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Tuesday 20th March 2018

Lebanon's Best Chance


James Watt

Mon, 04 Feb 2019 19:38 GMT

Lebanon's troubles and its small victories seem to develop so slowly that the wider world pays almost no attention. But it is a mercy for the country not to be in the breaking news category, for that usually spells bad news. The announcement on January 31st that agreement had at last been reached on the formation of a new government did however achieve some coverage, often from the usual geopolitical angle that focuses on whether Iran has extended further its regional influence through its proxy, Hezbollah. The conclusion that it has done is correct as far as it goes, in that Hezbollah slightly increased its already extensive grip on parts of the government structure.

The greater problem lies with the paralysing effect of zero-sum competition within Lebanon's sectarian system of government. The kind of behaviour that caused nine months of haggling over the exact composition of the new Council of Ministers, when the country was in desperate need of clear and firm policy change. The same weaknesses that have dragged the country down, economically and in terms of effective government, remain as unresolved as ever. The subordination continues of the true, objective national interest to factional priorities.  This is above all through Iran and Hezbollah ruthlessly using the openness of Lebanon's political traditions to wage their 40-year confrontation with Israel, and with any form of Western alignment, operating as a parasite on a tree that has long been sickening as a result. The general confusion also lays the country open to exploitation by corrupt interests, some local, and some (as in the grim period of Syrian military occupation from 1977 to 2005) in the form systematic racketeering conducted by its neighbour.
Ordinary Lebanese are disgusted by this, and now increasingly desperate as the economy slows to the point where, averaging little more than 1% growth over recent years, unemployment and hardship are spreading. Last year's elections gave little scope to express their frustrations. Their expectations of the new government are low. Yet the Prime Minister, Sa'ad Al Hariri, is a determined reformer. He gets it. He was instrumental in securing the pledges by international donors last April in Paris that put around $12 billion on the table, though most of it in loans which Lebanon, already with a debt/GDP ration of around 150% and set to rise sharply, cannot properly afford without radical structural changes. The pledges were indeed conditional on just that, something the delay in government formation has so far rendered impossible.

It is not clear how far the Prime Minister can get without a real change in the attitude of political factions to their national responsibility for good government, and for Lebanon's survival as a modern economy. All economists agree that the crucial sector to get right is the supply of electricity, still unsatisfactory almost thirty years after the end of Lebanon's devastating war. The problem is simply one of deeply entrenched corrupt interests, both within the governing structure and now, with the country's dependence on diesel-powered neighbourhood generators, in the commercial interests that benefit from not fixing the problem. The electricity sector devours 20% of government spending, something that could be put right relatively easily if the corrupt interests could be neutralised. Much will depend on the political skill of the Prime Minister and his allies.

The other sector to get right, equally devastated by corrupt short-termism, is IT. For a country with a well-educated population, entrepreneurial DNA and a natural place in the globalised knowledge economy, it is a scandal that Lebanon still suffers such poor internet and Wi-Fi provision, and such limited and expensive telecommunications. Private initiatives have reduced the deficiencies, despite government paralysis, showing what can be done. Meanwhile the sector which until recently was driving growth in Lebanon, construction of upmarket residential properties, has shuddered to a halt. There is too much of that type of building, buyers are no longer coming, and a glut will overhang the market for years to come. The loss of those construction jobs had hit the poorest sector of the population most, and with it the many Syrian refugees who were managing to get by.

Another piece of news from Lebanon which received attention recently was a $20 million contract signed with Rosneft, the Russian state oil company, to upgrade and operate an oil storage facility at Tripoli, a city in desperate need of economic stimulus. The small size of the contract was no deterrent to Western commentaries which, this time, saw the news through the prism of losing ground in the region to Russia. If it is not Iran, it is Russia. Lebanon can be forgiven for feeling it is not only the pawn of ruthless internal factions, but of competing geopolitical forces. In the past the factions have tried to exploit international rivalries. Some of that remains inevitable.  But the new government should be clear, as the Prime Minister undoubtedly is, that the time for such games is over. The international economic assistance Lebanon needs is there on the table, for now at least. Only the new Council of Ministers can decide the reforms that will meet the conditions attached, without the demeaning and unforgivable bargaining and horse-trading that has for so long paralysed policy-making in Lebanon.

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Middle East