Spoils of Truce: Corruption and State-Building in Postwar Lebanon 9780801465871

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Spoils of Truce

Spoils of Truce Corruption and State-Building in Postwar Lebanon

Reinoud Leenders

Cornell University Press Ithaca and London

Copyright © 2012 by Cornell University All rights reserved. Except for brief quotations in a review, this book, or parts thereof, must not be reproduced in any form without permission in writing from the publisher. For information, address Cornell University Press, Sage House, 512 East State Street, Ithaca, New York 14850. First published 2012 by Cornell University Press Printed in the United States of America Library of Congress Cataloging-in-Publication Data Leenders, Reinoud. Spoils of truce : corruption and state-building in postwar Lebanon / Reinoud Leenders. p. cm. Includes bibliographical references and index. ISBN 978-0-8014-5100-3 (cloth : alk. paper) 1. Political corruption—Lebanon. 2. Lebanon—Politics and government—1990– I. Title. JQ1828.A56C65 2012 320.95692—dc23

2012018067

Cornell University Press strives to use environmentally responsible suppliers and materials to the fullest extent possible in the publishing of its books. Such materials include vegetable-based, low-VOC inks and acidfree papers that are recycled, totally chlorine-free, or partly composed of nonwood fibers. For further information, visit our website at www.cornellpress.cornell.edu. Cloth printing

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Contents

Acknowledgments

vii

List of Abbreviations

ix

1. Corruption: A Window into the State of Postwar Lebanon

1

2. Assessing Corruption

18

3. Public Institutions and Bureaucratic Organization

72

4. The Political Settlement of the Second Republic

122

5. The Politics of State-Building and Corruption

164

6. Corruption and the Primacy of Politics

223

Epilogue

242

References

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Index

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Acknowledgments

This book took over a decade to materialize, and as might be expected, many individuals and organizations provided indispensable insights and assistance. Financial support came from the U.K.’s Economic and Social Research Council and from its Dutch counterpart NWO, which provided a grant to finance an additional field trip. My special gratitude goes to Anko Beldsnijder, who made it possible for me to embark on my studies in London. During my years at the School of Oriental and African Studies, and indeed beyond, I received inspiring and dedicated attention from Eberhard Kienle in addition to the support and insights of Charles Tripp, William Hale, and Graham Dyer. I was privileged to receive comments from Michael Johnson, author of the seminal work Class and Client in Beirut. In Beirut I was hosted for some time by the Center for Behavioral Research at the American University. I especially thank Samir Khalaf, who never tires in his efforts to create a platform where Lebanese and foreign researchers can discuss their work. Rima Nour Ed-Din generously shared her knowledge and experience of the frequently mesmerizing complexities of Lebanese politics and society, of which she remains a keen observer despite longing for a different universe. Jihane Sfeir offered me her own useful insights as well as her boundless encouragement and a lasting friendship. Thanks also to Bassam Fattouh, who was a constant source of inspiration and reflection. Mona Harb, Hussam Itani, Amal Sa’ad-Ghorayeb, Fawaz Trabulsi, Kamal Hamdan, Paul Salem, Sami ‘Atallah, Maroun Kisirwani, Antoine Haddad, Carole Hakim, Farid El Khazen, Nadim Shehadeh, Abdu Sa’ad, and Jawad ‘Adra were among the many wonderful Lebanese academicians, researchers, and journalists who generously

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Acknowledgments

granted me time, reflected on my questions, crushed my assumptions, and helped me find data. My book would not have been possible without the help of Nohma Khairallah, librarian with the daily An-Nahar, whose encyclopedic knowledge of Lebanon’s politics and elite society continues to amaze me. I also wish to commemorate the late Yusuf Sayigh and thank Rosemary Sayigh and their son Yezid Sayigh for taking an interest in my work and for providing kind encouragement. Steve Sherman, editor of Middle East International before financial constraints regrettably forced this unique magazine to close down, cheerfully provided feedback on my reports from Beirut. In doing so he inadvertently helped frame the focus of my research. During my time as an analyst with the International Crisis Group in Beirut between 2002 and 2005, I had the chance to improve my analytical skills thanks to Robert Malley, newly gained qualities that I hope he will recognize in this book. My thanks also go to the staff at the Lebanese Transparency Association, who hosted me at their offices in Beirut. Jim Quilty added his own encouragement by jointly exploring Beirut’s nightlife and incessantly quoting my elusive book on Lebanese corruption in his excellent and inspired reporting from the country. Yet most important, I owe Lebanon a great deal of gratitude because it was there that I met Eva, my partner and mother of our son, Finn, and daughter, Zoe. My gratitude to her for enduring the less pleasant moments of preparing this book falls hopelessly short in compensating her for what she has had to put up with. Finally, I thank Roger Haydon, my editor at Cornell University Press, for his support and his gift for rephrasing in two sentences what I had needed two paragraphs to express. This book is dedicated to Samir Kassir, a friend and a rich source of inspiration until his life ended abruptly and violently on 2 June 2005. I learned tremendously from his always erudite and thought-provoking perspectives on Lebanese and Middle East politics. Yet his brutal assassination continues to stir doubts in me whether I understood anything at all.

Abbreviations

AA AD AH AL AM AN AS ATHC AW BCD BOT CA CDL CDR CDR-PR CEGPB CFD CIB CPD CPI CSB DPA DS ECGP

Al-Anwar Ad-Diyar Al-Hayat Al-Liwa’ Al-Mustaqbal An-Nahar As-Safir Arab Tripartite High Commission Al-Wassat Beirut Central District build-operate-transfer Court of Accounts Le Commerce du Levant Council for Development and Reconstruction Council for Development and Reconstruction Progress Report Compagnie d’Exploitation et de Gestion du Port de Beyrouth Central Fund for the Displaced Central Inspection Board Council for Planning and Development Corruption Perceptions Index, Transparency International Civil Service Board Dubai Port Authority Daily Star Executive Council for Grand Projects

x

Abbreviations

EDL EIB FAO FIDIC FOO GDUA HCR IDP IFC IIM ImF IMF LDC LF LQU LR MEA MEWR MfD MIO MMRA MoE MoF MoH MPC NBM NCQ NIE OE OJ OMSAR PADR PD PID REC TA TC TMA UNDP UNSC WHO

Electricité du Liban European Investment Bank Food and Agriculture Organization Fédération Internationale des Ingénieurs-Conseils furnish-operate-own General Directorate for Urban Affairs Higher Council for Relief internally displaced person International Finance Corporation Information International Monthly Independent Municipal Fund International Monetary Fund less developed country Lebanese Forces Lebanon Quarterly Update Lebanon Report Middle East Airlines Ministry of Energy and Water Resources Ministry for the Displaced Ministry for Industry and Oil Ministry of Municipal and Rural Affairs Ministry of the Environment Ministry of Finance Ministry of Health Medicines Pricing Committee National Bureau for Medicines National Council for Quarrying New Institutional Economics L’Orient–Express L’Orient–Le Jour Office for the Minister of State for Administrative Reform Public Agency for Development and Reconstruction Pharmaceutical Department Pharmaceutical Inspection Department Real Estate Company Ta’if Accord Transitional Commission Trans Mediterranean Airlines United Nations Development Program United Nations Security Council World Health Organization

Spoils of Truce

Chapter 1

Corruption: A Window into the State of Postwar Lebanon

For many years Lebanon featured as a textbook case of civil war and sectarian conflict. It is less likely, however, that the country will be a model for postwar recovery. Some would argue that given the magnitude of destruction from which Lebanon awoke in the early 1990s, any step toward normalization and recovery should be regarded as a major accomplishment. The “events” (al-hawadith), as the cycles of killing and atrocities in Lebanon between 1975 and 1990 are often euphemistically referred to, left this small country with approximately 150,000 people killed, tens of thousands of others displaced, most state institutions paralyzed or collapsed, its physical infrastructure largely destroyed at an estimated cost of $25 billion, and with an estimated fall in per capita income by two-thirds compared to prewar levels (Lebanese Republic 2002; Labaki and Abou Rjeily 1993, 25). Not that the early 1990s were devoid of political violence. Yet with the notable exception of the Israeli onslaught against Lebanon’s infrastructure in the summer of 2006, which caused the deaths of over one thousand Lebanese, the scale of violence paled in comparison with the much bloodier 1970s and 1980s. The relative improvement of the country’s security conditions, not least thanks to the remarkable reconstitution of the Lebanese army, allowed many ordinary Lebanese to return to a modicum of normalcy. Following the Ta’if peace accord of October 1989, named for the Saudi resort that hosted the survivors from Lebanon’s Parliament (fifty-eight out of seventy deputies elected in 1972), and the birth of

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Lebanon’s Second Republic one year later,1 Syrian armed forces helped keep a lid on recurring political violence, even though their increasingly heavy-handed approach earned them the label of an “occupation force.” Beginning in 1992, under relatively peaceful conditions, parliamentary elections were held every four years, mostly on time as prescribed by the country’s amended constitution. The large coalition governments formed after 1990, comprising most of the country’s political elites, have been less stable and often short-lived, but the rapid succession of leadership did not prompt a return to the level of political violence that the country had endured throughout the 1970s and 1980s. Likewise, Lebanon’s ambitious postwar reconstruction program, initiated after the end of major intraLebanese clashes in the early 1990s but gaining speed from 1992 on, improved general living standards, although some benefited far more than others. It was these accomplishments that Rafiq al-Hariri—a gifted businessmanturned-politician who served five times as prime minister in this period— underscored and took credit for when, in 1999, he drew up a balance sheet of achievements and successes in Lebanon’s struggle for recovery ( Hariri 1999). In view of a disturbing trend in which “postwar” countries return to armed conflict within a few years, his claims seemed justified. Perhaps fearing that this progress was at risk six years later, many Lebanese remembered Hariri for these same accomplishments after a huge bomb blast in the center of Beirut hit his motorcade on 14 February 2005, killing him and more than twenty others. Lebanon was to enter a new era marked by the departure of Syrian troops only a few months later—yet, it soon appeared, not necessarily for the better. Internal and often sectarian frictions among Lebanese, to a significant degree ignited by outside forces, again turned violent and effectively put the country’s stunted recovery on hold. Looking back at the past twenty years or so, and irrespective of their diverging views, most Lebanese agree that the achievements in terms of their country’s recovery and reconstruction came at too high a price. The most frequently and persistently expressed grievance concerns political corruption, which has come to be widely perceived as endemic. As shown in table 1.1, numerous opinion polls and surveys since 1992, registering the views of Lebanese and of outside observers, confirm this broadly shared impression. Even a casual visitor to Lebanon will not be surprised by the overwhelming and damning consensus suggested by these surveys. Many Lebanese look at their political leaders and state institutions predominantly through the prism of omnipresent corruption, and they are quick to share this view with visitors. For their part, Lebanon’s political elites have similarly acknowledged corruption as a key 1. The Second Republic came into being after changes to the constitution in 1990. It followed the First Republic, founded in 1945.

