Lebanon is in a deep hole. Not only is its financial sector badly broken, but so is the state and indeed, its economic model. The country is now much poorer and more unequal. We are stuck in a poverty trap, and it will take generations, or a miracle, before the proverbial phoenix manages yet another rebirth.
 
This piece, like many written these days, is a search for how to shorten the time to resurrection. There is no easy answer. I will dare to argue that if there is a miracle, it would have to be an economic one. That it can only be engineered by civil society and citizens associations. And that it is unlikely to be of the sudden salvation type, but rather, that it would require several years of activism and organizational work to start showing progress. In the process, I will indulge in multiplying references to my recent work on related issues.
 
The starting point is to recognize that while the technical challenges facing us are really complex, a good governance system should be able to rebuild state services and progressively bring back prosperity, albeit initially from a much lower level, by focusing on creating a new path of economic growth. This is because Lebanon is now way below its potential – you just have to look at its education, infrastructure (minus electricity), and housing stocks, its productive knowhow, the connections abroad of its citizens, to recognize that current productivity is way below where it should be.
 
But we must live with the governance system that we have, even as we strive to improve it. The post-war oligarchic coalition has proven highly inefficient at policy-making, but also highly resilient. Pragmatism requires that to recover, we must search for a formula that can work even before governance improves. My goal here is to develop the proposition that progress requires as a starting point a credible vision for a new path of economic growth (more on this here).
 
Lebanon has an economy that has overshot in its collapse, now around $20b compared to $50b in 2018. Is there a credible outlook of a recovery? The Rafik Hariri formula cannot play-out again, as the reputation of Lebanon as a safe bank has now been lost and cannot be rebuild on shaky grounds. The older vision of the entrepôt of the Middle East is also gone, with that function now firmly based in Dubai. The remaining part of the Swiss-on-the-Mediterranean dream is tourism, which by itself is insufficient. The only growth elevator left is to produce and export goods and services to complement tourism. How society can get organized to do so is an essential question. There are many visions out there on how to do so. In my own vision of a new growth path, decentralization, care for the environment, and culture, would be the underpinning of a new path of a “knowledge economy of the sea and the mountains” producing high value services, high-tech manufactures, and agri-business (see my take here).
 
So far, despite a massive devaluation, exports have fallen instead of starting to rise. The first steps in any promising scenario must be to fix the electricity sector, re-open bank credit, and provide minimal state services. This could generate enough momentum to start reducing the brain-drain and capital flight (more on this here). Until state revenues rise sufficiently, securing the education sector, with the help of donors, is the top priority, as it is in the end Lebanon’s essential comparative advantage, which needs to be preserved to keep the possibility of a recovery alive.

Usually, we tend to think of stabilization as the first step to recovery. In this case, paradoxically, a credible vision of a future growth path is required to allow for the stabilization of the economy. In the financial sector, dividing up the humongous financial losses turned out to be a super-difficult task (more on this here). In retrospect, it is not surprising that the financial elite - large bank shareholders and depositors -would refuse writing off their assets within what resembles a liquidation procedure. It makes sense that they would rather wait and bet on a possible upside, even if at low probability.
 
If there was a credible growth plan, instead of dividing losses, adjustment would constitute a higher value organization that would also attract new money. A more hopeful future would allow the state to issue growth warrant to recapitalize the rich, while using national assets – the remaining reserves and gold, banks’ loan portfolio, and public properties, to support smaller middle-class depositors and pensioners. A broad stabilization coalition would then support the necessary restructuring of the banking system.  
 
The state has shrunk by ten-folds, from $10b to $1b. Public servant salaries have fallen by similar proportions. While you cannot have an economy without a financial sector, you cannot have a country without a state. Rebuilding the economy requires a functioning state, but rebuilding the state requires tax revenues and a functional economy. To get out of this chicken-and-egg situation, borrowing against future growth opportunities is the only way out. This would reduce the need for monetary financing which generates inflation. The ability to borrow anew for growth paradoxically reduces the required haircut on financial capital that is needed to regain creditworthiness (more on this here).
 
In fact, it can even be argued, albeit more speculatively, that economic progress is the necessary route to gradually improve governance itself. The next growth miracle can only take place through increased productivity and hard work. This will increase the demand for improved governance, as it cannot happen without it. A productionist path would empower labor unions, industrialists, and professionals over protectionist and rent-seeking merchants and bankers’ groups. These groups will demand a better application of the rule of law, social justice, and effectiveness - out of self-interest. This is a path that got started in the 1960s but was aborted by the extra-liberal policies of the 1970s, and later by the civil war.
 
