Israel’s surprise attack on Syria shattered nearly 30 years of calm between the two countries, since the guns fell silent after a negotiated truce following the October 1973 Arab-Israeli war. Despite this, the “situation” between Syria and Israel has been one of a conflict under control.

However, Damascus does periodically pop up on Washington’s political radar screen and since the war in Iraq began last March, President Bashar Assad’s Baathist government has never truly been completely out of Washington’s line of political fire. Particularly active in the drive to keep the Syrian issue alive in Congress are Bush’s neo-conservative friends and Lebanon’s former army commander, General Michel Aoun – strange bedfellows, indeed, when you stop to think about it. But you know how the old adage goes, the enemy of my enemy … and so forth. And there is hardly a town that loves complex politics as much as Washington.

Since the invasion of Iraq began, various members of the Bush administration have at times accused Syria of assisting the Iraqi military and abetting Saddam Hussein’s regime. Among the alleged offenses are the claims that Syria is sending the Iraqis night-vision equipment, allowing Islamist jihadis to cross the porous border into Iraq to fight American troops, supporting major “terrorist” organizations (a number of which maintain offices in Damascus) and of possession and continued development of weapons of mass destruction. Some even went as far as to assert that Saddam hid his WMD in Syria shortly before the outbreak of hostilities. Syria denies the charges and claims the offices maintained in Damascus are “information bureaus” of groups it regards as resistance movements.

However, at a roundtable discussion on Syria last month on Capitol Hill, Congresswoman Ileana Ros-Lehtinen, a Republican from Florida, accused the Syrians of running “a terror center near Damascus.” Of course, no mention was made of the intelligence center that is reportedly based near Aleppo and where Syrian intelligence is rumored to be closely cooperating with the CIA in the war against terrorism. This might explain the White House’s reluctance in signing the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003, calling for economic sanctions against Syria unless it deploys out of Lebanon and alters its policy towards these groups regarded as terrorists by the US State Department. But again last month, friends of Israel and enemies of Syria stepped up their efforts to pass the bill in a renewed effort to have sanctions imposed on Syria as punishment for failing to toe the US line. Marc Ginzburg, a former US ambassador to Morocco, said, “Syria continues to believe it can ignore any threat from the US.” Syrian Foreign Minister Farouk Shara, however, said earlier Syria would meet any “reasonable” US request for help following US accusations that Damascus was not doing enough to end support of “terrorist activity.”

Undersecretary of State John Bolton also announced last month that the administration had now dropped its objection to the bill and Representative Eliot Engel said, “I think it’s time to pass this important legislation.” Engel said the bill has the support of the majority of the House (266) and the Senate (73), including the majority of Democrats and Republicans. It would be worth looking at what those sanctions would in fact accomplish should President Bush, who last year opposed passing the act, now decide to sign it.

However, a number of high-ranking seasoned State Department officials, who have served many years in Damascus and other Arab countries, and together possess more than 100 years of experience in the Middle East, believe passing the anti-Syrian legislation would be counter-productive and would not profit US interests. Instead, they say it would marginalize Syria, rendering future negotiations all the more difficult, and further infuriate an already volatile Arab world. They say it would be seen as an insult by Syria, whom the US needs as it continues to fight its war on terror. Particularly at this point in time, when events are not turning out as smoothly as the Pentagon expected.

Closing offices of what the US and Israel consider terrorist organizations, the State Department diplomats argue, would force the groups underground and would simply render the task of keeping tabs on them all that much harder. Far from solving the problem at hand, it would create new ones. Its only accomplishment would be to mark political points, which would not translate into much in real practical terms. Particularly in the spotlight are Hamas, Hizbullah, Islamic Jihad and the Popular Front for the Liberation of Palestine-General Command.

Maintaining relations with Damascus allows the United States to pressure Syria to, in turn, pressure Hezbollah, the Lebanese Shiite paramilitary organization, which Syria partially funds and somewhat controls. Consigning Damascus to the proverbial corner would remove those constraints, rendering the situation along the Lebanese-Israeli border all the more precarious. This would have the opposite effect of one of the intended aims of the Syria Accountability Act — that of providing greater stability and protection for Israel from cross-border raids on northern Israeli towns and settlements. Aoun, a staunch opponent of the Syrian presence in Lebanon, accuses Syria of “playing the role of both arsonist and firefighter.” Given the influence Damascus holds in the political arena, Syria, in this instance, can indeed be the firefighter, if it chose to. Imposed sanctions on Damascus would be received as a slap in the face and could well find them playing a single game, that of arsonist, a move that would be counterproductive in any future peace effort, say Middle East analysts. Meanwhile, following his appearance on Capitol Hill, the Lebanese government censored Aoun for his remarks. While the economic sanctions that would accompany the Syria Accountability Act does somewhat worry the Syrians, its ramifications are not all that devastating, seeing the current level of trade between Syria and the US is not all that important in the first place. According to the US-Arab Chamber of Commerce and the US Census Bureau, exports to Syria from the US in 2002 amounted to a pitiful $274.1 million, while imports from Syria for the same year were only $148.1 million. And sanctions aimed at keeping technology out of Syria would simply not work. “If Syrians need a computer, they simply drive to Beirut,” said a veteran US diplomat, intricately familiar with the area. Smuggling banned items into Syria from Lebanon would be all the more simplified by the fact that Syrian troops are still present in large chunks of Lebanon, especially along the border between the two countries. In any case, those trade figures do not represent the real volume of imports, seeing there already exists much transport of goods between the two countries. And that’s not counting imports from American companies based in Europe.

Engel, one of the congressmen pushing for the bill, blames the lack of progress on the State Department, which he said “seems to be full of Arabists supporting Syria over Israel.” The State Department, which he called “one-sided,” continues to “frustrate” the issue.

Leading up to the war in Iraq, the administration – particularly the Department of Defense – chose to ignore the State Department’s advice, whose “Arabists” seemed to know the mindset of Iraq and the Arab world far better than most others in the administration, particularly the neocons closest to the president. The rest, as they say is history. Let’s hope that this history, in this instance, does not repeat itself.

(Claude Salhani is foreign editor and a political news analyst for United Press International in Washington, DC.)
 

Lebanon’s ranking in the 2003 Corruption Perception Index of international watchdog organization, Transparency International (TI) was poor. Receiving a rating of 3.0 on a scale ranging from 0 (totally rotten) to 10 (impeccably clean), Lebanon ranked 78th for perceived levels of corruption in 133 countries. However, it did rank significantly higher than the dirty dozen of nations that earned less than two on the scale. According to TI founder and chairman, Peter Eigen, the ranking puts Lebanon on the borderline of highly corrupt countries, and in middle of the pack of the world’s less affluent countries which are all cursed with the affliction. “Five out of ten developing countries score less than 3 out of 10, indicating a high level of corruption,” Eigen said at the release of the 2003 CPI on October 7.

To Mohammed Matar, president of Lebanese TI affiliate La Fasad, the outcome of the poll is useful as a wakeup call. “Having countries such as Syria come out ahead of them will be shocking to the Lebanese,” he said. But he also cautioned that the CPI represents perception levels, not an actual base of statistical evidence on corruption, leaving Lebanese civil society, “to reach our own evaluation of the results.”

Lebanon’s relatively low regional ranking may be less disturbing than at first appears.. The point is technical in nature but as the CPI ranks countries based on a compilation of several indices, each rating reflects a larger or lesser span of divergence. Lebanon’s high-low rating discrepancy is less than those of these neighbors (2.1 to 3.6 for Lebanon, versus 1.8 to 5.3 and 2.0 to 5.0 for Egypt and Syria). In a nutshell, the rating for Lebanon may reflect the actual perception of the polled rather accurately whereas the wider discrepancies between surveys for other countries in the region could be indicative of tendencies to project a positive image against more accurate knowledge. Could this, however, be an excuse for turning a blind eye to the immense threat of corruption? Even as companies here are weary of the damages that a low reputation of Lebanon could cause for their chances to win international clients and investors, they do not actively pursue an anti-corruption stance. What fetters the corruption resistance of companies is the perception that the advantages of paying bribes and swimming with the flow of corruption outweigh the benefits of fighting it. But that, say advocates of transparency and good governance, is the fundamentally wrong idea. Patterns of corrupt dealings divert the power of trust in relationships into a closed system where the first order is self-enrichment at total disregard of greater structures. As such, corruption is based in an amoral attitude of egotism that refuses to take others into consideration or strive for success based on real achievements. This is bad for both company and economy. The latest business wisdom therefore teaches that a base of trust founded upon transparency enables players to achieve mutually beneficial relationships that are profitable in the larger frame of providing added value to market and society.

