By Georges Pierre Sassine

Food prices in Lebanon have risen by more than 66 percent since 2006. Increasing food prices are severely impacting Lebanese consumers as families spend on average around 34 percent of their expenditures on food, and can reach more than 60 percent for the poorest households.

One of the main causes of increasing food prices in Lebanon is the country’s high exposure to international food price fluctuations, given that Lebanon imports more than 80 percent of the food it needs. This has affected Lebanon severely during the 2008 global food crisis where food prices increased dramatically across the board. For example, Lebanon’s cereal import bill increased by more than 65 percent from 2005 to 2008, vegetable oils and sugar by 45 percent, meat products  by 40 percent, and dairy products  by 20 percent – according to the Lebanese Ministry of Agriculture.

In order to reduce food inflation and the impact from international food shocks it is important to address the underlying causes of high food prices. There are many factors contributing to high food prices, thus requiring a combination of policy responses.

Lebanon needs to make a strategic shift from low profit traditional agricultural practices to more economic and less water-intensive products.Georges Sassine

To start, high and unregulated profits are leading to overpriced food. Influential trading cartels dictate high profit margins in Lebanon at the expense of consumers. While they are supposed to be regulated by the government according to a 2005 law, it remains improperly enforced. Also the dominance of middlemen between producers and consumers raises final food prices. In this case the solution is to reduce the number of intermediaries and establishing agricultural cooperatives.

On the other hand, the most effective response for a net food importer like Lebanon is to expand domestic agricultural production and reduce its vulnerability to international food shocks.

Currently, the Lebanese agriculture is constrained by underinvestment in the sector. While the government recently increased its budget, it remains insufficient and falls short from the required investment levels. Less than 1 percent of both the government budget and bank lending are allocated to agriculture in Lebanon.

Agriculture production is also constrained by weather conditions, the use of inefficient technologies, and inadequate infrastructure which is limiting water access to 75 percent of farmed land. This is why Lebanon needs to make a strategic shift from low profit traditional agricultural practices to more economic and less water-intensive products.

Finally, trade policies of neighboring countries are further exacerbating the competitiveness of Lebanon’s agricultural sector. Regional cooperation will then be essential to improve trade integration, including bilateral and regional trade agreements. 

By Georges Pierre Sassine

Gasoline prices in Lebanon almost doubled in the past six years and are proving to be a source of economic burden and political tension. Analyzing what goes into the cost of gasoline is key to understanding what the government could do to lower gasoline prices.

According to the Lebanese Ministry of Energy & Water, 67 percent of the current retail price of gasoline in Lebanon reflects the price of purchasing fuels on international markets; 22 percent are government fees – including customs and VAT; 9 percent for distribution and marketing private profits; and 2 percent for shipping and transportation costs. 

 
While prices could be theoretically reduced by 22 percent by lifting government taxes, it is not viable to the economy. Fuel taxes constitute a major source of government revenue, and since 2009 the Lebanese government decreased its share of revenues from fuel taxes from 42 percent in 2009 to 22 percent in Q1 of 2012.  According to Prime Minister, Najib Mikati, gasoline taxes would be lifted if alternative revenue sources to the treasury are ensured.

It is then obvious that gasoline pricing in Lebanon is mainly driven by international oil prices and policy efforts should be targeted at reducing the fuel import bill. While Lebanese policymakers cannot affect world oil prices, they do have other options to reduce gasoline costs.

First the use of more fuel-efficient cars and trucks should be encouraged. Fuel standards or tax incentives on more fuel-efficient cars will reduce oil consumption in Lebanon and save Lebanese significant amounts of money in fuel bills. Second, an efficient and improved transport system would also reduce oil consumption. The third initiative should address the availability of gasoline in cases of emergencies and supply disruptions. One viable option is for Lebanon to benefit from its relations with regional oil producing countries and enter into “emergency oil sharing agreements” – where Arab countries would be obligated to make oil available for sale to Lebanon in the event of an emergency.

By Georges Pierre Sassine

There is hope for Lebanon. Most of our problems can be resolved. Sectarianism, foreign interventions, crippling debt, corruption, deteriorating public institutions, and many other issues can be tackled if Lebanese vote for competent and honest leaders.

