This paper seeks to provide recommendations regarding the long-term dispersal and management of aid funding in order to assist the Syrian people in rebuilding their nation following the cessation of major hostilities. The recommendations in this paper describe a framework to ensure any aid provision is effective, equitable, and realistic, while avoiding fostering aid dependency. This paper draws on international evidence to inform its recommendations, including the cases of Lebanon and Iraq, countries whose demographic composition, social structures, and typology of conflict share many similarities to that of Syria.
The paper does not attempt to detail the specifics of how different facets of assistance, such as humanitarian response, transitional justice, or Disarmament, Demobilization, and Reintegration (DDR) of fighters should take place; each of these—and similar post-conflict development areas—warrant their own analysis. Rather, the focus of this paper is on creating the framework and safeguards that will allow aid funding to facilitate these and other essential post-conflict activities in a manner that has the greatest impact and most equitable effect in a post-conflict Syria.
There are inherent challenges involved in compiling policy recommendations for a post-conflict environment that remains a distant hope on the horizon. The duration and intensity of the conflict, as well as the parties involved, will obviously affect circumstances relevant to aid funding following major hostilities. The political circumstances under which the conflict concludes will also have a large bearing on the willingness of various international stakeholders to fund a post-war Syria. While these realities cannot be discounted, there remain foreseeable issues relating to the mechanisms, safeguards, and considerations of aid that need to be studied and addressed in order to rebuild physical and governmental structures in a post- conflict era.
The past two and a half years have seen a surfeit of literary works and academic articles attempting to dissect the Arab uprisings. Yet few have focused on some of the region’s most autocratic regimes in the Gulf Cooperation Council (GCC) who have combined their vast wealth with an iron-fist to largely sidestep calls for reform and democratization.
Christopher Davidson’s latest book After the Sheikhs: The Coming Collapse of the Gulf Monarchies is an attempt to explain the complacency of the Gulf States in a time when their region clamors for democratic reform. At first glance, the work is a courageous addition to the debate about whether these notoriously opaque autocracies will ever succumb to demands for wider representation.
Despite its lack of any convincing arguments that portend the eventual downfall of the GCC monarchs, Foreign Policy named the book as one of it top ten for 2012, and major Western news outlets from The Independent, The Guardian, and The Huffington Post have given it a pass. The book has now been republished in a 2013 US edition.
Davidson sets out to paint an alternate picture of these sheikhdoms to the inclusive, progressive and benevolent projects they espouse. Much in the same way Howard Zinn’s seminal work on American history seeks to challenge the dominant narrative, he manages to use historical context to elucidate the intricacy of these regimes’ power structures. The author picks away at the use of both domestic and external soft power underpinned by the protection of Western nations and demonization of subversive influences, especially that of Iran.
His descriptions of economic diversification and the co-optation of Western academia and finance through strategic sovereign investments is a useful reminder of how these petro powerhouses have hedged their bets in seemingly every direction.
Yet, in trying to convince readers that any sort of regime collapse is imminent, or even eventual, Davidson’s case is flimsy, at best. For an academic, there is little empirical evidence of the heralded collapse of the poorer Gulf states, something the author believes could occur in as little as two years.
His main contention is that these undoubtedly authoritarian and oppressive regimes will be unable to support generous social spending programs and lose support from the majority of their population. This is based largely on a regurgitation of historical fact and press reports from the last five or so years, which reads like a rapid fire account of press clippings rather than a deep and accurate analysis of the GCC monarchs’ impending demise.
An empirical model explaining how and when the breaking point is supposedly reached as resources decline and the demands of local populations rise never emerges. Throughout, the reader continually feels as if the narrative will lead to one, but it does not deliver.
The only concrete scenario Davidson proposes is that the death of the current GCC monarchs will lead to the downfall of their regimes. Yet, while succession is an issue amongst these authoritarian regimes, the processes have historically been rather smooth, with the exception of Qatar with its feud amongst the Al Thanis.
The first two chapters (around half the book) are a historical overview with a few tidbits that could be interesting for those who have no previous knowledge of the region. But it will ultimately bore anyone who has ever lived or visited the Gulf for anything more than a holiday.
In the chapter titled “The Coming Collapse” he takes the reader through the pressures that regimes have faced since the uprisings spread throughout the region. One anticipates that he will at least offer some kind of scenario as to how all the inherent internal and external weaknesses will culminate in a systemic collapse, but it never occurs. Instead, Davidson tells of how the regimes largely weathered the storm through their usual combination of repression and largesse. Indeed, by the end of the chapter, and the book, Qatar even looks to be the outlier that will most likely survive his doomsday predictions.
