REPUBLIC OF THIRD QUARTER 2002 A Quarterly Publication of the LEBANON Lebanon Country Office UPDATE The World Bank Group
THE WORLD BANK GROUP BUILDING PARTNERSHIPS TO PROMOTE TRADE & INVESTMENT
Conference on “Building In addition to Lebanon, the SME Middle East road show covered the following countries: Partnerships to Promote Trade and Investment”, December 12, Jordan (December 10, 2002) in collaboration with the Young Entrepreneurs Association, and under the 2002 chairmanship of the Minister of Planning of Jordan.
During the month of December 2002, The World Bank Syria (December 15, 2002) in collaboration with the Group held a road show for the Small and Medium Federation of the Syrian Chambers of Commerce, and Enterprise Group (SME) in the Middle East Region. The under the sponsorship of the Minister of Economy and road show covered three countries: Jordan , Lebanon and Foreign Trade. Syria. A conference was also scheduled in Iran on December 17, In this context, a conference entitled “The World Bank 2002 but was postponed until further notice. Group, building partnerships to promote trade and investment in Lebanon” was held on December The one-day Workshop Agenda included the following 12, 2002 at the Beirut Chamber of Commerce, Industry sessions: and Agriculture. The Conference was organized by the World Bank Group (WBG) and the Federation of 1) Lebanon, Europe and the Middle East: the at stakes Chambers of Commerce, Industry and Agriculture of of the conference. Lebanon (the Federation), under the chairmanship of the 2) Three testimonies from Lebanese companies on the Ministry of Finance and in partnership with leading investment climate and business opportunities in intermediary organizations such as the Association des Lebanon: one testimony from a Lebanese company Banques du Liban, Association of Lebanese Industrialists, (Uniceramic), one from a Joint Venture company Rassemblement des Chefs d’Entreprises Libanaises (Snaidero Middle East and Indevco), and one from a (RDCL), Investment Development Authority of Lebanon consultancy company established in Lebanon (Investment (IDAL), and the Council for Development and Advisory). Reconstruction (CDR). 3) The World Bank Group, partner of the private sector The purpose of the Conference was to provide an in Lebanon with speeches from the WB MENA regional opportunity for Lebanese companies to meet with advisor on procurement, IFC, and MIGA . representatives of the WBG, comprised of the International Bank for Reconstruction and Development 4) How to take advantage of the business opportunities (IBRD), the International Finance Corporation (IFC) and offered by the World Bank Group? Three parallel the Multilateral Investments Guarantee Agency (MIGA) to discuss opportunities to work together. The Conference Inside This Issue: presented various WBG partnerships, programs, and New Country Manager for the WB Lebanon Office 3 services for the private sector and explained how Bank Group Operations 4 Lebanese companies can take advantage of WBG business Recent Economic Developments 6 opportunities. The Conference also looked at ways in The Macroeconomic Road to Arab Competitiveness 10 which Lebanese companies can expand their business World Bank Publications 13 opportunities both nationally and internationally. The World Bank Lebanon Team 16
Republic of Lebanon Update workshops were held with 15 to 20 participants each. The members. The site provides easy access to information on workshops consisted of questions and answers sessions three major levels, and in three languages (Arabic, English with subsequent individual meetings held with a number and French): of participants: Workshop 1: How to bid on World Bank projects? 1) Information sharing on products, services and Workshop 2: How to invest with a political risk activities provided by intermediary organizations such as guarantee from MIGA? the chambers of commerce, business and trade Workshop 3: Presentation of the SMExchange program organizations, or investment promotion agencies. to intermediary organizations from Lebanon and Europe. 2) Capacity building of intermediary organizations in the South of the Mediterranean in partnership with their As a result of this one-day conference, an agreement was counterparts in Europe, and based on the transfer of best reached whereby the WBG would establish a Liaison practices in the fields of access to financing, export Officer desk in Lebanon which will be hosted by the promotion, information technology, institution building, Federation of Chambers of Commerce, Industry and and training. Agriculture in Lebanon. This desk would operate as a strategic door-opener to bring the Bank closer to 3) Intermediary Organizations whereby available data is companies in Lebanon and to bring companies closer to from public sources. the Bank. Liaison Officer desks help to disseminate information about the World Bank Group by organizing Browsing can be done by region (Europe, MENA) , as well local events or facilitating contacts between the local as by country (any country in Europe or in the MENA companies and the Bank. They are also able to foster region). The site also has a calendar of activities by closer strategic dialogue between the private sector and country, and a section on news and upcoming events. the Bank on issues of interest to developing countries. SMExchange classifies the services provided to SMEs SMExchange into five major categories: (1) Access to Financing, (2) Export Promotion, (3) Information Technology, (4) The World Bank’s SMExchange programme is a capacity Institution Building, and (5) Training. building endeavor which links intermediar y organizations (chambers of commerce, business or trade associations, In the case of Lebanon, services available fall basically investment promotion agencies…) in developed and under the Export Promotion section with some activities in developing nations to support SME development through Training. All services available are channeled t hrough the the transfer of knowledge and experience. Its ultimate Chamber of Commerce, Industry and Agriculture of mission is to stimulate tra de and between the SMEs in the Beirut and Mount Lebanon (CCIAB). North and South. Export promotion activities provided to SMEs in Lebanon The MENA SMExchange programme is based on three consist of: tools designed to facilitate the knowledge transfer: * Export promotion tools; 1- A website (www.SMExchange.org) which contains * Administrative procedures; information on capacity building programs, offered * Market place for export promotion; and requested, by intermediary organizations from * Speeding up goods at border crossing; the North and South; * Lebanese Arbitration Center. 2- An SMExchange Liaison Officer (SMELO) from a European intermediary organization seconded to an Export Promotion Tools (ATA Carnet) intermediary organization in the South for a thre e The ATA Carnet is an easy-to-use tool consisting of year period; and vouchers that can be taken out by the Customs Authorities 3- “World Bank Group Roadshows” to get the World of the countries concerned when crossin g the border, thus Bank, IFC and MIGA closer to the companies in avoiding the usual time consuming formalities. The ATA developing countries through conferences and carnet covers the transport of a wide aray of goods, exept seminars organized in partnership with intermediary perishable and consumable items. Carnets are issued organizations, explaining how to better use WBG exclusively by Chambers of Commerce affiliated to the private sector services. International Bureau of Chambers of Commerce (IBCC) guarantee chain, whose members cover 56 countries and The World Bank SMExchange website is a market place territories. Other members are steadily joining the chain as for information sharing and capacity building between more governments sign the ATA Convention. Members of intermediary organizations from East and North Africa, this chain have agreed to pay Customs Authorities any eager to promote trade and investment between their SME import duty required should irregularities be discovered,
