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Amidst escalating conflicts in Gaza after October 7th, security tensions have surged along the Lebanese-Israeli border. This has raised critical concerns about national security, potentially impacting Lebanon's economy.
LIMS explained that the economic landscape is marred by heightened uncertainties. During the summer, a surge of dollars flowed into the nation's coffers. However, recent incidents have precipitated the exodus of remaining tourists and expatriates. This departure raises concerns about their willingness to choose Lebanon as a destination for the upcoming Christmas and New Year holidays. Lebanon's national output, heavily reliant on tourism, stands at the precipice of a substantial downturn.
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Faced with the prospect of a wider conflict, citizens tend to stockpile essential goods and currencies, particularly foreign reserves such as the US dollar. This surge in hoarding increases selling Lebanese pound and buying dollars. Simultaneously, the specter of war creates an inhospitable environment for investments. Corporations postpone expansion plans and capital expenditures. Investors, too, adopt a defensive stance, diverting funds away from Lebanon.
The result is a noticeable deceleration in economic activity, accompanied by a rise in capital outflows and a concurrent reduction in inflows. This scenario sets the stage for a potential imbalance in the external sector, exerting increased pressure on the exchange rate of the Lebanese pound and on foreign exchange reserves.
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PRISM Townhall Meetings: Bridging Municipal Horizons Through Private Sector Collaboration
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Lebanon's economic turmoil has precipitated the breakdown of public services, notably in electricity and solid waste management. This situation has cast a pervasive pall over businesses nationwide, driving many to insolvency. Faced with the government's incapacity to deliver those services, attention has turned to municipalities as potential providers. However, municipalities find themselves grappling with the same economic challenges plaguing the government.
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Project PRISM (Private Initiatives to Service Municipalities) organized a series of townhall meetings, in cooperation with business associations, aimed to underscore the private sector's potential in delivering municipal services. The first townhall took place on October 5 at the Chamber of Commerce of Tripoli and the North of Lebanon. The second was organized on October 26 at the Beirut chamber, and the third on October 31 in the Jounieh chamber.
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Despite the prevailing challenges posed by the ongoing war in the South of Lebanon, these townhall sessions proved to be resounding successes. Drawing together around 60 influential stakeholders at each event, including presidents of municipal councils, representatives from businesses, members of parliament, active citizens, and media representatives. The resilience displayed by Project PRISM and the engaged participants signals a promising trajectory for future cooperation in addressing crucial facets of municipal services.
PRISM advocated for transitioning from the taxpayer model to the user payer model. The model envisions the establishment of local solar farms by the private sector. The energy generated by these farms will be distributed through the existing microgrids of "subscription generators". This hybrid model, demonstrated successfully in towns like Toula, combines renewable energy with a generator, delivering cleaner electricity at half the cost. In solid waste management, the private sector can provide the service at the municipal level, mirroring the successful model in Beit Meri. The meeting also streamlined the collaboration process between businesses and municipalities and shed light on the legal framework. This presentation garnered interest and enthusiasm, with numerous municipalities and private enterprises expressing a strong desire to seek LIMS guidance in navigating the legal landscape.
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Catalyzing Change: PRISM Advocates Opening the Municipal Market to Private Businesses
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Lebanon's overarching economic crisis casts a shadow over municipalities, grappling with severe financial constraints that hinder their operations and investments. Resource scarcity amplifies concerns about meeting citizen needs, raising doubts about municipalities' capacity to deliver essential services.
LIMS argued for a collaboration between municipalities and the private sector in three key areas: renewable energy, waste management, and water. The private sector can invest in these sectors on the local level, which would allow municipalities to save costs and increase revenues. This engagement will also have a positive impact on the local economy driving growth, generating jobs, and providing citizens with continuous, high-quality services. In some instances, this partnership has already yielded success. In Toula, for example, a solar energy farm provides uninterrupted service at half the usual cost. Likewise, Beit Mery effectively managed waste collection through citizen subscriptions, leading to cleaner streets and strict anti-littering measures.
LIMS also shed light on the existing legal framework governing partnerships between municipalities and private companies. For instance, Law 462/2002, though not enforced yet, broke the monopoly of National Electricity Company and permits for energy production and distribution by private entities. Additionally, Law 48/2017 on Public-Private Partnerships allows municipalities to get involved in joint projects. There's also an ongoing effort to introduce a new law on renewable energy that would streamline the process even further.
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Corruption in the Electronic Platform of the Traffic and Vehicle Authority
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Under the banner of Program APPLE C (Apply Public Procurement Law to End Corruption), a recent investigative study conducted by LIMS has unveiled a concerning reality within the Department of Motor Registry. The spotlight is on INKRIPT, the entity managing Lebanon's electronic traffic and vehicle system, as it takes drastic measures that run afoul of legal protocols.
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In a bold move, INKRIPT, in violation of the law that prohibits the suspension of public services under any circumstance, has locked the system, concealed passwords, and prohibited the issuance of licenses and plate numbers. The company's actions are allegedly aimed at gaining leverage in negotiations with the government over the exchange rate used for payment of its dues. INKRIPT seeks a revision of amounts owed due to the sharp deterioration of the Lebanese pound's exchange rate.
