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French Version

Lebanon's challenge : moving from malaise to renaissance

Beirut Pact provides vision for putting the state in service of citizens, says Omar Razzaz

WORLD BANK commentary

The last six months have been packed with events of historic proportions for Lebanon.

This period has revealed the tremendous strengths of the Lebanese society and economy, and also some serious vulnerabilities.

The strengths include the power of the population to make its voice heard in a peaceful manner; the resilience of the financial sector; considerable investor loyalty; and the high credibility that the Central Bank enjoys. Demonstrated strengths also included the capability of a government, even though short lived, to deliver on reforms, if unobstructed. And finally, yet equally significant, this era has exposed tremendous international goodwill toward Lebanon.

But serious vulnerabilities have become evident. While the shock of the assassination of the late Prime Minister Rafik Hariri was successfully absorbed by the markets, its economic and financial costs added to an already heavily burdened economy. The debt burden, among the highest in the world, became even higher. Lebanon became even more dependent on the resumption of large external financial flows than it was. And on the electoral scene, short-term political rhetoric again took primacy over long-term agendas for national reform.

As Lebanon moves forward, it faces the challenge of transformation from a condition of malaise to a political, social and economic renaissance. The main challenge now is to move the country out of the postwar, debt-spiraling reconstruction phase into a vibrant emerging economy. The incumbent Prime Minister Najib Mikati and his team laid the foundations for such a transformation by launching the Beirut Pact process.

The Beirut Pact provides a vision for putting the state in the service of the Lebanese citizen. In its first phase, the process makes no attempt to provide a recipe for reform. Instead - and rightly so - it identifies the challenges that lie ahead. It poses fundamental questions about development priorities, policy choices and necessary tradeoffs. These questions touch every aspect of political, economic, and social development in Lebanon, including the role of the public sector and administrative reform; fiscal adjustment; monetary policy; public-debt sustainability; social policy and safety nets; human development (health and education); sustainable use of natural resources; and private sector competitiveness and growth.

Answers to the above questions have been articulated in the past by public-sector groups, local think tanks, various political parties, regional and international agencies and the World Bank. It is important to stress, however, that there are not necessarily "right" answers to each question posed. But there is, however, a "right" package of answers: one which is internally consistent; reflects broad agreement among the Lebanese; and allows Lebanon to transcend its current state of political, social, and economic malaise onto a sustainable path of growth and development. Only a broad-based consultative approach, but with determined leadership, can lead to this package called the Beirut Pact, which Prime Minister Mikati, rightfully, described as the "Economic Taif" after the political accord that ended the war 15 years ago.

Once the Beirut Pact is articulated, the next challenge would be to make it binding over several years of implementation, and not subject to manipulation for short-term political ends.

Here, a time-bound action plan, endorsed by all branches of government and associations of civil society and the private sector, would give greater credence to the Beirut Pact and its implementability.

The international community plays a crucial role in Lebanon's transition. In the best scenario, the international community could provide the technical assistance and the financial package to help Lebanon bridge the gap between the status quo and a future of higher equilibrium. In the worst of scenarios, a financial package would be actually counterproductive, simply postponing the day of reckoning when hard decisions need to be made. Indeed, even the most generous financial package of assistance would dissipate within a few years in the absence of the transformation described above.

The success of Lebanon as a model for coexistence and prosperity in the Middle East is important for the international community and is worthy of its support. But it cannot possibly be more worthy a cause to the world than it is to the Lebanese themselves. The political elite of Lebanon has an opportunity to show that it can put the country above factional differences and be in the driver seat of Lebanon's future transformation towards a new era of renaissance.

Omar Razzaz is the World Bank country manager for Lebanon.

Beirut,06 27 2005
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