Annual polls on perceived corruption levels (0 = most corrupt, 10 = least corrupt)

Measuring freedom from corruption in %

Measuring existence and effectiveness of anticorruption controls (0 = weakest, 100 = strongest)

Transparency International Corruption Perceptions Index (CPI 2003–2007)

Heritage Foundation Index of Economic Freedoms (1996–2008)

Global Integrity Index (2006–7)

Nature of assessment

TABLE 1.1. Surveys and polls on corruption in Lebanon, 1992–2008

Own in-country experts and peer review

2003–2008: CPI; 1996–2002: “expert” assessments including U.S. state agencies

“Expert” assessments by international rating agencies

Sources

2003–2008: CPI ⫻ 10 1996–2002: 10% In comparison, 2003–2008: see CPI 1996–2002: Lebanon among region’s worst 6 performers. Results worst before 2003, then improving following CPI trend.

(Continued)

• 2007: 54 (very weak) • 2006: 48 (very weak) • In comparison, Lebanon scores worse than Jordan and Egypt. Slight improvement in score over 2006–7.

• • • •

2007: 3.0 (out of 10) 2006: 3.6 2005: 3.1 2004: 2.7 2003: 3.0 In comparison, 2007: on a par with Argentina, Mongolia, and Albania • 2003–2005: Lebanon’s score worse than 11 countries in Middle East– North Africa region. 2006–2007: Compared with Syria and Egypt, Lebanon’s score improves yet still low in regional terms.

• • • • • •

Main results

Measuring perceived corruption levels (0 = lowest corruption, 10 = highest)

Measuring perceived control of corruption (0 = worst, 100 = best)

Corruption-relevant questions to respondents in public poll

Corruption-relevant questions to respondents in public poll following 2005 elections

Corruption-relevant questions to respondents in public poll during 2005 elections

World Bank Worldwide Governance Indicators (1998, 2003, 2007)

Information International Benchmark Poll on Corruption in Lebanon (1999)

Information International poll (IIM September 2005)

Lebanese Center for Policy Studies poll (2005)

Nature of assessment

Economic Research Forum Institutional Country Risk Guide (1992–1998)

TABLE 1.1—(Continued)

Representative sample of Lebanese adult population

Representative sample of Lebanese adult population

Representative sample of Lebanese adult population

Expert assessments and Gallup poll among Lebanese public

Weighing and ranking average of “expert” assessments by international rating agencies

Sources

2007: 31.4 2003: 40.8 1998: 51.0 In comparison, Lebanon’s scores worse than many countries in the region except Syria. Deteriorating performance since 1998.

1998: 10 1995: 4 1992: 8 In comparison, Lebanon’s 1998 score on a par with Colombia and ahead of Indonesia and all other countries in region. Corruption levels rising faster than anywhere else in the world.

22% prioritize fighting corruption as main task for new government, while 28% prioritize other economic policies.

75.8% deem curbing waste and corruption to be top priority of new government, yet 48.2% think it will not succeed in prosecuting those guilty of corruption

86% deem corruption levels to be very high, 27.2% deem all politicians corrupt, 61% deem corruption in all public utilities to be high, 59% think most public employees accept gifts, nearly 100% think bribes are common.

• • • •

• • • •

Main results

Corruption-relevant questions to respondents in public poll

Corruption-relevant questions to respondents in public poll

Corruption-relevant questions to respondents in public poll on “political trust”

Corruption-relevant questions to respondents in public poll

Corruption-relevant questions to respondents in poll of private sector

Corruption-relevant questions to respondents in poll of Lebanese private sector

Corruption-relevant questions to respondents in poll of Lebanese private sector

Corruption-relevant questions to respondents in poll of foreign investors in Lebanon

Information International Poll (IIM November 2003)

Information International poll (IIM December 2002)

Simon Haddad poll (1998)

Statistics International poll (AN 25 October 1996)

World Bank Investment Climate Assessment (2006)

Sami Atallah poll (1998)

World Bank Lebanon Private Sector Survey (1995)

Economic and Social Council for West Asia FDI Lebanon poll (Mansour 2001)

Sample of foreign businessmen in Lebanon

Sample of Lebanese businessmen and private enterprises

Sample of Lebanese businessmen and private enterprises

Sample of Lebanese businessmen and private enterprises

Representative sample of Lebanese adult population

Representative sample of Lebanese adult population

Representative sample of Lebanese adult population

Sample of Lebanese adult population in greater Beirut area

Corruption identified as main discouraging factor in doing or expanding business.

High-cost business environment blamed on inter alia corruption and stifling state bureaucracy.

60% say Lebanese government suffers from lack of credibility, 62% admit to paying bribes; corruption and “informal competition” strongest perceived obstacles to doing business. In comparison: Lebanon scores considerably worse vis-à-vis businessmen’s views in Middle East at large.

Businessmen complain about high costs of doing business, blamed on inter alia corruption; public procurement viewed as most corruption prone.

62% say they have personally witnessed incidences of corruption in public sector dealings, 60% hold ministers responsible for corruption, 17% expect improvements, 77% think that corruption has worsened.

68% think that “quite a few” people in government are “crooked,” 70% think government is run by officials looking out for personal interests.

38.1% blame economic crisis on waste and corruption.

53.8% blame mounting public debt on corruption and waste.

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problem. Battles among political leaders in the various governments after Ta’if were often fought by exchanging allegations over corruption. Individual denials were just as frequent, but taken together the accusations were tantamount to an embarrassing confession that the reconstruction of Lebanon had brought about an insupportable degree of corruption.

The Backdrop to This Book This book presents an assessment of political corruption in postwar Lebanon and offers an explanation for its pervasiveness. In this respect it engages with a growing body of literature on the study of comparative corruption, bribery, rent-seeking, and crony capitalism, primarily in less developed countries (LDCs). Until the late 1970s, social scientists working on corruption in LDCs routinely complained about their colleagues’ lack of interest, prompting one of them to talk about a “conspiracy of silence” (Andreski 1978, 347). Such complaints are no longer justified. An overwhelming quantity of studies has transformed the onetime “conspiracy of silence” into a cacophony of views, models, and opinions dealing with corruption. A great deal of this relatively recent academic interest in corruption evolved out of concerns that in many LDCs, efforts to boost “modernization” or “development”—repackaged and made pertinent by the World Bank and the IMF’s “structural adjustment programs”—had failed to deliver.2 Against this background, it has increasingly been asserted that corruption raises serious obstacles to economic growth and associated “good governance,” and that the phenomenon constitutes a drain on emerging economies.3 Most economists have focused on assessing or demonstrating the economic costs of corruption or—using an inverse logic—highlighting the economic virtues of corruption’s assumed antitheses: transparency, accountability, and “good governance.” Other analysts have taken a moral or more overtly political interest in the subject, driven by outrage over a host of other disastrous effects attributed to corruption. In Lebanon, politicians, activists, intellectuals, journalists, and the public at large have echoed such views, primarily in search of an explanation for the country’s unsatisfactory economic performance and mounting debt burden since its

2. For an overview of the many reasons behind the reemergence of interest in corruption, see Tanzi (1998), Brown and Cloke (2004). The World Bank’s renewed interest in corruption coincided with its reevaluation of the role of the state in development. See World Bank (1998, 99–110). 3. See, among others, Tanzi (1998), Lambsdorff (2001), Andvig and Fjeldstad (2000), Mauro (1998), Bardhan (1997), Ades and Di Tella (1996), Murphy, Shleifer, and Vishny (1993).

Corruption: A Window into the State of Postwar Lebanon

7

supposed “recovery” from war in the 1990s.4 In 2004 the Lebanese economist Samir Makdisi succinctly summarized Lebanon’s economic slump in reference to a series of indicators showing that “the economy [is] relatively stagnant, fiscal deficits [are] running high, the public debt burden [is] rapidly mounting, the [Lebanese] pound [is] under pressure, and the Central Bank’s foreign exchange reserves [are] under pressure” (2004, 107). My research is not designed to support or to take issue with those who blame poor economic performance on endemic corruption, either in Lebanon or generally. Nor do I necessarily agree or disagree with a range of political activists who denounce corrupt politicians when, for example, conflicts of interest and corrupt transactions damage the environment or perpetuate socioeconomic disparities. Such arguments certainly increase the relevance of any study on corruption. Yet I must emphasize that my own interest in political corruption originated in a different set of considerations. In their zeal to condemn corruption, Lebanon’s activists appear intuitively to underscore a way to analyze and understand the fundamental roles and qualities of the Lebanese state. Challenging corruption can be seen as a first step toward a reappraisal of state-society boundaries and accepted standards of political behavior. Not coincidentally, the still inconclusive debate in comparative political thought about fundamental questions pertaining to the state has interrogated “the paired opposition” between public and private (Weintraub 1997, 4). A focus on corruption condenses some of these questions by exploring whether, how, and where this supposedly clear dichotomy is maintained when state institutions are being built, altered, and put into operation. It is this background that prompted me to look at the extent and causes of political corruption in postwar Lebanon. A focus on political corruption and Lebanon’s state institutions promises an added value: in contrast to the lively debates raging in Lebanon, academic research on the country’s society, economy, and politics seems to suggest that the state is

4. After the decrease in armed hostilities in 1991, annual growth in GDP peaked in 1994 at 8 percent but then declined sharply, to 3 percent in 1998 and then to a mere 1 percent in the early 2000s. In 2005 the International Monetary Fund (2005) estimated the GDP growth rate for Lebanon “at around zero” percent. Such unsatisfactory figures are even more striking in light of the considerable expenditure made on reconstruction since 1992—exceeding $7 billion (or on average nearly $1,750 for each Lebanese) in state capital investments through 2005. These expenditures helped fuel a total public debt topping 180 percent of GDP in 2006, up from 40 percent in 1991, and an overall budget deficit since 1993 averaging around 20 percent of GDP. The international credit rating agency Moody’s Investors Service in 2006 estimated Lebanon’s gross public debt at 727 percent of government revenues, the highest level in the world (cited in Banque Audi Lebanon Weekly Monitor, 23–28 January 2006). Figures cited here are from the Lebanese central bank and the Lebanese Ministry of the Economy and Trade, available at http://www.bdl.gov.lb/ and http://www.economy.gov.lb/MOET/English/ and CDR-PR ( July 2005). State capital investments exclude expenditures made by state institutions other than the Council for Development and Reconstruction (CDR). For Lebanon’s population I use the rough estimate of 4 million, as suggested by Lebanon’s official statistics agency (Administration Centrale de la Statistique 1998).

