By Georges Pierre Sassine, Olga Antoine Jbeili

A version of this article appeared in the print edition of The Daily Star on January 22, 2013, on page 7.

Political instability has become the norm in Lebanon. The country’s economic and political outlook seems to be tightly dependent on regional developments, especially in Syria. In 2012, Lebanon’s economic growth stood at 2 percent, falling significantly from an average 8 percent between 2007 and 2010. Analysts expect future growth of Lebanon’s tourism and financial services sectors to be negligible until a resolution is reached in Syria.

However, there is tangible hope in sight and Lebanon’s economic outlook can be improved regardless of the current uncertainty plaguing the country.

Risk and complexity are here to stay. Therefore, Lebanese businesses and government must learn to adapt. One approach is to identify global trends and find ways for Lebanese to leverage them.

For example, the U.S. National Intelligence Council, representing the 17 intelligence agencies of the United States government, recently published a report fleshing out global trends during the next 15-20 years. The NIC report highlights different scenarios of how the world could unfold, but also identifies megatrends that will likely occur under any scenario. Lebanese decision-makers should think and plan for the long term and find opportunities in these trends that are most likely to occur.

Lebanon’s economic outlook can be improved regardless of the current uncertainty … One approach is to identify global trends and find ways for Lebanese to leverage them.Georges Pierre Sassine, Olga Antoine Jbeili

One of the megatrends identified by the NIC is an increase of the global population by more than 1 billion people by 2030. This will put strains on food and water resources where demand for food will increase by 35 percent, and the global food production outlook will worsen due to climate change patterns.

Higher and volatile international food prices are already negatively affecting Lebanon – which imports more than 80 percent of the food it consumes – and will continue on driving up local food prices in the future. This will provide a unique opportunity for Lebanese farmers and entrepreneurs to expand domestic agriculture production and improve Lebanon’s food security. Specific measures include incentivizing investments in Lebanon’s agricultural sector, a strategic shift to high-yielding grains, crop diversification and developing irrigation infrastructure.

In addition, the growing demand for agricultural resources has also been driving countries such as Saudi Arabia, the United Arab Emirates, Qatar, Kuwait and China to acquire farming lands in foreign countries, mainly in Africa, in order to ensure their food supplies. However, land acquisitions have been leading to disastrous consequences for poor communities – as families are kicked out of the acquired lands – and attracting sharp international and local criticism.

The well-established Lebanese diaspora can then play the role of middleman and help make these land acquisitions more sustainable. They can facilitate cooperation and communication among foreign investors, international organizations, African governments and local communities ensuring more equal benefits to all parties involved. Lebanese can also play several roles across the agriculture value chain: Opportunities are not limited to the farming of acquired lands but also include food processing, agro-industrial and agribusiness services, traders and other businesses at multiple levels from the farm to consumers.

The Lebanese government can play a big role in enabling such opportunities to national businesses. Laying the groundwork for partnership with countries such as China and Gulf countries in Africa and stressing the involvement of African partners will be critical. Such cooperation will be an evolving process with few precedents but an opportunity that should not be missed.

The NIC report also suggests rapid urbanization in the developing world to be another megatrend certain to be witnessed. The volume of urban construction for housing, office space and transport services over the next 40 years could roughly equal the entire volume of such construction to date in world history.

This could have serious consequences for Lebanese construction companies, engineers and architects. While the construction industry, one of the most vibrant sectors of Lebanon’s economy, has traditionally focused on domestic and regional markets significant new opportunities could be reaped elsewhere.

According to the United Nations, 11 countries will contribute to 62 percent of the world’s urban growth by 2030 including China, India, Brazil, Mexico, Nigeria and the United States. Lebanese can and should play a role in helping serve the construction needs of urban formation and expansions in such countries. Demand in the Levant and Gulf countries will continue to come primarily from foreign markets for Lebanese developers, but diversifying to new growth destinations could set them up to unprecedented growth. The competitiveness of Lebanese businesses in these future markets can be improved if they start tapping today into Lebanese emigrant networks, chambers of commerce, Lebanese embassies and Lebanese banks which could facilitate access to credit for their expansion plans.

