Can Lebanon ever get its house in order?

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Retired Lebanese security personnel protest over feared pension cuts in the capital Beirut earlier this year, underlining the fragility of social peace in the country. (AFP)
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A man fixes the flag of the Lebanese Shiite movement Hezbollah along a brick hedge in the Lebanese village of Maroun al-Ras along the southern border with Israel on September 1, 2019, as fires blaze on the Lebanese side along the border following an exchange of fire between Hezbollah and Israel. (AFP / Mahmoud Zayyat)
Updated 09 September 2019

Can Lebanon ever get its house in order?

  • A new conflict would further strain parlous state of Lebanon’s political economy
  • Dire economic situation seen as reflection of the country’s many-sided crisis

JEDDAH: First, the international ratings agency Fitch downgraded Lebanon’s credit rating. Next, tensions on the border with Israel soared as Hezbollah let loose a barrage of anti-tank missiles. Finally, Lebanon’s political leaders declared “an economic state of emergency,” raising questions about the country’s ability to service its debts.

Sounds familiar? That’s because the more things change for Lebanon, the more they remain the same.

In an interview with CNBC last week, Lebanon’s prime minister Saad Hariri expressed concern that planned austerity measures such as a state hiring freeze and higher taxes on imported goods could lead to public demonstrations.

His warning followed a speech by Hezbollah chief Hassan Nasrallah, who said his fighters’ new focus would be Israeli drones that enter Lebanon’s skies, and that there would be “no more red lines.”

Experts say neither Israel nor Hezbollah can risk a return to the situation of 2006 when their month-long war claimed at least 1,500 lives and forced 974,000 Lebanese from their homes. But a new conflagration could still strain the parlous state of Lebanon’s political economy.

IN NUMBERS

  • 5.9 million - Estimated Lebanese population.
  • 3.2 million - People in need.
  • 1.5 million - Displaced Syrians in Lebanon.
  • 28,000 - Palestinian refugees from Syria.
  • 25% - Unemployment rate. (Source: UNHCR & Lebanon’s Ministry of Social Affairs)

Randa Slim, director of the Conflict Resolution and Track II Dialogues Program at the Middle East Institute in Washington DC, says a large military escalation, especially on the Israel-Hezbollah front, will accelerate an economic collapse.

“It is clear that both sides are interested for now in maintaining the ‘mutual deterrence’ equation that has been in place on the Lebanon-Israel border since the end of the last large confrontation between them in the summer of 2006,” she told Arab News.

The biggest difference for Hezbollah since 2006 is the significant combat experience it has gained from the battlefields of Syria. Thousands of Hezbollah fighters took part in the civil war there and helped turned the tide of war in President Bashar Assad’s favor.

“Hezbollah has the military capacity to inflict serious damage on Israel, but it is not in its interest to initiate such a confrontation while it is busy fighting Sunni militancy in Syria and Iraq,” said Imad Salamey, associate professor of political science at the Lebanese American University in Beirut.

“For Hezbollah and Iran, confrontation with Saudi Arabia and, to a lesser extent, Turkey is a priority.”




Lebanon is struggling even to keep its garbage under control. (AFP)

Slim argues that “the dynamics underpinning the state of ‘controlled’ conflict between Hezbollah and Israel have changed.”

“Israel now frames its conflict with Hezbollah through two strategic priorities: Rolling back Iranian regional entrenchment with Hezbollah being the linchpin of Iran’s regional enterprise; and preventing Hezbollah from developing a precision-guided missile arsenal,” she told Arab News.

 “Iran and Hezbollah see both this regional network of Iranian proxies and Hezbollah’s missile arsenal as an integral component of Iran’s forward defense strategy and Hezbollah’s mutual deterrence strategy vis-a-vis Israel.

“If both parties still see the costs and benefits of a limited tit-for-tat strategy acceptable, which seems to be the case for now, they will continue to test each other’s red lines through a limited and calibrated escalation strategy. At some point, either and/or both sides will come to the conclusion that this strategy is no longer working.”

The dire economic situation in Lebanon is a reflection of its many-sided crisis. The country has been struggling with one of the world’s heaviest public debt burdens, high unemployment, instability and years of slow economic growth. The banking sector, which is a critical source of finance for this small Arab state, has witnessed a reduction in deposits, especially this year.

Foreign reserves have plunged and continue to fall. A report released by the Lebanese Center for Policy Studies in February 2019 said the unemployment rate in the country is nearly 25 percent overall and 37 percent for those under the age of 25.

The World Bank says one of the key issues facing Lebanon is the economic and social impact of the Syrian crisis, now in its ninth year.

According to government and independent sources, up to 1.5 million Syrians have taken refuge in Lebanon since the conflict erupted in March 2011. An estimated 28,000 Palestinians from Syria have also sought refuge in Lebanon, in addition to the 174,000 longstanding Palestinian refugees from previous Middle East wars.

Beset by so many intractable problems, gross domestic product growth in Lebanon in 2018 fell to a measly 0.2 percent, down from 0.6 percent in 2017. Meanwhile, inflation averaged 6.1 percent, up from 4.7 percent in 2017.

The International Monetary Fund said last month that Lebanon’s budget deficit in 2019 would likely be well above the government’s target of 7.6 percent.

Salamey says Lebanon can at best mitigate the major repercussions of a crisis but cannot resolve its fundamental structural problems, including those associated with domestic and regional conflicts.

Furthermore, he says, the government cannot be held to account for its actions because of its confessional composition, which prevents an opposition from emerging to keep a check on its performance. Consequently, corruption flourishes and the economy suffers.




