THE POLITICAL ECONOMY OF CONTEMPORARY LE!BANON: A STUDY OF THE RECONSTRUCTION by: Tom Pierre Najem A thesis submitted in partial fulfillment of the requirement for the degree of Doctor of Philosophy (PhD) in Middle East Politics The copyright of this thesis rests with the author. No quotation from it should be published without the written consent of the author and information derived from it should be acknowledged. Supervisor: Professor Tim Niblock PhD Thesis 1997 The Centre for Middle Eastern and Islamic Studies University of Durham Autumn 1997 0 23 JAN 1998 ii ABS TRACT The general purpose of this study is to look at the post- war economic reconstruction of Lebanon. More specifically, our primary aim is to examine, within the context of development theory, the institutional arrangement for implementing the various reconstruction programmes. In order to address these points, we will need to examine several important issues: How the economic leadership of post-war Lebanon has developed; what the institutions providing economic leadership have been; what plans have been developed for Lebanon's reconstruction; what groups have participated in the reconstruction; and what the principal obstacles to the economic reconstruction of the country have been. We will argue that the institutional arrangement is inappropriate for implementing the recovery programme. In part, because of the institutional arrangement, the recovery programme has suffered, and it is conceivable that the programme may fail to strengthen the Lebanese economy. The information collected for this study originated from three main sources including: material obtained from library research in the U.K.,; material collected in Lebanon from organisations, institutions, and individuals involved in the recovery programme; and material acquired from a series of unstructured interviews conducted in Lebanon in the winter of 1997 with individuals intimately associated with the reconstruction, prominent opponents of the system, and general observers of the Lebanese scene. iii Declaration I, Tom Pierre Najem, the author of this research declare that the content of this thesis is my original work. None of the material contained in this study has previously been submitted by me for a degree in this or any other University. All the material in this study, which is not my own work, has been appropriately cited. Tom Najem September 1997 Copyright The copyright of this thesis rests with the author. No quotation from it should be published without his prior written consent, and information derived from it should be acknowledged. iv TABLE OF CONTENTS Page ii---bstract ill--Declaration iv---Table of Contents xiv--Abbreviations xv---Note on use of Arabic words xvi --Acknowledgements xvii--Dedication Main Text 1---Chapter One: Introduction 1----1. Objective of Study 2----2. The Historical Context 3---------2.1 The Lebanese Political System: 1943-1975 9---------2.2 The Lebanese Economic System : 1943-1975 12--------2.3 The Collapse of the Lebanese Political System 18--------2.4 The Lebanese Civil War: 1975-1990 19-------------2.4.1 The Political System: 1975-88 21-------------2.4.2 The Economic Situation: 1975-1990 25-------------2.4.3 A Violent Prelude to the 1989 Ta'if Accord 29---3. The Political Economy of Contemporary Lebanon: A Study of the Reconstruction 39--------3.1 The Literature on Lebanon To Date 32--------3.2 Development Economics and the Importance of Institutions: Theoretical Considerations 32-------------3.2.1 Dominant Theories in Development Economics 35-------------3.2.2 The Role of Domestic Institutional Arrangements 37-------------3.2.3 A Theoretical Understanding of Domestic Institutional Arrangements 39-------------3.2.4 The Economic Development of Lebanon: The Institutional Arrangement 41---4. Methodology of the Study V 44---5. Outline of the Study 45---Chapter Two: The Rise of Rafig Hariri 47---1. Problems with the Post-Ta'if Political System & the Failures of the Karami and Solh Government 47--------1.1 Problems with the Post-Ta'if System 50--------1.2 The Karami Government 50-------------1.2.1 Developments in PostTa!if Lebanon 50-------------1.2.2 "The Government of National Reconciliation" 52-------------1.2.3 The Return of State Control: The Dissolution of the Militias 55-------------1.2.4 The Increase in Syrian Dominance of the Lebanese Political System 58-------------1.2.5 The Economic Reconstruction of Lebanon 63-------------1.2.6 The Economic Crisis: 1990 - October 1992 72--------1.3 The Government of Rashid Solh 72-------------1.3.1 The Formation of a New Government 75-------------1.3.2 The Parliamentary Elections of 1992 80-------------1.3.3 The Election Results: The New Parliament 82---2. The Rise of Rafiq Hariri 82--------2.1 Questions for