While there is a legitimate argument for amending laws to account for exchange rate fluctuations, encouraging private companies to engage in public tenders during times of currency instability, the company's chosen approach sets a perilous precedent by holding the population hostage.
LIMS contends that the root cause of this issue lies in the government's tendency to contract monopolies for the delivery of public services, granting a single company undue control over the entire population. The study suggests that introducing multiple companies into the motor registry services landscape would significantly mitigate the risk of a complete system shutdown. This underscores the importance of dismantling monopolies held by service providers, paving the way for fair competition that ensures the provision of the best prices and services, even in challenging times.
The chronic issue of government contracts being consistently awarded to monopolies due to corruption and undisclosed kickbacks has been exacerbated by the ongoing economic collapse. This, in turn, dissuades honest companies from engaging in tenders in Lebanon. The proposed solution involves opening up the market to genuine competition, setting the stage for much-needed reforms.
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Alfa's Adherence to Public Procurement Law: $10 million in Additional Revenues Compared to MTC
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Lebanon's Mobile Network Operators (MNOs), Touch and Alfa, recently engaged in an auction to contract A2P (Application-to-Person) messaging providers. A2P messaging involves automated messages sent from applications to individuals, a prevalent tool for notifications, alerts, and promotional content. Opting for an auction brings competitive pricing to the forefront.
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As part of the APPLE C initiative (Apply Public Procurement Law to End Corruption), LIMS conducted a study evaluating the outcomes of A2P contracts by Alfa and Touch. Alfa's adherence to Public Procurement Law through a lawful tender process resulted in competitive bids. This approach attracted cutting-edge technology, superior services, and an impressive $10 million in additional revenues. The law-compliant approach allowed Alfa to secure favorable terms and contribute positively to government revenues. Contrastingly, Touch attempted to bypass regulations, leading to unfavorable terms in their A2P contracts. The study revealed that Touch's approach resulted in outdated technology and reduced government revenues, despite having more subscribers than Alfa. Attempting to sidestep regulations seemingly backfired for Touch, highlighting the importance of following due process in public procurement.
The APPLE C initiative has underscored the significance of adherence to public procurement laws to ensure the presence of genuine competition. Competition between bidders secures the best outcomes. Alfa's success serves as a testament to the effectiveness of competitive bidding in driving innovation, technology advancement, and financial gains. Touch's experience serves as a cautionary tale, emphasizing the potential pitfalls of bypassing established regulations in public procurement processes.
In a second report, LIMS has brought attention to a legal loophole, introducing a concerning ambiguity in the regulatory framework. Rather than subjecting all entities accessing public funds to the scrutiny of the public procurement authority, an imprecise definition has been applied to certain entities, enabling them to navigate around the requirements of the Public Procurement Law. These entities include the Mobile Network Operators, the casino, Middle East Airlines, etc. The consequence of this lax definition is a descent into the depths of corruption and favoritism when it comes to contracts and deals. In light of these revelations, the report advocates for a comprehensive modification of existing legislation to eradicate any ambiguity present in the text.
As Lebanon's economic landscape evolves, the APPLE C initiative paves the way for fair competition, innovation, and integrity in the industry.
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The 2024 Budget Draft: Concerns Over Government Borrowing
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The Finance and Budget Committee completed its assessment of the first part of the 2024 budget draft presented by the Lebanese Government. The committee opted to revoke the government's authorization to borrow, citing apprehensions surrounding the persistent reliance on borrowing. This decision signifies that any future borrowing by the government will necessitate returning to parliament for approval, injecting an added layer of legislative oversight.
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LIMS observed that the committee's stance aligns with the acting Central Bank governor's resolution to refrain from lending to the government without the requisite legislative endorsement. Central to this unfolding scenario is Lebanon’s government proposing a budget with an alarming deficit of approximately 41 trillion LBP, lacking any identified means to bridge this fiscal gap. LIMS encouraged the parliament to oppose any proposal featuring a deficit, urging the government to present a balanced budget.
LIMS emphasizes that achieving a balanced budget is also imperative for the transition from the existing SAYRAFA exchange rate platform to the anticipated "Bloomberg" platform. Bloomberg holds the potential to consolidate Lebanon’s myriad exchange rates, contingent upon the central bank distancing itself from erstwhile practices. Historical interventions involved the sale of dollar reserves below market rates to stabilize the exchange rate, inadvertently fostering the proliferation of multiple exchange rates.
Furthermore, the unification of exchange rates necessitates the new platform to be accessible to all market participants, either directly or through intermediary banks. This expanded accessibility promises enhanced transparency, channeling exchange rate operations from the informal market to banks. Such a transition addresses concerns surrounding the substantial cash economy, curbing issues related to illicit activities and money laundering.
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LIMS Leaders' Academy Empowers Reform-Minded Candidates
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The 7th edition of the Leader's Academy (LLA) descended upon the Chouf and Aley district, engaging with 24 reform minded candidates for municipal elections and activists seeking alternatives to traditional sectarian political parties.
