From children and adolescents rummaging through rubbish bins in search of scraps of food or aluminum cans, to elderly people selling minuscule commodities on the streets of Beirut and deprived of any modicum of social protections to live out their twilight years in dignity, Lebanon’s socioeconomic collapse is in full swing.
In mid-2020, when the COVID-19 pandemic was still in its early stages, it was estimated that around 55% of the population was living below the poverty line, with a whopping 23% finding themselves in the extreme poverty bracket. The Lebanese pound’s value has since flown past the 20,000 pounds-to-USD threshold, while the proportion of the population living in poverty continues to climb. Yet, one thing that has remained constant is the vice-like grip the country’s political-financial class has had on the country, a grip which, just over a year ago, tore through half of the capital and murdered over 250 Beirut residents in one of the most powerful non-nuclear blasts in history.
Credits: The desk at the currency exchange office amidst Lebanon’s financial meltdown. – Stephani Moukhaiber
Since the Civil War came to a halt in the early 1990s, warlords-turned-politicians and billionaires, coupled with their overseers from Syria, consumed the Lebanese state. Frayed and fatigued after a decade-and-a-half of war, Lebanon’s public institutions devolved into vehicles for cronyism and patronage, while public funds became the private purse of the ruling class. The spoils-sharing system (‘muhasasa’ in Arabic) became fully established, while the country’s tax system significantly regressed, allowing the wealthiest strata of society operating in the real estate and financial sectors, among others, to enjoy windfalls of profit. To finance post-war ‘reconstruction’, the public debt swelled to unprecedented and unsustainable levels, as political elites shrewdly arranged for the state to borrow from the country’s numerous private banks, on whose boards they themselves sat. With that, the taxes paid by citizens went to either service a public debt with exorbitantly high interest rates, and hence into the pockets of bankers and their political allies, or to fuel the sectarian clientelist system. As this was happening, public services decayed, social protections remained exclusionary, and socioeconomic inequalities – a staple of Lebanon since time immemorial – cleaved deeper than ever.1
This article will focus on two hotbeds of corruption in Lebanon since the end of the Civil War, the healthcare and electricity sectors, both of which are of supreme importance today. The COVID-19 pandemic has highlighted the drastically imbalanced access to healthcare and fuel shortages which are routinely plunging the population into lengthy blackouts.
Healthcare in Lebanon: Profits Tainted by Sectarianism and Clientelism
Lebanon’s healthcare system is deeply fragmented, with various private healthcare providers and a Ministry of Public Health (MoPH) more intent on coordinating, negotiating, and subsidizing private institutions which provide needed services rather than developing public hospitals. Executive Decree 9826 of 1962, which addressed the evaluation and accreditation of hospitals, provided no specific guidelines for determining how private hospitals could receive contracts for government subsidization of healthcare treatment. Beyond reducing the affordability of healthcare to citizens who must resort to for-profit private establishments, the absence of such criteria meant that the choice of private hospitals to be contracted by the ministry was left solely in the hands of government officials. In the context of the post-Civil War spoils-sharing system, political parties and their cronies have been enabled to channel government subsidies to their supporters in private institutions.2 It has also been noted that several influential politicians own, either directly or through family relations, many of the private hospitals which established long-term relationships with the MoPH. Well-connected beneficiaries, such as hospital owners, have exerted pressure on “allies” in the ministry on multiple occasions in order to prevent initiatives that would make relations between the ministry and the private hospitals more transparent. According to a senior ministry official interviewed by political scientist Reinoud Leenders in 2006, “[t]he private hospital sector is owned by politicians. It has been a gold mine for them.” Politicians were thus able to both select which hospitals receive subsidies and who benefits from subsidized healthcare treatment, blocking any attempts at reforming the sector.3
The sectarian spoils-sharing system allowed subsidized treatment to be distributed in a clientelistic manner. On an individual level, those with connections to party leaders and influential political figures have enjoyed greater access to healthcare. Support for establishment parties, demonstrated with actions such as engaging with, volunteering for, or building personal connections with the politicians themselves, can often translate into financial assistance or preferential treatment for health services. While all citizens are (technically) entitled to certain government-subsidized healthcare, such as drugs for cancer treatment, the reality has been that there is ample opportunity for ministry employees to discriminate and give preference to their political supporters.4
Overall, the fragmented healthcare system enables corruption, nepotism, and preferential treatment for supporters of establishment parties. The public sector plays a minimal role in service provision and acts instead as an intermediary, mostly funnelling public funds to private establishments that are often tied to the political class. This not only results in the exclusion of many from fair and equal health coverage, but institutionalizes the clientelist system while affiliates of the political class are rewarded for their support. The public healthcare system has been replaced by one in which life-saving services and medicines are rationed out primarily to the staunchest political supporters, a toxic cycle in which politicians participate in the provision of healthcare primarily for personal profit.
