World Bank Document

Report No. 4434-LE Lebanon ReconstructionAssessment Report Public Disclosure Authorized March 25, 1983 Europe,Middle Eastand North Africa RegionalOffice Country ProgramsDepartment II ProjectsDepartment FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Documentof the World Bank This document has a restricted distribution ard may be used by recipients only in the performance of their official duties Its contents may not otherwise be disclosed without World Bank authorization CURRENCY EQUIVALENTS Currency Unit Lebanese Pound = 100 Piastres Lebanese Pound per US dollar Period End of Period Period Average 1973 2.5163 2.6104 1974 2.3338 2.3278 1975 2.4500 2.Z946 1976 2.8947 ... 1977 3.0465 3.U686 1978 3.0309 2.9554 1979 3.3773 3.2428 1980 3.6938 3.4358 1981 4.6352 4.3139 1982 March 4.8506 4.7385 July ).1579 December 3.9267 Source: Banque du Liban LISI OF ABBREVIAIIONS BCAIF Banque de Cr6dit Agricole Industriel et Foncier BNDIT Banque Nationale pour le Developpment Industriel et Touristique CAFP Conseil d'Administration de la Formation Protessionnelle CAH Caisse Autonome de l'Habitat CBD Central Business District (Beirut) CDR Council for Development and Reconstruction CEGP Conseil Executif des Grands Projets CEGPB Conseil Executif des Grands Projets de Beyrouth CNSS Caisse Nationale de Securite Sociale DGETP Direction Generale de l'Enseignement Technique et Professionnel DGRB Direction Generale des Routes et Batiments EDL Electricite du Liban HB Housing Bank LFPA Lebanon Family Planning Association MDC, Municipal Development Corporation MOYC Ministry of Housing and Cooperatives MiER Ministry of Hydraulic and Electric Resources MOE Ministry of National Education MOH Ministry of Public Health MOLSA Ministry of Labor and Social Affairs NIGI National Institute for Guarantee of Investments OEB Office des Eaux de Beyrouth PWT Ministry of Public Works and Transport P&T Ministry of Posts and Telecomununications FOR OFFICIAL USE ONLY ABSTRACT The protracted warfare since 1975 bas bad a devastating impact on Lebanon's economic and social development. Many people have either been displaced or left the country. Physical destruction has been considerable in all sectors. As a result, the country's production capacity has been significantly reduced, and the efficiency of public services, impaired. The Government began preparing for reconstruction in 1978 but, because of internal conditions, it was not possible to implement many of the policy decisions and projects. The Government's main objective remains to reconstruct damaged public infrastructure, strengthen the public sector, which had a limited role before 1974, and assist the private sector to recover its prewar level of activities. To assist the Government in the process of planning reconstruction, the Bank, in cooperation witb the Lebanese administration, identified a reconstruction program whicb could be started in the 1983-85 period. The program is composed of priority projects in public infrastructure and credit programs to assist the reconstruction of housing and industry; it is accompanied by recommendations on studies, technical assistance and institutional measures needed for the program to be executed in a timely manner. The proposed reconstruction program is described in an assessment report wbicb includes a review of tH¶emain sectors, except for agriculture, and a list of the main projects. Because of the unavailability of up-to-date statistics and the uncertainty of making projections under current circumstances, economic analysis was limited to the public finance situation and prospects. Because of internal conditions, the public sector accumulated a large domestic debt to finance sizeable current deficits. In spite of rapidly increasing external trade deficits, but owing to large inflows of foreign transfers, the level of foreign exchange reserves was maintained for the last eight years and will constitute an indispensable cushion against unforeseen or speculative financial movements during the critical process of normalization. In the next ten years, however, the Government will have to mobilize large amounts of foreign and domestic funds to finance both the reconstruction program and public sector deficits, which will require some years to be eliminated. This report could serve as a basis for discussion witb potential donors. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. TABLE OF CONTENTS Page Social and Economic Indicators Summary and Conclusions .1... i-iv I. General Background . 1 II. Macroeconomic Situation ..... .. .. 4 Recent Developments and Trends .... 4 Public Finance: Issues and Trends .... 7 Balance of Payments: Issues and Trends . 13 III. The Reconstruction Effort . 18 IV. Recommendations for a Medium-Term Reconstruction Program . 22 A. General ..... .. .. .. .. .. .. .. .. 2z B. Sectoral Programs, Policies and Institutions . 27 V. The Reconstruction Program Financing. 