But can we expect our current regime to facilitate such a path? On this, I would not be as pessimist as I am in the case of Egypt or Tunisia. Our political malady is different from theirs. In Egypt, a myopic autocrat fears that a dynamic private sector would pose a risk to regime survival. In Tunisia, intense competition among young political parties led to power-sharing governments, which as in Lebanon, proved impotent at making tough strategic economic decisions. Unlike Egypt and Tunisia, we do not risk ending up with a populist strong man who is supposed to solve everything but typically only makes things worse, as our suspicious communities would not allow that to happen – we are among the rare global cases of “a society against the state.”
 
Instead, our malady is the difficulty of coordinating the many oligarchs of our sectarian governance system. Our oligarchs are not opposed to the private sector. They simply fell in the pocket of sectors that do not have potential anymore – banking, real estate, commerce. A stronger push by civil society, unions, productivist associations can equally push them in other directions.  A growing economic pie would benefit their supporters, who would also push in this direction, even if as argued earlier, economic growth would also start planting the seeds for an evolution of the system.
 
How to get better economic coordination towards the goal of improved prosperity? I am a bit of a loss at this point and would have to conclude this article by leaving the question open for debate. What is clear is that at least two elements are needed.
 
First, a vision of a productive Lebanon should become much more real and visible. It should be articulated in all kinds of ways – in schools, the media, art, and political programs. Believing rationally that the economy can grow is the can opener to many of our ills. We have moved, whether we like it or not, from the Lalaland that outlasted the genie of Rafik Hariri, to the age of economics. We better start understanding better what this means. It is time to bring back the Phoenicians-the creators, inventors, and innovators!
 
Second, we need an effective conductor to bring the diverse veto-payers on board around important steps and decisions. The Emirs of the mountains are long gone. In more recent times, Hafez El-Assad played this role until his demise. Since then, the political elites spent their time buried in the search for the holy grail of the next “safa’a”, instead of solving priority problems one at a time. Hezbollah may have the firing power, but it does not have the will nor the skills to play economic cop. We are at a stage where it can only be the civil society that acts as a traffic cop. It has the power to do that, but this pushes the coordination question from formal politicians to civic leaders and associations. It can potentially be done, but it is a challenge. It is in the fact the most important challenge, as it is only progress here that can realistically speaking improve the functioning of the whole structure.
 
If the next demonstrations and social mobilizations start focusing on the real constraints to economic progress – a capital control law, a solution to the electricity problem and so on– this will create momentum to move to a fuller vision, and to start improving its credibility. This would in turn support finding solutions to the loss-distribution imbroglio, in ways that create the type of banking sector needed to support growth. As momentum build-up, monetary policy could start supporting stability. If enough progress is achieved, we could afford having a program with the IMF that improves Lebanon’s credibility abroad, without sacrificing program quality to the whims of IMF bureaucrats.
 
I want to thank, without incriminating, Joseph Bahout, Raed Charafeddine, Youssef Fawaz, Fawwaz Traboulsi, and Mohamad Zbeeb for conversations that have inspired this article.

As Lebanon struggles amid poor sanitation and collapsing infrastructure exacerbated by the unprecedented and ongoing economic crisis, October 2022 marked the first cholera outbreak in almost three decades. The near epidemic currently being witnessed illustrates the utmost need for adopting a Water-Energy-Food (WEF) nexus approach. The WEF nexus reflects a holistic, socio-ecological system perspective that values all three sectors equally and draws on the synergies among them.

مارك أيوب
 
أقرّ مجلس الوزراء الأسبوع الماضي خطّة الكهرباء بنسختها الثالثة، والتي سمّيت بـ«الخطة الوطنية للنهوض المستدام بقطاع الكهرباء في لبنان». من خلال هذا الإقرار، أزيلت عقبة أمام تمويل اتفاقيتي استجرار الغاز من مصر والكهرباء من الأردن مع البنك الدولي. حيث اشترط هذا الأخير وجود خطة مع جدول زمني محدّد قبل إقرار التمويل، كما تمّ ربط التمويل بتطبيق الإصلاحات، على أن تخضع الخطة لتقييم على مراحل لضمان التنفيذ وجدولة الدفعات. لكن إقرار الخطة لا يكفل أبداً وصول الكهرباء في ظلّ غياب الضوء الأخضر الأميركي حول إمكانية إعفاء مصر والأردن من مفاعيل قانون "قيصر" لتمرير الغاز والكهرباء عبر سوريا، وربط الأمر بطريقة أو بأخرى بنتائج المفاوضات الجارية لترسيم الحدود البحرية.

