All posts by 234Radio

Beirut, Lebanon – More than five years into an economic crisis that sent inflation spiralling and saw the Lebanese lira plummet, Lebanon’s government is facing its biggest infrastructure project in years: Post-war reconstruction.

After 14 months of war with Israel, Lebanon needs $11bn to rebuild, according to World Bank estimates.

But, experts say, donors do not trust the Lebanese political class, which has a track record of funnelling construction contracting money to politically connected businessmen.

The needs

In addition to more than 4,000 deaths, the war took a vast material toll on the country already reeling from a multi-year economic crisis.

About 10 percent of the homes in Lebanon – some 163,000 units – were damaged or destroyed, to say nothing of the more than $1bn in infrastructure damage.

Most observers, and the new government formed in February, say Lebanon will again need foreign aid, as it did after a previous war with Israel in 2006.

But that aid has been slower to arrive than in 2006, with donor attention divided between Lebanon, Syria, and Gaza, and major donors like the United States pushing for the Hezbollah group’s disarmament as a precondition.

Hezbollah, until recently the most powerful political and military force in the country, suffered severe blows during the war and has seen its power curtailed, although many Lebanese continue to support it.

The country’s south, east, and Beirut’s southern suburbs bore the brunt of Israel’s offensive. Together, they are home to most of Hezbollah’s constituents, so restoring their homes and livelihoods is a priority for the party.

That translates into leverage for foreign donor states.

The problem

Politically connected companies overcharged the state’s main infrastructure buyer, the Council for Development and Reconstruction (CDR), by 35 percent between 2008 and 2018, a 2022 study by local think tank The Policy Initiative found.

And the primary contracting regulation was so riddled with exceptions that as little as 5 percent of tenders were under the Central Tenders Board’s oversight.

All that came to a head in 2020, when a huge blast in Beirut’s port tore through much of the capital and donors decided they wanted nothing to do with the state, according to Khalil Gebara, economist and former World Bank consultant who previously advised the Lebanese government.

“Donors stopped transferring money to national authorities or to the treasury,” he said, because they had “a total lack of trust in national mechanisms”.

Instead, donors controlled spending directly or via a World Bank-managed trust fund, or worked through NGOs, Gebara added.

That year, the state, which was stalling on implementing International Monetary Fund conditions in exchange for a partial bailout, spent just $38m on its physical investments, down from more than $1.1bn in 2018, the year before the economic collapse, according to Ministry of Finance data.

Trying for solutions

A year later, Lebanon passed what many considered a landmark reform to state contracting, one of the few reform laws passed in recent years.

It dragged virtually the entire public sector into one unified framework, abolished a classification system that had frozen out contractors without political connections, and created a new regulator – the Public Procurement Authority (PPA).

As crisis-ridden state agencies were corralled into the new system, public investment continued to fall, hitting below $10m in 2022.

“Procurement is going to be a big thing … and absolutely the test for the procurement system and for the regulatory authority,” said Lamia Moubayed, head of an in-house research and training institute at Lebanon’s Finance Ministry.

Rana Rizkallah, a procurement expert at the same institute, says the law is solid, but it’s up to the government to implement what it promised, adding that a crucial part of that is staffing the regulator.

The PPA is supposed to be a board of five members backed by a team of 83 staffers but, three years after the law went into effect in 2022, it has a single member and five employees overseeing 1,400 purchasing bodies.

A four-member complaints board that the law established also has yet to be formed, so complaints still go to Lebanon’s slow, overburdened courts.

Jean Ellieh, the regulator’s president and sole member, says the state doesn’t have the “logistical capacity” to recruit dozens of regulators in one fell swoop, but he’s put in a request for new hires.

“We will work with determination and resolve, regardless of our capabilities,” Ellieh told Al Jazeera. “We will not give anyone an excuse to evade the application of the law.”

He added that donors have expressed “satisfaction” with the PPA’s abilities.

Bonanzas to the well-connected

After several lean years in which the state had to keep spending to a bare minimum, the contracting scene remains dominated by the large companies that built up enough resources from earlier rounds of investment to stay afloat.

Wassim Maktabi, economist and co-author of the 2022 report on cartel behaviour in construction contracting, said it would be a tall order to ensure that reconstruction isn’t another bonanza for the well-connected.

“Rest assured that these political elites will not let this slip,” he said.

In addition, years of high-value contracts mean politically connected firms have accumulated the capital to be, in most respects, bigger and more experienced than competitors.

“Even if political influence was not a factor and you awarded these contracts purely based on merit,” he said, these firms “would still get a large piece of the pie”.

Regardless, Maktabi says, reconstruction is simply too important to stall in pursuit of perfection.

Al Jazeera has identified 152 reconstruction contracts totalling more than $30m that are already under way, via the PPA’s online portal. Of the top four contract winners in dollar terms, two have political connections mentioned in media reports.

The top four companies, Beta Engineering and Contracting, Elie Naim Maalouf Company, Al Bonyan Engineering and Contracting, and Yamen General Trading and Contracting, have won contracts totalling $10.6m, $4.7m, $1.8m, and $1.4m, respectively – 60 percent of the total amount awarded in the PPA contracts examined.

Pushing for reformist credibility

The new government is negotiating with the World Bank on a $980m plan, known as LEAP, to kick-start reconstruction and be funded by a World Bank loan and foreign assistance.

But LEAP would only take care of a fraction of the total reconstruction costs.

The government also started hiring for a long-stalled electricity regulatory board and new faces on the CDR board.

Moubayed says refreshing the CDR board is a World Bank requirement to approve LEAP, which would be a vital win for a government pushing to gain reformist credibility.

The World Bank declined to comment on whether refreshing the CDR board is a requirement.

It’s still unclear how the programme might be structured, but the government has endorsed the creation of a trust fund for post-war reconstruction, “characterised by transparency”.

But, Beirut residents were unhappy with a similar model used in 2020 for the Port blast reconstruction, architect and urbanist Abir Saksouk of Public Works Studio says.

A lack of equity between residents, based on which organisation took over repairing each area, further eroded a sense of shared citizenship, she says, calling it an experience that shouldn’t be repeated.

She is one of many calling for an inclusive reconstruction process led by all stakeholders, including people who have suffered damages, and with the involvement of relevant ministries, because they are a vital part of the process.