The workshop, titled LLA 101 Economic Foundations of Prosperity, delved into municipal-level solutions for a spectrum of issues plaguing the district. Over the course of the workshop, participants collaboratively crafted a comprehensive paper outlining key policy suggestions. A central tenet of the paper advocated for enhancing the authority of municipalities over essential services such as electricity, water, and solid waste to enable them to attract competing companies. Attracting private companies emerged as a solution to establish solar farms, rehabilitate water distribution networks, and manage waste sorting facilities. In exchange, these private entities would contribute to the municipal coffers, allowing the establishment of an effective municipal police force to combat littering and safeguard the district's properties and installations. To ensure the actionable implementation of these recommendations, a dedicated committee was formed.
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The workshop marked a significant milestone for LIMS as it successfully transitioned to relying on internal resources exclusively. All speakers and moderators were associated with LIMS, providing the organization with heightened control, flexibility, and autonomy. This shift is crucial, particularly in light of the current war in the south that demands a high degree of agility. The feedback from the workshop was overwhelmingly positive, with the majority of participants expressing high satisfaction.
In a parallel effort, LIMS extended its reach launching the LLA 201 Connect to Prosperity Webinars for North Lebanon's 3rd district. The first session commenced with a review of the recommendation paper drafted during LLA 101. Participants, eager to amplify impact, suggested edits to the paper and proposed to reach out to activists who were unable to attend LLA 101. The collective brainstorming also focused on effective strategies for disseminating the findings of the recommendation paper to a wider audience. As the Leaders' Academy continues to empower and inspire, these initiatives stand as testament to the potential for positive change at the grassroots level.
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References
LIMS Media Interviews
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The War in Gaza and in Southern Lebanon: Impact on the Economy
- Can Lebanon Withstand The Pressure Of The War During This Period? October 10, 2023: VDL, Radio Interview AR
- What Is The Impact Of Tension In The South On Exchange Rate Stability? October 13, 2023: VDL, TV Interview AR
- An Economic Expert Reveals The Repercussions Of The Events In The south On The Exchange Rate, The Economy And Tourism, October 30, 2023: SBI, Article AR
PRISM Townhall Meetings: Bridging Municipal Horizons Through Private Sector Collaboration
- The following media covered the Tripoli meeting: Al Jadeed, nna, aljoumhouria, addiyar, janoubia, lebeconomy, nabd, alraednews, ad-dawra, ch23, journalalire, minkomwlakom, x-raylb, pressbee, lebapedia, and samapress.
- The following media covered the Beirut and Jounieh meeting: nna, annahar, addiyar, nidaalwatan, janoubia, lebeconomy, elsharkonline, alraednews, elnashra, ad-dawra, journalalire, ajwaapress, gulf365.net/world-news, aakherkhabar, and almontasher.
Catalyzing Change: PRISM Advocates Opening the Municipal Market to Private Businesses
- Patrick Mardini: If The Central Bank Maintains Its Decision Not To Lend To The Government, It Will Maintain The Stability Of The Exchange Rate, October 2, 2023: Al Jadeed, TV Interview AR
- Cooperation Between The Private Sector And Municipalities Is The Cornerstone For Expanding The Range Of Services, October 29, 2023: Al Safa News, Article AR
Corruption in the Electronic Platform of the Traffic and Vehicle Authority
- LIMSLB Exclusive: INKRIPT Stops The Operating System, Hides Passwords, And Prevents The Issuance Of Market And Car License Books To The Lebanese People, October 20, 2023: Limslb, Article AR
Alfa's Adherence to Public Procurement Law: $10 million in Additional Revenues Compared to MTC
- LIMSLB Exclusive: Touch “loses” About 10 Million Additional Dollars In The INMOBILES Deal, October 23, 2023: Limslb, Article AR
- LIMSLB Exclusive: Flaws In The Public Procurement Law Allow Favoritism In Contract And Deal Making, October 12, 2023: Limslb, Article AR
The 2024 Budget Draft: Concerns Over Government Borrowing
- Has The time Of Printing The Lebanese Pound Passed Forever? October 3, 2023: Leb Economy, Article AR
- Lebanese Face A New Platform For Pricing The Lebanese Pound Amid An Economic Crisis, October 6, 2023: Anadol, Article AR
- Attention Is Shifting To The Cash Transformation Battle In Lebanon, With A Bet On Bloomberg's Platform To Alleviate The Lebanese Pound Exchange Rate Crisis Against The Dollar And Restore Confidence In The Central Bank's Policy, October 9, 2023: Al Arab, Article AR
- Is "Bloomberg" Cloning "Sayrafa" Platform? October 13, 2023: Lebanon Debate, Article AR
- Saving In Gold: Expert Advice To The Lebanese! October 16, 2023: Leb Economy, Article AR
- The Finance And Budget Committee Has Suspended The Articles Related To Loans, Grants, And Credits From The 2024 Budget Project, October 17, 2023: Al Jadeed, TV Interview AR
- The Path Of The Lebanese Pound And The Dollar... No More Collapse! October 24, 2023: GrandLB, Article AR
- One Year Has Passed Since The Presidential Vacuum In Lebanon, With No Signs Of Solution In Sight, October 24, 2023: CNBC, TV Interview AR
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