Lebanon’s other government

One has to wonder what they are doing in there

By Sami Halabi

During the civil war, when the residents of Lebanon would give directions, they could always rely on one landmark from which to guide visitors to their homes — the mountain of garbage that had built up in each neighborhood over the years of violence and absence of a functioning state. Today those mountains may be gone, but other remnants of those terrible years are still as pungent as the stench of rotting trash.

After the war ended, Lebanon’s public institutions were literally in a shambles. “We used to go to general directors of ministries and they would say to us, ‘before you talk to me about computers there is the window that needs fixing because the employees are freezing’,” says Nasser Israoui, project manager of United Nations Development Program (UNDP) at the Office of the Minister of State for Administrative Reform (OMSAR).

Recognizing the dire need for reform, in 1992 an agreement was made between the Government of Lebanon and the UNDP to begin a joint partnership at the finance ministry, aimed at reforming the institution. The agreement was the start of what became known as the ‘UNDP program.’

As Executive went to press the program consisted of 67 projects, and is now influential across ministries and public administrations throughout Lebanon. Their activities range from clearing mines to drafting laws, effectively creating “a different executive arm that could provide policy formulation as well as policy implementation in key ministries,” says Hassan Krayem, policy specialist and portfolio manager of the governance program at the UNDP.

The expansion of the projects began at the Office of the Minister for Administrative Reform (OMSAR), which itself was created as a result of a needs assessment study of public administrations carried out in the mid-1990s by the Lebanese government with money from various donors.

At the time, in order to channel donor money for reforms, a UNDP unit was established at OMSAR. “It was supposed to play the role of a catalyst; this was the plan,” says Israoui, who doubles as the director of the technical cooperation unit at OMSAR. “Unfortunately, this did not take place.”

Fat and dysfunctional government

Since the UNDP unit which today comprises around 40 percent of OMSAR’s staff — was created, the organizational structures at most ministries have not been made more efficient. Of the 18 new organizational structures proposed to ministries by OMSAR, only the environment and sports ministries have implemented them.

The problem is that OMSAR has tiny teeth, if any. Unlike the other ministries, it was not created by any law but exists only as a legal entity through a vote of confidence it received from parliament and the budget it receives from the finance ministry. It cannot impose reform policies on public administrations nor can it, for instance, actually enter into ministries to review staff performance and then recommend they be promoted or fired. The only way OMSAR can effectively push through reform is if the minister, currently Hezbollah Member of Parliament Mohamad Fneish, takes the case to the cabinet that then, with a two-thirds majority, can impose reform on public institutions. That scenario has yet to occur.

Without new organizational structures, ministries are subject to the haphazard dictates of whichever minister happens to be on the top of the pyramid — and there have been many, given the amount of times the cabinet has been reshuffled since the civil war. What this also means is that a review of salary structures is impossible, which has been identified by every person Executive interviewed for this article as one of, if not the largest, hurdle to civil service reform.

The lack of a proper organizational structure has also resulted in a bizarre situation in which ministries are bloated and over-staffed and yet, at the same time, chronically understaffed in key positions, and therefore they cannot fulfill the basic functions of their mandate. This does not look to be changing anytime soon because of the government’s apparent, yet unwritten, policy of halting new hires in public administration, with the exception of the security services and the army.

If public administrations remain bodies of sectarian patronage then scenes like these from the civil war look all the more likely (Photo: AFP/KHALIL DEHAINI)

“You know that further employment is [essentially] not allowed,” says Israoui. “There is some but it is limited.”

According to a source at the UNDP who spoke on condition of anonymity, in the Lebanese civil service there are three levels of employees: those within the organizational structure, contracted employees and temporary workers. The first two categories are subject to the authority of the Civil Service Board (CSB), which regulates public sector employment and is independent of any ministry, including the labor ministry, but reports to the prime minister’s office. The temps, however, are not regulated by the CSB and are appointed by the ministry.

The issue is that, more often than not, the number of contractual workers and temps exceeds those required by the departments.  This, in effect, results in staff employed at the ministries and in public administration without a position, receiving salaries paid for by the people who in turn suffer from inefficient public services.

It’s an open secret that these ‘workers’ — many of whom do not do the jobs they were hired for — are often little more than political appointments, turning civil service bodies into patronage departments. For instance, the latest plan to reform the electricity sector in Lebanon noted that Electricité du Liban, the state-owned electricity company, “employs around 2,000 contractual and daily workers, many of whom are political appointees and unqualified workers.”

