Sometimes we live in a hall of mirrors. The last time I saw burning tires on Lebanon’s streets was in May 1992, when the incompetent government of Prime Minister Omar Karami could only watch as the Lebanese pound went into freefall.
Karami was compelled to tender his resignation, and after the interim government of Rashid Solh had organized parliamentary elections, Prime Minister Rafik Hariri took over.
By February 1993, the Lebanese pound had stabilized and reconstruction could begin in earnest. Back then the Christians were also divided over the merits of two men: Samir Geagea and Michel Aoun. To his detractors, Geagea was no more than a militia thug who would eventually languish in prison for 11 years. Aoun, despite the disgraceful manner of his departure in October 1990, became a beacon of hope in Parisian exile.
Today, Geagea has done his time and is throwing his weight behind a government that appears to want to do the right thing economically. Aoun seems hell bent on collaborating with anyone who will give him the keys to the Baabda palace, even if they are the same he railed against from his French exile. 1992 redux? Not really. In 1992, there was much less at stake. The debt was only $2 billion – it had been as low as $400 million but that was before President Amine Gemayel went shopping, justifiably, on behalf of a woefully under-equipped Lebanese army.
Today, the debt stands at 190 percent of GDP, with roughly $3.2 billion worth of Lebanese paper that needs to be rolled over both this year and next. If that doesn’t happen, the banking sector could take the mother of all hits. Blaming the current fiscal situation on the cult of Harirism – as Aoun has coined it – is not fair. Hariri had a plan that on a level economic playing field could have worked. It gambled on 6 percent growth and massive foreign investment to finance the debt he knew would run up. No one appeared to complain back in the mid-1990s, when every draft budget went through Parliament.
However, the remedies advocated at the time, such as privatization, were frequently blocked, while racketeering was seen as a necessary evil and lined the pockets of many who today use Lebanon’s economic woes as ammunition against the government. Which brings us to the here and now. Today, Prime Minister Fouad Siniora takes the begging bowl Paris for a third donor conference in six years. It is a mission that must not fail. Unlike the 1992 government, Siniora’s is as competent as Lebanon has ever had in identifying fiscal and economic priorities. It has an invite to a donor party and the backing of a West that does not want to see Lebanon become a failed state. And what of the opposition? Other than throwing up billboards declaring that they too love life, but without debt (who doesn’t?), neither Hezbollah nor the Aounists have put forward a credible economic alternative. There was a time when Aoun had a plan. In 2005, he advocated privatization, reducing the interest on the debt and encouraging growth. He also claimed he wanted to create a framework that would enable Lebanon to become a regional financial center that protects and catalyzes private initiative. Since then, at least one of the economic advisors who helped draft that blueprint has deserted in disgust. Aoun has allied himself with Hezbollah, a party who, in the same year, told Executive magazine that it “does not presently have an economic policy. Go figure. That is not to say that the government has got it all right. The document it has prepared for the donors in Paris is pretty toothless. It does say what is needed – privatization, good governance, transparency – but the “how and “by when are largely absent; and in any case we have heard it all before. The government is either too scared to commit to specifics and rock the sectarian boat, or so sure of getting international financial support that it didn’t feel it needed to elaborate. Either way it doesn’t look good. Siniora should aim to knock $10 billion off the debt to reduce interest payments by $1 billion, and he should seek to increase revenues by $2 billion to reduce the deficit. Privatization is high on the agenda – in fact the government should offer 50-year concessions, rather like extended BOTs, for electricity, water and railways. But let’s face it, Electricité du Liban, the electricity utility, is worthless and costs the government some $1 billion per year. It is corrupt and inefficient and riddled with sinecures. The obvious solution is to give it over to the professionals. It is likely we will get the money – which estimates have put anywhere between $5 billion and $9 billion – but that’s the easy part. Lebanon’s economic problems are not that difficult to solve. It is will that is lacking. We must wish Siniora luck, but no one is holding their breath. As tourists, and no doubt a few businessmen, were trapped at Beirut airport on Tuesday, the clock that ticked with such robust confidence on Lebanon’s future in the first half of 2006 was flung into fast rewind. May 1992 proved to be a positive watershed for Lebanon.
Tuesday’s drama threatened to take us to an altogether different place, and the bottom line is that all Lebanese should care about what happens in France today. Otherwise, it could be our last tango in Paris.
Michael Karam is managing editor of Executive, a regional business monthly. He wrote this commentary for THE DAILY STAR.
