HealthcareRefugee healthSpecial Report

The impact of the refugee crisis on the Lebanese healthcare system

by Thomas Schellen
written by Thomas Schellen

Many column inches have been dedicated to the Syrian conflict and the resultant refugee crisis, the  impact of which has been particularly felt in neighboring countries like Lebanon. Less acknowledged but deserving of recognition is the shocking reality that Lebanon’s healthcare system has performed with surprising efficacy in coping with this crisis. The much-maligned and historically weak system, in the course of the last seven years, has proven its resilience, and has even expanded previously underpowered capacities.      

The resilience of the Lebanese healthcare system has been highlighted in recent research. A paper on The Collaborative Governance of Lebanon’s Health Sector was released in May 2018, the product of a partnership between the World Health Organization, the American University of Beirut (AUB), and the Ministry of Public Health (MoPH). It found that “Lebanon’s health sector has shown remarkable progress over the past twenty years,” and that Lebanese achievements in the mobilization of health resources “went well beyond what could have been expected given the country’s recent history and geopolitical environment.”

Two years earlier, an academic study examined the performance of the Lebanese healthcare system during two peak crisis years after Syrian refugee inflows in mid-2012 intensified to previously unimaginable levels. Reviewing the responses of the healthcare system in the years 2013 and 2014, the study concluded “that the Lebanese health system was resilient, as its institutions sustained their performance during the crisis and even improved.” The authors of this study, both Lebanese and international experts, took as their definition of resilience in healthcare the “capacity of a health system to absorb internal and external shocks, and maintain functional health institutions while sustaining achievements.”

Walid Ammar, the director general at the MoPH and an AUB professor, was a co-author of this study. He confirmed to Executive in July that since the publication of this research at the end of 2016, things have kept moving in the same direction: “From the publication of this paper until now, all [health] institutions, private and public, are still functioning, and our indicators in Lebanon are still improving.”

He points out that the last years had functioned as a genuine stress test of the national health system, and thus were all the more indicative of its resilience. “If you can predict something and make a plan to deal with it, this is part of your planning capacity to meet challenges that you expected. Resilience is when something occurs that is not predictable, and this is what happened with the Syrian refugees,” Ammar says.

In seeking to assess the Lebanese health system for its overall quality and for its resilience in the face of the refugee crisis, it should be noted that all of the academic evaluations of the system mentioned thus far have relied on collaboration or co-authorship with interested stakeholders, the MoPH’s Ammar above all. But despite the skepticism that will likely be triggered by this rare national success story, the proof is in the pudding.

The success narrative becomes more convincing when one is presented with the evidence and testimonies of the institutions and people who are in the thick of managing healthcare for refugees, such as the United Nations High Commission for Refugees (UNHCR) and non-governmental organizations (NGOs) focused on health.

Accessible care

According to UNHCR Public Health Officer Jakob Anhem, the organization’s record of the medical health needs of Syrian refugees is based on UNHCR surveys that are presented in the Vulnerability Assessment of Syrian Refugees in Lebanon (VASyR) annual report. “The trend on the numbers of refugees who need medical services and the number who are able to obtain them is relative stable,” Anhem tells Executive.

He explains that in 2017 the number of refugees in Lebanon who said that they needed and were able to receive medical help in terms of primary health care (PHC) improved to 89 percent, from 84 percent in 2016. Numbers were “slightly lower” for secondary healthcare, he adds, but four out of five refugees said they had access to hospital care when they needed it.

The improvements in the Lebanese health system are corroborated by Fondation Merieux, a French, healthcare-focused NGO. “The evolution of the crisis and response in Lebanon is not comparable to other countries because of its length and specificities. The healthcare system here is in [an] adaptation process. Relative to where it was, it sought to address issues as they emerged, with the funding they had. There is international coordination and also a very good push to strengthen the national NGO network. It is a good thing to see this evolution,” says Josette Najjar-Pellet, the foundation’s Lebanon representative.

According to Najjar-Pellet, Fondation Merieux is mainly active on the side of capacity building. Its missions include researching and fighting infectious diseases, building systemic access to diagnostics, and knowledge and information sharing.

Highlighting that the Lebanese healthcare system has thus far been able to avoid epidemics in the refugee and vulnerable Lebanese population, Najjar-Pellet confirms the important role that strengthening the PHC network played after the onset of the Syrian refugee crisis. She tells Executive that analyzing the factors behind this control of serious outbreaks and avoidance of epidemics is a complex undertaking; she also cites the resilience of the system and the resilience of healthcare workers in Lebanon. “When observing this crisis from the perspective of someone coming from outside, and also as a Lebanese who had left the country and has come back, you cannot say anything but that only a country like Lebanon could have supported this situation and remained peaceful,” she says. 

The comments by persons and institutions that are once-removed stakeholders in the Lebanese health system support the notion that Lebanese hospitals and PHC centers—dispensaries run by non-governmental organizations and charities, as well as those owned and operated by the Ministry of Social Affairs—have been able to deal effectively with the demands placed on them throughout the protracted crisis, which now spans more than six years of extensive and intensive needs. Moreover, the ability of Syrian refugees in Lebanon to access hospital care is not correlated with their legal status; according to UNHCR assessments, the barrier in accessing secondary healthcare is cost—the same barrier that locals must overcome in accessing hospital care.

Throughout the crisis, the capacities of the Lebanese PHC network continued to improve and the country’s healthcare networks were additionally boosted by growing collaboration between non-governmental organizations in Lebanon and international civil society. The PHC network grew out of a state of disorganization from its founding in the mid-1990s, having been designed by the MoPH to be the cornerstone of a health system that would focus on assisting the poorest Lebanese. Through effective collaboration with local NGOs, the MoPH’s network grew from 29 PHC facilities at the time of its establishment in 1996, to 85 facilities in 2005—a number that has almost tripled to 220 centers by the time of this writing.

Moreover, according to Hala Abou Farhat, associate public health officer in the UNHCR Inter-Agency Coordination Unit, there now is a sizeable and increasingly stable network of international and national organizations involved in UNHCR-coordinated aid efforts, including about 50 organizations that have indicated their interest in receiving funding under the Lebanon Crisis Response Plan (LCRP). “Many of [these organizations] work in health or are interested to expand their existing health services to the refugee population in Lebanon. They are interested to appeal for funds and interested to liaise with donors, but in 2017, out of all organizations, 31 partners received funds,” she explains.

Close partnership

Abou Farhat says that this group of NGOs is dependable and consistent. “The network has become more or less stable in size. In every year, we hear of new partner NGOs, but the traditional partners are the ones that have been working for the past four to five years consistently,” she says.

This increasing stability contributes to continuity and to the development of healthcare provision to extremely vulnerable population groups. Abou Farhat says that the MoPH-NGO collaboration has also produced other benefits, including the formalization of the PHC accreditation program, and investments in training and capacity building. She notes, however, that such improvements may not be highly visible in short-term comparisons, between periods spanning from a few months to a year.

“I would say that the system has improved a lot over the years. It has evolved greatly and the MoPH has been at the forefront of this development,” she says. Regarding collaboration with NGOs, she notes that “the MoPH has a very different mentality from other ministries, by acknowledging that it is the partnerships with NGOs that allow them to work.” Between the lines of such evaluations, listeners might think they detect unspoken messages that the Lebanese healthcare system is still vulnerable to influence by partisan interests and non-optimal political approaches, but that its ability to overcome such restraints is advanced compared to that of other institutions.

Many of the problems that persist in the area of refugee health care mirror the issues that afflict the Lebanese population, but with added severity. For both populations, cost is the main barrier. Anhem explains that the UNHCR has had to make tough decisions regarding hospital care for Syrian refugees: “We have been forced to prioritize when we set up the program of health services for specialized hospital care,” he says. “We decided to prioritize deliveries, i.e. obstetric care, and [the treatment of] urgent life-threatening conditions or conditions that might lead to disability. In the case of some conditions that are life-threatening, like renal failure, or cancer, where long-term expensive treatment is required, it was decided that we cannot support this. So, we had to ask the international community and other NGOs to step in with funding.”

In practice, this means that for the current year, UNHCR made an appeal for $67 million for healthcare funding in Lebanon. Of this funding appeal, which would contribute to the total required budget for 2018, “$18 million is currently funded, which leaves the total gap at $49 million,” UNHCR spokesperson Lisa Abou Khaled told Executive in early July. Moreover, when the funding gap is further qualified according to what is urgently needed to cover minimal assistance levels to ensure access to life-saving hospital care until the end of December, the need, according to Abou Khaled, is for $28 million.

Taking into account the time dimension of the process to acquire donor funding, the outlook for 2018 is not very dissimilar to the previous year, when funding needs were met to 80 percent, Anhem explains. But the process sounds at the very least like an exercise in stress induction. “It is my impression that we are biting our nails every year and wonder if we will need to make severe cuts to our programs by September, but by the year’s end, we have always been able to provide a decent level of care,” he says.

As Abou Farhat points out, however, this appeal does not cover all of the health needs seen by the community of NGOs. “We need to be mindful that UNHCR does not cover everything. From an interagency perspective, things look a bit different, because the total amount we have requested for 2018 is $290 million, out of which $193 million is requested for secondary healthcare and $94 for primary healthcare. [This total] includes [the $67 million budgeted under] UNHCR but also accounts for dialysis, cancer treatments, and other conditions which are not covered by UNHCR,” she says. A further $2 million is budgeted for improving outbreaking control and $500,000 for improving youth health. While there are different population groups included in this funding appeal, the bulk is requested for Syrian refugees, whose healthcare needs are seriously underfunded, she adds. 