Fundamental changes to the mindset, capabilities and organization of Lebanese institutions are required.Georges Pierre Sassine, Olga Antoine Jbeili

These are a few illustrations of the myriad opportunities that Lebanese businessmen and policymakers can identify if they incorporate long-term planning in their decision process. Political instability is likely to persist and the only way to secure Lebanon’s future is to adopt a flexible, innovative and adaptive approach to policymaking. It requires fundamental changes to the mindset, capabilities and organization of institutions. Tools like scenario planning, policy gaming and horizon scanning should all be added to the decision toolbox in order to secure sustainable development for future generations.

In summary, growth and opportunity are possible for Lebanon if private and public institutions are redesigned for new times.

Georges Pierre Sassine is a public policy expert and a Harvard University alumnus. Olga Antoine Jbeili is a development economist and a University of Sussex alumnus. They wrote this commentary for THE DAILY STAR.

A version of this article appeared in the print edition of The Daily Star on January 22, 2013, on page 7.

(The Daily Star: Lebanon News: http://www.dailystar.com.lb)

Improving quality of life should be cornerstone of government policy

By Georges Pierre Sassine on January 03, 2013

A version of this article appeared in the January 2013 print edition of Executive Magazine, on page 56.

The government’s proposed wage scale hike has hit a dead-end as the debate rages over how the salary increases will be funded, whether by raising taxes or other channels. However, this is not the right question to ask. The fundamental question is: How do we improve the quality of life for Lebanese citizens?

LEBANON’S ELECTRICITY SECTOR BETWEEN REGULATION AND DECENTRALIZATION

By Georges Pierre Sassine

A version of this article appeared in the December 2012 print edition of Executive Magazine, on pages 78 & 80.

Rolling blackouts have become a symbol of the political crisis affecting the Lebanese government. According to the World Bank, Lebanese citizens incur on average 220 interruptions of electricity per year, which is the worst performance in the Middle East.

Today, electricity production stands at around 1,500 megawatts (MW) while demand exceeds 2,400 MW at peak times, resulting in rationing cuts from between 3 to 20 hours a day, depending on where you are in Lebanon. Although the government signed a $360 million deal to lease electricity-generating barges from a Turkish company in July, which is expected to generate 270 MW, this will mainly offset losses as restoration works are carried out on existing power plants.

Building a few facilities to bolster generation capacity should not be too challenging, knowing that China builds plants at the rate of one a month. Instead the problem lies in the sector’s governing system: Lebanon’s electricity sector is dominated by the state-owned Electricite du Liban (EDL), which has thus far proven inept in addressing the country’s energy shortfall.  

Moving forward, solutions to Lebanon’s electricity crisis are constrained by a limited government budget, a heavily subsidized electricity sector, low collection of electricity bills, an ageing infrastructure, human resources challenges and various interest groups resisting change.

Politicians are discussing various options, including different models of privatization and even the decentralization of Lebanon’s power generation. The fundamental debate drills down to two key questions. The first is a choice of regulation versus deregulation, which addresses the degree of government involvement in Lebanon’s electricity sector. The second is whether electricity generation should be centralized or decentralized.

These choices are in line with the debates occurring today in the global energy system. As such Lebanese policymakers can learn from the successes of others and adapt them to local conditions.
 

REGULATION VERSUS DEREGULATION

The electricity sector’s restructuring has featured on the Lebanese government’s agenda since 1998 when a revised electricity law emphasizing privatization was first proposed. Following that an electricity decree was passed by parliament in 2002, more than 60 consultant reports were prepared, and the Council of Ministers, Lebanon’s cabinet, adopted different policies in 2002, 2006 and 2010. But very little progress was made on implementing any of these initiatives due to disagreements across the political spectrum around privatization. Some believe that utilities are the business of the government, while others argue for different forms of private sector involvement — spanning from full privatization to various models of public-private partnerships.

The success of electricity reform in other countries is mixed. Success depends on the design and implementation of competition laws.Georges Sassine

The truth is that in Lebanon some form of private sector participation is inevitable. More than 20 percent of the country’s electricity needs are already covered by private generation. Due to crippling public debt, the Lebanese government cannot single-handedly provide the required investment to reform the sector. Complicating matters, any plans to directly privatize EDL would be difficult to implement in the short to medium term, as private investors would be reluctant to invest before operational and managerial capacities are improved.

As Lebanese policymakers continue their deliberations, they seem to be drawing little from other countries’ experiences. The fact is that the electricity industry in many countries has seen a movement from heavy state involvement towards a greater reliance on market processes. The main rationale being that competitive markets raise investments, improve efficiencies and lower electricity prices.

