a vast sector, with many challenges and aspects in need of reform or restructuring. But the simple act of recognizing education’s significance for the future of Lebanon and dedicating the energy and mental power needed toward the betterment of the education system—and toward making it accessible for all Lebanese children—is a start. 

This translates into finding members of Parliament who are more engaged with education; those sitting on Parliament’s education committee need to be appointed less because of their political affiliations and power interests. They should be selected based on their knowledge of the subject matter and their dedication toward the improvement of the Lebanese school system. The head of the committee should be open to discussing the proposals and initiatives they are working on instead of refusing to give interviews to any media outlet (which is what Executive was told when we approached Bahia Hariri’s office for an interview). 

 We realize that money is tight, but the government needs to allocate more of the fiscal budget toward making quality education accessible to all Lebanese (we stress on quality education because while public schools are free in Lebanon, their quality, based on the limited resources they have, is questionable). The way in which they do that has to be relentlessly discussed and debated in the educational committee meetings and in parliament sessions. It has to be made a national priority. 

There have been certain steps in the right direction—such as the introduction of computer science classes in the middle school classes (or cycle 3) of 553 of the 875 public schools in Lebanon, according to the Center for Educational Research and Development—and they are to be applauded. But they also need to be built upon if the goal is the overhauling of the education system. 

If our government truly stands behind quality 21st century education as a basic right for all of its citizens, not a privilege for the wealthy few, and demonstrates its seriousness toward working to achieve that, then we as a country will be reaping the positive results for years to come. 

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EditorialOpinion

It is about credibility

by Yasser Akkaoui
written by Yasser Akkaoui

The concluding statement of the IMF’s Article IV consultations includes the following sentence: “Rebalancing the economy in the current framework of an exchange rate peg requires strong implementation of a large and credible fiscal adjustment and ambitious structural reforms.” 

Here at Executive this sentence sparked cynical jokes. We sensed from the reaction from our politicians, expected of course, that they had wholly misread this sentence, and so we feel compelled to explain it. 

The exchange rate peg, when it was adopted in the early 1990s, was a measure to ensure the monetary stability necessary to implement any state plan to trigger a prosperous cycle, a more efficient and effective use of public resources, functional public services, a thriving private sector, and an educational landscape that takes full advantage of the human resources of our country. It is only in these circumstances that a stronger local currency would render the exchange rate peg unnecessary, and so would lead to the adoption of a floating exchange rate. 

The 1996 Grapes of Wrath operation wiped out one of the components of this hopeful thinking, yet our nation building preserved its momentum even though geopolitical forces in the region became entrenched. Despite all the setbacks, the reconstruction of Lebanon continued until the 2005 assassination of Prime Minister Rafik Hariri. Even with this, the prospect of prosperity was still on the table—there was still hope. 

It is only after the 2006 war that we knew we would be punished for increasingly aligning ourselves with the eastern hemisphere as it began to strengthen its grip over Lebanese politics. The exchange rate peg in such an environment remained the only way to keep monetary stability when socioeconomic security was eroding, due to corruption, ignorance, and short-term thinking. 

The governor of the central bank must be rolling his eyes at the absurdity around him. Our politicians obviously have no idea that fiscal adjustment comes hand-in-hand with structural reform, which in turn relies on economic performance, purpose, and efficiency. And this is exactly what this sentence from the IMF is saying. The key word in the sentence above is “credible.” We need credible fiscal adjustment if we are ever to undertake the structural reforms this country so desperately needs. 

It is all about credibility, my dear ministers—and you have none. 

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CommentMobilityOpinionSpecial Report

Lebanon needs to build a railway network

by Carlos Naffah
written by Carlos Naffah

The absence of public transport in Lebanon has a substantial economic impact on the country, with congestion clogging the country’s main transport arteries. Without a sustainable transport system in place, this will only get worse; the average delay per vehicle will nearly double and the average speed will be halved according to a 2015 working paper from the Issam Fares Institute at the American University of Beirut. The effect is multidimensional; there is no solution to traffic congestion woes without a public transport system in place. The backbone of any public transport system is a railway network for the transport of passengers and freight. It is, therefore, crucial to have railways—and timely too, given Syria and Iraq’s reconstruction needs.