The resilience of Lebanon’s healthcare system is a narrative with two intertwined strands. One strand tells a story of healthcare assets owned by diverse stakeholders, from private, for-profit enterprises to non-profits to the public sector, which have performed for both the Lebanese and the Syrian refugee population at a surprisingly high level. The second strand of the narrative reveals that the system is still marred by special interests and imbalances, the most important of which is that the total financial requirements far exceed the available means for delivering the required healthcare to all needy people, of whatever nationality, in Lebanon. This nevertheless makes the performance and resilience of the existing healthcare system ever more surprising, in its efforts to provide care for Lebanese poor and refugees alike. 

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HealthcareMental healthSpecial Report

The social and economical cost of mental health in Lebanon

by Nour Chehab
written by Nour Chehab

In Lebanon, one in four people suffer from mental illness in their lifetime, according to non-profit mental health NGO Embrace. Mental health refers to the condition of a person’s emotional or psychological well-being, in the same way that physical health refers to the condition of their body. Although the public discussion around mental health in Lebanon has been increasing in recent years, a strong societal taboo surrounding the issue still lingers. Combatting this stigma in Lebanese society is now a mission of both governmental and non-governmental organizations (NGOs). There has been a recent increase in the number of NGOs advocating on mental health issues, as well as in the number of practicing psychologists, psychiatrists, and other mental health professionals, according to a 2015 World Health Organization (WHO) report on mental health in Lebanon.

How the government deals with the mental health of its citizens is one factor that influences how society views mental illness. “If [the government] recognizes that these people need help, it changes the public’s perception [of mental health for the better],” says Omar Dewachi, a physician and assistant professor of Anthropology, Social Medicine, and Global Health at the American University of Beirut (AUB). Shifting the public perception of mental health is important because neglecting mental illness can—in addition to other potential ramifications—negatively affect society’s productivity. When people suffer from untreated psychiatric disorders it can limit their ability to work, and, without adequate state assistance, the burden of care will often fall on family members. These caregivers, in turn, will be less productive and will often suffer a hit to their own mental well-being. The negative impact of untreated mental illness on a society’s productivity can be used as a counterargument to the economic logic of not covering mental health expenses. In Lebanon, as in other countries worldwide, there is insufficient awareness of the importance of mental health and a dearth of good, free healthcare services geared toward those with mental illnesses. Given the reticence of profit-driven private insurance companies to cover mental health treatment and the government’s lack of budgetary allocation for mental health, the burden falls on non-governmental and international organizations.

Private sector

Lebanese private insurance companies do not provide coverage for the treatment of mental illnesses. Pascale Abou Nader, head of the Medical Claims Department at insurance company Libano-Suisse, says that private insurance companies do not cover the potential psychiatric care-related expenses of their clients due to the long-held belief that “mental illness is not a real illness.”

In Abou Nader’s opinion, all private insurance companies would fight against the implementation of a law requiring that there be no mental illness-related exclusions in individual health insurance policies. However, the private sector is involved in one scheme concerning mental illness. An insurance package offered to big corporations covers the full supplementary cost of all of the treatments that are partially paid for by the NSSF. Since the NSSF pays for 90 percent of the treatment for mental illnesses, private insurance companies in this particular package are beholden to pay the remaining 10 percent.

In practice, however, Libano-Suisse has yet to deal with a case of an employee covered by the “Delta NSSF” insurance who has claimed the supplementary 10 percent coverage for treatment of a mental illness, even though clients regularly use this particular insurance for other physical ailments. It is statistically unlikely that none of these employees has ever been treated for a mental illness, so Abou Nader speculates that it is likely employees do not ask for this coverage either because they are unaware that the company’s insurance policy covers it or because they have internalized the stigma surrounding mental health issues. In other words, the societal cost is perceived to be higher than the economic cost and individuals would thus rather pay the supplementary cost themselves rather than claim it on their insurance.

It is also worth mentioning that psychiatric disorders are treated differently from the usual exclusions stipulated by private insurers, such as cancer, chronic diseases, and pre-existing conditions. The Insurance Control Commission (ICC), a body in the Ministry of Economy and Trade, implemented a ministerial decision (No. 109) in May that required insurance companies to cover chronic diseases, pre-existing conditions, and cancer, and to offer guaranteed lifelong renewability of individual healthcare insurance if the client gets sick six months after they have entered the contract. This policy does not, however, include psychiatric illnesses, with some minor exceptions.

These exceptions come with very strict limitations. First, consultations, tests, and medications are never covered, and hospitalization is covered only for those with schizophrenia and bipolar disorder, and only for 30 days. Hospitalizations due to attempted suicide, self-inflicted injury, or substance abuse are not covered because these afflictions are described as “caused by the individual,” Abou Nader says. The issue here is that because of the lack of physical proof and the intangible nature of such illnesses, a medical diagnosis is not seen as justified. Dewachi suggests that one of the reasons for  insurance companies’ reticence to cover psychiatric-related costs is that they “are afraid of the fact that there are very blurry lines between what is really an illness and what isn’t, because there are no real diagnostic tools, such as CT scans and blood tests for mental illnesses.”

Stigma aside, the associated costs also prompt insurance companies to exclude mental illnesses from their coverage. As Abou Nader explains, including psychiatric treatment in insurance policies would be very expensive for these companies, because psychiatric treatments are continuous and often last a lifetime. Such an inclusion would thus entail an unwelcome financial burden on these profit-oriented groups. And, unlike in the case of chronic physical illness, the lack of legal obligation to cover these treatments means that insurers have no motivation to do so.

Public sector

The NSSF is under the supervision of the Ministry of Labor, and decisions concerning changes in insurance policies require the ministry’s approval. “When we go to the Council of Ministers with proposals, it happens through the Ministry of Labor,” explains Mohamad Karaki, director general of the NSSF. The social security fund insures Lebanese employees in three categories: sickness and maternity care, family allowances, and end-of-service indemnities.

Employers from all economic sectors are required by law to enroll their employees in the NSSF. The NSSF covers mental illness-related expenses under the umbrella of sickness and maternity care. Unlike private insurance companies, its policy covers cases of attempted suicide, self-injury, and substance abuse, among others. Mental illness is treated in the same way as physical illnesses, with no special or specific policies or exclusions.

The NSSF’s general policy for all illnesses, whether mental or physical, is that there are no fixed budgets or limitations. Therefore, there is no specific budget directed toward mental health. Given that the institution does not produce statistics on insurance usage, it is impossible to know how many people make use of this coverage, or to determine, roughly, how many suffer from and receive treatment for mental illness. The lack of information means that it is not possible to calculate the social and monetary ratio between physical and mental illnesses.

However, the director general believes that even if there were official statistics, the taboo around mental illness in Lebanon would lead to popular misrepresentations of the country’s mental health landscape. Karaki believes that many people who need treatment for mental health problems do not seek it, and their illness therefore has no impact on the NSSF. This inaction, he says, might be either because of a fear of social repercussions or due to a lack of awareness about mental health and available psychiatric care. According to Karaki, just as in the private sector,  “there are no official requirements [on the NSSF] coming from the government and the Ministry of Public Health (MoPH).” Requiring both the public and private sector to cover mental health could be transformative, in ensuring increased access to good, free treatment for mental illness and a lessening of the social stigma around it.

The Ministry of Public Health

The goal of the MoPH is to provide free, universally accessible, high-quality health services to those who are not insured by either the private sector or the NSSF. In an effort to improve the state of mental health in Lebanon, the ministry in 2014 put in place a National Mental Health Program (NMHP). The NMHP aims to raise awareness about the importance of mental health through yearly campaigns designed to reduce the societal stigma around the issue. It also offers training for various professionals (general practitioners, nurses, social workers, etc.) in primary healthcare centers (PHCs) and provides medical attention to people who need it, not only via PHCs but also via specialized community mental health centers and inpatient facilities.

The NMHP put in place a five-year strategy for 2015 to 2020 aiming to lead the reform of mental health care in the country and develop a country-wide system at both the preventive and the curative levels. The NMHP has a collaborative governance model, meaning that it works with different actors to accomplish its goals. First, it cooperates with other public institutions, such as the Ministry of Education and the Ministry of Social Affairs. Second, it interacts with civil society, as can be seen in its collaboration with Embrace. In addition, international organizations such as the WHO, UNICEF, and the International Medical Corps (IMC) are financial partners in the program and provide some technical support.

These partnerships are very helpful in achieving the NMHP’s goals, especially since the MoPH does not allocate a budget to the program. There is one stakeholder, however, that the NMHP has yet to reach: private insurance companies. The program aims to ensure the full coverage of mental health-related expenses by these companies. “We cannot punitively make them do it, but we can discuss together potential schemes that can be integrated. It is something we are preparing at the moment,” says Nour Kik, policy and advocacy coordinator at the NMHP.

Because of the lack of fixed funding, some of the planned year-by-year goals of the NMHP have not been met on schedule. Nevertheless, Kik notes that, “it is still important to have a roadmap in order to know our priorities.” The program relies on opportunities arising to sign agreements with different partners funding a particular project. On the curative level, the NMHP is progressively introducing mental health treatment at PHCs and is also developing community-based mental health care facilities. They train non-specialized staff such as nurses, social workers, and family doctors who are already present in the PHCs to manage these issues and conduct outreach activities. Nevertheless, the  government’s actions are undoubtedly limited because of a lack of stable funding and their resulting dependency on civil society to conduct anti-stigmatization campaigns, as well as to help provide free healthcare for the mentally ill.