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of little relevance and not worth further analysis. The result, as one Lebanese economist put it, is that “generally speaking, the Lebanese [state] administration is a victim of clichés and remains largely unknown” (Nahas 2005, 109). Studies of Lebanon have pointed out a vast range of interesting aspects of its turbulent politics and political economy, and many of them contributed to my own understanding of the country. But I found no detailed characterization of the contemporary Lebanese state or its institutions, and especially none that covers the postwar period. This relative lack of interest in the Lebanese state also marks much of the literature on Lebanon’s sectarian or confessional politics. Thus the Lebanese state is virtually absent in studies evolving out of the school of “consociational democracy,” which cast Lebanon, particularly in the prewar period, as one of its major examples in the “Third World.”5 This is less of a surprise when we realize that this comparative and essentially normative approach to conflict management rarely showed much interest in the state anywhere, not just in Lebanon.6 In sum, the virtual absence of the state in the study of Lebanese politics may simply suggest that others do not share my research interest in how the state in Lebanon has manifested itself and why. Yet while the literature implies that the Lebanese state was of secondary importance, the fierce political battles over the role of the state indicated quite the contrary. To find guidelines for studying political corruption in postwar Lebanon, I had to look elsewhere. I found some consolation in the fact that Lebanon is not the only country believed to sustain high levels of political corruption.

Key Concepts of My Approach My approach to the subject of rampant political corruption in postwar Lebanon is simple and straightforward. This simplification is deliberate, as I aim to offer a persuasive elucidation of the causes of corruption with reference to as few independent variables as possible while capturing the widest possible manifestation of the dependent variable (corruption). In essence, I contend that political corruption in postwar Lebanon has been rampant, and is mainly due to the high degree 5. See Lijphart (1977, 154 ). Studies and critiques of Lebanon’s “consociational democracy” include Picard (2001 and 2002), Jabbra and Jabbra (2001), Seaver (2000), Messara (1982 and 1994), Dekmejian (1978), and Hudson (1976). 6. Designed in response to Gabriel Almond’s equally “society-centered” approach to political modernization, Arend-Jan Lijphart’s “consociational democracy” model explored the relationships between its dependent variable (“stability” in “extremely divided societies”), its four explanatory variables (“grand coalitions,” “mutual vetopower,” “proportionality,” and “segmental autonomy”), and a whole range of “favorable conditions,” all largely ignoring the nature and role of the state and its institutions. See Lijphart (1969 and 1977).

Corruption: A Window into the State of Postwar Lebanon

9

to which public institutions diverged from the criteria of bureaucratic organization. In turn, the debilitating nature of the political settlement initiated in the early 1990s, and evolving since, explains the limited extent to which corruptionprone public institutions in postwar Lebanon met these criteria. Put differently, the ways in which politics, or the political game, is structured and organized tells us a great deal about why institutions fail to curb, and indeed generate, everproliferating opportunities for corruption. In light of this central argument, a few reflections on theory and methodology are in order. Political corruption is defined here as the use or abuse of public office for private gain. This shorthand designation is in line with many current approaches. I employ it despite its unresolved shortcomings and pitfalls. In locating corruption at the boundaries between the “public” and “private” spheres, I differ from dominant approaches within neoclassical economics that often equate corruption to “rents,” “rent-seeking,” or “directly unproductive profit-seeking (DUP) activities” (Krueger 1974; Bhagwati 1982; Buchanan, Tullock, and Tollison 1980; Colander 1984). DUP activities may include corruption but also entail other forms of supposedly unproductive or inefficient profit-seeking activities. To limit the study of such an unwieldy phenomenon as political corruption to manageable proportions, I decided to concentrate on high political corruption, that is, forms of corruption occurring at the top of the state’s bureaucracy and its agencies (for example, among ministers, directors-general, and other senior officials), rather than those that occur at lower echelons of state bureaucracies.7 The reasons for doing so are mainly pragmatic, not because I believe that low political corruption is necessarily any less important, less harmful, or less worth studying. Many studies, including those that adhere to a similar definition of the phenomenon, treat corruption as a rather abstract notion without stating explicitly that the term refers to an aggregate of extremely diverse transactions and forms of conduct, occurring in equally varying institutional and political contexts. Economists especially favor regression analyses aimed at establishing correlations between corruption and variables such as the extent of government interference in the economy. One important advantage of such aggregated approaches may be that they allow for general and universal claims about corruption and correlating variables. Yet they fail to unpack the different manifestations and meanings of corruption. As a result, they assume rather than demonstrate a commonality between various forms and contexts of corruption. As Ed Brown and Jonathan Cloke argue, “too much is expected of corruption as a single term[;] 7. I prefer the terms “high” and “low” corruption to the more commonly used terms “grand” and “petty” because the latter also seem to imply a judgment on the amount of resources involved or the magnitude of the supposed consequences.

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it cannot encompass so many different types of behaviour and motivations” (2004, 284). Accordingly, one could plausibly counter that political corruption refers to such a heterogeneous category of practices that there is no reason to assume a priori that those categories share a common denominator warranting all-embracing causal explanations. To address this problem, we need first to disaggregate existing corruption in its various manifestations and analyze it in the specific contexts in which it occurs. Only after we show that individual occurrences of corruption share certain characteristics can we move to a higher level of abstraction. This excursion will inevitably explore the seemingly endless manifestations of corruption—ranging from bid rigging, influence peddling, collusion, extortion, theft of public funds, and nepotism to outright bribery. It is in this sense that I hope to contribute to a small but growing body of qualitative literature on corruption, within the Middle East and beyond, that does not shy away from detailed and disaggregated approaches to corruption.8 It is also worth stressing that political corruption will be explored here in terms of identifiable and structural conditions that explain its pervasiveness. This may appear to be self-evident. Yet in this respect I take a course very different from the dominant literature on corruption, particularly writings emanating from the “new political economy” or neoclassical economic thought. The latter in its various branches uses profit-seeking and utility-maximizing assumptions in the study of corruption, primarily toward the end of designing effective remedies against corruption. Indeed, some of those preoccupied with the perilous effects of corruption admit to their impatience when it comes to understanding its causes (Klitgaard 1991, 123). In contrast, I insist on seeking a causal explanation for pervasive corruption in a particular context and restricted time period. Likewise, formulating policy proposals to reduce corruption is not my main preoccupation. Nevertheless, I believe that a successful anticorruption drive should start with an understanding of the causes of rampant corruption and then address them. Indeed, as I demonstrate, anticorruption reforms in postwar Lebanon have not done this and therefore were doomed to fail. Furthermore, I postulate that corruption, as defined and approached here, is ultimately a political phenomenon. Explanatory variables for widespread and persistent corruption are thus to be found in what can be loosely termed the political process. In essence, I suggest a two-track approach to this political process in which I emphasize the qualities of state institutions and the ways in which these institutions are being built, shaped, and contested. 8. Examples of detailed, qualitative academic research on corruption include Hertog (2010) on Saudi Arabia, Sfakianakis (2004) on Egypt, Haddad (2004) on Syria, Hadjadj (1999) on Algeria, Reno (1995) on Sierra Leone, Kang (2002) on South Korea and the Philippines, and Warner (2007) on the European Union.

Corruption: A Window into the State of Postwar Lebanon

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Earlier modernization theories on corruption, more recent approaches within the New Institutional Economics (NIE), and adherents to the notion of good governance alike have drawn attention to certain qualities of state institutions to explain the prevalence of political corruption, especially in settings of “underdevelopment.” Against this background, the notion of a Weberian-style state bureaucracy has regained currency in the study of corruption and anticorruption reforms. Modern public administration, as Max Weber saw it, is associated with making decisions based on neutral, universalistic, and clearly defined criteria. Accordingly, he argued that the distinction between an “objective legal order” and the “subjective rights of the individual . . . presupposes the conceptual separation of the ‘state’ . . . from all personal authority of individuals” ((1978, 998). This, in essence, is brought about by a state bureaucracy, which he defines as a hierarchical organization that meets six main criteria (956–58). Following one authoritative study on the subject ( Page 1985, 9), I suggest grouping Weber’s criteria into three main components: (a) clear goal formulation and rules governing the operations of state agencies, (b) the existence of control and audit mechanisms, and (c) strict separation between public office and private interests. State institutions that fail to meet these three criteria of bureaucratic organization, or meet them insufficiently, are likely to be prone to political corruption. Institutions characterized by discretionary powers, lack of oversight or impunity, and conflicts of interests are bound to be corrupt. Weber, of course, designed his conceptualization of bureaucratic organization as an ideal type, a concept that helps us to understand real-existing institutions but should not be equated with them. Hence, the use of these criteria calls for some caution. Most important, no real-existing public institution is likely to match the three criteria perfectly; nor, perhaps, is it desirable that it does so. Even in the most highly developed bureaucratic organizations, clear mandates, regulations, and external checks are all important, but some scope for flexibility and adaptation survives ( Pierre and Peters 2000, 18). This degree of flexibility has indeed been stressed by adherents of new public management as desirable if public administration is to be more effective, efficient, and service-oriented (Barzelay 2001; Anechiarico and Jacobs 1996). In fact, analysts of Western public institutions who study the demise of the welfare state have observed a trend toward the weakening of bureaucratic organization, to make room for “ smaller scales, flexibility, diversification, informal exchange rather than formal control, and sharing power between state and market rather than maintaining a strict division between the public and the private” ( Pierre and Peters 2000, 15). In line with these developments, neoliberal policies, primarily articulated and enforced by the World Bank, have until recently deemphasized bureaucratic features in LDCs and insisted on reform programs aimed at removing the perceived inefficiencies and rigidities attributed to the overregulation and excessive centralization of bureaucracies in LDCs (El Ghaziri 2007, 32–36;