اقرا المزيد 

Marc Ayoub | Friday, November 2, 2021
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Energy, particularly electricity or fuel products, has proven to have the capacity to generate conflicts, and also play an important and under-recognized role in the dynamics of energy security in Lebanon.

Every time Lebanon endures a crisis, it is common to hear its people, and outsiders too, speak of Lebanon’s “resilience”: ever since the civil war, the Lebanese have believed in their power to “rise again like a Phoenix” as the common saying goes. And when they are unable to find a way out of their crises, the Lebanese still hold on to the belief that they will eventually be pulled out of the pit by outsiders – regional and Western powers. As the popular narrative goes, Lebanon plays a key role thanks to its unique cultural and religious diversity which makes it a model of coexistence in a divided region, and its importance as a host country for Palestinian and Syrian refugees; hence, Lebanon is a “red line” and will always be rescued by the so-called “international community.”

Yet, in the current context of unprecedented, multidimensional and existential crisis that the country is witnessing, and as the foundations of the post-war political and economic order are crumbling, no foreign power seems to be either willing or capable of stopping, or at least decelerating, the free downfall.  

علي أحمد، مارك أيوب | الأحد، ١٢ أيلول/ سبتمبر٢٠٢١

ضمن سلسلة مقالات الرأي “لبنان ينهار.. ماذا بعد؟”​

ماذا بعد رفع الدعم عن المشتقّات النفطيّة؟ كثُرَ التركيز على هذه الإشكاليّة منذ أكثر من سنة في لبنان، سواء من المسؤولين عن السياسات
النقديّة والاجتماعيّة أو من الخبراء والمتخصّصين. مع ذلك، لا يزال الحديث الطاغي لمواجهة تداعيات رفع الدعم عن المحروقات، والناتج عن إفلاس القطاع المصرفي وشحّ الدولارات المتوافرة لاستيرادها، محصورًا بالكوارث الإنسانيّة والاجتماعيّة التي سوف تطال الشريحة الأكبر من المُقيمين، في مُقابل المخاطرة بتبديد ما تبقّى من أموال المودعين. ما يوحي أن قضية رفع الدعم بشكلٍ عام تدور حول صراع مصالح بين طرفَين: المودعين وغير المودعين، وهو ما يحوّل هذه القضيّة العامّة إلى صراع فئوي يحيّد النقاش عن مسؤوليّة السلطة السياسيّة المولجة بإدارة شؤون المُجتمع وحمايته والنهوض بالاقتصاد، والمتنصّلة من مسؤوليّاتها على الرغم من مرور أكثر من عام ونصف العام على بدء الانهيار

Ishac Diwan | Saturday, September 4, 2021

The collapsing economy is bringing misery now apparent in every day’s life. To comprehend its scale, it is necessary to look at macroeconomic data. Recent data released by the World Bank and the Central Bank of Lebanon (BDL) provide estimates of the national and external accounts for 2020. These accounts make apparent two specificities of the crisis: A collapse in production, and an explosion of capital flight. These phenomena are related, and unless reversed, misery can only rise.

نديم فرج الله | السبت، ٣١ تمّوز/ يوليو٢٠٢١   

المقالة #١ ضمن سلسلة مقالات الرأي “لبنان ينهار.. ماذا بعد؟”

أدّى بيان ممثّلة اليونيسف في لبنان، يوكي موكو، إلى عاصفة إعلاميّة يوم الجمعة (٢٣ يوليو/ تموز ٢٠٢١)، بعد أن أعلنت أن معظم مضخَّات المياه سوف تتوقّف تدرّيجيًا عن العمل في جميع أنحاء البلاد خلال الأسابيع الأربعة إلى الستة المُقبلة، بسبب التدهور السريع في الوضع الاقتصادي، وتنامي الأزمة النقديّة، والنقص في تمويل شراء المحروقات وغيرها من الإمدادات مثل الكلور وقطع الغيار. وذكرت موكو أن هناك حاجة إلى ما لا يقلّ عن ٤٠ مليون دولار سنويًا للاستمرار بتشغيل مؤسّسات المياه

​Op-Ed #1 from the “Lebanon Nears Collapse: What’s Next?” Op-Ed series

UNICEF’s Representative in Lebanon Yukie Mokuo,  caused a media storm on Friday (July 23, 2021) in Lebanon when she declared in a statement that most water pumping will gradually cease across the country in the next four to six weeks due to the rapidly escalating economic crisis, shortages of funding, fuel, and supplies such as chlorine and spare parts. She stated that a minimum of $40 million per year are needed to allow the water establishments to continue operating. This news comes as a further blow to the crisis-hit country and adds to citizens’ list of life-threatening issues. Lebanon has been facing a series of crises since the beginning of 2020, which reflects the country’s decades’ long mismanagement .