Syria 83--------2.2 The Post-Election Process: International Reaction 86--------2.3 The Post-Election Process: Domestic Reaction 88--------2.4 Hariri T s Background 94--------2.5 The Decision to Appoint Hariri 95--------2.6 Reaction to Hariris Appointment 96--------2.7 The Hariri Government 98--------2.8 Hariri's Mandate 99---3. The Hariri Government: A Capitalist Developmental State? vi 101--Chapter Three: The Plan for the Reconstruction and Development of Lebanon - "Horizon 2000" 103--i. "Horizon 2000": The Government's Stated Objective For Reviving Lebanon's Economic Fortunes 106--2. The Origins of the Horizon 2000 Plan 112--3. The Contents of the Horizon 2000 Plan 139--4. The Hariri Government: A Capitalist Developmental State? 141--Chapter Four: The Institutions Managing and Implementing the Horizon 2000 Plan 143--i. The C.D.R. 143-------1.1 The Origins of the C.D.R. 145-------1.2 The Structure of the C.D.R. 146-------1.3 The Stated Role of the C.D.R. 147-------1.4 Actual Role of the C.D.R - From 1977-1990 149-------1.5 The Failure of Past Reconstruction Plans: Problems with the C.D.R. 153-------1.6 Recommendation for Reforms to the C.D.R. 154--2. The Lebanese Public Sector 156-------2.1 The Weaknesses of the Lebanese Public Sector 159-------2.2 A Brief Examination of Some of the Ministries & Agencies 162-------2.3 Recommendations for Improving the Ministries & Agencies 163--3. The Institutional Arrangement for the Implementation of the Horizon 2000 Programme 163-------3.1 Origins of the Institutional Arrangement 164-------3.2 The C.D.R. and the P.M.U. 169-------3.3 The Ministries, Agencies, and the S.I.U.s 171-------3.4 The Technical Coordination Committee vil 171-------3.5 The Actual Workings of the Institutional Arrangement 173--4. Hariri's Dominance over the Recovery Programme 176--5. The Hariri Government: A Capitalist Developmental State? 179--Chapter Five: The Progress of the Reconstruction Programme 180--i. The Implementation of the Horizon 2000 Programme 182-------1.1 The Rehabilitation of Lebanon's Physical Infrastructure 183------------1.1.1 The Electricity Sector 184-----------------1.1.1.1 The Consultancy Contracts 185-----------------1. 1. 1.2 Repairs to the Electricity Network 188-----------------1. 1. 1.3 The Rehabilitation of the Janthour & Bsalim Substations 188-----------------1.1.1.4 The Construction of Two New Power Plants at Zahrani and Beddawi 189-----------------1.1.1.5 The Installation of New Gas Turbines in Baalbeck and Tyre 190------------1.1.2 The Posts & Telecommunications Sector 192-----------------1.1.2.1 The Consultancy Contracts 193-----------------1.1.2.2 The Supply of Spare Parts and Equipment & the Rehabilitation of Buildings 194-----------------1.1.2.3 Repairs to Exchanges (Upgrading Telephone exchanges) 194-----------------1.1.2.4 The Rehabilitation and Expansion of the Telephone Network 195-----------------1.1.2.5 Contracts for the Rein.statement And Improvement of International Telephone Connections 196-----------------1.1.2.6 GSM Network (Global System for Mobiles) 197-----------------1.1.2.7 The Postal Service 198------------1.1.3 The Transportation Sector 199-----------------1.1.3.1 The Rehabilitation of Beirut International Airport 199----------------------1.1.3.1.1 The Consultancy Contract 200----------------------1.1.3.1.2 The Rehabilitation and Expansion of the Airport 20J.----------------------1.1.3.1.3 The Operation of Facilities at Beirut International Airport 202-----------------1.1.3.2 The Rehabilitation and Extension Of Beirut Port 202----------------------1.1.3.2.1 The Consultancy Contracts 203----------------------1.1.3.2.2 The Physical Rehabilitation of Beirut Port viii 204-----------------1.1.3.3 The Rehabilitation and Expansion Of the Road Network 206----------------------1.1.3.3.1 The International, Primary, Secondary, and Local Road Networks 207----------------------1.1.3.3.2 Completion of the Coastal Expressway 208----------------------1.1.3.3.3 Construction of the Beirut Ring Road and the Associated Penetrator Roads 211----------------------1.1.3.3.4 Improvement of the Road Network and Services in the Beirut Conurbation 212----------------------1.1.3.3.5 Beirut - Damascus Motorway 212-----------------1.1.3.4 Public Transport & Railways 213----------------------1.1.3.4.1 The Purchase of Buses 213----------------------1.1.3.4.2 The Railway Network 214------------1.1.4 The Water Supply and Wastewater Sectors 215-----------------1.1.4.1 Consultancy Management 216-----------------1.1.4.2 Work on the Rehabilitation and Extension of the Two Sectors 217----------------------1.1.4.2.1 The First Year Programme And the Second & Third Year Prograrruues 218----------------------1.1.4.2.2 Individual Proj ects in the Sectors 219------------1.1.5. The Solid Waste