Post by Salem6 on Feb 11, 2004 10:21:12 GMT
Country’s golden days seem far away
Daryl Champion
Daily Star staff
Legend has it that Lebanon is a gateway to the Middle East. It is a romantic image, but is it a fact and what does it mean? What, actually, did it ever mean? Since the legend is once again making the rounds on the back of post-war reconstruction euphoria, it is time to subject the concept to closer scrutiny.
In the years leading up to the 1975-90 civil war Lebanon was enjoying its fabled “golden era.” The good times, they were, both economically and culturally.
Such claims are being heard again in relation to today this on top of assertions that the “gateway” is once again open to free traffic.
A quick look at some relatively simple, comparative economic statistics helps put “then and now” into better perspective.
Take a prime indicator such as economic growth, for example. In 1972-74, growth in gross domestic product (GDP) was 6.9 percent in 2000-02 it stood at 1.2 percent.
Merchandise net exports as a percent of GDP in 1972-74 were 19 percent in 2000-02 they were only 5 percent. Investment in the manufacturing sector in 1998 was 19 percent below its level immediately prior to the civil war.
Net foreign assets in 2000-02 were only 60 percent of what they were in 1972-74.
Lebanon’s banking sector is lauded today, but in 2000-02 there were 53 banks in Lebanon compared with 74 in 1972-74; moreover, where regional banking is concerned, it is Bahrain that steals the limelight.
Perhaps most telling of all, however, is the devastating level of national debt, which today is to be found in the stratosphere and still rising: $32 billion. And what was it in 1975? “… practically nil” according to economic consultant Toufic Gaspard in his 2004 book A Political Economy of Lebanon, 1948-2002.
Looking beyond the economy, Gaspard states that Lebanon “clearly had the freest and most open society in the region, and the highest standard of living among the non-oil economies.”
Continuing, Gaspard maintains that Lebanon, with an “impressive growth record,” had been labeled the Switzerland of the Middle East in some quarters. It had the highest literacy rate in the Arab world and one of the highest in the developing world. A May 1975 World Bank report compared the country with European countries in the lower income bracket and stated that Lebanon’s goal was to attain European living standards the inference was that it was on its way to achieving that goal.
Indeed, it is a glowing description of a period that is looked upon with nostalgic fondness. But, in fact, is the fabled pre-war golden era of Lebanon what it is cracked up to be? Even economically, despite what on face value appears to be a rosy picture, there is doubt.
Gaspard argues that an apparently impressive record “owes more to transitory and external favorable circumstances than to a productive base that is the result of a sustained production and participation of skills in the economy.”
The argument of Gaspard, a former International Monetary Fund economist, university lecturer and commercial and central banker, is that there was “growth without development.” Take away the (essentially non-domestic) conditions stimulating growth, take away the facade of economic vitality, and little of substance remains.
Indeed, the civil war has much to answer for. Besides the tens of thousands killed, it also undoubtedly hastened the economy toward an early grave.
The war started just after the 1973-74 oil shock, when Arab oil producers slapped an embargo on Western economies in the aftermath of the October 1973 Arab-Israeli war. Lebanese banks were flooded with oil money from the Gulf for a short period but, ultimately, 1975-90 were Lebanon’s lost years as far as Gulf Arab petrodollar investment was concerned.
Before the war, Lebanon hosted a plethora of agents for international companies doing business in the Middle East. As the war dragged on, the agents migrated to other capitals, to Athens, Cairo, Bahrain, Dubai.
On the other hand, as the Gulf oil states modernized their own economic infrastructures, cities such as Dubai and Jeddah rose from desert sands to challenge Beirut as hubs of activity.
For a few years even Western expatriates working in the Gulf states would holiday in Lebanon, even on weekends; some based their families here. But as the Gulf oil economies boomed, their own education, entertainment and health infrastructures came up to par and, today, there is no longer the pressing need to seek such services elsewhere in the region.
Conversely, Dubai, especially, has seized the opportunity to invent its own attractions for lusty Gulf state males. Nightclubs and a healthy sex industry are reported to offer everything Beirut has traditionally been known for and gone a step further. The government of Dubai, of course, turns a blind eye. And why wouldn’t it? Dollars that would normally be spent on raucous holidays in Lebanon or Europe can stay at home.
Further, it forms a basis for a vibrant domestic Gulf tourist industry. For Saudi Arabians wanting to let their hair down, for example, even on an overnight dash, Dubai represents a conveniently viable option.