Several studies have attempted to quantify the economic impact of congestion caused by the lack of public transport, with estimates ranging between 5 and 10 percent of GDP. In a March 2018 press release announcing the World Bank’s approval of a $295 million package to overhaul Lebanon’s transport sector—the Greater Beirut Public Transport Project—Ziad Nakat, senior transport specialist at the World Bank was quoted as saying that, “In economic terms, the annual cost of traffic congestion is above $2 billion, representing a large impediment to growth and regional connectivity.”

Too much petrol

The absence of public transport is also fueling the high petrol bill that is negatively affecting the balance of payments, as petrol constitutes a large part of Lebanese imports. In 2017, Lebanon’s exports amounted to $3.91 billion, and its imports to $20.8 billion—of which, $3.77 billion was for refined petroleum, one of its top imports. If the country develops public rail transport, it could significantly reduce fuel usage and emissions, if the latest technology—trains that run on non-emission hydrogen fuel cells—is adopted. Transport in Lebanon accounts for around 23 percent of the country’s emissions of greenhouse gases, mainly from road transport, according to a 2016 Ministry of Environment report.

Many past opportunities to develop infrastructure projects in the country have been dismally missed. They included projects at the energy, waste management, water, and transport levels. In 2016, the French company EGIS rail conducted a feasibility study on three railway lines: 1) a Beirut-Tripoli cargo line to connect the ports of Beirut, Jounieh, and Tripoli; 2) a Beirut-Tripoli passenger line with eight trains per hour and a capacity of 2,000 passengers each; and 3) an intercity train between Beirut and Tabarja with eight trains per hour and a capacity of 1,200 passengers each. Since that date, the file has been sitting with the Council of Development and Reconstruction (CDR) with no action taken and no indication of why the file lies untouched. Likewise, there has been no action on the Tripoli–Syrian border railway link, which has been with the CDR since 2014. (There have been indications that the Chinese were interested in investing as recently as May this year, but no concrete steps have been taken.)

Stimulate the economy

Rehabilitating the railway network will have a positive impact on employment—currently local unemployment is estimated at around 25 percent. A new railway network would create thousands of jobs at no cost to the state as they will be supported by the private sector. The Lebanese government could also stimulate the economy by relinking the country to the region at a time when its neighbors are rebuilding their rail network—a regionally linked network to which Lebanon used to be connected. In March this year, Syria reopened its Tartous-Qalamoun line, while Iraq reopened its Baghdad-Fallujah line in late 2018, after years of war had brought both rail networks to a halt.

On a broader regional level, Chinese and French companies are leading many rail projects in Algeria, Egypt, Morocco, Qatar, the United Arab Emirates, Saudi Arabia, and Jordan. Lebanon should step in and take advantage of this unique economic opportunity to reestablish a railway network that was historically connected to the GCC and to Europe.

One hundred twenty-four years ago, railways connected the French port of Marseille to the port of Beirut as part of what is known as the Levant gate. French investment brought rail service to life backed by Swiss, German, and French technologies. It drew a chapter of cooperation between the West and the East, centered on Lebanon. Perhaps Lebanon should rewrite the same journey of cross-cultural and economic exchange by joining the Chinese “One Belt, One Road” initiative, a global development strategy launched by President Xi Jinping in October 2013, or by reconnecting the Levant region to Europe via a new Levant railway open to the southern part of Europe and North Africa via the Beirut and Tripoli ports. Only time will tell, but a political decision should be made quickly before Lebanon misses the train.

