MARCH 2021 | THE HAYEK GROUP MONTHLY NEWSLETTER
LEBANON:
AN ECONOMIC CRISE
OR A GLORIOUS RISE?
Whenever anyone hears of ‘Lebanon’, an instant tear fills the eyes and mixed feelings invade the soul. This country has been through a lot and is obviously still facing some hardships. Why? Because as the saying goes, “Straight trees are always cut first”. Everyone knows that Lebanon has a full qualification to become the lead in any field. People cross borders to visit it; it is a country of culture, entertainment, spirituality, and warmth. What is saddening about Lebanon is the number of crises that keep hitting it, from invasions, to wars, to a corrupted system. If it were any other country, it would have fallen apart within days. Plus, ever since March 2020, an unexpected and different kind of crisis hit Lebanon, causing extreme changes and devastating declines. A global pandemic, Covid-19, came unnoticed and started spreading enormously, and Lebanese people were caught off guard. One year later, the disastrous confinement still prevails, a big part of the population is unemployed, most businesses are closed, and the economy is collapsing.
Life in Lebanon has drastically changed, and the enthusiasm of citizens to fight the pandemic is slowly fading away. No one would have expected that the country would still be fighting the virus in March 2021 as if it were still new. What happened along the way? Is the unstable economic situation fixable, or is it too late?
International Countries:
Breathing after Covid-19
To begin with, Covid-19 entered the premises of almost every country in the world. Not only was Lebanon affected by the pandemic, but also a big number of countries all over the globe got seriously damaged. The only difference is these countries seem to be turning the Covid-19 page, while Lebanon is still dramatically stumbling through unending catastrophes. Let’s see how some countries have dealt with the pandemic.
China followed the advice that many experts have suggested: “The more quickly you bring the pandemic down, the more quickly the economy can recover” (Source: NY Times). During the first outbreak, most businesses closed only for a couple of weeks, the production in many factories increased, and the government allowed workers
to go back and forth to their workplace. Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance, stated: “Despite the human cost and disruption, the pandemic in economic terms was a blessing in disguise for China”.
Moving on to the United States, American leaders aimed to use the same recovery technique as the one used post World War II, which resulted in a good outcome. According to a survey conducted by McKinsey, many executives moved 20 to 25 times faster in their work, especially in the field of mobility, healthcare, manufacturing, and retail. This is because of the digital acceleration and the effective transition to remote working prior to Covid-19.
As for European countries, most governments learnt from their mistakes in the second wave of the virus. After profound analysis, it was found that a gradual reopening, especially after reaching the peak, resulted in a stronger economic recovery in comparison to a rushed reopening.
Moving a bit closer, Arab Gulf states also took measures to move on from Covid-19. Recent studies have shown that the recovery rate in the MENA region is significantly higher than the global rate. This was all due to economically developed societies that were provided with updated machines and technologies to take maximum precautions and therefore end up with the least possible damage. So, what is Lebanon waiting for? Hasn’t the country suffered enough from national lockdown? Isn’t it time to just find a solution and bring the country back to life?
Lebanon:
A Timeline of Crises.
The Lebanese Republic, home of early civilization, has been on a rollercoaster of difficulties and troubles that date way back. Not to mention that its land is a home for more than 1.5 million Syrian refugees and almost 200,000 Palestinian refugees. Lebanon endured a lot of troubles and just couldn’t catch a breath throughout the years. The situation always seemed to aggravate, and it was believed that the main reason behind all these problems is the sectarian political system in the country, that was adapted since 1989.
Therefore, every political party benefited from the spoils of corruption and none of them worked on a solution to the problems in the country; they rather divided the Lebanese people and tore them apart. They practice corruption in all its different forms: bribery, nepotism, favoritism, patronage, embezzlement, and vote-buying. Thus, on a daily basis, they fail to deal with important matters, which led to the collapse of the Lebanese economy under the weight of excessive national debt, liquidity evasion, currency devaluation and many financial hardships. In October 2019, a revolution took place on Lebanese grounds, and people refused to adapt to such conditions and accused the rulers of the country of corruption and economic mismanagement. In the beginning of 2020, the pandemic made its way through Lebanese borders. During this phase, the Lebanese Lira lost almost 80% of its
value, most depositors’ savings got trapped in banks, unemployment rates were through the roof, which caused significant inflation. The situation remained unstable until August 2020, when a huge explosion hit Beirut Port, killing hundreds of people, and leaving behind millions of broken hearts and sad ashes of one of the most beautiful cities in the world. None of the politicians was held accountable for this devastating explosion. Lebanese people struggled to see their greedy faces on television screens and hear their ongoing lies and empty promises.
