High-rises and Rising Unemployment

The political stagnation in Lebanon is taking a huge economic toll: a drastic decline in tourism and international loans stuck in parliamentary red tape. Only the armored car industry stands to make a profit.

The sales representative for the exclusive La Residence complex, slated for construction in central Beirut, was very courteous and interested: "Send me an e-mail and I'll forward all the details to you: the number of square meters, the price per unit and the terms of the payments." After a few minutes of talking with the representative of the Damac company, the project's developer with offices in Dubai, a few more interesting details came to light.

This project, designed by Ivana Trump, features especially large apartments. A two-bedroom apartment spans 180 square meters and the cost is sky-high: "$4,000 dollars per square meter, but if you buy an entire floor you get a 15 percent discount," the sales representative promises. The apartment specifications on the Web site are very tempting: marble and wood lobby, heated swimming pool, perfect air conditioning, "bank-level security," a fitness room as well as many parking spaces as there are rooms in the apartment.

"You're only interested in investing in Beirut? We have properties in Dubai as well that will be ready in another year," said the representative.

But Dubai's a lot more expensive, I argued.

"We can give you a lower price than in Beirut. They haven't even started building in Beirut, because of, you know, the circumstances, so the project won't be completed as planned in 2009. It may be postponed until 2010."

The "circumstances" the sales representative was referring to started last summer with the war and continue with the demonstrations in downtown Beirut and Hezbollah's campaign to bring down Prime Minister Fouad Siniora's government. However, apartments in these exclusive projects continue to be sold, "and they're not even willing to lower the price," as the sales representative made clear. "But perhaps if things continue this way, the prices will also drop."

Behind the luxury towers, which attract foreign investors, Lebanon's economy is based on war money. But worse than this - it has not been able to lift itself up because of the political crisis imposed on the state by Hezbollah leader Hassan Nasrallah.

"When you have a state, come and talk to us about the fact that we are setting up a state within a state," Nasrallah venomously mocked Siniora's government in a speech last week. In the meantime, Nasrallah is trying to prove to the Lebanese public that until his demands are met, Lebanon will not be a state; until he receives that same "decisive third" of the cabinet seats, the one third that can impose a veto on important government decisions, he will see to it that no decisions are made at all.

The compromise proposals that the secretary general of the Arab League, Amr Moussa, tried to put forward some months ago, sounded reasonable, but were rejected. Even the Saudi pressure was unable to move things much. Nasrallah thinks that the election law and the election results did an injustice to the Shi'ites, who represent a majority in the country. He also is striving to help the Syrians drive a wedge deep into that process of establishing an international court to try the murder of Rafik al-Hariri. And primarily, he wants to prevent a situation in which Siniora's government begins to conduct a foreign policy that goes against the interests of Syria and Iran - i.e., a pro-American and perhaps pro-Israeli policy.

In the meantime, he is succeeding. The political stagnation in Lebanon comes at a huge economic price. According to the assessments of Lebanese economists, the country is losing $40-60 million a day. Lebanon is mired in huge national debt amounting to $41 billion, approximately 180 percent of the GDP, and it is unable to obtain loans or grants that donor countries are willing to provide it. Last week, for example, the International Monetary Fund (IMF) decided to transfer a loan of $77 million to the government to ease its debt repayments. This sum was intended not only to provide a little breathing space, but also mainly to encourage the donor countries to quickly transfer the funds they committed to giving.

The total amount of these commitments is $7.6 billion, but only around $350 million, the contribution of the government of the United Arab Emirates, has arrived so far. The other contributions are waiting for "political developments" - that is, for a situation in which the government can truly function.

The government wasn't even able to accept the IMF's loan because the parliament must approve the loan agreements. The terms for its acceptance are that the Lebanese government must raise the VAT from 10 percent to 12 percent next year and to 15 percent in 2010. The government also has to levy a gasoline and capital gains tax in the coming year, in order to achieve a situation in which the national debt declines to 130 percent of the GDP within five years. However, the parliament is not convening. This is because Nabi Beri, the speaker of the parliament, receives instructions from Nasrallah, and he opposes convening the parliament since it is clear to him that the Siniora majority will give the government the approval it seeks and also credit it with an economic achievement.

The parliamentary front is only one of two fronts. The second front is the street. Hezbollah protestors who since December have been filling Beirut's two main squares with tents and camping equipment have led to the closing of dozens of stores, restaurants and other businesses in the downtown area. The political instability has led to a drastic decline, of around 32 percent, in the number of tourists visiting Lebanon this year.

The industry is in such a slump that some restaurant owners, after consulting with Tourism Minister Joe Sarkis, decided on a special campaign to revive the industry. Under the slogan "Help us now so that we can serve you later," restaurant owners offer surfers special Web site vouchers. There is a choice of type of food and desired tourist destination and the cost of the voucher will be deducted from the customer's bill at the restaurant. In addition, the voucher will be included in a raffle in which the tourist can win airline tickets.

However, these projects will not be able to bring back the thousands of workers who were fired from their jobs in hotels and restaurants and have since found new jobs in the Gulf states. This is not just the loss of a skilled and talented labor force proficient in the tourism industry totaling around 150,000 workers, but also a stiff blow to higher education, as many Lebanese students rely on wait staff jobs to pay their tuition. Ahead of the next school year, there is concern at the Lebanese Education Ministry that the number of students will drop dramatically.

According to Nasrallah's determined statements and the heated public debate underway in recent days between the opposition and the minority, it is hard to see signs of a breakthrough in the crisis. Today there is no international power, Arab or Lebanese nationalist that could force Nasrallah to change his conditions or stop bankrupting the country. On the other hand, there are those in Lebanon who believe it would be better to hold early elections and put Nasrallah's political power to the test once and for all. It is possible, say some commentators, that the anger over his having taken Lebanon to war and the economic damage he caused is greater than the disgust engendered for the Siniora government, which many feel represents the well-established and complacent elite of the country.

In the absence of a solution, even foreign investors are staying away and those who invested in the country are already considering suing the Lebanese government for the loss of income. "Lebanon is bad news for foreign investors," a Lebanese businessman was recently quoted in a local paper, "I wouldn't touch it."

It seems that at least one industry in Lebanon is benefiting from the situation: vehicle reinforcement. Until now, most of their business came from foreign representatives in Iraq, Afghanistan and South America, but now they report a substantial increase in sales to political figures, businessmen and wealthy citizens who fear another wave of assaults. The cost of such a car ranges from $100,000 to 200,000, but they can be rented on a daily basis for $1,000 per day, driver included.