Non-governmental organizations

Lebanon’s two most prominent nonprofits for mental health, Embrace and the Institute for Development Research Advocacy and Applied Care (IDRAAC), work to compensate for the government’s deprioritization of mental health. They also make it their mission to encourage the public sector to take action. “The public sector should do more when it comes to raising awareness and IAPT [Increased Access to Psychological Treatment] by training more people. They need to create dispensaries that people can easily access,” says

Aimee Karam, a clinical psychologist, member of IDRAAC, and president of the Lebanese Psychological Association (LPA). There are currently initiatives in place to reach out to policy makers and advocate for mental health care as a basic human right, via lobbying and the drafting of laws. Embrace’s website also mentions their aim to support the policies of the NMHP. The NGO participated in a dialogue to put in place a national policy “securing access to quality mental health services in primary health care in Lebanon.” It also collaborated with the MoPH, the National Committee for Ethics, and IDRAAC to draft a mental health law to submit to Parliament for the protection of persons with mental illnesses.

In Lebanon, the latest legislation decree concerning mental health dates back to 1983. Despite efforts by different associations to provoke discussions and drive policy making initiatives, no new policy has been implemented by Parliament to ameliorate and regulate the way mental health is treated both medically and socially for over thirty years.

In other words, NGOs have taken on the responsibility of bridging the gap between the needs of society and the shortcomings of different public institutions when it comes to mental health.

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Financing healthcareHealthcareSpecial Report

Issues and concerns at the intersection of health and finance

by Thomas Schellen
written by Thomas Schellen

In the opening line of American economist and public health expert Selma J. Mushkin’s paper titled “Towards a definition of health economics,” she pointed out two factors shaping the health issue: technological progress and increases in life expectancy. That was in 1958, a few years after the first wave of mass immunizations in the United States using Jonas Salk’s polio vaccine had raised hopes that mankind could overcome diseases that had plagued it for thousands of years. Polio had been among the most-feared scourges for children for two centuries before the introduction of the vaccine.

Over the six decades since health economics became a specialization in the economic sciences, the story of human health has been shaped and reshaped continually. Health, and with it, life, has been boosted by improved or entirely new treatments based on medical scientific discoveries. The very map of mortal existence has been redrawn by increasing life expectancies, which in turn have been driven by countless improvements in the realms (naming but some) of vaccinations and hygiene, food safety and food security, social safety, nutrition and wellness, the protection of human rights, and reduction of political violence.

As of 2018, increased life expectancy and constant improvements in medical technology have not only been with us throughout the living memory of most people, they are reaching levels that have no historical precedent outside of fairytales and myths. But these two blessings of the Anthropocene also are the drivers of countless personal worries as well as individual and systemic challenges. We now worry about diseases that in the past had hardly a chance to erupt because lives tended to be terminated early by a million other factors. And as our medical care technology is achieving new heights in its ability to treat diseases, societies face increasing challenges to align life expectancy and healthcare with finance and economics.

State-designed pension and care solutions that worked in the 19th century—when the interval between the end of a person’s work life and the end (largely) of their physical life was commonly measured in weeks and months—are becoming increasingly impracticable at a time when such intervals are on average counted in years and decades. Safety nets in medical care—which were based on compulsory mass insurance and worked when a surgical procedure, albeit primitive by today’s standards, cost hundreds of dollars or a few thousand—are becoming overstretched, now that both common chronic diseases like cancer and uncommon neuromuscular disorders require treatments that reach from thousands of dollar per month for advanced oncology drugs to up to a million dollars per year for the treatment of an infant with spinal muscular atrophy.

In the context of the Lebanese economy—keeping in mind that, despite the national love for economic complaints, Lebanon is in the higher middle income bracket, in the upper 50 percent of nations by GDP—the issue is the same as in many upper and middle income societies: how to finance treatments that are available in the country but have become hardly affordable for individuals, families, or the state. As Walid Ammar, the director general of the Ministry of Public Health (MoPH) sees it, the problem begins with expensive drugs. “We now have an increasing number of very expensive drugs that patients sometimes have to take for the rest of their lives. What this means for many countries is that [public healthcare officials] have to look at the [financial] resources and have to decide on the basis of what is available how they can offer services that are to the greatest benefit of the population,” Ammar says.

Complex/competing interests

Besides comprising public health officials who have to manage more or less scarce resources to the best utility for the largest number of citizens, the reality for any health system operating under scarcity includes patients in need of medical care as stakeholders with particular and possibly extreme private interests. People diagnosed with a serious disease in particular, understandably tend to be desperate enough to grasp at every promise of a new and untested cure, regardless of the treatment’s cost or proven effectiveness.

Other stakeholders in the complex health equation are involved in influencing the patients’ choices—in the form of physicians, who in turn are influenced by commercial interest holders, such as pharmaceutical manufacturers. In this setting, friction between public and private interests can hardly be avoided, in Lebanon just as anywhere else.   

But there are a few additional peculiarities to be observed in Lebanon’s health system, beginning with political interference. “New drugs often do not come with enough proof [to be accepted by the MoPH medical committee of highly qualified professors] while you often have evidence showing that cheaper and well tested medications generate improvements,” Ammar says. “This is a major problem since politicians are telling their constituents, ‘Yes, you have the right to get this medicine,’ but actually, no, they don’t have a right to have this medicine financed by the society. People think they have a right, and then are not happy if they are told that they can’t get a medicine from the MoPH. On the other hand, also, the government does not allocate enough [of a] budget to the MoPH.”

Moreover, under Lebanon’s entrenched dynamic of political clientelism between politicians and the public, a patient for whom their physician has prescribed a very expensive drug will often go to the minister. The minister then may sign an order to purchase the drug and in doing so contribute to the depletion of MoPH resources. “Every Lebanese can find a way to reach a minister. This then creates [a deficit] because I do not have the money to cover the others if I start giving very expensive medication to some people,” Ammar says. “It is not easy to explain to the population that we have limited resources and thus can provide them with good care but not necessarily give the latest state-of-the art medication to everybody.”

As all these factors play out in Lebanon—sometimes sparking arguments over which drugs a patient needs and which drugs their commercial insurer must cover if they have insurance, or whether the MoPH has to provide for needy Lebanese as the health payer of last resort—the local situation is driven to new heights by something that could be defined as inverted favoritism.   

According to Ammar, the MoPH has done its best to develop equal and decentralized access to the public health system, ensuring that the ministry has at least one office in every district, where citizens can obtain MoPH approval if they are eligible for coverage. This then does away with the need for travel or to have forms signed by a whole echelon of administrative entities.

“When we made the system transparent and guaranteed that everybody was equal under our rules—which mean rules of coverage of 85 percent and 15 percent co-payment—we thought that people would not need intermediaries,” Ammar says. “They would not need to knock on the door of the minister to get approval. But they still seek the intermediation by the political figure, because the minister tells them, ‘If you come to my office, I give you 100 percent coverage, not just 85 percent as under the rules.’ Because we were able to institutionalize and computerize everything and have a system where everybody is equal, so that people do not need anyone’s favor to get what is their right, now people seek to get something extra.”

Private sector worries and coping strategies

It seems that, short of a reprogramming of the Lebanese cultural genome, nothing will deter people from playing games of favoritism and pursuing clientelism as a national sport, and the efficiency of the Lebanese health system, despite its remarkable gains in the recent past, does not look set to reach optimum levels—which is problematic, as healthcare costs are increasing at a faster rate than GDP growth.

Private sector health management stakeholder Joe Abou-Chacra, general manager of third-party administrator (TPA) GlobeMed Lebanon, confirms that the technology and medical skills available in Lebanon are following the innovation cycle that prevails for medical machinery and advanced procedures in developed economies and top healthcare markets, but the cost is becoming very high.

To illustrate the blown-up medical costs, he tells Executive that the price for closed-heart surgery today can be as high as $60,000 to $70,000, compared to open-heart procedures of five years ago that would cost $20,000. According to Abou-Chacra and other health finance experts, the cost for a box of certain advanced cancer drugs has increased in the past few years into the range of $5,000 to $11,000 per month, five to 10 times more in monthly expenditure than the less beneficial radiation treatments cost a few years earlier.

The extreme rise in funding needs associated with common medical risks such as cancer and heart disease necessarily leads to responses from institutions and companies dealing with the management and finance of healthcare. Over the past years, insurance companies—the prime commercial stakeholders in the management of health risks—have increasingly relied on TPA companies for cost-optimization and the processing of payments to healthcare providers such as hospitals.

Issue of the hour

In the ongoing confluence of new medical treatments and increasing cost pressures, guaranteed renewability (GR) might emerge as a key issue influencing the future direction of insurance behavior. The industry, represented by the Association of Insurance Companies Lebanon (ACAL), has welcomed the recent introduction of GR and focuses on the positive aspects of the new regime. “[GR] is the proper response to the worries of our insured, especially persons of old age,” ACAL president Max Zaccar tells Executive. “It has also the advantage of enhancing the loyalty of the insured, since a client, if she or he decides to leave the current provider, will have to submit to new thorough underwriting procedures and health assessments.”  He notes, “All insurance companies are in a position to provide [policies with GR]. It is just a question of premium calculation.”

The calculation of new premiums, however, could translate into changes that will, in the view of GlobeMed’s Abou-Chacra, be felt by the insured population. “For Lebanese society, there is a good side and a bad side to guaranteed renewability. On the one good side, every member of society will have guaranteed renewability and will not be told that there is an exclusion here or that they are not covered there. On the bad side, to have medical coverage will cost the insured more than they used to pay … So what will be good on the side of coverage, will not be easy on the side of prices.”

