Countries of the World/COUNTRYS.BIN/dp/0215/02157.txt

Text File | 1991-06-25 | 20KB | 332 lines

$Unique_ID{COW02157}
$Pretitle{224}
$Title{Lebanon
Chapter 3D.   Aid and Reconstruction}
$Subtitle{}
$Author{John Roberts}
$Affiliation{HQ, Department of the Army}
$Subject{million
reconstruction
aid
lebanon
cdr
provided
arab
assistance
program
united}
$Date{1987}
$Log{}
Country:     Lebanon
Book:        Lebanon, A Country Study
Author:      John Roberts
Affiliation: HQ, Department of the Army
Date:        1987

Chapter 3D.   Aid and Reconstruction

Reconstruction and Hope, 1976-82

     After nineteen months of fighting in 1975 and 1976, reconstruction was
necessary but the prospects for reconstruction were seemingly hopeless. The
Council for Development and Reconstruction (CDR) was founded after the war and
entrusted with preparing and implementing a comprehensive reconstruction plan.
The government gave it authority to negotiate with foreign governments for
economic assistance and to implement reconstruction projects or authorize
other government agencies to do so. Its creation was a bold step, and the CDR
worked hard to honor its mandate.

     In December 1978, the CDR produced a US $7.4 billion reconstruction plan,
designed to rebuild the country's shattered infrastructure over an 8-year
period. The program was to be largely financed by external assistance, with
the government providing only 10 to 25 percent of the total. But it was not
until November 1979 that the Arab states, at a summit meeting in Tunis, agreed
to furnish Lebanon with US $2 billion in aid over a 5-year period.

 The CDR produced its first annual work plan, which spelled out the program's
implementation schedule. Projected spending for the project in 1980 was just
over US $296 million, well below what would be necessary if the entire plan
were to be completed within its supposed eight-year time frame. In conformity
with Arab donor state wishes, half was earmarked for the south, divided
equally between infrastructure development (such as port, road, hospital, and
housing repairs) and social projects.

     Nevertheless, the CDR was at least able to make a brisk start on
reconstruction. At the end of April 1981, it reported that about half of the
US $741 million in available funding was being used, with 32.3 percent going
for loans to the public sector, 29.1 percent designated as liquid resources
for projects being implemented, and 17.3 percent for expenditures on projects
under way.

     Lebanon was receiving reconstruction aid fairly regularly in 1981,
although some donors were behind in some of their disbursements. Other
international sources also provided assistance. The United States Agency for
International Development (AID) provided approximately US $5.7 million for a
variety of projects that year, including technical assistance for the CDR,
housing repair grants, housing authority loans, and various health projects.
And as far back as October 1980, Lebanon had signed an agreement with the
United Nation International Children's Emergency Fund (UNICEF) to carry out
US $43.5 million worth of social projects in the south, using reconstruction
funds channeled through the CDR. The United Nations Development Program (UNDP)
also provided around US $4 million worth of reconstruction projects.

Arab Reconstruction Aid

     The Arab aid approved at the 1979 Tunis summit meeting was the key to
Lebanon's reconstruction program. During the five-year period from 1980
through 1984, the seven Arab members of the Organization of Petroleum
Exporting Countries were to provide specific sums annually. The program got
under way late, so that in 1980 just US $168.2 million of an intended US $400
million was actually disbursed. The pace quickened in 1981, however, with the
arrival of US $202.9 million. The cease-fire in southern Lebanon from July 1981
until the Israeli invasion the following June provided an opportunity to step
up disbursements, but, in fact, they declined. During the first half of 1982,
only the United Arab Emirates made any effort to meet its commitment, paying
some US $13 million, presumably its regular first-quarter payment.

     The Arab states reacted to the Israeli invasion by virtually
discontinuing aid. By November 1982, almost three years into the program, the
Ministry of Finance had reported receiving just US $384.2 million of an
expected US $1.2 billion. Some aid did trickle in during late 1982 or in 1983,
but the highest figure reported for total aid deliveries agreed to in Tunis in
1979 was around US $420 million.

     By far the most reliable of the donors was the UAE. It had pledged
US $45.7 million a year and met its 1980 and 1981 commitments in full, in
addition to the US $13 million first-quarter contribution in 1982. At the
opposite extreme was Libya, which had pledged US $62.84 million a year but had
provided nothing by the end of 1982 (except covert arms deliveries to
pro-Libyan militia groups). Algeria, which had pledged US $142.8 million a
year, later declared that it could not comply because of financial
difficulties. The remaining donors agreed to meet Algeria's commitments, but
there is no evidence that they ever provided the funds.

     Saudi Arabia, with the largest annual commitment--US $114.3 million--
began its disbursements late. In 1980 it provided one-third of the amount due
and in 1981 two-thirds. The Saudis made no further payments before the 1982
invasion. Iraq met its 1980 annual commitment of US $59.4 million but made no
further contributions because of its war with Iran. Kuwait furnished US $25
million in 1980 and then in 1981 provided US $67.8 million--US $5 million more
than what was due. But it, too, failed to pay anything in the first half of
1982. Qatar provided no assistance in 1980 and in 1981 provided only half of
its pledged US $26.8 million.

     After the Israeli invasion, the Arab donors provided about US $40 million.
They indicated that they would contribute more funds to the reconstruction
effort as funds from the World Bank and the industrialized countries became
available. In July 1983, a US $229 million aid package was put together by
representatives of major donor countries and organizations. Attending the
meeting in Paris were officials from Austria, Belgium, Canada, France, West
Germany, Italy, the Netherlands, Japan, Britain, the United States, and
Sweden. Participating donor agencies included the World Bank, the IMF, the
Saudi Development Fund, the UNDP, and the EC and its principal financial arm,
the European Investment Bank.

     Specific aid agreements were subsequently reached with most, if not all,
of the participants at the Paris meeting, which marked the high point in
Lebanon's search for orthodox sources of reconstruction finance. But Arab aid
was given neither on the scale envisaged at the Tunis summit nor on the more
limited scale supplied in 1980 and 1981. Falling oil prices in 1983 caused
producers to cut back production to maintain prices. The cutbacks resulted in
lost revenue, not only for themselves but indirectly for Lebanon. Some Saudi
money did arrive in Lebanon, but only on an ad hoc basis. Some of it,
reputedly from King Fahd, was given to charities and for education. Organized
financial assistance, however, dried up by the mid-1980s. In early 1985,
President Jumayyil appealed to the Saudis for US $500 million in economic aid,
but the response did not match the request. The Arab nations, in essence, had
lost interest in Lebanon.

     Still, the Tunis aid pledge led Lebanon to believe that it could mobilize
reconstruction funds if it could come up with practical projects. The CDR
viewed the aid pledged as encouragement to intervene in the economy. The CDR's
interventionist attitude ran counter to the Lebanese government's
long-standing commitment to free-market principles. As a result, the CDR was
criticized in government and financial circles for pursuing too
interventionist a policy. Thus, in the months before the Israeli invasion, the
old politics that had so bedeviled Lebanon were threatening to destroy the new
economics on whic