As 2013 elections get closer, Lebanese should actively promote people that have two major qualities. They should be effective at improving our quality of life, and have strong moral values to serve the public interest.

If we want a better future in Lebanon then there is only one way forward: we should promote effective leaders, reward courage and integrity, and punish corruption and dishonesty.Georges Sassine

The ultimate goal of elections is to have a government that is able to solve today’s most urgent problems. Unfortunately, the past several administrations have been paralyzed and Lebanese citizens are deeply frustrated with its political class. The blame is on the electoral law, money in politics, the constitution, and geopolitical developments. But the answer is not only in improving Lebanon’s social contract. We need to hire better leaders on Election Day. Our choice of people matters. Because the right people can make a poor organizational structure work well; and people with poor leadership will make the best possible organizational structure work miserably.

Therefore Lebanese need to elect leaders with the abilities to get the job done. They should have the right economic and public policy skills but should also be capable to navigate the reality of the Lebanese system.

To be effective, politicians should surround themselves with the right team. For Ministers this involves the appointment of government servants. But many Lebanese ministers find that they cannot choose or change ministry employees. The reality is that the appointment process is often paralyzed in Lebanon over tensions between candidates’ competency, religion, and loyalty.

These constraints can be circumvented. For example, a Lebanese official recently faced fierce resistance from employees affiliated to opposing political parties. Not being able to replace them, he promoted them. He gave them a disguised promotion where they were given more prestigious titles but lost their previous powers. And there are many other tactics that a pragmatist can use to navigate the reality of the Lebanese political process.

Our leaders should also have the ability to compromise and build consensus. Today, Lebanon is at a standstill and the Lebanese government ineffective. The underlying issues of disagreement will surely not be resolved overnight but the only way forward is to focus on goals we all completely share. The effective leader will not compromise on principles but should be willing to cooperate with opponents to improve daily socioeconomic issues. Lebanon is a “consensus democracy” and can only be governed by leaders who are consensus-builders.

This is why we should draw lessons from the successes and failures of Lebanese politicians. An open meeting should be called with current and past public officials to share their experiences. These lessons on how to effectively govern in Lebanon should be passed on from one generation to the next.

The second quality Lebanese should look for in their leaders is strong moral values. Lebanon needs more honesty, integrity, and courage in its leaders.

Some people might think that politics and ethics cannot coexist, especially in a country like Lebanon. But I believe that there is no inconsistency between ideals and realistic possibilities.Georges Sassine

However, some people might think that politics and ethics cannot coexist, especially in a country like Lebanon. But I believe that deep convictions are not incompatible with the most practical of things. There is no inconsistency between ideals and realistic possibilities. It is actually not realistic to solve problems unguided by moral values. And it happens that in the context of Lebanese politics moral principles have prevailed.

Each of us can think of Lebanese citizens, soldiers, and statesmen that showed character at decisive moments in Lebanon’s history. To start with Prince Fakhr-al-Dine who fought for the sovereignty of modern Lebanon. Bechara el Khouri, Riyad el Solh and several others who gained Lebanon’s independence from the French mandate, and other modern examples to draw upon.

Examining their successes and failures has led me to believe that Lebanon’s best interest will be fulfilled by those who are absolutely determined to act upon their conscience. Lebanon will be best served by people whose self-respect is more important than their popularity with others; and those with morals and values stronger than their desire to maintain office.

Some people might be cynical about their vote making a difference. But they should remember that despite the many fallacies of Lebanon’s electoral system they have the free choice of vote through the secret ballot. Lebanese citizens possess what many are longing for in other Arab countries: the freedom of choosing their own representatives and vote upon their personal conviction. Down the line it will make a difference.

If we want a better future in Lebanon then there is only one way forward: we should promote effective leaders, reward courage and integrity, and punish corruption and dishonesty.

Georges Pierre Sassine is a public policy expert and Harvard University alumnus.

A short video by Lebanese artist Maya Zankoul explaining the definition of Inflation, CPI, and how it should be measured in Lebanon.

Download (PDF, 1.07MB)

Download (PDF, 59KB)