Lebanon was rocked by the COVID-19 pandemic in early 2020, leading to a high death toll brought about by a weak and disorganized pandemic response. Questioning the structure of the country’s healthcare system and reimagining a new one whereby all citizens and residents enjoy universal health coverage, devoid of patronage and clientelism, must be of utmost necessity.
Electricity in Lebanon: No Electricity Despite Billions Spent
In a past issue of Al Rawiya, Abla Hariri outlined how Lebanon’s electricity sector has been compromised by mismanagement and weak governance, becoming a major contributor to the public debt since the early 1990s and prompting citizens to absorb additional expenses by relying on private generator owners to fill in the gaps. Here, we will illustrate the entrenched corruption in the electricity sector through two recent examples in an attempt to further articulate how this mismanagement has been a deliberate policy while billions in public funds were siphoned off to politically affiliated cronies.
In 2010, two decades following the end of the Civil War and with 24-hour electricity nowhere near fruition, a new solution was brought forth to the Council of Ministers’ table by then-Energy Minister Gebran Bassil: renting power barges from a Turkish company to generate the needed electricity. In late 2012, the Lebanese consul in Turkey warned the Ministry of Foreign Affairs not to get involved with the Turkish company. Earlier that same year, the company was fined by the Pakistani judiciary following a lawsuit raised in 2009 alleging corruption and violation of the terms of the contract with the Pakistani government. Interestingly enough, this did not deter the Lebanese government, renting out power barges for three years for the massive cost of 392 million USD, ostensibly to allow power plant upgrades during this time. The contract with the Turkish company was then renewed on several occasions, costing the treasury around 1 billion USD in public funds, despite the fact that electricity on a 24-hour basis was not achieved and multiple reports were issued by the Court of Accounts and the Central Inspection Board in 2013 documenting violations committed by the company. It was presumed that the power barges rental solution was an agreement of spoils-sharing between two poles of the political class, the Free Patriotic Movement and the Future Movement, both of whom benefitted from the lucrative contract through their cronies.5 More recently in March 2020, the country was rocked by another corruption scandal in the electricity sector. Back in November 2005, the Ministry of Energy and Water signed a contract with what appeared to be Sonatrach, an Algerian state-owned oil company, to import fuel oil for three years. However, what may have appeared at first as a mundane public procurement contract turned out to be a major corruption operation lasting for 15 years. For starters, ‘Sonatrach’ was actually not an Algerian state-owned company, but a shadow company registered in the British Virgin Islands – a notorious tax haven – with a similar name.