“If you want to recruit an effective team that can implement reforms, new policies and can speed up the delivery of services and so on… in the structure of the current state you need civil service reform, a new salary scale, new ethics and probably it will take years,” says Krayem with a half sigh.

Karim Makdisi, associate director of the Issam Fares Institute for Public Policy (IFI) and assistant professor of political science at the American University of Beirut, suggests that Lebanon’s political class needs to be pragmatic about getting rid of the ineffectual workers they themselves hired.

“Between yourselves,” he says, as if speaking to the political patrons, “pay these guys off in a lump sum. If someone has been in a ministry for 10 years and was a political appointment, and they are not coming to the office, either fire them or figure it out.”

“It’s more than patronage; its control, its power,” Makdisi adds. “If you are [Prime Minister Saad] Hariri or [Parliamentary Speaker Nabih] Berri you come and you say ‘when you work for me, in or out of government, you are my guy, you are not a Lebanese government employee.’ As long as you have that mentality, all the reform business is nonsensical.”

The other civil service

Until the government gets its act together, the UNDP projects are continuing to do much of its work. The stated purpose of the projects is to fill specific gaps at the various ministries and public administrations, build their capacities, then pull out and let the government bodies do the work themselves. As yet they have not had the opportunity to pull out, effectively creating a counter-bureaucracy that circumvents the malfunctioning public institutions.

“We try to make sure that what we are providing [in terms of staff] is not available and could not be available because of the lack of civil service reform and the salary scale,” says Krayem, adding that “99 percent” of their staff is Lebanese, unlike most countries the UNDP works in. Though not universally true, UNDP staff tend to meet the qualifications of the high-level advisory positions they fill, and demand corresponding salaries.

As part of some of its projects, the UNDP ends up providing basic services to the public instead of the ministries or municipalities doing so. In collaboration with the Council for Development and Reconstruction (CDR), headed by current Future Movement MP Samir el-Jisr, (which itself does much of the work the public works ministry should be responsible for), the UNDP has commissioned pavement repairs, purchased septic trucks, built storm water conduits and rehabilitated public parks.

According to the IFI’s Makdisi, when Rafiq Hariri came to power in the early 1990s he “consciously” created a counter-bureaucracy with teams of advisors and quasi-government institutions including the CDR and Solidere, to circumvent the inefficient and patronage-based state structure, but also to consolidate power.

“The logic at the time was too much red tape and too much Syrian influence and ‘I’m a businessman and just want to do my thing’. What happened over time is they replaced these teams with UNDP,” he says. “The creation of counter-bureaucracies has its logic up to a point. The problem is that at best, you are talking about a transitory period within which you are training your people so that they can take over within a plan. Those of us who cared to know at the time knew that it was not going to happen, and it didn’t.” The CDR was not available for comment.

“These UNDP projects have been criticized many times as parallel administrations,” says Mazen Hanna, economic adviser to the prime minister, who did not reject the idea outright but suggested that such criticism is politically motivated rather than rooted in actual opposition to the UNDP projects. “Most of the ministers that criticized UNDP projects did not criticize them when they became ministers. In the absence of a civil service reform overhaul the need for UNDP projects will always remain.”

Some of the projects that are ongoing are partnered with opposition ministers, but many — if not all — of the project documents are missing the opposition minister’s signature. This was the case with the “Country Energy Efficiency and Renewable Energy Demonstration Project for the Recovery of Lebanon” (CEDRO), that would in theory be signed by the opposition energy minister, but instead carries the signatures of only the UNDP and the CDR. In this case, the energy ministry is categorized under “other partners.”

What’s more, the financial scales are heavily tipped toward the projects in the ministries controlled by the ministers from the parliamentary majority, as well as the CDR. The most expensive project the UNDP carries out is at the finance ministry and is budgeted at $18.5 million, followed by a project aimed at increasing decentralization and strengthening strategic partnerships between municipalities of the North and the South, budgeted at $11 million through CDR, with another project at the Ministry of Economics and Trade rounding out the top three at $8.7 million.

How the deal works

Today, in order to start a UNDP program in a public administration, an agreement has to be made between the UNDP and the public body on what is to be done, how long the project will take, and who will pay for it. Depending on the public institution, the project must “reflect the policy of the national coordinator who is either the minister or eventually the CDR,” says Samir Nahas, senior economist at the UNDP project in the office of the prime minister.

Funding for projects comes from three sources: the government, international donors, and the UNDP itself. The amount of money spent has seen exponential growth, increasing by 4.6 times since 2004 and last year reaching $39.1 million. Of late the lion’s share of the money spent has come from “international donors,” who contributed $34.3 million last year.

