Lebanese tycoons thrive despite war, but public sector suffers

Lebanon's economy is not immune to the effects of shelling and nearly constant fighting. But conditions like this often force a people to live by their wits. Some are very good at it, others are not.

Despite nearly seven years of virtual anarchy, the Lebanese private sector thrives. By comparison, the public sector is severely retarded.

Consumer goods, even luxury items, are readily available -- often from makeshift open-air stores with overturned cardboard boxes used as display stands.

But the public sector often can't provide enough water, electricity, or telephone lines for residents. The last wave of fighting between the Palestinians and the Israelis just made a bad situation worse.

The government has begun rationing electricity, and gasoline supplies are short. The Israelis bombed one of Lebanon's two oil refining facilities, knocking out several storage tanks, and the pipeline bringing crude from Saudi Arabia.

Even before that, gasoline was a problem, because the government could not afford to pay the company operating the pipeline. Saudi Arabia paid the $28.5 million bill. Lebanon already owes Saudi Arabia $25 million for oil.

"But government investment in infrastructure was below par before the troubles of 1975-76 [the civil war]," noted Salim Ahmad al-Huss, a former prime minister, economist, and banking expert. The lack of development by the government caused extreme poverty amid extreme wealth and helped trigger the war , Mr. Huss said.

What worries him and the Beirut Chamber of Commerce and Industry is not that the government is borrowing so much. What is worrisome is that it is borrowing just to cover administrative costs such as salaries. Lebanon is prematurely depleting the borrowing capacity it will need someday to rebuild the country, Huss maintained.

Adnan Kassar, the chamber of commerce head, has warned that the economy is on the brink of collapse. By contrast, Finance Minister Ali al-Khalil says there is no reason for undue concern.

The greatest problem facing the government is that it has lost much of the revenue from customs tariffs -- its most important revenue source.

Lebanon has been a trading country since the days of the Phoenicians. Until the civil war, Beirut was known as the banking and business hub of the Middle East.

Since the war, however, the government has steadily lost control of its biggest money- maker, the ports. Most of the berths in Beirut are now controlled by well-armed militias who levy their own "duty."

Many illegal ports have been estalished as well.Thanks to this, the private person benefits while the government's coffers shrink. The Shipper and the consumer pay less at the illegal ports because the militia duties don't run as high as the official ones plus the bribes to port officials and workers to do what they are already (badly) paid to do. The goods are also safer from pilferage.

But this means the government earned only L683 million Lebanese ($162.6 million) from customs. The chamber says it should have taken in at least L800 million ($190.4 million).

In the first six months of this year, the government expected to collect L500 million ($119 million) from customs. It got only L212 million, according to the chamber. Yet, some economists say that figure is padded and the loss was closer to L2 billion ($476 million).

Lebanon is not taking in much in the way of corporate or personal income tax, either. Corporations are being allowed to write off their taxes in compensation for losses suffered during the war. Personal tax evasion is easy and widespread , government officials and tax dodgers have admitted readily.

Despite dwindling income, the government has promised civil servants a 15 percent pay increase and committed itself to subsidizing fuels and flour to the tune of L1 billion ($230 million).

In 1979, a summit meeting of Arab countries pledged to help this tiny Mediterranean country back on its feet with a $2 billion fund. By late June of this year, however, Lebanon had received only $206 million of the $600 million it should have received by then, Mr. Khalil said.

In 1977 a post-civil-war reconstruction plan for the country called for spending L11 billion ($2.6 billion), said Dr. Muhammad Atallah, chairman of the board for development and reconstruction. Rising prices, inflation, and, most important, further damage caused by continued fighting, have made the figure much to low.

While the government sinks into the red, however, many Lebanese are making millions, an American stockbroker said. "The number of people here -- both Muslim and Christian -- who are worth hundreds of millions [of dollars] would astound you,"he said.

In Beirut, real estate prices are sky high, especially given the on-and-off warfare that makes life often very dangerous. Construction continues at a vigorous pace. One can often see a new building going up next to one badly damaged by fighting and still piled high with sandbags.

Many Lebanese left during the war and established themselves abroad. But they continue to send money back to the country, Huss said.

Great sums of money also come in from countries in the Gulf region and elsewhere in the Middle East in support of various factions in Lebanon. For example, Israel helps some Lebanese Christian groups, while Libya does the same for certain Palestinian elements. These countries finance multitudinous militias who keep the pot of sectarian strife on the boil, he added.

The way factories and employees keep working during outbursts of heavy clashes such as occurred in April and May is amazing, Huss said.

"My furniture factory is in an area of Beirut that came under the heaviest shelling in the spring," one employer said. "I have to admit that I was too frightened to stay in my office all day. I was embarrassed to leave in front of my employees, so I suggested that they also go home because I was.

"They almost laughed at me. Some went to the cellar for an hour or so and then came back to work, ignoring the shells that crashed near the factory, I went home every day at noon."

Fortunately or unfortunately, "the Lebanese worker has become accustomed to fighting as a fact of life," Huss said.

For Huss, that sort of attitude touches on a problem he wonders whether lebanon will be able to correct.

Even if some sort of political reconciliation were to be achieved in the country and physical reconstruction began, how does Lebanon rebuild the human being? the former prime minister asked.

There have been too many years with too many people who do not realize that stealing and killin g are not the way society is supposed to live, he asked.