Not the least factor to drive home the lesson how detrimental corruption is for business was the wave of American corporate accounting and ethics violations that ruined once mighty companies and decimated US stock values over the past few years. Comparing the impact of the 9-11 disaster on the financial world with that of the scandals at Enron, WorldCom, Tyco, Arthur Andersen et al, purely on economic grounds, there is no doubt what impacted most on the US stock market.

All these developments, the scores of company breakdowns and prison sentences handed out to executives found guilty of corruption in the US and elsewhere notwithstanding, when it comes to instigating real changes in business practices, making more money by doing it cleanly could be the biggest motivator. Small and medium enterprises – ie, the overwhelming majority of Lebanese companies – could dramatically improve their funding and profit prospects through greater financial transparency. This proactive message fits well with aims for reducing corruption in the business community, and it has recently been pushed by a coalition ranging from the Association of Lebanese Industrialists and the Kafalat loan guarantee corporation to the Lebanese American University. Small and medium sized, family-owned businesses are vulnerable to corruption, especially if they succumb to shortsighted views on reducing their tax dues by underreporting financial results or mixing company and personal funds, thus opening the way for abusing corporate money for private pleasure, said Josianne Fahed-Sreih, assistant professor at LAU and head of the university’s Institute for Family and Entrepreneurial Business. Family-owned businesses in Lebanon are still lagging on issues of transparency and disclosure and should create structures that fit the requirements for long-term success of good governance for both family and business, she told EXECUTIVE last month during a conference organized at LAU. “Organizations have first to institute rules on the side of the business, but they also have to do so on the side of the family, differentiating between the two.”

At the core of this new initiative promoting financial transparency to Lebanese enterprises is a brochure explaining the pathways by which an SME can acquire funding if it meets the requirements of good governance and accountability.

“In a mathematical equation, the financial benefits of transparency would far outweigh the financial benefits of underreporting. The issue is not preaching to them but highlighting the benefits of financial transparency and accessing varied sources of funding and attractive funding terms,” said George Azar, director of financial consulting firm GAConsult. “If Lebanese SMEs are looking for institutionalization and growth – which is a must for survival in the context of regional integration of the Middle East – it would be foolish not to lure those funds through good governance, cost efficiency and transparency.” Azar, whose firm produced the SME guidebook under a grant from the US Agency for International Development, USAID, noted throughout his career how local businesses encountered growth barriers because of transparency problems. “Companies have felt the pain of financing all their investment needs through debt,” he said. “I look at good governance, transparency and profitability as the three prerequisites for tapping into alternative sources of funding.”

The business sector on its own would nonetheless be overstretched in trying to clean up the national act. It is established that corruption and incompetence breed one another. Public sector implementation of administrative reforms and legislation of measures to support transparency and curb corruption thus are equally indispensable for advancing good governance on a national scale. But under consideration of the national experience in the last decade and in light of a recent World Bank analysis that diagnosed MENA countries with a significant deficiency in good governance, it is hardly surprising that Lebanese analysts and pro-transparency campaigners view civil society as offering better prospects as cornerstones in building transparency.

“Being ranked on the CPI might move businesses to do something more to improve transparency,” Matar said. “But I don’t expect much from the political elite.”

In context of building a wider culture of non-corruption, civil society could play an enormous role in combating the decay of ethics in public and private sectors, said transparency and accountability activist Randa Antoun. “It is a civil society responsibility to make things better. It is easy to complain and criticize; we think this is not good enough,” she told Executive. “We are fighting corruption indirectly, through good governance, by encouraging people to know their rights and supporting a higher role for civil society.”

Antoun, a professor of public administration at AUB, is involved in promoting civil society responsibility through the same US AID funded program that provided the grant for the SME financial transparency brochure. Under the name TAG (Transparency and Accountability Grants) and managed by US-based education and training organization Amideast, the initiative has financed numerous projects by Lebanese NGOs, including a regional study, executed by research firm Information International, that made Lebanon’s inclusion in the 2003 CPI possible. “We are trying to increase the abilities and capacities of local institutions to tackle these issues,” said Amideast Lebanon country director Barbara Batlouni. “We do not work with government departments as such but with NGOs that work with government departments.”

Many of the projects supported by Amideast with funding and advice since March 2001 have helped informing citizens about procedures in dealing with government institutions on all levels. In her quest for better governance, the presence of corruption in itself is not what worries Antoun the most. “The worst thing in Lebanon is that people now have reached a state of apathy in accepting corruption,” she said, diagnosing a sharp contrast to a past where the country and its people had been reputed for hard work and honesty. To Antoun, the years of internal conflict carry much of the blame in explaining the rupture in societal attitudes and spread of lassitude. “Never underestimate the impact of the war,” she said, confessing little hope that structural changes would begin to reduce the presence of corruption here unless the country’s international donors force changes upon the system.

But for a nation tempted to torment itself to death with lamentations over its countless problems, civil society’s interest in transparency and good governance is actually very strong. The NGO sector in Lebanon is dynamic and has much more leverage than in other countries of the region, Batlouni said. “Our assumption in this project is that the Lebanese are not corrupt by nature.”

This high interest in transparency grants is documented in the fact that Amideast in little over two years received 157 proposals for funding TAG projects, of which 59 were granted. Also from the side of donor, US AID, the high response rate drew a positive reaction. “Demand was high,” Antoun acknowledged. “Because of this demand, we were successful in that the program was extended twice.”

In these extensions, US AID raised the budget for the TAG program from an initial $500,000 for one year to $3 million and extending the duration until 2005. Interestingly enough, the entire initiative was ignited by the 1998 inaugural speech of Lebanon’s president, Emile Lahoud, whose strong verbal commitment to a fight against corruption motivated US AID to back and then launch the program.
 

Driving your car in Lebanon has never been so expensive. Neither has the government swallowed a more substantive share of the transportation budget from private households. Since the introduction of value-added tax in February 2002, the government’s revenue participation has reached and exceeded 50% on the amount a consumer spends on the purchase of a new car, even in the middle market segment of cars that cost $20,000 to $30,000 ex factory. Data from Lebanon’s ministry of finance (MoF) reveal that on the level of fiscal income, government revenue derived from the car sector has increased from 4.9% to 16% of total government revenues. These revenue streams are a combination of registration fees on cars, excise taxes on imported cars collected at customs, and excise taxes collected on fuel.

The most pronounced increase has impacted fuel costs, where the fiscal burden on Lebanon’s driving population ballooned from little over $50 million in 1998 to almost $465 million in 2002, or 12.02 % of the government’s total revenue of $3.95 billion. Often summarily called customs duties in conversations by tax-weary citizens, excise taxes on new and used cars imported to Lebanon also brought a massive boost to government revenue, reaching $100 million in 2002. From a fiscal perspective, the only dent in recent revenue optimization from the car sector was that excise tax collection from car imports, which last year registered a 21% decrease over 2001, from roughly $126 million to $100 million. This decline in car imports (from $619 million in 2001 to $558 million in 2002) is widely accepted to be a result of the implementation of VAT. However, if last year saw no decrease in the government’s revenue from car imports, it was because of VAT. Of over $500 million, which the government collected from VAT on imported goods in 2002, $127.5 million (25%) were levies on mineral products, fuel mostly, and $58.5 million (12%) on transport equipment, mostly cars. Adding these amounts to the $620 million which the government-generated from excises and registration fees on cars and fuel, the fiscal revenue linked to automotive sales and car usage reached a cool $806 million, 20% of the MoF’s total revenue generation for 2002. Not forgetting of course the vehicle maintenance fees, or MECHANIQUE, which added nearly $86 million to the purse. Driving license fees netted the government over $8.5 million.