Meanwhile, the Central Inspection Board’s warnings that the company was alleged to have been involved in corruption and money laundering were ignored by successive governments. The corruption scandal came to light once lab tests showed that the imported fuel did not fit the quality standards stipulated in the contract and was worth far less than what was being paid for, simultaneously damaging domestic power plants. Subsequent judicial investigations, which were denigrated by key members of the political class, showed that several subcontractors tied to the political class benefited from the contract. Bribes to officials of all ranks in the Ministry of Energy and in governmental laboratories were thus further normalized. It is estimated that at least 10 billion USD in public funds have been spent on this contract since 2005. None of the ministers involved in the case have been held accountable due to the dubious ‘immunity’ that they supposedly benefit from. Meanwhile the Director General of Oil Facilities at the Ministry of Energy and Water, revealed afterwards to have received bribes, remained securely in her position. She later callously suggested, at the height of the fuel crisis in August 2021, that Lebanese citizens should “not go out so much” as a solution and “adapt” to the crisis. The Sonatrach scandal showed not only how non-transparent the public procurement process is in Lebanon, but also the suffocating influence the political class has over the judiciary, along with the prevalence of systemic corruption in Lebanon.6
Now that Lebanon is in the throes of an electricity crisis whereby most households barely have a few hours, if any, of state-provided electricity and are paying climbing subscription fees to private generator owners, it is worth noting that these two corruption scandals have cost billions in public funds across the years. These funds could have otherwise been used to transition to renewable energy systems and end the reign of the generator mafia, rather than in schemes designed to benefit the political class and their cronies.
Can the Spoils-Sharing System be Broken?
This article has sought to illustrate, through examining two key sectors of the economy, how deeply entrenched systemic corruption is in post-Civil War era Lebanon, and how this blatant and shameless instrumentalization of public funds for private interests has very serious implications upon the basic rights of the population. Since the early 1990s, the political class and their allies in the private sector have not hesitated to turn any sector of the economy or public entity into avenues for self-enrichment, patronage, and cronyism. As Lebanon plunges deeper into darkness – both figuratively and literally given the ongoing electricity crisis – it is necessary for any citizen or independent political group aiming to reset this system to know not only how this spoils-sharing scheme functions, but also how drastic the damages have been. This is crucial in order for us to see justice served in the future, particularly given that parliamentary and municipal elections are just around the corner.
1 For a thought-provoking discussion with Nabil Abdo, senior policy advisor for Oxfam in the MENA region, on the public debt, taxes and socioeconomic inequalities in Lebanon, see Cavalcanti, C. (2021), ‘Workers’ Solidarity, Redistribution, and Universal Social Protections… Slogans of a Struggle Against Engineered Losses’, The Public Source, https://thepublicsource.org/workers-solidarity-redistribution-universal-social-protections.
2 Chen, Bradley, and Cammett, M. (2012), ‘Informal politics and inequity of access to health care in Lebanon’, International Journal for Equity in Health, 11: 23. https://doi.org/10.1186/1475-9276-11-23
3 Leenders, R. (2012). Spoils of Truce: Corruption and State-Building in Postwar Lebanon, Ithaca: Cornell University Press
4 Chen and Cammett (2012), ‘Informal politics and inequity of access to health care in Lebanon’
5 For an overview of the power barges scandal, see ‘Malaf Al Kahraba aw al ‘ata’: Ghanimat al Harb Al Kubra’, video prepared by Legal Agenda with investigative journalist Rasha Abou Zaki: https://www.youtube.com/watch?v=wR9ywtVSXkc&t=225s
6 For a detailed five-part analysis of the Sonatrach scandal detailing the whole case, see Saghieh, Nizar and Imad Sayegh. (2021), ‘Sonatrach aw Ihtikar Al Fassad’, Legal Agenda, https://legal-agenda.com/%D8%B3%D9%88%D9%86%D8%A7%D8%B7%D8%B1%D8%A7%D9%83-%D8%A3%D9%88-%D8%A7%D8%AD%D8%AA%D9%83%D8%A7%D8%B1-%D8%A7%D9%84%D9%81%D8%B3%D8%A7%D8%AF/
Karim Merhej is a researcher and writer at The Public Source, an independent media organization based in Beirut, covering corruption, socioeconomic inequalities, and failures in governance in Lebanon. He is also a Nonresident Fellow at the Tahrir Institute for Middle East Policy. He previously worked as a researcher at the Issam Fares Institute for Public Policy and International Affairs at the American University of Beirut.
Elina Qureshi is an undergraduate student at McGill University in Economics and International Development. She was previously an intern with the Issam Fares Institute for Public Policy and International Affairs at the American University of Beirut.