2 Third Quarter 2002 Republic of Lebanon Update such as sale of the goods or failure to take them out the three Chambers of Commerce and Industry of Tripoli, within the time limits specified. Saida and Zahle, the Bankers Association, the Association of Lebanese Industrialists, the Beirut Traders Association, Administrative Procedures the Association of Insurance Companies, and the Association of Construction and Public Works These procedures cover the issuance of Certificates of Contractors. The Lebanese Arbitration Center maintains Origin relative to the export of goods, authentication of close relationships with similar centers in the Arab world signatures and documents relative to commercial and and other international organizations. industrial entreprises, certification of the commercial status of member entreprises, and approval of invoices and The French-Lebanese Exchange Training Center issuance of required certificates for the authentication of the export prices of goods. This Training Center is the result of a partnership between the Regional Council of the Ile de France, the Chamber of Market Place for Export Promotion Commerce and Industry of Versailles Val d’Oise-Yvelines and the CCIAB. The mission of the Center is to promote A Market place will be designed to include: and implement technology training programs that meet the * Sectoral surveys; needs of both employers and employees, as well as those * A job-market watch. of fresh graduates. The Center also carries out employment orientation sessions for its trainees. Speeding up Goods at Border Crossing The TIR System is an international transit system which was designed to speed up border-crossing. It is based on Further Information? an international treaty, the TIR Convention of 1975, which Mr. Gilles Garcia was drawn up under the auspices of the United Nations. Manager, Enterprise Outreach Services Under the TIR System, at least one of the transport World Bank-Vice Presidency for Europe operations must be carried out by road, meaning that Tel: 33(1) 40 69 30 15 multimodal transport can be included. The System now Email: [email protected] has 64 contracting parties, mostly in Europe, the Middle East, and Central Asia. It is the only transit system with a Mr. Albert Nasr world-wide vocation. The TIR Convention is operational Beirut Chamber of Commerce, Industry & Agricultur e today in 47 countries, and is based on four principles: Tel: 961-1-744-163 Email: [email protected] 1) Goods must be carried in sealed containers, load Mr. Omar Razzaz joins the Lebanon compartment, or in trucks approved by Customs World Bank Office Authorities.
Mr. Omar Razzaz has recently been 2) International recognition of the controls operated by appointed as Country Manager for Customs Authorities both at departure and destination, Lebanon in the Middle East and i.e., no material inspection of the goods may be carried out North Africa Region. Mr. Razzaz, a by the Customs Authorities in the countries of transit. Jordanian national, joined the Bank in 1993 as a Young Professional. He 3) An international chain of guarantee, in f avor of the worked on privatization programs in Customs Administrations, securing the eventual loss of Africa and Eastern Europe and taxes following any irregularity in the TIR procedure is in Central Asia as a member of the place. Private Sector Development Department from 1994 to 2000. Mr. Razzaz joined the Middle East and North 4) The TIR Carnet itself, which contains all details about Africa Region in the position of Lead Urban Sector the cargo, the TIR holder, the issuing associations, and the Specialist in the Finance, Private Sector and follow-up of all control operations effected by the Infrastructure Group in 2000. Since then, he has been Customs Authorities is in use. leading sector work and lending operations on municipal development/ low income housing issues in Yemen, The Lebanese Arbitration Center Jordan, Lebanon, WBG and Iran. In May 1995, the CCIAB established the Lebanese In his new position Mr. Razzaz will be, in close Arbitration Center whose mandate is to settle all disputes collaboration with the Country Director, responsible for of internal or international character by the use of coordinating the Bank dialogue with the Lebanese procedures for arbitration or optional conciliation. Many Government, strengthening the Bank’s outreach efforts, institutions have so far contributed to this Center, namely: and managing the financial and human resources of the Beirut Country Office with a view to enhancing its role in the implementation of Bank operations.
Third Quarter 2002 3 Republic of Lebanon Update
water; (b) improving access to rural areas; and (c) upgrading BANK GROUP OPERATIONS institutional capabilities.
IBRD Ongoing Projects Vocational and Technical Education Project (VTEP). (US$29.0 million.) The Project’s objective is to improve the The current World Bank portfolio in Lebanon consists of 13 performance of the VTE System by making it more dema nd- Projects for a total commitment amount of US$517.94 driven and responsive to market needs. million, of which US$136.34 million has been disbursed through September 30, 2002. General Education Project (GEP). (US$56.6 million.) This Project is designed to support the Government's efforts to Irrigation Rehabilitation and Modernization Project enhance the capacity of the Ministry of National Education to (IRMP). (US$57.23 million.) The Project is designed to help function as an effective manager o f the education sector and increase agricultural production, ag riculture-based income to restore the credibility of the Public Education System. and employment in previously neglected rural areas, and achieve improved sustainable management of water First Municipal Infrastructure Project (MIP -I). (US$80.0 resources. million.) This Project aims at addressing urgent municipal works while setting the stage for the gradual assump tion of Revenue Enhancement and Fiscal responsibility for municipal services at the local level. Management Technical Assistance Commitments and Disbursements Project (REFMTAP). (US$19.94 as of September 30, 2002 million.) The Project seeks to support Approval Loan Amount Government efforts to enhance revenue Project Name Year Amount Disbursed and strengthen fiscal management. US$ Million Irrigation Rehabilitation and Modernization 1994 57.23 41.63 Health Sector Rehabilitation Project Revenue Enhancement and Fiscal Management 1994 19.94 14.85 (HSRP). (US$35.7 million.) The Technical Assistance objective of this Project is to improve Health Sector Rehabilitation 1994 35.70 14.59 Lebanon’s health conditions through Solid Waste/Environmental Management 1995 25.00 6.69 better allocation and use of resources in Administrative Rehabilitation 1995 20.00 18.30 both the public and private sectors. National Roads 1996 42.00 15.97 Agriculture Infrastructure Development 1996 24.00 10.82 Solid Waste / Environmental Vocational and Technical Education 1998 29.00 1.03 Management Project (SWEMP). General Education 2000 56.57 1.29 (US$25.0 million.) This Project is Municipal Infrastructure – I 2000 80.00 11.17 designed to help improve the methods of solid waste collection and disposal; Community Development 2001 20.00 0.00 improve cost recovery and mod ernize Ba’albeck Water and Wastewater 2002 43.50 0.00 municipal management and finance Urban Transport Development 2002 65.00 0.00 systems; and strengthen the management TOTAL 517.94 136.34 capacities of sector institutions.