The Rising of the
Phoenix from the Ashes:
Possible Solutions and
Ideas
Crisis after crisis, Lebanon always seemed to fight and stand on its feet; it never lost the potential to recover. Lebanese people were not ones to easily give up. But with everything that has happened and is still happening, what should be done to save the country? The first and most important solution to saving Lebanon, is an ultimate shift in the political system. Sanctions should be used to pressure current politicians to leave the scene and return a large part of the embezzled funds.
Once they leave, the void would be filled by a transitional government, run by non-politicized technocrats who will conduct reforms and prepare for new parliamentary elections. New figures should run for office and a group of honest and integrous people should be assigned to implement rules and regulations to restrict the damage and save what’s left of the country; simply, a state of law should lead. A financial stabilization plan is definitely crucial at this point. Core economic infrastructure should be improved, debt restructuring strategies should be applied, and the banking sector should be consolidated.
Moreover, if a Lebanese living abroad isn’t really looking to invest, simply flowing foreign currency onto the Lebanese land would be a great solution. For example, sending a sum of money to families residing in Lebanon, who would need a relatively small quantity to be able to afford basic and daily needs, is a great way to flow foreign currency into Lebanese markets. Also, the pandemic encouraged many international companies to remotely employ talents from all over the world. And let’s be frank, Lebanese talents are the leads in all fields, and they would be an added value to any international enterprise.
Why not encourage worldwide organizations to invest in young Lebanese talents? It would be a win-win situation. The cost is very minim, and the company would be investing in top talents that will undoubtedly deliver great quality work. The previously mentioned solutions would not only boost the economy, but also cut down unemployment and immigration rates.
Lebanese State and
Companies: Spreading
hope for the future
As we have already established, Lebanon has been through many lows for the past years, and some solutions could save this country from drowning in financial and health issues. The prerogatives of the state are numerous, from the airport, to the ports, to 20% of the Lebanese lands, and many more resources. These assets are valued for almost 40 billion dollars. How is it possible? Well, this value is basically just the vision of what the Lebanese state can actually do. If we put these assets into action and build well-organized projects, it will be worth much more. Plus, Lebanon holds 286,6 tons of gold. It ranks among the top 20 countries in the world in terms of gold reserves and comes second to
Saudi Arabia’s holdings among all Arab countries. If these resources can’t fix the economic situation and lift Lebanon, then what will? Moreover, local companies are putting daily efforts to keep moving forward. What is the best strategy that they have adopted in order to excel during these unprecedented times? Most Lebanese companies who are still operating, have opted for a work from home approach. Adapting to technology is crucial nowadays since some people’s livelihoods depends on that.
Hayek Group, for instance understood this point while going through lockdown. The team now meets up via calls and gets work done remotely to reduce contagiousness as much as possible. The company also offered “a bouquet of opportunities” to Lebanese talents in order to provide them with job offers, and therefore reduce unemployment rates.
On another note, INDEVCO Group, an international manufacturing group, also tried to fight Covid-19 and the economic crisis in its way. First, they embarked on the production of the best Covid-19 protective gear for the public and health system. It was their way of spreading a positive spirit and giving hope for the people. Benta Pharma Industries, a leading pharmaceutical company, is also putting effort to help Lebanese people overcome this crisis. They are importing medications from several countries in order to provide all Lebanese citizens with their needed treatments. Each company is aiming towards lifting Lebanese citizens up and making them more optimistic about the future of the country.
Most Lebanese businesses truly represent a breath of fresh air and offer a glimmer of hope in the darkness that invades our everyday life. They are determined to either help Lebanese talents in their time of need or offer them a chance to show off prosper within their homeland. Moving in this momentum can be the perfect attempt to improve the country’s economy, and hopefully escape
from the current storm that is suffocating each Lebanese citizen.
In simpler words, Lebanon is a country that constantly struggled under the power of outsiders and unqualified rulers, who are jeopardizing the future of young fresh graduates. However, Lebanese people seem to keep fighting and hopefully won’t easily give up.
Also, no one can deny how much Lebanese people adore their country and would do anything to save it. After all, a country isn’t just a piece of land, it is rather a unified community that works together to keep moving forward. Through it all, there is a deep belief inside every Lebanese heart that always has hope for a brighter future. In fact, with all the previously mentioned solutions, nothing is impossible. It may now seem dark and far, but soon, the situation will flourish, and Lebanese people will smile once again, spreading their contagious positive energy wherever they go. Nothing will stand in our way. We are not a generation of war and crises, we are not the Covid-19 generation; we are the future, the hope, the rise and the light at the end of this dark tunnel.
