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Volume 45, Number 1January/February 1994

In This Issue

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Up From the Ashes

Written by Ian Meadows
Photographed by George Baramki Azar

As Lebanon marked its 50th birthday last November 22, the mood in the country was soberly optimistic. The Lebanese were profoundly aware that they stood at a historic crossroads. Behind them lay two decades of violence that claimed tens of thousands of live, injured or rendered homeless many more, and brought the country's economy, its shattered capital, suburbs and towns, and even its people to the edge of anarchy. Civil war and military invasion had robbed Lebanon of its prized reputation as the Middle East's international marketplace and premier financial center, as the region's educational hotbed and quintessential vacation spot, and—perhaps most painfull—as an inspiring example of the peaceful coexistence of differing religions and nationalities (See Aramco World, September-October 1982). Ahead lay a herculean 10-year task of rebuilding.

But something else was also evident as 1993 ended: There was a new spirit of national unity in the land. The spirit was a little timid perhaps, but a sense of realism was evident at all levels, showing how well the grim lessons of the past two decades have been taken to heart.

Lebanese businessman Rafic Hariri's nomination as prime minister in September 1992 marked a distinct watershed, as Lebanon's disparate factions seemed to turn away from violent solutions and begin to work together to rebuild their fragmented country. In a series of interviews with Lebanon's leaders, bankers, planners, merchants and ordinary citizens, a clear understanding emerged of what Lebanon needs in order to prosper in tomorrow's Middle East-a region now poised for profound change.

Lebanon's recovery will require a drastic and rapid restructuring of many of the country's key institution to eliminate the remaining social, economic, political and financial anomalies that fueled the country's long civil war.

The physical blueprint for rebuilding Lebanon—originally dubbed Plan 2000,but now more commonly called Horizon 2002—is a consensual 10 year development plan. Important input for the plan was provided by the World Bank, whose November 1992 two-volume study on Lebanon constitutes a basic building block for many of the programs currently underway.

The rebuilding program, characterized by its flexibility consists of three phases: rehabilitation recovery and development. The hear of the mega-project lies in a crash program that went into first gear this past autumn, parallel to efforts to implement basic reform in Lebanon's economy and body politic.

The crucial first three years of Lebanon's planned rebirth are neatly summarized between the staid blue cover of a document entitled" The National Emergency Reconstruction Program"(NERP). The emergency program will cost some $2.8 billion, about half in the form of grants, soft loans and commercial loans already in the bank and available for allocation and disbursement.

When the NERP has run its three year course, a recovery phase begins that will last another three years and ensure the "economic and social distortion induced by the war are progressively addressed."

Next comes the development phase proper, when Lebanon will have "regained its ability to develop and modernize its economy without extra ordinary external assistance." If all goes as planned, the 10 year program will reach completion in the year 2002,at a total cost of some $13 billion, with the private sector financing further projects that are expected to cost an additional $16 billion.

Official documents spell out precisely what needs to be achieved in the coming decade. Among other things, Lebanon needs to tame its inflation—bringing it down from a raging 140 percent in 1992 to a controllable 10 percent in 1996 to enable the country to manage the expected large inflow of capital.

In the short run, official will focus on measures that give quick results: abolition of the so-called "customs dollar" in favor of the Lebanese pound, increasing electricity and other utility prices to" at least their economic cost," taxing real estate transaction on the basis of actual value, and so on.

Policies now being kneaded into final form include introduction of a value added tax around 1994-95 and a gasoline tax, elimination of subsides on wheat and other grains, increased duties on luxury items, higher car registration fees, tighter tax collection and reform of the civil service.

A revitalized civil service, able to collect taxes, customs revenues and utility payments, is crucial to Lebanon’s future. The water, electric power and telephone systems, for example have been hamstrung for year by illegal connections, payment evasion and outdated rates. Improved tax and utility collection efforts although difficult, given existing administrative and social frame-works are need to help generate additional revenue for reconstruction and development. Progress on this front was already visible last autumn, as customs receipts for the third quarter of 1993 jumped more than 42 percent over the same period the previous year, a clear sign of improved rates of collection.

