World Bank Delegation Pushing for New Economic Strategy in Lebanon

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Migrant workers pose in front of the luxury tower they are preparing to build in Beirut. Real estate is one of the few sectors still growing in Lebanon. The country has failed to create enough jobs for its population and has a poorly planned economy. Al-Akhbar/Haitham Moussawi.

By: Firas Abou-Mosleh

Published Tuesday, January 20, 2015

The World Bank claims to be working on a strategy to support job creation in Lebanon. The socio-economic policies adopted in the country since the early 90s [with the bank’s blessing] have generated a “toxic mix” of structural problems, according to a senior World Bank official. Is this a real consultative endeavour or is the bank merely conducting a study? Or is it a theatrical show that will only yield the same results?

A World Bank Group delegation, headed by the senior director of the World Bank’s Jobs Cross-Cutting Group (CCSA), Nigel Twose, is on a visit to Lebanon. The delegation visited the Central Bank of Lebanon and the Ministry of Finance to discuss a “strategy” aimed at boosting the economy and creating job opportunities. The strategy has yet to be defined, as discussions remain in the “brainstorming” phase, members of the delegation said on Friday during roundtable discussions on employment and unemployment in Lebanon.

According to Twose, the Lebanese economy suffers from a “toxic mix” of structural problems, low growth rates, and a “disregard for job creation.” He said that “the rich (who are in power) are doing well, while the rest (the majority) are not.”

When asked about the proposed strategy, Twose said that the government “needs a massive strategy.” He refused to blame the country’s political or governmental “paralysis,” saying that the initiatives, such as “incentive packages” and internship programs launched by the Central Bank, “should correspond with the scale of the problem.” He underlined the need to create favorable conditions to spur job creation.

Twose tackled several problems, such as the poor quality of public services, namely public education, and the high immigration rates which he said are “among the highest [in the region].” He made a distinction between the immigration of individuals pursuing an education or seeking work experience with the aim of returning to the homeland — which is a healthy phenomenon — and the “emigration of minds” that is draining Lebanon and its economy. The Lebanese economy is dominated by small and medium-sized enterprises (SMEs), said Thomas Jacobs, Principal Country Officer at International Finance Corporation (IFC) in Lebanon, pointing to the “loose government agenda” to support SMEs.

“Emerging companies will generate growth,” says Twose with slight optimistism, praising the “improved access to funding” and “incentive packages” launched by the Central Bank (the provision of subsidized loans to specific sectors, mostly for housing or services), and the increasing number of institutions that support start-ups. On the other hand, Twose referred to the “barriers” (or “obstacles”) hindering the growth of such companies, particularly weak competition (due to monopolies) and poor infrastructure in the electricity and transportation sectors.

Funding costs are very high in Lebanon, with the exception of a few sectors, particularly the service and information technology sectors, for which the Central Bank has offered subsidized loans. Thus, what are the prospects for job creation in Lebanon according to the World Bank?

A recent World Bank survey revealed the presence of “barriers hindering long-term growth,” especially poor infrastructure in the energy and transportation sectors. According to Peter Mousley, Program Director at the World Bank, this calls for supporting “short-term growth.”

Economic expert Eric Le Borgne refers to a report issued by the Lebanese Ministry of Economy and Trade that shows that about 40 percent of the markets in various sectors are either monopolized or semi-monopolized. Le Borgne adds that the entry of politically “connected” firms into new markets results in a sharp decline in employment growth rates, as shown in a recent World Bank report entitled, “Jobs or Privileges: Unleashing the Employment Potential of the Middle East and North Africa.”

The World Bank delegation referred to the report to emphasize the barriers to job creation in Lebanon. The report concludes that regional policies “are designed to shield entrenched elites against competition.” It provides evidence that shows how policies that stifle competition have prevented regional economies from creating the jobs necessary to absorb a growing workforce. It adds that “policies are needed to encourage young firms and productive firms which have proven to be the greatest source of job creation.”

One reporter said that the topics under discussion, including monopolies, infrastructure, energy, and funding, have been subject to debate since the 90s, but that the situation remains pretty much the same. Towse replied ironically, saying that the situation has “considerably deteriorated” since then.

Le Borgne says that “the continuation of things as is will cost the country a lot,” adding that it is impossible “to maintain the current debt growth rates,” questioning the lack of funding for public work and infrastructure projects.

Some question whether the World Bank Group is entitled to give such lectures, after promoting the importance of “balancing the budget,” “rationalizing spending,” and “improving public administration,” which would require freezing investment spending and public sector employment, and a decline in the government’s role and functions.

It also begs the question whether the Group is really concerned about conducting consultations, or if the visit is a mere show that will only offer standard remedies, such as those listed in the World Bank’s 2013 report titled “The Need to Provide Adequate Jobs.” The report focused on “freeing” jobs from legal constraints in terms of suspension from jobs, wages, and subscriptions under the headline “Labor Market Flexibility.”

An economy without employment

Despite the growth rates achieved by the Lebanese economy in the past decade, it was not accompanied by the creation of sufficient jobs, particularly for young men and women. More accurately, according to the World Bank’s 2013 report titled “The Need to Provide Adequate Jobs,” the gross domestic product (GDP) increased by an annual average of 3.7 percent between 1997 and 2009, but the employment rate increased by only 1.1 percent in the same period. Unemployment rates stand at alarmingly high levels, with 3.4 percent for men, 18 percent for women, and 14 percent for college graduates. Most of the country’s unemployed are under the age of 35.

In the next 10 years, 23,000 new job seekers are predicted to emerge, per annum. In order to absorb these newcomers, the Lebanese economy must create six times more jobs than today since the current “economy” provides only 3,400 new jobs every year (according to 2004-2007 figures).

This article is an edited translation from the Arabic Edition.


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