2010: The year of regulation

Two millennia after Caspar, Balthazar and Melchior saddled up and headed for Bethlehem, another group of wise men, this time those nice people at Standard & Poors (S&P), have sent us a festive gift: the announcement that their Lebanon rating has improved from B-/C to B/B. In plain English it means that S&P, arguably the world’s leading rating agency, sees Lebanon in better health than it was a year ago.
“We believe that the new government is prioritizing structural reforms in line with IMF and Paris III recommendations, which include privatization of the telecom and electricity industries, expenditure cuts and revenue-boosting measures,” S&P said, adding, “if successful, these reforms could lower fiscal deficits, cut government debt-to-GDP [ratio] and reduce Lebanon’s contingent liabilities.”
Yes, it’s true that, while many of the world economies have been brought to their knees, Lebanon –so often a byword for chaos, mayhem and instability – has been quietly racking up 6% growth in 2009 by using nothing more than good old Levantine ingenuity and hard work – and this in a year when its democratic aspirations were viciously (and cynically) buffeted by the winds of regional politics.
So, in a week in which it was also announced in An-Nahar that we will see “significant” – no doubt political – changes as a result of the meeting between Lebanese Prime Minister Saad Hariri and Syrian President Bashar al-Assad, it would also be prudent for the new government in 2010 to seriously and wisely build upon 2009’s relatively robust economic gains.
It remains to be seen if all the IMF and Paris III recommendations will be acted on, while, when it comes to coaxing major foreign investment, Hariri still has one hand tied behind his back. Modern communications for example, so crucial to investment opportunities, are either too slow – as in internet speeds – or too expensive – as in our cell phone tariffs. But it doesn’t stop there. Even if the new Telecom minister, Charbel Nahhas, auctions off the two mobile telecom licenses, cutting cell phone costs by a conservative 50% and no doubt improving bandwidth, the fact remains that Lebanon still cannot guarantee its own stability and security, two items that, understandably, rank quite high on investors’ wish lists.
So what’s to be done if Hariri wants to repay S&P’s confidence? The answer must surely be that his government must focus on supporting Lebanon’s core sectors, namely banking and financial services, and tourism and hospitality. The ingenuity of Lebanese entrepreneurship is beyond doubt. The challenge now is to consolidate the demand by improving the quality of services by creating a stronger infrastructure and greater regulation, and it is in doing this that the government must play its part. The financial sector is by and large self-regulated, but the private sector that has injected such dynamism into Lebanon’s tourism and hospitality industry must have the constructive backing and input of the state to create a genuinely world-class enterprise, cementing Lebanon’s reputation as a genuine world-class destination.
And while we are on the subject of state intervention, it appears we are already heading for a Dubai-style build-now-and-deal-with-the-traffic-later scenario when all the new residential developments, especially those in Achrafieh, are completed. It doesn’t take a PhD in Urban Planning to see that with these new homes will come new families (not to mention the legions of friends who will visit them), swelling the already-precarious numbers of vehicles on Lebanon’s streets to unsustainable levels.
The real estate sector is going nuts to satisfy the apparently insatiable demand for new homes, but here too the state needs to intervene and regulate. Rigorous urban planning in such a frenzied period of expansion is a must or we will never get anything done, because we will spend our time sitting in traffic, and that will reflect on the nation’s balance sheet.
So while the S&P have given us much to be happy about this festive season, their optimism is conditional on wise policy. In the meantime, we wish you all a very merry Christmas…and advise you to walk whenever possible.



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