كريم مرهج |الجمعة، ٣ تموز ٢٠٢٠ | #٢٦

في أوائل ستينيات القرن الماضي، صرّح ريمون إدّه، مع بعض المُبالغة، بأنّ لبنان أصبح دولة بوليسيّة. آنذاك كانت المُخابرات العسكريّة اللّبنانية (المكتب الثاني) المقرّبة من الرئيس فؤاد شهاب تلعب دورًا ناشطًا في السياسة، حيث كانت تمارس ضغوطات على وسائل الإعلام والنخب السياسيّة في البلاد، غالبًا عبر وسائل غير قانونيّة، بهدف تعزيز أجندة الشهابية السياسية والاقتصادية والاجتماعية، وكبت الأصوات المعارضة. وبالرغم من انتهاء هذه الحقبة، إلّا أنّ اللبنانيون لا زالوا يُعانون من قمع الحريّات المدنية، خاصّة الحق في حريّة التجمّع وحرية التعبير. تزايدت نسبة القمع في الآونة الأخيرة، وتصاعدت مؤخرًا بالتزامن مع تفاقم الأزمة الاقتصاديّة وظهور جائحة الكورونا في لبنان

مارك أيّوب | الأربعاء، ١٧ شباط/ فبراير ٢٠٢١
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ليس مرفأ بيروت الضحيّة الوحيدة للانفجار المدمّر في ٤ آب/أغسطس من العام المنصرم والانهيار المؤسّساتي الذي تبعه، بل تُعاني قطاعات حيويّة عدّة مثل الاتصالات والنفايات الصلبة وخدمات المياه، وغيرها منه أيضًا، وعلى رأسها قطاع الكهرباء. في حين أن الإنتاج الوطني قد انخفض بالفعل بشكلٍ كبير (حوالي ١٩٪ تدريجيًّا خلال الأشهر الـ ١١ الأولى من العام ٢٠٢٠)، فإن خطر مواجهة ساعات أطول من التقنين الكهربائي في الأشهر المُقبلة لم يعد مستبعدًا بعد الآن. وذلك للأسباب التالية

Karim Merhej and Ameera Dabbous | Thursday, February 11, 2021

The term “electronic government”, also known as e-government, first made an appearance in a ministerial statement in July 2005. The newly formed government at the time pledged that the performance of the public sector would be improved through the adoption of the latest e-government measures so that citizens’ rights and dignity can be respected and their trust in the state can be improved. Back then, Lebanon ranked 71 out of 191 countries on the UN E-Government Survey, a respectable score above the world average.

​جمال الصغير | الأربعاء، ٣ شباط/ فبراير ٢٠٢١

رسمت جائحة كوفيد-١٩ بداية حقبة من الصدمات النُّظُمية المتعدِّدة والمتداخلة، فأثّرت على قدرة الدول على التكيُّف مع المخاطر المناخيّة المتصاعدة والاستجابة لها. وفي العام ٢٠٢٠ انخفض الاستثمار في التكيُّف مع تغيُّر المناخ على الرغم من تضرر أكثر من ٥٠ مليون شخص بسبب تكاثر عدد الفيضانات وموجات الجفاف وحرائق الغابات والعواصف. وقد أثّرت هذه الجائحة بشكل سلبي على التقدّم الذي تمّ تحقيقه في المرحلة الأخيرة في مواجهة تغيُّر المناخ، ما جعل البلدان والمجتمعات المحليّة أكثر عرضة للمخاطر في المستقبل. لذلك لا بد من تعويض هذا التراجع والوقت الضائع عبر الإسراع في اتُخاذ الإجراءات اللازمة للتكيُّف مع تغيُّر المناخ الذي لا ينحسر مع جائحة كوفيد-١٩

Joseph Bahout| Friday, December 18, 2020

During the last year, an already weakened Middle East has witnessed stark challenges to its economic, environmental and structural foundations, thanks to COVID-19.

