LEBANON - The Corruption Factor.

The gap of wealth that exists in the country is immense, and is best signified by the political system itself. Prime Minister Rafic Al Hariri is a billionaire, and most of the ministers are themselves millionaires. Virtually all their key aides and family members are already millionaires or well on the way to becoming wealthy through their exploitation of contacts and the patronage system. This is not likely to change, and the poor people of the country - whose numbers are increasing in view of the poor economic conditions that have prevailed in recent years - are well aware of that.

Lebanon is unique to some extent, however, as the poor do not automatically bear a grudge against the rich for being wealthy and flaunting their wealth. Rather, all Lebanese aspire to become wealthy. The problem occurs when the political and economic climate is such that there are no avenues for such aspirations to be fulfilled. It is in such circumstances that external powers can play a role in creating the conditions for internal strife, simultaneously exploiting parallel social divisions relating to sectarian divisions as well.

This can be avoided because Lebanon has the entrepreneurial mindset and the high skill manpower required to return the country to its previous status as a business and banking centre in the Middle East. But its efforts to integrate into the global economy are being hindered by the corruption and cronyism - both of which delay reforms. Over the past two years, Premier Hariri visited Iran, Japan, Kuwait, Oman, Saudi Arabia and France - to name a few countries - seeking aid or business opportunities, but there has not been much to show for it. One of the reasons is a lack of confidence in the business environment.

A report on corruption assessment, commissioned by the UN's Centre for International Crime Prevention and released in 2001, estimated that the Lebanese state squanders over $1.5 billion per year as a result of pervasive corruption at all levels of government. Among other things, the report pointed out that only 2.4% of the $6 billion worth of projects contracted by various government bodies were formally awarded by the administration of tenders. According to the report, the rest of these contracts were awarded not to the most qualified applicant, but to the company willing to pay the highest bribe to the minister in charge of the project. The report found that over 43% of companies in Lebanon "always or very frequently" paid bribes and another 40% "sometimes" do.

Patronage within the system is closely linked to the issue of corruption. Politicians in Lebanon derive popular support by distributing services and jobs to their constituents. While this happens in other countries, especially democratically oriented ones, the system of patronage has become so entrenched that it has become the norm - i.e. not something regarded as being harmful to efficient economic functioning. Patronage can act as a drag on development, as powerful politicians fight over who can control a project in order to distribute patronage accordingly.

In the context of the war against terror, corruption will be a scrutinsed very closely. It could become linked to the question of Al Qaida finances. The checking of the finances of radical Islamic movements is one area where the US has claimed a level of success which has not been matched on the military front - as the key targets of Operation Enduring Freedom, namely Osama Bin Ladin and Taliban leader Mullah Omar, remain outside their reach. Hizbollah and the other Islamist movements in the country may well become the target of a US financial squeeze, and this would have to be applied through the Beirut government. This will again pose a major dilemma because of the external implications.