However, the evidence on the success of electricity reform is mixed. In countries such as the UK, Australia and Chile, liberalization reduced electricity prices by as much as 35 percent. Yet, deregulation caused, for example, Sweden’s electricity prices to spike to one of the highest in Europe. The key lesson is that deregulation’s success depends on proper design and implementation of competition laws. Getting market structure right at the opening of new power markets is crucial for the success of any electricity reform; this requires a deep understanding of sophisticated regulation and market dynamics in order to be effective.

Thus, as Lebanese policymakers consider various options for private sector involvement they need to understand the requirements to properly design and implement such a transition. Failure could lead to deteriorating electricity provision and higher prices.

CENTRALIZATION VERSUS DECENTRALIZATION

Another proposal put forward by Lebanese politicians suggests a decentralized electricity sector. The Ministry of Energy and Water would cede control to regions or municipalities. Supporters of such an initiative believe it will help tackle corruption, reduce political bickering and improve governance. However, this raises political sensitivities as some fear that regional electricity production could lead to political decentralization and, in a worst-case scenario, to the countries’ undeclared partition.

A hybrid centralized and decentralized system is possible. It is a matter of finding the appropriate mix that best suits Lebanon and the political will to implement it.Georges Sassine

In a centrally planned system, electricity is produced at large generation facilities, transmitted and distributed to millions of consumers over large geographic areas. It achieves economies of scale, and has been successful in providing consumers with a continuous and reliable flow of electricity. However, today the trend is reversing. Priorities have shifted, and the conditions that created centralized systems no longer hold true.

Renewables and distributed technologies emerged and are becoming more cost competitive, while policymakers’ concerns are increasingly focused on climate change and energy security challenges. This has driven energy planners in the EU and other nations to consider the transition from centralized to decentralized energy systems.

However, decentralized energy systems do not come without their challenges. Technical and engineering challenges abound when integrating large shares of distributed generation into the grid, and could adversely impact the protection and safety of the electric network.

Scoping the map, degrees of decentralization vary from country to country. Brazil has a strong centralized electricity system, whereas Canada’s is decentralized. India and Australia are currently transitioning from a decentralized to centralized structure. There is no unanimity on a universal model. Each provides different benefits and challenges, and needs to be assessed within the local context. In Lebanon, however, the motivation behind decentralization remains solely political and fails to account for technical, economic, environmental and energy security dimensions.

In its current form, Lebanon’s electricity sector already has some components of a hybrid centralized and decentralized model. EDL provides only 75 percent of the country’s electricity needs through six large, centrally controlled power plants; the rest is supplied through a network of small-scale backup generators. The only loophole is that these private generators are technically illegal and as such are not integrated into a wider regulated system.

A pragmatic approach would entail the Lebanese government leveraging the existing infrastructure of private generators across the country and adopting a policy of cooperation and coordination in the medium term, recognizing its inability to fully cover Lebanon’s electricity needs overnight.

In the longer run, a hybrid system combining the best attributes of both the centralized and decentralized structures is possible. It is a matter of finding the appropriate mix that best suits Lebanon and the political will to implement it.

In conclusion, some form of private sector participation in Lebanon’s electricity sector is inevitable under government oversight. But the success of public-private partnerships will be heavily linked to the design and implementation of competition laws. This is particularly pertinent in Lebanon considering existing draft anti-trust and competition laws have been left unimplemented for years on government shelves.

A realistic approach would also require the government to synchronize and leverage existing private generators. This is a stopgap solution until the most suitable mix of central and decentralized structure for Lebanon is agreed upon. However, this proposal and any other attempt to reform Lebanon’s electricity sector can only be meaningful in the presence of strong political will.

Georges Pierre Sassine is an energy policy expert and holds a master’s degree in public policy from Harvard University’s John F. Kennedy School of Government. He writes about Lebanon’s public policy issues at www.georgessassine.com

A version of this article appeared in the December 2012 print edition of Executive Magazine, on pages 78 & 80.

(Executive Magazine: a leading business, economics and policy magazine in Lebanon and the Middle East)

What is the current status of Syrian refugees? How is the Lebanese government responding? And what still needs to be done?

In the months ahead, one of the most important challenges facing the Lebanese government will be its ability to manage the influx of Syrian refugees.  Lebanon’s goal should be to fulfill its humanitarian responsibilities, while maintaining its national security and limiting socio-economic impacts on local Lebanese communities.  