While there has been much bluster in Beirut about becoming a high-tech and information technology hub based on obvious local talent and expertise opportunities can tangibly be seen to be slipping away. Dubai, in contrast, has not only talked, but has acted: it is, right now, a recognized regional high-tech and IT center.
Gulf state industrialization has also trounced Lebanon. Unlike here, manufacturing is carried out to international standards, and self sufficiency and exporting has replaced the importing of many products.
A lack of legal and regulatory infrastructures is as true in some Gulf states as much as it is in Lebanon, but at least an effort is being made to rectify shortcomings in those Gulf states that still need to do work in these essential areas.
In Lebanon’s case there is also the added insecurity of non-permanence of legislation. Confidence is a prerequisite of investment, and investors are understandably jittery when laws can change at the virtual stroke of a pen, potentially jeopardizing multi-million dollar investments. What are some examples?
Take the multinational corporate entities of Proctor & Gamble, Unilever and L’Oriol. Despite serious work and commitment to investing in Lebanon in 2000, by 2003 Proctor & Gamble had moved its regional office to Cairo, Unilever had moved to Dubai, and L’Oriol had drastically downgraded its presence here.
A confounding bureaucratic labyrinth only adds to investors’ woes; indeed, Arab investors post-Sept. 11, 2001 have been seriously considering Lebanon as an investment destination, but “the Lebanese way” the sum of all of the above, has put them off.
Add also the fact that Beirut is expensive and suffers chronic traffic problems, and that the country as a whole has serious environmental problems caused by pollution and careless management, and the socioeconomic future is looking much less than promising.
Now the war has been over for 13 years, and reconstruction expenses and, let it be described, unethical practices have been the final nail in the economy’s coffin, it would seem. Much more than the pre-war era, take away the (essentially non-domestic) conditions stimulating sluggish growth, strip away the facade of a couple of relatively healthy sectors, and what remains? The answer confronts the country today: an economy driven to the brink of collapse.
The legend of the Lebanese gateway to the Middle East, if it were ever based on anything solid, has now attained the status of myth. Economically, at least, the gateway is lying in ruins.
www.dailystar.com.lb/10_02_04/art1.asp
Daryl Champion
Daily Star staff
Legend has it that Lebanon is a gateway to the Middle East. It is a romantic image, but is it a fact and what does it mean? What, actually, did it ever mean? Since the legend is once again making the rounds on the back of post-war reconstruction euphoria, it is time to subject the concept to closer scrutiny.
In the years leading up to the 1975-90 civil war Lebanon was enjoying its fabled “golden era.” The good times, they were, both economically and culturally.
Such claims are being heard again in relation to today this on top of assertions that the “gateway” is once again open to free traffic.
A quick look at some relatively simple, comparative economic statistics helps put “then and now” into better perspective.
Take a prime indicator such as economic growth, for example. In 1972-74, growth in gross domestic product (GDP) was 6.9 percent in 2000-02 it stood at 1.2 percent.
Merchandise net exports as a percent of GDP in 1972-74 were 19 percent in 2000-02 they were only 5 percent. Investment in the manufacturing sector in 1998 was 19 percent below its level immediately prior to the civil war.
Net foreign assets in 2000-02 were only 60 percent of what they were in 1972-74.
Lebanon’s banking sector is lauded today, but in 2000-02 there were 53 banks in Lebanon compared with 74 in 1972-74; moreover, where regional banking is concerned, it is Bahrain that steals the limelight.
Perhaps most telling of all, however, is the devastating level of national debt, which today is to be found in the stratosphere and still rising: $32 billion. And what was it in 1975? “… practically nil” according to economic consultant Toufic Gaspard in his 2004 book A Political Economy of Lebanon, 1948-2002.
Looking beyond the economy, Gaspard states that Lebanon “clearly had the freest and most open society in the region, and the highest standard of living among the non-oil economies.”
Continuing, Gaspard maintains that Lebanon, with an “impressive growth record,” had been labeled the Switzerland of the Middle East in some quarters. It had the highest literacy rate in the Arab world and one of the highest in the developing world. A May 1975 World Bank report compared the country with European countries in the lower income bracket and stated that Lebanon’s goal was to attain European living standards the inference was that it was on its way to achieving that goal.
