With the death of the former prime minister, Rafik Hariri, among the most enduring aftereffects will be its putting an end to the feeling, no matter how misguided, that Lebanon could always pull economic rabbits out of its hat. That is probably as good a definition of economic confidence as any, and as Hariri’s years in office show, even when his policies stumbled, he could yet peddle Lebanon as a profitable bet.

When he came to power in late 1992, Hariri’s reconstruction strategy rested on three pillars, with a fourth serving as both cornerstone and illustration: a return to monetary stability; circumvention of the state bureaucracy, when desirable; and rehabilitation of Lebanon’s shattered infrastructure. The last leg of Hariri’s plan was to rebuild Beirut’s old city center, which would show what Lebanon was capable of, but also highlight a key ingredient in the prime minister’s vision, namely that the country’s destiny was to be largely reliant on the services sector.

Finding the money

Monetary stability was the first priority, inasmuch as the steady decline, and indeed virtual collapse, of the pound in spring 1992 was one of the reasons for the resignation of the government of Omar Karami in May. To get business running, Hariri, once he took office following parliamentary elections in summer, had to deliver predictability. The government set a relatively fixed parity between the U.S. dollar and the Lebanese pound, one which has fluctuated little until today. It was also obliged to allow the use of both currencies in daily life, even as it focused on slowly increasing the attractiveness of holding pounds.

Throughout 1993, the Hariri government consolidated demand for the pound, so that by the fourth quarter of the year the currency had gained value despite the inflationary pressures of a 120 percent increase in the minimum wage. In an interview at the time with the French-language business magazine Le Commerce du Levant, central bank governor Riyad Salameh noted that his priority was to “re-Lebanize” the economy and reverse the trend that had led to 70 percent of deposits being held in dollars. His second priority, as he put it, was to recapitalize the banking sector in accordance with international agreements, a step that would also allow the central bank to boost its foreign currency reserves to buttress the pound.

In parallel, the government began issuing high-interest pound-denominated T-bills, so that by the third quarter of 1993 the value of the domestic debt had increased by an estimated 8.7 percent, equivalent to $3.21bn. The structure of the debt changed too, as treasury bills came to supplant direct advances to the state. This dual approach of increasing pound demand and bolstering stability by increasing central bank reserves succeeded in stabilizing the currency.

Hariri’s second priority was to address the wreckage of the Lebanese state. This he did by both circumventing the state bureaucracy to put reconstruction on a fast track, and focusing on infrastructure rehabilitation. The former was perhaps one of the more controversial decisions of the prime minister, since critics could not understand how state institutions could be resurrected by being left to atrophy. In retrospect, however, Hariri was right in understanding that the bloated civil service would become a playing board for political gamesmanship, which would have held up reconstruction.

That did not mean, however, that all ministries were neglected; only those the prime minister did not consider a priority. The key finance ministry, for example, was effectively placed in the hands of close Hariri collaborator, minister of state Fouad al-Saniora, who over the years streamlined its tortuous structures and procedures, mainly to attract foreign investment, but also to rationalize and consolidate the state’s revenue base. In contrast, ministries such as Labor and Oil were left to wilt, or to become declining redoubts of political patronage.

The most noteworthy of Hariri’s structural innovations was to tie the Council for Development and Reconstruction (CDR) directly to the prime minister’s office, and, more significantly, to its budget. The CDR was set up in 1977 to channel funds into reconstruction, but had fallen by the institutional wayside due to the continuation of the Lebanese conflict. Under Hariri, however, it was revived and took the lead in issuing calls for bids and negotiating infrastructure projects. Hariri’s critics in parliament and the political class complained that the growing centralization of economic power in the prime minister’s hands made much more difficult legislative oversight of reconstruction. They were right, and that was precisely the prime minister’s aim. Reconstruction was indeed accelerated, but the relevant state institutions were hardly the better for it.

Lost Horizon

The third prong in Hariri’s postwar revitalization project was the core of his program, namely rehabilitating infrastructure. In March 1993, the Hariri government unveiled what it grandiloquently called the $12bn Horizon 2000 reconstruction plan, which was, in fact, little more than a series of broad spending targets. However, the priorities involved were revealing. The 10-year plan broke down spending into a number of phases, tilting it in the first three years (1993-95) heavily in favor of electricity ($550m), telecommunications ($462m), roads ($212m), and water works ($161m), as well as the Beirut Airport ($150m) and ports ($115m). The spending projections were hardly accurate, nor were the eventual projected budgetary surpluses that, gradually, were to go back into paying for the program. However, it was evident that the prime minister was not keen to spend money on such sectors as manufacturing and agriculture, which together accounted for less than 14 percent of anticipated spending in the first three years.