Official are also scrutinizing the entire social sector, and will consider creation of a "social safety net" including a comprehensive social service and human resources strategy that would be implemented two year from now. Interim measures could include such measures as offering "lifeline" utility rates for the less fortunate.

The reconstruction game plan itself involves two main players. The first is the state's Council for Reconstruction and Development (CDR), set up originally in 1977 and then powerfully revived by Hariri. CDR working with the World Bank, commissioned the NERP blueprint, authored by International Bechtel and the Beirut based international consulting firm Dar al-Handasah.

Player number two has been given the daunting task of restoring the heart of the nation, the devastated area that was once downtown Beirut. The company set up to handle this purely commercial operation is called Solidere, a private sector firm that has been granted a 25 year concession to rebuild and develop 1.6 million square meters (more than 395 acres) of the city's central district. When completed, the new downtown area will house 40,000 citizens and provide offices and work sites for 100,000 daytime employees. Initial cost projection come to a total of $ 3.25 billion, committed at an annual rate of $310 million- including an infrastructure bill of about $400 million in the first four years.

Sensitive to local and scholarly concerns, Solidere will carefully conserve the city's 3000-year heritage of antiquities. Handsome old buildings, archeological finds and other national treasures will be rescued from the present jungle of smashed and twisted rubble, creating what planners describe as a vibrant, bustling metropolis that blends the best of old and new. This "Mega-agora," or giant market place will run right down to the Mediterranean shoreline, near the first basin of Beirut Port.

In the process, thousand of tons of rubble will be cleared from the down-town area and trucked to the nearby Normandy landfill, a dump created in the civil war years just a few hundred meters from the celebrated—and still closed—St Georges Hotel. The dump will be transformed into a man made, 22-hectare (54 acre) island, linked to the mainland by a short causeway. The full development plan for the island is still open ended, but it will include an international business center, a park, a central library and various administrative buildings.

The island will be linked with another reclaimed land area and enhance what promises to be an attractive waterfront, framed by Beirut's legendary sea and mountain vistas. The master plan calls for downtown reconstruction to blend harmoniously with development of the rest of Beirut. Meanwhile, the French government's Ile de France urban Planning Institute is readying a master plan for reconstruction of the area between the city of Beirut and the suburbs.

Lebanon's entrepreneurial private sector will of course be deeply involved, directly and indirectly, in the rebuilding enterprise, as well as in private construction, industrial or agro-industrial projects throughout the country.

By mid-summer 1993, as first disbursements flowed out, contractors began moving on the first of the 132 infrastructure projects grouped in 15 sectors, provided for by the plan. The war ravaged remains of the once-popular Khalde stadium were bulldozed to make way for a new sports facility for the 1996 pan Arab Games. Roads were being patched up and repair teams were visible in many areas of the city. Lebanon was on the move again.

These first infrastructure projects cover telecommunication, power and water, as well as Beirut International Airport, Beirut Port and school repairs. Returning utilities and public services to normal will not only make daily life easier, but will also act as a powerful morale-booster, rescuing the populace from years of telecommunications chaos, daily power rationing and defective water system.

With costs inching close to the $2.9 billions first phase target, tenders were going out last autumn to pre-qualified bidders world wide for the next batch of projects, including more water systems, sewage and solid-waste disposal state schools and additional work at Beirut Airport.

Thus far financing has flowed generously from the major Arab funds (See Aramco World, November December 1979), notably from Saudi Arabia, Kuwait, Abu Dhabi and the Arab Fund for Economic and Social Development (AFESD). Non-Arab contributors have included the World Bank, The United Nations Food and Agriculture Organization (FAO), the European Community (EC) and some of its member-states, as well as various other multilateral organizations, providing either soft loans some with what amounts to a grant component—outright grants or straight commercial loans.

