Corruption in Public Contracts in Lebanon: A Smoking Gun

Corruption in Public Contracts in Lebanon: A Smoking Gun

Under the ambit of the APPLE-C program, LIMS has released three policy briefs scrutinizing contentious public contracts for: (1) over-the-top (OTT) content services, (2) e-wallets, and (3) the Beirut airport duty-free auction. 

In the first exclusive, LIMS explained that OTT is a service that allows users to access TV shows, movies, music, and other content, directly over the internet, bypassing the need for traditional cable or satellite subscriptions. The Ministry of Telecom opted to grant a monopoly on the service to a pre-selected company, sidestepping competition and established legal tendering processes. To legitimize this monopoly, the minister intertwined Ogero, the national telecom company, and masqueraded the contract as a Public Private Partnership (PPP). LIMS’ analysis uncovered that Ogero would receive 25% of the revenues with minimal reciprocal offerings, characterizing this income as pure monopoly rent extracted from the Lebanese population. Moreover, circumventing public procurement laws under the guise of a PPP poses even graver issues, as PPPs necessitate procedural steps that are currently unfeasible.

Similarly, the same ministry is pushing to engage “Seoul” company to provide e-Wallet services through Alpha, one of Lebanon’s two mobile networks, without adhering to a proper tendering process. The purported lack of bidders was presented as an excuse, despite the fact that the other mobile network company, Touch, managed to attract several interested firms. Parallel to the OTT scenario, the ministry seeks to circumvent public procurement laws in e-Wallets and favor one service provider. This monopoly approach would result in lower quality services and higher prices, as it sidesteps a competitive process. Open competition among providers of e-wallets and respecting the law when engaging in public contract could optimize revenue, safeguard data, and bolster public trust, diverging significantly from the current opaque outsourcing approach to a single company adopted by the ministry.

Suspicions of favoritism also plague various services at Beirut airport, including parking, duty-free, restaurants, cafeterias, food, and airplane fuel supply. These services are contracted by the Ministry of Public Works and Transportation without requisite studies. The auction pricing mechanism is cause for serious concern, as it typically commences with an exceedingly low price, encouraging collusion among bidders to offer below-market prices. The auction winner then substantially increases the bid while remaining below a fair market price. LIMS advocates for the proper conduct of auctions and, more critically, urges the introduction of competition in these facilities. For instance, the duty-free area could be divided among different companies to stimulate competition. Such reforms are imperative to ensure competitive prices and good quality service for travelers, maximize returns on public assets, and prevent cronyism from capturing public resources.

  • Exclusive Beirut Airport Regulations: Contravening laws And Reinforcing Monopolies, Leaving The Traveler To Bear The Cost, December 1, 2023: Limslb, Article AR
  • Exclusive The Ministry Of Communications Hides Behind OGERO To Grant the monopoly of OTT service to a Private Company, In A Contract Reeking Of Favoritism, December 14, 2023: Limslb, Article AR
  • Exclusive “The Electronic Wallet” Is A New Service Subjected To Regulation By Mutual Consent Away From Transparent Competition, December 28, 2023: Limslb, Article AR