A bit of stability and normality – that’s all Lebanon’s private sector is asking for from the new government formed last week after a year of sectarian squabbling over cabinet seats.
“We’re not asking for much,” said Mirielle Korab-Abi Nasr, vice president of the Real Estate Developers Association in Lebanon (REDAL).
The caretaker government over the last year had little ability to pass laws or introduce legislation. Tycoon-turned-Prime Minister Najib Mikati will head the new 24-minister cabinet that will try to pull Lebanon out of worsening economic collapse and will try to kick-start talks with the International Monetary Forum for a badly needed bailout.
In the last year, the economy has deteriorated, joblessness is rising still, businesses have shuttered permanently, and the currency has lost over 90 percent of its value. An estimated 82 percent of the population has been plunged below the poverty line, according to UN figures released this month.
In the last month, more businesses have been forced to close as they couldn’t secure diesel to fuel privately owned generators that for years have plugged the gap that state-provided electricity failed to fill.
In a country where the government’s approach to the private sector can be seen as apathetic as best and a hindrance at worst, Lebanon’s competitiveness rating is 88th out of 141 countries in 2019’s Global Competitiveness Index.
Lebanon’s private sector, despite the government that reins over it, has done its best to thrive.
“Don’t hold us back,” Korab-Abi Nasr said, about the private sector, known for its innovativeness.
But those in the private sector know this government isn’t the answer to their many problems.
Arabian Business asked one analyst if the recent government formation signalled a bright spot for the private sector or if the sector would have to pull itself up by its bootstraps, as has been the case for years?
Lebanon’s private sector calls for ‘stability and normality’ amid ongoing crisisMirielle Korab-Abi Nasr, vice president of the Real Estate Developers Association in Lebanon (REDAL).
“Well, I mean, the latter is obviously going to be the case,” said Sami Halabi, the director of policy and co-founder of Triangle, a development, policy and media consulting firm.
The private sector’s structure is intrinsically linked to Lebanon’s sectarian system that is blamed for the country’s woes as it creates and relies on patronage networks to survive.
“And I don’t think that Mikati or anybody else in the government is going to address those shortcomings to open space for [the] private sector to be more competitive or allow new players to enter the space, because it’s not in the interest of sectarian power brokers to do so,” he said.
Innovating for fundamentals
And for now, the government has more fundamental problems to address. Bread and medicine shortages have deepened. Cell service is patchy and Wi-Fi depends on electricity, which there is now only a few hours of per day. Many modern-day jobs have become nearly impossible to do.
A fuel crisis means the city has descended into darkness, and a cab crossing town has to stop to siphon fuel from a fellow cab driver’s car or wait in kilometre-long lines at gas stations – many of which either don’t have fuel or are hoarding it to sell at a higher price later as subsidies stop. Now, water shortages are emerging, with UNICEF last month warning 70 percent of the population faces critical water shortages.
“We are innovative, but unfortunately now we have to be for the basics, rather than being innovative in the real sense of the word and creating something new for our businesses to make them grow,” Korab-Abi Nasr said. “Everyone I know around me in the private sector is struggling to stay.”
One of the first tasks the new government faces is restarting talks with the IMF, which President Michel Aoun on Monday said he intends to resume.
The new government formation has opened a pathway to return to talks with the IMF. Headed by Mikati, Lebanon’s cabinet will seek to begin making necessary reforms that previous governments have failed to make. The reforms are necessary to unlock billions of dollars of badly needed international aid. But few have faith this government will get the job done.
“I don’t see any reason why this government would have more success than the previous,” Halabi said. “So we’re going to go to a situation where you have a wider gulf between haves and have not, the private sector will try to cater to the haves.”
Mikati served as prime minister previously from 2011-2014, and he “usually comes in at times when there’s a need for a transition”, Halabi said, adding that his policies are geared towards economic outputs, like adding capacity to the heavily subsidised electricity sector that bleeds billions annually from state coffers.
This time around, the electricity issue is an even bigger challenge, and other issues range from investing in proper infrastructure, vocational training, export boosting measures (Lebanon imports some 80 percent of its food, but it is increasingly focusing on local production), and clamping down on smuggling of fuel and medicine across the Syrian border to the east, according to Paul Abi Nasr, a board member on the Association Of Lebanese Industrialists.
“A couple of regulations that need regulatory structures in specific sectors such as energy, renewable energy, transport, or telecoms would go a long way to opening up private sector opportunities,” Halabi said.
What’s primarily missing is the regulation, which has been drafted. It just needs to be signed.
“This could change under a new government, because all of the work has basically been done. And it will require a lot of a lot of politics, a lot of horse trading [in the] government,” he said. “Now, is that high on the agenda of the government? I’m not really sure it’s first on their agenda.”
Lebanon’s finance ministry on Monday said the central bank would receive $1.135 billion on September 16 in IMF Special Drawing Rights, which is an international reserve asset designed to supplement member countries’ official reserves. The small Mediterranean country’s reserves have dwindled rapidly since a dollar shortage emerged in mid-2019; needed to pay for imports, the lack of greenbacks has caused shortages of basic goods.
Even if the government can secure quick wins to gain popularity – like passing into law legislation that has been waiting for signatures – it will have little trickle-down effect on the starved private sector, according to Halabi. Structural reform takes years, and the problems created by current structural issues are only deepening.
“The private sector is not going to see the effects,” Halabi said. “We’re not really looking at any short-term outcomes on the economic side of things, except for hopefully, some movement on the IMF package.”
Source:https://www.arabianbusiness.com/middle-east/468399-lebanons-private-sector-asks-for-stability-normality