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LEBANESE STALEMATE

Lebanon needs drastic changes but no one knows which ones

Author:

15.09.2020

Earlier this month, Lebanon marked its centenary. But according to Reuters, only one person dominated all local headlines that day. It was not one of the leaders of the country, not a local celebrity but a foreign national, the French President Emmanuel Macron, who planted a cedar tree (the traditional symbol of Lebanon also found on its coat of arms and flag) and visited the destroyed port of Beirut.

Moreover, Lebanese politicians, who would have allowed themselves fierce statements about foreign intervention, lined up to pay their respect to the head of the former colonial power.

A month ago, just two days after the explosion at the infamous Lebanese port that killed more than 200 people, injured 6,000 and left a million of Lebanese homeless, Macron was heading to Beirut in his plane. In the first days after the disaster, when Lebanese politicians were afraid to leave their fortified palaces, the French president wanted to inspect the ruined port and meet with the inhabitants of the destroyed neighborhoods.

His openness (Macron pushed his bodyguard away to hug a crying woman) and criticism of the Lebanese ruling elite impressed the people of Beirut. They even organized an online petition calling for the return of Lebanon "under the French mandate to establish clean and lasting governance." It is reported that in just an hour, the petition collected almost 60,000 signatures before it was removed.

Residents of Beirut expressed their attitude to their politicians by placing symbolic gallows with photographs of the country's leaders on the central square of the city.

The Lebanese are not willing to return to the colonial past but it looks like Lebanese politicians will not be able to manage a very difficult situation in the country without external support.

 

Who needs change?

Just a couple of days before Macron's second visit to Beirut, the Lebanese President, Speaker of Parliament, leaders of confessions, parties and movements made statements about the need to change the country's political system and turn Lebanon into a secular state. Moreover, none of them really likes the reorganization, since for decades they have been profitably exploiting the confessional division of power effective in the country since the last century.

The political system of Lebanon is based on communal and religious representation, which depends on the elites of these religious communities, who have enormous economic power. The country has a power-sharing agreement that helped consolidate peace between the conflicting factions of the 1975-1990 civil war. According to the agreement, President of Lebanon must be a Maronite Christian, Prime Minister must be a Sunni Muslim, and the Speaker of Parliament must be a Shiite Muslim. All 128 seats in parliament are equally divided between Muslims and Christians. The portfolios of the cabinet of ministers are also divided among the main ethno-religious groups in the country.

The system has created chronic paralysis of power, while religious leaders have created effective fiefdoms, playing on the fears of the population and using their official position to attract resources to their constituents in exchange for votes and loyalty. The situation is further complicated by Hezbollah, an Iranian-backed militia that has grown into a powerful political force and is sometimes referred to as a ‘state within a state’.

Remarkably, even the school textbooks on history of the country is not uniform, making Lebanese children receive education through the prism of their respective communities.

 

Everyone happy with the mess

The Mediterranean country with a population of almost 7 million people has been unable to implement political and economic reforms to manage its overwhelming debt and combat entrenched corruption, which is a product in part of Lebanon's complex religious and political governance system.

The recent explosion at the port, which is infamous as the most corrupt place in the country riddled with corruption from top to bottom, is a striking example. The port is not only corrupt, but also divided into spheres of influence between politicians and religious leaders. For example, the longtime head of customs service of the port is known to be a supporter of President Michel Aoun, while the boss of the port supports Saad Hariri, a Sunni leader who has served as prime minister on multiple occasions. Hezbollah and its Shiite ally, the Amal Party, led by the speaker of the Lebanese parliament Nabih Berri also have supporters in the port. As a result, the port is divided into factional estates, which do not necessarily work together, and sometimes are direct rivals. And government officials turn a blind eye at the port issues to protect their supporters.

The dispersal of power among various competing confessions suits everyone. For example, this allows politicians to say that various issues are outside their competence or influence, if something goes wrong, as then they can blame external forces. After all, there are many examples of such external interference.

“I am not responsible. I do not have the authority to deal directly with the port," Lebanese President Michel Aoun said a few days after the explosion and suggested that the disaster was a result of a "foreign intervention”.

Since the political system is based on the consensus of opinions of different parties and trends, no decisions can be made without general agreement. The result is a permanent stalemate, intermittently with acts of violence. If decisions cannot be made in government offices, they are taken out to the streets, gathering tens of thousands of protesters. This prompts the leaders of denominations and parties to call for the support of their external patrons to defeat their rivals, making Lebanon even weaker and more dependent on foreign powers.

Syria, Iran, Saudi Arabia, the US, France and other interested countries have been competing for influence in Lebanon since the end of the civil war in 1990. Therefore, they may well be unwilling to have a large-scale system change that leaves them in less advantageous position.

