(and the Case of Sub-sovereign Ratings)
Lebanon’s resources consist of its human capital, unique geography and privileged location – assets that bestow upon Lebanon its comparative advantages at the regional and global levels. For Lebanon to achieve high and sustained economic rates of growth, and create high value added jobs on a scale sufficient to consolidate civil harmony and dent emigration, it must redirect its economy towards sectors and activities based on knowledge and innovation anchored onto its vast pool of talent and expertise. To do so, Lebanon must increase its productivity in the niches where it holds a comparative advantage and can strengthen its competitive position and become an important pole capable of expanding the size of its market, and therefore of its economy, beyond the narrow confines of its national borders, in exporting its “knowledge-based” services – in addition to its traditional goods and services where its position is well established – rather than its human resources as in the past.
Seven Pillars for Implementing Economic and Social Reform in Lebanon
1.Cette note examine le rôle des autorités publiques dans la mise en œuvre de politiques qui contribuent à la promotion de la croissance créatrice d’emploi. La revitalisation de l’action du secteur public est essentielle au vu de: la précarité des finances publiques du fait du fardeau pesant de la dette; l’état obsolète de l’infrastructure, entrave à la productivité et compétitivité des entreprises libanaises; et l’iniquité de la politique fiscale et du régime de protection sociale. L’économie libanaise opère en deçà de son potentiel réel et ne crée pas, en qualité et nombre, les emplois nécessaires à la croissance et à la paix sociale. Le débat économique au cours des deux précédentes décennies a porté essentiellement, sinon exclusivement, sur les problèmes importants et épineux des finances publiques sans que leur gestion n’en fût en rien plus réussie. En particulier, la dette publique toujours ascendante constitue un drain continu sur les ressources de l’état, dont résultent: (i) un fardeau fiscal sans rapport avec la qualité des prestations et services rendus par l’état au citoyen; (ii) une infrastructure obsolète; et (iii) une administration publique aussi pléthorique qu’inefficiente, avec des institutions de réglementation, supervision et contrôle marginalisées, et des forces armées sous-équipées.
- Les carences de l’infrastructure au Liban constituent de l’avis unanime un obstacle majeur au progrès économique et social – des carences qui n’épargnent aucun secteur, des transports à l’énergie, l’eau, l’assainissement, et l’environnement.Des solutions durables doivent être apportées à la mise à niveau de l’infrastructure indispensable à la croissance. Cette note examine le problème des transports.
- Le problème des transports au Liban est complexe, et sa solution sera difficile et onéreuse. Les causes de l’asphyxie routière sont nombreuses et requièrent des approches qui vont au delà des mesures classiques d’élargissement de voies, de construction de passages à niveau, d’observation plus stricte du code de la route (s’il en est!), et d’organisation du stationnement. C’est en premier lieu la concentration de 80% de l’activité économique nationale dans le grand Beyrouth qui définit le mode et la topologie des déplacements et de la circulation. Les centres d’activités – administrations, commerces, bureaux et ateliers – aux horaires divers, souvent ne sont pas distincts des quartiers résidentiels. Les travailleurs se meuvent en tous sens et directions aux heures de pointe et au delà, qui des quartiers centraux de la ville vers sa périphérie, qui en sens inverse! Tant que l’essentiel de l’activité économique restera concentré dans la capitale et sa banlieue, les mesures d’aménagement d’usage amèneront une amélioration certes, mais pas de solution radicale au problème des transports. La solution durable dépendra en grande partie de la décentralisation de l’activité économique et de sa localisation de façon plus équilibrée sur l’étendue du territoire national.