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CommentLast WordMobilityOpinion

Sustaining mobility in Lebanon

by Marc Haddad
written by Marc Haddad

Lebanon’s transport sector is one of the most unsustainable in the Middle East region. This is mostly due to the continuing absence of any public transportation by bus or rail for over 40 years, and the lack of infrastructure for alternative transport means, such as bicycles and walking. The result is an exclusive reliance on cars and trucks that are overly polluting; according to local research, 98 percent of all fuels used in Lebanon’s transport are gasoline and diesel, with 60 percent of all cars having large engines, and 70 percent being older than 10 years. Mobility in Lebanon has become synonymous with traffic congestion and noxious fumes, harming human health, the economy, and the environment.

It is clear from the diagnosis of the problem that serious solutions by the state are needed immediately, under the organizing umbrella of a national transportation strategy that is still missing to date. But in a tough economy and without effective state institutions today, it might be more useful to look at feasible solutions that can be done in the near-term at the level of municipalities and non-state actors, such as non-governmental organizations (NGOs) and the private sector.

Where the government is not able to fulfill its mandate, many NGOs and experts have been active, but each one working in a separate part of the sector. To increase chances for success, NGOs should unify their voice and engage the state, the private sector, academia, and international bodies in a constructive dialogue, pooling resources. This can push forward low cost, near-term projects and pilot projects with tangible positive impacts on the daily commute.

For example, in the absence of a comprehensive public bus service across all regions, smaller regional initiatives by municipalities and the private sector can be very effective in improving mobility within cities and high-density areas. Such initiatives can also serve as pilot tests ahead of any future deployment of a country-wide bus network by the state, providing valuable insights about passenger demand, service costs, and bus technology performance, potentially even becoming feeders for the main network in the future. These projects would also encourage the gradual development of local capabilities in the sector, from training and maintenance of facilities to information service providers.

However, such initiatives cannot replace the state, which has the primary role and responsibility for providing a nationwide and modern public transport service to its citizens, with all the significant infrastructure and resources needed to operate it. This is why it is equally important to continue lobbying the state for this right, especially at this critical juncture where funding pledges for the transport sector out of CEDRE amount to a third of the $11 billion pledged.

In its current form, the CEDRE -linked Capital Investment Plan (CIP) for the transport sector is entirely focused on infrastructure projects such as roadways and tunnels, but does not account for public transportation needs. And while many of these projects are useful and needed, they will not, however, improve mobility in the long term, as more cars and trucks will eventually overfill the additional capacity—according to a 2016 Bankmed report, on average, over 35,000 new-model passenger cars alone enter our roads each year. This is why some NGOs, like “Transport Coactives” (TRACS), which itself is formed by a number of active NGOs and experts in the transport sector including myself, are actively lobbying today to reprioritize the CEDRE/CIP spending toward transport projects that include public transportation.

In the meantime, more of the feasible and affordable initiatives can be implemented easily and can have a positive impact, if not on congestion levels, at least on human health and the environment. In a 2017 study by the Ministry of Energy and Water and the UNDP on the potential use of low carbon fuels in the transport sector, one of our short-term policy recommendations was to reduce taxes on hybrid electric vehicles in order to make this cleaner technology more affordable, and thereby encourage its adoption in Lebanon. In that study, hybrids were estimated to save nearly 30 percent in fuel consumption and greenhouse gas emissions compared to conventional engine vehicles, while also significantly reducing emission of some of the air pollutants harmful to human health. And while the government did recently reduce taxes on these vehicles down to 20 percent, more reductions are necessary to speed up their adoption, as Lebanon remains largely behind global and even regional trends.

But perhaps the most important takeaway is that collaboration on feasible solutions, while necessary and useful, is not sufficient to sustain the transport sector in Lebanon. Only a national transportation strategy that organizes efforts and resources can begin to tackle the problem at its root cause.

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Disaster Risk ManagementEconomics & Policy

Lebanon needs a disaster policy for earthquake risks

by Basil Mahfouz
written by Basil Mahfouz

Over the past 2,000 years, Lebanon has experienced over 13 major earthquakes. These tremors are a result of the country’s location within an active tectonic system called the Dead Sea Rift, which divides the African and Arabian plates.

