AUB - Economics - Roundtable on Paris 3 and the Post War Landscape

Roundtable on Paris 3 and the Post War Landscape

Author:
Dina Abou Salem,
Freelance writer,
Office of Information and Public Relations,
da09@aub.edu.lb


	(L-R) Soueid, Neaime and Rached discuss proposed economic reform measures

The Issam Fares Institute for Public Policy and International Affairs (IFI), the Department of Economics, and the Lebanese Economic Association (LEA) held on January 15 an inaugural roundtable on "Paris 3 and the Post War Landscape: Lebanon's Economic Policy Imperatives."

The roundtable discussion attracted over one hundred participants, including AUB president John Waterbury, given the relevance of the topic in the current political crisis over the proposed economic reforms that will be part of the Paris 3 agenda, which is scheduled for January 25.

Fiscal policy and debt challenges as well as privatization and liberalization were the two themes that dominated discussions at the roundtable meeting.

IFI Director Rami Khouri and Professor Simon Neaime, chairman of the department of economics, presented the speakers of the first session, with Neaime noting that the objectives of the roundtable were to "bring together research work and public policy in a constructive way."


The roundtable discussion attracted a large audience...

Presenting a paper on "Fiscal Reform alongside Political Turbulence: the Many Policy Challenges We Face," Shirine Shallah from the Lebanese Economic Association surveyed the government's main efforts and plans for fiscal reform including "gradual uncapping of the gasoline excise, increase in income tax and the Value-Added Tax (VAT), and reform in key sectors such as power, water, and transport."

Before passing the floor to the second speaker of the first session Professor Neaime presented the "fundamentals of the Lebanese economy," including its debt, its GDP growth, and the Paris 3 agenda in brief.

"What is expected from the government is not optimistic; it cannot avoid an imminent fiscal crisis. What the government needs to do is stimulate GDP and create opportunities by reducing expenses and reducing primary expenditures." Such measures can be done by imposing a tax on interest earned, privatization of telecommunications, power and water and the Middle East Airlines (MEA).

Professor Neaime proposed a series of questions to be considered for discussion prior to the Paris 3 meeting: "How will the government stimulate GDP and increase taxes at the same time? Can the increase in tax for the past 15 years be justified when nothing has been done to reduce government expenditures?"

Professor Mazen Soueid, chief economist at BankMed and a founding member of the Lebanese Economic Association, overviewed the economic changes that took place between Paris 2 and Paris 3, while keeping in mind the political factors that helped or hindered economic growth following Paris 2 -- such as change in government, assassinations of Lebanese figures including ex-PM Hariri, and the July war 2006. He added that these obstacles might still be present even after the Paris 3 meeting.

"The fiscal implications of the July war were high due to direct and indirect causes," Soueid said. "The direct cause lies in the fact that the war incurred $2.8 billion dollars' worth of damage... As for the indirect effects, they are higher due to higher funding cost, loss of economic activity, and increase in expenditure."

According to Professor Soued, a "successful Paris 3 is a necessity to tackle the structural debt issue and lay down the foundations of a viable economy."

The last speaker in the first session was Professor Mounir Rached, senior economist at the International Monetary Fund (IMF) and a Lebanese Economic Association founding member. In his talk on "Debt Sustainability, Medium Term Outlook," he examined Lebanese debt from four different angles. After overviewing the debt structure in Lebanon, he presented the status of debt sustainability in Lebanon, namely after Paris 2. While presenting "options to reduce the debt, and a debt sustainability outlook," Professor Rached concluded that "debt is unsustainable at present and the debt ratio will remain high... It can be sustainable with adjustment towards the year 2011."

After a 15-minute break, the participants at the roundtable convened again to attend the session on "Privatization and Liberalization." Session moderator Nisrine Salti who is a Lebanese Economic Association founding member and assistant professor at the department of economics, gave a brief synopsis of the benefits and disadvantages of privatization, one of the key results of Paris 2, which is considered as an efficient way to reduce fiscal debt. Professor Salti concluded that "there is mixed evidence on the effects of privatization, and even though cross-country privatization studies are useful we need to take them with a grain of salt."

Professor Faisal Nsouli, a founding member of the Lebanese Economic Association, argued that privatization resulted in the growth of MEA.

Professor Kamal Shehadi, who was supposed to lecture on liberalization, could not attend the roundtable. His talk was substituted with that of Hana Hbeib a senior consultant in communications and information technology.

Hbeib began by explaining why "Lebanon's telecom sector is not doing very well compared to other countries in the region." Privatization is not the only solution to save it. She recommended opening up more channels through licensing more mobile, diverse, and up-to-date communication methods in order to increase "penetration." This sort of "liberalization" has proven to be extremely successful in countries that have adopted it such as Jordan. "We need more choices than OGERO," she said, of the Lebanese telecoms company that monopolizes the sector. "Currently, it is that way: Between OGERO and OGERO you will have to choose OGERO!"