The government rationale behind increasing the taxation of fuel consumption and car purchases was, quite evidently, revenue optimization, Chadi Abou Chakra, a tax analyst at the ministry of finance, confirmed to EXECUTIVE. It did not include obvious components aiming at controlling the number of vehicles on the road or reduce fuel consumption out of environmental concerns. “The perspective of the government is to generate revenue,” he said, “by taxing people who make more money than others.” Some of the fees charged car owners in Lebanon, such as the MECHANIQUE fee, are quite low in comparison to other countries, Abou Chakra added, but he could not say if the car sector was generally overtaxed because the MoF has not yet undertaken a study of the automotive sector and related economic activities. For consumers, the most inescapable tax dues in the entire transportation scenario were evidently the petrol taxes. Here, taxation rates differ by fuel type. According to Abou Chakra, the rates also fluctuate frequently because the ministry of energy adjusts them in response to the ups and downs of the oil price to maintain the stability of the respective mandated gasoline prices at the pumps. As a combination of excise tax on fuel and VAT, however, the share of government revenue from each liter of gasoline sold at the service station pump is roundabout 75%, or LL15,000 out of a LL20,000 gas tank filling, the MoF analyst said.

Driving being perceived as daily need by at least two thirds of Lebanese households, the fairly consistent levels of government revenue from petrol taxes suggest that citizens, however grudgingly, paid the increasing charges on gasoline consumption without radically changing their driving patterns. They did not, however, renew their vehicles at the rate of earlier years, as evidenced in the 2002 contraction of the value of total car imports by almost 10 %, after VAT introduction altered the whole equation of buying.

The reason is simple enough to compute. The combination of customs duty, value-added tax and registration fees racked up the cost counter radically. Car dealers say they have to calculate 20 % in customs charges for the first LL 20 million of new car value. On the remaining value of the vehicle above LL20 million, the duty is 50%. Above a base charge of LL5 million in customs duty and excise taxes on used vehicles valued up to LL20 million, the duties on a used car are also 50% on the amount of its value that exceeds LL20 million. Although handsome, the fiscal revenue participation does not stop here. After the dealer has added his margin, the customer has to pay 10% VAT on the car’s value, which now includes both customs duties and dealer margin. As icing on the automotive revenue cake, the buyer faces an additional fee of 6% to 7% for registration – calculated not based on the car’s factory price but the transaction value between dealer and consumer that already includes two hefty tax components.

Based on a dealer markup of 5% – which local dealers say is barely enough to sustain their business – the price for a new sedan that left an American or European factory with a $20,000 dealer invoice thus will have jumped to more than a $32,000 acquisition cost to the Lebanese customer. If the car’s base price was $30,000, the driver here will have shelled out more than $50,000 by the time he turns the ignition. For a car that left the Ferrari workshop in Modena or the Mercedes factory in Sindelfingen with a sticker price of $150,000, one can liberally add 80% as surcharge of that original cost to see the fancy wheels spin in Beirut or Beckfaya. The regime of overlapping taxes has wiped the smiles of the faces of many a car dealer in Lebanon. From over 22,000 new cars that were sold in Lebanon in 1998, the sales dropped to some 14,000 units in 2002, according to figures published by the Automobile Importers Association (AIA). Dealers say an annual sales level of 12,000 to 12,500 units is today realistic in the new car market, and some describe the business as reaching the point where it starts to look unfeasible. It is beyond question that the high taxation of car imports has a strong negative effect on the automotive sector in Lebanon, even as it cannot be assessed with exactitude how much this field contributes to the Lebanese economy. According to Samir Homsi, president of the car dealers’ association, the country’s 35 car agents with official distributor contracts from international manufacturers employ about 2,500 persons directly. Adding to that the importers of spare parts and automotive supplies, plus a vast number of independent small car repair and service workshops would bring the number of people living in one form or another from the sale and servicing of motor vehicles to easily more than 10,000 employees or self-employed individuals and their families.

Other than in car manufacturing countries, the automotive sector in Lebanon is organized only to a very small degree, and even fundamental data on car usage are often broad estimates.

The Lebanese government’s policies of automotive taxes and taxation of fuel consumption, based on the country’s dire need for fiscal revenue, cannot be expected to change fundamentally. But evidence from the fiscal revenue evolution supports the claim of AIA president Homsi that the reduction of the government revenue share in the cost of newly bought cars would not harm the fiscal revenue stream. In an interview with EXECUTIVE, Homsi named the tax and fee burden as one of the main reasons why sales figures of AIA members have contracted. “I believe that if the taxes went down, the volume could go up. Then the government will be happy and the consumer would be happier, because he would be able to renew his old vehicle, which is now polluting the country and creating hazardous transportation conditions through the use of very old vehicles.”
 

Events in the Middle East are not exactly turning out the way President George W. Bush would have liked, and this is particularly bad with an election year just around the corner.

The situation in Iraq is not progressing nearly as fast or as successfully as was initially hoped for. Rather, resistance to the continued US occupation is escalating. There are approximately 10 to 15 attacks carried out every day against American troops, though the military only reports them when a death occurs.

“There has been a dramatic worsening in the security situation in Baghdad, with attacks against the coalition forces remaining a daily occurrence,” stated a September 8 report from Baghdad issued by Centurion Risk Assessment Services, a firm specializing in providing protection services to many media and non-governmental organizations operating in Iraq. “Many parts of the city are out of bounds due to the increase in violence,” added the report.

So, understandably, the president is asking for help. Bush has requested from Congress an additional $87 billion (above what has already been allocated) to help support military operations in Iraq and Afghanistan and to combat ongoing threats of terrorism, which have also not abated. In fact, since September 11, 2001, rumblings of a possible new al-Qaeda attack on America are louder than ever. In a recently released message, al-Qaeda vowed to hurt the US in a way that would make them forget the attacks on Manhattan and the Pentagon.

Interestingly, the president is now seeking help from the United Nations, as well as from the Europeans, two groups his administration cold-shouldered in launching the invasion of Iraq earlier this year that got the Bush administration in the Iraqi mess in the first place. Bush is beginning to feel the pressure. Since June, his approval ratings, according to a Zogby International Polls survey, have dropped by 13 points, while his disapproval ratings have risen by 12 points.

Consider the following: in mid-June the president commanded a 58% approval rating. That number went down five points to 53% by July 1. The president then lost another point by August 19th and ultimately sank to a low of 45% by September 6.

So, just how badly does the president need a successful turn in the Middle East to win the next election? Why is he spending that astronomical amount on Iraq? If a price tag could be placed on that question, the answer would be $87 billion.

Eighty-seven billion dollars buys a lot, particularly when compared to what has been earmarked in the Fiscal Year 2004 Budget for Discretionary Programs.

As rumblings over the increased war spending begin to gather momentum, Democratic presidential hopeful Joe Lieberman called Bush “the most fiscally irresponsible president in the history of America.”

But in the reverse sense, how much does the Middle East need Bush? With American casualties in Iraq surpassing the number of killed during the actual offensive, a debate is beginning to brew in Washington whether there is a need to dispatch more troops to Iraq or not. Some say yes, while others, such as Secretary of Defense Donald Rumsfeld, say no, the current numbers can adequately do the job. Others in the administration, such as Karl Rove, the president’s senior advisor and Richard Pearl, the former chairman of the Pentagon’s Policy Advisory Board, are now advocating leaving Iraq altogether. The reality, however, lies somewhere in between.

