Lebanese Government to push for privatization of public utilities with World Bank cover

On Tuesday, World Bank President Jim Yong Kim concluded his visit to Lebanon. However, leaks about the talks he held in Beirut suggest the issues discussed go far beyond the stated purpose of his meetings, namely to help Lebanon cope with the large number of Syrian refugees on its territory. It seems the World Bank wants to encourage the government to launch the broadest drive yet for the privatization of state assets, including public utilities such as electricity and water.

Even for the World Bank, it is difficult to understand what is happening in this part of the world. This was the gist of World Bank chief Jim Yong Kim’s opening remarks at the press conference he held in the Mövenpick hotel in Beirut on Tuesday, marking the end of his two-day visit to Lebanon. Briefly, he said that the political situation in the region was very critical, and that he was not optimistic over the prospects of reaching a solution to the Syrian crisis anytime soon.

Kim may not resemble his predecessors who sat at the helm of the World Bank before him. But the man who came to the job from the world of medicine and humanities, rather than politics or economics, and who once took part in protests against the institution he currently leads, will not be able to work miracles, given the huge amount of complex problems created by the events in Syria, both there and in neighboring nations.

Kim’s tour of the region, which included Lebanon, was ostensibly meant to draw the international community’s attention to the difficult conditions in Syria, Lebanon, and Jordan, and also to urge various donor countries to support Lebanon’s efforts to cope with the refugee crisis.

Yet, in addition to examining the effect of the Syrian refugee crisis on Lebanon personally, Kim’s visit had another stated goal: to formulate a joint plan between the Lebanese government and the World Bank for utilities, to include electricity, water resources, and renewable energy.

This is the “hidden agenda” of the visit that hides behind the euphemism of “reforms.”

Electricity: A New Stage

On Tuesday, the World Bank chief alluded repeatedly to what he said was serious commitment by the Lebanese government to carry out structural reforms in the energy sector. This indicates that the World Bank’s vision for addressing the energy crisis in Lebanon, through Public-Private Partnership (PPP), may enter a new phase quite soon, given the current favorable political conditions.

World Bank officials see a lot of similarities between Lebanon and Jordan in regards to PPPs in public projects, and cite what they see as successful examples in this regard, such as the Queen Alia International Airport project and a wind power project in Jordan; so why not replicate this “success” in Lebanon?

In his statements on Tuesday, Kim said that Lebanese Prime Minister Tammam Salam had pledged before him to undertake structural reforms in the electricity sector, to provide round-the-clock supply of electricity in all regions. The World Bank president told reporters that many innovative energy solutions have been successfully implemented in a number of countries, but that it was up to the Lebanese government to decide, saying that the World Bank only comes up with recommendations but not ready-made recipes. Kim also said that officials at the Ministry of Finance told him they were planning to carry out reforms that would address a lot of the current problems.

According to World Bank officials accompanying Kim, an agreement was reached with the Lebanese side for a number of reforms involving governance and public sector institutions. The officials were at pains to stress that the PPP model did not mean privatization, especially in relation to public utilities. Interestingly, they said that they sensed great interest by the Lebanese private sector in electricity and water projects, which is very encouraging in their view.

Syria by Satellite

Kim said, “The Middle East and North Africa Region is at a crossroads. In one future scenario, the political crises, violent conflict and deteriorating economic conditions of the last three years could deepen and possibly spread to neighboring countries. But there’s another scenario – the region could…realize its potential for sustained growth.”

Concerning the Syrian crisis, the World Bank chief admits that it is very complex, and involves many international players. This, he said, affects the flow of aid, saying that this is why it was natural yet surprising at the same time that only US$ 20 million has been raised for the Lebanon trust fund.

According to estimates by ESCWA from nearly four months ago, the cost of rebuilding Syria would exceed US$150 billion, though the World Bank has no precise estimates regarding the actual figure. Kim said that the World Bank has to rely on satellite imagery to survey the situation in Syria because of the ongoing conflict, explaining that reconstruction would need setting up major funds. However, he said, the World Bank cannot wait for a political solution before starting to work, and must put forward a vision for the future of the region.

Responding to a question about whether the World Bank would still be involved in reconstruction if President Assad remains in office, he said that the international agency would wait until an internationally recognized government is in place, adding that it would take a while before an international consensus is reached over the matter.

The Stated Objectives

Officially, the World Bank chief’s visit was meant to get a clearer picture of the short-term outlook of the economic situation in the country, ahead of drafting the next World Bank report on the prospects for the Lebanese economy and the challenges it faces, as well as their impact on living conditions. The report is also set to tackle the new Grades and Salaries Scale and its effects on public finances in Lebanon, not to mention the reforms needed to stimulate growth and balance the state finances.

Kim said the goal of his visit was to discuss ways to meet the urgent needs of the country, particularly reforms in various sectors, and to promote economic growth and support short-term and long-term economic strategies.

Kim spent four days between Saudi Arabia, Jordan, and Lebanon. He said that among the key points he wanted to stress during this visit were partnership, good governance, transparency, and employment opportunities for women and young people.

According to World Bank assessments, the effect of hosting Syrian refugees who are the equivalent a quarter of the population of Lebanon has caused the country’s GDP to drop by 2.9 percent between 2012 and 2014. During that time, 170,000 Lebanese slipped below the poverty line, unemployment doubled to more than 20 percent, while total economic losses in both the public and private sectors amounted to US$ 7.5 billion.

This article is an edited translation from the Arabic Edition.