One of Lebanon’s most devastating earthquakes occurred in 551 AD, a 7.5 magnitude quake along the Mount Lebanon Thrust (MLT) resulted in a tsunami, which, according to a 2007 paper in the journal Geology, “destroyed most of the coastal cities,” “drowned Tripoli,” and caused damage so severe that Beirut “did not recover for 1,300 years.”

Seismologists predict that the MLT has a recurring cycle of every 1,500-1,750 years, meaning a major earthquake could fall anytime within the next 250 years. The World Bank’s Global Facility for Disaster Risk Reduction (GFDRR) puts Lebanon at a medium-risk level, estimating that there is a 10 percent chance for a potentially-damaging earthquake and tsunami to occur within the next 50 years.

Additionally, Lebanon’s offshore oil and gas operations are scheduled to begin along the MLT, and could trigger a larger earthquake in a shorter time frame. A 2016 article in Scientific American highlighted that “scientists are increasingly confident about the link between earthquakes and oil and gas production,” while criticizing regulators for being slow to react.

To mitigate these risks, the government, with the support of international agencies, has been working to improve the country’s resilience to disasters. The government established a Disaster Risk Management Unit in 2009, followed by the National Coordination Committee on Disaster Risk Reduction in 2013, the latter of which has been setting up a network of emergency control rooms, conducting drills and simulations, and raising awareness.

Despite these steps, the GFDRR notes that Lebanon still “does not have an operational disaster management plan.” With the overall risk of earthquakes in Lebanon coupled with the potential seismic tremors of the MLT and ongoing offshore oil and gas activities, it is time to begin the conversation and make a consolidated effort toward preparing for the worst. In addition to saving lives, the World Bank estimates that every dollar invested in disaster prevention saves $4 in disaster damage.

The Sendai Framework for Disaster Risk Reduction outlines principles and global best practices that aim to improve global resilience to natural or man-made hazards. These range from governance structures to policies, tactics, and technology, as well as rescue guidelines. One key aspect is insurance. A 2015 OECD report finds that ability to mobilize finances quickly to pay for rescue operations, compensate victims, and rebuild destroyed property after a disaster is a key challenge most governments need to overcome.

Similar to conventional insurance schemes, the system works by pooling financial resources from a large number of people in advance of a disaster, and then using these funds to compensate potential victims for natural or man-made hazards. However, the technicalities of the scheme varies, which allows room for innovation.

In some developed countries, insurance firms offer private disaster insurance cover. These schemes, however, usually cover businesses and tend to be unaffordable for the more vulnerable lower-income households or companies. Alternatively, government-supported insurance programs are becoming increasingly popular across developing countries. In this system, stakeholders pay a mandatory—usually affordable—premium that is used to finance a common fund—usually reinsured on the global private insurance market—that is then accessible for disaster relief in case of a catastrophe.

In Morocco, draft law 110-14 seeks to add a compulsory, affordable tariff to existing car insurance policies to fully cover 5 million people against catastrophes. The fees contribute to a national solidarity fund that will compensate uninsured victims in case a catastrophic event causes personal harm or damage to a family’s primary residence.

In my opinion, Lebanon’s caisse mutuelle (mutual fund) system provides an excellent infrastructure for citizens to voluntarily create a common pool disaster insurance autonomously from the government. A group of stakeholders can band together, agree on the terms and conditions for payouts, and contribute directly to a mutual fund that protects against natural or manmade hazards. The same funds can likely be reinsured on the private market as well, enabling access to more money when people might need it the most. The current framework provides a good stepping stone that could pave the way—with the right reforms, control, and oversight—for a national one. It is time to start the conversation, and ensure Lebanon will be ready when the time comes.

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Economics & PolicyElectricity

Despite protests, Mansourieh power lines go live

by Lauren Holtmeier
written by Lauren Holtmeier

On June 17, in Mansourieh, the last 2 km power line link went live in the 369 km, 220 kilovolt (kv) loop that runs from the south of the country up to the north, out to the Bekaa Valley, and connects Lebanon’s network to Syria. For 17 years, the government has been trying to close this loop, with this latest move prompted by attempts to implement the new electricity plan adopted in April. Mansourieh residents, however, have been protesting the construction for years, citing potential health risks, specifically a possible relation to increased childhood leukemia.

