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LIMS unveiled two policy briefs under its APPLE C initiative (Apply Public Procurement Law to End Corruption), shedding light on the challenges confronting Lebanon's new public procurement law (Law 224/2021).
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The first brief underscores the law's primary objective of promoting competition and transparency to safeguard the integrity of public contracts through the pivotal role of the Public Procurement Authority (PPA). Central to this is the mandate for the PPA to disseminate procurement information via its central e-platform, yet this mandate is hamstrung by the PPA's current scarcity of resources. With a limited staff of merely 7 personnel and a pending internal regulatory framework, the PPA is unable to materialize this pivotal task, resulting in restricted access to data for prospective bidders, thereby stifling competition and fostering an environment ripe for favoritism.
Conversely, certain provisions within the law introduce cumbersome administrative procedures, notably the establishment of an "Appeals Board." This redundancy clashes with the State Council's jurisdiction, engendering discord, incongruences, and procedural bottlenecks. Furthermore, the absence of clear definitions and penalties for flouting competitive procedures and engaging in conflict-of-interest nurtures a culture of impunity, amplifying the specter of corruption within public procurement processes.
The second brief underscores the government's persistent transgressions against the Public Procurement Law, circumventing competitive processes in favor of preferential mutual consent contracts, a practice inherently conducive to corruption. LIMS elucidates instances where ministries eschew competitive mechanisms, contravening the foundational principles of transparency and fair competition. The document underscores the imperative of upholding competitive tenets enshrined within the law to realize optimal value in public procurement contracts.
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Lebanon's Fiscal Tightrope: Public Sector Wage Hikes Add Fuel to the Fire
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On February 28, 2024, the Council of Ministers made a significant move, increasing public sector wages retroactively from December 1, 2023. This new wage package marks a substantial jump, with retirees and security forces seeing their salaries tripled, while active members of public administrations experience a twofold increase. Combined with previous raises, public employees now receive a total of nine times their initial salaries.
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The recent salary increase, approved without secured funding, exacerbates concerns about fiscal sustainability. LIMS had previously questioned the budget's equilibrium before the raise, and now with the additional expenditure, fears about a widening fiscal deficit loom large. The potential payment of these raises in US dollars rather than Lebanese pound could strain the central bank's foreign exchange reserves, deepening the ongoing banking crisis. LIMS urges the central bank to resist such pressures and proposes expenditure cuts and tackling the black economy as more prudent alternatives to current measures.
Just a month earlier, Lebanon's parliament celebrated the adoption of a balanced budget. However, LIMS, in a recent policy brief, has cast skepticism on the projected income and expenses of the adopted budget, even before the latest wage increase. First, the budget is expected to be challenged constitutionally and certain taxes repealed. Furthermore, Lebanon already positioned unfavorably on the Laffer curve, anticipated tax hikes may not yield the expected revenue. This could shrink the tax base further by forcing businesses to close or relocate and would definitely spur increased tax evasion and smuggling.
On the spending side, the brief stressed on the government's reluctance to undertake substantial reforms in the public sector, including restructuring and dismantling dormant administrations like Alissar, the displaced fund, the ministry of displaced, and consumer markets, among others, raises concerns. The allocation of one million dollars in the 2024 budget for these entities, without visible contributions, adds to the criticism. Moreover, the persistence of phantom jobs within the government inflates public spending without corresponding productivity.
LIMS contends that the promised budget balance is unrealistic given the exaggerated income projections and inefficient expenditure. Instead, fostering economic growth is a more sustainable approach than burdening a shrinking economy with tax hikes. Growth can be stimulated through dismantling government monopolies and introducing competition in critical sectors for economic recovery, especially in areas where government management has been lacking, such as telecommunications, electricity, aviation, tobacco, Casino du Liban, and the transportation sector.
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Lebanon's Banking Crisis: Draft Law Sparks Controversy
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The banking crisis has surged back into focus with the unveiling of a draft law on February 8, 2024, aimed at restructuring banks in Lebanon. This move has triggered a barrage of objections, criticisms, and responses, particularly from depositors and banks, owing to its proposal for substantial deposit haircuts and bank liquidations.
LIMS has highlighted that this draft law absolves banks of their responsibilities towards depositors, hoping that this may restore confidence in both the Lebanese economy and the banking sector. However, LIMS contends that the law will not restore confidence. Its treatment of depositors is unjust and fails to address the underlying issues that precipitated the crisis.
To fortify the banking system and avert future crises, LIMS advocates for three crucial reforms: Firstly, a prohibition on banks depositing their funds in the central bank, a practice often likened to a "Ponzi scheme" within the context of Lebanon's banking turmoil, must be explicitly banned. Secondly, the Lebanese government should be barred from borrowing from the central bank, a measure that has contributed to monetary stability over the past six months and should be enshrined in law. Lastly, stringent restrictions should be placed on the central bank's ability to print excessive amounts of Lebanese pound (LBP) not fully backed by US dollar reserves at a fixed exchange rate.
LIMS emphasizes that failure to implement these reforms could impede efforts to rebuild trust in the banking sector, even if the immediate deposit issue is liquidated.
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Electricity Reform: A call for Transparent Pricing and Warning Against Government Management
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EDL's recent endeavor to repair its pricing structure, promising improved electricity supply and bill collections in exchange for higher tariffs, has met yet another failure. While prices surged promptly, the anticipated enhancements in power supply and bills collections faltered, disproportionately burdening compliant bill payers while absolving non-paying consumers.
