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Politics, economy are not same debate - hamade calls for radical dissociation of country’s 2 main woes (Daily Star)

Finance minister says he will bring realism to portfolio, slams ‘technocracy’ as a policy and vows dialogue with key players.

Economy Minister Marwan Hamade has called for a radical dissociation of the political debate from the economic and financial troubles plaguing the country. “It is possible,” said the minister, “we have either to convince everybody or force it upon them, otherwise we will face very difficult times and we will all bear the responsibilities of such actions,” he said.

In an interview with The Daily Star, Hamade said he feels confident that he can inject some political realism and objectivity into the ministry’s portfolio to cope, in the best possible way, with the problems facing the economy. “I think that technocracy is not a recipe for success in leading the economic policy of Lebanon,” he said.

The recently appointed minister, who doesn’t have the economic background of his predecessors, declared that he can make a difference by establishing a good dialogue with the different players of the socio-economic field ­ mainly the syndicates, trade and industrial associations and the different political parties, “whose attitudes finally determine the decisions that are added on the governmental level or ratified by the Parliament.”

According to Hamade, the Economy Ministry needs to follow the paths that the previous minister, Basil Fuleihan, has established to reform it. “On the foreign level we need to push ahead with the negotiations for the World Trade Organization accession, implement the Euro-Med agreement, and implement a stronger Greater Arab Free Trade Agreement with the Arab states. Internally, we have to find an area of consensus without which we will not be able to execute what we have committed ourselves to in ‘Paris II,’” said Hamade.

In response to a question from The Daily Star on what was happening with the vital privatization process, Hamade said it was being delayed by two main factors: internal dissensions and negative repercussions of the Iraq crisis on world and regional markets. “We have secured a period of grace due to the regional crisis and those who gave us their confidence and also their money in Paris II have realized that the general atmosphere in Lebanon, the area and the world was not favorable to the privatization process during the first six months of the year,” said Hamade.

However, according to the minister, the “clock has been ticking again since June,” and the government has once again engaged in the privatization process, which had completely stopped in recent months. “We will be faced in the next two months with drastic decisions where we will have to try to regain the lost time and then accelerate our decision-making process. We have either to test the market to see what would be the best obtainable deal, or find alternatives without delay, be it securitization or simply privatizing the management,” said Hamade.

The minister was nonetheless unable to specify a date for launching privatization.

Regarding the 24.7 percent deficit target that Lebanon promised to attain in its 2003 budget during the Paris II donor meeting, Hamade said that “the target will not be achieved since it currently stands at 37.4 percent.” He added: “We have to explain why we didn’t reach this target, attempt to close the gap as much as possible and take into account the figures of 2003, including the impact of the Iraq crisis, into structuring a convincing, realistic and objective budget for 2004.”

Asked by The Daily Star if there was a possibility that Lebanon’s credibility could be damaged to the point where the international community would not be willing to help because of the country’s failure to meet its deficit target or privatize its state-held assets, Hamade answered that the country’s reputation will be hurt if “we don’t make the effort and truly show that we are trying to improve our situation by restarting the privatization process, putting into practice the 5 percent tax on interest revenues and lowering the value-added tax threshold.”

The economy minister added that Prime Minister Rafik Hariri’s proposal to increase the VAT to 16 percent and cancel the income tax was “a negotiable one.” The prime minister is aiming through this suggestion to simplify the tax collection and reduce tax evasion by taxing expenses rather than revenues. “I don’t stick to the 16 percent. I would agree to 14 or 13 percent, only if the tax exemptions benefit the lower- and middle-income classes, so that we can create a real middle class in Lebanon,” said Hamade, adding that he does not agree with the total abolition of income tax since “its philosophy is a manifestation of social solidarity.”

However, Hamade reinvigorated his will to create a stronger Lebanese middle class by proposing to lower or exempt taxes for people who earn LL3 million or LL4 million, and not only LL1 million. “By reducing the income tax on lower and middle classes and increasing the VAT, we not only would create a larger middle class, but we would also have a better tax system, which would increase our revenues for 2004.”

The minister said that Lebanon should shift its electrical system to gas “immediately,” since it is a cheaper source of energy. “We have to seriously analyze what Syria can provide us with, see what Qatar or Egypt can offer and not rely on the possibility of finding gas reserves on Lebanese shores.” Electricite du Liban, one of the oldest Lebanese administrations, “needs reform to help lower our high production costs. It was done with Middle East Airlines and it can be done with EDL,” he said.
Hamade added that Lebanon would remain uncompetitive if industry and agro-industry continued producing products that were not sought by the market.

Beirut 01-09-2003
Tarek El Zein
The Daily Star

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