Printer Friendly

Will Lebanon's politicians spoil yet another opportunity?

Byline: Shadi A. Karam

Summary: The international press as well as specialized banking and financial circles worldwide are lauding the Lebanese banking sector and its main protector, the governor of the Central Bank of Lebanon, for sheltering Lebanon from the cataclysm which is shaking the world. In effect, a series of circulars and regulatory measures introduced gradually, as early as 2004.

First person by Shadi A. Karam

The international press as well as specialized banking and financial circles worldwide are lauding the Lebanese banking sector and its main protector, the governor of the Central Bank of Lebanon, for sheltering Lebanon from the cataclysm which is shaking the world. In effect, a series of circulars and regulatory measures introduced gradually, as early as 2004, have banned banks from any exposure and any direct or indirect investment in the exotic derivatives and complex financial instruments which have brought about the demise of global financial institutions once trusted for their conservatism and believed to be unsinkable. This has brought on the tremors we have witnessed for the past few months, and the fear of social dysphoria and civil unrest have led the top world leaders to band together to provide solutions, mainly by injecting thousands of billions of various currencies in the banking system and insurance companies. We are even witnessing a philosophical and ideological reversal as symbols of capitalism, free enterprise and laissez faire are effectively nationalizing banks and insurance companies or forcing mergers and acquisitions at prices and in conditions governments are unabashedly dictating.

Unquestionably, in the past decade and a half, Lebanon's banking sector has survived through civil strife, wars, political crises, invasions and occupation, coming out reinforced each time. This resilience is due to the resourcefulness of the Lebanese bankers but also to a set of consistent Central Bank policies that helped safeguard the currency, and consequently people's purchasing power; shore up the banking sector, and in effect the economy; and prevent the bankruptcy of the state since banks are the main source of financing for the Treasury. This may have come at a cost, and some measures were severely criticized when in fact they were pioneering rescue procedures that are now adopted worldwide to face the crisis. The major difference, however, is that in the case of Lebanon, they were implemented at no cost for the taxpayer contrary to what is happening elsewhere.

It all seems as though every time we were heading toward the wall, the Central Bank has managed to push away the wall a little farther.

Political circles cannot be accused of having been as competent and efficient. If anything, they have more often than not been at the source of the problems the Central Bank had to cure.

Today there is a new challenge: obtaining from the body politic to do its share in preserving national interest.

The present success needs to be capitalized on. For that purpose a series of measures have to be rapidly agreed on by the government in order to demonstrate that we are serious about reform.

First, we need to address the Treasury's financial priorities by starting to implement existing solutions to the problem of Electricite du Liban, thus tackling one of the main chunks of the budget deficit. Showing determination in this area will encourage the implementation of Paris III and maybe convince donors not only to deflect assistance from specific projects to direct and indirect unconditional budget support, but also to accelerate the pace of their payments.

Second, we have to keep in mind that this success is fragile because we do not yet measure the full impact of the crisis. We do not know what the slowdown in the Gulf countries will generate in terms of future costs for Lebanon. We have to be prepared for a sudden influx of expatriates who are coming home because they have lost their jobs, to a reduction in tourist flows from the Gulf and to stagnation in the real-estate sector. None of this may happen, but to govern is to foresee. Unfortunately, our governing body does not have a track record of scoring highly on the foresight scale. As of today, how many meetings have been devoted by the government to exploring measures to be taken to face such issues? How many studies have been commissioned to assess their quantitative effects?

Thirdly, there is even no guarantee that banking problems of a yet-unknown nature may not erupt. In the case of Lebanon who will pay the bill? Assuredly, the state of public finances, with a debt twice as large as the size of the entire economy, does not allow us to even remotely consider resorting to a rescue package involving taxpayers' money. Furthermore, we do not presently have a mechanism for salvaging the banks as the law on mergers, voted by Parliament over three years ago, is still awaiting the promulgation of the application decrees by the government. The draft decree was readied a long time ago and its text corresponds to the needs. The government should hurry and promulgate it at the next Cabinet meeting.

Thirdly, and most importantly, we need political harmony. We require the government and the legislative body to get to work to catch up on lost time and to proceed with the long-delayed agenda. For that, we have to whisk noiselessly through the "reconciliation" procedure and the dialogue roundtable lest we forfeit whatever credibility we managed to establish because we were not affected by the crisis and, hence, shatter all hope we may have of benefiting from the fleeting window of opportunity open to us now of attracting stable investments to the country.

I appeal to politicians of all sides to heed the wise calls of the president. It behooves them to march decisively through the mockery of reconciliations and proceed with a quick and exhaustive agreement around the dialogue table. Otherwise, the present blissful moment of success will become another item on the long list of lost opportunities engraved on the tablets of Lebanon's history over the past 15 years.

Shadi A. Karam is a Lebanese banker.

Copyright 2008, The Daily Star. All rights reserved.

Provided by Syndigate.info an Albawaba.com company
COPYRIGHT 2008 Al Bawaba (Middle East) Ltd.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2008 Gale, Cengage Learning. All rights reserved.

 Reader Opinion

Title:

Comment:



 

Article Details
Printer friendly Cite/link Email Feedback
Publication:The Daily Star (Beirut, Lebanon)
Date:Nov 4, 2008
Words:1030
Previous Article:Belgian UNIFIL troops enjoy being in South - but may be headed home.
Next Article:Fadlallah: 'Israel has vicious plans for Lebanon'.

Terms of use | Copyright © 2014 Farlex, Inc. | Feedback | For webmasters