Lebanon News

McKinsey plan aimed to up confidence: Khoury

Khoury speaks during an interview with The Daily Star in Beirut, Tuesday, Oct. 30, 2018. (The Daily Star/Hasan Shaaban)

BEIRUT: Caretaker Economy Minister Raed Khoury said a macroeconomic plan he commissioned from global consultancy firm McKinsey and his recent move to regulate the electricity generator sector were attempts to reinvigorate confidence in the Lebanese state. Khoury made the comments in a wide-ranging interview with The Daily Star at Cedrus Bank in Dora, during which he also responded to rumors that Lebanon was on the brink of an economic collapse.

FROM THE BANK TO THE MINISTRY AND BACK

Khoury was founder and executive director of Cedrus Bank before his ministerial appointment.

He did not deny that the bank is close to President Michel Aoun, saying it was because he himself was a family friend of Aoun, and the president’s daughter Mireille had previously worked there. “She’s my best friend,” Khoury said. “And it’s normal that [President Aoun] would pick people he trusts in capability and in loyalty” to head the ministry.

An economics graduate from the American University of Beirut, Khoury said he has been a card-carrying member of the Free Patriotic Movement that Aoun founded since 2008. Asked about how much time he spent at the bank versus at his ministry, he said he had resigned from any day-to-day role upon his ministerial appointment, though he had remained on the board and kept going for a few hours every week.

But, since the government went into caretaker status, he said he has been spending about 30 percent of his time back at Cedrus Bank “to prepare myself to come back.”

Asked if this meant he would not return as minister, he said that while the Economy Ministry was likely staying with the FPM, he would probably not remain. Instead, he will become an economic adviser to Aoun. “I like this job and I think I did many important things ... but I don’t like the administrative side, so in that sense I’ll be relieved.”

THE MCKINSEY PLAN

Khoury said his most important achievement was working on an economic plan for Lebanon with McKinsey. He said it was the first Lebanese economic plan since the term of first-ever President Beshara Khoury. “The idea of planning does not exist in Lebanon,” Khoury said.

“The government doesn’t plan. It’s amazing they live day by day.”

So the decision was taken to study Lebanon’s “economic identity” and translate it into a plan to focus state support on a number of productive sectors. This in turn would show foreign investors where the government is ready to facilitate business in the country, he said. “The private sector is smart, you can’t fool them they need clarity, transparency, commitment, a road map.”

This could be aided by incentives such as tax deductions and subsidies for companies looking to invest in certain sectors, such as industry, pharmaceuticals, medical tourism and agriculture. “If we are clear, as a government, on what we want to do ... money will flow in. Why don’t you see investment now? Because there’s a lot of uncertainty and nobody knows what the government wants to promote,” he said.

Defending the fact that the report, which cost the state $1.3 million, has not been made public, Khoury said it would remain so until it was endorsed by Cabinet when a new government is formed. “Maybe the new Cabinet will want to change something,” he said, adding that if it is released now, “people will start to shoot at it and distort it.” Putting the cost of the plan in perspective, he said the $1.3 million was equivalent to 15 minutes of government spending on subsidizing electricity.

ESCALATION AGAINST ‘MAFIA’ GENERATOR OWNERS

On the electricity front, Khoury said he began taking escalatory measures after more than half of generator owners failed to implement consumer protection measures that went into effect at the beginning of October.

Khoury’s decision to have kilowatt-hour consumption meters installed faced intense opposition from many generator owners, some of whom he likened to a “mafia.”

After more than 800 violation notices were issued to generator owners in October, Khoury said units from State Security, one of Lebanon’s four major security agencies, were now patrolling the streets with members of the Consumer Protection Bureau to find violators.

They briefly arrested several generator owners who refused to implement the decision, he said. “We’ve given [a generator owner who serves a large portion of Metn] 15 days to implement the measures or he’ll be put in jail and we will confiscate his generators,” Khoury said, adding that violators would likely face criminal charges if they persisted.

He said that while there had initially been no confidence that the decision would go into effect based on the fact that many other regulations had been ignored, “there is no going back this time.”

The decision was “entirely” in force, with a per-kilowatt-hour price of LL410 ($0.27), he said, adding that any generator owner who said otherwise “is dreaming.”

In fact, after he began the escalation, “[the generator owners] got scared and they are coming to me and saying they want to abide.”

Approximately two hours after The Daily Star’s interview with Khoury, a delegation of generator owners announced at a joint news conference with the minister that they would abide by the decision.

IS THE LEBANESE ECONOMY COLLAPSING?

Khoury said he did not want to say whether or not an economic collapse was imminent, but “until now we are going in the wrong direction.”

“The situation is not very good,” Khoury said. “It’s an accumulation of the last 30 years. ... If you really want solutions, you need long-term solutions, just as the problem was long-term.”

One positive development, Khoury said, was the recent reopening of the Nassib border crossing between Syria and Jordan, which he said would help increase Lebanon’s income from exports.

This used to be $4 billion before the Syrian war, he said, but was now hovering at around $2.2 billion.

The crossing, a major transport route for Lebanese agriculture to Syria, Jordan and the Gulf states beyond, was shuttered in 2015 after its capture by rebels on the Syrian side, but recently reopened after Syrian forces took it back earlier this year. The crossing is entirely open for Lebanese traffic, he said.

“There is no need for a political decision. The roads are open.”

THE GOVERNMENT IS THE PROBLEM

Much more than anything else, Khoury’s concern for Lebanon’s economy centers on a lack of government planning, due to what he described as undeserving ministers with large egos being chosen for key positions. “Ministers don’t talk to each other ... every minister is the king of his ministry. He thinks he’s the most important guy and it’s like [Lebanon is] a cart being pulled in different directions.”

“I could have done much more if the government was prepared to take important decisions but how can I improve productive sectors if we don’t even have the basics like electricity, roads, a clean environment or proper water?” he said.

Asked how the same political class that had led the country toward crisis would be able to bring it back from the brink, Khoury responded: “We have to live with what’s a present, it’s a given, a fact.” But he said they should change their ways given the dire economic situation.

“That’s why I’m running behind the generator thing, because it gives confidence that there is a state and it’s taking steps not always saying, ‘We can’t, we cant.’ You need 10 moves like that to bring confidence back to the people.”

 
A version of this article appeared in the print edition of The Daily Star on November 01, 2018, on page 3.

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