The UNDP’s breakdown of the money individual government bodies have “committed” to projects since 2004 shows the Ministry of Finance has spent $20.50 million, the Ministry of Telecoms has spent $5.9 million, the Office of the Prime Minister spent some $3.1 million, CDR has $1.8 million, and the Ministry of Agriculture $100,000, totaling $31.4 million. But separate UNDP data for government contributions since 2004 pegs it at $27.7 million — a discrepancy of $3.7 million.

The reason for this, Krayem explains, is that much of the funding from ministries and government bodies comes through a maze of separate bilateral agreements with donors that are then funneled to the UNDP programs. Hence, figuring out how much the government is allocating from the national budget is nearly impossible to do without going into the books of every ministry to find out where all their donor money is coming from and going to.

Still, a closer look at the donor list reveals a strong connection between some UNDP projects and the prime minister’s private business interests. Solidere, for example, contributed $120,000 to the UNDP this year. Krayem explains that the money was an in-kind contribution for an environmental campaign, and as such insists that there is no conflict of interest. The “Institutional Support to the Ministry of Environment,” project began this year under Future Movement Minister Mohamad Rahal.

“Political affiliation is none of our business; we work with Berri or Hariri,” says Krayem who stressed that the UNDP is “apolitical, but not naive.”

…but for how long?

Politics aside, there is little doubt that Lebanon has benefited greatly from the expansion of UNDP projects. At the moment many of the projects are being evaluated to see whether they will be renewed, extended, changed or discarded at the end of the year. The projects include those at the finance ministry, the Ministry of Economics and Trade, poverty reduction at the ministry of social affairs, support to mine affected communities, support to the Lebanese parliament, strengthening the electoral process in Lebanon, and improving the performance of the justice ministry, among others.

While Hanna says it is unlikely UNDP projects will ever become larger than their affiliated public institutions, he believes that they will continue to grow at the same pace they have since 2004. Krayem disagrees, noting that thanks to the country’s economic growth and increasing per capita income, Lebanon could soon graduate to the UN designation of ‘net contributing country’ (NCC), which would make it ineligible for certain levels of developmental support. The UN press office in New York, however, said Lebanon’s case was “far from decided.”

“The argument has been made and sold to the UN that the developmental needs of Lebanon are not affected by the GDP growth because there are imbalances such as regional imbalances and so on,” says Hanna. Makdisi also agrees that the transition to NCC will have no effect. “We have a class of political elite who are very adept at building royal palaces and begging for money from abroad,” he quips.

Conditional love

“The problem is that the system is malignant and the UNDP are doing the minimum to keep it afloat and give it a certain respectability,” says Makdisi. Hanna adds: “You have this patient [Lebanon’s civil service], thank god you have this doctor because without this doctor this patient will die.”

Getting around patronage and sectarianism is a minefield that the UNDP walks through every day. (Photo: Jihad Samhat)

One way to force the issue forward would be for the UNDP to offer further assistance on a conditional basis, but Nahas says it is not the UNDP’s job to impose reform on the government. “We cannot intervene if there is a director general or a staff that is not performing, this is their duty,” Krayem adds.

Without that reform the ministries and public administration bodies continue to work without a system to measure their output or effectiveness. Only the environment ministry and the public works ministry have taken on pilot programs to implement systems similar to the Key Performance Indicators used by the UNDP.

Ministries also do not have human resources (HR) departments, although a law has been proposed by OMSAR to implement HR departments in all ministries. As such, the only way that their performance can be evaluated is by the various ministers and heads of administrations. This runs contrary to the constitutional principle of administrative decentralization enshrined in the Taef Accord.

More fundamentally, what the Taef Accords also proposed was the implementation of a process to abolish political sectarianism. This has yet to happen and the ongoing sectarian division of the government hampers the creation of open, effective governing bodies.

“As long as I have Shia, Maronite, Sunni, Greek Orthodox and all the politicians and their interests, that’s it — you have a system that is essentially dysfunctional,” says Krayem. “You cannot imagine that your children will live in this system. But this is what I thought when I was young and I’m sure my father thought the same when he was young too.”

First published in Executive Magazine’s October 2010 issue.

Dealing with the devil

(Illustration: Executive Magazine/Karim al-Dahdah)

by Sami Halabi

Summer in the Middle East is typically a time when life slows down;  business deals are put off until everyone has finished their vacations and the weather has cooled off. So in August when Credit Suisse issued a statement that it was embarking on a $1 billion-plus fund “with a small group of Credit Suisse’s key shareholders,” it perhaps thought that no one would notice.

