Lebanese economic shake-up to focus on privatization
Telecom, electricity set for sale as Haffar takes control

By Osama Habib - Daily Star
Newly appointed Finance Minister Raya Haffar said on Wednesday that achieving higher economic growth in Lebanon requires a political harmony and a will to carry out necessary reforms. “Lebanon can attain even higher economic growth if political synchronization and a strong will to work become available,” Haffar said, after she took over her new responsibility from her predecessor Mohammad Shatah.

Haffar was the first woman in Lebanon to assume the highest post in the Finance Ministry .

She said that the ministry would proceed with the general directives of the ministerial statement which will set a guideline on economic policies.

Haffar suggested control of government spending could be achieved through the liberalization of some sectors.

“But as far as privatization, we will abide by what the ministerial statement says at the end,” she said.

The government of Prime Minister Saad Hariri intends to implement the remaining clauses of Paris III donor conference and most importantly the privatization of the telecom and electricity sectors.

The previous governments after 2005 failed to carry out major reforms due to the sharp political differences, security incidents, and the Israeli war on Lebanon in 2006.

The opposition in principle was not too eager to transfer state-owned assets to the private sector, fearing that a monopoly by private companies could affect the poor and hike prices of mobile and electricity bills.

However, sources said that the opposition had assured Hariri that it will not block the privatization of the telecom sector, provided that the process is transparent and that  the money generated from the sale is substantial enough to reduce the public debt.

Privatization is a key element in the program of the previous cabinets, and officials assured that the entire proceeds will be used to reduce the public debt which now stands at $49 billion.

The International Monetary Fund said last year that it was not advisable to privatize the state-owned assets due to the severe global financial crisis.

Even outgoing Prime Minister Fouad Siniora preferred to wait for the proper time to privatise the telecom sector.

Haffar said that she is committed to Paris II and Paris III reform papers.

For his part, outgoing Shatah said that 2010 draft budget would be sent to the Cabinet for further discussion.

He added that Hariri wanted to avoid colorful ministerial statements of no practical value.

Shatah said that Hariri prefers statements that convince people that the government will embark on an all-out economic program.

He added that one of the key problems which the new government will face will be the high deficit of Electricite du Liban, adding that this year alone, the Finance Ministry will subsidize this sector with nearly $1.5 billion.

The Finance Ministry said that by the end September 2009, $5.7 billion of the Paris II pledges were signed into agreement, representing 76 percent of total pledges compared to 74 percent at the end of the first quarter of 2009.

The balance of pledges to be entered into agreement includes pledges by Saudi Arabia, World Bank Group, European Investment Bank, Arab Fund for Economic and Social Development and the European Commission.

Disbursement increased to 50 percent ($3.772 billion) of total pledges as of end September 2009, compared to 42 percent of total pledges at the end of the first quarter of 2009, representing an increase of $600 million. The increase in disbursements is mainly attributed to private sector support.