It's not too late for Lebanon: A view from the ground

It's not too late for Lebanon: A view from the ground
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Lebanon today can be likened to a bus without brakes, its driver hurtling toward a brick wall. One can see the impending collapse of the country’s economy and national currency, a perfect storm that’s been in the making for at least ten years.

However, the passengers on this bus — the Lebanese people — are not sitting idly by. They have risen up against those who drove Lebanon toward its collapse, and many have abandoned it midway, taking from the country all they could carry.

The Transatlantic Leadership Network held a conference earlier this month at the U.S. House of Representatives in Washington D.C. dedicated to Lebanon’s turmoil. All-star experts gathered in an effort to discuss best ways forward. One was one of the most reputable members of Lebanon’s parliament: Neemat Frem.

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Frem left the comfort zone of a successful 25 years in the private business sector to run for parliament. After winning the seat, he began his public service with a simple question that ended up demonstrating the gravity of problems in Lebanon: How many paid employees were there in Lebanon’s public sector? Frem could not obtain the answer from anyone.

Frem instructed the Central Audit Bureau to his parliamentary committee, officially requesting a bottom-up audit of all 150 governmental departments and directorates. The report displayed stunning results: Lebanon’s public sector workforce stands at 256,000 employees and 100,000 retirees — out of a total Lebanese workforce of 1.2 million. Almost a third of the country’s workforce was on the public sector payroll.

When the prime minister and his cabinet informed parliament of their intention to issue Eurobonds for the amount of $4 billion USD, and requested parliamentary approval, Frem raised objections, and offered conditional approval subject to the implementation of tangible administrative and economic reforms. The objection was met with disapproval, seen as the antics of a new kid on the block. 

For government, this was business as usual, done twice a year for over a decade and adding billions to the national debt. It easily concealed years of unproductivity and paralysis. The ultimate shock was when Frem saw his first year in parliament ending with a budget deficit of more than $6.5 billion USD — out of a total budget of $21 billion, for a country with a GDP of $58 billion — over an 11 percent deficit of GDP. The system was unsustainable and rested on decades of economic plunder.

On Oct. 17, 2019, hundreds of thousands of Lebanese from every location and community — Sunnis, Shiites, Christians, Druze, and others — went into the streets to peacefully protest and announce their disgust with the corruption and ineptitude of the political class. With this unprecedented popular outburst, a new kind of revolution started in Lebanon: a social, cultural, and moral revolt against the establishment — an establishment of which Hezbollah is an intrinsic part. 

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The predictable response was an attempt to inflame sectarianism through inter-confessional conflict — an attempt that did not succeed, indicating the populace is indeed united against the corrupt system.

Meanwhile, financial collapse continued to accelerate. The private sector in Lebanon is today in complete disarray: 70 percent of employees find themselves with half a salary or laid off. Soon the public sector will not be able to pay its salaries, and a complete blackout of electricity is likely imminent, followed by a state default on the Eurobonds and treasury bills. Lebanon is quickly heading towards a failed state. 

This is the moment of truth.

At such a critical juncture, there must be drastic behavioral change and structural reforms for a new Lebanon to emerge. It is important for the United States, Europe and the Arab world to prevent Lebanon from joining the growing list of failed states. Such a catastrophe would immediately result in the exodus of the last major, native, and — most crucially — free Christian community of the Middle East, among other painful realities. In addition, waves of refugees from the Eastern Mediterranean basin would flood Europe with untold consequences.

Positive eleventh-hour change is still possible for Lebanon. 

To achieve it, a series of measured financial infusions are required — conditional upon behavioral change that produces tangible assets. For example, in return for the first limited cash infusion, the whole telecom sector would be transferred to donor control for a defined period.  The second calibrated infusion would be in return for donor control over Beirut Port and the railway right-of-way to inland dry ports for a specified period.

The third infusion would be against donor management of Beirut Airport, Quleiaat Airport in the north, and Riyaq Airport in the Bekaa Valley. The fourth infusion would involve donor control over the country’s electric generation and distribution sector. Donors would have to create more than one company in each sector to guarantee competitiveness and quality of service. The country still has plenty of assets — companies that could be at least semi-privatized to generate cash flow and improve the productivity.

However, even this is not enough.

The street revolution will not be satisfied without the structured reform of Lebanon’s operating system: an independent judiciary, modification of duties and prerogatives of top leadership positions to enhance efficiency, a move towards a federal decentralized state, the cultivation of armed neutrality, a new defense strategy and finally a new electoral law for a bi-cameral legislative assembly — a senate representing the religious communities, and a parliament representing the districts. 

Good people in Lebanon, like Neemat Frem, would never have dreamt of proposing these far-reaching yet unavoidable reforms toward a new Lebanese Republic were the country not at the doorstep of complete collapse.

Even Hezbollah, which considers itself a first among equals of the various Lebanese factions, has every good reason to embrace this holistic monetary, economic, administrative, political, and military reform package.

The financial collapse of Lebanon would bring about an all-out Hezbollah war with Israel or an armed conflict between Shiites and Sunnis coupled with open chaos, both horrible scenarios.

It is a no-brainer which route to follow.

Sasha Toperich is senior executive vice president of the Transatlantic Leadership Network. From 2013 to 2018, he was a senior fellow and director of the Mediterranean Basin, Middle East and Gulf initiative at the Center for Transatlantic Relations, at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University in Washington.

John Craig is former U.S. Ambassador to Oman and former Special Advisor to President George W. Bush on Combatting Terrorism. He is a senior fellow at the Transatlantic Leadership Network.