Minister of Energy and Water Nada Boustani tells Executive that completing the loop will increase current carrying capacities on the network as a whole and increase the network’s stability. The government’s new electricity plan seems to have provided impetus to finally complete this last link of the “electrical highway” that connects the country. Ramzi Dobeissy, the head of the high-voltage transmission lines department at Lebanon’s public electricity utility, Electricité du Liban (EDL), says that the 220 kv loop—including the Mansourieh link—is the “backbone of the Lebanese network.” At present, the link is needed to inject power from the main power plants in the north and south toward Beirut and its suburbs, he says.

The importance of this loop raises questions as to why it has taken so long to complete. Successive governments have attempted to close the Mansourieh link since 2002, but according to Dobeissy, who has worked at EDL since 2005, the project was never fully implemented on the ground due to the protests of local residents. Until the link was completed in June, there had been piecemeal progress over the years—the final pylons were erected in Mansourieh in 2006, and a 2016 Council of Development and Reconstruction progress report noted that all had been completed bar the Mansourieh link, which it said would be done in 2016 “if all goes well”—but there was no official reason given for why these had not been successful.

The objections

For their part, these protestors tell Executive that their primary concerns are the potential for adverse health effects, as well as noise pollution, and safety concerns about having these lines overhead (the lines are at a minimum of 16 meters overheard to comply with EDL standards). The resident’s objections predate 2002 to 1997 when the original planned path of the lines changed, according to a map from that year that protesters showed Executive with the original straight path passing through then uninhabited land. Carole Ibrahim, a Mansourieh resident, tells Executive that when she bought her home in 1996, no plan existed for power lines to pass near it. For them, the original path remains a sticking point in their continued objection.

Mansourieh residents also tell Executive that construction workers entered their private property during construction, and they have filed a lawsuit against the Ministry of Interior (MoI) and the Ministry of Energy and Water (MoEW) that aims to invalidate a decree that allowed for temporary occupation of private land to place installation equipment. Boustani told Executive that while she had read about the lawsuit, she had not yet received it. Executive spoke with a representative from the MoI but did not receive a response prior to publication.

For the government, closing the loop is one of the first steps in expanding transmission capabilities.

Boustani tells Executive that right of way payments and temporary access payments—compensation for the lines running overhead and money paid for workers to briefly access private property for installation—will be made to all residents in the path of the new power lines. The amount offered for these payments is confidential, but Dobeissy says that it depends on how close the power line is to the home and on the area itself. In 2012, the government had offered to buy 15-20 of the apartments set to run under the cable, but no residents accepted the offer. The prices, according to Dobeissy, were set to be near the original prices of the land.

Regarding health risks, Mansourieh residents and the MoEW, in combination with EDL, both cite studies that back their own perspective on the issue. The major health concern for the protestors is a potential link to childhood leukemia. One 2005 study conducted by Oxford University, often cited by these protestors, found that children living within close proximity to powerlines had an increased risk of leukemia, but the study’s author, Gerald Draper, admitted that the results were likely due to chance, with no causal mechanism found.

Other effects that protesters say are possible are anxiety, headaches, suicide, depression, and nausea; however, the World Health Organization (WHO) says that scientific evidence does not support a correlation between these symptoms and exposure to electromagnetic fields. Regarding leukemia, the WHO International Agency for Research on Cancer has classified extremely low-frequency magnetic fields as possibly carcinogenic to humans. “WHO, in the absence of certainty of adverse health effects, recommends the adoption of prevention and avoidance of potential health risks,” reads a prepared statement Executive received from WHO.

Aside from the possible carcinogenic nature of the powerlines, there is debate over to how many microteslas—a unit that measures the strength of a magnetic field—humans can safely be exposed. Mounir Rached, who was a speaker at a May 24 press conference on the power lines under his capacity as a lecturer in energy studies at the American University of Beirut says—in agreement with other protesters—that the allowed limit should not exceed 0.4. This, however, is disputed by EDL, with Dobeissy pointing to studies conducted by Electricité de France and other EU countries that show that values exceeding 100 microteslas have not been proven to affect human health—according to EDL modeling, no more than 20 microteslas would reach the balcony of the nearest apartment.