Critics charged, with some justification, that Hariri never had any intention of going through with the later stages of the program. Rather, he was keen to pour money into revitalizing infrastructure for services, while using the promise of more socially-oriented spending down the road as a lever to secure wide-ranging support for his plan. Ostensibly, private sector investment was expected to match the debt-financed public sector reconstruction and fill in where the latter had come up short. It is also probably true that the prime minister was gambling that Middle East peace would be secured sometime by the mid-1990s, at which stage the high deficits that his program entailed would be gradually eaten away by post-regional-peace investment and improved government taxation on more profitable businesses.

Ultimately, Hariri’s gamble on peace was lost. While Palestinian-Israeli and Syrian-Israeli negotiations seemed at various times to be near a resolution, final agreement remained elusive. Moreover, with Lebanon closely tied into the Syrian negotiating track, there was never a prospect for a separate deal with Israel, nor did Hariri contemplate taking such a route. By the time the post-Madrid process came to a halt in 2000, following the inability of Syria and Israel to reach agreement and the outbreak of the Palestinian Intifada, Hariri had been out of office for two years, his onetime optimism on peace anathema to a regime that had, by then, embraced militancy.

For all its success, infrastructure rehabilitation was probably the darkest black hole of the Hariri years. In the political climate of those years, financial transparency was a splendid fiction as members of the political class, and their allies in Syria, were offered lucrative contracts, largely as a tradeoff to ensure the smooth advance of the reconstruction process. While Lebanon was being rebuilt at an often remarkable tempo, the costs of the enterprise, both legal and illegal, were far above what they needed to be.

Combined with the insufficient tax collection rate and the massive cost burden of financing the oversized and inefficient administration, its employees and civilian and military retirees, this trend was instrumental in denying the government the ability to take a hold of budget spending, with deficits routinely running in the 35-50 percent range as a percentage of expenditure. Sorrow at Hariri’s demise should not lead one to ignore that his governments’ policies were substantially, though not entirely, responsible for leading the country into a cycle of spending that has expanded Lebanon’s gross debt today to some $35bn, equivalent to 190 percent of GDP.

Hariri’s focus on rebuilding the old city center of Beirut was both showcase and hook for his far broader rehabilitation effort. When the war ended, it was clear to officials that the exceptionally intricate ownership status of downtown properties, many of which had been destroyed during the war, might delay reconstruction of the area indefinitely. Hariri helped engineer a shrewd, but ultimately controversial plan whereby a private company, Solidere, would be given control over much of the area, and compensate property owners with shares in the company. While this was undoubtedly a necessary sleight of hand to avoid a tsunami of legal action over property rights, many owners complained that the valuation of their properties was far lower than market value – and indeed that the process was characterized by inconsistency and favoritism. Nor were those worried about conflict-of-interest issues reassured when the prime minister himself invested heavily in Solidere.

In parallel, those more concerned with how the rebuilt area would integrate Lebanon’s different communities, and itself be integrated into Beirut, complained that only the rich would benefit. They were perhaps right, but also missed the point: the Solidere area was mainly designed to appeal to the prosperous middle classes, international companies, hotel chains and wealthy individuals willing to buy into its high-end residential properties. There was no problem of integration either, as people from all communities converged on the downtown area to eat, play, shop or, indeed, invest. Hariri was also vindicated when the area became – at the expense of many other not-always-pleased neighborhoods one might add – a popular destination for foreign tourists, many lodging in hotels in and around the Solidere area.

Death of a salesman

Perhaps the most intriguing aspect of the Hariri phenomenon was how the former schoolteacher, accountant and contractor could also be a remarkable salesman and showman. His was a soothing voice of assured profit, which would draw investors toward the good news while carefully concealing the bad. That talent is surely one of the reasons why Lebanese confidence remained afloat, when already during the mid-1990s international financial institutions, including the World Bank, were anticipating a collapse of the national currency.

