Context
Lebanon’s new Government took office in mid-July 2011 after six months of political stalemate that followed the collapse of the of National Unity Government in January 2011. Economic and social reforms, particularly in the electricity, telecommunications and social protection sectors, top the agenda of the new Cabinet. In addition, fiscal management reforms including the preparation of the 2012 budget are also on the agenda’s priority list.
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The government’s ambitious reform program proves to be timely: 2011 marks a return of the business cycle ending a three-year period with an average growth of 8 percent per year. The recent turmoil in neighboring countries (but also in countries that host a large Lebanese Diaspora such as the Ivory Coast) have underlined the vulnerability of Lebanon to shocks that affect the flow of goods, services, financial resources and workers between Lebanon and the rest of the world. As a result, the first six months of 2011 showed a decline in growth (around 2 percent), foreign direct investment, tourism, and capital inflows including remittances. The new Government’s policy statement shows a political will to capitalize on Lebanon’s human and financial potential. It aims to engage in a reform process by creating a more diversified, innovation-driven economy, capable of generating the high number of jobs required to absorb sustained increases in skilled labor force. However, one of the main challenges for Lebanon going forward remains maintaining a sensible approach to short-term economic management. Due to public debt and high fiscal and current account deficits, Lebanon’s economy remains vulnerable. Maintaining the confidence of domestic and foreign depositors and investors will play a critical role. Continued prudent monetary policies are also important in managing risks and buffering Lebanon from the effects of future global shocks.
Strategy
The World Bank has supported Lebanon in a wide range of sectors over the past fifteen years, including: Emergency Reconstruction and Rehabilitation Municipal Development and Infrastructure Revenue Enhancement Administrative Rehabilitation Agriculture and Irrigation Solid Waste and Environmental Reform Vocational and Technical Education Education and Health Roads and Power Community Development Water and Wastewater Urban Transport Protection of Cultural Heritage
The World Bank’s strategy focuses on five specific areas over the next four years: (1) Sustained fiscal stability and improved public financial management governance; (2) Competitive business environment; (3) Improved basic infrastructure services; (4) Quality public education system and; (5) An expanded, sustainable and inclusive social protection system (social safety nets, pensions, health insurance, and other forms of income protection for the most vulnerable). The strategy also addresses Gender and economic integration within the region.
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The World Bank portfolio in Lebanon consists of 10 investment and technical assistance projects for a total commitment of $510m ($198m disbursed to date). The World Bank has produced a number of Economic and Sector Work pieces and policy notes aimed at shaping policy debates and providing analytical underpinnings for reform. The World Bank is also providing capacity building activities to the Central Administration for Statistics, National Social Security Fund and five of the biggest growth centers - Cities of Tripoli, Jounieh, Saida, Sour and Ba’albeck.
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Since 2007 the International Finance Corporation has significantly scaled-up its activities in Lebanon. IFC exceeded its Paris III/Reconstruction pledge of US$250-275 million, having committed over US$770 million since the end of the 2006 conflict. IFC’s investments and Advisory Services emphasizes increasing access to financial services for small and medium enterprises and trade finance activities, extending services to the under-served, promoting improved corporate governance, improving competitiveness and facilitating greater private investments. IFC is broadening its engagements in Lebanon with its first investment in Tripoli, and new projects to promote greater access to finance for women-owned SMEs and sustainable energy finance. It is also seeking equity investments in the retail and manufacturing sectors aiming to expand regionally and beyond. In addition, investments in the energy and infrastructure sectors will be explored. IFC’s Advisory Services will continue to focus on activities that create jobs, mitigate effects of climate change and promote greater economic inclusion. Â
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Results Working in partnership with the Lebanese government, the World Bank helped to lay the foundation for an effective and more inclusive social safety net system, better public financial management structure and increased private sector development: First Municipal Infrastructure Project: Improved access to basic services at the local level (around 750 municipalities hosting more than 50% of the country’s population) through building and/or upgrading of essential infrastructure; construction of about 3,175 km of urban roads; 257 km of retaining walls; installation of 15,083 streetlight poles; improvement of 290 km of storm drainage networks; improvement of 28 km of potable water networks; and rehabilitation of 36 km of sewerage networks.
IFC Investment Projects: Helped to catalyze more than 3,000 jobs (almost 400 of which were for women) and contributed to more than 9,000 small and medium enterprise loans. In addition, IFC activities reached 645 students, approximately half of whom were women.
Education Development Project (EDP I): contributed to - (1) Building and equipping training centers for teachers and training more than 450 school principals in leadership and management skills; (2) Constructing and making operational 11 new schools; (3) Establishing computer classrooms in a majority of secondary schools and in all vocational schools; (4) Designing and implementing exams and test standards; and (5) For the first time in Lebanon, developing and adopting an education reform strategy, currently under implementation, with the support of the World Bank and other donors.
Emergency Fiscal Management Reform Project: The main objective of this project is to improve budget and debt management through enhancing the Ministry of Finance’s institutional capacity. Achievements include - (1) Fiscal management capacity is in place and work on developing an MTEF has been initiated; (2) Financial Management Information System (FMIS) to improve control and transparency is being established; and (3) A national debt management strategy has been developed and a debt management team is in place.
Partners
The World Bank Group operates as part of a broader international effort in Lebanon working in cooperation with the following partners in five sectors: Water Sector:Â Kuwaiti Fund for Arab Economic Development and the Islamic Development Bank
Energy Sector, Cultural Heritage and Urban Development Sector: Agence Française de Développement
Urban Transport Sector: Arab Fund for Economic and Social Development, Abu Dhabi Fund for Development
Social Protection Sector: Canadian International Development Agency (CIDA) and the Italian Cooperation
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All dollar figures are in US dollar equivalents. Updated September 2011
For more information, please contact:
In Washington, Lara Saade; LSaade@worldbank.org; Esther Rosen; ERosen@worldbank.org In Beirut, Mona Ziade: mziade@worldbank.org   |
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