The conclusion, where Davidson anticipates that the poorer states will fall, is only nine pages long and goes through another last gasp of recent incidents rather than any final structural analysis.
Even though Davidson has lived and taught in the Gulf, it’s suspect that he never considers the amount of actual vocal and vibrant support that many locals have for their rulers, much unlike the apathy and eventual anger of Arabs who eventually overthrew their autocrats. Like many other Western writers, he falls into Western ethnocentrism, overemphasizing social media as the factor that “crucially” drives subversive change amongst all Arabs, who he also seems to perceive as some kind of monolith instead of the fractured people they have proven to be.
Almost as a force of habit, the Western publications that heralded Davidson, as well as the work itself, take on an orientalist approach devoid of any critical analysis around the idea that all peoples will automatically prefer the uncertainties of democratic life to a comfortable state subsidized existence.
What they continue to miss is that one cannot expect to produce the kind of society-wide phenomena needed to effect a true transition resembling those from Tunisia to Yemen without a prolonged period of wide inequalities and discrimination between rich and poor, not the middle class and the uber-rich. Because, ultimately, people do not revolt when they are in a mall with a ski lift and can’t afford to buy the next iPhone. They rise up when they tire of loitering on the curb hungry and jobless as fancy cars with government plates pass by them by like the days of their lives.
First published in Al Akhbar English on June 21, 2013.
Every year Lebanon loses the population of a small village, about 3,500 people, not to emigration but to needless death from smoking-related diseases.
For all the furor around Lebanon’s current smoking ban, little is said about the simple policy instrument that has proven the most effective in reducing tobacco consumption and raising government revenue around the world: higher tobacco taxes. When you ask a Lebanese politician why our state does not apply this instrument and each year fails to raise excise taxes on tobacco, the immutable answer is smuggling. At first it seems a logical retort, and there is an historical precedence to back it up.
Lebanon once increased tobacco taxes as a proportion to pack price from the current 51 percent to 113 percent in 1999. Back then, the revenues of the Regie Libanaise du Tabac et Tombacs (Regie), Lebanon’s tobacco monopoly under the Ministry of Finance, fell by around half. The tax increase was rescinded when an “unstoppable” increase in smuggling jeopardized the Regie’s ability to pay subsidies to farmers who held onto land that was on the frontline of the war with Israel.
The “patriotic” argument for tobacco subsidies appears slim if one notes a recent Gallup survey whereby 88 percent of Lebanese would support dropping these subsidies in favor of a more equitable social safety net. More importantly, it is questionable if the Regie, which maintains a barter agreement with “Big Tobacco”, actually saw revenue drop because of smuggling when taxes rose.
What likely happened was that Big Tobacco intentionally lowered imports in response to the hike in tobacco taxes. Subsequently, the Regie, being close to tobacco firms, blamed smuggling as the sole cause of its troubles and succeeded in lobbying the government to overturn the tax rise. What’s more, Big Tobacco has a long and documented history of battling tobacco taxes in Lebanon as well as encouraging illicit trade.
It is telling that tobacco taxes have not risen since 1999 despite all the evidence that it would benefit everyone but those with vested interests. According to a recent study from the American University of Beirut, raising the average price of a packet of imported cigarettes from LL2,500 ($1.67) to LL8,250 ($5.47) would bring down consumption by 22 percent, even if smuggling increased by 200 percent. Indeed, the government as a whole would have gained 55 percent more revenue — $188 million for 2012 sales — from tobacco excise taxes by raising average prices to just LL4,750 ($3.21). This drop in consumption would result in 770 fewer Lebanese citizens dying from smoking-related diseases per year.
Given that cancer treatment makes up anywhere from 60 to 80 percent of the Ministry of Health’s annual spending, the effect it would have on its ability to address other public health issues cannot be understated.
The notion that nothing can be done about smuggling should also be stubbed out. Part of the tobacco tax revenue stream could easily be allocated to combat smuggling through better information and identification systems of tobacco products — unique barcodes, invisible ink, radio frequency identification and high-tech tax stamps.
In fact, smuggling has much more to do with corruption — whether it be petty bribes at borders or political involvement in illicit trade — than with prices. Egypt and Morocco are countries that faced similar problems of smuggling and corruption and also have tobacco monopolies. They increased taxation on tobacco with good success, witnessing substantial falls in consumption, rises in government revenue and positive public health outcomes.