 

Stalemate all around

It is estimated that rebuilding the capital city damaged by the explosion will require $15 billion, or 28% of last year's GDP. This has undoubtedly exacerbated the economic collapse in Lebanon. Economists have long warned that Lebanon could face its biggest crisis since the civil war.

The Diab government formed earlier this year tried to develop a plan to get the country out of the worst economic crisis in three decades, but failed and resigned in August.

In January, the country's national debt rose to $92 billion (170% of GDP), which is one of the highest in the world, and has only been growing since then. Over the past nine months, the Lebanese pound has lost 80% of its real value.

The Lebanese are highly dependent on imports, which makes 60% of the goods they consume. The sharp jump in the USD exchange rate led to a significant increase in retail prices. According to the latest report from Credit Libanais, clothing and footwear prices rose 345% over the year.

 

IMF predicts 12% GDP decrease

Regular negotiations with the International Monetary Fund (IMF) on a $10 billion loan to the country have not yielded any result yet. The country was blocked from international debt markets. Lebanon's central bank began printing money uncontrollably, which further plunged the currency's value and fueled inflation that approached 90% of the annual rate already by June 2020.

The reasons for the failure of negotiations with the IMF are very trivial. The conditions for issuing loans are economic reforms and the fight against corruption, but none of Lebanese politicians wants to lose something without compensation.

First, the leaders of each confessional group view any deal with the IMF as a tool and an opportunity to strengthen their positions in the country's political system.

Secondly, Lebanese politicians are often monopolists in some sectors of the national economy. Therefore, external injections into this sector increase their chances of political influence. For example, the IMF demands reforms in the highly wasteful and corrupt electricity sector. The dominant position here is in the hands of Gebran Bassil, head of the Free Patriotic Movement. And he is not against compensation in exchange for supporting his candidacy for the presidency, which is now occupied by his father-in-law Michelle Aoun.

Thirdly, politicians do not want to personally pay a high price for the revival of Lebanon and seek to shift the burden of any recovery onto the population.

 

Scratch my back and I’ll scratch yours

A virtual donor conference hosted by the French president on August 9 has raised nearly $300 million in aid.

This is not the first time that Lebanon has been promised substantial assistance, but they are all stipulated by one condition - to finally carry out large-scale economic reforms. In 2018, about 40 countries and the IMF at a conference in Paris announced their readiness to provide Beirut with loans at a preferential rate and material assistance for a total of $11 billion. But in the end, Lebanon did receive nothing because of the same problem with the IMF loan.

The money collected on August 9 will mainly go to the purchase of medicines, medical equipment and food. Moreover, the Lebanese state bodies will not be involved in the process. Macron personally promised this to the victims of the explosion in Beirut. For these purposes, international humanitarian organizations will be involved.

Official authorities were warned that no one would play games with donors anymore. And the next donor conference in Paris at the end of October will be convened only when political and economic reforms are implemented. Lebanese officials were asked to form a new government within two weeks because a political setback would mean refusing foreign aid.

The countdown began from the moment of the second visit of the French President to Beirut on September 1-2. Moreover, the French developed a draft reform plan for the Lebanese and insisted that the Lebanese authorities consider the document as a guide to action.

Key requirements include changes in capital control legislation, the adoption of a law on the independence of the judiciary, reforms in the public procurement system, energy sector and customs, the creation of an anti-corruption commission and the fight against smuggling in ports and borders, etc.

 

Response pending

After reviewing the document that was handed over to the Lebanese government before Macron's second visit, the Lebanese leaders, one after another, expressed their agreement with the demands. They even stated the need to transform Lebanon into a secular state with appropriate changes in the constitution.

Usually, the candidacy of a new prime minister is discussed in Lebanon for months, or even years, but this time it took only a couple of days. It is quite possible that the diplomat, Lebanese ambassador to Germany Mustafa Adib is a compromise figure proposed by future donors. But the fact that the appointment was so quickly accepted by the country's rival religious and political leaders says a lot. The threat of sanctions from the international community seems to have had an effect.

Yet the figure of the new prime minister raises questions. For many years Mr. Adib served as an advisor to billionaire and ex-prime minister Najib Mikati, who faced charges of financial corruption last year.

Is Adib able to fulfill the difficult mission assigned to him? After all, among other things, he has no experience in public governance within the government.

In Lebanon and beyond, there is a growing awareness that the country needs a new social contract. The old one operating since 1990 not only failed to justify itself, but also caused permanent crises.

But in fact no one knows how to solve all issues once and forever - neither political parties and religious communities, nor opposition movements, nor the international community.

No one knows what lies ahead of the Republic of Lebanon in the future.



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