Following the horrific blast at the Najaf Imam Ali mosque on August 29, which killed Ayatollah Syed Bakr al-Hakim and some 100 others, the bombing of the UN headquarters in Baghdad on August 19 that killed its representative, Sergio Vieira de Mello, and another 20 people, some voices argued for reinforcing “boots on the ground.”

The Najaf and UN attacks, which came on the heels of a similar attack on the Jordanian embassy and the sabotage of major water and oil conduits, as well as another car bomb outside a Baghdad police station on September 2, reinforce the belief that the current level of troops is simply not enough for the task at hand. There are currently about 130,000 US, 11,000 Brits and some 8,000 soldiers made up from the rest of the coalition.

Others argued for more international troops from Europe, India and other friendly nations, particularly Muslim countries, that would allow American soldiers to be less visible, thus less prone to attack. The counter argument opined that more troops would simply offer those targeting coalition troops greater opportunities to kill American (and other allied) soldiers. The attack on the UN, after all, was not aimed at American troops. There is, indeed, something to be said for that.

In truth, it’s not more American troops that are needed in Iraq, but rather, speeding up of the process required in order to replace coalition troops with autochthonous forces.

In terms of simple numbers, Iraq had the largest army in the Middle East before the US-led invasion abolished it last April. According to a 2003 CIA estimate, Iraq had about 3.5 million men fit for military service. Deduct from that number those who were killed and disabled in the war and those who were too closely linked to the old regime in one way or another. Filtered down, you should easily come up with at least 100,000 able men. Why not mobilize them? And if you really want to revolutionize the country, allow Iraqi women into the armed forces, too. That should easily provide an additional 5,000 to 10,000 troops.

By now, more than five months into the occupation of Iraq, coalition commanders – with assistance from their friends in the Iraqi National Council, Kurds and others – should have no trouble identifying a cadre of friendly Iraqi officers able to lead a reformed military to take over control of much of the country’s security. At least as far as high-profile assignments go, such as the guarding of government buildings, major intersections, bridges and other sensitive installations. Let the Iraqi people feel they have direct involvement in the rebuilding of their nation, instead of appearing as bystanders with little or no say. The current situation in Iraq leaves little room for doubt; something needs to be done to prevent the country from becoming a refuge for Islamist militants and other groups opposed to democratic reform. And it needs to be done quickly. Every day that goes by draws more and more anti-American (as well as anti-democracy) forces to the region. So much has been acknowledged by American intelligence agencies. Note to those who opposed the United States’ unilateral policy or who might regard US policy in the Middle East as neo-colonialist imperialism: before you begin to applaud America’s headaches in Iraq, be advised that continued unrest in Iraq will also weaken the rest of the region. An unstable Iraq will only endanger the whole Middle East. The attack on the UN has changed the face of this war.

“If the Americans pull out now, it will open the area to the forces of darkness, the nihilists, the (Osama) bin Laden supporters, and others who will regress the area into the dark ages,” said a seasoned Middle East observer. Or, as President Bush pointed out to an American Legion convention in St. Louis on August 26, “Retreat in the face of terror would only invite further and bolder attacks.”

What we are seeing in Iraq in many ways is a repeat performance of what happened in Lebanon in 1982 to 1983, when a multinational force was dispatched to restore order to the war-ravaged country. Lebanon, at the time, was torn apart along sectarian lines with Christian militias opposed to a fractured Muslim-Leftist-Palestinian alliance. Much as the Shiites, Sunnis, Assyrians, Kurds and Turkmen are in Iraq. The difference in Iraq is that the various factions are not fighting each other at the level the Lebanese were, at least not yet.

Following the bombing of the US marines and the French army barrack attacks in Beirut 20 years ago this month, the multinational force decided to cut its losses and leave, abandoning Lebanon to its own predicament. The Bush administration, however, does not have that luxury in Iraq (particularly if he is looking towards the 2004 elections). Abandonment in its current state is not an option. Which is why two things need to happen with haste.

First, more international troops should be brought in, because security is a concern. The attack on the UN building demonstrated that this was not simply an assault on US forces, but also on the international community. And second, Iraqis should be given a more direct role in the running of their country sooner rather than later. Only at that point will the US be able to withdraw without dire consequences and begin to save taxpayers’ dollars. Until then, Bush needs Iraq as much as they need him, although both would like a quick divorce.

Claude Salhani is a senior editor and a political news analyst with United Press International in Washington, DC.

This year, roughly 1,000 couples, spending between $25,000 and $35,000 each, retained the services of wedding planners, those hardy souls who organize, advise, coordinate and offer a shoulder to cry on. Essentially an American import, wedding planning has evolved from a few scattered operators into a lucrative $7 million niche sector, serviced by a dozen established names.

Planners argue that what they do is not a fad. Whether you are opting for a grand marriage or something a bit more restrained, hiring a wedding planner can often make sound financial sense. One of the main advantages of hiring a wedding planner is that they can provide their clients with discounts on everything from entertainment to flowers. “We can save our clients up to 20% in discounts on high quality items,” says Raya Zahlan, manager of Weddings 4 Life. “People are learning more and more that it is very hard to organize weddings and to remove the stress from the bride,” says Vivianne Ajini of Weddings “R” Us, “it a huge, huge thing.”

Nathalie Rahal Abou-Jaoudé, general manager and owner of Amareyn, another leading wedding planner, agrees. “Weddings for Lebanese people are very important,” she says, “they will spend money on a wedding, even if it means taking out a loan.”

Abou-Jaoudé estimates that about 40% of couples (or in 95% of the time their parents) spend more than they can actually afford. And with amounts of up to $35,000 being doled out, it’s no wonder that they have to go cap in hand to the bank. “But,” Abou-Jaoudé points out, “a small budget doesn’t mean that you can’t have a nice wedding.” Some planners see themselves as artists and Zahlan insists that planning a wedding is “not about the money” – well, not only about money. She and her business partner and cousin, Maya Zahlan, take into consideration a client’s background as well as their budget. “We prefer to plan weddings for clientele from a certain background so that our work is appreciated.”

It is an industry that attracts people from all professional backgrounds. Zahlan admits she fell into the job. “I majored in psychology and education, and my business partner studied interior design.” She points out that the paramount skill is the ability to communicate with people. But how much does good communication cost these days? Ajini explains that it is often difficult to give a clear picture of fees simply because they vary according to each wedding. “We could charge anywhere from $5,000 to $50,000, depending on the client.” However, most charge either a fixed fee or take commission based on the client’s budget (the Weddings 4 Life team charges a fixed fee, while Amareyn’s costs range from $2,000 to $15,000 for what she calls ‘big’ weddings with budgets of $400,000 plus, which represent 10% to 15% of the high-end market).

According to Abou-Jaoudé, there are four main variables that affect the cost of any wedding: the number of people, the season, decorations and entertainment (music, dancers, fireworks, special effects etc.). When deciding on the venue, Abou-Jaoudé says that most halls and major hotels charge similar fees. Cocktail receptions can cost from $15 to $30 per person, whereas seated, or buffet dinners, about $30 to $150, depending on the quality of the menu (traditional Lebanese cuisine, for example, is cheaper than an all seafood menu). Bridal gowns, invitations, flowers and invitations all combine to send the bill into the stratosphere. Not surprisingly, it’s big business and this is good news for the fledgling sector. Abou-Jaoudé says that since starting Amareyn five years ago, her clientele has doubled so that her company now plans about 80 events per year. Weddings 4 Life boasts even higher figures, with 150 weddings per year, 70 to 80 of which are in the high season (May 15 to end of September and the entire month of December). Still, to survive, wedding planners have to be up to speed with current trends and ideas if they are to sell themselves as cutting edge. “We are here to create something new and different for every wedding,” says Abou-Jaoudé. “Our job equals details.” Some of the big trends hitting Lebanon’s weddings this year were splashes of big color and the use of special effects. According Zahlan, weddings no longer stick to a specific color theme, with vibrant hues making their way onto the scene in the form of flowers, tablecloths and other decorations. Becoming increasingly common is the not-so-white wedding gown, with champagne shades making the most waves. Special effects are also no longer limited to fireworks displays – which are not exactly unique here. Now even the first dance sequence can feature a fog machine, complete with falling confetti spread with the use of a giant fan. The end result is much like the couple’s very own music video.

