The unrelenting demand for a pay rise from Lebanon’s public sector workers has threatened to expose the shocking state of the nation’s finances and its fiscal management. The problem is that it is also a pay rise the country can’t afford, and if we are being honest, one the public sector does not deserve.
That did not stop a joint parliamentary committee on Friday approving a spanking new wage bill for ratification – although it remains to be seen if Lebanon’s MPs are shameless enough to push it through.
In the process, Lebanon’s bankers threw their toys out of their collective pram, claiming that such a move would glaciate an already wintry economy, while our parliamentarians took serious umbrage when Francois Bassil, the head of the Association of Lebanese Banks, implied – and you’d be hard pushed to find anyone to disagree – that the state was shot through with corruption. Parliamentary speaker, Nabih Berri, a man with a private militia and personal fortune estimated very conservatively at $200 million, refused to talk to Mr Bassil until he apologised for the outrageous slur.
The rest of us are still scratching our heads wondering why we have to stump up an extra US$1.6 billion to pay for an underperforming public sector. The state already wastes millions on salaries for people who in many cases quite literally do nothing, like our railway and oil refinery workers.
The bankers threw the initial wobbly when the committee suggested that the tax on savings interest be increased to 7 per cent from 5 per cent, a move that would generate an extra $160m for the coffers and VAT on luxury goods be increased to 15 per cent from 10 per cent.
It was a clumsy suggestion made by those who feel that the state has not dipped its beak enough in Lebanon’s profitable banking system. But what they can’t see is that an increase would hit savers who rely on interest income to top up their monthly earnings. The new level would hit purchasing power at precisely the wrong time. The country needs a bit of consumption.
Another proposed fund raising solution was to penalise what is termed illegally obtained land and illegal seafront constructions, with fines ranging from 2.5 per cent to 7.5 per cent of the value of the land. It would, the finance ministry has told us, generate roughly $330m and effectively make them legal. Yes, it’s a mess.
Surely now is the time to begin a genuine debate on freeing up areas of the economy that can contribute to economic growth and fill the nation’s coffers. In a rare display of wisdom, maybe because he was speaking as an industrialist rather than a politician, the former tourism minister Fadi Abboud reminded anyone who cared to listen that 40 per cent of economic activity in Lebanon flies under the taxman’s radar.
He has a point. Twenty years after the civil war, there has been no solution to the nation’s haphazard electricity network, which is crying out for privatisation but which is bound in a swamp of sectarian interests.
Ditto the country’s two government-owned mobile phone networks, whereby the state sets the price and foreign operators manage them. Privatisation and the admission of a third operator would reduce prices and increase consumption, support productivity and attract investment. It is, as the Americans say, a no brainer.
Freeing up Lebanon’s air space to low-cost carriers would also be a mighty revenue stream and have the added bonus of ensuring that Middle East Airlines gets off what must be a very flattened set of laurels.
Mr Abboud even suggested regulating drug farming in the Bekaa Valley, selling the crops to international pharmaceutical companies. An army would be required to subdue Lebanon’s drug lords but it’s a novel idea.
What I wouldn’t do is penalise people’s savings, especially when you consider that these deposits are what keeps Lebanon from bankruptcy. And for what? $160m? I just don’t know why we don’t simply sell off some of our $9 billion worth of gold reserves and be done with it.
“In another country there would be a revolution,” said my banker friend. “We’d all be on the streets”.
Michael Karam is a freelance writer based in Beirut
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