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Hirschmann 1999). Yet in the study of public administration this approach has now been largely discredited, in both normative and analytical terms. As Jon Pierre and B. G. Peters (2000, 18) argued over a decade ago, the notion of “flexibility” should not replace bureaucratic organization but should be seen as complementary to it. Moreover, institutional realities may be at variance with bureaucratic organization, but they can still be perceived as deriving from Weber’s ideal type (Meyer and Rowan 1977). That is to say, as long as notions such as transparency and accountability are valued as desirable, bureaucratic organization will continue to function as a benchmark for how public institutions operate. Furthermore, as Weberian bureaucratic features constitute an ideal type, my claim regarding their association with rampant corruption needs to be qualified in probabilistic terms and to entail a continuum. In other words, I suggest that the more public institutions deviate from the criteria of bureaucratic organization, the more likely it is that these institutions will be marked by high incidences of political corruption. Nor is the precise meaning of the third criterion of bureaucratic organization— the distinction between public office and private interests—cast in stone. Weber explained, “The civil service separates the bureau from the private domicile of the official and, in general, segregates official activity from the sphere of private life” (1978, 957). Failing this distinction, a conflict of interests “denotes a situation in which an official has a private . . . interest sufficient to influence, or appear to influence, the exercise of his public duties and responsibilities” (Williams 1985, 6). Of course, a conflict of interest does not equal corruption. Whereas the former refers to a situation that may feed suspicions of corruption by increasing its probability, the latter is an act in which an official has intentionally and in fact used his office for his private benefit. Yet it needs to be emphasized that even in developed bureaucratic environments, only since the 1970s has the notion of “conflict of interest” been sharpened to prevent officials from using their office for private gain. Discussions of specific forms of alleged conflicts of interest, such as officials taking jobs in business after a career in the civil service, continue unabated. Moreover, there is no clear consensus among countries as to where the boundary between public office and private interests should be drawn, as witnessed by relatively lax regulations in the United States compared to most European countries (Williams 1985, 113ff.). More generally, the distinction between public and private domains is itself subject to change and is far from universal. I maintain, however, that it is still possible to demonstrate blatant conflicts of interest empirically, even when a country’s legal system would not categorize them as such.9 A conservative approach nevertheless 9. Although Lebanon has no clear legislation on conflicts of interest, the Illicit Wealth Law (discussed later in this chapter) is premised on the notion. Moreover, the Civil Service Code (Legislative Decree 112, 12 September 1959) bans public servants from taking up private sector activities or employment.

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seems advisable in this respect so as not to subject the cases to unrealistically high standards. Also, a study of conflicts of interest can be informative by showing the extent to which and ways in which the boundaries between public and private are drawn. Through this third criterion of bureaucratic organization, it thus becomes possible to assess the separateness of the state, or its status as a distinct entity. Modernization theorists who focused on Weberian-style bureaucracies were often found guilty of a Western or Eurocentric bias in dismissing non-Western attempts at state institution building. I hope to steer clear of such a bias; I see no analytical virtue in simply observing that a non-Western setting, in this case Lebanon, fails to comply with Western standards. Neither do I share the assumption of modernization theory that bureaucratic organizations in LDCs inevitably develop in linear fashion, as if “developing” countries followed some imaginary path toward modernization. Nor do I adhere to related approaches wherein the negation of Western genealogies in settings of “development” or “modernization” is supposed to account for the low quality of public institutions. On the contrary, an explanation of how and why certain public institutions are built should be placed within the political contexts of those countries themselves. In short, by using the concept of bureaucratic organization, I will ultimately be better able to conceptualize how particular institutions operated as they did. As Sudipta Kaviraj put it in a different context, “By using a familiar concept, and by carefully observing the processes and reasons for its disconfirmation, we can begin to inflect or change the concept, or see that in its logical place we need some other concept, not the one we have used” (1990, 51). Many studies of the appropriate structures of state institutions, particularly those associated with administrative reform and good governance packages advocated by the World Bank, end here: institutional qualities and their desired modifications are habitually portrayed as matters of technical or managerial interest and subjected to expert interventions without regard to their political ramifications. By contrast, in this study of political corruption in postwar Lebanon, I seek an explanation for the changing qualities of state institutions, to the extent that they are relevant for understanding rampant corruption, by placing the creation, modification, and functioning of state institutions firmly into the political process. We know from NIE that institutions, once created, can have a tremendous impact on how resources will be generated and distributed (North 1981, 1989, and 1990; Bardhan 1989; Nabli and Nugent 1989). Moreover, institutions are durable and have a tendency to be sticky; they often have long life spans, exceeding their usefulness from the perspective of efficiency. NIE theorists add that political actors, of course, are not unaware of these characteristics, which is why institutions should be regarded as “political to the core” (Shepsle 1999) and, consequently, why battles over them are so hard fought. In other words, an analysis of conflicts

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over distributional gain and of the way these conflicts are resolved needs to be placed at center stage (Knight 1992, 123). All these observations, I contend, are relevant to the formation of one specific set of institutions: state bureaucracies. What political processes can account for the building of public institutions with a specific location on the continuum of bureaucratic organization? NIE generally answers this question by giving primacy to decision-making rules. Emphasis in this context is given to “the formal rules, compliance procedures, and standard operating practices that structure the relationship between individuals in various units of the polity and economy” (Hall 1986, 19). Kathleen Thelen and Sven Steinmo (1992), two “historical institutionalists,” assert that by mediating relations of cooperation and conflict, rules structure political situations and leave their own imprint on political outcomes, that is, on institutions. As Douglass North puts it, rules “constitute ex ante agreements about cooperation among politicians” and will therefore affect political outcomes in general (1990, 50). For our more modest purposes, it is necessary to identify the rules affecting the decision-making process and political struggles in the creation of new state institutions and/or the initiation of institutional change. Formal rules such as those embodied in the constitutional framework, laws, and bylaws governing public decision making are important. But one also needs to identify how such formal rules are applied, used, or manipulated and consider possible other factors that can impose or shape rules of institution building. The rules (both written and unwritten) and their application, and possible externalities, which in concert determine the process of institution building I call the political settlement. The nature of this political settlement, I will argue, ultimately explains institutions’ location on the bureaucratic continuum. Certain moments of dramatic change (such as institutional breakdown or the sudden rise of new political actors) can have a fundamental and lasting impact on the political settlement. Political settlements can be expected to emerge in a piecemeal fashion over a long period of time; their analysis thus warrants a historical approach. As Elisabeth Clemens and James Cook put it, “Historical analyses demonstrate how choices among institutional arrangements [i.e., political settlements] may be ‘constitutive moments’ or branching points that channel subsequent political and economic developments,” that is, institutional outcomes (1999, 447). I suggest that the 1989 Ta’if Accord, and the subsequent constitutional changes of the early 1990s, signified such a constitutive moment; it therefore serves as the starting point for my inquiry into Lebanon’s postwar political settlement. My focus on the making and effects of Lebanon’s political settlement has determined the time period covered by this book, October 1989 through April 2005. When reference is made to “postwar” Lebanon, the 1989 Ta’if Accord marks the beginning of this time frame. It was at this moment that Lebanon

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embarked on a new political experience that profoundly affected state institutions and associated levels of corruption. Hence we can circumvent the ambiguities associated with a more literal application of “postwar” as designating a strict end to violence and the start of recovery or reconstruction. Conditions in Lebanon after 1989 do not qualify as “peaceful,” however defined. With continuing political violence and recurrent armed clashes, we might think that the country’s status is probably better described as a lengthy truce, and an imperfect one at that.10 Nor do I choose April 2005 to suggest that Lebanon’s “postwar” era has come to an end, although speculation about looming violence and sectarian clashes suggests that the country may be pushed in that direction. Instead, April 2005 was chosen because it produced another turning point that affected Lebanon’s political settlement, marked by the withdrawal of Syrian troops from Lebanon.

The Perils and Pitfalls of “Corruptology” Hard facts are a rare commodity in most research on the politics of developing countries, and fully reliable data on corruption are even harder to obtain. Lebanon is sparsely endowed with information on its political, economic, and social life that in many other countries is often taken for granted. This hampers an investigation into corruption, particularly one that insists on disentangling real manifestations of corruption in full detail. Yet a focus on corruption, typically concealed from the public eye and constituting at least a significant part of Lebanon’s omnipresent non-formal economic transactions, can help to address the data

10. Political violence certainly did not end in 1989. In what is often described as the most ferocious round of fighting in the Lebanese wars, militiamen of the Christian-Maronite Lebanese Forces, Syrian troops, and forces loyal to General Michel Aoun clashed between 1989 and 1990, immediately after the Ta’if Accord. Moreover, the Israeli occupation of south Lebanon continued until May 2000 and prompted low-intensity warfare between Israeli forces, their proxy force the South Lebanon Army, and the Lebanese-Shi’ite movement Hizbullah. On several occasions, Israeli forces hit Lebanon’s infrastructure: in July 1993, April 1996, and June 1999. After May 2000, fighting in south Lebanon continued, albeit at reduced levels, as Hizbullah repeatedly clashed with Israeli forces over real or alleged infractions of the disputed demarcation line separating the two countries. Numerous smaller-scale clashes elsewhere in Lebanon involved Palestinian armed factions and Islamist armed groups, while political assassinations, so common in the 1980s, kept occurring between 1989 and 2005, killing among others President René Mouawad in November 1989 and, in February 2005, former prime minister Rafiq al-Hariri. Lebanon subsequently witnessed an Israeli incursion and the destruction of much of its infrastructure in July– August 2006, a bloody standoff between Lebanese army forces and armed members of Fatah al-Islam, a militant jihadi organization based in the Palestinian camp of Nahr al-Bared near Tripoli, and more political assassinations and bomb attacks killing, among others, the Lebanese journalist and writer Samir Kassir and member of Parliament Jibran Toueini. This was followed by a brief but intense military confrontation between the country’s divided political forces when, in May 2008, armed men of Hizbullah clashed with pro-government supporters of the 14 March movement.