In order to stay on top of her game, Abou-Jaoudé employs a team of 22 – interior and graphic designers and technicians etc – during the high season and admits annual operating costs of over $200,000 a year. “Our telephone expenses alone are a catastrophe!” she moans.

Removing stress was the key factor that prompted Nada Afeiche-Shehadi to hire a wedding planner for her 2002 nuptials at Sursock. “I only had a little time [two months] to plan everything and needed someone who could have everything done at short notice,” she says. She was especially pleased with the party favors suggested by Zahlan – a little cedar tree to represent Lebanon since many of the guests were coming from the United States. Afeiche-Shehadi was also comforted by the fact that the Weddings 4 Life team would be present at her wedding to orchestrate everything at the church and the reception. “For me, it was more about having peace of mind than anything else,” she says, adding that little unexpected perks from the planners, like a guest book and special decorations on her table were a nice touch. So, was it all worth it in the end? For Afeiche-Shehadi it certainly was but she was quick to point out that hiring a wedding planner is not necessarily the best route for everyone. “At the end, it’s really the couple that makes the wedding.”

E: How would you describe Lebanon’s summer in terms of tourists?

PA: If summer means July and August, then summer was excellent for Beirut. Like last year, it was also good for the regions of Jounieh, Broummana and Bhamdoun. Our aim, however, is to extend the summer season from April to October, as in the rest of the Middle East.

E: From where did most tourists originate?

PA: Most of them came from Syria, Jordan, Egypt, Saudi Arabia and the Gulf. But don’t underestimate the number of Lebanese expatriates. About 35% of summer visitors are Lebanese coming back from Africa, the Arab world or South America. Many of them stay in hotels.

E: Does one good summer mean Lebanon has regained its pre-war status as a top tourist destination?

PA: Since September 11, we’re again the biggest and best summer resort destination for the Arab region. But we have a problem attracting European tourists, even though any kind of tourism can flourish here. Just look at the country. There’s the sea, mountains, clubs, pubs and freedom for women to dress and behave as they like. Lebanon has the best of two worlds, East and West, and so it should be able to attract people from both sides.

E: Why aren’t the Europeans coming?

PA: Lebanon has an image problem. The international media only report about Lebanon in terms of terrorism, Israel and the civil war, even though these ended years ago. We have to change the image, but that cannot be done overnight. We’re talking big politics here. If a certain world leader says a certain group in the country is terrorist, this affects Lebanon’s image, and tourism. We need to change the image to attract a big tour operator who buys 10,000 room nights, like in any other top world destination. Here we generally talk about 10 to 50 room nights, which is too little for prices to really come down.

E: What do you think to do about it?

PA: So far, the Lebanese who profit from tourism have all been working on their own in promoting Lebanon. We’ve suggested that the ministries of tourism and economy, IDAL, Solidere, MEA, Casino du Liban and others cooperate under one umbrella. That would save costs and enable us to make a bigger, better impression at the big international tourism fairs. Secondly we’ve found a niche in the market. From now on, we will focus more on countries like Poland, Ukraine and Russia, as Eastern Europeans are much less impressed by the “propaganda” of the international media. During the second Gulf War hardly anyone cancelled their flights to the Middle East, while some 80 percent of the Europeans and Americans did.

E: How would you characterize the Lebanese market?

PA: Highly competitive, especially outside the summer months. There are just too many hotels for existing demand, especially in the four- and five-star range and there are still another 1,500 rooms under construction. Average occupancy rate in Beirut is some 59 percent; it should be at least 65 percent before further investments are needed. But what happens? As soon as there’s a big conference and most Beirut hotels are full, everyone calls for more hotels, while only 20 minutes away in Jounieh and Broummana most hotels remain largely empty.

E: What are the hopes and fears for the future?

PA: One of the problems of Arab tourists coming back again and again, is that at a certain point they will rent a furnished apartment or buy one. The market for furnished apartments is already booming, which is a big threat to the hotel business. The hope for the future, as I said before, is an improved image abroad, which would enable us to attract more European guests.

E: What should the role of the government be?

PA: We live in a free economy, so we don’t want a government ban on building more hotels. The problem is that the government is badly organized. We all know that. But the least we expect is decent, reliable data on which we can make our management decisions. Apart from that, we would like to see more cooperation. One thing the government can start doing is providing everyone promoting Lebanon with one and the same logo.

For the first time since 1992, IPSOS STAT, which monitors media advertising expenditures in Lebanon, reported a decrease during the first semester of 2003. Previous reports had reflected growth even when the actual market was in decline. In fact, total gross media advertising expenditures in Lebanon declined from $105 million in 1998 to $85 million and are projected to drop by 20 to 25% to around $65 million in 2003. Media TV expenditures went down from $55 million in 1998 (i.e. a share of 52%) to $35 million (i.e. a share of 41%) in 2002 and are expected to decrease to around $24 million in 2003. During the same period however, outdoor (billboards) went up from $7.5 million in 1998 to $16 million in 2003.

The main reasons of the decline of media expenditure in Lebanon, especially on TV, can be blamed on the worsening economic crisis, the high price of TV advertising (resulting in lower cost efficiency by regional standards, which are measured in terms of cost/GRP or worse, in terms of cost/thousand), the escalating price war between various media (reflected in the ratio between real and monitored ad expenditures based on official rate card prices that went up from 3.2 in 1998 to 5.6 in 2002).

The average ratio, which varies enormously depending on the media is, however, much higher than the actual level of discounts given to clients. Indeed, out of the monitored ad spend of $490 million in 2002, barter deals (ads for the entertainment, leisure, media and publishing sectors) accounted for $124 million.

During the same period – between 1998 and 2003 – one can estimate that the average net media margin of advertising agencies (agency commission plus volume rebate, less client discounts) went down from around 22% to around 12% as a result of three factors. First, lower rates of agency commission and volume rebates facilitated by the market domination of regies, representing over 50% of advertising expenditures. Second, is the appearance of media buying units, whose entire raison d’etre is to discounting. And finally, increased discounts to advertisers and the fact that they are increasingly booking their campaigns directly (especially on outdoor) or making barter deals with the media. It means that the total media revenue shared by all advertising agencies in Lebanon will probably not exceed around $7.5 million in 2003, compared to around $23 million in 1998.

Income from production, especially TV commercials, also declined. This can be attributed to the phenomenon of globalization, which has resulted in multinationals using to use more international or regional copy (in our case Dubai). Other factors include the increasing tendency of local advertisers to favor BTL (below the line) activities over brand building and the shift towards outdoor advertising over TV.

The consequences of this decline in revenue for Lebanese full service agencies that rely heavily on their income from media commissions are dramatic. The revenue indexation between high value-added services, such as strategic planning and creative development and execution on one hand and media buying, which is a low price-driven commodity, on the other hand should be broken. It is only by convincing clients that our services should be increasingly remunerated on a fee basis that advertising agencies will be able to survive. The syndicate of advertising agencies should also be more active in defending the interest of its members against the regies, intermediaries whose margins are disproportionate to their value-added.

Ibrahim Tabet is chairman and CEO of DDB Strategies. He wrote this commentary for EXECUTIVE

Lahoud summed it up better than most. Speaking to the cabinet during a discussion on the EDL file, the exasperated president turned to the ministers and raised his arms. “What do you expect me to say when you tell me that $3 billion has gone missing from EDL. I am speechless.”

EDL is indeed in a miserable state. It continues to be riddled with corruption, wasteful spending and mismanagement. By this summer, the company was in debt to the tune of $950 million with little to show for $1.5 billion of government investment. Since 1992, it has lost over $600 million in uncollected bills and another $230 million to illegal connections and technical problems. Things could hardly get worse – or could they?