While the new GR rules, introduced in April, add to the complex scenarios of uncertainty on the horizon of financial conditions in the Lebanese health system, the stakeholders financing the system are turning to mechanisms that they expect to help them cope with the new GR reality. Insurance companies positioned away from the budget end of the market, such as Libano-Suisse, which has been providing GR to its policyholders for over 20 years, seek to affirm their competitive edge. At a large product launch event in April, Libano-Suisse General Manager Lucien Letayf Jr. told a crowd of insurance intermediaries and media that “we invented GR in Lebanon.” The company introduced a package of “exclusive privileges” called Health Plus for its insured, with Class A policies. But in addition to betting on reputation enhancement by offering their insured free value-added benefits and a few feel-good gimmicks, the forward thinking insurers are also seeking to enhance the health equation by expanding their focuses on wellness and prevention.

The strategy is to promote wellness under the rationale that any improvement in clients’ pursuit of wellness will lower the need for medical treatments and hospital visits, and be beneficial for health insurance costs. Efforts to increase the commitment to wellness and prevention strategies among insurance clients have been going on for a few years, but awareness appears to spread unevenly. “I think that regarding wellness and prevention, the market growth is slower than the growth in deployment of machine surgery and conventional medical treatments, and it can take a lot of time to reach older people and make them change their behavior,” says Abou-Chacra of TPA GlobeMed, in which Libano-Suisse is a major shareholder. “Wellness and prevention needs more marketing and awareness building among the Lebanese people. However, I am confident that we can market wellness and prevention quickly and very well among the younger generation.”

Stronger impulses to reposition health insurance as the primary private sector financial constituent in the national health system of Lebanon could arrive in the foreseeable future, if Insurance Commissioner Nadine Habbal—by now “interim” Insurance Control Commission head only in name—follows through on her plans to introduce rules mandating risk-based capitals in the insurance sector and to look toward a compulsory health insurance and pension plan program to power up the collective financial body of the population.

Another, non-financial, issue that in Executive’s experience plagues all stakeholders in the diverse Lebanese health system is communication with the public—and sometimes even the effective projection of one united voice when interacting with the state.   

The MoPH, for example, is perceived very differently by people who rely on its services and those who are only exposed to politically driven media rants that badmouth the public health system. “One of our weaknesses is still about how to communicate with the community,” Ammar acknowledges. “Politicians monopolize the media and thus have a stronghold on how the health issue is perceived. People who are not in need are not really informed. If you ask people what opinion they have of the MoPH and if they benefited from the ministry, you get very positive feedback—if they have received services. If they did not, you get a negative feedback because they are influenced by the media.”

Misperceptions, in this case of the Lebanese health system as backward, tend to get dangerously entrenched when they are allowed to grow unchecked. The improvement of health provisions and affirmations of the resilience of Lebanon’s health system in the past few years, and the shift in the Lebanese people’s international perception as ready to help the needy are valuable gains that it would be a shame to squander.

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HealthcareOverviewSpecial Report

A look into Lebanon’s healthcare

by Thomas Schellen
written by Thomas Schellen

Health encapsulates economic activity that amounts to trillions of dollars by the—in this context crude—methodology of collating production of goods and services as gross domestic product (GDP). The Global Health Observatory of the World Health Organization (WHO) puts the world’s expenditure on health at $7.2 trillion (2015 estimate), or 10 percent of the world’s GDP. Many countries have health expenditures representing between 7 and 9 percent of their GDP. However, some economies (for example, on the Indian subcontinent and in Sub-Saharan Africa) allocate less than 4 percent of GDP to health spending. Upward outliers, mostly from member countries in the Organization for Cooperation and Development, clock in above 9 percent.

According to a Human Development Report (HDR) by the United Nations Development Programme in 2013, low-income countries early in this decade spent on average 5.7 percent of GDP on financing healthcare, whereas high-income countries show average health expenditure of 12.3 percent. Reports generally show that higher levels of healthcare spending are reflected in higher life expectancy and are very visible in data points such as the number of physicians and hospital beds in relation to a country’s inhabitants.

Disparities between low-income and high-income countries in the density of available health services as shown in the HDR are enormous, with 0.7 physicians per 10,000 people in the former versus 29.2 in the latter. Likewise, low-income countries have about 13 hospital beds per 10,000 inhabitants whereas the average for high-income countries is over three times that, at 42.3 beds. (Nevertheless, having a high share of healthcare expenditure does not automatically signify that a nation’s system is superior in terms of being beneficial or efficient).

A number of international healthcare rankings indicate that Lebanon is on a trajectory of continuous improvements in coverage and performance. The 2018 Healthcare Access and Quality (HCAQ) index by international medical journal The Lancet, for example, ranks Lebanon in 33rd place with 86 points (in a previous HCAQ edition, Lebanon was ranked 31st with the same score), rubbing shoulders with European nations like Estonia and Portugal. Lebanon in this index is also positioned a mere four spots lower than the United States and ahead of Taiwan and Israel.

A May 2018 study on Lebanon’s health governance notes that the country’s diverse (some say fragmented) health system provides “compared to other countries, good value for money.” When the HCAP score is put in relation with total healthcare spend as share of GDP (in constant purchase-power parity dollar), Lebanon’s score of 86 places it below some countries with higher health spending but, as the study points out, the country “is on the frontier curve.” This is to say that none of the countries with lower healthcare spend than Lebanon as share of GDP rank above it in the HCAQ index.   

Good health on systemic level: a function of quality supply, evidentiary decisions, and collaborative governance

According to the Ministry of Public Health (MoPH) in Lebanon, the national spend on healthcare as share of GDP is 7.5 percent. On the basis of the 2017 GDP estimate of $53.4 billion, the health bill would be about $4 billion and be paid for by three main streams of financing in roughly equal measure. One third is government expenditure from tax revenue, one third is covered by private insurance and also provided via contribution-based schemes, such as the National Social Security Fund (NSSF) and cooperative funds, and the remaining third is composed of direct private expenditures by patients, as out-of-pocket (OOP) payments. Commercial stakeholders in the management of healthcare services in the Middle East agree that Lebanon represents an interesting value proposition to its population, even as they note that the growth of the healthcare insurance business has, in recent years, not been as strong as in countries with higher economic growth.

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“Although we haven’t witnessed tremendous growth in GDP in Lebanon in recent years, there has been growth in the market for health insurance. This growth was mainly because of higher health inflation when compared with GDP inflation in Lebanon. However, when I look at all markets under my responsibility, Lebanon has been performing resiliently over the years. There are flaws, and the market is not growing in the double-digits like the Gulf markets, because the economy is not growing in double digits. But the market has been growing steadily and is providing quality care,” says Christian Gregorowicz, chief executive officer of regional third-party administrator (TPA) Nextcare.

“If we compare costs of insurance in Lebanon to those in the Middle East or in Europe, the cost of insurance premiums is still cheaper and people here have better coverage than in many other countries,” Joe Abou-Chacra, general manager of TPA GlobeMed Lebanon, notes. “But it is not at all certain how long the insurance sector in Lebanon will be able to keep going without increasing premiums massively.”

Factors contributing to the improved standings of Lebanon’s health today, as compared to its state at the turn of the century, included gains in efficient usage of the people’s private financial resources. For example, OOP health expenditure dropped from 6.2 percent of GDP in 2000 to 2.4 percent in 2015. Further important benefits were generated by a set of successive reforms and systemic improvements implemented under the leadership of the MoPH, in the course of which the health sector was transformed from one oversupplied with underutilized expensive machines and characterized by “perverse incentives”—where the old MoPH system had provided compensations to hospitals irrespective of their competencies or quality—to one that is driven by evidence-based decisions and collective governance.

Fragmented to diverse

The transformation of the healthcare system was in large part systemic but it also entailed a change in perception: discovering strength where the previous perception of Lebanon’s health system structure with its multiplicity of actors had been negative. “In describing this situation, we usually spoke of fragmentation, which has a negative connotation,” explains Walid Ammar, the director general at the MoPH. “You have overlap in some areas of coverage and gaps in others, and you don’t have the global picture. [This fragmented system] is difficult to govern. However, if you apply good governance principles and succeed in managing fragmentation, you mitigate for the negative effects of the multiplicity and what remains is diversity. Diversity is very important, as it gives you flexibility and this means you can adapt to unpredictable situations. In describing the multiplicity of the Lebanese health system, we now use [the term] diversity, which has positive connotations. But if you are not able to govern a system of multiplicity, you have a fragmented system that is inefficient.”

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Lebanon’s national health indicators (see infographic) show values that are today in better balance. No longer is the number of medical doctors higher than the number of nurses, and the number of hospital beds is moving away from previous congestion that was sometimes characterized by questionable quality, toward a more balanced supply, also in comparison with the primary healthcare system. Research by GlobeMed shows some interesting trends in the number of nosocomial infections (infections contracted in hospital and requiring additional treatment). According to findings that GlobeMed shared with Executive, the average rate of nosocomial infections in Lebanese hospitals was 1.6 percent for the period from 2010 until 2017. While this rate fluctuated between 2010 and 2015, it dropped to 1.3 percent in 2016 and then to 1 percent in 2017.

“We do continuous studies on medical care and we inform the hospitals if our studies show any red flags [of rising incidence rates] or when more care is needed because we percieve hospitals as our partners. Our studies on nosocomical infections are indicating that the rate of infections contracted during treatment in hospitals has decreased a lot compared to five years ago. Talking about hospitals in Beirut, the rate of these infections has decreased by 60 or 70 percent,” says GlobeMed’s Abou-Chacra.