Administrative Rehabilitation Project (ARP). (US$20.0 Community Development Project (CDP). (US$20.0 million.) million.) The Project’s primary objective is the rehabilitation This Project is designed to raise living standards in targeted of the Lebanese public administration, while launching the poorer communities, and to raise economic activity levels in process of administrative reform and development. such communities by investing in grass -roots social and small infrastructure activities, and in employment creation. National Roads Project (NRP). (US$42.0 million.) The objective of this Project is to improve the capacity of the road Urban Transport Development Project (UTDP). (US$65.0 administration to undertake the rehabilitation of the primary million.) The Project’s objectives are to provide the city of road network. Beirut and the Greater Beirut Area with the basic institutional framework that is currently lacking, and to support critical Agriculture Infrastructure Development Project (AIDP). investments needed to maximize the efficiency of existing (US$24.0 million.) The Project’s objectives are: (a) urban transport infrastructure. The Board of Directors increasing farmers' incomes and conserving the environment approved the Project in June 2002. through land terracing and development and storage of runoff Ba’albeck Water and Wastewater Project. (US$43.5 million.) The major development objectives of the Project
4 Third Quarter 2002 Republic of Lebanon Update include: improving the access of satisfactory water supply of water and wastewater facilities by preparing for a and wastewater services to the region’s residents; introducing Management Contractor (MC) through a lease or concession appropriate sector reforms – particularly the development contract that would secure the long -term financial needs for and strengthening of the capacity of the existing Ba’albeck sector investments. The Board of Directors approved the Hermel Water and Irrigation Authority and, once it is Project in June 2002. established, the Bekaa Regional Water Authority; and involving the private sector in the operation and maintenance
IBRD Projects In The Pipeline
Cultural Heritage and Tourism Development Project. assistance to strengthen the capacity of the Directorate (US$30 million.) The Project will finance site conservation, General of Antiquities, Ministry of Tourism, and targeted enhancement investments and associated urban infrastructure municipalities in cultural heritage preservation and tourism improvements in selected sites, and provide technical development. also includes two credit lines from IFC to fund LLC’s leasing activities.
IFC Projects in Lebanon
Uniceramic. The Project supports the modernization of the Middle East Capital Group (ME CG). The Project consists company’s existing production line and the expansion of the of the establishment of the first regional investment bank in plant’s capacity of glazed ceramic floor tiles. the Middle East, and is headquartered in Beirut.
Bank of Beirut and the Arab Countries (BBAC) Credit Banque Libano-Française. The Project offers innovative Line. The Project offers innovative residential mortgages to residential mortgages to middle income customers . middle income customers. Cimenterie Nationale. The Project consists of increasing the Banque Saradar SAL. The Project involves an equity company’s production capacity by the addition of a new investment in common shares of the company. clinker production line, and the rehabilitation of some existing facilities. Byblos Bank Syndicated Credit. The Project aims at providing long-term project finance to small - and medium- Bank of Beirut Lebanon Credit Line. The Project consists of sized enterprises in Lebanon for infr astructure project credit lines to four Lebanese private sector commercial banks finance, and to increase its housing loan portfolio. for on-lending to local small- and medium-sized enterprises in the private sector, and to middle income families to Société Générale Libano -Européenne de Banque. IFC finance either the purchase of their first residence or the extended a Line of Credit to Société Générale Libano - expansion of their existing h ome. Européene de Banque to be utilized in support of its housing finance program. Idarat, SAL. The Project funds the company’s investment program in hotels and restaurants and is designed to help Fransabank. IFC extended a credit line to Fransabank to revive the tourism industry, which is a key sector in Lebanon. support its housing finance program. Idarat SHV (Société Hôtelière "de Vinci" SAL). The Agricultural Development Company (ADC). The Project is Project supported th e company's investment in a Green -field, designed to rehabilitate and expand the existing facilities of 5-plus stars "boutique", all-suites hotel, in an up -scale ADC, which is involved in the poultry busine ss, into an residential district of Beirut. integrated broiler meat production facility. Lebanese Credit Insurance (LCI). LCI provides short - and France Telecom Mobile Lebanon (FTML) Services medium-term credit insurance. Subsequent to the formation Cellulaire Liban. The Project helps finance the expansion of of LCI, IFC and Namur Re (part of the Gerling Credit FTML’s digital GSM cellular network from its current level. Insurance Group), sponsors of LCI, established a specialized global credit insurance company, Gerling Credit Emerging Lebanon Leasing Company (LLC) . The Project involves the Markets (GCEM), for the purpose of making similar establishment of Lebanon’s first leasing company, providing investments in credit insurance companies i n emerging lease finance to local small - and medium-size enterprises. It markets with initial authorized capital of EURO20 million. LCI was transferred to GCEM as its first investment.
Third Quarter 2002 5 Republic of Lebanon Update RECENT ECONOMIC diminishing expenses); and (2) the decline in the trade deficit is mainly due to a decline in imports (rather than increasing exports). DEVELOPMENTS Figure 3. Dollarisation Rate of Fiscal, trade and financial developments during the Third Commercial Banks ’ Deposits Quarter 2002 (Q3-2002) confirm the upswing of the Lebanese economy discerned during the previous Quarters. 75% First, the primary budget surplus (public revenue minus non - 70% debt expenditures) rose in Q3 -2002 compared to the same period in 2001. Second, trade deficit continued to decline in 65% Q3-2002 confirming the positive evolution observed during the first two Quarters of 2002. Third, demand for Lebanese 60% Pounds rose against the US Dollar, relaxing pressure on the parity and enabling the Central Bank to reconstitute part of 55% its depleting foreign reserv es.
50% Figure 1. Quarterly Primary Surplus (US Dollars, millions) 2000-09 2000-12 2001-03 2001-06 2001-09 2001-12 2002-03 2002-06 2002-09
250 Source: Banque du Liban.
200 The implementation of the VAT may have been at a cost in 2001 150 terms of GDP growth in the short run, as it probably lowered 2002 the demand for domestic goods and investment – although no 100 indicator can strictl y confirm this. But, it is believed to be a measure that will enhance growth potential in Lebanon in the 50 long run, as it will reduce the anti -export bias and will 0 provide the Government with additional means of financing Q1 Q2 Q3 its expenses. In turn, reducing t he fiscal deficit could lower -50 interest rates and encourage productive investments, all helpful for growth and poverty alleviation in the medium to Source: Ministry of Finance. Includes Treasury operations. long run.