In August, it emerged that arch-wheeler dealer Ahed Baroudi publicly admitted to bribing public officials on all levels and on numerous occasions to secure lucrative contracts worth around $750 million in the early 90s. His involvement in these deals has allegedly cost the state millions and is responsible for the dilapidated state of the national grid. Baroudi has not been officially investigated; probably because of his threats to disclose the names of high profile officials he claims took bribes. Ahed Baroudi has always worked the shady end of business. His name appeared in the murky demi-monde of dealmakers in 1974, when MEA bought three 747s from Boeing. The American aircraft manufacturer paid $3.6 million in commissions to a Swiss bank account in the name of a Rosera, on behalf of MEA executive (and future chairman) Assad Nasr and other parties working for or connected to the airline.

Although an open secret since the deal was signed, the payments officially came to light in 1979, when MEA sought to buy another 19 aircraft at a cost of $1 billion (the commissions on that deal would have been a whopping $30 million). An investigation by the US Securities and Exchange Commission (SEC) into the 1974 deal, forced President Elias Sarkis to call off the purchases, and created a scandal that reached the higher echelons of the Presidency and Intra Bank. The debacle effectively ended the career of Nasr, who had to leave the country, only to be allowed back after much string pulling.

However, one man, believed to be the architect of both deals, lurked in the shadows, relatively untouched by scandal. No one can say whether this secretive character was in fact Baroudi, but those on the inside believe he was the only one to hold onto his share of the fees paid by Boeing in 1974 Ð around $1.6 million Ð and point to the close ties he cultivated with President Sarkis. In 1982, Baroudi was himself famously exiled by Bashir Gemayel after an encounter at Au Vieux Quartier, when Lebanon’s youthful new leader, who had vowed to wipe out corruption, allegedly strode over to Baroudi’s table and gave him 24 hours to pack his bags, telling him, “the country is sick because of people like you.” Baroudi claims he left because the food was not to his liking. Baroudi returned in the late 80s to Amin Gemayel’s Lebanon expecting to carry on where he left off. He found Roger Tamraz and his advisors had become the favored dealmakers. Professionally, the two men were chips off the same block, but while Tamraz sought the limelight and gained notoriety, Baroudi bided his time, working diligently in the shadows, courting the patronage of those in power. It was a policy that paid off. Tamraz’s star waned, while Baroudi fought his way back into the game, recruiting Tamraz’s team along the way. After leaving during the Aoun war, he returned in the early 90s to carve out a lucrative niche at EDL, one of the few ministries not blocked to him. His calling card at EDL’s Mar Mikhael’s offices was his trademark $1 million gift.

In his new-found role as a key player in the state’s ten-year plan to rehabilitate the national grid – one which, among its many aims, sought to convert from fuel to gas – Baroudi set about beating off all other international bids to secure the contracts for the building of the Zahrani and Baalbek power stations, contracts worth a combined total of $300 million.

A senior EDL consultant at the time remembers the irregularities. In a letter to the board of EDL, sent on December 10, 1994, he protested that the 200-page rehabilitation plan was drafted in secret, outside the official framework of EDL, over a period of ten days. He went on to complain that there was no time for him or his colleagues to review the plan, which was, for the most part, devoid of page numbers, figures and tables. In a very sketchy financial plan, it was stipulated that all payments be made to Ansaldo, a company that had been earmarked for both the Badawi and Zahrani stations, even before the jobs had been tendered. The consultant was further mystified by the fact that only three years’ work was outlined in what was supposed to be a ten-year plan, and the cost estimates appeared to have been reached without due diligence. ”This is what we were told to do,” an exasperated colleague told him, when he was questioned about the report. It became clear to the consultant that the plan was imposed and not meant to be contested. The extent of the conspiracy was reflected in the speed at which the plan was rushed through parliament on the night of Saturday, December 10, 1994 (those who are convinced of Baroudi’s involvement in the 1974 MEA deal, point to the same way that agreement was rushed through on the eve of the meeting of the MEA board of directors on May 30, 1974. Baroudi, it seemed, liked a fait accompli.)

Baroudi was part of the EDL deals from beginning to end. After the signing of a $600 million Italian-Lebanese loan (one that he personally negotiated), earmarked for electrical equipment, three contracts were awarded to Baroudi, who was still the representative of Ansaldo.

The first deal involved the buying of new heavy equipment that was later discovered to be used and obsolete. The second was for the installation of $50 million worth of equipment for the Zahrani and Baalbek stations. Through its inside contacts, Ansaldo, via Baroudi, ensured that all other bidding companies never got a look-in. Such was the extent of Baroudi’s impudence that he installed the equipment, generators and machinery before the contract was officially awarded. The third deal was a $17 million maintenance contract, which was signed even though the equipment was under warranty. The $17 million was allocated for the maintenance of Lebanon’s gas-powered power plants – a system that was allegedly 30% cheaper, environmentally friendlier and more efficient. In 2000, after rumblings within EDL, the contract was re-awarded to the Italian company INNEL for $9 million a year, a saving of 40%. INNELÕs agent in Lebanon at the time was none other than Ahed Baroudi. The signing of the three contracts took place outside the supervision of CDR, which was supposed to, according to the protocol signed with the Italians, oversee all bidding, installation and maintenance.

Today, the equipment bought by the government and provided by Baroudi is still not connected to the electrical network, while the power stations require rehabilitation worth $200 million. There has never been any gas-generated electricity from the two plants, which run on a jury-rigged fuel system that has effectively destroyed the operational integrity of both stations. A report compiled by General Electric and sent to EDL on November 29, 1999, blames the use of incorrect fuel for the blowing up of the third turbine at the Baalbek power station. No one is absolutely sure of how deep the level of corruption ran in the ‘Italian Job.’ What is known is that the EDL case, was one of many that went to the very top of Italian politics and implicated the disgraced former Italian Prime Minister Benetto Craxi. In Lebanon today, nothing has changed. Baroudi and his ilk maintain their cover by cultivating friendly relations within political and key civil servant circles at the highest level. While most corruption is a smash and grab ‘career,’ Baroudi has lasted, and has never felt the long arm of the law.

Meanwhile, EDL is in a corner. The excuse that the main problem lies with unpaid bills is as weak as it is insulting to our intelligence. The public might be more willing to pay their bills if they see that EDL is putting its house in order. Maybe when that happens, the collectors will not need armed escorts to carry out their duty.

If EDL is keen to root out graft and corruption from its core, it is going about it in a very low-key manner. Corruption is a chronic sickness in any society and requires constant treatment. As the saying goes, it’s not the man in the fight but the fight in the man. Like Fuad Chehab, who built a state of law, President Lahoud has founded his term on rooting out graft. But such a campaign will only bear fruit if there is collective political support to fight those who rob the public and private purse.

Therefore, EDL must act to right the outrageous wrongs that have taken place in the past ten years. This is the perfect opportunity for a government, committed to showing the people that it is serious about tackling the legacy of a more sordid past. Either that, or those at the very top of EDL must make what would be an honorable and memorable move: they should resign. At least then they would be remembered for something. Executive investigated and published the EDL story in the public interest. Further cases involving Ahed Baroudi and others are still under investigation.

In the academic analysis of economics, corruption is a clear and present danger. “Efficient allocation of resources is the key to the capitalist system,” said Karim Salameh, managing director at Saradar Investment House and member of a new generation of Lebanese economists. “In the textbook answer, corruption cripples because it diverts resources away from their efficient use and directs them into the wrong pockets. Corruption is money badly spent.”

Here is a textbook evil that has become recognized to be a huge economic liability, or as The Economist once wrote in a scriptural allusion, “a worm that never dies.” The best available estimates put the cost of corruption at a magnitude of more than $80 billion worldwide, annually. Other studies by international agencies see the detrimental effect of corruption on Foreign Direct Investment in the hundreds of millions of dollars per each afflicted developing economy.