Dr Boutros Labaki, the CDR's secretary general, stabs at rows of figures with an eloquent finger as he explains that the remaining funding requirement should present no great problems, with fresh Arab inputs expected along with funds from France, Germany and other EC member states. Notable non contributors so far include the United states and cautious Japan, although both may get involved now that the Middle East peace process has moved forward.

Looking ahead, the CDR chief listed a tentative program for the first six month of 1994 which included Beirut Port work, more airport development, school and hospitals the latter thanks to a timely Saudi loan in midsummer. Most importantly, the program would address a central problem providing affordable housing for persons displaced or made homeless by the violence of the past two decades. The displaced and home less number from 300,000 to 500,000 depending on whether you count those who have found temporary shelter with relatives and those who have become squatters, eking out a living in Beirut's numerous shattered buildings. The housing problem is given high priority because many feel that, unsolved, it could harbor the germs of renewed future discord.

About 180,000 household units were completely destroyed during the civil War and related violence, and as many were badly damaged. Projections now call for some 500,000 new units to be built at an annual rate of 37500 and a yearly cost $550 million.

Funding construction of these units is no real problem; the difficulty is providing affordable financing for prospective owners. Nor has any clear rental solution yet emerged. The Housing Bank, in the process of being restructured, may come up with viable solutions. For the present, however, home loans in Lebanon just don't offer private lenders a very good return when compared with other available investment vehicles.

Other proposals getting priority treatment include electric power price subsidies, the social safety net, freeing rent controls and levying a special housing tax to finance or subsidize low-cost housing.

Lebanon's population of 3.5 million is fairly evenly spread over Beirut (581,000), Beirut's suburbs (681,000) Mount Lebanon, (635,000), North Lebanon (690,000) South Lebanon (598,800) and the Bekaa Valley (410,000). The World Bank notes how event in South Lebanon have caused the perennial flight of mostly poorer people from that troubled area to Beirut and other urban centers, with all the socio-economic pressures that result.

Lebanese birth rates showed a notable decline between 1982 and 1987. Yet the largest segment of Lebanon's population is in the 10-to-20 age group a corresponding shrink age in the 20 to 30 group is due largely to emigration, said to have been in excess of 300,000 people.

Some 700,000 children were enrolled in state schools in 1992 over 90 percent of the 5 to 20 age group. In the coming 18 months, some 1100 state schools will be repaired and a few new units built. Ten new technical schools will be constructed as well and a human- resources utilization program is being prepared.

Higher education will remain foccused on such institutions as the American University of Beirut (See Aramco World January -February 1991) St. Joseph University, Beirut Arab University. This last institution, due for expansion, is being viewed as a powerful engine of development and unity; an apolitical, classless center of learning.

Lebanese University rector Dr. Assad Diab, an eminent jurist, will preside over an anticipated 1993-94 student body of 43,000 young men and women. University facilities are spread far and wide; a plan to bring them together in one campus at Choueifat, 15 kilometers (nine miles) out side the capital is still far from being realized.

Arabic and French are the languages of instruction at the Lebanese University, which Diab believes fills a big social gap. "Sixty to 70 percent of our students come from the less favored classes," he pointed out, commenting on the effects of 17 years of strife and what he called three totally lost years."

A $15-million Saudi Arabian loan will enable the university to continue operations, make repairs and acquire vital equipment." Our aim is to make a solid and durable contribution to over all regional educational advancement ," says Diab. "Our teachers are dedicated. They understand the need for national unity, free thinking and free speech."

Horizon 2002 allocates a total of $1.14 billion to the education sector, with the bulk of the spending in years four through 10. In the early recovery years, education and teacher recruitment will have to step aside for what are seen as more pressing priorities.

Government planners are well aware of the urgent need to reconstitute the national work force, which was crippled by a mass exodus of professional and skilled labor between 1975 and 1982. The country has an immediate need for an estimated 200,000 technicians, foremen, skilled and unskilled workers.

The human-resource program now being prepared will define just how the Lebanese work force is to be enlarged to the numbers the country needs, taking into account wage levels, current housing constraints and social security.