Figure 2. Quarterly Trade Deficit In the shorter run, VAT implementation already constitutes (US Dollars, millions) one important pillar of the Government’s plan to reduce its debt stock, estimated at US$ 29.7 billion (approximately 173 1,650 percent of GDP) by end September 2002. This remains 1,600 however insufficient to halt the growth of public debt. 1,550 Recognizing the severity of the situation, the Government 1,500 has announced its intention to launch an overall program 1,450 2001 based on the following three pillars: (1) strong tightening of 1,400 2002 public finances, (2) privatization and (3) active asset -liability 1,350 management. According to the government, this plan, if 1,300 1,250 fully implemented, would result in a decline in the debt to 1,200 GDP ratio from 173 percent in 2002 to 133 percent in 2007. Q1 Q2 Q3 As of the writing of this article, the so -called Paris II Donors Conference had just been convened, with pledges from Source: Custom s Administration. Donors amounting to approximately US $ 4 billion. This should definitely help the Government of Lebanon to achieve This is good news in light of the three great challenges its goal of breaking the debt dynamics. However, while this Lebanon is facing: (1) the reduction in the fiscal deficit and external support constitutes an important signal to the the need to slow down the growth of public debt; (2) economic community, only the materialization of the maintaining confidence in monetary and exchange rate measures announced by the Government can help policies and Lebanon’s financial institutions; and ultimately significantly mitigate the strong macro -economic imbalances. (3) the restoration of real sector growth. Using the most recent data available, the following The successful implementation of the Value Added Tax summarizes economic developments during the period July - (VAT) explains to a large extent the following two September 2002: Real Sector Indicators; Public F inance and developments: (1) the decline in the public deficit is, above Public Debt; and the Financial Sector. all, the result of increased tax revenue (rather than
6 Third Quarter 2002 Republic of Lebanon Update
Real Sector Indicators billion, US$530 million) is expected to come from the introduction of the 10 percent VAT rate, which so far has GDP Growth. Strong economic growth remains a critical performed very well, and suggests that fiscal targets can be component of the recovery program, and should aid the reached in 2002. Government in raising additional tax revenue to reduce its debt. The absence of national accounts precludes a rigorous Monthly fiscal data released by the Ministry of Finance for monitoring of economic activity. This lack of data leads to the Third Quarter of 2002 reflect a significant improvement various interpretations of developments in the real sector (in on the revenue side, thanks to the VAT. Budget revenue was contrast to the financial sector, which is well covered up 34.9 percent (when compared with Third Quarter of statistically). 2001), while budget expenditures increased by 7.6 percent, leading to a decrease in the budget deficit (before Treasury Most indicators, nevertheless, converged to signal continued operations) of 21.5 percent during this period. slow GDP growth over the Third Quarter of 2002: inflation remained low (consumer prices declined one percent between Compared to a Quarter ago, this performanc e however marks June and September 2002 according to the Association of a slight backward movement, as the budget deficit was 30.7 Banks in Lebanon, despite th e fact that monthly VAT percent lower in Q2 -2002 than in Q2-2001 (against 21.5 collection rose almost 21 percent during the same period, percent for Q3-2002 compared to Q3 -2001). This is a most likely due to an increased tax base). Nominal imports consequence of various developments. On the revenue side, grew 3 percent compared to the Second Quarter of 2002, but the Third Quarter 2002 suffered from a strong decline in declined 12 percent compared to a year ago. This decline domestic tax revenues (LL300 billion, from 578 to 278). could stem from a substitution of the demand in favor of This decline was only partially offset by greater import tax domestic goods, less affected by VAT. However, the fact that revenue, as well as non -tax revenue (+ LL178 billion). In exports have not declined during the same time is rather an total, budget revenue therefore declin ed by LL72 billion. indication of a stagnating domestic demand than of a substitution effect. Ex ports indeed increased by 11 percent in Changes on the expenditure side were less pronounced, as the Third Quarter of 2002 compared to last year, which could total budget expenditure declined by LL72 billion from Q2 - signal real and anticipated depressed domestic demand, 2002 to Q3-2002. But this general trend , however, masks thereby encouraging enterprises to orient a larger share of very contrasted evolutions of the different lines of their production towards external outlet s. The appreciation expenditure. Non-interest budget expenditure increased 25.4 of the Euro, in which most imports are denominated, might percent compared to the previous Quarter, and 33.1 percent also explain why the value of imports (expressed in US Dollars) compared to a year ago. On the contrary, interest rose during Q3 -2002. expenditures declined 23.2 percent compared to Q2 -2002, and 11.6 percent compared to a year ago. Some other indirect indicators of economic activity however point in the opposite direction : cleared checks increased 10 Accounting for Treasury receipts and expenditures, the percent compared to Q2 -2002, while during the same time overall Quarterly deficit (budget and Treasury) decreased by inflation remained low. This could reflect an increase in LL76 billion (US$50.8 million) compared to Q2 -2002, and money velocity during Q3 -2002, i.e., acceleration in the by LL227 billion (US$150 million) compared to a year ago, volume of transactions. to stand at LL921 billion (US$610 million). Overall, fiscal targets (in terms of ratio to expenditures) seemed to remain in Estimates from observers and i nstitutions for 2001 and line with projected improvements for the year. projections for 2002 of real GDP growth range between -1 and +2 percent. However, all these estimates are based on a Figure 4. Revenue, Expenditures, Deficit very limited statistical basis. The recent decision made by the Budget and Treasury Transactions Government of Lebanon to join the General Data (Lebanese Pounds, billions) Dissemination System is an important step in this regard, as Customs Rev. and VAT Debt Service it should greatly help Lebanon to upgrade its statistical Other Receipts Other Budget Expenditures capacity and reach international standards in ter ms of data 3,500Deficit Treasury Payments 3,000 collection and dissemination. 2,500 2,000 1,500 1,000 Public Finance and Public Debt 500 0 500 1,000 The 2002 budget f oresees a deficit of LL3.8 trillion (US$2.5 1,500 2,000 billion), which represents 40.1 percent of total expenditures. 2,500 3,000 If realized, this would be a considerable improvement over 3,500 the LL5.1 trillion (US$3.4 billion, 50.9 percent of expenditures) budgeted for 2001, and the LL5.9 trillion (US$3.9 billion, 56.3 percent of expenditures) achieved in 2000-Q3 2000-Q4 2001-Q1 2001-Q2 2001-Q3 2001-Q4 2002-Q1 2002-Q2 2002-Q3 2000. The majority of the expected improvement (LL800 Source: Ministry of Finance . Third Quarter 2002 7 Republic of Lebanon Update
Public debt continued to grow in the Third Quarter of 2002, through privatization, securitization, and a gradual dr op in the natural result of ongoing deficits. As of end -September interest rates on public debt, as a result of greater confidence 2002, net public debt reached LL44.7 trillion (US$29.7 in the ability of the Government to fulfill its financial billion), up from LL40.8 trillion in end-December 2001 commitments. levels (US$27 billion) and LL43.7 trillion from end -June 2002 (US$29.0 billion). (Source: Ministry of Finance.) Figure 6. Lebanese Pound Treasury Bills Outstanding by Holder Figure 5. Gross Public Debt (Lebanese Pounds, billions) (Lebanese Pounds, billions) Commercial Banks Non-Banking System Central Bank Public Sector Deposits Lebanese Pound T-Bills 30,000 Eurobonds Other Foreign Curr. Debt 28,000 50,000 45,000 26,000 40,000 24,000 35,000 22,000 30,000 20,000 25,000 18,000 20,000 16,000 15,000 14,000 10,000 12,000 5,000 0 10,000 5,000 2000-09 2000-12 2001-03 2001-06 2001-09 2001-12 2002-03 2002-06 2002-09
2000-09 2000-11 2001-01 2001-03 2001-05 2001-07 2001-09 2001-11 2002-01 2002-03 2002-05 2002-07 2002-09 Source: Banque du Liban.
