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Businesspeople fret effects of high-level spat - Economists say leaders must speed up privatization (Daily Star)

Bankers and economists warned of dire consequences if the country’s leaders fail to speed up privatization, administrative reforms and the country’s economic development.

“There’s a lot at stake if President Emile Lahoud and Prime Minister Rafik Hariri continue to fight over sensitive issues,” Chairman of Byblos Bank Francois Bassil said. He added that the poor performance of the government will undermine the achievements of last year’s “Paris II” donor conference.

Government projections indicate it will succeed in reducing the budget deficit to 25 percent, the level promised at the Paris conference, but it still has to secure the promised $5 billion from privatization and securitization, cut public spending and generate more revenues.

This bold program of reform prompted France, Saudi Arabia and other states to pledge $4.4 billion in soft loans to help the government reduce debt servicing. “To date, the government has not met its promises. The economy is in shambles and all the development projects the government promised have not yet been implemented,” Bassil said.

Bassil is one of many leading businesspeople who expressed their indignation over the current political and economic situation, which has been exacerbated by daily wrangling between the country’s politicians.

The president and prime minister are at loggerheads over many issues, such as privatization, economic development, construction of public schools and administrative reforms. At the request of the president, the Cabinet will hold two sessions next week to discuss all major pending issues.

Observers stress that the next Cabinet session may be the last chance to reconcile differences between Lahoud and Hariri. Bassil said that many banks are beginning to question the wisdom of buying Treasury bills and eurobonds at zero percent interest rates.

Commercial banks had agreed to use 10 percent of their deposits to subscribe to $4 billion in interest-free T-bills. The move is aimed at helping the government reduce debt servicing by $400 million a year. “The banks and the donor states have all fulfilled their promises. It’s time for the government to get its act together,” Bassil said.

Central Bank Governor Riad Salameh warned earlier that the public debt may reach $32 billion at the end of this year if privatization does not take place.

The chairman of Beirut Chamber of Commerce Adnan Qassar also joined the chorus of government critics. “If the government remains idle then the private sector will go on open strike,” Qassar said.

Economists are also concerned that postponing the implementation of the five-year program may lessen the positive impact of Paris II.
“Interest rates on T-bills have dropped sharply this year, allowing the government to reduce debt servicing,” economist Marwan Iskander said. He added that privatization is a key element in the government’s reform plan. “We should not look at privatization as just a means to get money. It will also show that Lebanon is serious about administrative reforms,” Iskander said, and criticized the argument that the government should only sell if the price is right.

The government receives $500 million annually from the cellular networks and wants to get a reasonable price for them to reduce the public debt, but many telecom experts say that the prices of second and third generation networks have declined in recent years. “It’s highly unlikely that the government will get a high price for the cellular networks,” one telecom expert said. He added that the government may keep 40 percent of the network and sell the rest to the private sector.

Hariri is in favor of securitizing the government’s share in the cellular networks. “The prime minister hopes to get $2 billion from securtization of the government’s share and another $1 billion from privatization,” the telecom expert said.

Beirut 16-06-2003
Osama Habib
The Daily Star

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