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gap and, in turn, become the basis of a more detailed, more comprehensive, and better understanding of the country’s state-society relations and politics. This is not to play down the contentious nature of corruption and the problems this may cause the researcher. Indeed, no indicator of corruption goes uncontested. Moreover, on the one hand, state officials and politicians do not like to advertise shady deals that others may classify as corruption. Their opponents and critics, on the other hand, may have a clear interest in exaggerating reports of corruption or fabricating them altogether in an attempt to discredit rivals. The tasks for the researcher on political corruption are made even more difficult as he or she (or his or her informer) is confronted not only by the standards regarding verifiable analyses prized by academic colleagues, but also by real or potential actions (including threats, intimidation, violence, or libel suits) taken by politicians, senior officials, and their sympathizers who feel called to account. Indeed, at least a dozen Lebanese whistleblowers about real or alleged corruption have been subjected to such sanctions. Readers accustomed to countries where the rule of law is commonly upheld may suggest that, in order to circumvent the problems associated with politically informed slander and untrustworthy allegations, research on corruption is better limited to cases that have been proved in court. Anyone familiar with Lebanon’s largely defunct judiciary and legal process will know that putting one’s faith in the Lebanese courts, for research purposes or indeed with the aim of seeking justice, is not a viable option. Perhaps most tellingly, the number of politicians and/or state officials brought to trial on corruption charges is negligible; actual convictions have been even less frequent. This is not for lack of relevant legislation. The country’s Penal Code (art. 351) makes corruption and related misconduct a criminal offense. In December 1999 the Lebanese Parliament amended a largely defunct law, the “Illicit Wealth Law” (Legislative Decree 38 of 18 February 1953, commonly referred to as the law on “where did you get this from?”—min ween lika haida?), purportedly to ensure more effective enforcement of existing anticorruption legislation. It obliged ministers and senior public servants to declare their personal wealth prior to taking up and immediately after leaving office. In addition, the Lebanese constitution (art. 80) allows for establishing a Supreme Court, composed of members of Parliament and senior judges and invested with the authority to revoke the political immunity of presidents, ministers, and members of Parliament and try them for offenses ranging from treason to corruption. Yet a host of factors—including loopholes within existing legislation, persistent political interference in the judiciary, judicial mismanagement and inefficiency, and indeed judicial corruption—has consistently worked against the use of these legal tools (Taqi ad-Din et al. 1999; Takieddine 2004; Mugraby 2000; UNDP 2001; World Bank 2005a; CDL 12 March 1998).

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In the absence of one comprehensive and reliable indicator of corruption, I concur with David Kang’s observation that only “a variety of indicators can give us a sense of the size and pattern of corruption” (2002, 19). In the period under study, many allegations have been raised in a wide range of sources: local and regional media, a few books, reports by NGOs, private consultancy agencies, and the World Bank, and reports prepared by various ministries, the state’s auditing and inspection agencies, lawyers, and, albeit to a lesser extent, the judiciary. I make use of all these sources, in addition to unstructured interviews and available state documents. Yet even when immense caution is taken in interpreting and contextualizing such sources, data obtained from informers and written sources are still likely to reflect the always controversial and often risky nature of debating corruption. For this reason, all the corruption cases referred to in this book come with such obligatory adjectives as “allegedly” and “reportedly,” thereby testifying to the sorry state of “corruptology” as a science. In addition, the names of directly accused politicians and officials have largely been withheld. Some attentive readers may notice that several alleged corruption cases are not covered in this book. This may simply be a matter of oversight, a risk looming large in any qualitative assessment of corruption. But in some cases I concluded that allegations had been made too hastily or indeed were contradicted by the facts on which they were purportedly based. Other frequently expressed complaints about corruption were omitted because, on closer inspection, they turned out primarily to involve petty corruption rather than the high political corruption under investigation. In other cases, high political corruption did appear to be the issue, yet it did not seem to be part of a wider trend involving the affected institutions sufficient to warrant systematic analysis. Furthermore, some cases were simply resistant to this researcher’s scrutiny owing to a lack of access to essential sources or because of my own limited technical knowledge. To those who still feel unfairly treated by this book’s account of the politics of corruption in postwar Lebanon, and to those who may cherry-pick data hoping to discredit their political opponents, the following deserves further emphasis: This book is not about pinpointing individual culpability for corruption; it is about understanding the collective and structural failure of Lebanon’s political class—as it has maneuvered within political constraints since 1989—to bring about the strong state institutions Lebanese citizens deserve.

Chapter 2

Assessing Corruption

Although numerous surveys and polls suggest that in broad terms Lebanon sustains high levels of corruption, my task here is to document and appraise individual allegations of high political corruption in their institutional contexts. By moving away from the bird-eye’s view of generalization, I seek a qualitative and disaggregated assessment of corruption, exploring a host of individual allegations and incidences of political corruption. These involve institutions that were found to be particularly prone to the use of public office for private benefit. This qualitative exploration digs up pertinent data in order to disentangle and assess the validity of specific allegations. For reasons explained earlier, comprehensiveness in corruption research is simply unattainable. Making matters worse, inductive research is often deficient if the legal prerequisite of “beyond a reasonable doubt” is expected from the evidence. In this chapter I aim to prepare for subsequent causal analysis, and for these more modest purposes, establishing probabilities will have to suffice.

Fraudulent Health Care Political corruption involving the Ministry of Health (MoH) has been a persistent source of complaints. Allegations mainly concern the ministry’s dealings with private hospitals, to which it contracted out the provision of public health care. Other reports suggest conflicts of interest and corruption in the ministry’s procurement deals, the control and regulation of imported medicines for local use,

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and the embezzlement of funds belonging to the ministry’s National Bureau for Medicines (NBM). Lebanon’s public hospitals suffered during the war to the point that by the early 1990s, virtually none of them was capable of treating patients. In response, the MoH increasingly referred patients eligible for subsidized health care to private hospitals and clinics. For this purpose, the ministry negotiated individual arrangements with such suppliers, stipulating the costs of treatment and medication that the state was prepared to refund, up to 85 percent of patients’ expenses (Ammar 2003, 31). Yet several reports, including by the state’s watchdog Central Inspection Board (ha’iyat at-taftish al-markazi [CIB]), suggest that private hospitals systematically abused these arrangements and heavily overcharged the state for services. The staggering rise in both the number of patients (an increase of nearly 80 percent between 1994 and 1997) and the costs per patient per day (an increase of over 50 percent in the same period), the CIB argued, can largely be explained by hospitals cheating the state (CIB 1998, 75, and 1994, 65; AN 29 January 1999). The increase in MoH expenditures, owing to rising fees for treatment and growing overnight use of hospital beds, is confirmed by other sources, including the MoH itself, which saw a rise in its reimbursements to private hospitals. The swelling costs of private hospitalization consumed as much as 78 percent of the MoH budget in 2001 (Ammar 2003, 35). The CIB expressed particular concern that the ministry’s medical inspectors, who were responsible for checking hospitals’ financial claims, systematically colluded with hospital owners and physicians in forging bills for treatment and medication, in exaggerating the duration of treatment, and even in registering fictitious patients and charging the ministry for their “treatment” (CIB 1998, 70–74). The CIB found that in such ways many hospitals declared expenses in excess of 50 percent of the real costs of treatment. The total hospitalization bill amounted to $356 million for 1997 alone, the year covered by the CIB report, and so the extent of cheating was substantial (CIB 1998, 77). One senior official at the MoH confirmed what appeared to be customary overbilling by private hospitals for services at the expense of the state treasury. “For example, the hospitals resort to cheating the state by charging it for unnecessary treatment. So if someone has a heart disease, he or she is almost automatically sent for expensive surgery even if there exist reasonable alternatives” (interview, Beirut, 13 October 2006). As a result, the MoH was charged for a rapidly rising number of open-heart surgeries in 1992–1997; the number stabilized at much lower levels only after the MoH forced patients to cover part of the expenses themselves (Ammar 2003, 112). In addition, the MoH’s director-general, Walid Ammar, accused private hospitals of fully charging patients for treatment that was already covered by the MOH (Ammar 2003, 14). Similarly, multiple surgeries were found to have been performed on

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patients who needed only one operation, again to drive up expense claims (Information International 2000a). Other sources noted that hospital beds were kept occupied even in the absence of medical necessity (IIM September 2002). Furthermore, private physicians were accused of systematically prescribing expensive medicines in excess of real medical needs and, in some cases, bearing no relation to the patient’s condition (Ammar 2003, 109). Little wonder, then, that a poll of adult Lebanese in 1999 revealed that nearly 75 percent of respondents perceived the medical profession as “materialistic” rather than compassionate (Information International 2000a, 34). More isolated but related cases were reported on several occasions. In 1995 a former health minister was summoned to appear in court on charges of having been an accomplice to the “theft of public funds belonging to the ministry” (AN 11, 12, and 13 September 1995). The accusation followed a judicial investigation into the disappearance of $3.3 million earmarked for the treatment of war casualties. In collusion with high ministerial officials, several private hospitals were believed to have drawn up lists of fictitious patients. Doctors’ signatures were found on patients’ reports long after the doctors concerned had left their jobs. One hospital returned payments to the MoH as soon as the probe was initiated. After the former health minister died, however, the case was dropped, and no further prosecutions followed. Other allegations concerned blood tests conducted on fifteen thousand people in 1996 and financed by the MoH. Reportedly the test results were analyzed by a private laboratory in the Biqa’ region and paid for by the MoH before the laboratory had even been built, suggesting that the test results had simply been made up in collusion with ministry officials (DS 20 May 1999). In view of the CIB’s findings, it is striking that the MoH inspectors mostly failed to report fraudulent private hospitals or physicians, and when they did, their reports did not prompt the ministry to renegotiate or terminate its contract with the hospitals concerned. As Ammar observed: “The [MoH] was unable to take the appropriate sanctions because of political pressure. Attempts to breach contracts with badly performing and fraudulent private hospitals were unavailing” (2003, 56). Such excesses also prompted widespread suspicion about the ways in which the MoH was selecting and accrediting private hospitals for its public health care scheme in the first place. What is certain is that accredited private hospitals generated handsome revenues as a result; in 2003, 64 percent of their income came from public financing and 30 percent from the MoH budget alone (56). Many of the general services and standards of these hospitals did not appear to make them worthy of their status. In a survey taken by the MoH in 2000, only 47 out of 128 surveyed hospitals met the quality standards set by the MoH for accreditation within its public insurance scheme (117, 120). More than 30 hospitals even failed minimum safety standards (121)—yet the MoH maintained its

