Lebanon is years away from filling its coffers with money gained from drilling the seas for oil, but that isn’t stopping anyone from figuring out how best to spend it. Bold asked five prominent citizens what they would do with the oil wealth if they had their way.
We’re many years away from seeing any of the billions of dollars expected from the vast oil and gas reserves surveys suggest lie off the coast, but the government is already looking for ways to spend it. The Ministry of Energy and Water even launched an advertising campaign asking residents where they think the oil cash should go.
A sovereign wealth fund, similar to those set up in other countries suddenly awash in oil, is being created to manage the revenues that flow from the ground, but there probably won’t be much to manage until the end of the decade. In the meantime, Lebanese can ponder how the expected windfall will change their lives. Revive the old train line from Beirut to Tripoli and beyond? Clean up the river and make Beirut an oasis of green sustainability? Spread underground parking lots throughout the city? Reduce the $58 billion debt?
BOLD spoke with five experts, professionals and thinkers to get their takes on how the sovereign wealth fund should be managed. Ziad Hayek, secretary general of the Higher Council for Privatization, and Nabil Sawabini consider debt reduction the top priority for government spending, in part due to the significant burden interest payments are imposing on the national budget.
Nicolas Photiades, general manager of Gulf Finance & Investment, named electricity as his top pick – but only if the sector isn’t privatized, as he prefers. And that’s only after, over the next seven to 10 years while waiting for the oil, other steps are taken to ensure that Lebanon makes the most of the fund, namely achieving political stability, privatizing the telecoms sector as well and reforming the ministries.
But Eli Khoury, CEO of Quantum Communications, argues that the first thing we need to do is bring in new politicians to avoid the money being squandered.
Yves Rahme thinks Lebanon should focus on agriculture and industrial projects in neglected areas of the country. "The Bekaa Valley, Akkar and South Lebanon are the most deprived areas of the country," he said. "Financing well studied agricultural and industrial projects in these areas will help fight poverty, create job opportunities and minimize the need for illegal business."
#1 Reduce Lebanon’s Mountain of debt
The top pick of two of the six people surveyed, debt reduction was also what the government said it wanted to do first with the fund when it laid the groundwork for it in 2010. The debt is currently about 137% of GDP, while the deficit widened to just under $4 billion in 2012. The cost of servicing that growing pool of red ink has come down in recent years as interest rates globally have plunged, but it’s still $3.62 billion – representing almost all of the budget deficit.
"The service of our large debt places a huge burden on our national budget," Hayek said. "So much so that we run chronic deficits and the Government is unable to finance infrastructure projects and social initiatives that are so important for the growth of our economy and the well being of our people, respectively."
#2 The Power Sector
After interest payments, government subsidies to the national power company eat up the next biggest chunk of Lebanon’s budget, tallying $2.26 billion in 2012. While Photiades was the only one to call it the top priority, it ranked among the top on most of the lists.
#3 Clean Up The Environment
A focus on the environment didn’t rank at the top of any of the lists, but it was somewhere on every single one. Hayek thinks we need better wastewater treatment and nature preservation, Photiades argued for environmental cleanup and Rahme urged reforestation. Sawabini, meanwhile, wants to see a study done that emphasizes clean air and healthy living.
#4 Invest In Education
Education is the future of any society, so it’s no surprise it scored high among our panel. Rahme wants to see more women empowerment and education programs in rural areas to help fight illiteracy, and Sawabini believes Lebanon’s schools and universities need to be modernized to make them "state-of-the-art in terms of curriculum (starting with nation-building courses) and equipment."
#5 Mass Transit
Bring back the glory days when Lebanon was on the cutting edge of bringing efficient mass transit to the Middle East, was the consensus. Hayek wants rapid bus transit along the Jbeil-Beirut corridor and a rail link to Damascus, and everyone considered building up infrastructure, including mass transportation, as a high priority.