Declining oil prices went on declining at a steady pace, aggravated by a long-term global shrinking of demand; there was turbulence in the labor market, amid shortages of skilled imported labor due to the pandemic and the growing weight of public sector expenditures. This, in turn, translated into further public debt, growing deficits, and an opening up of public companies to private foreign capital.

In the last few weeks, the World Bank Group and the International Development community in Lebanon issued three important reports.

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Immediately after the massive blast that rocked the port of Beirut on August 4, the World Bank Group in cooperation with the United Nations and the European Union (EU) launched a Rapid Damage and Needs Assessment to assess the impact on the population, physical assets, infrastructure and service delivery. They estimated damages in order of US$3.8-4.6 billion, with housing and culture sectors most severely affected and losses around US$2.9-3.5 billion, with housing being the most hit followed by transport and culture. Priority Recovery and Reconstruction needs were estimated around US$ 2.0 billion, with transport needs highest followed by culture and housing.

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Joseph Bahout| Thursday, November 19, 2020

​The dialectic of rupture and continuity in foreign policy between the different US administrations has long been a classic issue. The Middle East is no exception here. It is actually one of the most recurring and prominent issues on the table.

كريم مرهج وإلينا قريشي|الجمعة، ١٦ تشرين الأول، ٢٠٢٠
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في ظلّ التحدّيات الخطيرة التي يواجهها لبنان، من حوكمة فاشلة، وانهيار اقتصادي، وانفجار مرفأ بيروت وما نتج عنه من أزمة إنسانيّة، هل يمكن للاقتصاد الرقمي أن يلعب دورًا في التغلّب على هذه التحدّيات؟

Karim Merhej and Elina Qureshi| Friday, October 16, 2020

تطوّرت المُجتمعات البشرية على مدار التاريخ، بدءًا من الصيّادين-الجامعين الذين أظهروا اعتمادًا قويًا على بيئتهم قبل نحو عشرة آلاف عامًا، إلى البستنة والزراعة حيث سمحت الأمطار والأدوات المُبتكرة بإنتاج ومداورة أنواع مُختلفة من المحاصيل وبشكلٍ مُستمر في بعض البقع الجغرافيّة، ممّا أدّى إلى نشوء مُستوطنات بشرية منذ ما قبل الميلاد بحوالي ثلاثة آلاف سنة

الثلاثاء ٤ آب، ٢٠٢٠

Karim Merhej| Friday, July 3, 2020

​In the early 1960s, the late Raymond Edde claimed, perhaps with some exaggeration, that Lebanon had become a police state. At the time, Lebanon’s military intelligence – the notorious Deuxieme Bureau close to then-president Fuad Chehab – was increasingly playing an active role in politics, exerting pressure on the country’s media and political elites, often on an extrajudicial basis, in order to promote the Chehabist socioeconomic and political agenda, and silence dissident voices. 

جاد يتيم| الخميس، ١٤ أيار ٢٠٢٠ | #٢٥

ا تقتصِر المَخاطر الناتجة عن انتشار وباء كورونا في مختلف أنحاء العالم على التهديد الصحّي والانهيار الاقتصادي فَحَسب، بل إنّ إرهاب الجَماعات المُتطرّفة العنيفة هو أبعد ما يكون عن الخمود، خصوصًا في دول الاتحاد الأوروبي

مقدمة

أقرّت الحكومة اللبنانية في اجتماعها في ٣٠ نيسان/أبريل خطة “التعافي المالي”، وتبع ذلك اجتماع بعد أيام في المقرّ الرئاسي في بعبدا مع رؤساء كتل نيابية لعرضها ومناقشتها. والخطة تحمل مُسمَّيات مختلفة فهي تارة برنامج للتعافي المالي وطورًا خطة إصلاحية وإنقاذية وأحيانًا اقتصادية. لكن بعيدًا عن التسميات وعن بعض الاختلافات في الأرقام بين النسخة الأصلية باللغة الانكليزية وتلك المترجمة للعربية، تحتوي الخطة على تدقيق دفتري للخسائر المالية الحاصلة في لبنان منذ عقود، وهذا التشخيص هو الأول من نوعه منذ تدهور الوضع النقدي والمالي

                                                    An IFI-GHI Commentary

Nasser Yassin and Shadi Saleh | Friday, May 8, 2020