Dr Nasser Saidi, first vice governor of the Bank of Lebanon, the country's central bank, is a member of a new top talent team charged with helping the bank restructure itself from top to bottom so it can play a lead role in building tomorrow's Lebanon. The team also includes Governor Riad Salameh, Fadhi Mohdad, Mohammed Shatta and Haroutine Samoutin. All are banking experts with impressive credentials, most of them have wide foreign experience, and all are in their early 40's.

Saidi explains how the central bank will be modernized and restructured internally—once again with World Bank help. He stresses that the bank of Lebanon must itself be rock solid "before we can cast our nets" and start the three-fold task of participating in reconstruction programs, charting the role of Lebanon's entire banking system in this process and, last but not least, helping Lebanon position itself in the region.

The American- and British- trained banking specialist believes the nonpolitical nature of the new team enhances the central bank credibility not just for Lebanon's financially powerful diaspora—some $10 billion held by Lebanese abroad could be at stake—but for international backers as well. "We are now preparing our programs ready for action," he says. We insist on top people. We need managers to help shape tomorrow's Lebanon... and we will find them."

The banker also calls for economic reconstruction, with the roles of public and private sectors clearly defined, and a consistent set of economic policies laid down and adhered to.

In equally instructive meetings with Finance Minister Dr. Fouad Siniora and Lebanese Bankers Association President Dr. George Asshi, Siniora radiated optimism but acknowledged that rebuilding Lebanon is "a hell of a task... a real challenge."

Looking back over the past few years, however, he saw the emergence of much greater national unity. "There are differences of opinion," he remarked, wryly listing a few of Lebanon's 150 stations, 50 television channels and countless publication," but there's dialogue."

"One of our main preoccupations—something we're looking at very closely right now—is improving living conditions. It a priority and solutions will not be long in coming." He hinted that a German economic and financial protocol might be a prime vehicle to help overcome existing barriers to low cost and affordable housing.

Siniora observed that "Lebanon's real role is beyond its borders. The outside world in now taking us seriously...as a people who mean business"- an oblique reference to on going reforms across Lebanon's financial and socio-economic structures.

Asshi went a step further down the road of far reaching structural reform. "We’re at a threshold. We had a very serious fracture, social and confessional, and we are at long last beginning to pull together."

Lebanon now has 73 banks, he said, all of them potential signatories to the new banking reform law, which will put them in professional harmony with their international kin, including alignment in the Basel Convention and its eight percent minimum liquidity requirement.

The new legislation will also encourage a number of smaller banks to amalgamate and regroup. Said Asshi, "We shall shortly see between 40 and 50 banks in Lebanon, banks operating at the highest standards," their ranks bolstered by three important newcomers: The Housing Bank, planned to be 20 percent public and 80 percent privately owned; the partially privatized Industrial and Tourist Development Bank, its capital augmented; and the Agricultural Credit Bank, also 20 percent public and 80 private, with commercial credits offered according to private-sector guidelines.

Asshi confidently predicted that "with a lot of hard work, frankness, a little good luck and, above all, progress in the Middle East peace negotiations, Lebanon, come the year 2000, will be back in business as a full partner, providing a durable bridge between East and West."

A $45 million loan by the International Finance Corporation a World Bank subsidiary, to five Lebanese banks this past summer was aimed at hoping several small add medium sized Lebanese enterprises modernize or re-equip, creating 8000 jobs. The loan is an example of growing international confidence in Lebanon, Asshi contends. He predicts the IFC facility will trigger similar agreements between Lebanese banks and regional or international lenders .

The human resource theme came up again in discussions with National Economy and "Commerce Minister Hagop Djemerdjian, a Stanford trained engineer who joined the Hariri Government after a highly successful business career. He points to the large number of professionals in the year old government, saying this emphasis on promoting "high investment in brain capital" must be one of the country’s chief objectives.

