Lebanon: Refuse crisis threatens political stability

05 Aug 2015

Lebanon: Refuse crisis threatens political stabili...
A political deadlock affecting refuse collection in Lebanon has fuelled unrest in Beirut and threatened the stability of the government. The inadequate government action and mismanagement of the situation is indicative of how wider indecision and political factions have disrupted policy-making and slowed economic development. Reports that Prime Minister Tammam Salam could resign will do little to resolve the current situation and will further stall reforms in key policies such as the public private partnership framework, that are needed to improve the business operating environment in Lebanon.
The closure of the Beirut’s main landfill site in Naameh, on 17 July came about when the contract with waste management company Sukleen expired. When the Naameh facility opened in 1997 it was planned to operate for only six years, and despite intermittent protests over the issue and repeated postponement of plans to close the site, the government failed to secure an alternative location. The closure led to the accumulation of more than 20,000 tonnes of rubbish on the streets of the capital and Mount Lebanon, fuelling unrest across the city and warnings over the potential environmental and health risks. Protests escalated across Beirut and southern Lebanon, resulting in disruption along key routes blocked by demonstrators and prompted start criticism of the government’s failure to manage public services.
The government announced a partial resumption of waste collection on 27 July as part of a preliminary solution that would send waste from Beirut to makeshift landfill sites and other unidentified municipalities that were granted financial incentives. However large amounts of rubbish have remained in public environments. Demonstrations have also grown in areas where municipal officials have agreed to receive waste from Beirut, suggesting local resistance will persist until the situation is fully resolved.
Rubbish crisis symptomatic of wider political dysfunction
The recent crisis is illustrative of how of deep political rivalries can hamper decision-making across government. In 2010, opposition politicians previously clashed with the government over its refusal to disclose the terms of the contract with waste management firm Sukleen, which runs the Nameeh site and has reportedly benefitted from close ties to Lebanese politicians. Environment Minister Mohammad Machnouk has acknowledged the country’s political crisis, which has seen lawmakers unable to agree on a new president since May 2014, has also undermined efforts to address the waste issue before the landfill closed. Already strong political divisions have somewhat hardened in Lebanon during the past two years with regional conflicts, including in neighbouring Syria, intensifying political sectarian tensions. The current unity government, led by Prime Minister Tammam Salam, was formed in February 2014 after a 330-day stalemate among lawmakers that reflected deteriorating relations between the pro-Western March 14 bloc and the Hezbollah-led pro-Syrian March 8 coalition.
The mounting garbage in southern Lebanon is the latest in a series of crises to demonstrate the fragility of political institutions and has led to suggestions that Prime Minister Salam could resign. Divisions among the Christian, Sunni and Shi’a parties that comprise the current cabinet have prevented decision on critical issues, including major reforms, budgets and senior appointments that typically require the approval of two-thirds of the cabinet. The ongoing deadlock prompted Salam to temporarily suspend cabinet sessions in June and subsequent efforts have failed to identify an effective decision making process. Salam’s predecessor, Prime Minister Najib Mikati, resigned from office in 2013 under similar circumstances as he became unable to navigate between rival factions. With Salam temporarily functioning as head of state in the absence of a president, the political uncertainty triggered by a possible resignation would be even more disruptive.
Political crisis threatens economy
The ongoing political unrest threatens to prolong already slow-decision making and cause further damage to Lebanon’s economic prospects. In a May report, the IMF warned that the absence of a president and political divisions were undermining investor confidence and threatening key sectors, including finance, tourism real estate, and construction. Regulatory uncertainty remains a critical impediment to investment; lawmakers for example have failed to pass a budget for more than a decade while a number of key laws and reforms have also stalled. In March, a group of Lebanese businessmen and economists called on the government to approve a long-delayed public-private partnership (PPP) law which they argued could increase private investment in key sectors such as energy and water management. The legislation, which would strengthen the role of the private sector and accelerate project delivery, is among several important pieces of legislation stalled by the political impasse.
The PPP law would also create a more transparent regulatory regime which could ameliorate concerns over political favouritism in the government tendering process, including those raised in relation to the Sukleen contract. The failure to approve long-delayed anti-corruption laws has contributed to the persistence of high levels of corruption, which have cost the economy an estimated five percent of GDP annually and led to a series of high-profile scandals, including a fraud scheme involving oil ministry officials and refiners estimated to have cost the treasury USD 1 bn in the 1990s. The collapse of the government could exacerbate existent operating challenges for the private sector in Lebanon, creating additional bureaucratic hurdles and investment barriers to new or expanding operations in the country. While there have been reports that pressure from Western diplomats has reduced the odds of the prime minister’s resignation, his ultimate intentions remain unclear and no major breakthrough in the current political crisis is expected. The rubbish crisis is likely to remain a flashpoint for unrest in Beirut, which will compound pressure on the government until a credible solution is found.
Government inaction damages prospects for energy sector
Lebanon’s emerging oil and gas industry has been among the sectors paralysed by the indecision. According to a 2010 US Geological Survey report, offshore Lebanon could have some 30 trillion cubic feet (tcf) of this natural gas and 660 million barrels of oil. Positive seismic survey results and major discoveries in adjacent Mediterranean waters have encouraged strong interest from international oil companies, with Chevron, ExxonMobil, Shell, and Total among the 46 companies qualifying to participate in the country’s first licensing round, which was delayed for the fifth time in August 2014 over the failure to pass key legislation.
Though lawmakers have approved a new petroleum law, progress has stalled since the last government fell in 2013, with internal divisions among cabinet members preventing agreement on decrees that would specify terms of exploration and production agreements and address an ongoing maritime dispute with Israel. The regulatory uncertainty has already seen Lebanon fall behind Cyprus and Israel in developing its offshore oil and gas potential, and with no indication the political stalemate blocking necessary legislation will be resolved, Beirut looks set to forgo indefinitely the estimated USD 164 bn total revenues that Lebanon could obtain from exploiting its gas reserves.
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