The severe political crisis in Lebanon is crippling the higher institutions of the state, rendering them unable to make any decision or adopt any measure to facilitate the urgent, daily-life affairs of the people. The crisis also contributes to keeping the country’s black gold underground and unexplored.
This phase is decisive to a great extent as it requires the state to broaden its horizons. The state, however, is unable to do so for well-known reasons, namely the inflated public debt and the ongoing general budget deficit. In such a case, the Lebanese private sector, which has excelled in investment inside as well as outside the country, must intervene. The private sector must be as keen to preserve the safety of the state as it is to preserve the prosperity of its investments.
How can the private sector contribute to reconstruction and correcting the development path in the upcoming phase?
In the past, especially in the 1990s, the idea of privatizing a number of public facilities — notably Electricite du Liban (EDL) — was set forth. For that purpose, the government formed a committee of economic and financial experts to look into the idea and the possibility of its implementation, knowing that privatization would lead the state in one way or another to cede ownership of the privatized institution. This is why the idea was turned down. Additionally, at a time when the belief that peace in the region was imminent, some parties suggested the privatization of power plants and power transmission lines.
As the state wished to catch up on developments and prepare the country for the coming period of peace, the government began to increase spending to implement construction projects, going beyond the balance that must be maintained between revenues and expenditures. Thus, the state was plunged into debt internally and externally, leaving the public debt to reach currently unprecedented levels that do not match the abilities of Lebanon and its national income.
The idea that was proposed in 1994 concerning the establishment of a joint venture to build an oil refinery at the site of the Iraq Petroleum Co. (IPC) in Tripoli was warmly welcomed in the cabinet, which wanted to apply the idea to a number of public facilities. An expedited draft law as referred to the parliament, including the following important articles:
Article One: Upon the proposal of competent ministers, the government is permitted, according to decrees passed by the cabinet, to establish joint-stock companies to manage the following public facilities: transport, railways, investment of power plants, oil refineries. The establishment of the company as well as its capital, in addition to related provisions — notably in terms of the company’s establishment, shares subscription, management, and scope of work — shall be specified in a decree.
Article Two: The company’s capital can be determined in foreign currency, provided that the contribution of the state is of not less than 20% of the specified capital.
Article Three: The state is allowed to contribute partially or fully to the capital of each company, provided that the state’s financial contribution does not exceed the equivalent of $200 million in Lebanese pounds. The funds specified for each company mentioned in Article One above are distributed in accordance with decrees passed by the cabinet upon the proposal of the competent minister.
Article Four: If need be, covering the funds needed for the financial contribution of the state to the capital of the established companies can be done through: aids, loans and exceptional revenues specified by laws. The government is allowed to issue treasury bonds in foreign currency according to the following conditions:
- The maturity date of any issued bond shall not be less than two years as of the date of issuance.
- The issued bonds must be paid fully during a period not exceeding 15 years as of the date of issuance.
- The interests on these bonds are specified according to the market rates.
Unfortunately, the parliament did not approve the draft law, and the issue of oil refineries proved insurmountable for the majority of MPs. The parliament proposed that the government adopt the DBOT formula for 25 years. This formula is financially unsuitable and does not go in line with state policy. It could drag Lebanon back to problems it faced earlier with the IPC and Medrico refineries, knowing that after 25 years the refineries require maintenance. Additionally, there is no guarantee that refineries would function as efficiently as before.
It is important to note that the formula of joint-stock companies has the following advantages:
- The state contributes by 35% (blocking share) in exchange for [acquiring] the site of the old refinery, its infrastructure and premises.
- Guaranteed by the state, the companies have the chance to be granted loans from local and foreign banks to fund the refinery, with a grace period of five years and reasonable interest rates, as is the case normally with major companies when they extend pipelines to transport crude or establish petrochemical units or other facilities related to the work of oil companies.
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