Here it is well to remember that among the 1993 finance-sector goals, the recapitalization of banks was certainly accomplished. The re-Lebanization of the economy was less successful and dollar deposits remained high – which in the end may work in favor of the Lira’s stability. More troublesome is that, with the exception of the improvement in fiscal revenue generation through the introduction of VAT, the economic problems behind the severe currency worries of 2002 persist today unabated. The Paris II conference, which could not have happened without Hariri, bought Lebanon some time to implement structural change. With Hariri gone, however, and with no change on the horizon, this time is running out.

Even before Hariri’s assassination, analysts were sounding economic alarm bells. In a January 2005 report, Moody’s concluded that “for GDP to keep growing, confidence has to be firmly reestablished, which entails governmental reforms such as privatization to be pushed forward, the level of government debt to decrease and private investment to rise.” In an implicit rebuff of those saying that the central bank might weather a serious financial crisis (an assurance repeated by Riyad Salameh after Hariri’s death), it warned “the high level of reserves since the Paris II conference could drop drastically if confidence were to decline, which could happen since reforms have been postponed.”

The Economist Intelligence Unit, it its first-quarter 2005 report, observed: “There remains no prospect that the moribund economic reform program will be rejuvenated until a new government is appointed after the May general election.” While it did note some positive developments in the economy, including improvement in the government’s liquidity position and effective management of the tax system, it also noted: “The government’s long-troubled privatization plans have also made no progress and the dismissal, in effect, of the reformist Mr. Hariri in September has ended any realistic prospects of the program moving forward.”

This implicit association of fiscal reform with Hariri, though it may have conveniently overlooked his contribution to the debt in the first place, was indicative of a more general mood among investors: namely that he alone had the standing to bring in international donors to help Lebanon restructure its due payments, but also to effect economic reform. Was this view entirely accurate? Perhaps not, but there is a growing consensus, expressed by not a few investors and businessmen, that the post-Hariri phase will be one of wait and see, as far as their ambitions in Lebanon go. The dynamism of the post-September 11, 2001, period, when many Arab visitors preferred Beirut to airport search queues in the United States and Europe, may have taken a hit.

There are no good sides to the death of so overpowering a figure as Rafik Hariri was in postwar Lebanon. However, if one had to venture some statement of optimism, it might be that reliance on a single individual for periodic economic resurrections is never advisable. Perhaps in Hariri’s death Lebanon might wean itself away from that belief. It was to the former prime minister’s credit, however, that he always looked better than the alternatives, and that even today, though he’s gone, what is on offer looks so much less reassuring.

Rafik Hariri, who was killed by unknown assailants as he drove in his motorcade through Beirut on February 14, age 60, was a man who got things done, but who neither let his pragmatism nor the power of office get the better of him. Thus, while he was progressing on his path as leader on the Lebanese political and socio-economic scene, he grew with his experiences and many times surprised both his admirers and detractors. What was to be his greatest battle in the completion of Lebanese sovereignty ultimately cost him his life, because his enemies, unable to beat him on a level playing field, descended to the lowest and most heinous means to see him off.

It is as challenging to do justice to the work of Rafik Hariri in his 40-year career as entrepreneur and political mover and shaker, as it is to account for his philanthropic achievements and personal contributions in shaping the prospects of Lebanese fortunes through his life and ultimately, his death. Between his birth in Saida on November 1, 1944 as the son of a pious but humble grocer, his brief stint as an accountancy student at Arab University in Beirut that he had to break off after one year due to lack of money, his initial employment in Saudi Arabia as private tutor and accountant, and his stellar career of building a business empire worth $4 billion, becoming the father of Lebanon’s reconstruction and ultimately the nation’s foremost statesman, lie a multitude of massive leaps of professional development and astonishing, if not downright mysterious, achievement.

His early career, from his emigration in 1965 to his first big construction project in 1977, is especially opaque. More speculations than evidence has been used in trying to figure out some of the factors that would have help him in the tremendous and very fast advance from an expatriate job starter with a partial diploma to being a supremely successful contractor. After all, it is not only uncommon that a young accountant, however efficient, would be able to amass enough capital to start a company yet alone do so in – in ownership terms – introspect Saudi Arabia and, with his new firm, Siconest, immediately win a bid for a major contract.