40 VI. Reconstruction Programming and Development Planning . 45 Attachment: List of Proposed Public Investment Projects by Sector for the 1983-85 Reconstruction Program . 49/55 List of Tables in the Text Table 1 Estimated Public Sector Deficit: Trends and Structure, 1977-82 . 11 Table 2 Ongoing Public Sector Reconstruction Program (Commitments) . 21 Table 3 Annual Commitments by Sector for the Public Sector Reconstruction Program Proposed for 1983-85 ... 23/24 Table 4 Annual Disbursements for the Public Sector Reconstruction Program Proposed for 1983-85 .... 25 Table 5 Public Investment Project to be Started after 1985 .b.. 2b Table 6 Financing the 1983-1985 Public Investment Program . 42 SECTORAL ANNEXES I. The Education Sector II. The Healtlh Sector III. The Housing and Urban Development Sector IV. The Port Sector V. The Power Sector VI. The Road and Airport Sector VII. The Telecommunications Sector VIII. The Water Supply and Sewerage Sector IX. A Note on the Beirut Central Business X. Industria L Credit Maps This report was prepared by members of a mission which visitea Lebanon during November 1982. This mission was composed of: Roberto M. Fernandes, Mission Cbief; Abdallah El Maaroufi, Sectoral Staff Coordinator; Herminia Martinez,, Loan Officer; Messrs. Rene Vaurs, Country Economist; George Hadjicostas, Speci-al Studies; Peter Long, Highways; Jean Grosdidier de Matons, Ports; Gerard Tenaille, Water Supply and Sewerage; Marcel Scoffier, Telecommunications; Niall Corwell, M.A.T. Flandre (consultant), Education; David Pearce, Health; Ismail Serageldin, Albert Peltekian, Urban DevelQpment. This draft was completed and discussed with the Government by a seconci mission which visited Beirut during February 1983 and included, in addition to part of the above team, the following members: Michel Loir and Iona Sebastian, Transport; Aziz Kassab, Water Supply; Noel Lindsay (consultant), Education; Willy de Geyndt, Hfealth; Jean-Francois Landeau, Urban Development; Davici Hutchins (consultant), Power; and Abhay Deshpande and Anil Gore, Industrial and Development Finance. Page lof 5 LEBANON- SOCIAL INDICATORSDATA SHEET LEBANON REFERENCEGROUPS (4EIGHTEDAVERAGrl AREA (THOUSANDSQ. KM.) - MOSTRECENT ESTIMATE) TOTAL 10.4 MIDDLEINCOt AGRICULTURAL 3.6 MOSTRECENT NORTHAFRICA 6 MIDDLE INCOME 1960 /b 1970 Lb ESTIMATE/b MIDDLE EAST LATIN AMERICA& CARIBBEAN GNP PER CAPITA (US$) .. .. .. 1253.6 1902.0 ENERGYCONSUMPTION PER CAPITA (KILOGRAMSOF COAL EQUIVALENT) 537.2 768.2 1027.7 713.5 1259.9 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 1857.0 2469.0 2658.0 URBAN POPULATION (PERCENT OF TOTAL) 44.4 61.8 75.9 47.3 65.7 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 3.9 STATIONARYPOpULATION (MILLIONS) 6.1 YEAR STATIONARYPOPULATION IS REACHED 2070 POPULATION DENSITY PER SQ. EM. 178.6 237.4 256.0 35.8 35.2 PER SQ. EM. AGRICULTURALLAND 663.2 737.0 743.6 420.9 92.5 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.8 43.9 39.7 44.3 39.7 15-64 YRS. 53.4 51.2 55.4 52.4 56.1 65 YRS. AND ABOVE 5.8 4.9 4.9 3.3 4.2 POPULATION GRO.YTHRATE (PERCENT) TOTAL 2.5 2.8 0.7 2.8 2.4 UR3AN 7.1 6.2 2.8 4.6 3.8 CRUDEBIRTH RATE (PER THOUSAND) 43.1 35.4 29.9 41.2 31.4 CRUDEDEATH RATE (PER THOUSAND) 14.3 10.6 8.3 12.2 8.4 GROSS REPRODUCTIONRATE 3.1 2.7 2.0 2.9 2.1 FAMILY PLANNING ACCEPTORS, ANNUAL(THOUSANDS) .. .. USERS (PERCENT OF MARRIED'WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71=100) 102.0 99.0 90.0 100.4 110.0 PFR CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 104.2 99.0 112.4/c 108.5 108.5 PROTEINS (GRAMSPER DAY) 73.3 67.8 76.2/c 71.9 66.0 OF WHICHANIMAL AND PULSE 26.0 23.1 21.0/ 18.0 34.0 CHILD (ACES 1-4) MORTALITYRATE 5.4 2.9 1.9 15.1 5.6 HFALTH LIFE EXPECTANCYAT BIRTH (YEARS) 57.6 62.1 66.0 56.9 64.2 INFANT MORTALITYRATE (PER THOUSAND) 67.5 50.0 41.2 104.3 64.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 92.0 .. 59.1 65.6 LRBAN .. 95.0 .. 83.1 78.9 RURAL .. 85.0 .. 39.8 43.9 ACCESS TO EXCRETADISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. .. 59.3 URBAN .. .. .. .. 75.3 RLRAL .. .. .. .. 30.0 POPULATIONPER PHYSICIAN 1212.9 1299.5 .. 4015.5 1617.3 POPULATIONPER NURSING PERSON 2084.7/d 1102.2 .. 1802.2 1063.5 POPULATION PER HOSPITAL BED TOTAL 212.1 230.2 .. 641.7 477.4 URBAN 128.8 327.4 .. 538.3 679.8 RURAL .. .. .. 2403.3 1903.4 ADMISSIONS PER HOSPITAL BED .. .. .. 25.5 27.3 HOUSINC AVERAGESIZE OF HOUSEHOLD TOTAL .. .. URBAN .. .. RURAL .. .. AVERAGENUMBER OF PERSONS PER ROOM TOTAL .. .. URBAN 2.2 2.1 RURAL .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 82.0 98.0 UR5AN 95.8 .. RURAL 71.0 .. Page ? of 5 LEBANON - SOCIAL INDICATORS DATA SHEET LEBANON REFERENCE GROUPS (WEIGHTED AVERAG/A - MOST RECENT ESTIMATE) - MIDDLE INCOME MOST RECENT NORTH AFRICA & MIDDLE INCOME 1960 /b 1970 /b ESTIMATE lb MIDDLE EAST LATIN AMERICA 6 CARIBBEAN EDUCATION ADJUSTED ENROLLMENTRATIOS PRIMARY: TOTAL 102.0 118.0 97.0 88.7 104.3 MALE 105.0 127.0 .

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