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In response, LIMS has underscored a series of corrective actions imperative for aligning EDL's pricing model with actual household consumption, steering away from a tax-like imposition on all households irrespective of their electricity usage. These recommendations encompass: (1) scrapping the fixed rehabilitation allowance, debunking its purported use for system refurbishment. (2) Transitioning from a fixed meter fee to a variable fee indexed to actual hours of electricity provision. (3) Pricing electricity in Lebanese pounds based on real-time market exchange rates during consumption, providing transparency on kilowatt-hour costs and averting billing surprises months or years later. (4) Abolishing value-added tax (VAT) on meter fees and associated consumption charges.
Meanwhile, the Council of Ministers stands at the cusp of a pivotal decision concerning the "Electricity of Zahle (EDZ)" concession, a private utility responsible for electricity generation and distribution in Zahle under a concession pact. LIMS clarified that authorities failed to renew the contract of EDZ post-concession expiry in 2018, coupled with the failure to reclaim assets and equipment as stipulated in the contract. The maneuver to issue a government decree to redress these lapses is viewed skeptically by LIMS, cautioning against potential cover-ups for further breaches. Notably, LIMS critiques the ineffectiveness of the handover committee within the ministry, highlighting systemic deficiencies and mistakes.
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References
LIMS Media Interviews
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Unveiling Corruption: LIMS Exposes Challenges and Imperatives in Lebanon's Public Procurement Landscape
- LIMS Exclusive: Weakening The Public Procurement Authority And Its Supervisory Role, March 18, 2024: Limslb, Article AR
- LIMS Exclusive: Expanding Competition In Public Contracts Combats The Scourge Of Corruption And Ensures Voluntary Compliance, March 29, 2024: Limslb, Article AR
Lebanon's Fiscal Tightrope: Public Sector Wage Hikes Add Fuel to the Fire
- LIMS Exclusive - 2024 Budget: Deepening Collapse And Violation Of The Principles Of Inclusivity And Credibility, March 18, 2024: Limslb, Article AR
- What Impact Does The Decision To Increase Salaries And Wages In The Public Sector Have On Exchange Rates And Deposits? March 4, 2024: MTV, TV Interview AR
- Local Economy, Mardini to Addiyar: Monsouri Practices A Monetary Policy Considered Exceptionally Reformist, March 4, 2024: Addiyar, Article AR
- Targeting the Reserves of the Central Bank From The Angle Of Increasing Salaries And Wages? March 4, 2024: VDL, Radio Interview AR
- The Performance Of The Public Employee Between The Right To Cover His Livelihood Needs And The Positivity Of "Productivity", March 6, 2024: Al Joumhouria, Article AR
- Budget Blues And Lebanon’s New Ineffective Budget, March 6, 2024: Now Lebanon, Article EN
- Will Increasing Public Sector Salaries Affect The Exchange Rate? March 11, 2024: Naqd, TV Interview AR
- Stumbling In Raising Salaries Of Public Sector Employees In Lebanon.. What Are The Reasons? March 11, 2024: Al Jadeed, TV Interview AR
- Current Salaries In Dollars Are Insufficient: No Return To Pre-2019 Conditions, March 12, 2024: Al Modon, Article AR
- Economic Expert to SBI: Increasing Public Sector Salaries Is Unplanned And Unfunded, March 12, 2024: SBI, Article AR
- Will Bribery In The Public Sector Decline After Salary Increases? March 13, 2024: Beirut24, Article AR
- This Only Happens In The Poorest Countries Of The World! Expert Fears Pressure On The "Central Bank", March 25, 2024: Lebanon Debate, Article AR
- Abu Chacra: Lebanese Majority Below Poverty Line, March 28, 2024: VDL, Radio Interview AR
Lebanon's Banking Crisis: Draft Law Sparks Controversy
- Will Lebanese Expatriates Bear the Cost of the Banking Crisis? March 13, 2024: SBS, Radio Interview AR
- The Necessity Of Banking Reforms To Restore Confidence In The Lebanese Economy, March 28, 2024: Al Jadeed, TV Interview AR
Electricity Reform: A call for Transparent Pricing and Warning Against Government Management
- What's Happening Behind The Scenes Between EDL And Zahle Electricity, March 18, 2024: Lebanon Debate, Article AR
- Increasing Electricity Bills Solely On The Committed Citizen, March 11, 2024: VDL, Radio Interview AR
- The Financial Electricity Crisis In Lebanon.. What Is The Fate Of The Iraqi Fuel Agreement? March 11, 2024: Huna lobnan, TV Interview AR
- What Are The Obstacles Facing Public Institutions In Settling Electricity Bills? March 11, 2024: VDL, Radio Interview AR
- Recover Of Zahle Electricity Facilities Awaits The Final Decree, March 18, 2024: Nida Al Watan, Article AR
- Electricity In Lebanon Warns Of Power Cuts In Case Of Non-Payment… Is There A Possibility Of Non-Implementation? March 20, 2024: VDL News, Radio Interview AR
- Expatriates Ready To Finance Electricity Projects: Thinking Outside The Box, March 26, 2024: Al Modon, Article AR
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