This project, with which Hariri made his name, was for building the Massara Hotel in the resort city of Taif in preparation for a 1977 regional summit. As hosts of the summit, the rulers of Saudi Arabia considered it crucial for the kingdom’s image that this hotel was fully completed in the only six months available for construction. Hariri won the contract and delivered the project on deadline. While more daring explanations for the sources of his funding and the reasons behind him being awarded his great chance have been suggested but could not be substantiated, it seems safe to assume that personal trust played a key role.

No one doubts he took this opportunity and from that moment on, the story becomes more transparent. Hariri himself explained the cornerstone of his business success in telling a reporter many years later that in executing the 500 million Riyal hotel project, his company had a choice of making a big immediate profit of 200 million Riyals by working like everybody else or being content with a profit of 50 million by emphasizing best quality. In choosing the latter, he established his reputation and cemented the foundation for his business empire that grew soon internationally, into France, and from the 90s included construction, real estate, telecommunications, media, banking, insurance and other investments. The crowning symbol of the new tycoon’s favor with the Saudi ruling family came in the granting of citizenship in 1978.

Hariri’s first public forays back into Lebanon were characterized by charitable contributions to his hometown, Saida, and nearby communities. He once stated that he put half of his wealth in the late 70s into these projects, involving schools, hospitals and the Hariri Foundation dedicated to provide deserving Lebanese students with education grants and to preserving the national heritage. A big part of that original contribution, however, was lost in the fighting of 1982, when in course of the Israeli invasion, about $150 million worth of investment in a huge educational and health complex in Kfarfalous near Saida were wiped out.     

Not long thereafter, Hariri turned his attention to politics. In so doing, he arrived on the Lebanese political scene when his nation was at its most needy. In fact, one can say that he did so more than once. If Lebanon had an overabundance of anything in the third quarter of the 20^th century, it was national emergencies and it is the tragedy of Rafik Hariri’s life that the nation which he wanted to see prosper was beleaguered from the outside by circumstances, internally marred by indecisiveness, deathly rivalries in the political class, and lack of unity between great national hopes and the petty pursuit of narrow interests.

In the 1980s, Hariri made his political entrance not so much as high-profile front stage actor but as an emissary and intermediary with support from his patron, Saudi Arabia’s King Fahd. On May 17, 1983, he was instrumental in relating the revocation document of the problematic peace agreement between Christian Lebanon and Israel to Syrian vice-president Abdel-Khamid Khaddam, who became a life-long friend. Hariri then worked with the 1983 Geneva and 1984 Lausanne rounds of negotiations to end the war and in 1989, he was the key facilitator in bringing a sufficient quorum of Lebanese parliament members to the table in Taif, scene of his first business triumph, which resulted finally in the settlement of the 16-year violent Lebanese conflict. (Whether, and how much, payments to participants at Taif it actually took to have all concede to the agreement was, even 14 years later, not a matter that Hariri aides would discuss.

From this still relatively obscure function he was cast into the central position in Lebanese politics in October of 1992. This was another dire hour. The Lebanese economy was in dismay and the currency in a tailspin. Although subsequent measures by the central bank and other factors played important roles, Hariri’s appointment as prime minister was key in re-instilling confidence in the Lira and reversing its slide. In the next six years, he made the politics of reconstruction his guiding line, pushing it forward in a style that, in the eyes of many observers, cast him more as an entrepreneur than a politician.

In terms of leadership performance, two factors stand out: the hands-on decision making, evident in the Hariri team’s tight grip on the key portfolios from finance to telecommunications, and the triangular squabbling over major decisions. Over the course of three cabinets, disputes between the prime minister, the speaker of the house, and the president defined the first Hariri premiership, which concluded with the presidential elections of 1998.

For Hariri, this period of political responsibility came to an end with a rather low blow, when he was essentially coerced into refusing the premiership under newly elected president Emile Lahoud. After the initial shock of a government without Hariri wore off and the Lira appeared resilient, the popular mood shifted and the country began to wonder if the Hariri era had drawn to a close. 

This new and much more critical approach to the role and person of Rafik Hariri found a nourishing ground in the country’s recession, which began 1998 and roared ferociously till 2002. As the Lebanese reeled under a ballooning national debt, Hariri was made widely responsible for the escalation of the deficit and blamed just as much for every conceivable problem as energetically as he had been praised and burdened by expectation at the beginning of his regnum.