What is the current status of Syrian refugees?

Every day, 2,000 to 3,000 Syrians are fleeing their homes across borders into Lebanon, Jordan, Iraq and Turkey. These four countries now host more than 400,000 Syrian refugees. At this pace, the United Nations expects there to be as many as 700,000 Syrian refugees in neighboring countries by the end of this year.

In Lebanon, the number of registered refugees has now climbed to 120,906 – even higher than in Turkey – but the real total is far larger, as many choose not to register. As the Syrian conflict drags on, the number of displaced Syrians entering the country will continue to rise.

About 78 per cent of Syrian refugees in Lebanon are women and children. The majority (64%) originates from the city of Homs – the rest originate from various Syrian cities: 8% from Damascus, 7.7% from Aleppo, 7.5% from Idleb, 6% from Hama, and 6% from other cities.

Syrian refugees are distributed across Lebanon. The majority are split between the North of Lebanon (53%) and the Bekaa (42%), while the rest is spread between Beirut (1%), Mount Lebanon (2%), and the South (2%).

How is the Lebanese government responding?

The flow of Syrian refugees has been raising tensions in Lebanon. Local communities are witnessing socio-economic and security implications. Petty crimes against Lebanese citizens are on the rise. Harassment of Syrian workers in Lebanon is growing. Members of the Free Syrian Army are believed to be amongst the refugees in Lebanon. Kidnappings of Lebanese citizens in northern Syria, followed by retaliatory kidnappings of Syrians in Lebanon, have added to the tensions, as did the assassination in Beirut last month of Brig Gen Wissam al-Hassan whose death was widely blamed on the Syrian government.

The challenge of the Lebanese government is to balance between its humanitarian responsibilities, and manage the political, security, and economic risks of the Syrian refugee crisis. It is no easy feat.

The Lebanese government has been partnering with foreign governments, as well as international and local organizations to provide shelter, food, healthcare, schooling and other services to displaced Syrians.

Fifty-two humanitarian organizations are working to support the growing number of Syrian refugees. Coordinated by the United Nations High Commissioner for Refugees (UNHCR), an inter-agency regional response plan was developed in which Lebanon is a part of. The UNHCR issued an appeal for almost $500 million. To date, only 30 per cent has been funded, and Lebanon received a portion of the collected funds.

The High Relief Commission (HCR) is leading the coordination and implementation of relief efforts on behalf of the Lebanese Government. Several ministries and institutions are participating in various efforts, including the Ministry of Social Affairs, the Ministry of Education, the Ministry of Health, the Lebanese Armed Forces, and the Internal Security Forces.

 
What still needs to be done?

Until Syria’s conflict is resolved the flow of Syrian refugees to Lebanon will continue to grow. The success of the Lebanese government in managing the associated risks hinges on its ability to secure adequate funding and logistical support.

On the eve of winter, the Lebanese government asked donor countries to contribute an additional $450 million to help them provide for the growing number of Syrian refugees in Lebanon.

The most serious issue facing displaced Syrians in Lebanon is the issue of shelter. Lebanon is ruling out erecting refugee camps as done in Turkey, Jordan and Iraq for political reasons. Instead, other options are being considered by the Lebanese government, including using abandoned buildings as collective shelters, paying Lebanese families who are hosting Syrian refugees, and covering the rent of some of the poorest refugee families.

In conclusion, the Lebanese government’s policy should be focused on managing future threats instead of solely reacting to them. In your opinion, how should Lebanon plan to respond to the growing number of Syrian refugees on its territory?

By Georges Pierre Sassine

A version of this article appeared in the print edition of Annahar Newspaper on October 20, 2012.

Lebanese politicians, economists, and businessmen are debating the recent government proposal to raise public sector salaries. However, the debate is ignoring the fundamental question of whether salary increases are enough to improve the quality of life of Lebanese citizens.

This article argues that salary increases alone are not enough to improve the purchasing power of Lebanese citizens; and suggests a series of reforms to reduce the high costs of living, including housing, food, and gas prices.

Unlock Beirut’s gridlocked north entry

By Maurice Obeid, Daniele Diab

A version of this article appeared in the print edition of The Daily Star on September 18, 2012, on page 7.