The successful shift from a system dominated by divergent self-interested commercial players to a resilient system with better coordinated actors has been demonstrated convincingly during the ongoing Syrian refugee crisis.

An industry with many vital sides

What complicates the overall scenario is the fact that the health sector combines commercial stakeholders with clear profit motives for achieving high sales of goods and services—such as private hospital operators and pharmaceutical manufacturers—with other stakeholders whose business models are driven by cost optimization and rationalization, such as third-party-administrators and insurance companies. This map of health system dynamics is incomplete, however, as there are further important  elements involved, namely third-party stakeholders—medical practitioners—who can or cannot be driven by profit motives, and the usually extensive involvement of public sector interventions.

The production of health goods and services has increased international trade and the manufacture of goods for export. Just to give an idea of its dimensions, European pharmaceutical exports, according to statistics portal Eurostat, have more than tripled since 2002, going from less than 50 billion euros to over 153 billion euros in 2017, and imports grew similarly, from about 26 billion euros in 2002 to 76.7 billion in 2017. IFPMA, the global federation of pharmaceutical manufacturers and associations, reported in a 2017 study that global pharma production was worth almost $1 trillion and that the value added rate of producers was 45.5 percent, or $453 billion.

[media-credit name=”Ahmad Barclay & Thomas Schellen” align=”alignright” width=”590″][/media-credit]

While the Investment and Development Authority (IDAL) highlighted Lebanon’s pharmaceutical industry for its investment opportunities and reported that pharma sales reached $1.63 billion in 2015, the bulk of pharmaceutical trade is inbound. Lebanon’s pharmaceutical exports, according to the Najm system tracking Lebanese trade at the customs level, have yet to lift significantly beyond the $50 million per year range. Several leading members of the Lebanese pharma industry were not available or unresponsive when Executive approached them to inquire about the sector’s export development potential.

Beyond pharmaceutical products, Lebanon by all logic has the potential to increase the export and import of qualified human capitals—doctors, nurses, pharmacists, lab technicians, etc.—plus immense potential for health sector disruption by information technology—currently in the form of full digitization—as well as new or growing adjacent economic activities, from preoccupation with wellness and nutrition to medical and wellness tourism.

All in all, it seems practically impossible to overestimate how much health writ large could contribute to this nation’s GDP, beyond what is spend on health as share of GDP. Common categorizations apparently are unable to quantify the role of health in the economy in the way that agriculture and mining can be quantified. However, as Executive examined different health-related fields of the Lebanese economy, it appeared that the proverbial glass is still eminently fillable.

There is room, firstly, to further improve the medical system. Overlap and gaps need to be addressed and, in the management of financial assets that people dedicate to their healthcare, economies of scale could be deployed by introducing a system of compulsory medical insurance, argues Nadine Habbal, the head of the Insurance Control Commission at the Ministry of Economy and Trade.

Untapped potential

Then, there is the presence of ignored societal costs from the neglect of mental health. Arguably, the costs that result from the stigmatization and denial of mental health issues can have repercussions for the Lebanese workforce, including drops in employee productivity, impairment through substance abuse or depression, or mental affliction-related work absences. The resulting costs are staggering and could be reduced by investing more attention and resources into the treatment of mental disorders .

Outside of opportunity costs incurred by employers not securing comprehensive insurance packages or failing to address mental health, there are untapped potentials in Lebanon’s pharmaceutical sphere. This is illustrated by the newly revived discussion of medicinal cannabis, as well as currently untaken opportunities for research into and development of the medicinal potential of other local plants and herbs. In addition, the potentially lucrative fields of wellness tourism, medical tourism, nutrition, and wellness services from yoga to life coaching can all be advanced to realize better economic and health outcomes. Also, with regard to the ambitious Lebanese entrepreneurship sector, which has throughout the decade been striving to make the best of new opportunities in the knowledge economy, IT, and mobile applications, health-tech entrepreneurs tell Executive of unnecessary obstacles and missed growth opportunities.        

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In the bottom line, the health industry of Lebanon appears rife with opportunities that have not yet been fully taken advantage of, or that are still waiting to be captured. At the same time, very encouraging signals as to our health economy potentials are being sent by the health system’s improvements over the past two decades and by its duress-defying performance under conditions of worsening national poverty and inbound despondencies since the outbreak of the Syrian refugee crisis.   

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All this potential comes with the caveat intrinsic to all dealings with the market for medical care. The economics of health is much more than a matter of pure price and profit, in contrast to markets for goods and services that one can easily live without. As famed economist Kenneth Arrow wrote in the conclusion of a seminal 1963 paper on uncertainty and the welfare economics of medical care, “the limitations of ideal competitive behavior under uncertainty force us to recognize the incomplete description of reality supplied by the impersonal price system.”

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Economics & PolicyInflation

High oil prices and a weak dollar hurt the Lebanese

by Jeremy Arbid
written by Jeremy Arbid

It is August in Lebanon, which means stifling heat during the day, and humidity that hugs the skin late into the evening like a hot, wet blanket. Traffic jams choking major roads and garbage washing ashore make beating the heat at the beach less appealing, and, adding to the woe, a seaside lunch is becoming a little more pricey. A dollar in Lebanon is just not buying as much these days.

Consumer prices are on their way up. Lebanon’s inflation rate reached 7.6 percent this June in a year-on-year comparison of the consumer price index (CPI), a measure of a basket of consumer goods and services gathered by the country’s public bean counter, the Central Administration for Statistics (CAS). Since the start of 2018, however, the inflation rate has risen at a slower pace, at 3.1 percent.

There could be a number of contributing factors to year-on-year inflation. These include a slumping US dollar, a rise in the price per barrel of oil, and this year, to some extent, the implementation of new taxes that went into effect at the beginning of January.

In recent years, the US dollar has weakened. According to the US Dollar Index, a measure of the value of the US dollar relative to a basket of foreign currencies, the dollar fell from a high of $102.92 in 2016 to $94.49 on July 22 this year. Lebanon’s is a highly US dollarized economy, with the local currency pegged to the dollar, so the country has little room to maneuver regarding its monetary policy. A depreciated US dollar could mean imports from Europe to Lebanon become more expensive.

An additional factor contributing to Lebanon’s inflation may be the rising price of a barrel of oil, which leapt up by 54 percent since last June, when a barrel cost about $50. This June, the price reached almost $80. The price of oil and the weakened US dollar were the main reasons for Lebanon’s inflation in 2017, which the International Monetary Fund calculated at 5 percent, in its most recent Article IV concluding statement, published this June.

The elusive reason

To a lesser extent, tax increases that went into effect at the beginning of 2018 may be a factor in the inflation. The new taxes, which included an increase in the Value Added Tax (VAT), has affected prices on household consumer items, says Jad Chaaban, an economist at the American University of Beirut. Chaaban argues that the increase in VAT and other indirect taxes was the main driver behind rising inflation, and that the resulting rise in the costs of doing business had really hurt consumer prices.

Two other economists who Executive spoke with had not yet definitively pinpointed the reasons behind the inflation increase. Louis Hobeika, an economist at Lebanon’s Notre Dame University, expressed surprise at the increase, saying he thought that the year-on-year 7.6 percent inflation figure was a high estimate. He suggested looking to the central bank’s inflation rate (4.5 percent for the full year of 2017) for a more conservative indicator. Kamal Hamdan, of the Consultation and Research Institute, is still mulling over how to explain the upward trend. He argues that the inflation rate suggests something abnormal, and lists a few possible reasons, including the increase in the price of meat, fruits, and vegetables. But he said that the regulated price formula for fuel imports had somewhat tempered the effect of fuel prices on the CPI.

Prices are rising in Lebanon, and the country has not been able to boost economic growth for several years now. This summer, Moody’s, a credit rating agency, forecast only “a modest rise” in Lebanon’s GDP growth, at 2.5 percent this year, up from 1.9 percent in 2017. Textbook economics would suggest that higher inflation coupled with low economic growth could lead Lebanon’s economy to stagflation.

The higher oil prices and weaker US dollar point toward Lebanon’s year-on-year inflation rate as an imported phenomenon. Experience has taught us that Lebanon has a hard time insulating its economy from external pressures. It is possible that November’s reapplication of unilateral sanctions by the US targeting Iran’s oil exports could result in an oil price spike, which may push inflation even higher in Lebanon.

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Economics & PolicyIran deal

Iran showdown threatens Lebanon’s economy

by Jeremy Arbid
written by Jeremy Arbid

It is common knowledge that Lebanon is in an economic rut. The six-year war in neighboring Syria has negatively impacted the local economy, just as domestic politics, particularly the two and a half year presidential void, eroded confidence and piled on pressure. While government formation following May parliamentary elections has carried on through the summer, the expectation is that the next cabinet will at least partly endorse reforms promised at this year’s CEDRE conference in order to unlock donors’ pledges for infrastructure investment.

Commitments made at CEDRE, held in Paris in April, may be necessary to keep the Lebanese economy afloat—if waves from regional disturbances do not sink these plans first. A July report from credit rating agency Moody’s forecast only “a modest rise” in Lebanon’s GDP growth, to 2.5 percent this year, up from 1.9 percent in 2017. But the accompanying press statement also suggested that geopolitical unrest could damage confidence and disrupt Lebanon’s CEDRE dreams. Syria’s civil war may be all but over, but a potential showdown between the United States and Iran may hurl swells Lebanon’s way.

