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Lebanon 2015 | ECONOMY | VIP INTERVIEW

TBY talks to Ferid Belhaj, Director of the Middle East Department at The World Bank, on the work the institution is doing in Lebanon and the challenges the country faces.

According to Fadi Saab, Chairman of the Lebanese Society for Quality, the annual cost of corruption in Lebanon amounts to $6 billion, equivalent to 12% of GDP. How is the World Bank supporting anti-corruption initiatives?

Generally speaking, governance and transparency to serve secured and faithful transactions are the main underpinnings of the World Bank's engagements worldwide. Safeguards and rules are devised by the management of the World Bank and approved by its Board of Directors. Each of the countries in which we operate is represented on that board, meaning that each rule and regulation is that of the countries where we operate. Therefore, we are not imposing rules on member countries, but rather implementing rules, regulations, and guidelines that have already been approved by representatives of the 188 member countries. Through our operations and financing, we aim to build the capacity of the government agencies with which we work, and to do so by instilling transparency and predictability in our procedures and processes. Subsequently, those agencies are exposed to the makings of good governance. Our main thrust is to build the long-term capacity of local institutions, and a sound basis for their business. This is important, because when foreign and local investors weigh the risks of investing in a certain country, they need to be confident of predictability, transparency, and accountability at all levels. The Lebanese Minister of Finance has lately taken a strong public stance on corruption. He has mentioned in no uncertain terms that the system as it is functioning today is inefficient, and works to the detriment of the Lebanese people and Lebanese institutions. He stated that the presidential vacuum was taking its toll on all institutions, and that, consequently, parliament was rendered ineffective and unable to perform its basic legislative duties. He is looking aggressively at addressing the corrupt practices that seem to be plaguing the system, and cited the energy sector as one of those areas where more needs to be done. It will be interesting to see what methods and means he will opt for in tackling these challenges.

The World Bank recently granted Lebanon a $474 million loan for the construction of the Bisri dam, aimed at improving national water supply. What is the significance of this project?

This is the largest project that the Bank has ever financed in Lebanon. When this completed, it will provide potable water to 1.6 million people in Greater Beirut and Mount Lebanon. These citizens represent 45% of the Lebanese population. It will therefore, make a huge difference in the way Lebanon manages its water potential. Despite its abundance, to date Lebanon's water resources have not been properly governed. In fact, in an ideal world, Lebanon should be able to export water to neighboring countries. The new project will have transformational outcomes, by establishing new, comprehensive systems for water treatment, distribution, and management. It is part of a package of projects in Lebanon that the Bank has been financing for a number of years. It is a huge infrastructure undertaking, which will take six or seven years to be completed, and another year or two to become operational. This is a medium-term project, which is all the more reason to start implementation swiftly once the agreement is ratified in Parliament. And the challenge today is precisely that while all government-related actions have been taken to move forward with this project, parliament is stalled. We want to avoid this project being cancelled due to the legislative inability to ratify it. Cancelling this project due to institutional immobility would be disastrous.

“Lebanese entrepreneurs are extremely successful abroad because host governments allow them to perform to their full potential."

With a large diaspora, Lebanon has relatively stable remittance inflows. What is the importance of this for the Lebanese economy?

Lebanese entrepreneurs are extremely successful abroad because host governments allow them to perform to their full potential. In Lebanon, they are doing the best they can, but the country's governance structure is not as conducive as it should be, stifling the energy and productivity of the Lebanese people. This country is blessed with tremendously human resources; bright and highly educated people, who end up frustrated by inefficient institutions, and may therefore opt to emigrate. Yet the vast remittances that derive from emigration play a great part in maintaining the Lebanese economy. In evidence of this, against all the odds, is the fact that the Lebanese are viscerally attached to their country and are keen to finance it through various channels, remittances, and also by participating in the bond market. When Lebanon issues bonds on the international market, the vast majority of subscribers are Lebanese; such cash injections are crucial.

© The Business Year - June 2015