Getting stuck in traffic and complaining about it are daily ingredients of Lebanese life. Along the 30 kilometers between Jounieh and Beirut, the commute can last two hours. The price? On top of nervous meltdowns, idle time is costing the Lebanese economy upward of $2 billion a year in foregone opportunities. This is 5 percent of GDP.

With one vehicle for every two individuals, there are simply too many cars in Lebanon. Turkey, in comparison, has one car for every seven people. It doesn’t help that Lebanese public transportation is limited to shared taxis, or “services,” and unscheduled, rundown buses. The result is that travel demand, at 6,000 cars per direction, has exceeded the capacity of the northern highway to and from Beirut.

With current politics at a gridlock, the situation appears to be hopeless. But it is not. A yearlong study that the authors conducted at Harvard University, in conjunction with local and international experts, uncovered a solution.

It is not your typical scheme. It does not involve widening the existing highway. That would require getting rid of considerable commercial and residential encroachment, a politically impossible demand. It does not involve building a new highway. Billed at $1.2 billion, such a scheme would cost the state 6 percent of its annual revenue. It does not involve enhancing public transportation on the existing highway, as this would require a dedicated lane. The highway, which in some locations such as Kaslik converges to two lanes, lacks such a capacity.

The solution we propose is to rehabilitate the prewar railway path and dedicate it exclusively to public transportation.Maurice Obeid, Daniele Diab

The solution we propose, instead, is to rehabilitate the prewar railway path and dedicate it exclusively to public transportation. The appeal of using this passageway, which currently serves as a seaside relief road, is in its alignment with the highway and its proximity to residential neighborhoods and employment centers. We recommend implementing a high-speed bus system, with limited entry and exit points. In addition to fitting up to 11 times more passengers than would private vehicles, a functioning public transit system would go a long way in nudging the Lebanese toward shared transportation.

Specifically, Bus Rapid Transit, or BRT, offers the most practical hope for change. BRT provides faster service than ordinary buses. This is achieved by dedicating an exclusive path for buses, limiting the number of stops, and offering pre-boarding fare payment. Ease of access is made possible through a combination of a park-and-ride system and a dedicated shuttle scheme that carries commuters to and from the nearby suburbs in the Kesrouan and Metn.

If implemented well, as in Bogota, Colombia, BRT offers a fast and comfortable solution. And it is gaining momentum elsewhere as an idea. Rio de Janeiro is planning BRT lanes for the 2014 World Cup and the 2016 Olympic Games. BRT is also cost effective: While reaching the speed and capacity of rail options, it can cost as little as $80 million to build, compared to more than $400 million for rail.

BRT also offers added flexibility: Buses can be redeployed to the highway should increased demand on the dedicated path not materialize. And a damaged bus can be readily replaced while disruption along a rail path could cripple transit.

For Lebanon, there are significant benefits. Passengers can expect to commute from Jounieh to Beirut in under 30 minutes during peak hours. Studies indicate that an hour spent on the road costs the economy $4.5 per commuter, therefore reduced travel could save the economy between $2.2 and $3.4 billion, realized over a 15-year timeframe. An improvement in toxic emission levels would also result from shifts to higher occupancy vehicles. And finally, more people are expected to venture to and from the region. In a country with a geographically segregated population, a mass transit system increases the possibility for social integration.

Two main implementation hurdles, however, stand in the way. A key component of BRT is a dedicated and unhindered pathway. Currently, 11 percent of the old rail path is obstructed due to a combination of illegal construction and conversion into local streets. The government should provide resources to restore the continuity of the path.

If there is ever a cause that unites the Lebanese, it must be transportation … it is a public necessity for people of all political persuasions.Maurice Obeid, Daniele Diab

The institutional framework also needs to be revisited. Today, the Transportation Ministry heads public transit only in theory, with more than 98 percent of buses run by private individuals caught up in a patronage relationship with local politicians. To ensure expertise and scale efficiency, a private operator should run the BRT project through a fair and productive public-private partnership. The public-private partnership should be established through a transparent bidding process, focused on technical expertise.

For significant progress to materialize, transportation needs to become a government priority. That is unlikely to happen without people voicing concern and demanding an overhaul. The fate of transport may well rest on the work of grassroots movements that create the burning platform needed to necessitate change.

If there is ever a cause that unites the Lebanese, it must be transportation. Transportation is a matter of economic development because it moves people, goods and ideas. It involves social mobility, because it provides access to employment. It also involves quality of life and environmental sustainability. After all, we are talking about a main highway in Lebanon, a public necessity for people of all political persuasions. How ironic that for as long as the political process is stuck, so too will remain commuters on the road.

