Standard & Poor’s has revised the outlook for Lebanon on the long-term ratings from “stable” to “negative”. We used to blame regional instability on the economic situation in Lebanon and it definitely has impacted us negatively but I believe our biggest problems right now are domestic instability and corruption.
We haven’t had a Lebanese president since May 2014, elections since 2009, the parliament has failed to pass a budget since 2005 and garbage is all over our streets! It’s a good thing we still have a solid financial system backed by the Central Bank.
My favorite quote from the article is the below:
The agency did not expect the government to use the lower oil price environment, and the resulting fiscal space, to implement the structural reforms that would reduce fiscal vulnerabilities and promote longer-term economic growth. It added that public finances and fiscal flexibility would remain constrained by structural expenditures that include transfers to EDL and high debt servicing.
I guess this is the S&P’s way of telling the Lebanese authorites: #YouStink!
The World Economic Forum’s 2014-2015 Annual Global Competitiveness Report is out and it placed Lebanon among the 10 least efficient governments in the world. Lebanon is in fourth position behind Venezuela, Italy and Argentina. The report “evaluates the efficiency of 144 of the world’s governments on measures including the wastefulness of government spending, burden of regulation and transparency of policymaking, to produce an overall global ranking”. I’m quite surprised we are not in the top rank but I am sure we can pull it off next year so let’s keep our fingers crossed and hope that our government will make things even worse for all of us next year.
If you look more closely at the report, you will notice we ranked before last or last in the following categories:
– Quality of electricity supply.
– Ethics and Corruption.
– Public trust in politicians.
– Wastefulness of government spending.
– 3rd pillar: Macroeconomic environment
Mabrouk la Lebnen 😀
On the other hand, Qatar & the UAE were ranked among the top 10 most efficient governments in the world. You can check out the full report [here].
The minimum wage in Lebanon was increased three years ago from 500,000 ($330) to 675,000 ($450), yet a lot of people here still think it’s not enough and that it should be drastically increased. There’s no doubt that you can barely live with $450 in Lebanon given how expensive things are now, but that’s not a reason to increase the minimum wage as this could lead to serious economic problems (there are other ways to improve living standards).
I will not dig into this issue as it’s a very complicated one, but I was reading yesterday a chart published by the OECD, Organization For Economic Cooperation and Development, showing the minimum wages in 34 different countries and I thought it would be a nice idea to see where Lebanon stands on that chart. Since the chart is showing the cost per hour after taxes, we need to compute the cost of 1 working hour in Lebanon according to the Labor Law.
As mentioned above, the minimum wage is now 657,000 LL or $450 and most people work 5 days a week and 8 hours a day, which amounts to 168 hours in May for example. If we take Saturdays into consideration the total number of hours would be 188, so the cost of 1 working hour is between $2.4 and $2.7. This means that Lebanon ranks somewhere in the bottom between Hungary and Estonia. Australia and Luxembourg top the list with wages over $9 an hour each, while the US stands in 11th position with $7.25 per hour. As far as Arab countries are concerned, there’s no data available for Qatar, UAE, Saudi Arabia’s minimum wage is of $720 per month for the public sector while it’s $268 per month in Jordan, $175 in Egypt and between $176–$266 in Syria,
Thank you Elie for the help!
A survey was conducted by Sakker el Dekkene in order to evaluate the attitude of Lebanese citizens towards corruption and their willingness to compromise on their principles and bribe officials. 7810 doors were knocked and 4873 persons were contacted to obtain a sample of 1200 respondents across the entire country and the results were as follows:
– 62% of the Lebanese population would not wait in line
– 25% of the population would certainly compromise on values and principles to reach material objectives.
– 38% of the population would go around a queue.
Corruption and Age:
– Youth are more willing to make compromising choices than older generations.
– 30% of those aged 55 and above admit that they would seek outside interference against a police officer doing his job.
– 62% of those aged 18 to 24 would call for interference against a law enforcement officer on duty.
Corruption and income level/political identity:
– 38% of the higher income level respondents say they will sure bribe to get a public servant’s signature to avoid delay (vs 16% of lowest income level).
– There’s no difference between political sides with regard to corruption
Perceived Corruption levels in public institutions:
– Only 14% of the population fully trusts the judiciary. When asked why, 64% of the respondents mentioned spontaneously political interference, and 49% mentioned corruption.
– 93% of the respondents consider corruption widespread at the port and 86% in the cadaster.
– The least corrupt institution is the Lebanese Army.
– Public opinion locates corruption in Port, Vehicle Registration, Cadaster, Ministry of Finance and the legal sector as top targets.
All in all, half the citizens are willing to report corruption, as long as it does not backfire on them, and as long as it leads to results. I think the most worrying figure is the fact that the younger generation is more willing to compromise on its principles. It is our duty to report bribes and put an end to corruption and Sakker el Dekkene is providing a platform to do so.