In addition to the number of lives saved and money to be made, there is an added urgency to introduce higher tobacco taxes because the relevance of the indoor smoking ban introduced last year is waning. According to the Tobacco Free Initiative, a civil society organization, less than 50 percent of bars and restaurants were applying the smoking ban last month, down from 90 percent at the end of last year. Consumption is also on the rise, as state revenue from tobacco excise taxes in 2012 increased by a whopping 26 percent year-on-year from higher imports.
But, just like a cancer, Big Tobacco’s unfaithful arguments against tobacco smuggling still permeate the Lebanese body politic. Unless we start to treat it now, that cancer will eventually kill any policy reform, and many more Lebanese.
First published in Executive’s June 2013 print edition
The consequences of Lebanon becoming an oil or gas producing state have probably not registered among much of the public – consumed as they are by a lack of economic progress, the absence of basic public services, and crippling inflation that continues to decimate wages. Given successive governments’ track records in tackling these issues, people should be a lot more worried about these initial phases, which are already looking like a piece of Lebanese policy plunder.
Put aside the fact that Israel and Cyprus are far ahead of Lebanon in terms of exploring the very same waters that hold untold riches; forget that what has already been found could ignite another conflict with Israel. Instead, consider for a moment that a government that cannot keep good on its promises to its own public servants to pay them will have to manage up to a third of the economy’s size washing ashore. Yet, the government barrels forward nonetheless.
Now try to imagine how that will be managed by existing government structures.
At present, any oil or gas money coming into the government will, after some expected skimping off the top, go into the treasury. At that point it will first be used to pay off the interest on the public debt, which has basically become a cover for paying off the country’s banks that hold over two-thirds of it.
In turn, those banks will increasingly fund the real estate sector that brings quick and easy profits, and is now subsidized by the central bank to boot. This will continue to push up housing prices, which raises the price of everything else. With affordable housing unavailable, people are forced further away from where they work, forcing them to spend longer in traffic gridlock to get to jobs that pay them a pittance.
With whatever money left, the government will (hopefully) pay its public servants, then siphon off whatever is agreed upon to the different politically-managed funds and institutions such as the Council for Development and Reconstruction (Hariri and co), the Council for the South (Berri and co), and the Council for the Displaced (Jumblatt and co).
Assuming there’s more to go around, all the ministers who have been squawking for higher budgets can then be paid off and people can wait – as they have for decades – for the effects to trickle down.
And this is by no means a hypothetical scenario; rather, it is one that is already playing itself out.
In late February, the energy ministry launched the pre-qualification round for offshore oil and gas tenders – the first tangible action that starts the process of exploration of the coast.
In order to bid for any of the offshore areas where countless riches may linger, a consortium of companies must be set up encompassing at least three firms. While this has become rather standard practice from Brazil to the Persian Gulf, most countries ensure (or at least try to ensure) that a part of the consortium is of national origin. The fact that this has not occurred in Lebanon is likely the first step on a very slippery slope where foreign firms take advantage of Lebanon’s position as an untapped investment opportunity, rather than the other way around.
What most countries do when they start oil and gas operations is set up a national oil company (NOC) that, at the very minimum, can participate in negotiations or be part of bidding consortium. An NOC, even one that did not participate in the first bid round, would greatly increase the nation’s capacity to conduct and monitor operations in the field. The latter is important because large oil companies try to recoup their investments by extracting resources quickly, something that can damage oil and gas fields permanently.
An NOC not only benefits the country in the exploration and production, but also in the much needed areas such as refining the gasoline for cars or purifying gas for power plants, both of which weigh heavily on public and private budgets.
What’s more, the idea of an NOC has been touted by the minister’s own advisors on several occasions. Developing that company now, a few years before the oil tap starts running, would inspire some much needed confidence, because it could take over from the traditional government institutions that have proved so useless at managing sectors in the past.
However, those in a hurry to produce results and deal with consequences later do not always listen to good advice.
By default, some onshore jobs will be created as a result of any operation off the coast. But because there is no legal requirement to hire Lebanese companies, even for ancillary requirements, large international oil companies will likely argue that the Lebanese market is too underdeveloped to serve the sector. Instead, they will probably opt to use their economies of scale and massive global supply chain contracts for these services.
This not only means potential jobs are squandered. As money goes to foreign providers, our balance of payments – the difference between what money comes in and out of the country and the only major economic indicator that remains in the black because of remittances – becomes progressively worse as the sector grows. That means the country’s wealth is exported instead of being reinvested to grow the economy and create jobs.