Yet, despite the blame, Hariri surprised everyone by winning a sweeping victory in the 2000 parliamentary elections. His popularity was so convincing and the alternative candidates so disenchanting, that he emerged from the ballot as the only possible choice for the premiership. In his fourth and fifth cabinet, the popularly empowered Hariri then showed that he had not only sat in opposition for two years, he had evolved his leadership style.

His cabinets now were no longer divided as they had been, with the important portfolios under his control and peripheral ones thrown as bones to shady militia types or those rewarded by Syrian patronage. As prime minister in the new millennium, Hariri appeared a better listener, less personally dominant and more political than when he had been the sole reconstruction mover in his previous terms.

But while ministries were at least making some visible efforts towards administrative efficiency, the fundamental situation of disputes at the top did not abate. They mere changed from three-way to two-way disagreements. These perennial rows between prime minister and the president followed a depressingly regular pattern, week in week out, from one year to the next and must be seen as cause of many delays and derailments of important decisions and caused many of the prime minister’s initiatives to grind to a halt. Finally, when confronted with intense pressure to agree to a non-constitutional procedure that would see an extension of president Emile Lahoud’s mandate, Hariri at first succumbed to the Syrian-backed demand and then stepped aside, walking into the sunset for the second time in his political career.

The difficulties of his position had certainly been taxing. When appearing on a global forum at the September 13, 2004, UN Habitat conference in Barcelona to receive a special “Habitat Scroll of Honor Award” citation for his ”outstanding and visionary leadership in the post-conflict reconstruction of Lebanon”, Hariri bared his feelings in what came to be one of his last speeches.

“Allow me to thank all my family, especially my wife Nazek, for sharing with me this happy occasion after living the difficulties, the challenges and the sacrifice during these long years of official and public life,” he said. “My family’s support and encouragement, and, most importantly, their constant love contributed greatly to my perseverance in my work, even when I felt frustrated in the face of what some people considered impossible.”

However, he was not immune to mistakes, either his own or those of his advisors, and perhaps it is unfortunate that he entered the corridors of power without having fully cut his political teeth. In comparing the ambition of the Lebanese reconstruction with the real accomplishments, Hariri conceded in Barcelona, “in saying that we succeeded [in the primary reconstruction goals] does not mean that our mission is complete. We still have to do a lot to make development as balanced as it should be.”

Some would say that the all-encompassing reconstruction goals laid out in Hariri’s program, such as renewal of confidence in the Lebanese democratic process and rebuilding of the Lebanese state and all its civilian and military institutions, were indeed unattainable in his time and that their author had too much optimism in the future. But the mammoth ambitions showed that this man was equipped with one essential quality that has proven decisive for leaders in the troubled pre-millennial epoch: he had vision.

In this capability to maintain a vision while living with the trappings of power, Rafik Hariri displayed the same type of alert sense of seizing the opportunities afforded by his time, in the same way that leaders such as Ronald Reagan and Helmut Kohl did. But while they had the good fortune to see their visions become reality by ending the Cold War and reunifying Germany respectively, fate denied Hariri realizing his dream of a sovereign, united, prosperous Lebanese nation standing on foundation of regional peace.

Some of the errors in the Hariri years were certainly unsettling, and his era bore moments when his resolve seemed to waver. But it was always inconceivable, at least to this writer, that Rafik Hariri would have sought political office in Lebanon and accepted the burdens and tremendous personal risks of the premiership, for power or personal financial gain.

He was an example for the fact that it is in the human design of every strong man and woman to want to leave something of lasting value behind, be it through their family, their works, or their thoughts. Hariri knew that on a national level, the most valuable legacy an individual can create is that of patriotic achievements. After he had resigned from office the last time, he was still ready to continue working on completing Lebanon’s sovereignty with the astonishing and unquenchable vigor that was his. His proven ability to resurge and develop anew after each setback suggests that he would have played an outstanding role in a freely elected parliament and government after untainted 2005 elections.

In Barcelona, Mr. Hariri concluded his speech with the words, “Peace is our fate. Let us work together on achieving this fate. Let us always work for peace.” He left this legacy to his family and the whole country. After his assassination, it is up to the people of Lebanon to carry that light.

Thomas Schellen is the co-author of Hariri – A Phenomenon.