In Lebanon, Dutch Disease hangs over the torn country

Abdullah Malaeb

Published: Updated:

French President Emmanuel Macron addressed the Lebanese political class after they failed to form a cabinet within two weeks, accusing the political elite of betraying their promises to the French initiative that Macron laid out after the deadly Beirut port explosion in August.

In his speech, Macron also offered another chance for the Lebanese leaders to form a government and begin work on the roadmap, giving them four to six weeks.

However, Lebanon has been struck by a case of Dutch Disease – a paradox in which good news, typically the discovery of oil, has negative implications at a macroeconomic level.

While Lebanon has not discovered oil or gas, even though it has begun offshore exploration for gas reserves, another Dutch Disease is present today in the country.

And Macron has failed to realize or addressed the country’s deeply rooted problems that hinder macroeconomic development.

Further, the French president has called for the restoration of the political system that created the import-dependent and service economy that lacks industrial and agricultural production.

The Taif agreement, which ended the civil war in 1989, reconstructed the politics of the country, authorizing Syria’s control over Lebanon in exchange for Hafez al-Assad’s acceptance to participate in the peace process with Israel.

The unprecedented power given to the Syrian state gave it control over the reconstruction process that was led by Lebanese Prime Minister Rafik Hariri who brought the country several economic and financial projects, attracted direct foreign investments, and rebuilt the shattered economy.

But Lebanon remained in Syria’s backyard. The Taif Accord ensured that militias disbanded – with the exception of Hezbollah that refused to turn in its arms – and organized the Lebanese army. But it also fitted it with an internal police that had to coordinate with the Syrian security and military apparatus, including Syria’s intelligence agency, the Mukhabarat.

It is true that Hariri’s policies brought the country vast economic gains. But these gains had limitations as another stipulation under the Taif Accord was the assurance that power was balanced among sects. A form of power sharing that preserved Syria’s supremacy was institutionalized, thus prohibiting Lebanon from having an independent and strong economy.

Building a proper agricultural sector and strengthening Lebanese industry would have harmed the Syrian economy and threatened Assad’s grip over Lebanon by decreasing the Syrian influence over the country, which was directly maintained by Lebanese President Emile Lahoud at the time.

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The system set up allowed for all kinds of foreign meddling, and further had no means to strengthen domestic sectors.

Many in Lebanon saw coming the economic crisis that erupted at the end of 2019. At the time, Lebanon was facing economic instability and many felt the country had been on the brink for years as a result of failed policies. These decisions created a country of extreme libertarianism where privatization is forced upon the economy. Lebanon’s economy today operates on loans, grants, and donation conferences. The country has never had a rigid economic plan to build a sturdy, self-sufficient economy.

In an interview at a Lebanese TV station three months ago, Ahmad Fatfat, a former Lebanese parliamentarian belonging to the Future Movement bloc, said that resigned Hezbollah parliamentarian Nawaf Al-Moussawi told him that Hezbollah replaced the former Syrian control, becoming the new security regulator in Lebanon.

Hezbollah has abused several provisions in the Taif Accord, and in turn, the Iran-backed group has heavy control over state institutions. This has been the state of play in Lebanon for decades.

Yet, Macron erroneously assumes the previous period was a golden age. Where he calls for a government that would strengthen the ties between the ruling elite and its protector Hezbollah, what is needed is a government of transition. This transitional government would need to adopt a new economic approach. It is about time that Lebanon creates an economy that can stand on its own through the formation of a non-sectarian political system that diversifies the economy and improves productive sectors of the economy, without measuring these improvements on the scale of sectarian benefit or having to be limited by Hezbollah’s calculations.

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If President Macron really wants to set Lebanon down the path of reformation, he has to understand that the economic growth of the previous era was at the expense of the social and economic wellbeing of many Lebanese.

Quality education, social protection, favorable work conditions, and scientific progress are internationally known to be rights, not privileges. These rights will not be preserved nor protected by attempts to reinstall and upgrade the current political and economic system.

Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.