MANY WAYS

Lebanon 2015 | ECONOMY | VIP INTERVIEW

TBY talks to Ziad Hayek, Secretary General of the Higher Council for Privatization (HCP), on the role of privatization, PPPs, and the expectations of Liban Telecom.

What are the latest developments concerning privatization in Lebanon, and what initiatives are the Higher Council for Privatization (HCP) currently working on?

The only sector that could benefit from privatization in Lebanon today is, in my judgment, the telecoms sector. Unfortunately, there has not been much progress on that front to-date. The current Minister of Telecommunications has expressed willingness to apply the Telecoms Law and so create an integrated operator, to be called Liban Telecom. We are now waiting for that process to start. On the public-private partnerships (PPPs) front, we are still awaiting the enactment of legislation and have issued a book of guidelines for the tendering of PPP projects in Lebanon. And even though we currently lack PPP legislation that mandates international best practice, there is ongoing PPP activity. Parliament passed legislation in 2014 to allow the Council of Ministers to license PPP power plants, usually referred to as Independent Power Producers (IPPs). We are waiting for the Ministry of Energy to take the necessary steps to launch that process.

What is the importance of PPPs for the sustainable development of Lebanon's economy?

The importance of PPPs for the economy is tremendous. I personally think that it is the only thing that will make a difference in improving our economy at this point. We are in desperate need of infrastructure and PPPs are exactly designed to finance infrastructure. We need roads, bridges, towers, and telecoms infrastructure. Our needs span a wide spectrum ranging from power plants and dams, to prisons and public transport. We now have bank assets in Lebanon of about $190 billion, of which about $160 billion are deposits. This is a huge volume for a country the size of Lebanon, where GDP is at $47 billion. As a result, banks are particularly interested in funding PPP projects; they view such schemes as an alternative to simply continuing to finance the Government on an unsecured, non-recourse basis. Certain Lebanese entrepreneurs have been highly active for the past 15 years creating and undertaking PPP projects in the Gulf, Saudi Arabia, and various regions in Africa. We have the need, we have the financing, and we have the entrepreneurs to do it. There are also now 1.5 million Syrian refugees in Lebanon. This situation has led the lowest cost of manual labor in relative terms in the history of Lebanon. We should take advantage of that fact. It creates a win-win situation, where they help us build our infrastructure and we organize their presence in the country. Furthermore, today our economy is based on enterprises that are often family owned, and individual enterprises do not create employment. In order to create jobs in large numbers, you need large projects like infrastructure development. These projects will not only be employing manual laborers but also local architects, engineers, managers, accountants, lawyers, IT people, and admin people. Creating jobs is the priority for our economy, not only to create better living standards, but also to stem the tide of emigration. Through emigration we lose our best and brightest, which has been happening for the past 30 years.

“The importance of PPPs for the economy is tremendous."

Are public authorities doing enough in terms of improving the framework for investors and promoting the country?

Public authorities need to primarily focus on job creation, which has not been the case as they have been sidetracked in other directions. One of the most important factors in job creation, besides stability and economic growth, is having an investor-friendly environment. In Lebanon, we still have work to do in this regard and the public authorities definitely need to give it more attention. Red tape and complicated and unnecessary procedures are among the elements that still hinder simple matters such as the creation of new companies and the dissolution of old ones. A series of reforms has been identified, which requires legislative amendment and these are being submitted for parliamentary treatment.

To what extent do you agree with the privatization of sectors such as energy?

Given that I am responsible for privatization, people expect me to say that everything should be privatized. But in fact, I'm clear when I say that privatization is not the right tool for all contexts. I believe that in certain areas, namely the telecoms sector, it is the right tool. However, we should turn to PPPs for electricity and other sectors. The privatization of the telecoms sector and the adoption of the PPP approach in other sectors can help foster the creation of true capital markets in Lebanon, promoting an easier flow of capital among private sector players.

What is your mid-term outlook for Lebanon's economy?

I think that if the politicians make progress with PPPs, we have a very bright future. If we do not, I am afraid that the economy will continue to suffer. The war in Syria is set to continue for years to come, and our involvement in it has already reached a worrisome degree. However, despite that, our economy has been doing well, in relative terms, because of the private sector and because civil society organizations have been providing services where our government has been largely absent. The armed forces have been doing a good job of maintaining peace, security, and stability. What we need is for the government to pay closer attention to socio-economic matters. If it does that, Lebanon's economy will do very well, I am sure.

© The Business Year - May 2015