Indeed, it is a glowing description of a period that is looked upon with nostalgic fondness. But, in fact, is the fabled pre-war golden era of Lebanon what it is cracked up to be? Even economically, despite what on face value appears to be a rosy picture, there is doubt.
Gaspard argues that an apparently impressive record “owes more to transitory and external favorable circumstances than to a productive base that is the result of a sustained production and participation of skills in the economy.”
The argument of Gaspard, a former International Monetary Fund economist, university lecturer and commercial and central banker, is that there was “growth without development.” Take away the (essentially non-domestic) conditions stimulating growth, take away the facade of economic vitality, and little of substance remains.
Indeed, the civil war has much to answer for. Besides the tens of thousands killed, it also undoubtedly hastened the economy toward an early grave.
The war started just after the 1973-74 oil shock, when Arab oil producers slapped an embargo on Western economies in the aftermath of the October 1973 Arab-Israeli war. Lebanese banks were flooded with oil money from the Gulf for a short period but, ultimately, 1975-90 were Lebanon’s lost years as far as Gulf Arab petrodollar investment was concerned.
Before the war, Lebanon hosted a plethora of agents for international companies doing business in the Middle East. As the war dragged on, the agents migrated to other capitals, to Athens, Cairo, Bahrain, Dubai.
On the other hand, as the Gulf oil states modernized their own economic infrastructures, cities such as Dubai and Jeddah rose from desert sands to challenge Beirut as hubs of activity.
For a few years even Western expatriates working in the Gulf states would holiday in Lebanon, even on weekends; some based their families here. But as the Gulf oil economies boomed, their own education, entertainment and health infrastructures came up to par and, today, there is no longer the pressing need to seek such services elsewhere in the region.
Conversely, Dubai, especially, has seized the opportunity to invent its own attractions for lusty Gulf state males. Nightclubs and a healthy sex industry are reported to offer everything Beirut has traditionally been known for and gone a step further. The government of Dubai, of course, turns a blind eye. And why wouldn’t it? Dollars that would normally be spent on raucous holidays in Lebanon or Europe can stay at home.
Further, it forms a basis for a vibrant domestic Gulf tourist industry. For Saudi Arabians wanting to let their hair down, for example, even on an overnight dash, Dubai represents a conveniently viable option.
While there has been much bluster in Beirut about becoming a high-tech and information technology hub based on obvious local talent and expertise opportunities can tangibly be seen to be slipping away. Dubai, in contrast, has not only talked, but has acted: it is, right now, a recognized regional high-tech and IT center.
Gulf state industrialization has also trounced Lebanon. Unlike here, manufacturing is carried out to international standards, and self sufficiency and exporting has replaced the importing of many products.
A lack of legal and regulatory infrastructures is as true in some Gulf states as much as it is in Lebanon, but at least an effort is being made to rectify shortcomings in those Gulf states that still need to do work in these essential areas.
In Lebanon’s case there is also the added insecurity of non-permanence of legislation. Confidence is a prerequisite of investment, and investors are understandably jittery when laws can change at the virtual stroke of a pen, potentially jeopardizing multi-million dollar investments. What are some examples?
Take the multinational corporate entities of Proctor & Gamble, Unilever and L’Oriol. Despite serious work and commitment to investing in Lebanon in 2000, by 2003 Proctor & Gamble had moved its regional office to Cairo, Unilever had moved to Dubai, and L’Oriol had drastically downgraded its presence here.
A confounding bureaucratic labyrinth only adds to investors’ woes; indeed, Arab investors post-Sept. 11, 2001 have been seriously considering Lebanon as an investment destination, but “the Lebanese way” the sum of all of the above, has put them off.
Add also the fact that Beirut is expensive and suffers chronic traffic problems, and that the country as a whole has serious environmental problems caused by pollution and careless management, and the socioeconomic future is looking much less than promising.
Now the war has been over for 13 years, and reconstruction expenses and, let it be described, unethical practices have been the final nail in the economy’s coffin, it would seem. Much more than the pre-war era, take away the (essentially non-domestic) conditions stimulating sluggish growth, strip away the facade of a couple of relatively healthy sectors, and what remains? The answer confronts the country today: an economy driven to the brink of collapse.
The legend of the Lebanese gateway to the Middle East, if it were ever based on anything solid, has now attained the status of myth. Economically, at least, the gateway is lying in ruins.
www.dailystar.com.lb/10_02_04/art1.asp