"We now have high social mobility," continued the minister," and can record important positive changes in community relations. Our structures are solid but in no way top-heavy. That’s a hallmark of this government. We’re highly aware of the need to communicate openly with all the people, all the time."

Like other leaders, Djemerdjian cites the importance of the ongoing Middle East peace process, and notes that Lebanon and Syria have been "talking-engaged in dialogue" with a view to defining "areas of tangible mutual interest." He nods and adds, " Hopefully we'll go on recording progress, although it's a step-by-step process." Both Syria and Lebanon need to identify common goals in the context of a larger Arab economic system in which "sterile competition, overlapping and duplication would be avoided," he said. "We need plain talk. It can work wonders."

Pre-war industrial exports represented between10 and 15 percent of Lebanon's gross domestic product, but the civil war damaged some 200 plants and led to wholesale emigration of workers, leaving this sector of the country's economy functioning at barely 25 percent of capacity. Naturally, as industry recovers, it is going to get a lot of attention, and joint ventures are being discussed more and more in Beirut business circles.

Dr. Assad Rizk brings a physician's analytical mind, warmth and perceptiveness to his new job as industry and petroleum minister. "I've been doing the rounds," he laughs, "and can promise you that I've visited every ward of our industrial hospital."

Rizk notes that the CDR plan is constantly being reviewed and, where necessary, modified. Industrial and petroleum policies are now being incorporated into it. Ironically," construction actually got a boost from the conflict-part of the strange logic of war, I guess," the minister says. "The point is that we have good logistical structure and readily available equipment."

He adds: "Our development potential is significant, but right now we need technology partners, a return of skilled workers and a clear idea of exactly where we want to go both at home and in export terms."

The minister described plans to set up strategic regional industrial zones and a bank for industrial development, capitalized at 200 billion Lebanese pounds. Rizk notes with satisfaction that the World Bank's IFC and "at least one other major international financial organization will help seed-fund the related agricultural and housing banks."

Rizk highlights the importance of ongoing talks between Beirut and Damascus on rationalizing Lebanese-Syrian relations. He hints that a blueprint for a common market is being readied. A trailblazing project that would allow finishing in Lebanon of ready-made garments begun in Syrian plants is imminent, the minister suggests: Syria produces 700,000 tons of cotton and cotton thread a year. The two countries' combined population of 15 million would be a substantial economic force in the region, Rizk adds.

Syria's oil and gas wealth could also prove useful to Lebanon, the minister says. For example, gas-or oil-fired power plants could be built in North Lebanon as part of a Lebanese-Syrian-Jordanian grid, he explains.

Saidi at the Bank of Lebanon also notes the complementarity of the Lebanese and Syrian economies, underlining prospects for increased specialization in each. Syria's agricultural production, in his view, could be an input for agro-industrial and food processing facilities in the Bekaa Valley and North Lebanon. Saidi also sees scope for Syrian crude oil in Lebanon's refineries, and for Syrian natural gas in power stations feeding both countries. In addition, Lebanon's tourist-industry experience could prove of value to Syria in its efforts to build up its own, still underdeveloped, tourism potential.

Saidi predicts that "under the appropriate conditions," Beirut could develop once again into a regional capital market, providing market-related services, channeling funds, and functioning as a trading link for emerging stock markets in Jordan, Kuwait and Saudi Arabia, as well as Syria.

As Middle East peace prospects improve, Saidi believes, so do chances for multinational trade, aid and development packages, to help the countries of the region retool their economies for peace and to fund regional projects in such key sectors as water, transport, communications and power. Lebanon, he adds, "can and should play a pivotal role in designing and identifying the objectives of such a regional plan."

Lebanon's export potential, including agriculture, was badly damaged during the war, with losses put at $600 million; 50 percent of the country's cold-storage capacity was knocked out, 15,000 hectares (37,000 acres) of forest gutted by shellfire, animal stocks were depleted, and irrigation systems were put out of action.