The Donald effect

In May, US President Donald Trump announced that his country would withdraw from the Iran deal, formerly known as the Joint Comprehensive Plan of Action (JCPOA), and would begin unilaterally reapplying sanctions against Iran that had been removed as part of the deal. American sanctions will be reinstated over two “90-day and 180-day wind-down periods for activities involving Iran,” according to the US Treasury Department website. The first wind-down period ends on August 6, with sanctions resuming on certain Iranian activities.

But it is the second wind-down period, which will end on November 4, that has greater implications for Lebanon and the global economy. This period will see American sanctions reapplied to key Iranian trading and energy activities, targeting: Iranian port operators, shipping companies and shipbuilders; petroleum-related purchases from Iran; provision of underwriters, insurance, and reinsurance; and Iran’s energy sector. On November 5, the United States will formally revoke government authorization for American companies to do business in Iran, and will reimpose sanctions on entities that were removed in 2016 from the SDN list—the Specially Designated Nationals list, produced by the US Office of Foreign Assets Control, which names individuals, groups, and entities whose assets are blocked by the US and with whom US nationals are generally prohibited from dealing. American and foreign entities currently doing business in the specified areas of activity are, according to an FAQ published by the Treasury, “advised to use these time periods to wind-down their activities with or involving Iran that will become sanctionable at the end of the applicable wind-down period.” Those that do not comply with the American directive could be sanctioned themselves or targeted by US law enforcement.

United we stand?

The United States wants to significantly reduce Iran’s crude oil sales. US Secretary of State Mike Pompeo has said the Trump Administration wants to curb exports of Iranian oil from some 2 million barrels of oil per day to “as close to zero as possible” by the end of 2018. But can this happen unilaterally?

If the United States is to pressure Iran effectively, it will need other countries to comply with American directives. So far, there have been mixed signals from governments around the world about following the lead of the US, and the private sector has its own interests.

Turkey has already said it may not recognize the reimposition of American sanctions. “The decisions taken by the United States on this issue are not binding for us,” Nihat Zeybekci, Turkey’s economy minister, said, in comments published by Hürriyet Daily News in late June. Turkey shares a land border with Iran and was allegedly facilitating gold transfers to Iran (gold is not registered in the banking system) to bypass sanctions.

Whoever is willing to cross the US and continue to deal with Iran, however, must also be able to protect themselves from American sanctions and risk a possible downturn in their relations with the US. It remains to be seen whether any countries are capable of doing so.  The Indian government has said it may not comply with unilateral American sanctions. India does not always align with the United States geopolitically, having struck some Russian military agreements in the past. But its private sector may have other interests. Likewise, despite European Union leaders wanting to keep the Iran deal alive, EU companies have been fleeing the Iranian business scene in droves because they do not wish to jeopardize their standing, assets, holdings, or activities in the American market. China is posited as one possible savior for Tehran, if the Europeans are unable or unwilling to salvage the Iran deal—but will China have the appetite to absorb Iranian oil and invest where Western companies pull out? A Lebanese senior public banking official told Executive that it does not seem likely the Chinese will be wholly capable of filling the void left by the likely European exodus, and speculated that because of ongoing nuclear weapons negotiations between the US and North Korea, and the specter of a trade war between the US and China, the Chinese may not wish to further antagonize the Americans at this stage.

The price of oil

Data from the US Energy Information Administration (EIA) shows Iran’s oil exports increased by 70 percent after sanctions were lifted. In 2015, Iran exported over 1.1 million barrels per day, and by 2016 it was exporting almost 1.9 million. Exports reached 2.13 million barrels per day in 2017, according to the Iranian oil ministry’s news agency, Shana. In July, Shana reported the previous month’s exports at 2.28 million. If the United States is successful in cutting down Iran’s oil exports, who can fill the gap to keep global oil prices stable?

It will not be easy to fill the supply gap produced if the Iranians are forced to give up market share, says Mona Sukkarieh, a political risk analyst and a frequent contributor to Executive on oil and gas topics. Sukkarieh says supply disruptions from other oil producers may make it difficult to cover an Iranian supply gap, pointing specifically to the ongoing political and economic crisis in Venezuela that has affected that country’s production and exports. Ups and downs in Libyan production has also proven difficult to address, she tells Executive. At the June 2018 OPEC/Non-OPEC meeting, it was agreed to boost supplies by bringing overall compliance to the initial production adjustment reached on November 2016 to 100 percent, after it had reached 147 percent in May. But the crisis in Venezuela, sanctions on Iran, further disruptions or declines in production here and there, possible geopolitical shocks, and so on mean that further efforts will be required. The dynamics will start to emerge toward the end of the year, in time for the next OPEC/Non-OPEC meeting.

Market disruption

If the Iranian oil supply to the market is disrupted, it could cost price shocks and keep the cost of a barrel of oil high. Reuters’ most recent  poll of oil analysts and economists (conducted and published in June) saw forecasts of increased future oil prices. The respondents thought the cost of oil would stay above $70 per barrel, citing the same reasons that Sukkarieh gave Executive.

We still do not know what, if anything, was agreed upon at the Trump-Putin summit held in Helsinki in July, but any agreement between Russia and the United States related to the Middle East is likely to be partly shaped by Russian efforts to limit Iranian presence in the south and southwest of Syria. The Israelis have been lobbying against having any Iranian presence near their border for some time, and the country reportedly secured security guarantees from the US and Russia at the Helsinki summit.

A tripartite deal involving Russia, the United States, and Saudi Arabia may also be in the works. As long as the Saudis and Americans can work together regarding oil production, they might strongly coordinate global oil prices. The experience of 2014 and 2015 was that the Saudis were displeased with the ratcheting up of oil shale in the US. The increase in production due to shale extraction was accelerated by its technical feasibility, and this was instrumental in pushing oil prices below $50 a barrel. The Saudis, by maintaining their production levels, kept global prices low and sought to force shale extractors to halt their development of production capacity, which came at high cost to the kingdom and became unsustainable around 2015. After Trump’s inauguration in early 2017, there was sudden outburst of oil driven friendship between his administration and Crown Prince Mohammad bin Salman (known as MBS), who was appointed heir to the Saudi throne around the same time. It may be possible that a coordination of interests between Trump and MBS could be directed against Iran, to make sure there is a balance of whatever pressure is placed on Iran to limit oil trading in global markets.

Domestic repercussions in Iran as a result of the sanctions are also uncertain. It is true Iranians continue to protest the worsening economic situation in the country, but it is questionable and maybe wishful thinking by observers that this street pressure could lead to regime change. There may not be enough internal momentum. The Iranians are still trying to salvage the JCPOA and comply with its requirements. European analysts think that the country is playing the waiting game, and probably praying that Trump will not be reelected in 2020.

If American sanctions do curb Iranian oil exports, a rising oil price could prove positive for Lebanon given that so many of its nationals work in oil-producing countries in the Gulf and send cash back home in the form of remittances. However, higher oil prices could offset these gains by rising inflation and higher government expenditures for fuel purchases to produce electricity. It is still too early to say what will happen regarding Iran, or how Lebanon might be affected. In a worst-case scenario, any wide scale military confrontation against Iran by the US would paralyze Lebanon’s politicians and sink CEDRE plans.

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Economics & PolicyPharmaSpecial Report

Efforts to legally monetize Lebanon’s cannabis

by Jeremy Arbid
written by Jeremy Arbid

If you ask the farmers of the Bekaa Valley, they will explain that cannabis cultivation in Lebanon predates the establishment of Lebanon’s republic by generations. Located some 30 kilometers east of the capital Beirut and nestled between the western Mount Lebanon range and the Anti-Lebanon Mountains to the east, the Bekaa Valley has for a long time been the heart of Lebanon’s drug country. Now, advice from an international consultancy, a statement by Parliament’s speaker that legalization is being studied, and plans by a local university to establish a medicinal cannabis research center all might kick-start a new branch of Lebanon’s pharmaceutical industry.

High hopes

There certainly are credible dreamers invested in the idea. At a university campus north of Beirut, Mohammad Mroueh has high hopes. A professor of chemistry and expert on medicinal plants, Mroueh plans to one day establish a medicinal cannabis research center and study the potential of the Lebanese cannabis plant.

The intent to establish the research center at the Lebanese American University (LAU) was announced in late May, with Mroueh leading the campaign. In the time since, McKinsey & Company, as part of its five-year plan to boost the country’s stagnant economy, has advised Lebanon to legalize cannabis for medicinal export and manufacturing. In late July, Speaker of Parliament Nabih Berri tasked a committee to ready legislation to that end.

Under Lebanon’s 1998 narcotics law, cultivation of the plant is illegal. In 2014, the Internal Security Forces (ISF), Lebanon’s national police force, reported it had discovered 35 square kilometers of cannabis fields but that none were destroyed. The agriculture growing size of the Bekaa Valley, according to Ministry of Agriculture figures from 2010—the latest available—is 165,660 dunum (roughly 166 square kilometers). The ISF does occasionally raid cannabis fields, but the protection of many growers has been so powerful that crops are not destroyed, nor are shipments seized, to stem the drug flow.

But preventing research may just come down to plain old politics. The perspective at Lebanon’s Ministry of Public Health (MoPH), according to director general Walid Ammar, is that licensing for cannabis research is not a problem because research into anything is not prohibited. Obtaining the cannabis needed for study would be the complication because of its legal prohibition. Ammar says the law would need to be amended, and that would require a political will.

Studying the strain

Back at the LAU campus, Mroueh says the May announcement was the culmination of three years of proposal writing, building consensus with the university administration, and public relations efforts. He says the goal of the institute would only be to conduct research on cannabis. “Let us analyze the plant, and the government can make use of the results and can legalize or not. But at least allow us to experiment,” he adds.