Unfortunately, what is obvious damage to the national economy and a detriment to foreign investment can look extremely enticing to an individual interested in his own pocket, personal business and bank account. When asked about the current reality of corruption in Lebanon, a politically connected importer of medical equipment guffawed. “How do you think I won a contract to set up a teaching laboratory at a big university?” he asked, describing how most deals are sealed in Lebanon today. “Let’s say I want to buy a satellite. I approach a Chinese, a German and an American manufacturer to get a price quote. I get offers at $5,000, $10,000, and $20,000. Then I call a Lebanese dealer, who quotes $25,000. He gets the deal.”

He continued: “How do I get the authorization? I buy the Chinese one at $5,000 and split the rest of the money with the department head who signed-off on the purchase.”

The high awareness of corruption in Lebanon manifests itself in plentiful individual occurrences of public sector irregularities. Talk to anyone and there is a rumor, a theory, or an anonymous account of how this official has been discovered siphoning money off from state payments to institutions housing orphans; how that ministry, although dissolved, still is paying rent for premises at an annual cost of $350,000; or how this or that civil servant maintains three luxury cars on an official salary of between $370 and $1,000. Whatever damage assessment is offered on the extent of public sector graft and greed, however, is usually at least partly speculative. Political or personal concerns and fears on part of the involved parties make it difficult to obtain statements that allow for detailed documentation of damages. Even the Lebanon mission director of US donor agency USAID, Raouf Youssef, did not want to talk to Executive about its agricultural program, one that former agriculture minister Ali Abdallah has been accused of defrauding. The costliest individual case of corruption damage to the Lebanese economy under discussion is that of Electricite du Liban, which has recently been labeled the cause behind a massive portion of the budget deficit. Finance minister Fuad Siniora was attributed with stating that loans to EDL over the years cut a $9 billion hole in the Lebanese treasury. Newspaper reports claimed in August that as much as $1 billion out of the $2.8 billion post-war rehabilitation investment into the national electricity generation and distribution network had been swallowed by thievery and embezzlement. The reports on the loss making of EDL and the reasons for the public enterprise’s disastrous financial state make for a composite horror story of grand corruption, political nepotism, and petty corruption. Energy consultant and middleman Ahed Baroudi has been named the architect behind the sector’s poor performance in his role as key dealmaker (see “The Italian job,” page XXXX). The sagas of black market sales of fuel oil by the tanker and deals over the construction and maintenance contracts of the country’s electricity generation plants are as close to big-deal corruption as anything reported or rumored in Lebanon over recent years.

However, analysts say the numbers and result figures that are available from the utility do not allow for a comprehensive assessment of the utility’s real performance. As civil servants, EDL management is supposedly accountable to public and media inquiries, but none of Executive’s calls were returned. Minister of energy and water Ayoub Humayed, however, did agree to meet with us at the 13th hour (see “From the eye of the storm,” page XXXX). But another big chunk of losses at the utility quite undisputedly stem from power theft by a large number of individual customers Ð between 25% and 40% of bills have been unpaid, according to various reports. This phenomenon in itself amounts to a sub-culture of corruption, with the non-paying customers to some extent being shielded against prosecution by political players with high levels of influence. The case of a massive share of non-collectable bills and systematic avoidance of paying for the electricity service in areas such as Palestinian refugee camps and the southern suburbs is generally undisputed. It makes for a case of multiple petty corruption through wide-ranging abuse of public services and defrauding of the law-abiding majority. This corruption of the poor does not, however, alter the fact that the part of the population that is most disadvantaged by the presence of corruption are the poor. They are denied the access to services that petty corruption buys in dealing with administration and private sector. What remains not known are the exact direct costs and indirect damages caused by corruption to either Lebanon’s national economy or the business community. The Beirut based consulting firm, Information International, issued a Corruption in Lebanon Country Assessment Report in early 2001, in which it estimated that “one billion US dollars in annual drain may be directly linked to corruption.”

At over 5% of GDP, that figure substantially exceeded the rule-of-thumb assessments for corruption damage to a developing economy. Information International – which described its $1 billion estimate as “a conservative figure based solely on the research findings” – drew immediate and heavy fire for its statement at the time. The most ardent opposition arose from Lebanon’s political quarters but criticism came also from several civil society researchers, who questioned the methodology and motives behind the report, which had been based on large parts of focus group debates and opinion polls. After the reaction to the report, which had been commissioned by the UN, Information International has not executed any further research into the cost of corruption for Lebanon. The Lebanese private sector likewise shows no record of assessing the current cost of corruption either for the entire economy or for specific sectors. The cost of corruption basically finds no mention in the annual reports of Lebanese corporations. Although they agree with the national sentiment that corruption is rampant and often confess to it being a major problem for the country, individual business leaders see the problem as endemic with the political establishment more than with the business community.

Although corruption exists among the business realm, business-to-business relations are “by nature” less corrupt than politics, opinioned Claude Bahsali, an executive with the information technology group IDG Holding and member of the ethics and management committee at the Lebanese managerial association RDCL. “Without being able to put figures, I would say that IT due to its high competitiveness is not as affected as other sectors,” he told Executive (see box). ”I rank corruption as the number one issue in the country,” said Rizk Khoury, president of insurance company Cumberland. “If you want to do anything in Lebanon, you find that there is corruption.”

In the insurance industry, the most obvious cost is legal cost, he said. “When you are in the business of liabilities and there is corruption, the legal costs go up.”

To Salameh, corruption would rank definitely among the top five problems in Lebanon, although he also has no information on the costs of corruption to the nation at his disposal. In his corporate role as manager of the Saradar real estate investment company Eagle 1, he found it imperative to shape the company activities to be distanced from corruption, he said. “Real estate development is prone to corruption, because it is non-transparent. In real estate, corruption poses a problem directly proportional to the degree of interaction between private and public sector,” he said. “But in a real estate ownership situation where existing real estate is bought and managed by a fund, it is easy to minimize the impact of corruption by maximizing the decree of transparency.” Roger Dib, director of consulting firm Near East Consulting Group, took the view that the battle against corruption is a major political fight. The problem of encountering corruption mostly arises for companies that deal with the government in big projects, he said. “The cost to the economy is definite, through higher prices, delays in some projects, and the lack of transparency.”

His work did not involve the type of large projects where corruption becomes a major factor, Dib said, but noted that international consulting firms interested in joining up with NECG for a bid offer regularly ask as their first question “is this an open and transparent bid?” Corruption incurs a big cost because it deters foreign direct investment but might not be the top element of detraction, Dib added. “Frankly, I think the higher cost to the economy is the over-centralization of all decisions in an old-fashioned decision making process.”

Nonetheless, according to Salameh: “Investments want transparency. If it doesn’t encounter transparency, investment shies away. At the same time, the lack of transparency breeds corruption. Both things are related, the need to increase transparency and the need to reduce corruption.” He paused. “We in Lebanon cannot afford corruption.”

When World Bank President James Wolfensohn opened the annual meetings of the World Bank and International Monetary Fund last month in Dubai, he said the world was out of balance, with one sixth of the global population controlling 80% of global GDP and the divide between rich and poor nations ever increasing. The head of the cornerstone institution for global finance felt the need to remind the assembled central bank governors and officials that world leaders had agreed to the goals of the United Nations’ Millennium Declaration in 2000 in order to address the world’s most pressing inequalities. UN member nations committed themselves to targets on improving provisions for health, education, equal opportunities for women and to cutting global poverty in half by 2015. To do so, developed countries pledged to open markets and increase aid, Wolfensohn said, while “developing countries promised to strengthen governance; create a positive investment climate; build transparent legal and financial systems; and fight corruption.”

When asking why many developing countries are not on track towards fulfilling the goals of the UN’s Millennium Declaration, Wolfensohn gave the answer himself. “Part of the reason is that reform is not happening fast enough in the developing nations,” he said. “There is still too much cronyism and corruption. In nearly every country, it is a matter of common knowledge where the problems are and who is responsible. Frankly, there is not enough bold and consistent action against corruption, particularly at the higher levels of influence.”