Agriculture gets a combined $435 million in Horizon 2002, but only $18.5 million is being disbursed in year one, mostly for irrigation projects, with an eye on nearby export markets where Turkey and other competing countries have made some inroads.

In light of the unique historical importance of Beirut, it was reassuring to hear from Dr. Helga Seeden, archeologist at the American University of Beirut (AUB) that she is convinced the city's architectural and archeological treasures will be well cared for during the 20-year restoration period. "If we can save 50 percent, it'll be fine, "says Seeden.

Solidere Director-General Nasr Riad Shama'a says his firm might do even better than that, thanks to an updated inventory of historic buildings which boosts the number to almost 300 in the city's historic core. Everyone is determined not only to respect the past but also, if possible, to enhance it, he asserts. "What we uncover here during reconstruction could be an even greater revelation of the true wealth of Beirut's long past."

AUB, with powerful support from the British Museum and other institutions, and a team of two British and three French archeologists, has identified seven areas for digging, starting this spring. "We'll follow the bulldozers," Seeden vows.

A new model of the reconstructed downtown area has been prepared, taking all these factors into account. Wandering today through the ruined suqs, squares and streets that everyone who has lived in Beirut knew and loved, it is hard not to catch the excitement of what might be uncovered, and of a splendid new agora about to rise from the ashes of the old.

Quality and beauty are the accents, as Shama'a reveals details of an international competition to design Beirut's future suqs and waterfront areas in the $2.3-to-$3 billion program.

Solidere's own status was finally settled in late summer of 1993, and with the basic square-meter costs of reconstruction now determined, a work start-up is imminent. Under the company’s statutes, property-rights holders in the downtown area —owners, tenants or leaseholders—can convert the value of their assets into Solidere shares. Understandably, not all potential shareholders are happy with the value assigned to their assets in the central district, but letters of intent for share purchases worth close to $700 million are in hand. So far the split between Lebanese and non-Lebanese shareholders—the latter predominantly Arab—is said to be about 50-50; no one person or group is permitted to acquire more than a 10-percent stake in Solidere.

The government's role is to ensure fairness in the land transactions and evaluations and see to the smooth running of the project, which will build 35 kilometers (22 miles) of roads, install 56,000 direct phone lines, and use 800,000 tons of reinforcing steel and 2.2 million cubic meters (2.9 million cubic yards) of concrete to build 4.4 million square meters (47 million square feet) of mixed office, residential and administrative space, including a 40-story World Trade Center. Also planned are a national library, exhibition center and opera house.

Naturally, the CDR's 10-year plan and Solidere's huge program require certain guarantees for investors, something that the Hariri government has dealt with through a completely revamped and enlarged national guarantee organization.

Lebanon's National Investments Guarantee Corporation (NIGC) was set up in the late 1970's, but never really got off the ground, due to the civil war. But today it's back on track, and its president is energetic and affable Dr. Samir Nasr, a French-trained economist. He took time from a busy schedule to explain that "NIGC guarantees, like an A-1 insurance policy, cover both foreign and local investors. They will be absolutely ironclad."

Nasr's institute has working arrangements with the World Bank's Multilateral Investment Guarantee Agency (MIGA) and the Arab Investment Guarantee Corporation." You've probably heard, too, that France's Coface and other European export credit guarantee agencies are again providing cover for Lebanon."

NIGC is about to publish a comprehensive investment guide for Lebanon. Nasr voices confidence in ongoing governments moves to remove bottlenecks, overhaul the country's financial and monetary systems and tame budget deficits.

He is encouraged by signs that Lebanese expatriates are returning dollars to the country. He cited the "enormous advantage" of these human and financial resources for the country, stressing opportunities for industrial and other joint ventures, including tripartite projects grouping Lebanese, Arab Gulf and Western partners, especially in high-tech industries.

Banking Association Director General Dr. Makram Sader, whose close links with Arab banking circles give him particular insight into regional trends, offered a breakdown of the sources of financing needed for Lebanon's rehabilitation, reconstruction and development. Roughly 30 percent of overall budget requirements will be met from foreign loans, he explains, about six percent from direct overseas grants and the balance from Lebanese government savings and domestic source, including loans from foreign equity banks.