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relations with most if not all of them by granting summary accreditations. Ammar explained: “Providers belong to a diverse set of political and religious influential groups. [These affiliations were] pushing the MoH to contract with almost all the existing private hospitals, including the low-classified ones. [Also] under group pressures, MoH has been continuously increasing the number of contracted beds, irrespective of real needs and financial reimbursement capabilities” (68). Available ownership data, though sketchy, suggest that politicians had financial interests in a large number of private hospitals. By using the influence they enjoyed as a result of their public positions, these politicians prompted or forced the MoH to sign contracts and provide accreditations, to overlook shoddy safety conditions, and to leave reported incidences of fraud and financial irregularities unpunished (56–57). Politicians with a stake in the country’s hospital sector were even said to have pressed the MoH to pay the ministry’s arrears to private hospitals by violating the terms and purposes of a $24 million World Bank loan earmarked for the rehabilitation of public hospitals (DS 20 May 1999; AN 31 May 1999). Instead of facilitating the urgent rebuilding of the country’s public health care sector, the loan was largely used to reimburse private hospitals, while the remainder of the funds had allegedly “gone into private pockets” or “were spent on nonsensical projects” (interview with MP Isma’il Sukariya, Beirut, 16 October 2006). The CIB looked into the matter and found undisclosed evidence supporting the allegations (interview with senior CIB inspector, Beirut, 25 May 1999). Yet this case failed to trigger measures to insulate the MoH from politicians and their private financial interests. The modest attempt to rehabilitate public hospitals so as to reduce the MoH’s virtually unlimited subsidizing of private hospital owners also provoked a series of accusations over corruption. Throughout the 1990s the MoH frequently arranged construction tenders that failed to provide equal opportunities to private bidders, raising suspicions of favoritism resulting from conflicts of interest or bribery or both. In 1996 the Court of Accounts (diwan al-muhasaba [CA]), a state watchdog in charge of overseeing financial transactions in the public sector, rejected three contracts worth nearly $1 million that had been awarded to rehabilitate or build several public health care centers, on grounds of serious irregularities in the tendering procedures (AN 29 January 1999). In 1999 its auditors reported that the ministry had arranged a tender the year before that violated the principle of fair bidding, this time concerning the purchase of x-ray equipment for public hospitals (CA 1999, 29). The court rejected another MoH contract that same year, which the ministry had failed to present for prior scrutiny. The two deals amounted to nearly $2.5 million. Such bidding irregularities and lack of oversight caused newly built or repaired hospitals to suffer from unfinished construction or shoddy work, or to face a lack of funds to purchase essential equipment and

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acquire human resources (AN 2 July 2005; IIM November 2003; DS 7 February 2003). Customary political interference in the recruitment of managers for state hospitals further undermined the effort to increase public sector capacity; professional mediocrity prevailed (Ammar 2003, 57; DS 7 February 2003). According to a report on Lebanon’s health care sector jointly prepared by a parliamentary committee and the World Health Organization (WHO), half of the twenty-seven public hospitals that had been repaired or built since the early 1990s were eventually closed down owing to poor management and financial problems. The capacity of state hospitals in 2007 was a mere 300 beds, compared to 14,500 beds in private hospitals (IRIN 28 February 2008). As a result of these and other factors, and despite the $243 million jointly spent on (re-)building state hospitals by the MoH and the Council for Development and Reconstruction (CDR) after 1992, by 2005 the private sector still controlled 90 percent of the country’s hospitals and 83 percent of health centers (World Bank LQU first quarter 2005; CDR-PR July 2005). In sum, the attempt to reduce the state’s corruption-prone dependency on private hospitals appears to have triggered other forms of corruption that, in turn, helped undermine these initiatives. The MoH’s regulation of the local market for imported medicines has likewise witnessed numerous incidences of corruption. Reported malpractices include senior MoH officials colluding with private importers, pharmacists, hospitals, and charities in violating quality controls; evading or manipulating MoH pricing regulations; and importing and selling medicines under the guise of research or aid. In addition, in 1999 a scandal struck the NBM as a senior official stood accused of embezzling public resources. The MoH hypothetically strove to uphold safety and health standards by subjecting the lucrative import and merchandising of medicines, worth an estimated $300–500 million per year (Ammar 2003, 46; Karam 2004, 4; IIM August 2004), to strict regulation and controls. CIB inspectors and others revealed, however, that systematic violations of these regulations often occurred in collusion with MoH officials. In an unreleased ninety-three-page report dated 4 April 1999, of which large excerpts appeared in the daily An-Nahar (16–17 August 2005), the CIB pointed out numerous incidents wherein MoH officials had failed to take action against importers who they knew had failed to meet safety standards, omitting or forging the expiration dates, manufacturer details, and place of origin of medicines. Other infractions pertained to the import of medicines unregistered by the MoH or banned for safety reasons. In one documented case an importer even refused to present formal certificates containing details about the medicines to MoH inspectors. The CIB noted in this context that senior officials at the MoH had in most cases issued warnings against the private importers involved but had failed to penalize them, for example, by issuing fines or withdrawing

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import licenses, as stipulated by law. Nor had MoH inspectors confiscated the medicines, thereby adding to CIB concerns that these officials had been bought off (AN 16–17 August 2005). The report quoted a pharmacist who complained that MoH officials were systematically demanding bribes in return for registering certain medicines that needed import clearance, while importers connected to influential politicians and public officials failed to obtain such registration permits altogether (AN 16–17 August 2005). To conceal violations, importers were found storing medicines in illegal warehouses that often did not meet health and safety standards; again, MoH inspectors failed to act (AN 16–17 August 2005). In other cases, importers were granted import licenses for unknown medicines that remained untested by the MoH’s National Laboratory, as legally required, also likely in return for bribes (AN 16–17 August 2005 and 27 January 2004). Because of these and other breaches of the law, the Lebanese market was flooded with hazardous and counterfeit medicines, generating millions of dollars of profit at the expense of public health. Repeatedly, print media issued long lists of available medicines that failed to meet regulations and quality standards, combined with instructions to the reader on how to recognize them (AN 23 October 2004; CIB 2006, 3860). Both Isma’il Sukariya, an MP and physician who repeatedly blew the whistle on malpractices in Lebanon’s health sector, and the National Pharmacies Syndicate stacked their offices with dangerous and counterfeited medicines purchased from local pharmacies, which they showed to visitors as graphic evidence of the MoH’s dysfunction (interviews with Isma’il Sukariya and at National Pharmacies Syndicate, Beirut, November 2000 and October 2006). On the whole, MoH officials stood by and did nothing. Similar reports of collusion between MoH officials and businessmen active in the health sector reflected the growing and illegal involvement of hospitals and charities in the pharmaceuticals business. Both hospitals and charities are required to ask permission from the MoH for the duty-free importation of certain medicines, which is granted provided that the medicines are not to be sold but are used solely for the purposes of scientific research or assisting vulnerable individuals not covered by the MoH’s facilities. Yet the 1999 CIB report detailed several cases in which senior MoH officials had knowingly granted hospitals permission to import “scientific research medicines” even though the medicines were commercially available and were subsequently sold to patients, often through the hospitals’ unlicensed in-house pharmacies (AN 16–17 August 2005, 6 and 7 July 2004). Nor did these hospitals submit a research plan to the MoH or identify the medical staff supposedly carrying out scientific investigations, as required by law. In all cases mentioned by the CIB, senior officials at the MoH had no qualms about granting such licenses. In collusion with MoH officials, private hospitals were capitalizing on a legal loophole that enabled them to import and sell medicines

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while evading taxes and import fees, and simultaneously dodging the MoH’s quality, registration, and pricing controls formally imposed on commercial medicines. Naturally this practice exacerbated the already chaotic nature of Lebanon’s market for medicines. The CIB even expressed concern that under the guise of scientific research, hospitals were importing large quantities of unregistered or “unknown” medicines that may in fact have been hard drugs proscribed by Lebanese law, and for which an import license can be obtained only under exceptional circumstances (AN 16–17 August 2005). In more general reference to hospitals’ frantic importing activities, the CIB observed that leniency and dishonesty among MoH officials allowed such hospitals to make “vast profits” (CIB 1998, 69). In 2004 it emerged that MoH officials had even repeatedly arranged for pharmaceutical supplies for the public sector by contracting with the unlicensed dispensaries of private hospitals (IIM February 2005). Predictably, the Syndicate of Pharmaceutical Importers loathed this market rivalry, which it said was made possible only by the ministry’s granting hospitals a bogus “research status” (AN 2 December 2005). Charitable societies, too, appear to have seized on opportunities to generate illicit gains from importing medicines. The CIB report documented several cases of charities using their exemption from import duties to purchase and import medicines unrelated to or in excess of the needs of their licensed aid activities. They sold excess stocks to local pharmacies at discounted prices (AN 16–17 August 2005). One charity supposedly supporting the elderly was found to have imported the medicine pregnyl, a drug used to treat fertility problems in women, with the full knowledge of MoH inspectors. The same charitable organization had also imported 1.4 million tablets of Panadol (acetaminophen), a quantity far in excess of the conceivable needs of its home for the elderly. Once again, MoH inspectors were notified, but they took no action, signifying their likely collusion with the importing charity and/or bribery. Nor were pharmacies penalized when MoH inspectors discovered that they had bought medicines from charitable organizations, corroborating suspicions that charities were acting as a front for highly lucrative commercial transactions. The CIB’s findings on charities’ illicit imports were confirmed by the National Pharmacies Syndicate, which in public statements claimed that over nine hundred charities, often owned by or aligned with politicians, had transformed their clinics into unauthorized dispensaries for financial gain (OJ 14 February 2002; AA 14 January 2003; AN 4 June 2005). The syndicate also alleged that charities used their drug stocks for the purpose of buying votes during parliamentary elections in exchange for free medicines. Many of Lebanon’s 118 registered importers of pharmaceutical products and around 1,500 licensed pharmacies were themselves accused of malfeasance (Karam 2004, 4). Generally, the MoH priced imported medicines in accordance with market prices prevailing in their countries of origin, stipulating a maximum

