|Bank chief says economic revival out of the question (Daily Star)
|Notes country runs risk of embarrassing paris II donor countries in process
Points to privatization as preferable to operating companies like Electricite du Liban at such substantial losses
Lebanese Canadian Bank Chief Executive Officer (CEO) George Zard Abou Jaoudeh characterized the proposed 2004 budget as a parody that would fail to lead to any real economic resurgence and would cause great embarrassment to all the Paris II participants who bestowed their vote of confidence on Lebanon."
Sadly a more ambitious budget will never see the light until a comprehensive economic, financial and administrative reform project is implemented," said Abou Jaoudeh during a conference at the Press Club in Beirut on Wednesday. "With around 90 percent of the budget dedicated to debt servicing and public sector wages, an economic revival is out of the question."
For Abou Jaoudeh, the solution lies in the combined drive for privatization and the reduction of the public sector. Contrary to popular belief, he said, a leaner and more efficient public sector, with a greater reliance on the private sector, would create job opportunities, and would offer better remuneration."With all respect to our financial and legislative bodies, there are no international, or even regional, hurdles whatsoever in going ahead with such a project," he said. "It only requires a bold decision, and its implementation on our part. The traditional increasing of taxes is no solution and will lead us to an impasse."
For example, Electricite du Liban has cost the government over $10 billion since 1992, whereas auctioning it off to the private sector, even at a symbolic $1, would have saved the treasury all those funds that could have been channeled to lowering Lebanon's growing debt."Our banking sector, by shying away from political squabbles, has achieved healthy results in 2003," said Abou Jaoudeh. "An unexpected rise in deposits despite the dire economic situation, lowering of interest rates and the 'cleansing' of bank balance sheets by settling unproductive loans were our greatest achievements."
"The new legislation, permitting overseas loans, has offered Lebanese banks new venues for investment and profit," he added.
"But the banking sector's greatest upcoming challenge remains the Basel II accords which haven't been finalized yet," stressed Abou Jaoudeh. "The biggest difficulty remains Lebanon's country rating, as this will determine the extent of measures to be undertaken for compliance with the said accords."
The Basel II accords are recommendations from the Basel, Switzerland, Bank for International Settlements. They provide official guidelines for financial institutions that standardize measurements of credit risk, market risk and operational risk. Despite inherent difficulties, Basel II and other regulatory compliance measures can give organizations a competitive advantage by incorporating a centralized infrastructure to properly control data management.
Abou Jaoudeh called on Lebanese banks to expand their markets to include all the Arab countries, and especially establish connections with the Lebanese diaspora to tap into their huge financial potential. Already most Arabs, following the events of Sept. 11, 2001, have transferred sizable amounts into Lebanon as a more desirable haven for their funds.
As for the recent zero interest loan of $4 billion to the Lebanese government, Abou Jaoudeh admitted that, despite the fact that the Lebanese banking sector always supported the government and did not regret the move, it would have been better if certain conditions were laid down, for example a ceiling for the public debt.
"We are at a phase where we cannot afford any further delays in implementing the appropriate solutions," concluded Abou Jaoudeh. "And unless our three top leaders reach a political agreement among themselves, we are contemplating an economic meltdown and ever increasing debt, not to mention riots by the working classes."
Ara Alain Arzoumanian
The Daily Star