A Nation Smiling at Death in the Face
According to The Economist, Lebanon's dysfunction and mismanagement, a cause of the protests, has its origins in the country's sectarian political system enshrined following the Taif agreement, which took place in 1989, almost thirty years before the 2019 protest began.
Lebanon has a competitive and free market regime and a strong laissez-faire commercial tradition. The Lebanese economy is service-oriented; main growth sectors include banking and tourism. There are no restrictions on foreign exchange or capital movement.
Lebanon's complex web of corruption and its legality runs under a confessionalist power-sharing governance structure, having long been subject to nepotism, systematic patronage, judicial failures, electoral fraud, bribery, cronyism, and clientelism.
With a 152% debt to GDP ratio, Lebanon is the third most indebted country in the world after Japan and Greece. Lebanon ranked as the worst among six Middle Eastern states in Transparency International’s ranking of bribery and the 137 least corrupt nation out of 180 countries. The comparison was even starker when it came to judicial corruption. Favouritism, corruption and clientelism within ministries are also rife.
According to a 2016 study, 18 out of the top 20 banks have major shareholders linked to political elites and 43 per cent of assets in the sector to be under political control. Ratings agencies have downgraded several major Lebanese banks assets to junk territory in the past year, expressing concern about the quality of their holdings.
Lebanon is in the process of preparing for its first offshore oil and gas exploration but there is uncertainty over transparency and rule of law. Without reform, activists and monitoring groups say “Lebanon's economy is beyond easy solutions”, “It will take at least 9 or 10 years to have the first revenues” and, even in this best-case scenario, they will not contribute more than 2 per cent of the GDP. That’s also assuming that any hydrocarbons are actually found and in commercially viable quantities to extract.
Bribery and fraud in Lebanon is widespread and permeates all levels of society, as reflected by the country’s global and regional average performances scores in most governance areas. Political parties, public administration, Parliament and police are perceived as the most corrupt institutions of the country. Partly due to political instability, the country has not established the necessary integrity structures nor are there indications of a strong political will to fight corruption. Lebanon’s confessional power-sharing arrangements fuels patronage networks and clientelism, which undermines further the country’s governance system.
As if that was not damaging enough, Banks have since September arbitrarily capped the amount of dollars customers can withdraw or transfer abroad, in a country where the greenback and the Lebanese pound are used interchangeably. Although no formal policy is in place, most lenders have limited withdrawals to around $1,000 a month, while others have imposed tighter curbs.
The local currency has lost over a third of its value against the dollar on the parallel market, plunging to almost 2,500 against the US dollar, whereas, the official rate was pegged at 1,507 Lebanese pounds to the greenback since 1997.
Demonstrators accuse banks of holding their deposits hostage while allowing politicians, senior civil servants and bank owners to transfer funds abroad. Banks have as a result transformed into arenas of conflict, where shouting and tears abound, as depositors haggle tellers to release their money.
The banking association condemned the attacks blaming the "severe and irresponsible tardiness in forming a new government", saying this made it look like banks were responsible for deteriorating conditions. Regardless, Lebanon's crisis has shattered confidence in its banking system.
While the international donor community holds their breath as their 11 billion USD in CEDRE funds are dangling just out of the Lebanese government’s arm’s length, and an impending sense of economic doom looms in the distance, millions of protestors have flooded the streets in a display of social dynamism and cohesion that disproved the accepted “given” of a divided, sectarian, Lebanese civil society.
At the core of protestor’s demands is combating corruption. Forms of such vary, but include abuse of power, bribery, extortion, cronyism, nepotism, parochialism, patronage, influence peddling, graft, and embezzlement. Corruption does facilitate criminal enterprise such as drug trafficking, money laundering, and human trafficking, though it is not restricted to these activities.
Despite the assumption that all forms of corruption are underhanded, some aspects of corruption are legal due to the absence of existing legislation, non-reform of existing legislation to address current applications, and/ or a precedent of lack of implementation.
Realistically, there is no magic solution to all of Lebanon's woes. But without a power overthrow, constitutional reforms, and a hierarchy reshuffle, fighting the scourge of corruption that permeates the Lebanese government and public administration is not an option.
Food for thought!