Not so. Almost immediately the Israeli press picked up on the announcement and began to report that the Jewish state’s economic prowess had once again managed to circumvent the Arab boycott. The reason being that Credit Suisse’s largest shareholders are the Qatari government’s sovereign wealth fund, the Qatar Investment Authority (QIA) and the Saudi Olayan Group, who own 8.9 percent and 6.6 percent of Credit Suisse respectively, alongside Koor Industries (3.24 percent owners) — part of influential Israeli businessman Nochi Dankner’s empire.

Then it was the Western press’ turn to jump on the bandwagon with Reuters reporting that Koor’s parent company, Dankner’s IDB Group, would put up $250 million through its subsidiaries Koor and Cal Insurance — each contributing $125 million — to be matched by an equal contributions from “Credit Suisse and two of the bank’s largest shareholders.”

A sensitive issue

The QIA and the Olayan Group did not respond to Executive’s repeated requests for comment, while Credit Suisse said that they “don’t disclose or comment on the parties.” The query apparently raised some eyebrows, as several days after the request was made Executive was contacted by Credit Suisse’s Middle Eastern Public Relations contractor to confirm if it intended to cover the story.

“At a time when Israel is not exactly popular around the world, particularly the Arab world, the agreement by two large investment companies from the Gulf states to cooperate with an Israeli group is no trivial matter. It can even be assumed that they will come under fire for it,” wrote Israeli columnist Irit Avissar in business newspaper Globes on the day the announcement was made. “For the Saudis this is less worrying. There it’s a matter of a private body that can always use the Qatar government as a fig leaf for the approval of an investment alongside an Israeli company. The participation of Qatar, however, has real significance, because that is a matter of a sovereign fund of a very rich and important Arab country.”

The fact that the announcement came at a time when Israel and the Palestinian Authority were debating whether to re-engage in direct peace negotiations has prompted some to suggest that the impetus for the deal was a political sweetener for the Israeli’s via the Qataris.  “[Qatar’s] role in the peace process is to lubricate and the only thing they have to lubricate with is money and increasing normalization by trying to incentivize the Israelis,” said Karim Makdisi, professor of political studies and associate director of the Issam Fares Institute for Public Policy at the American University of Beirut. “It’s like a woman lifting her skirt and showing you her leg saying: ‘Come on board, and you are going to get a lot of pleasure out of this.’”

It is difficult to gauge whether the move is in line with the QIA’s previous investment strategy because, given that the fund is considered one of the world’s less transparent SWFs, few people are really sure what that strategy is. According to the Linaburg-Maduell Transparency Index developed by the United States-based think tank the Sovereign Wealth Fund Institute, the QIA features on the lower half of the index with a score of 5 out of 10.

“The exact execution of the investment strategy of the QIA is very opaque,” said Sven Behrendt, Associate Scholar at the Carnegie Middle East Center. “There is no information about the strategic asset allocation, like other SWFs publish. Therefore one can only refer to anecdotal evidence.”

Profits over politics

According to Ashby Monk, co-director of the Oxford SWF Project, what that anecdotal evidence suggests is that pure economics rather than political considerations were the impetus for the deal. “I think the QIA saw a unique and compelling investment opportunity, and they took it,” he said. “I really doubt that the QIA is being used as a pawn in some sort of financial diplomacy.”

Monk explained that because the QIA, Olayan and IDB are all major stakeholders in Credit Suisse, it would most likely mean they received better terms and will sit on any investment committee that will make decisions regarding where to place capital.

That would mean that representatives of a Qatari state-owned agency, a Saudi company (albeit based in Greece), and representatives of an Israeli conglomerate will be sitting around the same table mulling investments. It’s not hard to imagine this not going over well with the Arab public, given the ongoing occupation of Palestinian lands.

At the same time, a number of non-Arab SWFs, such as the Norwegian Government Pension Fund, have excluded Israeli companies from their portfolios in response to their actions in the occupied territories.

“What is ironic is that you have an increasingly active global society that is just beginning [to boycott the occupation],” said Makdisi. “This [deal] is the opposite. The Arabs are saying to the Israelis: ‘Come join us in the middle and we will be your main markets, your main buyers of technology and at the same time we will have a common initiative to fight terrorism and the whole Iran/Hezbollah/Shia issue.’”

First published in Executive Magazine’s October 2011 issue.