To bury or not?

For the residents of Mansourieh, like Thomas el-Saad, the possibility that these lines could be carcinogenic is enough to ask that the government consider other options, such as underground installation. “The line is obviously very important for all of Lebanon, and nobody contests this,” he says. “Of course these lines must exist, but not around our homes, and it’s doable to do it beneath the earth.”

Protesters, alongside Rached, point to the existence of underground lines in Beirut as evidence that these lines exist in Lebanon and would be a viable alternative, but Boustani and Dobeissy say it is not feasible for technical reasons. In Beirut and Tripoli the lines must be underground because the density of buildings leaves no space to build pylons and string the cables, Dobeissy says. He adds that because the capacitance—the ratio of the change in an electric charge in a system to the corresponding change in its electric potential—of underground cables is 20-75 times more than overhead lines, it is very technically difficult to control voltage spikes—specifically during times of minimal demand—when utilizing underground cables over long distances, which could lead to risk of network collapse. Because of this, no more than 5 to 8 percent of a line should be located below ground, and with the 369 km loop, 5 percent equals 18.45 km that can safely be buried. He adds that Lebanon already exceeds this with about 13 percent of the lines, primarily in Beirut, being underground.

Dobeissy also says that installing underground lines can cost up to two-and-a-half to three times what it costs to install them overhead, for which he says estimated installation costs equal 450,000 euros/km ($503,000 at time of writing). Underground cost estimates were not completed for Mansourieh because the technical barriers rendered them unnecessary.

For the government, closing the loop is one of the first steps in expanding transmission capabilities. With the lines now live, protesters’ concerns about adverse health effects have not subsided, and many tell Executive that they will continue to organize and raise public awareness of their concerns. They say that they have started organizing with surrounding communities that have overhead lines to gain a larger foothold. And while Saad admitted that he feared the past protests would prove futile—and they did—he hopes that if they maintain momentum they can get the lines moved underground in the next 10 years. But with the percentage of the line buried already exceeding the maximum EDL tells Executive is acceptable, burying the Mansourieh lines seems like a distant possibility.

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Economics & PolicyExportsManufacturing

Exports must be part of economic growth strategy

by Sami Atallah, Nancy Ezzeddine & Jana Mourad
written by Sami Atallah, Nancy Ezzeddine & Jana Mourad

Successive Lebanese governments have largely neglected the manufacturing sector. Policies were instead limited to a number of financing schemes, based on subsidized interest rates and several trade agreements with EU and Arab countries. Industrialists were left to contend with multiple challenges, including high production costs, inefficient provision of public services, and significant skills mismatch. Consequently, the manufacturing sector’s share of the GDP has shrunk from around 10 percent in 2005 to 6.2 percent in 2017, despite employing 25 percent of the labor force. More recently, the sector’s exports dropped from a high of $5 billion in 2012 to $3.9 billion in 2017.

Ignoring the sector is a big mistake. Empirical evidence, based on the 2006 findings of Harvard economist Dani Rodrik, shows that manufacturing-led structural transformation creates higher productivity and better paying jobs. According to UNIDO, every one job in the manufacturing sector creates 2.2 jobs in other sectors. Despite the poor performance of the sector, Lebanese exports exhibit interesting patterns that seem to have gone unnoticed by the government. For one, Lebanon’s exports are well diversified both in terms of products and markets. In 2017, Lebanon exported 1,147 products, the majority of which were distributed across the following sectors (based on international classifications): 18 percent were in precious metals, which includes gold and jewelry; 15 percent in machinery, which includes computers, electric generators, and insulated wires; 14 percent in metals; 13 percent in foodstuffs, such as processed fruits, raw sugar, chocolate, and other food items; 8.7 percent in chemicals, including packaged medicines, phosphoric fertilizers, and perfumes; 8 percent paper and wood products; and 5 percent plastics and rubbers.