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profit margin for importers of 10 percent and 30 percent for selling dispensaries (Ammar 2003, 60). In addition, prices set in local currency were allowed to fluctuate on the basis of a foreign exchange index pegged to the U.S. dollar, to be issued every three months by the MoH’s Medicines Pricing Committee (MPC) (AN 16–17 August 2005). Alleged malpractices pertaining to this regime involved importers who, possibly in conjunction with foreign manufacturers, presented certificates of origin that deliberately inflated prevailing market prices in the producing countries (AN 16–17 August 2005; World Bank LQU fourth quarter 2004). The MPC and MoH inspectors consistently failed to verify these declared prices. For their part, pharmacies that subsequently pushed up local prices further, sometimes doubling them, were rarely reprimanded, and in some cases received only a warning from MoH inspectors. Furthermore, the CIB found that the MoH’s Pharmaceutical Inspection Department ( PID) had persistently approved imported medicines at much higher declared prices than the MPC had determined, even when official communications revealed that the PID was aware of MPC decisions. Yet another way in which stated prices of pharmaceutical products were deliberately inflated was by manipulating the foreign exchange index with regard to the countries of origin. The CIB reported that in early 1998, senior MoH officials had allowed the index to be repeatedly adjusted over a very short period of time, in clear violation of the legal stipulation that such adjustments could occur only at three-month intervals, and notwithstanding a dollar exchange rate that had remained stable; all index adjustments were to the financial advantage of importers and pharmacies (AN 16–17 August 2005). To complete the list of price manipulations, some importers appeared to make vast additional profits by relabeling cheaper generic medicines and even counterfeit drugs and passing them off as more expensive brand-name products (AN 4 June 2005);1 this practice may shed some light on World Bank data suggesting that 80 percent of prescriptions in Lebanon are written for the original brand of a certain drug and only 20 percent for generics (World Bank LQU fourth quarter 2004). Indeed, to judge from international manufacturers’ complaints, counterfeit drugs were widely prescribed, even if not recognized as such ( Pharmaceutical and Research Manufacturers of America 2009, 139–43). In these and all other forms of price manipulation, MoH senior officials were persistently alleged to have gained personally by way of collusion with importers or by seeking bribes in return for closing their eyes to importers’ and pharmacies’ shatara (cunning) in manipulating MoH regulations (AN 16–17 August 2005). Such practices left Lebanon with a steadily mounting bill for its pharmaceutical expenditures. 1. On its website the WHO cited a 2004 estimate that 35 percent of pharmaceuticals available in Lebanon were counterfeit products; see http://www.who.int/en/.

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Partly in response to widespread malfeasance and corruption in the private pharmaceuticals sector and the steep costs associated with such practices, the Lebanese government strove to reactivate the largely defunct NBM throughout the 1990s. Its stated aim, in brief, was to allow the state to arrange its own imports for public sector use and, consequently, cut state expenditures on overpriced and inferior medicines from the private sector. In May 1999, however, a senior official at the NBM was arrested for alleged mismanagement of public funds. According to a report prepared by the Finance Ministry and the financial prosecutor’s office, this official had during his six years in office withdrawn large amounts that were subsequently spent on unauthorized travel, illegal salary increases for himself and some of his employees, and a range of payments which could not be accounted for (DS 25 and 27 July 1999). The report alleged that the official had pocketed nearly $175,000. Yet all charges were dropped after the official reportedly paid this sum into the state treasury.

Middle East Airlines and the Airbus Scandal In October 1997 the Lebanese monthly Al-Mu’ashir broke the story of a dubious deal allegedly concluded by a senior manager at the parastatal Middle East Airlines (MEA), facilitating the lease of three Airbus aircraft from an Asian transport company. The costs and terms of the contract were so unfavorable to MEA that it was widely suspected that some airline managers had personally benefited from the deal either by receiving bribes or through a conflict of interest, if not both. The scandal was the most publicized case of corruption at MEA amid indications of similar practices in the airline’s procurement decisions. These appeared to be the details of the contract. First, each plane was leased for $220,000 per month. This amount appeared to exceed the usual price ( paid, for example, by British Mediterranean for its flights to Beirut) by $70,000 per month; MEA lost $12.6 million on the entire package (DS 12 November and 15 December 1997; LR winter 1997; AN 25 November 1997). Second, the lease was for a relatively long five years, generating a total bill of $13.2 million per plane. This amount is believed to have been only slightly lower than the estimated cost of buying the planes outright, about $15 million per plane (DS 12 November and 15 December 1997; LR winter 1997, AN 25 November 1997). On top of this, and unusually, the terms of the contract did not allow for a “lease-and-buy” scheme whereby MEA could purchase the aircraft at the end of the lease period. Finally, the contract stipulated that the Asian company would provide maintenance operations against additional payments. This also raised eyebrows, for MEA employed 650 maintenance workers who serviced a few Airbus planes already in MEA’s possession, but who were underused because of the airline’s shrinking fleet (AH 12 October 1997).

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Further details of the deal leaked by the judiciary, which started to investigate the case, added to suspicions about the transaction. The senior MEA manager had signed the deal with the Asian company on 4 July 1997. Shortly after that, the Asian company transferred ownership of the aircraft to a subsidiary, and MEA signed a second but identical contract with that subsidiary on 29 July of the same year. Two days after the second deal had been sealed, the aircraft were again transferred to yet another subsidiary. MEA was thus no longer leasing the aircraft directly from the initial Asian company. To determine whether this complex arrangement concealed conflicts of interest, it is of course crucial to know who exactly held an interest in the subsidiary. What can be said in this respect is that the company’s ownership was shared among the initial Asian transport company, the government of its host country, and a U.S.-registered company that owned 35.5 percent.2 It was the participation of the U.S. company that caught the attention of Lebanese investigators. The trail of subsidiaries and companies involved in the Airbus deal fed suspicions that some participants were trying to conceal their involvement, perhaps in order to cover up commissions they might have taken. Alternatively, the frequent transfers of ownership may have been designed to allow for the participation of individuals who were seeking to share in the proceeds. Against this background, it was perhaps not without significance that the involvement of the U.S.-registered company brought the deal suspiciously close to home, for it was represented in the Middle East by a Lebanese national through his own Lebanese company.3 As soon as details of the Airbus deal came to light, the Lebanese judiciary focused on the relationship between this Lebanese national and the U.S-registered company. He was arrested and interrogated for several weeks, but he denied having any links to the Asian transport company or any of its subsidiaries, or having played a role in its dealings with MEA (AN 27 November 1997). His claim seems to be contradicted, however, by the fact that the U.S. company he represented held shares in the Asian company, whose operations now included Lebanon—for which he acted as agent. Moreover, when the central bank later insisted on changing the terms of the contract with the Asian company, this Lebanese businessman was reported to have “helped [in] renegotiating the deal,” further suggesting that he had a stake in the transaction (DS 22 December 1997). The Lebanese judiciary was also reported to have suspected that a son of the senior manager at MEA had a direct interest in the Airbus deal by way of his alleged shareholding in either the U.S.-registered company or the Asian transport company (DS 27 November, 3 and 10 December 1997). The judiciary’s 2. Information accessed on 16 November 2002 at this U.S. company’s website. 3. Data obtained on request from Ort, Masri & Associées (a Lebanese private market research agent), 11 October 2000.

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questioning of this individual concentrated on a “business visit” he had made to an Asian capital in October 1997, just before the scandal was revealed. The visit was in itself thin evidence, but it fueled suspicions that he had played a crucial role in his father’s dealings with the Asian company, which was based in that same city. An attempt I made to clarify this and other matters with the accused manager and his son was unsuccessful; they refused to discuss the affair. Both the central bank, which by 1997 had become MEA’s largest shareholder, and the board of directors of MEA appear to have been bypassed in the decision to lease the aircraft (AS 25 December 1997; AN 28 November 1997). In early 1997, board discussions had focused on the question whether to lease three planes or to buy them. Airbus Industries in Hamburg had reportedly offered an attractive deal whereby MEA could buy three used Airbuses for a down payment of only $7 million. For unknown reasons, the senior manager at MEA rejected the offer. Then several other foreign companies, including Airbus Industries, made offers to lease aircraft to MEA; all offers were presented to MEA’s board of directors on 5 March 1997. On 17 March the board brought two of these offers to the attention of the governor of the central bank. He insisted later that at no point had he given permission to sign any specific contract. But at a routine meeting on 4 June, the senior MEA manager informed the board about the contract with the Asian company, which had been signed that same day. According to board members who attended that meeting, the senior manager gave them no opportunity to discuss the deal, nor did he clarify its details. It seems that he had acted on his own and presented the board with a fait accompli. The manner in which the judiciary dealt with the scandal certainly did not remove suspicions of corruption. After the contract with the Asian company’s subsidiary had been renegotiated in favor of MEA, central bank governor Riyad Salameh declared that he was withdrawing all formal complaints against MEA’s senior manager (AN 23 December 1997). Given the widely publicized intention of the central bank to bring all those implicated in the scandal to justice, this unprecedented step was received with skepticism, both by the press and by some senior officials at MEA (OJ 27 July 1998). One explanation for Salameh’s move may be that the central bank had gained leverage in negotiations with the Asian company by threatening to expose the earlier deal if the company failed to reconsider the terms of the contract (LR winter 1997). But it was unprecedented that a president of the central bank would instruct the judiciary to stop its investigations after having encouraged them in the first place. The state’s chief prosecutor, Adnan ‘Addum, publicly expressed his determination to pursue the case (AN 23 December 1997). Yet the senior MEA manager resigned in January 1998, and officials sent by the central bank soon replaced the company’s board of directors. No trial was held and nobody was prosecuted. When, a few years later, MEA announced its intention to refurbish its fleet further, Transport Minister

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Najib Miqati refused to provide any details. In an implicit reference to the Airbus scandal, Miqati argued that to do so would be to allow “middlemen to interfere with the operation” (DS 4 March 2002). Even though the evidence in the Airbus scandal is far from conclusive, the allegations regarding the lease contract were sufficiently detailed and documented to foster suspicions of high-level corruption. Furthermore, the scandal was not the only episode of alleged political corruption at MEA. For example, in December 1997, rumors about fuel companies overcharging MEA in collusion with some of its managers led to the creation of a subcommittee within the company’s board of directors for a full-scale investigation (AN 31 December 1997). It never reported its findings, but central bank official Muhammad al-Hut publicly admitted that too much had been paid for fuel.4 In January 1998 MEA’s internal accountant declared to judicial investigators that in his view, high-ranking staff of the company had been guilty of “superfluous spending” (DS 13 January 1998). None of these reports was sufficiently detailed or substantiated to provoke further scrutiny. But as one anonymous member of the airline’s board told a local newspaper, there is little doubt that there existed “high levels of squandering and corruption [at MEA], permeating virtually all its operations” (AN 24 January 1998). A highranking and extremely well informed official at MEA confirmed this assessment. Asked about the extent of corruption at the airline, he suggested that the Airbus scandal may have been the proverbial drop in the bucket: Many shuyukh [top managers at MEA] took money when they got the chance. Useless spare parts were bought from traders they befriended in exchange for commissions, storage costs increased for no apparent reason, excessive amounts were paid for aircraft fuel, high commissions were taken on duty-free goods sold on board, and so on. [Alleged] corruption [in the Airbus deal] stood out only because they did it in the most stupid and obvious way. Those involved were in the unfortunate position of leading MEA at a time when it was having substantial losses. Before, when MEA was still making money, nobody really cared about a bit of waste and a few sweetheart deals. (interview, Beirut, 24 January 1999)

Shady Oil and Gas Deals Lebanon’s dependence on international markets to meet its domestic demand for oil, refined petroleum products, and gas makes energy imports a vital sector of the country’s economy. To ensure that both the import and distribution of oil and gas 4. Hut, after he was appointed MEA’s chairman, renegotiated the airline’s contracts with private fuel companies, saving over $1.5 million (DS 10 March 1998; AN 27 May 1999).

