Lebanon’s political deadlock burdens economy

Friday 01/04/2016
UN Secretary-General Ban Ki-moon in Beirut, on March 25th.

Beirut - Lebanon seems unlikely to sort out its political mess anytime soon despite pressure by internation­al institutions worried about the economic toll, which is raising fears about the country’s stability as the war in neighbour­ing Syria continues.
World Bank President Jim Yong Kim, during a joint visit with UN Secretary-General Ban Ki-moon to Lebanon on March 25th, expressed frustration at Lebanon’s political paralysis. Kim cautioned that good governance was essential to pre­vent conflict. The day before Ban had urged Lebanon’s political pow­ers to end the presidential vacuum “as soon as possible”.
Ban’s comments came 24 hours after a parliament session to elect a new head of state failed for the 37th time to secure a legislative quorum because of sharp rifts among political blocs. Hampered by sectarian tensions, Lebanon has not passed a budget since 2005 and has been without a president for almost two years, preventing vital legislation from being en­acted.
Electing a president, passing a general election law and voting for a new legislature were key recom­mendations in a road map for end­ing Lebanon’s economic ills pro­posed by the Ministry of Economy and Trade. These recommenda­tions were needed to “revive con­stitutional institutions”, according to the plan filed to the cabinet.
The dispute over a new election law has been going on since a 2009 vote produced a legislature whose 128 seats were divided between the Western-backed March 14 coa­lition and the Iran-backed March 8 coalition, with a few seats going to independents. Since the govern­ment failed to have elections in 2013, parliament extended its ten­ure twice into a full four-year term.
Following the revival of consti­tutional institutions, “a budget for 2016 must be passed but it should rely on a clear economic plan and a law governing public-private part­nership (PPP) to allow the private sector revive struggling public sec­tors, such as power generation and supply”, the Ministry of Economy and Trade plan advised.
“Lebanon needs a new president and regularity in the work of con­stitutional institutions to jump-start the economic cycle,” said Joseph Torbey, head of the Asso­ciation of Banks in Lebanon. “The Central Bank’s wisdom is sustain­ing stability in the Lebanese cur­rency at the time being.”
Parliament had a single legisla­tive session in December to pass banking and financial reforms and approve needed credits by interna­tional and foreign donors. “Other reforms are still on hold,” said Jacques Sarraf, president of the Mediterranean Businessmen Un­ion. “An example is the PPP draft law and updates to laws governing companies.”
Mohammad Choucair, chairman of the General Union of Chambers of Commerce, Industry and Agri­culture in Lebanon, said good gov­ernance in the country is needed to help resolve issues such as poverty and employment. “This is needed to avoid economic collapse and so­cial explosion,” he said.
Aid pledged by Kim and Islamic Development Bank (IDB) President Ahmad Mohamed Ali al-Madani focused on Lebanon’s 1.5 million Syrian refugees but included sup­port for the host country’s infra­structure. “Much of this aid needs to be passed by parliament sooner than later,” a source at the World Bank’s Beirut office said.
Lebanon is home to more than 1.2 million registered Syrian refu­gees in addition to a few hundred thousand not registered but liv­ing in the country, making them nearly one-quarter of the country’s population of 4.5 million.
The World Bank granted Leba­non a $100 million loan to support educational projects but a devel­opment package from the bank worth nearly $1 billion was delayed by the political deadlock. “As long as the vacancy of presidency per­sists, national unity and Lebanon’s standing will remain fragile and in­complete,” Ban said.
Kim said the World Bank’s board decided to take the $100 million from a fund used only for the poor­est countries and “provided today a very concessional loan for the ed­ucation sector, again to show our appreciation for what Lebanon has done in educating refugees here”.
“We have signed five agree­ments worth $373 million. There is another agreement that will be signed soon, God willing, in which the amount will be $400 million,” Madani said. He added that several projects were under way and “we expect that during this year there will be agreements worth $220 mil­lion”.