Source: Ministry of Fin ance. The Ministries of Lebanon, the Council of Ministers, or the The Government of Lebanon continued its policy of turning Prime Minister’s Office (LL290 billion) - and under it, the to Eurobonds to finance its deficit, with US$750 million Council for Development and Reconstruction, and the issued during the Third Quarter of 2002, (Source: Ministry Ministry of Public Works (LL80 billion) should absorb the of Finance), driven partly by choice – reflecting the lower largest shares of total cuts in expenditures. interest cost on foreign currency borrowing – and partly by necessity, given the limited capacity of the commercial banks Total revenues are to increase by LL900 billion (US$597 to continue absorbing increasing amounts of Pound - million), LL275 billion (US$182 million) through improved denominated Government paper. direct tax collection and LL300 billion (US$199 million) through an enlarged VAT base. In addition, the Minister of However, Q3-2002 seems to mark a turning point, as the Finance plans a significant increase in non -tax revenues, demand for the Lebanese Pound increased against foreign including fixed-line charges and other types of administrative currencies. Such a demand for Lebanese Pounds increased fees. both in relative and absolute terms, which in turn enabled the Central Bank to reduce its holding of T -Bills, as well as reconstitute part of its depleted foreign reserves. Financial Sector
As of the writing of this issue, the Parliament had started Growth in broad money (M3) rebounded during the Third discussing the budget for 2003. The Government’s budget Quarter of 2002. The annual growth rate of M3 was 5.1 proposal can be qualified as highly necessary in light of the percent, compared to 3.8 percent in June 2002 and 5.4 challenges Lebanon is facing, as it targets a further dec rease percent in March 2002; the share of foreign currency deposits in total deficit (to reach 24 percent of total expenditures by in M3 reached 67.3 percent in September 2002, down from end-2003, against 41 percent targeted for end -2002). It can 69.6 percent in March 2002. be qualified as courageous as well, as its austere nature will impose an additional tax burden on its population and After four consecutive months of slight decline (February, economy. Although the budget is insufficient to stabilize the March, April, May 2002) , growth in private sector debt over GDP ratio, it is obviously pointing in the right commercial banks’ deposits in Lebanese Pounds resumed in direction, and its efforts should be sustained over the next June 2002, and accelerated thereafter, as confidence in the few years to reach this objective eventually. ability of the Central Bank to maintain the par ity improved.
Banks in turn converted a large part of these new deposits in As such, non-interest expenditures are to be reduced by T-bills. Loans to the private sector resumed as well, although LL475 billion (US$315 million), and interest expenditures by at a more moderate pace. LL500 billion (US$330 million) - the former mainly through a cut in capital expenditures (LL471 billion); the latter 8 Third Quarter 2002 Republic of Lebanon Update
Figure 7. Commercial Banks’ Selected The Central Bank’s net international reserves rose over the Lebanese Pound Assets and Liabilities Third Quarter of 2002 by US$538 million, reflecting (Lebanese Pounds, billions) diminishing pressures on the Lebanese Pound. Gold valuation increased by US$37 million during this period, Banks' Lebanese Pound Deposits with BdL Banks' Treasury Bill Holdings while foreign liabilities increased by US$97 million. Loans to Private Sector in Lebanese Pounds Customers' Lebanese Pound Deposits Figure 9. Central Bank Reserves 25,000 Gold, Foreign Currency H oldings, Foreign Liabilities, Net International Reserves (US Dollars, millions) 20,000 Foreign Currencies Gold Foreign Liabilities Net Reserves, incl. Gold 15,000 10,000 10,000 8,000 5,000 6,000 0 4,000
2,000 2000-09 2000-12 2001-03 2001-06 2001-09 2001-12 2002-03 2002-06 2002-09 Source: Banque du Liban and World Bank staff calculations. 0
Even though the share of deposits in foreign currency -2,000 declined during the Third Quarter 2002, its absolute value remained stable as a result of stron g growth in M3. Private
sector deposits in foreign currencies increased by 0.1 percent 2000-09 2000-11 2001-01 2001-03 2001-05 2001-07 2001-09 2001-11 2002-01 2002-03 2002-05 2002-07 2002-09 in September 2002 compared to June 2002, and by 2.3 Source: Banque du Liban. percent compared to September 2001. On the assets side, the share of loans to the private sector over total assets in foreign This general upswing in Lebanon’s external position is currencies declined in September 2002 to 47.3 percent from finally reflected in Figure 10, which depicts changes in the 48.6 percent three months before, and 51.9 percent a year Central Bank and commercial banks’ net foreign assets. ago. On the contrary, commercial banks’ Eurobond holdings During the Third Quarter 2002, foreign assets in the banking increased by 14.8 percent compared to June 2002. system grew by US$516, out of which US$433 in the Central Bank and US$82 million in commercial banks. In the year Figure 8. Commerci al Banks’ Selected Foreign since end-September 2001, net foreign assets of the banking Currency Assets and Liabilities sector have declined US$412 million. (Lebanese Pounds, billions) Commercial Banks' Net Foreign Assets Figure 10. Monthly Changes in Net Foreign Assets Banks' Foreign Currency Deposits with BdL Banks' Eurobond Holdings Central Bank, Commercial Banks, Total Loans to Private Sector in Foreign Currency (US Dollars, millions) Customers' Foreign Currency Deposits Central Bank Commercial Banks Total 45,000 1000 40,000 750 35,000 500 30,000 250 25,000 0 20,000 -250 15,000 10,000 -500 5,000 -750 0 -1000 -1250
2000-09 2000-12 2001-03 2001-06 2001-09 2001-12 2002-03 2002-06 2002-09
Source: Banque du Liban and World Bank staff calculations . 2000-09 2000-12 2001-03 2001-06 2001-09 2001-12 2002-03 2002-06 2002-09
Source: Banque du Liban.