Lebanon can potentially achieve an increase of exports by an annual $1.7 billion.

Lebanon’s ability to produce and export products in sophisticated sectors such as machinery and chemicals is telling. Indeed, it shows that despite the current large share of exports in less complex products such as foodstuffs and metals, the country has the advanced productive capacity and know-how to manufacture a wide variety of complex products.

Diversification is key

Export diversification is not only across various sectors of the economy, but also within the manufacturing sector. One way to measure this is by calculating the share of the top three products from the subsector total exports. In the processed food sector, the top three exported products make up only 28 percent of the subsector total exports. Even in the chemical subsectors, this amounts to 37 percent of the subsector total exports. In fact, in six out of the 15 sectors, industrialists produce a variety of other products within these sectors where the share of the top three products does not exceed 40 percent of exports.

Furthermore, Lebanese industrial exports are well-positioned in the global market with an opportunity for further growth. For one, Lebanese products reach more markets than some countries within the same upper-middle income group, per the World Bank’s 2018 classification. For instance, Lebanon exports to 171 countries, whereas Costa Rica exports to 108, Jordan to 156, and Serbia to 159.

In terms of markets, 40 percent of Lebanese exports go to Middle Eastern countries, where the top export destinations in 2017 were the United Arab Emirates ($265 million), Syria ($246 million), and Saudi Arabia ($240 million), based on data from the Observatory of Economic Complexity (OEC). Outside the region, 29 percent of Lebanon’s exports go to Africa—including South Africa ($317 million), Gabon ($236 million), and Ivory Coast ($177 million)—and 23 percent to Europe, according to the OEC.

Lebanon export markets are also diversified across the manufacturing sector. In seven out of 15 sectors, the top three export destinations constitute less than 40 percent of the sector’s market reach, which means that Lebanon is not dependent on a few markets. For instance, the top three importing markets import only 20 percent of basic manufactured goods, 37 percent of chemicals, and 37.4 percent of processed foods exports—noting that such export percentage shares, albeit subject to fluctuations, are generally indicative of an ability or inability by exporting economies to penetrate importing countries’ markets and compete therein.

Given the country’s accessibility to overseas markets and the growing global demand, an LCPS study shows that Lebanon’s exports exhibit high-potential in various markets. First, the Middle East is considered the largest export potential region with an untapped potential worth $406 million, but most of this potential is confined to the agro-food sector, with some in the machinery and chemicals sectors. Second, there is a large potential for diversification into higher complexity exports to North Africa and West Africa, with products in the machinery and electrical equipment industry, including generators, as well as the chemicals industry. Third, potential exports to Western Europe are confined to medium-complexity products, like printed books, guts, and nuts. The diversification into the production of more complex products could pave the way to further exports toward Western European markets. Fourth, North America is considered a very small potential export market that has not been penetrated sufficiently. Avenues for possible penetration into this market include a diverse basket of goods such as food and beverages, but also other higher complexity products from the machinery, electrical equipment, and chemicals industries.

Prioritize industry

In sum, based on its current market position, market accessibility, and global demand, Lebanon, assessed under the methodology used by LCPS for measuring export potential, can potentially achieve an increase of exports by an annual $1.7 billion. Since this does not assume any change in the cost structure, the value of exports could even be higher if the cost of production decreases.

Lebanon must capitalize, rather than ignore, the export potential of the manufacturing sector. Providing support and public inputs such as infrastructure and proper regulation to existing manufacturing sectors with the aim of improving their productivity can lead to significant growth and advancement within the sector’s exports. The government, represented by the Ministry of Industry, and the Association of Lebanese Industrialists, should set up regular public-private dialogues where evidence-based policy is furnished so systematic, rather than ad hoc, decisions are made. To this end, the strategy must target specific markets with specific products through promoting competitive production—i.e., reducing production and export costs—and supporting research and development to advance diversification into higher complexity production.

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