- 11
- Jan.
- 2024
If one wished to enumerate, for amusement, the hindrances to investment and economic development in the country, they would have a plethora of options. I'm not certain that the allocated megabytes for this section would be sufficient.
In a hodgepodge fashion, one can mention: closed, semi-closed or ajar administrations, turning formalities into a lost uphill battle. Then, the state budget barely foresees any investment expenses. Followed by the banking blockade that has crippled their economic role. Lastly, the "geopolitical risk," a sophisticated term that essentially refers to a faction of hotheads who believe that they are descended from the supreme Mullah.
But rest assured, we won’t attempt to reshape the world or, in the course of this article, fantasize about creating a business utopia akin to a certain Dubai. In a noteworthy anecdote, Dubai’s leader, Sheikh Mohammad bin Rashid, who used to visit Lebanon with his parents during his youth, shared in a 2019 autobiography, "I had a dream for Dubai to become like Beirut someday."
Setting aside these wistful longings, let's explore some avenues that could inject a breath of fresh air into the local economy.
One promising approach is to leverage projects financed by foreign entities, minimizing local authorities' contributions. While it might seem like an obvious strategy, the tendency here to procrastinate on such projects often leads to the frustration of the donors, reaching a point where their patience wears thin.
The approval process for each of these projects often takes years. Even with the green light, everything can come to a standstill for a project designed to boost a region or sector, engage local entrepreneurs and infuse liquidity.
Consider the major highway expansion project from Dbayeh to Tabarja in the North, financed by the European Investment Bank and crucial for the entire northern region. The concept dates back to 2006, but the project received approval years later. In October 2019, construction began, only to halt a few days later, with the onset of the crisis. Theoretically, nothing prevents the resumption of work, as the budget in euros is fully covered. However, it seems unlikely, as nobody seems interested in following up on this matter.
Countless projects, initiated at various times by international organizations, are no longer even worth quantifying, as they have been prematurely halted by local authorities without apparent reasons – be it due to negligence or the inability to derive personal gain. Among these projects are crucial endeavors, such as the establishment of a public transportation system, tirelessly championed by the World Bank for years, but ultimately thwarted by our leaders.
One can't help but wonder why these donors haven't given up in despair, persisting in their seemingly endless efforts. This includes a project endorsed by the European Investment Bank to enhance 700 km of roads, recently approved by the Parliament. However, approval does not necessarily guarantee execution.
In another instance, the postal service is currently in dire straits after multiple unsuccessful attempts at tendering, with its former operators now reluctant to make further investments. The root cause? Nothing out of the ordinary. The CMA CGM group, led by the Saadé family, consistently emerged as the sole candidate in each bidding round, only to be rejected because of the berryist Wissam Achour's apparent desire to secure the deal at a discounted rate without officially participating in the bidding process.
This impasse has adversely affected millions of individuals and thousands of businesses reliant on postal services. CMA CGM is involved for philanthropic reasons. Its revenues from such a venture would anyway be negligible if we consider that its reported net profit was $25 billion in 2022, surpassing Lebanon's GDP.
Let’s wrap up with the banking sector, which remains a focal point. It is widely acknowledged that banks are refraining from extending loans, even in fresh dollars, despite accumulating substantial deposits in recent years. The reasons behind this are twofold from a regulatory perspective. Firstly, a 2021 circular from the central bank mandates that banks must transfer 100% of the fresh dollars deposited in their local branches to their foreign corresponding banks, a measure aimed at bolstering confidence in depositors regarding the safety of their funds. Nevertheless, regulatory directives can be subject to modification, potentially allowing for a partial easing of this obligation and the introduction of new avenues for credit.
In conclusion, another obstacle lies in an existing law that allows debtors to repay their loans in Lebanese pounds at the official rate (LBP 15,000 per dollar). In other words, one could settle a 1,000-dollar loan with a sum of LBP 15 million. Unfortunately, our lawmakers, despite their well-known diligence, have yet to address this absurd law that hinders the provision of bank credit, precisely when it is most crucial for individuals and businesses, and essential for overall development.
Moreover, amending this law could release liquidity for banks, potentially enabling them to be more accommodating to their depositors. Everyone stands to benefit from this situation, and it might be this prospect that unsettles our leaders.
In essence, whenever a vital service is needed, our leaders seem keen to advise on how to manage without it.
nicolas.sbeih@icibeyrouth.com
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