Third Quarter 2002 9 Republic of Lebanon Update
CRUISE CONTROL, SHOCK ABSORBERS, AND TRAFFIC LIGHTS: THE MACROECONOMIC ROAD TO ARAB COMPETITIVENESS
Introduction Economies that, in reality, have cost advantages in labor and domestically-produced inputs begin altering The road to competitiveness is a long journey, and as their production processes and substituting for capital such, requires responsible macroeconomic policy and a equipment and imported inputs. And the greater the supportive business environment to facilitate long-term overvaluation that takes place, the more difficult it planning, promoting investment and knowledge becomes for the existing drivers of competitiveness to transfer, supporting the efficient allocation of resources maintain their competitive edge, and the more it to insure that the drivers reach the intended destination. discourages new drivers from getting on the road. And the drivers on this road-trip to competitiveness are the firms/enterprises that find ways to create increasing What has been the experience of the Middle East and value added through their ability to invent products, North Africa Region (MENA) with exchange rate adopt new technologies, and respond to changes in management? In a recent paper of the World Bank, this market conditions at home and abroad. issue was examined by looking at the degree of exchange rate misalignment in the region. The findings Building on this analogy of a road-trip, below is a focus are discouraging. In the past three decades, MENA on three of the key forces in the macroeconomic arena countries experienced substantial overvaluation of their that determine whether the drivers on the road to exchange rate--around 29 percent a year from the mid- competitiveness are best equipped to venture on the 1970s to the mid-1980s, and 22 percent a year fr om the challenging expedition of long drives, unexpected terrain, mid-1980s to 1999. Currency overvaluation has been and the satisfaction of an ever-approaching destination. prevalent in MENA for a long time, unlike most other regions and especially relative to trends in the past few Exchange Rate Management years.
One of the central requisites for competitiveness is What accounts for the significant overvaluation that has appropriate exchange rate management. In a sense, it is prevailed in MENA? It is almost wholly the result of the option to manually manipulate brake and gas relying on fixed exchange rate regimes that no longer pedals, or to rely on cruise control when determining are appropriate for responsible economic management. your speed on the road. Prior to the late 1980s and early 1990s, most economies in MENA opted for a fixed exchange rate regime as the And what are the pitfalls that can develop from most effective strategy for combating high inflation. inappropriate exchange rate management? The most The adoption of fixed exchange rates, either de facto or important is an overvaluation of the currency. From de jure, was successful in contributing to almost all assessments of economic policy and macroeconomic stability. However, once the performance throughout the world, it has been shown immediate threats of inflation running out of control that best performers are countries that have maintained had been averted, only a handful of countries shifted to an "appropriate" exchange rate regime. In particular, more flexible exchange rate arrangements. From the countries that have been successful in promoting battery of empirical investigations looking at the manufactured exports have avoided exchange rate subject, a central piece of evidence has emerged: overvaluation. exchange rates are overwhelmingly more likely to become overvalued under fixed systems than under Profitability of production hinges on prices. Prices of more flexible ones. inputs that go into the production process, and the price that can be obtained in the market for output. In the analogy of the road-trip, the choice of the Overvaluation is damaging to competitiveness because exchange rate regime is akin to relying on cruise it artificially alters the price ratio between tradables and control to determine your speed of travel. While taking non-tradables. So the producers of tradable goods find pressure off the driver of the vehicle, the cruise control they are less able to compete with either imported option does not take into account weather conditions, goods or with other countries' exports. the terrain of the road, or other vehicles in your path. If your foot is not free to access the gas and break pedals,
10 Third Quarter 2002 Republic of Lebanon Update you can’t change gears, limiting your maneuverability directly affected by conflict, the economic costs of an options. And so it has been in the MENA economies, interrupted and damaged economic structure have been having to adjust the exchange rate periodically as it has very high. But almost all countries have been affected gotten off course. But these fixes are only temporary by association, through lower tourism revenues, and and do not wholly address the problem. Moreover, more generally through lower confidence in their these ad-hoc adjustments to the exchange rate economies, bringing down private domestic investment discourage the entry of companies into the export and FDI, etc. market, since exchange rate volatility sends confusing signals to economic agents and raises the uncertainty of What is the cost of volatility to competitiveness? long-run investment in producing tradable goods. Perhaps the biggest cost is lower private investment from domestic and external sources. An economic The point: Keep your foot on the gas pedal. Choose an slowdown and drop in private consumption triggers a exchange rate system that will suffer from fewer response by businesses to cut their expenses and limitations and distortions, so that economic agents - investments to adapt to declining demand. Weaker these drivers of competitiveness - know where their business activity further dampens consumer confidence, true cost advantages lie and are able to make decisions exacerbating the recession. At the same time, the effect based on those advantages. on investment is not altogether compensated for by a commensurate economic boom the following period. Output Volatility and External Balances In addition to capacity constraints, volatility dampens investment because economic agents cannot be certain The second issue is what could be compared to driving that a recovery is sustainable. So businesses tend to through rough and rocky terrain on the road to adapt their investment decisions more to the competitiveness: MENA countries have historically downswing in the business cycle rather than the suffered from excessive volatility in output and external upswing. This dampening effect on investment, balances. In the 1970s and 1980s, output was more particularly foreign investment, makes competitiveness volatile in MENA than in Latin America or in East Asia for existing companies in the region substantially more and the Pacific. And although volatility has fallen in the difficult, with fewer opportunities for information flows 1990s, it still exceeds, by far, the world average. between economic agents, and thus fewer opportunities to tap into the technological, organizational, and There are several reasons behind the high volatility in managerial capabilities of other companies. MENA. First, countries in the region remain relatively un-diversified and dependent on a few export The volatility in output growth and external balances is commodities that often experience strong fluctuations compared to driving on a segment of the road that is in relative prices. Oil prices in particular have tended to full of potholes and fallen rocks. Volatility creates a cause sharp fluctuations in fiscal and external accounts, lack of confidence in the road-trip altogether. And either through direct dependence on oil revenues or while ensuring that the vehicle is equipped with the through strong linkages between oil producers and appropriate shock absorbers is a multi-step process, other countries in the region through trade, financial including diversifying economic structures and and labor flows, including workers' remittances. stabilizing the security environment in t he region, there are other steps that can be taken on the macroeconomic Moreover, several countries in the region are subject to policy front to mitigate the effects of volatility. frequent droughts, which in turn produces sharp cuts in rural incomes and agricultural production. Volatility is In particular, monetary and fiscal (and even exchange higher in agriculture than in any other sector, and rate) policies are often a transmission channel for agricultural volatility is the main force behind output external shocks. Weak policies amplify the impact of fluctuations in many non-oil-exporting countries. volatility as it is transmitted to the economy. In some Morocco, for example, experienced as many as five MENA countries, pro-cyclical fiscal policies have droughts in the 1990s, and booms and busts in total historically acted as an important amplifier of terms of output were correlated directly with these droughts. trade shocks. The absence of mechanisms for inter - temporal government smoothing of revenue shocks has In addition, most countries in MENA are adversely in turn rendered government expenditures very volatile affected by the instability of regional security, either in the past, and although public expenditures volatility directly, by association, or through the various was reduced in the 1990s compared to earlier decades, economic linkages within the region. For those areas it was still twice as high as output volatility.