Mroueh says the chemical composition of Lebanon’s cannabis is not well studied, and the ratio of the psychoactive tetrahydrocannabinol (THC) to the non-psychoactive cannabidiol (CBD) is not known. He also points out the plant is a special strain combining indica and sativa (two species of the plant). “But it is under-researched to the most basic level of genome typing, and it is unknown how environmental factors affect the quality of the strain [for example soil quality, rainfall, and temperature] and [how] those affect the strain’s chemical composition.”

To experiment, Mroueh would extract cannabis oil from the plant through a simple process. “I don’t expose the plant to heat. I soak it in alcohol and evaporate the alcohol using a special machine, and I’ll end up with cannabis oil.” He says different solvents can be used as part of the extraction process, and the flower can be saturated in the solvent for differing lengths of time, depending on the experiment. In testing the medicinal potential to treat cancer he explains the starting point is in vitro. “We take cells in the lab. We test cancer cells, from the brain, breast, or colon. For colon cancer and skin cancer we have an animal model.” Successful in vitro trials would lead to in vivo testing, meaning on the whole animal. Then, studying pharmacokinetics would determine how a newly developed drug would interact in the body, before the very long process of human trials can begin.

He expects researching Lebanon’s cannabis to span 50 years, requiring at least five academic disciplines including chemists, biologists, physicians, and later agriculturalists to work on growing conditions. “We may have some results within a couple of years, at least the chemical analysis.”

Mroueh also says LAU’s school of medicine at the Byblos campus already houses the necessary equipment required to analyze the plant. The proposal for the research center has internal buy-in, and Mroueh believes the center can bring visibility and donations to the university. Altogether he estimates a starting budget of $1 million to hire research staff and to have dedicated equipment for the center on a pro tem basis using the medical school’s pre-existing equipment.

There are only a handful of cannabis-focused research centers around the world, and LAU’s initiative could be amongst the first in the region if it gets the green light and the state amends the narcotics law. Other countries have amended their narcotics laws to allow the cultivation of cannabis for medical and research use. And cannabis-based drugs have already been approved for use in other markets as cancer treatments in the form of easing chemo-induced nausea, as an appetite stimulant for anorexic AIDS patients, to ease seizures from a specific form of epilepsy in children, and to ease neuropathic pain in diabetics.

Pharma potential

The use of cannabis for research and, possibly later, production of cannabis-based medicines comes with significant costs. These costs are generally associated with the infrastructure needed to cultivate the cannabis such as the cost of land or greenhouse construction, security, growing materials, electricity, costs to obtain government licensing and maintain compliance with regulations, insurance, costs to extract oil from the plant, and salaries for laboratory technicians. These factors need to be modeled in the Lebanese scenario and the costs can be quantified in a ballpark way.

While the initial costs might seem large to establish a research center, the potential benefits may be significant because they might result in a new branch of Lebanon’s pharmaceutical industry with high quality advantage in outcome utility. The state could also control the raw material by licensing who can cultivate and supply the cannabis. This also is not easily quantifiable at this point, but Lebanon’s caretaker economy minister, Riad Khoury, according to recent media reports, thought the export of cannabis for medical use could be worth between $500 million and $1 billion annually, if its cultivation were legalized.

Globally, the medical field is witnessing a huge change in cost structures related to treatments driven mostly by innovations in cancer therapy. Biotech drugs are becoming more expensive, and risky, more invasive drugs like those for chemotherapy are on their way out. We do not know how the market will develop in global terms for medicinal or other alternative medicines, but the past few years have shown it will grow.

Healthcare spending made up 7.5 percent of Lebanon’s GDP in 2017, according to MoPH data, comparable on average to other countries around the world. This 7.5 percent equates roughly to $4 billion. One tenth of this spending, which might be in the low hundred millions, could be diverted to medicinal marijuana derivatives and treatments.

Lebanon may not domestically become a multi-billion dollar market, but, if marketed and exported successfully, the local industry could reach that size. This might turn into a boon for the economy,  and to farmers and the agriculture sector specifically, which in 2016 contributed less than 4 percent to the nation’s gross domestic product according to World Bank figures. But this industry will take time to develop and researchers of the medicinal quality of Lebanese cannabis, medical practitioners, businesses, and growers will all need to be licensed.

Lebanese cannabis could become a cornerstone of domestic production at scale of medicinal drugs. But that is only if the state establishes tight control and specific licensing procedures for its cultivation,  including a level of protectionism for growers and manufacturers to kick start the industry.

The illegal growing of cannabis for use as a recreational drug is a problem of the gray and black economy. Pharmaceuticals wanting to market Lebanese cannabis as a quality ingredient of their medicines could not put Lebanese cannabis on the packaging if it were acquired illegally and outside cultivation standards. Substitution programs to root out illegal cultivation by financing and subsidizing alternative crops to wean the Bekaa Valley economy off cannabis were not sustainable because they did not yield enough to be a viable alternative. Cannabis, as a medical alternative, seems more reasonable if the political risks and legal obstacles can be resolved, and it could be a healthy high for the Lebanese economy.

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EditorialOpinion

On the frontlines

by Yasser Akkaoui
written by Yasser Akkaoui

The worst kind of despair is the type that creeps in over time and contaminates our behavior, our character, and our life, becoming routine. We have survived wars, but never have Lebanese felt as exiled from the world as during the last seven years, and this has created an anxiety that manifests itself in how we conduct ourselves.

The suffocation is both geographic and economic. Our inability to access our immediate geography is contradictory to our natural impulse. The economic crisis that is hitting Lebanon and the region is overwhelming. It has even affected how we raise our children. Families separate at the airport with a finality not seen before—our goodbyes have turned from “au revoir” to “adieu.”

Hands are clasped, not in a final goodbye, but in a desperate attempt to save those determined to stay, with tears of pity and calls to abandon a crippled homeland and accompany them out of this self-imposed exile in their own country.

Those who remain are plagued by their circumstances, from their dazed wandering they seem functional and happy, filling restaurants and roads, but on closer inspection the anxiety that governs their lives is clear to see.

We are in self-preservation mode, mimicking a normal life and functioning on autopilot without knowing when the light at the end of the tunnel will appear.

Meanwhile, our healthcare industry is helping us find our own sanity in light of the mental and physical abuse that form our despair. The men and women who make up this industry are on the frontline of our desperation. Without their selflessness, we wouldn’t have been able to survive the civil war and all that has come since.

As the world is deciding on how long to keep Lebanon under quarantine, with sanctions their latest prescription, we call on the administration to take action—or risk their own irrelevance when we ultimately overcome this disease.

And we will.

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Economics & PolicyOld vehicles

Lebanon’s bid toward low-carbon mobility

by Vahakn Kabakian
written by Vahakn Kabakian

With a global move underway to green the transport sector—in particular, to reduce the impact of privately-owned vehicles—analysts predict that the end of the age of the internal combustion engine is just down the road. The primary catalyst for this move toward greener options can be attributed to the Paris Agreement—a treaty struck among the countries of the world in a bid to save the planet from the impact of climate change, the main driver of which is anthropogenic greenhouse gas emissions. Around 15 percent of global gas emissions are generated by the transport sector.

For Lebanon, the case is slightly more alarming as seen from the results of several studies undertaken by the environment ministry and the UNDP. For example, around 25 percent of the country’s national greenhouse gas emissions emanate from the transport sector—more specifically, from land-based transport. The official number of registered vehicles in the country has surpassed 1.6 million, with 42 percent of these vehicles being older than 20 years and almost 60 percent being 15 years or older, bringing the number of outdated vehicles on Lebanon’s streets to nearly 1 million. This indicates an excessively high vehicle ownership rate (with 250 cars per every 1000 people), dominated by old vehicles. In 2016, Lebanon’s transport sector consumed 2.8 million liters of gasoline. The externality cost (the economic losses incurred due to air pollution, carbon emissions, congestion, and accidents) of this volume of gasoline is a staggering $3 billion per year, or around $2,000 per vehicle.

In addition to contributing to climate change, the transport sector in Lebanon is responsible for 93 percent of the country’s carbon monoxide, 67 percent of non-methane volatile organic compounds, and 52 percent of nitrogen oxide emissions—all of which are air pollutants that have a disproportionate impact at the local level. Lebanese living around major road axes and in large cities are exposed to these pollutants on a daily basis.

Back in 2015, UNDP  estimated the mobility cost in Lebanon—that is, the cost of one passenger traveling one kilometer in a passenger vehicle, including externality components of pollution, travel time, congestion, and accident costs. This study found an average (albeit conservative) mobility cost figure of 48 cents per km. It was also found that the most critical sub-indicator pointed to excessive energy consumption by the passenger transport sector (cost of fossil fuel). In fact, Lebanese consume close to 2.7 times more gasoline annually than the world average.

In an attempt to combine local benefits with global ones, a national mitigation plan for the transport sector was approved last October by the Council of Ministers. The incentive program aims to remove cars that are older than 15 years old and replace them with fuel efficient (hybrid and electric) vehicles. Replacing the 1 million older model vehicles on Lebanon’s roads would result in a 14 percent reduction of the country’s greenhouse gas emission by 2030 (nearly 1.1 million tons of carbon dioxide), a reduction in gasoline consumption by 466 million liters in total over a 12 year period, and less air pollution. Subsidizing these vehicles may also stimulate the market for new car purchases.