The solution is clear. It is a matter of making it happen.

Maurice Obeid is a management consultant with McKinsey & Company in New York. Daniele Diab is a trader at Morgan Stanley in London. While at Harvard University they conducted a yearlong study on transportation in Lebanon. They wrote this commentary for THE DAILY STAR.

(The Daily Star: Lebanon News: http://www.dailystar.com.lb)

By Georges Sassine

Lebanon’s paralyzed governance system is leading many to rethink its political structure. Opinions vary on the best path forward including federalism, other forms of administrative decentralization, and many others.

One solution put forward by analysts is the establishment of a Senate as declared by the Taef Agreement. The premise is that the Senate would represent the different religious groups while Parliament would be open for political representation away from sectarian quotas. Advocates argue that this measure would reduce confessionalism in the Lebanese political system, while maintaining minorities’ rights.

Elias Muhanna, Assistant Professor at Brown University, recently published a paper raising the key questions around establishing a Senate in Lebanon, and explores the different options related to a Senate composition, possible methods of election, jurisdiction, and its relationship to other government bodies.

Key Points from Elias Muhanna’s Paper

The idea of a Senate is not new in Lebanese political history. Lebanon observed a Senate alongside Parliament for a year and half in 1926 and was abolished on October 17, 1927 – because it was viewed as “too expensive, too slow, and too weak”.  

The Taef Agreement in 1989 called for a Senate but its vague formulation led to conflicting interpretations of the role it should play. The common assumption is that such a Senate would be headed by a Druze but no serious action has been taken towards its establishment.

Muhanna argues that the effectiveness of a Senate would depend on the way it is designed. He highlights the complex range of options available to set up a Senate in Lebanon – which I attempt to summarize in the table below.

According to Muhanna, the way a Senate is designed

“could potentially free the government from its legislative gridlock, ushering the possibility of issue-based politics and electoral laws that permit the emergence of liberal voices. [Or it] could prove to be a disastrous policy for Lebanon, one which would paralyze its government, adding new layers of costly bureaucracy and creating an additional arena for corrupt and reactionary politics.”

My Opinion

I personally doubt the success of establishing a Senate in the current Lebanese sociopolitical context. A top-down approach is unlikely to abolish confessionalism in Lebanon. Instead, a more effective method would require a longer term bottom-up approach allowing civil marriage, as well as reforming our education system as prerequisites to a more functional democratic model.

Muhanna’s paper is a must-read for all Lebanese. We must be aware of the pros and cons of a Senate system and consider it as a potential option moving forward.

However, before debating whether or not a Senate should be enforced in Lebanon, the immediate concerns of policy makers should be protecting Lebanon from a Syria spillover, reforming the electoral law, and appointing the members of the Oil and Gas commission.

By Georges Sassine

It is possible to make it easier to do business in Lebanon. One potential solution is to simplify the government’s bureaucracy and reduce administrative paperwork.

The Problem

While starting a business in Hong Kong requires standing in one line and filling one form, it takes weeks, if not longer, in Lebanon.

Currently it takes a company in Lebanon almost 2 years to enforce commercial contracts and 37 administrative procedures, compared to an average of 1.4 years in Western countries. This places Lebanon at the 104^th place among 183 countries worldwide in terms of ease of doing business, according to the World Bank. Lebanon lags behind countries like Papua New Guinea, Yemen, Jordan, and Sri Lanka.

Lebanon is competing in a 21^st century global economy with a 20^th century bureaucracy. This is hindering economic growth, making it harder for entrepreneurs to start new businesses, and making it less attractive for foreign companies to invest in Lebanon.

A Potential Solution

Fortunately, it is possible to make it easier to do business in Lebanon in a few simple steps.

Just by simplifying the government’s bureaucracy, eliminating waste and inefficiencies – as simple as it sounds – could significantly boost Lebanese businesses.

One potential solution is to consolidate all government agencies dealing with business into one Department with one website, one phone number and one mission: helping Lebanese businesses succeed.

Other countries are adopting similar initiatives. Even the United States – which ranks 4^th worldwide on the World Bank’s Ease of Doing Business Index – is pursuing a similar plan, including:

–  Merging Government Agencies: the USA will merge the six federal departments focusing on business and trade into a single department tasked with boosting American business and promoting competitiveness.