Third Quarter 2002 11 Republic of Lebanon Update
There exist mechanisms for reducing revenue influential businesses (whether public or private) uncertainty, as well as the transfer of volatility from exercise effective control over rules and regulations and revenue to expenditure levels, some of which have been utilize them to profit, at the expense of the rest of the applied by natural resource dependent countries. These private sector. Glaring examples of this are include market-based options hedging and stabilization infrastructure and telecommunications, but the list funds. The latter has been favored by developing extends to taxes, licensing, and manipulating the countries like Venezuela (oil) and Chile (copper), and loopholes within the system. has recently been implemented by Algeria. These types of mechanisms need to be explored throughout the region. The privileges extended to some elite firms prevent other entrepreneurs from entering and competing. But More generally, the advice on volatility follows the the damage extends beyond competition. The process road-trip analogy. If the journey takes you through of reform also suffers when time and resources are rough terrain, then you are better off insuring that the wasted on maintaining unfair advantages and restricting proper mechanics are in place to handle it, than to wait access to consumers. Rent seeking behavior in for an accident. And detours and bypasses, while not ideal, government is rewarded, reformers are discouraged, can still ensure that the trip is taken and the journey is and needed changes in governance are delayed or completed. worse, derailed altogether.
The Road to Competitiveness Related to this, there is the host of reforms that are needed in the area of the legal and regulatory Finally, the third point is about the road to framework. In many of the MENA economies, there are competitiveness. In the long run, that road is built on some reforms underway to revise and modernize raising productivity. Period. As has been the case sinc e company laws, investment codes, and customs and tax the industrial revolution at least, productivity is the regulations. Some of these reforms are being fundamental source of competitiveness. considered in connection with accession to the WTO or EU membership. But as a whole, the business Our own institution recently looked at productivity environment in MENA is plagued by burdensome growth in MENA over the past four decades - from the regulations. In Egypt, entrepreneurs spend about 1960s to the 1990s. What we found was interesting. 30percent of their time resolving problems of While the region experienced negative productivity regulatory compliance. In Morocco, it still takes up to growth over both the 1970s and 1980s, there has been six months to register a business. substantial improvement in productivity growth in the 1990s. This is the good news. Transparency of regulations is also a problem. To create an enabling environment for the private sector, The more disappointing news is that despite this almost the MENA region needs to insure that the road to universal turnaround in productivity growth, it has competitiveness is not full of yield signs, red lights, and failed to generate a comparable private sector one-way streets. It needs to create the reforms that can investment response. In fact, investment per worker eliminate the gridlock of honking cars and unnecessary declined from the 1980s to the 1990s in eight out of ten U-turns that currently hinder the speed of the traveler, countries. As a result, there has been no growth "pay-off" and hinder the rate of private sector growth. from the accumulation of productive privately owned capital. These are just a few of the reforms that come to mind What is preventing the private sector from responding? as being essential for making the road more attractive to Clearly, private investment depends on a host of domestic and foreign private investors. factors. They encompass the range of reforms that are needed to create an environment in which private Conclusion investments in value-creating industries can thrive. One area here deserves particular focus. These are In an age of instant communication and supersonic what are called the traffic signals on the road to travel, the lure of the open road has become eclipsed by competitiveness: that is, the systems of governance and the conveniences of expediency. But economic the related matters of legal and regulatory reform. competitiveness cannot be achieved through shortcuts or alternatives. A successful end must have a To begin with, there is little doubt that the current successful beginning, and a successful middle as well. systems of governance in MENA stifle the development In this respect, the responsibility of macroeconomic of a private sector. Chief among the governance policy to providing the essential background forces is problems is the issue of state capture, where groups of unquestionable.
12 Third Quarter 2002 Republic of Lebanon Update
World Bank Reports objectives of reducing poverty, maintaining growth, improving social cohesion, and protecting the On Lebanon environment. The World Development Report 2003 emphasizes that many good policies have been
identified, but not implemented, due to distributional Health Sector in Lebanon: Issues and Prospects issues and barriers to developing better institutions. The (Report No. 21593). This Report provides an Report reviews institutional innovations that might help assessment of Lebanon's health sector. It contains an overcome these barriers, and stresses that ensuring analysis of the system's strengths and weaknesses, and economic growth and improved management of the policy recommendations for reforming the system. The planet's ecosystem requires a reduction in poverty and most important lessons are the need for the Ministry of inequality at all levels: local, national, and Health to be the central player in a pluralistic system, international. As in previous editions, the World particularly in defining the areas of public and private Development Report 2003 contains an appendix of sector operations based on a needs assessment, and selected indicators from the World Development having the capacity to monitor and regulate the private Indicators. sector. In the absence of a policy framework and of a regulation capacity, there is a danger that health systems based on public and private participation will not produce the desired health outcomes, nor provide The World Bank Annual Report 2002: Volume 1, health services that are equitable, efficient, and of good Year in Review (ISBN: 0-8213-5157-5 SKU: 15157). quality. The Annual Report is prepared by the Executive Directors of the International Bank for Reconstruction and Development (IBRD) and the International Public Expenditure Review: Education Sector (WS Development Association (IDA) in accordance with the No. 21567). This Study reviews the allocation and by-laws of the two institutions. James D. Wolfensohn, utilization of Government resources for education. The President of the IBRD and IDA, and Chairman of the discrepancy between the extents of public expenditures Board of Executive Directors, submits the Report, for education in Lebanon and their productivity suggest together with the accompanying administrative budgets that these resources could be used more efficiently. and audited financial statements, to the Board of Governors.