As there is no national component to the consortiums, it will also make negotiations over what is cost oil (what companies can take to recover their costs) and what is profit oil (what they can then split with the government) even harder to negotiate, especially given whom they negotiate with.
When international oil companies come to the table they will talk to the Petroleum Authority (PA), the so-called independent regulatory body that was appointed last December to manage a notoriously difficult negotiation and monitor oil and gas contracts and procedures. The process of appointment took months because different politicians kept tossing out names of their patrons without realizing that there was actually a professional profile to be filled with some specifications.
What emerged was a six-person body with a member that was the minister’s advisor, another who used to advise former prime minister Saad Hariri and the current premier, and a third who had worked for the finance minister’s foundation. In any case, the energy minister signs off on contracts, not the PA.
And, when the negotiations are finally over and its time to pay the licensing fees to start drilling offshore, the action will likely be technically illegal.
When the maritime petroleum law was being put together, Lebanon’s politicians disagreed on who would manage the funds to be held in a Sovereign Wealth Fund (SWF). Seeing that Israel had found a massive gas deposit off the coast of Haifa, the Lebanese parliament decided to kick the gas canister down the road and add a clause that stipulates the SWF will have its own law. The idea of such a fund came from the Norwegian government that helped Lebanon draft the law.
In theory, and in Norway, such a fund would have built-in mechanisms to prevent money being used in a way that causes a resource curse, a phenomenon where an increase of natural resources can lead to lower economic growth, internal conflict, and increasing corruption – as if we needed more of those.
If you’re wondering how and why a government that cannot make progress on any major policy has been so keen to see the oil and gas issue through, remember that until today, the SWF does not exist. It took decades to pass the current offshore oil and gas law, years to put in place a PA, and a new election is (or should be) around the corner.
Bearing that in mind, it does not seem likely that an SWF will emerge in less than one year when licensing fees for exploration contracts are due to come into government coffers. Instead, that punctured chest of a national treasury, with all its political funnels attached, will have to do.
First published in Al Akhbar English on March 22, 2013
The Central Bank plans to spend $1.46 billion in hopes of jumpstarting the sputtering economy. In the first of our monthly roundtable discussions tackling lebanon’s top issues, We asked six experts whether it’ll work
A fter a year of internal security troubles, a poor tourism season and the closure of scores of restaurants and other businesses, Lebanon bid farewell to 2012 with a deficit in the balance of payments in excess of LL2 trillion and welcomed the new year amid fears that companies will once again be hindered by political and security challenges as the crisis in Syria looms large over the economy.
In order to stimulate the stagnant economy, the Central Bank put together a financial plan that is expected to inject LL2.2 trillion ($1.46 billion) in loans to commercial banks at an ultra-low interest rate of 1%. Banks will then be responsible for lending the cash to businesses and consumers at a maximum rate of somewhere between 5% and 6%.
The Central Bank hopes the stimulus plan, which earlier reports estimated at LL2 trillion, will help reinvigorate various productive sectors of the economy, the housing market, projects subsidized by Kafalat, renewable energy projects, and research and development ventures.
In its inaugural Roundtable feature, BOLD assembled a panel of economists, businesspeople and other experts to offer their views on the potential effect of the stimulus package on the struggling Lebanese economy.
The Roundtable will be a monthly feature that puts a question on an issue affecting Lebanon before leading thinkers from a variety of backgrounds.
Question For Our Panel: Can the Central Bank bring the economy back to life?
Jad Ab Haidar Financial Analyst
We are confident that the Central Bank’s initiative to inject cash into the Lebanese economy in the form of subsidized loans will provide a boost for the real estate and productive sectors and ultimately spur economic growth. Moreover, we believe that any imminent solution for the Syrian crisis will magnify the impact of the Central Bank’s initiative.
Walid G. Touma CEO
It’s a beautiful step by the Central Bank that is always the first to help out the private sector. I’m definitely positive since the Central Bank is motivating the injection of capital in real estate and in the economy. The loans should be encouraged and extra loans should be made available since banks become more confident in giving out loans and consumers are encouraged to take loans with manageable rates.
Georges Corm Economist, historian and
former finance minister
I don’t have any criticisms for the Central Bank’s measures in theory, since the measures are economically sound and follow in the footsteps of the US Central Bank pumping liquidity into financial institutions. However, there might be business sectors other than construction – as well as some regions within Lebanon – that need public financial support.
