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French Version

Thirteen years later, an expensive reconstruction effort is questioned (Daily Star)

Working class Lebanese overwhelmingly bear the DEbt burden
UNDP figures show that 32 percent of Lebanese have low living standards while 14 percent of the population holds 42 percent of the wealth

While precious few Lebanese commemorate the start of the civil war, which began this week in 1975, it is still unclear if the general population has benefited economically since the guns fell silent and the reconstruction process began in earnest more than 13 years ago.

A far cry from the buoyancy that prevailed three decades earlier - when Lebanon served as a regional banking and services hub - the country's economy now ranks among the poorest performing in the region, according to a recent study by Euromoney, which placed Lebanon in 139th place among 178 countries worldwide.

Experts agree that citizens are now benefiting from a massive upgrade in state services, such as electricity, water, roads and telephones. But as the government grapples with a spiraling $33 billion public debt (which accounts for close to 190 percent of GDP), Lebanese entrepreneurs and individuals are also paying some of the highest utility rates and fuel taxes in the world, while many of those services remain questionable at best.

Of course there is a myriad assortment of other problems: Growing unemployment, an increased cost of living coupled with static wages and, to top it off, vague budget data from an over bloated bureaucracy.

Massive post-war spending did create a temporary rebound which saw record 7 to 8 percent levels of growth, but those numbers fell dramatically to between 0 and 2 percent in recent years.

The government now faces international criticism from countries who donated billions to help it restructure its mounting debt, which continues to grow despite two high profile donors conferences. Those donors had been promised cost cutting reforms and the sell-off of state assets, both of which did not materialize due primarily, to political bickering among the country's top leaders.

The rapid reconstruction plan, which was sponsored by Prime Minister Rafik Hariri, failed to meet expectations in part because it was based on the realization of regional peace, according to Paul Salem, the general director of the Fares Foundation. "The plan made sense at the time, but then (Israeli Prime Minister Yitzhak) Rabin was killed," he said.

Yet, spending continued. Hundreds of millions of dollars were poured into new, loosely regulated independent government bodies, such as the politically affiliated Councils for the South and the Displaced. In addition, massive funding went into the military, while authorities failed to collect taxes and utilities. "The government did not fundamentally alter its approach quick enough to avoid the rapid accumulation of debt," he said. "It's like we threw a party and nobody came."
The cost of today's debt is felt most by the working class, he added, as the prospect for job creation, salaries and upward mobility have remained stagnant since the end of the war.

New Arab investments and the continuous flow of remittances from the Lebanese diaspora have kept the country afloat, he explained, while poor debt management, high input costs and a convoluted bureaucracy "make it almost impossible to do business."

Arab-Israeli peace, stability in Iraq and economic reforms in Syria are all sure to stimulate economic recovery, however much of the blame for today's stalemate emanates from within: "A lot of sectors need to be fixed up ... privatization should have happened 10 years ago," Salem exclaimed.

Saradar Investment House Research Manager Nassib Ghobril echoed that sentiment. "Peace or not, 75 percent of Lebanon's problems are domestic. What does cutting wasteful spending have to do with the struggle against Israel," he added. "We can't keep blaming others for our problems."

Ghobril also laments the lack of crucial government statistics, such as figures related to the national account which were recently published for the first time since 1974.

Like most local economists, he blames political interference for much of the delays in privatization and securitization, and says government waste is rooted in its size, as well as its role as the country's largest employer.

"We have 30 ministers for a population of 4 million. Imagine if France had the same ratio. That would make around 450 ministers. They would be the laughing stock of Europe," he said.

Still Ghobril lauded the post-war advantage of "clear rules and regulations," for the banking sector, a new anti-money laundering law, "higher GDP" and a "solid functioning financial structure." He said local banks possess $60.85 billion in assets and $49.3 billion in deposits, the later totaling more than double the country's GDP.

Much of this wealth is derived from the high interest rates that the government paid on Treasury bills, with banks prioritizing bond investments over those involving industry and job creation.

And banking secrecy laws mean such revenues could escape taxation, while a small, low-income shopkeeper will pay a host of occupancy-related taxes. Having a society replete with wealthy bankers and cash-strapped industrialists is not necessarily a healthy sign of development, according to Adib Nehmeh, the manager of a national poverty reduction project carried out jointly by the Social Affairs Ministry and United Nations Development Program (UNDP).

1997 UNDP figures show that 32 percent of Lebanese have low living standards, while 14.1 percent of the population - the highest income bracket - holds 42.7 percent of the country's wealth.

Nehmeh said the local monthly minimum wage has risen from LL90,000 at the end of the war to LL300,000 today, yet the "real value" of income, in terms of spending power, has stayed almost the same.

The increased availability of basic services, along with minor improvements in health care and education are offset by stagnant wages, rising immigration and growing unemployment, which currently stands around 11 percent according to conservative estimates.

Though statistics are scarce, Nehmeh maintains that today's lopsided wealth distribution is comparable to levels in the 1960's - the only other time that social conditions have been analyzed in Lebanon's history. He added that the period between 1965 and 1975 marked the highest level of prosperity for the greatest number of Lebanese. "I am optimistic. We don't have problems that can't be solved. We just need to develop relevant polices and implement them."

Beirut 26-04-2004
Habib Battah
The Daily Star

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