Picture taken outside Lebanon’s Central Bank during the wave of October 17 protests. Coincidentally the face mask provides a symbolic link to today.

A preliminary version of Lazard’s salvation plan for Lebanon surfaced online this past weekend. There is no clear indication whether or not this is the final draft of the actual plan but its safe to say it’s very close to the final version that were going to get. Lazard is a financial advisory and asset management firm hired by Hassan Diab’s government to assist Lebanon in digging itself out of it’s own grave. You can find the plan online, or if you don’t feel like reading the whole 34 pages, there are numerous economic experts that have popped up around Lebanon in the last 2 years and they’ve all taken a shot at dissecting this thing. So feel free to choose one out of the many and have a read. The sheer number of economic experts that now exist and operate in Lebanon is so confusing. Where did they all come from? Why don’t any of them agree with each other?  Can’t they all just get along?

Reform Fantasy

Back to Lebanese Government reform plan (or fantasy) sponsored by Lazard. I’m not going into the details of it simply because I don’t fully understand it because I’m not an economic expert, because the line for applying to be one was too damn long. On paper it is a good plan, well thought out and analyzed, and set out a timeline for the future. In reality, this plan is near impossible to apply and here is why. For this plan to be successful, a lot of things have to go right. The plan itself relies on mostly 3 main factors: a well functioning government (that remains functioning throughout), a truly independent central bank, and an international community willing to stomach us and give us money again.

Now, even if we might have a semblance of the first one, we are still way behind in the other two. For example, the “independent” central bank is yet to fill vacant key positions due to the sectarian bickering surrounding them. As for the “international support”, to put it politely, Gulf countries told us to fuck off, the EU and the USA both told us to fuck off, China has been telling us to fuck off. Then there’s France, who symbolically see in us a troubled younger sibling, that they are willing to help and console, before eventually telling us to fuck off. It’s an ideal plan but like I’ve said repeatedly you can’t afford to be idealistic in Lebanon.

Steal of the Century

It’s sad to think about how we managed to get here. It wasn’t bad enough having a corrupt public sector, but they had to go and contaminate the banking sector also. A banking sector which was once considered Lebanon’s steel armor. Now that same steel of armor has been melted down and turned into shackles, tying this country down for the next 10 years. I imagine it didn’t take much. In fact it probably took just one day to set in motion the series of events that completely bankrupt the Lebanese economy and crippled the financial sector. Riad Salemeh probably did it sitting in his office puffing on a cigar while online shopping for vacation homes in Sierra Navada, California, for much needed summer RnR.Do you know till this day the Central Bank still maintains that the Lebanese Lira peg is 1,507L.L. when 5 minutes down the road it trades at 50% even 100% more than that. It’s like they’re in total denial that the currency is in free fall.

Personally I think because if they do admit it, they could end up being held liable in a court of law. That’s why they keep throwing the ball into parliaments court and parliament keeps throwing it right back. Nobody wants to be caught with their finger on the trigger. They want to chalk this up to the effects of bad “financial engineering” and call it a day, but we all know that’s not the case. This is like every other financial fuck up that ever happened in the modern world. It was a heist, plain and simple. Just like the 2008 crash was a heist, this too was a heist. The greatest bank robbery to ever happen in this country and nobody even had to point a gun.

“The Central Bank still maintains that the Lebanese Lira peg is 1,507L.L. when 5 minutes down the road it trades at 50%, even 100% more than that”

Close But No Cigar

For any other country in the world, the document leaked over the weekend would be a shot at true salvation. In Lebanon it’s just a bunch of chopped up trees with words on them. That’s why I’m not high on the Lazard plan, or any other plan that comes out of the woodworks. Many of you may remember another economic reform plan: McKenzie’s. And where is that now? In some former Minister’s desk, collecting dust in a drawer next to a half empty bottle of Viagra. Point being, minus true initiative and leadership, a plan with this delicacy, and with the extent of it’s reforms, it could never be pulled off.

Even if I’m wrong, and by some Hail Mary we end up truly implementing it, the plan doesn’t even punish the actual culprits. Lebanon is a mom and pop store compared to other countries. Lazard executives can walk into their meeting with the Government, and throw around a bunch of numbers. But once they leave, everybody left in that room knows the truth: that the people that lied and cheated the Lebanese people out of their money should be the ones paying the price. Any solution that falls short of reprimanding those individuals, fails in its standards. And if the culprits so happened to have spent the money, or smuggled it, then I’m sure the bevvy of illegal seaside properties that they also own (and stole) should be more than enough to compensate any dues owed. I don’t see why a hard working Lebanese expat of 30 years who spent his/her whole life sending money to their home country because they didn’t have any other choice, should have their lifesavings slashed.

And a bail-in (a process where the current shareholders in Banks would be wiped out and their shares be given to the depositors) is not enough. Who the hell would want to become a shareholder in a failing bank anyway? Not to mention the country is about to crack down on the banking sector, so banks aren’t even going to be as profitable as they once were.

“Point being, minus true initiative and leadership, a plan with this delicacy and with the extent of it’s reforms, could never be pulled off.”

Fine Print

So while the plan comes closes, it still falls short. There is still work to be done for this plan be deemed economically and socially suitable. A rewrite should be in order. This time without the overly zealous terms, such as: independent, international support, regulatory, judiciary, PLAN. Also make sure to call out the culprits by name, and impart onto them some form of punishment. Maybe sprinkle the word “prison” in there while you’re at it. I’m not being cynical I’m just being honest. Some of the devices and techniques stated in the plan are sound and, in certain aspects, required. I don’t doubt them one bit. My problem is with the people and institutions tasked to implement these reforms. It is them I have my doubts with. It’s like with everything else in life. A great script with a great director equals a great fucking movie. A great script and a baboon as a director, completely different story.

One thought on “Lebanon’s Reform Fantasy

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