The reminder could not have been timelier for Lebanon. Over the past two months there has been much talk over several highly publicized cases involving corruption. The Al Madina banking scandal, the judicial investigation of former agriculture minister Ali Abdallah, and the outcry over funds that have disappeared at Electricite du Liban. Each charge involved allegations of corruption at high levels of influence. On the sidelines, the arrest and temporary detention of lawyer Mohammed Mugraby in August was decried by his supporters as an attempt to stop Mugraby from fighting corruption in the Lebanese legal community.

The standard definition of corruption is the abuse of public trust for illicit private or personal gain. This implies that the problem tends to manifest itself where the interaction of a public official with an enterprise or citizen opens the opportunity for improper conduct and illegal financial gain. As a rule, corrupt deals between the private sector and public servants involve a bribe giver and bribe taker. The initiative to embark on such criminal activity can originate from either side. Demand driven Ð the official whose responsibility it is to issue a permit or evaluate a project bid presents himself as unresponsive or slow, until his abilities are boosted with a bit of monetary medicine. In the most obvious and blatant cases, the bribe demand is blunt and explicit. On the other hand, the corrupting process may originate from the business end of the relationship. The corporation bent on acquiring a lucrative public project uses bribery, as a means to get a contract it might not win in fair and square bidding. In this example of supply-driven corruption, the criminal enterprise may explore the possibility of soliciting a public official by shelling out innocent gifts, which over time evolve into more and more lavish and potentially compromising favors that establish ties of complicity.

Beyond small-scale bribes there is of course high-level corruption, which can seriously damage a nation’s reputation, development and fiscal balance. Take for example Ferdinand and Imelda Marcos who plundered the Philippines; Nigeria’s Abacha regime which stole billions of dollars from the people of Nigeria; and Peru’s former president Alberto Fujimori who is wanted by his country’s prosecutors who claim he enriched himself from weapons deals and aid contributions while in office until 2000.

In these cases the sums of money in question are often hard to quantify. A declaration by African anti-corruption activists in 2001, estimated that corruption damages in Africa amount to anywhere between $20 billion and $40 billion. The Nyanga Declaration stated that this figure had “over the decades been illegally and corruptly appropriated from some of the world’s poorest countries, most of them in Africa, by politicians, soldiers, businesspersons and other leaders.” The declaration has since been quoted by a UN global study on illegal transfers.

The UN study, prepared at the beginning of 2003 for the committee deliberating on the world body’s impending Convention Against Corruption, listed some of the heads of governments and their families who plundered national resources, investing the money abroad. Mobuto Sese Seko pilfered $5.5 billion as president of Zaire, outdoing the Abacha regime’s estimated siege of over $2 billion; HaitiÕs Jean-Claude Duvalier transferred more than $120 million in presidentially embezzled funds out of the country, which is one of the poorest in the world. $227 million went amiss under Peru’s Fujimori government; the brother of former Mexican president Carlos Salinas raked in a fortune of $120 million as result of corruption, while Argentina’s Carlos Menem, left his country owing $90 billion.
 

Other reports on corruption in Africa suggest that, as a rough rule of thumb, a 5% bribe of a $200 million contract would get the personal attention of a head of state, while a government minister would be in the game at about one tenth of that. Nigeria’s problem is so chronic that the international community has suspended loans to the West African state.

These amounts are sharply set apart from the pots of petty corruption in the lower half of the corruption sphere. Here, you may be talking as little as a $1 bribe for a village official in an impoverished nation, or as much as $1,000 in exchange for gaining a contract to haul a company’s garbage or landscape the city parks in a G7 country. This realm includes anything from slipping a traffic cop a $20 bill rather than paying the $150 speeding fine, buying the city inspector a cozy lunch while the building crew pours that slightly doubtful looking concrete, the police detective enjoying himself “on the house” with the escort service – to a price fixing deal between the supplier of medical syringes and the purchasing manager in a public or private hospital.

In addition to dissecting these universally present layers of what has been called the “culture of corruption,Ó international corruption fighters Ð most vociferous among them the non-governmental watchdog organization, Transparency International (TI) Ð have been attacking specific cases of corruption such as that found in the global diamond trade, party financing, and money laundering. There is no indication that this web of grand and petty corruption, bribery, graft, and criminal egotism will shrivel up anytime soon, or that some countries and institutions are immune to the plague. The European Union, where six of the world’s ten least corrupt countries are located, has just been embattled by a $6 million corruption scandal at the Eurostat statistics institution and allegations of corruption in other departments. A glance into the pages of any respectable newspaper proves that corruption is one of the most frequently exposed evils to surface in media reports between Beijing and Cape Town, from Munich to Miami. The Enron scandal, showed that investor confidence can be maintained if corruption is dealt with immediately and swiftly.

In Lebanon, the general awareness of the existence of corruption appears to be nothing short of pervasive. “Corruption definitely exists in this country,” said a member of parliament who won his seat as an independent. “Even more, it is a requirement. The system here will reject anyone who doesn’t agree to be involved in a network of corruption.” As many local politicians will point out, corruption is found anywhere, said Yehya Sadowski, a political science professor at AUB. “The difference is that in most countries, you can reap revenue from corruption but you still have to deliver something. In many Middle Eastern countries, it is often a transfer of income without the bribe taker having to deliver anything,” he said.

From business leaders, journalists and consultants to financiers Ð Executive encountered no one who would deny the existence of corruption in Lebanon. The question, “does corruption exist in Lebanon” typically led to one of two initial responses; laughter, or a resounding “No!” of the type that a grownup would answer a five-year-old who asked: “Didn’t Santa Claus look just like uncle Joseph in Santa’s suit this year?”

The harder question is how prevalent corruption is in this country. Pundits claimed that the former minister of agriculture, Ali Abdallah, is being investigated for embezzlement of agricultural aid funds because his greed became too excessive, eventually grating the political circles that had previously tolerated his activities.

In the course of the Al Madina banking scandal, allegations of money laundering piled up on accusations of embezzlement and check fraud, standard financial crimes which the country’s financial and judicial authorities are usually more than keen to prosecute. As the Al Madina case dragged on for the better part of the past year, observers have repeatedly crowed that Lebanon’s central bank should have stepped in much earlier, and hinted at political interference in the investigation.

In the often-murky reports of the daily press, the case against Al Madina was supposedly even about to be suspended at one point this summer because the financial damage had been contained, and the file sent back to the Special Investigation Commission at the central bank. Amid the outrage, the central bank quickly clarified that it was only updating the information for the prosecutor’s office, and the office confirmed that the investigation into the criminal offenses was continuing.

Undeniably, the current policies and practices on informing the Lebanese public about cases of alleged or proven corruption, leave much to be desired. Accountable and transparent procedures in addressing the issue of corruption, evaluating its extent and exposing individual cases are imperative for improving the public perception that corruption is being fought. But Lebanon is at least not the last country to be in the dark. On a global scale, the fight against corruption is a recent one. Measuring and comparing the infestation of corruption country by country as a tool to strengthen the fight against this scourge has been a project that TI initiated first in 1995. By introducing the Corruption Perception Index (CPI), TI has significantly increased awareness of the issue and countries with a low score for good practice, such as Nigeria, have become bywords for countries that are bad for business. In many nations, TI’s CPI has become a widely used instrument of alarm that helps responsible officials and civil society groups in their fight against the syndrome. However, Lebanon until now had not ranked in the CPI, leaving it up to every person to guess where the country might stand in the global ranking. Lebanon’s corruption is of “Nigerian proportions,” suggested Sadowski, and the country should set itself a goal to reach the standard of China for its level of corruption in global comparison.

Here comes the good news. Starting this year, Lebanon will be included in the CPI, and there will be no more guessing about how the country is being perceived, based on the compounded findings from at least four studies sponsored by international agencies and independent consultants. TI set the release date for the 2003 CPI, rating 133 countries including Lebanon, for October 7. Although the exact ranking for Lebanon was not available at time of going to print, Executive learned that Lebanon will not score the lowest.

Whatever the score, some people will certainly be disappointed.