- Avec une population dense répartie sur 10.000 km²,le Liban-nation, présente les caractéristiques d’une “cité-nation”. En somme une grande agglomération urbaine qui aurait la superficie de Washington (dont elle dépasserait la population de 10%), ou de la Grande Couronne de Paris (dont elle représenterait 40% de la population). Cet “espace urbain” pourrait et devrait être relié par un réseau de transport de surface routier, ferroviaire, et maritime qui permette l’intégration économique effective de toutes les régions du pays. Un tel réseau consisterait des installations suivantes:
This program puts forth a set of public policy reforms and proposals aimed at fostering civil peace, strengthening national unity, furthering social progress and purring economic growth. It is predicated on the belief that with the right political, legislative, development and social initiatives, Lebanon can be a secure, democratic, inclusive and prosperous nation operating at full economic potential. In such a frame, it will be able to generate employment on a sufficient scale for he youth thronging its labor market, including high value-added jobs for educated professionals and spare them the inexorable fate of emigration. Yet no policy will achieve its objectives if not anchored onto mature state institutions, with organized political groups reflecting the people’s will through fair electoral laws and processes allowing peaceful transfer of power, and enlightened national leaders committed to the public good and the rule of law.
Rule of Law Towards a Fair and Affluent Society
- Lebanon pension system is generous towards the happy few whom it covers: civil service employees accounting for some 20% of the labor force. Yet it is an unfair system that excludes the other 80% consisting of private sector workers – formal and informal employees, and most of the self-employed – let alone the unemployed.
- Workers in the formal private sector are entitled upon retirement to an “end of service indemnity” – a lump sum payment roughly equivalent to one month of salary for every year of service. Those retiring today between the ages of 60 and 64 get an average payment of US$15-20,000. Retirees also lose their health coverage since employers cease contributing their share of the health insurance premium.
- This sharply differs from the public sector retirement regime, almost unique to Lebanon, where:
and Sustainable Pension Scheme
INTRODUCTION
- In providing independent opinions to investors as to the credit quality of debt issuers, credit ratings have become important parameters in market acceptance and pricing of debt. Ratings are now viewed as easily usable tools for differentiating credit quality by both individual investors ill-equipped to assess credit risk, and institutional investors often required to hold instruments of given credit categories in their portfolio. This introductory note reviews the key definitions and features of credit ratings and the bases on which ratings are assigned. It briefly addresses the correlation between credit quality and default rates, and outlines some of the criteria underpinning sub-sovereign credit assessments in emerging and developing economies.
In developing and transition economies, the combined effect of decentralization and urbanization has increased demand on local governments to provide and
finance public services. Against this background, tight fiscal policies have constrained budgetary transfers from central to local governments. Competing claims for scarce budgetary resources have resulted in large funding gaps for local infrastructure investments. Private capital will be required if local services are to be brought to minimum standards that support growing urban demand. Local capability to shoulder the expanded responsibilities and, in particular, mobilize the required resources is contingent upon the existence of an adequate regulatory and fiscal framework for decentralization which requires, most importantly, that: (i) responsibilities for service delivery be clearly assigned among government tiers; (ii) capacity for own-source revenue generation (local taxes and user charges) be enhanced; and (iii) net flows (tax sharing and transfers) from central to local governments be rationalized and made predictable.
A Market-based Tool for Local Infrastructure Finance
Against a background of fiscal restraint, governments in developing countries have come to realize that private resources must be mobilized to support the growing demand for infrastructure services. One way is through privatizations and concessions for private provision of infrastructure services which are taking place at a growing pace. Decisions for the provision of these services are also being increasingly decentralized with municipalities playing a growing role in forging partnerships with financiers, operators and constituents. Municipal governments seek to fund capital investments and cover operating costs through local taxes and user charges and, as available, central government transfers. Where essential services—that are not provided through private operations—cannot be funded by current revenues, the financing gap that emerges would have to be filled through borrowings. In many developing countries, local government borrowings have largely been confined to loans from commercial banks or specialized financial institutions, often with central government guarantees.
for Developing Countries
In many countries, the responsibilities for the provision and financing of public services are being increasingly decentralized. In transition and developing economies, the expanded local government role in service delivery is often hindered by limited financial resources, as well as weak institutional capacity particularly in terms of inadequate financial, practices, management and know-how. In this context, this note reviews the broad range of parameters pertaining to a sound local government finance system, including local government capacity and potential to access private capital markets in a way consistent with macroeconomic stability and policy objectives.
Local Government Finance System