Sami Halabi Journalist and consultant
The Lebanese don’t need more inflationary policies; they need jobs that pay living wages that are not eaten up by inflation. The fact that almost half of the package will reportedly go to housing does not bode well for this prospect given its already over-bloated nature, inflationary effects, and the fact that it creates few local jobs. If money goes to sectors that will have a substantial multiplier effect on productive economic growth that actually creates job opportunities for Lebanese citizens, as opposed to maintaining capital in the upper echelons of society in anticipation of a trickle down effect, then it will have a positive impact.
Adnan El Hajj Economist and
It’s a good step from the Central Bank in economic stagnation to prevent recession. This step will need 12 to 14 months to be used and it would cause a 2-3% growth. Since some sectors like trade and investments are likely to have little growth, these loans might stimulate business activity that would help cover the growth deficit.
Assem Safieddine Director
AUB’s Corporate Governance Program
The subsidized housing and private sector loans previously supported by the Central Bank proved to be an economy booster in the past. The move from BDL has similar objectives in perspective. On top of boosting the economy through reviving the real estate sector and private sector investments, it is expected to create competition among banks and support the sector at times when its profits are hampered by regional turbulences.
First Published by Bold Magazine in the February 2013 print edition
In 2005 an exiled former general of the Lebanese Army stepped off a plane in Beirut to meet the throngs of supporters coming to welcome him after 15 years abroad. Once amid his loyal followers on the tarmac and with the obligatory kisses complete, the general made his way to a podium where he spoke his first words to the cacophony of enthusiasts and press gathered before him; he told them to “shut up”.
You can say what you want about Michel Aoun and his party, but you can’t deny that the general speaks his mind. But when last month the Free Patriotic Movement (FPM) decided to run an electoral ad supporting the Orthodox Gathering Law (OGL) many of his previous supporters were taken aback, given that for decades the FPM has prided itself on being a ‘secular’ party, even if Aoun himself based his credibility on the ‘majority’ of the Christian vote.
For those unfamiliar with the proposal, the OGL basically mandates that each member of each sect votes for the seats in Parliament allocated to their religious confession on a proportional basis. All the major Christian parties in Lebanon, who are just as sectarian as the FPM, if not more so, have agreed to the law. Yet the FPM’s ad stands out. It parades several Lebanese Christians who state their names, their confessions and voicing their support for the OGL because it “represents” them and their interests while previous laws did not. In essence, what the FPM and other Christian parties are now saying to their supporters, and the Lebanese at large, is the most honest electoral appeal to date. They have done away with the façade of ‘Change and Reform’ and other empty policy-based promises. Instead, they are telling the Lebanese that they are nothing more than a collection of sects who have no common interests beyond their narrow sectarian identities, who must acknowledge this as their fate and vote accordingly.
It should, however, be abhorrent to anyone who believes in democracy to elect their representatives purely on the basis of sect, and hopefully this proposal will expose how sectarian our political parties really are and lead more people into the secular camp. However, we also have to be honest about the nature of the country and not expect everyone to become anti-sectarian overnight. A balance must be found between appeasement of the established status quo and progress toward a better electoral system.
Realistically, it is too late this year, and there is not enough political investment in true electoral reform for proportional representation and a single district for all of Lebanon to be implemented in full before the election — not to mention the laundry list of other reforms such as pre-printed ballots to prevent vote buying. And yet, many countries with complex circumstances such as ours have found new and inventive ways to run elections for seats in their parliament, and there is no reason Lebanon should be any different.
Ultimately, the aim of electoral reform is to provide a more representative government. But the old party leaders will not accept election reforms unless they are assured their power bases will be maintained. Thus, the dilemma is how to appease these sectarian parties and those who support them, while both holding the elections on time and implementing electoral reforms. The answer might just be the use of mixed-member proportional representation with countrywide proportional representation for a half of the parliament — ideally on a non-sectarian basis — while allowing sectarian parties to squabble over a way to elect the other half; this is probably the most progressives can realistically hope for at this juncture. Similar voting systems have been used in Germany, New Zealand and the United Kingdom, albeit in different forms adapted to the circumstances of each nation.
This would allow small constituencies and sectarian interests to elect their own people — which is all they care about anyway — while also opening the door to proportional representation in Lebanon as a single constituency, as well as push for other electoral reforms. Even if such a system were implemented on a sectarian basis it would incentivize issue-based politics, given that candidates would have to appeal to voters across the country, rather than being able to concentrate their vote-buying and patronage networks on a particular fiefdom. In the longer term, this might even nudge members of the electorate to consider casting their ballot for leaders that represent their issues, rather than those that don’t but happen to be from the same sect.
First published in Executive’s February 2013 print edition