–  A One-Stop Shop Website: the USA will be unveiling a new website: Business USA. This site will be a virtual one-stop shop with information for businesses that want to begin or increase exporting.

This is one example of the kind of action to consider. In your opinion, what are other simple and effective ways to improve the business environment in Lebanon?

By Georges Sassine

In order for Lebanon to create jobs and grow its economy, policy makers should identify the sectors and industries that will have the highest impact on Lebanon’s economy.

One way to go about this analysis is to compare potential industries along three variables:

1. The first is the industry’s potential contribution to Lebanon’s economy.
2. The second factor to consider is how easily these industries can be developed. This includes capital investment requirements; the need for new policies and regulations; and the availability of local talent and infrastructure to develop these industries.
3. The third factor is the number of new jobs created by industry. Some sectors are more labor intensive than others, which is an important element to consider.

I attempt to map different industries Lebanon can further develop along these three variables considering both quantitative and qualitative measures.

Please help me refine this analysis with additional insight and data you may have.

A summary of key findings include:

IT & Media industry

● Description: Hardware and software; cyber security; new and traditional media.
● Economic impact: Arab World online platform ~$1B by 2016 and 276 percent growth; recent studies estimate that when Internet penetration rises by 10 percent in emerging economies, it correlates with an incremental GDP increase of one to two percent.
● Ease of implementation: Talent available; established Media industry
● Jobs created: high level skills required.
● Enablers: Infrastructure; remove red tape; VC funding and support.

Tourism

● Description: Healthcare tourism; and others.
● Economic impact: Healthcare tourism market ~$1.2B; 30% growth potential.
● Ease of implementation: available talent; facilities need upgrading.
● Jobs created: labor intensive.
● Enablers: Investments; infrastructure; remove red tape.

Agriculture

● Description: Traditional agriculture; new/added Value agriculture.
● Economic impact: Exposure to large MENA market; today 80% of Lebanon’s food consumption is imported costing $1.5 Billion per year.
● Ease of implementation: Moderate climate and rich soil; underinvestment in Lebanon’s agriculture sector; low political support.
● Jobs created: labor intensive.
● Enablers: Agricultural policies; investments; infrastructure.

Oil and Gas

● Description: O&G production; LNG, refining & exports.
● Economic impact: Uncertain yet, but neighboring country’s offshore finds ~$80 Billion by 2040.
● Ease of implementation: Limited domestic expertise; high investment requirements.
● Jobs created: the oil and gas industry is a capital intensive industry rather than being labor intensive.
● Enablers: Regulations and governance; transparency; investments.

Manufacturing

● Description: Machinery; food & beverages; pharmaceuticals.
● Economic impact: Lebanon exports a large number of sophisticated products but they constitute only 2 percent of total Lebanese exports. A focus on increasing added value exports could significantly increase Lebanon’s manufacturing industry contribution.
● Ease of implementation: low political support.
● Jobs created: labor intensive.
● Enablers: Industrial policies; infrastructure; financing.

By Georges Sassine

Lebanon needs to fight persistent and widespread corruption in order to restore the trust of Lebanese citizens and foreign investors.

One approach is for Lebanon to draw from the experience of other countries, including Tunisia. And a specific example is a new anti-corruption website recently launched by the Tunisian government, which Lebanon can imitate.

The Tunisian “Anticorruption-Idara” website allows any citizen or public employee to report cases of corruption by filing a form online. The identity of the informer remains confidential and anonymous.

Tunisian officials set up this initiative to counteract corruption, nepotism, cronyism, and other forms of injustice in their country’s public sector.

However, three specific issues are raised regarding this website. First of all, the Tunisian site was only published in Arabic, which excludes non-Arabic speaking entrepreneurs and investors. To be effective, Lebanon should then consider a multilingual anti-corruption website.

The second issue is around the credibility of the reports. Given the anonymity of these claims, this tool can easily be used to launch false accusations against individuals. An effective verification mechanism will then be needed if such a website is used in Lebanon.

The third issue that is raised is the amount of resources required to monitor, verify, and implement such an initiative. While the idea of a website sounds simple, it could require significant financial and human resources to carry it through. This is why Lebanon would need to better understand the requirements to launch a successful anti-corruption platform.

In your opinion, is this initiative worth considering for Lebanon? And how should it be designed and implemented to help reduce corruption in our country?