Lebanon’s Prime Minister Saad Hariri has warned of public unrest. (AFP)

Lebanon ranked 138 globally on the index of 180 countries and 13 among 22 Arab countries in Transparency International’s “Corruption Perceptions Index 2018.” The watchdog group said corruption was widespread; it is present in many levels of society and in the country’s institutions.

“Steps against corruption must be political so as to undermine sectarianism in the country through ‘deconfessionalization’ of parliament as stipulated by the Taif agreement,” Salamey said, “as well as through electoral reforms that can end the monopoly of the major confessional parties in favor of genuine opposition or the division of sectarian parties into smaller ones.”

The Taif accord, signed in Saudi Arabia in 1989, provides the basis for the ending of the civil war and return to political normality.

Salamey’s views are echoed by Slim, who says corruption in Lebanon is rooted in the structure of the political system that is based on the division of political and economic power among a few leaders of confessional groups.

“The strongest step to take against corruption in Lebanon requires a major overhaul of this political system. Needless to say, corruption in Lebanon is here to stay,” she said.

According to Salamey, the presence of a large informal economy undermines the ability of the state to increase revenues and develop the comprehensive infrastructure essential for efficient performance, for example in the energy sector.

“These are irreversible and deeply rooted problems and the country can only provide temporary fixes,” he told Arab News.

As for the latest austerity measures, Salamey says they will help, but they need to be complemented by political stability and incentives for investments and deposits. 

Slim points out that the Hariri government made a solemn promise to undertake economic measures before foreign governments and donor institutions announced a $11 billion infrastructure investment package at the 2018 CEDRE conference in Paris. “It is a fragile situation,” she said.

Clearly, Prime Minister Hariri has no illusions about the task that lies ahead. “Everyone is conscious there is a problem and everyone wants to take action,” he told CNBC’s Hadley Gamble. “The issue is how to combine all our efforts in one big package of reform that will come with all the things we need to do.”


UN tries to salvage Libya talks after Tripoli govt withdraws

Updated 20 February 2020

UN tries to salvage Libya talks after Tripoli govt withdraws

  • Salame was trying to convince the Tripoli delegation to stay in Geneva and resume indirect talks

GENEVA/CAIRO: The UN tried to salvage talks over a cease-fire for Libya on Wednesday after the government based in Tripoli said it was pulling out after a single day to protest against the shelling of the capital’s port.

Talks began on Tuesday in Geneva between the internationally recognized Tripoli government and its main rivals, the eastern-based Libya National Army (LNA), which has been trying to take the capital.

Late on Tuesday, the government said it would suspend its participation after the LNA shelled Tripoli port in the latest of several strategic plays by troops loyal to eastern commander Khalifa Haftar that have coincided with attempts to ease tensions.

Delegations in Geneva

UN Libya envoy Ghassan Salame was trying to convince the Tripoli delegation to stay in Geneva and resume indirect talks, a source close to the talks said and the UN confirmed.

“Delegations are still here (in Geneva) and Dr. Salame has a meeting today with the head of the GNA delegation,” said Jean El-Alam, spokesman for the UN Libya mission, referring to the Tripoli-based Government of National Accord. 

“The mission leadership is in contact with the GNA in Tripoli and member states to keep the momentum going.”

In a separate statement, the UN mission said it was “expressing its strong and renewed condemnation of the bombing of Tripoli’s seaport yesterday by the Libyan National Army.” 

There was no immediate comment from either side. 

Russian Defense Minister Sergei Shoigu met with Haftar and they discussed to resolve the conflict in the north African state, the ministry said in a statement.

They agreed a political settlement is the only option for Libya, according to RIA news agency.

Shoigu and Haftar also discussed “the important role of talks” held in Moscow in January as well as “the need to fulfil” terms agreed at an international summit in Berlin later last month, Moscow said.

Russian Foreign Minister Sergei Lavrov said on Wednesday that outside players should push both sides in Libya to sit down for peace talks.

“All those who in one way or another influence political or other forces in Libya should stimulate them to sit down for talks. The first steps in this direction were taken but now additional difficulties are coming up again,” Lavrov said while meeting his Jordanian counterpart Ayman Safadi in Moscow, RIA Novosti news agency reported.

Nearly nine years after rebel fighters backed by NATO airstrikes overthrew Muammar Qaddafi, Libya still has no central authority. The streets are controlled by armed groups, with rival governments based in Tripoli and the east.

HIGHLIGHTS

• Russian Defense Minister Sergei Shoigu met with Haftar and they agreed a political settlement is the only option for Libya, according to RIA news agency.

• Since the LNA marched on Tripoli nearly a year ago, fighting has displaced 150,000 people.

Since the LNA marched on Tripoli nearly a year ago, fighting has displaced 150,000 people. Both sides have support from an array of foreign governments, with Turkey supporting the Tripoli government.

The Geneva meetings have so far been held in different rooms, with Salame shuttling between the parties. Another round of talks is scheduled next week in Geneva.

The latest attack is part of an emerging pattern amounting to an apparent power play by the commander.

Haftar’s forces last month shut down Libya’s main oil ports as European and Arab powers and the US were meeting with his supporters in Berlin aimed at halting the campaign to capture the capital. 

In 2019, eastern military forces moved to western Libya just as UN Secretary-General Antonio Guterres arrived.

The LNA initially said its strikes on Tuesday had targeted a Turkish vessel bringing weapons. It later said it had hit an arms depot.

The port is the main entry gate for wheat, fuel and other imports for Tripoli and has also been used by Turkey to send military trucks and other equipment to its government allies.

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