Reconstruction in Lebanon: Challenges for Macroeconomic Management (Report No. 20959). Trade CAN 2002 (ISBN: 0-8213-5077-3 SKU: 15077). This Report sets out to investigate whether the existing Trade CAN 2002 is a comprehensive database and macroeconomic imbalances in Lebanon should be versatile toolbox for the analysis of the competitiveness considered as a serious threat to the reconstru ction of nations. It is based on the official U.N. international process, or as inevitable, transitory phenomena, and trade statistics, using the four-digit standard what is the appropriate macroeconomic stance to deal international trade classification. It covers the period with these imbalances. 1985-2000 for all exporter countries in the world. Around the central concept of "market share," Trade CAN offers novel indicators of the quality, structure Trade Policy Developments in the Middle East and and performance of international trade specialization of North Africa (Report No. 20322.) Focusing on trade nations. and trade policy, this Report reviews recent trends in trade performance, assesses current trade and Trade CAN 2002 contains a user-friendly interface that investment regimes, and discusses some of the allows rapid data retrieval and easy report preparation. emerging microeconomic policy challenges. Trade CAN will be highly useful to policy makers, consultants, academic researchers and students of
international trade, providing empirical and analytical Other Bank Publications support for analyzing general and specific trade trends and comparative performance by countries and regions. World Development Report 2003 (ISBN: 0-8213-5150- 8 SKU: 15150). Now in its 25th edition, this year’s Empowerment and Poverty Reduction: A Sourcebook World Development Report examines, over a 50-year (ISBN: 0-8213-5166-4 SKU: 15166). Empowerment period, the relationship between competing policy and Poverty Reduction: A Sourcebook is an outcome of
Third Quarter 2002 13 Republic of Lebanon Update
World Development Report 2000/2001: Attacking downloaded from a CD-ROM, which is included with Poverty, which highlighted opportunity, empowerment, this book. and security as key elements in the creation and implementation of poverty reduction strategies. This Sourcebook provides a framework for empowerment New Service Offered by MENA's Knowledge Sharing that concentrates on increasing poor people’s freedom Group. The MENA Knowledge Sharing Service of choice and action to shape their own lives. This focuses on serving Bank staff and partners in accessing framework pertains to five areas of action to improve knowledge resources on development issues in a timely development effectiveness—provision of basic manner. Backed by the World Bank Group's Advisory services, improved local governance, improved national Services and the wider development community, the governance, access to justice and legal aid, and pro- Service will help you locate research papers, best poor market development. practices, terms of reference, presentations, key policies, communities of practice, project information, This Sourcebook gives 20 “Tools and Practices”, which and useful links from the World Bank and other sites. concentrate on a wide range of topics to encourage the The goal is to provide you with a response within 24 empowerment of the poor, from poor people’s hours. The more precise the queries, the more precise enterprises, information and communication will the responses be. All responses are derived from technologies to diagnostic tools, including corruption publicly available resources. surveys and citizen report cards. E-mail: [email protected]
Economic Development and the World Trade Developing Value: The Business Case for Organization After Doha (WPS2851). The Paper Sustainability in Emerging Markets (ISBN: 0-8213- analyzes what actions could be taken in the context of 5181-8 SKU: 15181). Developing Value is a the World Trade Organization’s Doha negotiations to groundbreaking report, which challenges the assist countries in reaping benefits from deeper trade conventional thinking of the role that business plays in integration. The Paper discusses the policy agenda that emerging markets. This Report examines the assertion confronts many developing countries and identifies a that sustainability pertains exclusively to rich number of focal points that could be used both as companies in developed nations and is not applicable to targets and as benchmarks to increase the likelihood private sector companies in emerging markets. It is that WTO negotiations will support development. To designed to assist business people in emerging markets, achieve these targets, the author proposes a number of and identify opportunities to help increase profits by negotiating modalities for goods and service-related making progress toward sustainable development. market access issues, as well as rule making in regulatory areas. This Report is based on more than 240 real-life examples in over 60 countries. It is the first large-scale study to analyze the “business case” for sustainability Understanding and Measuring Social Capital: A in emerging markets, providing businesses with the Multi-Disciplinary Tool for Practitioners (ISBN: 0- opportunity to achieve benefits such as higher sales, 8213-5068-4 SKU: 15068e). The importance of social reduced costs and lower risks as a result of better capital for sustainable development is well understood. corporate governance, improved environmental However, the impact of social capital is not easily practices, and investments in social and economic quantified and to overcome this, the Social Capital development. Developing Value details the numerous Initiative at the World Bank attempts to contribute to opportunities available to diverse businesses in Africa, this understanding by concentrating on how to measure Asia, Central and Eastern Europe, the Middle East and social capital and its impact. Latin America.
This book details both the quantitative and qualitative approaches to the analysis of social capital. Also From Natural Resources To The Knowledge Economy included is the Social Capital Assessment Tool that - Trade And Job Quality (Report 23440). The Report combines quantitative and qualitative instruments in questions whether, after a decade of remarkable order to measure social capital at the household, progress in trade reform, Latin America and the community, and organization levels. This Tool can be Caribbean really integrate into the global market,
14 Third Quarter 2002 Republic of Lebanon Update offering promising rapid growth, and good jobs for its shows why, and offers crucial lessons for developing workers. Despite the incidence of the loosely called countries everywhere. “knowledge economy”, the concern prevails that most countries’ rich natural resources are still the determining factors for exports. Policy Frontiers of Development Economics: The Future in recommendations include fostering openness to trade, Perspective (ISBN: 0-19-521592-3 SKU: 61592). With market access, and foreign direct investment flows, in contributions from 35 leading economists, this forward- addition to building human capital, institutions, and looking book explores the future of development public infrastructure, without disregarding the natural economics against the background of the past half- advantages. century of development thought and practice. Outstanding representatives of the past two generations To this end, policymakers should aim at developing of development economists assess development educational systems that provide quality education, thinking at the turn of the century and look to the focused on lifelong learning and training activities to unsettled questions confronting the next generation. build human capital. Emphasis should follow on The book offers a thorough analysis of the broad range Research and Development (R&D) incentives, and of issues involved in development economics, and it is innovations systems, arguing that countries should especially timely in its critique of what is needed in experiment with taxation incentives, and subsidies to development theory and policy to reduce poverty. An promote both private, and public investments in R&D, overriding issue is whether in the future "development (dependent on the institutional capacity of governments economics" is to be regarded simply as applied to enforce tax laws, and monitor the quality of economics or whether the nature and scope of investments). Moreover, evidence in this Report development economics will constitute a need for a suggests that Information and Communications special development theory to supplement general Technology (ICT) can reduce coordination costs, economic theory. Frontiers of Development Economics enabling effective industrialization, and market access. is an ideal reference for all those working in the international development community.
The Microfinance Revolution: Lessons from Indonesia (ISBN: 0-8213-4953-8 SKU: 14953). The Electronic Newsletters. You can subscribe to the E- revolution occurring in finance for low-income people Newsletters by logging on to the following website: refers to commercial microfinance—the delivery of http://www.worldbank.org/subscriptions/ . financial services to the economically active poor on a large scale through competing, financially self- Here are some of the thematic newsletters available: sufficient institutions. Lessons from Indonesia, Volume Access: Water and Sanitation Program (bimonthly); 2 of The Microfinance Revolution, examines in the Economic Growth Research (periodic); Indonesian context the principles and practices of Research E-Letter; commercial microfinance that were explored and World Bank Weekly Update (weekly). analyzed in Volume 1. The first country to develop profitable microfinance on a large scale, Indonesia is home to the world’s oldest and largest commercial microfinance institutions, as well as many others.
The book examines many financial institutions, with a Ordering World Bank Publications special emphasis on Bank Rakyat, Indonesia’s By Phone: (001) 1-800-645-7247 microbanking system, which in the mid-1980s was or (001) 703-661-1580 transformed from a failed subsidized credit program to By Fax: (001) 703-661-1501 a nationwide commercial financial intermediary that On-Line: http://publications.worldbank.org/ecommerce now profitably provides microfinance services— E-mail: [email protected] savings and credit—to more than 20 million people.
Commercial microbanking remained stable and profitable in Indonesia, even as the country's financial system collapsed during the recent crisis. This volume
Third Quarter 2002 15 Republic of Lebanon Update
World Bank Contacts – Washington
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16 Third Quarter 2002