On Lebanon reaching an all-time low and a pinch of hope. Or not…

Or how on earth has Lebanon managed to fall short of the podium on the Misery Index.

Yes dear readers, there is a misery index which classifies countries based on a misery score. Without getting into the details of how the score is computed, top of the list is the most miserable country in the world. Lebanon made it to number 4 in 2020, out of 156 nations covered by the index. Only Venezuela, Zimbabwe and Sudan are faring better as numbers 1, 2 and 3. 

It must sound surreal to most Lebanese people who are still trying to fathom what hit them: The first default on Lebanese sovereign debt in history, the mass destruction and losses stemming from the sixth largest artificial non-nuclear explosion in history, the COVID-19 pandemic, the ongoing Syrian conflict and its ramifications taking their toll on the country, all on top of the structural weaknesses of the Lebanese economy and political system. It takes less than that to bring a country to its knees.
From all the causes above, there is one which could explain at least two others: the structural weaknesses of the Lebanese economy and political system. And the corruption within.

The solution on paper seems straightforward. And very unattainable, like only a straightforward solution can be: a new political system and social contract to restore confidence in the Lebanese economy and currency, which would encourage foreign investment, unblock international aid and allow some leverage in the debt restructuring negotiations with creditors. Although this statement is true in essence, it does not sound like a plan. It sounds more like a slogan. A Manifest at best. I mean, where would you even start… 

We could spend countless hours debating on the abysmal trade deficit, the record debt to GDP ratio and the huge toll that debt servicing is taking on the country revenue, the artificial peg of the Lebanese Pound to the US Dollar and the opaque policies of the central bank, or the decline of the remittance share in the GDP as Lebanese expatriates are struggling  with the COVID-19 pandemic and other crisis.

We could also debate on the political system in Lebanon which consists roughly of two sides, each backed by different international players with conflicting interests and how this will not change in the near future, or the far one for that matters, because the people who can make it change are too busy surviving to vote a majority of the 128 MPs out of parliament. 

Hope as far as I am concerned, lies in some of the economic forces at large and with the Lebanese diaspora. The latter is obvious. Lebanese living abroad have always sent remittance back to Lebanon, either to invest in real estate, benefit from artificially attractive interest rates on deposits or to support their families, and they will keep sending remittance. Not for the same reasons perhaps but it will still amount to something.

Economic forces at large are successful companies with ties to Lebanon or which could have a presence in the country, and which make most of their revenue abroad and hence are less sensitive, if at all, to the Lebanese economic situation. If such companies operated part of their processes from Lebanon, they would provide great benefits to the local economy by creating jobs and value and still benefit from an offshore legal status provided by law, which offers tremendous flexibility from a legal standpoint and many tax incentives. They would also benefit from a less expensive and highly skilled workforce. They will obviously have to put up with the unstable political situation, the run-down economy and the challenges which come with them but I still believe a business case can be made, especially if the company has ties to Lebanon: a Lebanese founder or shareholder, a historic presence in the country, etc.
Some examples I can think of:

• A software editor which operates its quality department from Lebanon, with minimal requirements to run production: A bit of electricity and an internet link. Servers can be hosted anywhere in the world, revenue is made abroad for the most part and there are no stocks to worry about.
• IT consultancies which operate on IT projects in the Gulf region, Turkey, Greece, etc. and which can base their client support activities in Lebanon. Similar business case, all they needs is electricity, internet connections and brains.
• Companies in any field externalizing their call centers to Lebanon. They need people who speak foreign languages and Lebanon is in no shortage of them. So far.

All the examples above are real and are still operating in Lebanon. The software editor has been assessing the quality of its software in Lebanon for 25 years and has since put in place a consultancy department in the country serving the region and moved part of its production chain there. It still makes the bulk of its revenue abroad but caters for around 600 Lebanese families. The IT consultancies have been around for about 10 years now and still make the bulk of their revenues abroad. The externalized call center was set up in January 2021 and this last example brings a lot of hope to me: companies with no specific ties to Lebanon still choose to invest in the country and sees value in it and its workforce even after its economy has fell apart.

In conclusion, the idea here is to call out on men and women (and companies) of good will who can still see value in Lebanon, who can identify win-win business cases in operating part of their cost centers from Lebanon and who are willing to take a chance on this country, knowing they have a cheat code to enhance their chances of success in the game: they are part of the solution.

Let the board sound

Rabih