Reaffirming national priorities, such as infrastructure repair and maintenance, and housing for homeless or displaced persons, Sader lauds the "family fabric," which he feels was the factor that prevented Lebanon from breaking down completely.

The role of Lebanon's banks in the 10-year plan is a determining one, Sader says. The country needs a "qualified, restructured, properly legislated banking system," not just as viable partner with foreign lenders in the reconstruction process but also as a source of complementary financing for short-term needs-that is, working capital.

Sader defined two crucial tasks in the months and years ahead. The first is to rehabilitate, recycle and correctly employ human resource capital. The second: to bring back to country, each year for five year, at least 200 first-quality Lebanese-born executives who have been working in the international banking system, industry or world bodies. Thousands of skilled workers left Lebanon as industries and job opportunities went up in smoke, he explains. "Their return is vital," he says, noting that Lebanon must restore productivity to at least 1974 levels.

He postulates a third theme, too: restructuring the country's entire educational sector, to secularize it and prepare it for the 21st century. "It's difficult but not impossible," he acknowledge." We have the skills but we need self-honesty, discipline and rigorous controls, not just for ourselves but in respect of the world around us, which tends to look at us as troublesome chunk of a complicated jigsaw puzzle. So let the world tell us precisely what it wants and we will react accordingly."

Turning to the Arab world, Sader notes that, even after 17 years of civil war, Lebanon is still viewed as "viable" and "of excellent value."

"We can and must play a key role in regional development," he goes on, "be a relay for channeling short-term Arab funds. The Beirut market can help channel Arab resources into our reconstruction, worth $30 billion over 10 years and double that sum once the country is rebuilt and embarked on a growth curve. In return, we offer state-of-the-art computer technology and can help Arab states with industries tailored to their own requirements, including semi-finished inputs—for example, pharmaceuticals, textiles and cosmetics. Arab investors are most welcome in our industries and they know full well that ours is a truly liberal economy."

Sader says thoughtfully: "In all this we must act quickly and honestly. We became mediocre after a very good start. We have to win back that place and then do even better in every way."

The transportation sector is seen as crucial to the reconstruction of Lebanon, in terms of logistics and enhanced revenues. A Bank Audi analysis records 800 ships discharging almost 1.5 million cargo tons in Lebanon in the second quarter of 1993, a trend continuing into the second half of that year. That represents a 16-percent improvement over 1992.

Lebanon's ports, particularly Beirut, are allocated $200 million in the 10-year plan. Beirut Port sustained relatively little damage during the civil war, as all the combatants, even in the worst fighting, spared this entry point for their own vital supplies.

Beirut International Airport gets an immediate allocation of $350 million. Work there, including upgrading of hotel and duty-free areas, will proceed quickly because of the airport's importance for business and tourism, as well as its revenue-earning potential.

The stepped-up pace of arrivals and activity at the airport bodes well for the future of national carrier Middle East Airlines. MEA's equity is split among Lebanese shareholders, Arab Gulf investors and Air France, with five percent held by MEA staff. Chairman Abdul Hamid Fakhoury quietly concedes that the airline suffered enormous losses right up to late 1992, including a 50-percent fleet loss. "Our own resources kept us going," says Fakhoury, "enabling us to operate a 14-ship fleet-mostly on lease, of course."

He characterizes 1993 as "a transitional year for us," and adds that "new acquisitions planned for 1994-1998 should get us back to profitability by next year. "MEA, stresses Fakhoury, has taken special pains to maintain very high technical and passenger-service standard. "Our crews and engineering staff are rated highly."

Loss of American and Australian destinations, because of bans on travel to Lebanon by those countries, is a problem that should disappear by early 1994, says Fakhoury. With Lebanon returning to prosperity and with a significant rise in tourist and business travel, "we should be back in the major league within five years," he predicts.