Check out their [website] and make good use of it.
Update (20/01/2015): It appears that the government won’t be fixing any prices and the prices will drop by more than 1,000 Lebanese Lira tomorrow.
Gas prices have dropped by over 13,000 Lebanese Liras from last year until now in Lebanon, and they should normally continue to drop since oil prices are plunging worldwide. However, it appears that the Lebanese authorities and the concerned ministries want to put an end to this drop and set a minimum price for the tank. Moreover, there are talks that they might re-introduce a fixed amount that is related to internal distribution and governmental taxes and that was abolished by Gebran Bassil a couple of years ago.
Knowing that the prices are related to international market fluctuations, I don’t think it’s fair for the government to set a minimum price. If they want to compensate for the oil companies and gas stations’ losses, they should also set a maximum price and relieve the Lebanese from high fuel bills. If the government wants to take action and help oil companies by fixing the price of 20 liters of gas at 22,000, they should also prioritize the average citizen and set a maximum price.
On another note, I wonder if the drop in gas prices has anything to do with the increase in traffic lately.
Update: BDL governor Riad Salameh denied some media reports that the Americans had urged him during the World Bank and International Monetary Fund meetings in Washington to reduce the number of banks operating in the country from 72 to 25 through consolidations and mergers. [Source]
How is it possible to reduce the number of banks from 72 to 25 in just five years?
The World Bank and the U.S. Treasury Department proposed to Central Bank Governor Riad Salameh to reduce the number of working banks in Lebanon from 72 to 25 within a period of five years.
According to al-Liwaa newspaper published on Tuesday, the proposal came in light of the tough measures imposed on transactions, especially those conducted by expatriates. The newspaper said that the reduction in bank numbers would give the banking sector the needed boost and increase the capital of national banks by merging their branches. [Link]
I was reading on Liberation that the French are more pessimistic about their economic future than Palestinians, then I noticed Lebanese feel the same.
There’s no doubt that the economic situation is bad in Lebanon, but I doubt that it is worse than Palestine. The countries that are most optimistic about their future economic situation are China, Peru, Vietnam, Senegal, Nigeria, India and Colombia.
Check out the full study [Here].
More than half of Greeks (53%) anticipate economic conditions worsening over the next 12 months, (another 26% expect the Greek economy to remain the same, which, in a nation where the economy shrank by -3.9% in 2013 is hardly a vote of confidence). In addition, 48% of the French expect their economy to deteriorate, as do 46% of Lebanese and 44% of Palestinians. Greek pessimists, however, may be pleasantly surprised: the IMF foresees the Greek economy improving from 0.6% growth in 2014 to 2.9% in 2015. Similarly, while less than half the Lebanese expect more hard times, the IMF forecasts Lebanon’s economy to accelerate from 1% growth in 2014 to 2.5% in 2015. [Pew]
According to the 2013 Global Competitiveness Report, Lebanon ranked 116th out of 144 in terms of basic requirements, 125th out of 144 in terms of institutions, 135th and 32nd (out of 144) in terms of macroeconomic environment and health/primary education respectively.
The most problematic factors for doing business in Lebanon are:
– Inadequate supply of infrastructure
– Inefficient government bureaucracy
– Government instability/coups
– Policy instability
– Access to financing
– Insufficient capacity to innovate
– Poor work ethic in national labor force
– Inadequately educated workforce
– Restrictive labor regulations
– Poor public health
– Tax regulations
– Tax rates
– Crime and theft
– Foreign currency regulations
You can check out the full report [Here].
Migrants to the United States are responsible for sending almost a quarter of the global total of intentional remittances. While the countries with the biggest flows are Mexico, India and China, Lebanon is in 14th position and sent over 1.5 Billion Dollars in the year 2012.
The map was done by Pew Research Center based on data from the World Bank.
Read the full article [Here].
Rand Ghayad is a Lebanese Economist who will shortly be receiving his Ph.D. in economics from Northeastern University. He published a paper back in 2012, along with his doctoral adviser William Dickens, which offered a new take on long-term unemployment and found that “the long-term unemployed were qualified for jobs but were ranking lower than other potential candidates because of the length of time they had been out of the workforce”.
Rand’s paper was described by the Atlantic Post as “pioneering”, and was cited recently by US Senator Rand Paul, to which Ghayad responded. More importantly, this new theory on unemployment has caught the attention of US president Barack Obama who invited Ghayad to attend a meeting by Gene Sperling, Obama’s National Economics adviser.
For those interested in economics and the topic of unmeployment, here’s a [Link] to Ghayyad and Dickens’ paper, which was originally written for the Federal Reserve Bank of Boston.