Saturday,21 April, 2018
Current issue | Issue 1389, (12 - 18 April 2018)
Saturday,21 April, 2018
Issue 1389, (12 - 18 April 2018)

Ahram Weekly

Boosting Lebanon’s economy?

Could loans agreed at the Cedar Conference in Paris last week be what Lebanon needs to achieve sustainable economic growth, asks Hassan Al-Qishawi

 

Boosting Lebanon’s economy?
Boosting Lebanon’s economy?

At the Cedar Conference in Paris last week donor countries and international organisations pledged some $10.78 billion to Lebanon in the form of soft loans, together with some $800 million in grants, announced Riad Salameh, governor of the Banque du Liban, Lebanon’s central bank.

The loans include a credit line worth $1 billion from Saudi Arabia, according to counsellor to the Lebanese Prime Minister Nadim Al-Manla.

French Foreign Minister Jean-Yves Le Drian announced 550 million euros of low-interest loans and grants pledged to fund investment projects in Lebanon.

Loans to Lebanon also included a World Bank loan of $4 billion to be paid back over five years. The European Bank for Reconstruction and Development pledged a six-year loan of 1.1 billion euros, and Qatar announced a five-year loan of $500 million.

Lebanese Prime Minister Saad Al-Hariri told Lebanese President Michel Aoun and parliamentary speaker Nabih Berri that “the success of the Cedar Conference is evidence of the political harmony in Lebanon and what potentially could be achieved for the sake of the Lebanese people when there is a will to achieve the country’s interests.”

During the Cedar Conference a set of recommendations for reform were announced. “We believe these recommendations are good for Lebanon, and they should be implemented,” Al-Hariri commented.

The recommendations make up a creative plan for reform despite their simplicity, said French Finance Minister Bruno Le Maire. “The strategy of the Cedar Conference is based on an investment scheme and structural reforms supported by various countries and international organisations. Investments and reforms should go hand-in-hand to revive Lebanon,” Le Maire said.

“The meeting of 51 country representatives, the World Bank, the International Monetary Fund and Arab and international financial institutions made the Cedar Conference a success,” said economist Fouad Al-Siniora, a former Lebanese prime minister and head of the country’s Future Movement.

“The conference is a positive step to help Lebanon end its difficult local, regional and international crises and to achieve good growth, decrease unemployment and provide better living conditions for the Lebanese people,” he added.

Al-Siniora said that Lebanon needed to lower its budget deficit and public debt and to achieve a surplus in the production of goods and services in order to regain the ability to compete in international markets. An environment encouraging investment should be created in Lebanon, he added, through the return of proper law-enforcement throughout the country.

“Despite the fact much of the money is in the form of soft loans with the participation of the private sector, these loans are exclusively allocated to infrastructure projects across Lebanon with the knowledge and cooperation of donor bodies. Naturally they will also be worried about how the money is spent,” Al-Siniora said.

“Lebanon has a chance to turn these loans into a tool for growth,” he added, referring to previous Paris-backed conferences on Lebanon including the Paris 1, 2 and 3 Conferences. “This time the conference’s title refers to the cedar tree. The world and the Lebanese people need to know that the country is serious about reform.”

The Cedar Conference also discussed investment schemes in vital sectors such as energy, water, infrastructure, the environment and education.

However, critics believe the conference will turn out to have the same problems as earlier ones, with loans eating up budget allocations and imposing additional taxes on the Lebanese people. “Countries in a similar situation to Lebanon present full economic plans and the amount of money they need. Lebanon lacked this strategy, and there was no sign of a proper four-year economic plan,” they said.

Some critics said Lebanon should have used loans from earlier Paris Conferences that are still frozen because the state has been unable to pay $600 million owing from previous projects. These frozen loans now total some $3.5 billion.

Lebanon’s economy is mired in problems other than civil strife, corruption and political turmoil that have negatively impacted the country’s tourism industry in particular, a major source of national income.

Lebanon is a regional platform for real-estate investment, the financial services industry, and tourism, and the country’s successes in these areas have made it dependent on imports, discouraging production and exports.

A middle-income country, Lebanon has maintained a fixed exchange rate for the pound and relatively high interest rates for many years. This enabled the Lebanese banks to attract savings, especially from Lebanese expatriates.

In addition to the country’s dependency on real-estate investment and tourism, such policies, coupled with land and energy scarcity, limited resources and various monopolies, resulted in inflation and high costs, ultimately weakening the country’s competitive edge in industry and agriculture.

However, Lebanon cannot forego such policies, as they have made it a safe haven for investors. It has one of the largest banking sectors in the world in comparison to the size of its economy.

Given difficulties in changing the political, geographic and human-resources realities on the ground, the country has no other choice than to develop its production capabilities, counting on the skills and education of the Lebanese people in the fields of technology, the media, design, the arts, renewable energy and medicine.

Lebanon should invest in building more renewable energy power stations in order to deal with the electricity cuts that now last three hours on a daily basis in some parts of the country.

However, many Lebanese politicians are now placing their bets on the petroleum and gas reserves in Lebanon’s territorial waters, believing these to be an opportunity to strengthen the country’s economy and enabling it to acquire more loans from the international financial markets.

Should Lebanon become a petroleum-exporting country in the region? Or should it become a hub for creativity, design, commerce and quality industries that depend on individual skills? For many, Lebanon should aim to become the Middle East’s answer to Hong Kong, Singapore, Switzerland and the Netherlands all in one.

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