On the road to Jounieh, we passed a touchingly dilapidated train struggling along the coastal strip—a reminder that planners very much want to see a good railroad system back in action, linking Lebanon to Syrian terminal, Jordan and even Saudi Arabia.

Two leading Lebanese businessmen, Robert Debbas and Roger Nasnas, agree that Lebanon has emerged from its ordeal battered but unbowed and in surprisingly good shape, despite the terrible human and material losses.

Nasnas, a luminary in the Federation of Lebanese Business Associations, is equally optimistic and points to the "increasingly creedless character of today's economic structures."

He too is confident of Lebanon's ability to survive, of the strength of its private sector—given appropriate government backing—and the strength of the country's social fabric. But he adds, "We must pursue our stated aim of creating 20,000 new jobs yearly, and get that figure up to 100,000 by century's end."

Raymond Audi, general manager of the 150-year-old Bank Audi, notes that Premier Hariri has shown himself to be a powerful "pole of attraction, a major pivot... very much the right man at the right time."

Audi never held back on investments, even at the darkest point of the civil war. He has strong faith in the country's resilience and skills, and believes Lebanon has great undeveloped tourist potential, with a vast amount of history, cultural diversity and geographic variety packed into its 10,452 square kilometers (4036 square miles) of plain, valley and mountain. This fact underscores the need to get ports, airports, roads and even trains back to normal operations in anticipation of returning tourists, Lebanese expatriates and Arab residents.

Audi's bank, in its third-quarter 1993 economic report, cited a clear improvement in Lebanon's monetary and financial positions, with exports rising sufficiently to produce a $260 million balance of payments surplus—a big step forward, considering the $692 million deficit registered in the same period the previous year. Looking ahead, Bank Audi took note of a Euromoney prediction that Lebanon's economic growth in 1994 would be the highest in the Middle East, with a projected rate of 7.1 percent.

It is a warm autumn morning in Ras Beirut. A returning visitor finds it strange and wonderful to be walking the familiar streets of the city once again, free and unchallenged, absorbing the incredible energy, color and vitality of Beirut—from the American University, down Rue Bliss, up into the Hamra shopping district, catching a glimpse of the old Manara lighthous before arriving at Premier Rafic Hariri's office.

The impressively built prime minister projects the quiet confidence of a leader who knows what he wants and how to get things done. As we talk of last summer's violence in south Lebanon, which, at the time, posed a serious threat to reconstruction efforts, Hariri remarks quietly: "Force won't work. This whole sad affair has made us stronger and more unified, believe me."

In a wide scan of Lebanon's immediate priorities, Hariri says social problems are getting his personal attention, and that discussions with various financial sources should result in low-cost, affordable housing loans for the less fortunate.

Looking at a future Middle East context, the prime minister forecasts that "competition will come after peace," and that Lebanon will be a vital economic component in future connections that will encompasses the whole Mediterranean basin.

"Let me tell you that Lebanon is back in business and we welcome its return. I do not want to see my country as a place of passage but rather as a center liberty—cultural and financial—and a model for international cooperation."

As we depart, Hariri sits down to a further round of official consultation, another 16-hour day in 1993, Lebanon's year of destiny. Outside, a bulldozer springs back into noisy action clearing rubble from a side street, as we drive up to the cliffs of Raouche with the Mediterranean sparkling clear along the coast.

Lebanon indeed has an enormous task ahead, particularly in these first three years of reconstruction. But given the country's frank commitment to tackling its problems, and the adaptability of its highly competent people, it is hard to disagree with predictions that Lebanon will in fact prevail, and will re-emerge 10 years from now in a new version of its traditional role, as a diverse, interesting and valuable meeting—place of East and West.

Ian Meadows, veteran journalist and author, lives in Languedoc, France, where he is at work on a historical novel set in Palestine and Occitania during the crusades .

This article appeared on pages 16-29 of the January/February 1994 print edition of Saudi Aramco World.


Check the Public Affairs Digital Image Archive for January/February 1994 images.