This spring, Parliament legislated the reduction or removal of customs taxes on hybrid and electric vehicles (EVs). This incentive was laid out in article 55 of the 2018 budget law. For private vehicles, customs and excise taxes are reduced by 80 percent for hybrid and 100 percent for electric vehicles, though the owner will still have to pay the registration and circulation fees (the latter is known as “mecanique”). For taxis/service vehicles, the customs and excise taxes are reduced by 90 percent for hybrid and 100 percent for EVs, in addition to a total exemption on registration and circulation fees.

This program does not contradict the efforts of the government to establish a public transport system. In fact, it complements the efforts underway to green the land transport sector. Both approaches contribute toward meeting Lebanon’s global commitments under the Paris Agreement, as well as the United Nations’ Sustainable Development Goals (SDGs) related to Good Health and Wellbeing (SDG 3), Affordable and Clean Energy (SDG 7), Sustainable Cities and Communities (SDG 11), Responsible Consumption and Production (SDG 12), and Climate Action (SDG 13).

As global markets shift toward hybrid and electric cars, projections suggest that the upfront cost of these vehicles will become competitive on an unsubsidized basis starting in 2025 and reach parity by 2029, a trajectory that will accelerate as battery prices decline. For Lebanon to secure a smooth transition, and renew its private vehicle fleet with hybrids and electrics, certain actions must be undertaken at the national level in the medium term. In relation to electric vehicles, the implications of the current state and quality of the power grid for the charging of these vehicles must be assessed, likewise the impact of this activity on the power sector (for instance, additional capacity requirements) and the proper alleviating measures (time-of-use pricing, for example). In parallel, it might also be useful to assess the current and required regulatory framework to further promote hybrid and electric vehicle usage, including building codes to introduce charging stations at home and in offices, where a certain percentage of parking bays must be installed with conduits to allow charging stations to be set-up.

Necessity dictates a plan for infrastructure and the provision of incentives to encourage and accommodate the growth of green mobility (including public transportation). A comprehensive plan must also be set out to prepare the electricity grid to accommodate increased demand generated by EV charging, and studies must be done to examine comparative emissions from EVs versus conventional vehicles. To be truly effective, this approach will also require the continued greening of the electricity grid, since an electric vehicle is only as clean as its power supply.

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Economics & PolicyQ&A

Promoting peace in the Mideast

by Jeremy Arbid & Thomas Schellen
written by Jeremy Arbid & Thomas Schellen

Executive sat with Matahiro Yamaguchi, Japan’s ambassador to Lebanon, to discuss the country’s humanitarian aid to Lebanon, April’s CEDRE infrastructure investment conference, and prospects for peaceful resolutions to the region’s conflagrations.

E   The Japanese Embassy is now funding a United Nations Industrial Development Organization (UNIDO)-designed project targeting job creation, productivity gains, and market access for furniture makers in the north of Lebanon. Can you tell us the motivation behind this initiative?

UNIDO made a well-designed plan, and we as [the] embassy aimed to see this project realized, because of the conditions of the host communities for refugees in Lebanon. We were attracted by a target to train host communities and include Syrian refugees. That idea was very suitable for us, [because] we not only want to help the Syrian refugees, but also [support] projects targeted at the development of host communities.

E   In Lebanon, one often encounters talk that host communities need to be supported before aid is given to refugees. Did you take steps to defuse such demands?

I know this claim. We always compare the situation in Jordan and Lebanon. Jordan has also received a lot of Syrian refugees, but they are hosting them where? In the Zaatari Camp, where a huge number of refugees live. This is very visible, and the UN can help systematically, and donors will see these refugees. But here in Lebanon, where are the 1.5 million refugees? We can see some unauthorized camps in the Bekaa, but these are small camps. All the refugees have penetrated into society so that our approach should be different from the project in Jordan. We should think about society itself. We should provide some funds for the [humanitarian support of] refugees, but we should at the same time take care of host communities.

E   Would the Lebanese furniture industry have any chance, in your view, to enter the Japanese market?

I think that, frankly speaking, this will be very difficult. One reason is that Japan is a very complicated market. We [have also] developed our own furniture industry which is very competitive. There would be a chance for a manufacturer who has very innovative design or material. For example, Swedish furniture is very popular in Japan.

E   Trade figures between Japan and Lebanon are driven by imports of cars and electronics to Lebanon, and in the other direction the flow is quite minimal and is mainly based on copper. Are there any trade deals that would make it possible for Lebanese goods to penetrate Japan’s market in greater numbers, perhaps in agriculture?

I noticed that Lebanese agricultural products are very good, but Lebanon is far from Japan, so the cost of transportation is huge. We prefer to have a very competitive price, so we mainly import from neighboring countries. That is the reality. I was very surprised that there are more than 200 Japanese sushi parlors in Lebanon; it is so popular here to have sushi that even the supermarkets have sushi corners and sell kits to roll sushi.

E   Could you imagine seeing a Lebanese food corner in a Japanese supermarket?

No. But there is potential for some Lebanese products, like wine. Some wines get a Robert Parker [ranking of] 93 or 94 points, and these can sell in Japan because we are the biggest importer of foreign wines. Also, I find the best olive oil in Lebanon, and I’m so happy about that. I personally have an idea to organize some kind of Lebanese fair in Japan in cooperation with the Lebanese ambassador in Tokyo.

E   How is the reputation of Lebanon in Japan today?

To be honest, ordinary Japanese do not know Lebanon at all. It is such a small land in the Middle East. Usually, the Japanese think about the Middle East as a whole and have some concept of areas, such as Yemen and Syria [because of the conflicts], and the Palestinian territory, but our embassy is now fighting to correct the perception [of the Middle East as war-ridden and risky] by saying that Lebanon is a safe place. We have removed a travel advisory, and now we see that, even though it is still in small numbers, Japanese tourists are coming back.

E   We saw that just under 2,000 Japanese visitors come to Lebanon every year, but is there much of a flow of Lebanese visitors to Japan?

Of course, as we can see from the number of Lebanese applying for a visa to Japan at our embassy. This number is stable and slowly increasing.

E   But is the image that Lebanon is a country in a crisis region and has historic and current issues with militia organizations still a concern in the development of bilateral tourism or visits?

Yes. [Looking at the history], we established diplomatic relations with Lebanon in 1954 and have developed business relations with Lebanon since then, and before the civil war the population of Japanese in Lebanon was 1,500 people because many companies had established presences in Beirut because Lebanon was the hub of the Middle East. All representatives of Japanese companies were stationed in Beirut. It was a nice city and allowed very good access to other Arab countries. But all that is gone. After the civil war [broke out], these companies moved to Bahrain and then to Dubai. The idea that Japanese businessmen have of Beirut is that they had offices here, but after the civil war they moved. They are still remembering the civil war, and now we are trying to inform them about the new reality in Lebanon.

E   In the relations between the Middle East and nations in the Western hemisphere, there is a main issue related to Iran. How does the situation look from the East Asian viewpoint? Is Iran a barrier for relations with the Middle East?

We are very neutral and have very good relations with Iran, but big brother is always pushing us [in certain policy directions]. For example, we are not naming Hezbollah as a terrorist organization, like America does. They are a political party in Lebanon, and so we consider it as a political party. We are not discussing them under the aspect of activity related to arms.

E   So can this be interpreted as a policy that aims for peace? As a country, you have chosen the road of peace even in designing your constitution after the end of World War II.     

Middle East peace is very important to us with regard to both the Palestinian issues that include Lebanon, which has received so many people of Palestinian origin, and also with regard to the peace process with Israel, which we are pushing for in our way, even as this situation is not easy, but rather very difficult.

E   In this context of enhancing peaceable structures in the Middle East—or specifically in Lebanon—is there interest from the Japanese business community in getting involved in infrastructure projects in Lebanon as were proposed under the CEDRE concept?

What is my concern is that the size of the [Lebanese] economy and the size of the projects is so small [by our standards]. Perhaps European firms, which are very near to this area, can more easily come here. Our engineering companies are highly developed nowadays, but the problem is that the labor cost in Japan is very high. How can we deal with such projects? [In some other cases] where we have very good and expensive technology, Japanese engineering companies will team up with a Korean or Chinese company to build something. This is our reality: The infrastructure projects in the [CIP] list in Lebanon are not at all sophisticated.

E   At the CEDRE conference Japan pledged $10 million in loans and part of the takeaway from the conference was that Lebanon’s government would commit to certain reforms. Do you have a wish list for how Lebanon should change its modus operandi in terms of public finance or in order to create stability?

The conditions that they promised to meet are very, very important. As I said, we are not so interested in the infrastructure projects as they were presented in the Capital Investment Plan, but one project outside of the CIP pipeline—which is not decided yet—is that we are providing $100 million [alongside] the World Bank in a rural road construction project. The World Bank has allocated $200 million to this project, and they are about to start the project which was already passed in Parliament. With our contribution, the total funding for this project will be $300 million in an infrastructure project that has a kick-start function for injecting money into the Lebanese economy. This is needed in the current situation. We, as the embassy, are trying very hard to see this project realized, and I hope that this will take place within this year. This is a very good project, and we already designed [it] with the World Bank. Thus it is different from the pledge at the CEDRE conference.

E   What are other things that Japan seeks to do to promote peace in the Middle East as one of the core regions of global conflict that exist today?

We are not a main player in this region and have realized this. But we want to make the situation much easier for discussing peace. This is our policy. For example, in the Palestinian territories, we have an industrial park in Jericho. It is Japanese funded in cooperation with Israel and the Palestinians. This is a kind of realistic project that is now exporting products [from this industrial park] to other countries.

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