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products were cost efficient, effective, and acceptable with respect to public safety and health standards, the Ministry for Industry and Oil (MIO) was tasked with regulating and controlling this sector through its Directorate of Oil. During the war years, this agency was largely paralyzed. Private companies imported and sold their products at will, in habitual disregard of state regulations concerning quality and price. In addition to the large revenues accruing from these practices, private importers and distributors benefited from large subsidies spent by the MIO’s Fund for Fuel (Caisse des Carburants) through the late 1980s ( Picard 2000, 303). Private businesses, often aligned with armed militias, charged their customers several times the rate set by the government, or reexported subsidized fuel to neighboring countries, which resulted in even larger profits. When, after the war, the state began to undertake efforts to correct the chaotic situation in the energy sector, it did not take long before allegations over corruption singled out various activities involving officials at the MIO. Most reports and allegations centered on the ministry’s role as regulator and importer of oil derivatives and gas. Several transactions stand out as highly suspicious and reportedly allowed high public officials to use their office for huge private gain. One widely publicized scandal in the oil business centered on a decision by the MIO in 1997 allowing two private companies to export state-owned gasoline to Turkey (AN 6 August 1997). On 31 July one of Lebanon’s fifteen private oil-importing companies requested permission from the ministry to buy and then export fifteen thousand tons of gasoline (company’s correspondence to the MIO 31 July 1997).5 On 2 August the ministry granted the company a license to withdraw the requested quantity from the state’s reservoirs in Zahrani (near Tripoli) for “export” (tasdir) to Turkey (MIO 1997b). The price at which the Lebanese company obtained the gasoline, $158 per ton, casts serious doubts on the ministry’s intentions. Barely three days earlier another Lebanese private company had similarly received permission to export gasoline from the state’s reserves, but it had paid the ministry a much higher price, $175 per ton (MIO 1997a). In the second deal, the state appeared to be losing out on $255,000.6 Market prices fluctuate sharply for oil products, but such a large difference over such a short period of time is unlikely to have been the result of market forces alone (interviews with Lebanese oil traders, Beirut, April 2000). Indeed, the price charged to the first company seems to have been completely at odds with prevailing market rates. According to sources quoted by the lawyer of the daily An-Nahar (which

5. A copy of this correspondence is in the author’s possession. 6. That is, 15,000 (tons)  $17 ($175158) = $255,000.

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was later sued for libel), on 2 August 1997, the date of this company’s contract, the domestic price for gasoline was $172 per ton (Sab’a n.d.). On this account, the state still lost out, though to the tune of $210,000.7 Even more interesting to know, of course, would be the price the two Lebanese companies charged their Turkish customers. One can safely assume that, given prevailing market prices, the amount finally paid by the Turkish customer was higher than the price paid by the two Lebanese companies to the ministry. But the point to be stressed is that, if the gasoline was to be reexported because the state owned excess reserves, the ministry could have earned a profit by conducting the transaction itself. On my reading of events, the ministry lost out while private oil traders made a profit, and perhaps a handsome profit. Furthermore, the ministry’s formal role is not that of an oil trader. Its job is to guarantee domestic oil supplies and prevent price hikes caused by sudden shortages. As pointed out by the Court of Accounts (Sabra, Fadil, and Masbanji 1999, 132), allowing private companies to buy and sell the state’s oil reserves does not fall within the ministry’s prerogatives. For this reason the Customs Department in Tripoli became suspicious when the two Lebanese trading companies approached it with a tanker load of gasoline for export. It refused to give permission, arguing that only the MIO could conduct such transactions. On 4 August one of the two Lebanese companies wrote a letter to the ministry complaining about the obstacles it faced at customs and requesting the MIO to order the export of the gasoline (company’s communication to MIO, 4 August 1997). According to An-Nahar (Sab’a n.d.), the MIO duly issued this order shortly thereafter. Apparently to mislead officials at the Customs Department and make them believe that the paperwork concerned a transaction other than the one they had refused earlier, the order changed the term “export” (tasdir) to “return export” (i’ada tasdir) and marked Russia as the country of destination instead of Turkey (Sab’a n.d.). As the transaction was now being conducted in the name of the MIO, the Customs Department agreed, and the gasoline left the port of Tripoli. The two companies received some unexpected additional gains from the ministry’s intervention in that they did not have to pay any export fees or taxes, as they were now acting on behalf of the state (Sab’a n.d.). The MIO thus appears to have used its formal monopoly over oil supplies to enable private companies to gain substantial profits from the export of gasoline. The efforts that the ministry undertook to facilitate this illegal transaction were elaborate and aroused suspicions that senior officials at the MIO were personally benefiting from the deal. It is also worth mentioning that at least one of the

7. That is, 15,000 (tons)  $14 ($ 172158) = $210,000.

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companies involved was partly owned by a prominent politician.8 My own investigations did not reveal whether this politician used his public position to facilitate the deal one way or another. Yet the MIO’s actions certainly cost the state by undercharging private companies for the delivered oil, by missing out on profits the ministry could have made itself, and possibly by compounding domestic oil shortages that arose soon afterwards as a result of depleted state reserves (discussed later in this chapter). In the wake of a report published in An-Nahar, the minister for industry and oil, Shahé Barsoumian, denied that there had been anything unusual about his ministry’s dealings with the two companies. Although he had no comment on the evidence provided, the minister accused An-Nahar of serving as the voice of a “cartel” of oil companies and of conducting a smear campaign against the ministry in order to frustrate his attempts to control the oil sector (AN 7 August 1997 and 29 January 1999). The MIO does not seem to have been deterred by the public outcry over its dealings with private oil companies. Indications of collusion accumulated when, in November 1997, senior officials at the ministry stood accused of forging export manifests for what appeared to be the sale of crude oil to a refinery in Houston, thereby granting private oil companies and perhaps themselves a windfall of illicit profits. Copies of export documents published in An-Nahar (10 February 1998) suggested that the MIO had sold 33,986 tons of “oil residues” or “sludge”—not the more valuable crude oil—for $237,902 (or $7 per ton) to a Lebanese private company. The company then loaded the “sludge” onto a tanker and sold it to a French company at $15 per ton, thus generating a profit of 114 percent (on top of extra gains from having paid lower taxes on residues instead of crude oil). After changing hands several times, the oil was finally sold to a U.S. company. An-Nahar claimed that the merchandise did not constitute “residues” or “sludge” but was expensive high-quality crude oil. The newspaper concluded that the treasury had been robbed of millions of dollars. Again Barsoumian denied the accusations against his ministry and stressed that the Lebanese company had been sold a load of inferior and “unclean oil also known as ‘stinking oil’” (AN 14 February 1998). When An-Nahar refused to retract its accusations, Barsoumian filed a libel case against the newspaper. Meanwhile, the newspaper published a copy of a fax, dated 30 January 1998 and sent by a Texas-based surveillance company, confirming that on 29 November 1997 the tanker had delivered a load of crude oil originating from Lebanon (AN 13 February 1998). Its final buyer, a U.S. company, is believed to have paid $80 per ton (DS 2 March 1999). If correct, this information suggests that the MIO 8. Information obtained from Ort, Masri & Associées, Société d’Information Commerciale et Financière (Groupe Reuters), 11 October 2000.

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could have earned $2.7 million instead of the $237,902 it received from the initial Lebanese buyer.9 The state had thus lost out on roughly $2.5 million (excluding transport costs and taxes).10 After the courts investigated An-Nahar’s evidence, they cleared the newspaper of Barsoumian’s charges of libel. Other allegations suggest that corruption has not been limited to the cases I have detailed. The evidence has been less conclusive, however. Many of these allegations concern the ministry’s inspection of imported oil and gas deliveries, which apparently allowed private companies to make large illicit gains in collusion with public officials. In November 1991 high officials at the ministry stood accused of colluding with a local agent of an international oil company and a private fuel inspection company in facilitating the import and distribution of contaminated gasoline (OJ 15, 20, 22, 27, and 28 November 1991 and 4 and 5 December 1999; CDL 28 November 1991). Reports said that blue coloring was added to inferior fuel to make customers believe that the gas contained superior octane levels, for which higher prices could be charged at the pump. The affair came to light following widespread complaints about sour-smelling car fumes causing allergic skin reactions, heart disorders, and breathing problems. Yet a judicial investigation into the matter came to a halt after the main suspect, the oil company’s agent in Lebanon, fled the country. A parliamentary subcommittee opened its own inquiry but met behind closed doors and never reported on its findings. As a result, evidence of any wrongdoing in the case remains sketchy. Indeed, one prominent Lebanese oil trader told me that, in his view, the accusations against the Lebanese agent had originated in a fierce fight, dating back to the early 1980s, between the foreign company he represented and another major Lebanese fuel importer over market shares (interview, Beirut, 10 November 2006). In 1997 An-Nahar alleged that on several occasions senior officials at the MIO had given permission to various oil tankers to defer quality and quantity controls or to skip these tests altogether, ostensibly to speed up the transfer of their supplies to the state-owned Electricité du Liban (EDL) (AN 2 April and 21 August 1997; Sab’a n.d.). In all these cases the officials appear to have violated legislation pertaining to the import of oil products, thereby risking that supplies might fail to meet reported octane levels and agreed-on quantities. Barsoumian cited stock shortages at EDL as the reason for taking “emergency measures” and for deferring inspection on a delivery dated 17 August 1997 (AN 21 August and 3 April 1997). But given the ministry’s simultaneous export of excess fuel supplies to Turkey (as detailed earlier), there were strong suspicions that some senior officials 9. That is, 33,986 (tons)  $80 = $2,718,880. 10. That is, $2,718,880$237,902 = $2,480,978.

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at the MIO had colluded with the importing companies in supplying EDL with inferior fuel or smaller quantities than declared and paid for. In at least some cases, private supply companies are also believed to have obtained lucrative contracts from MIO officials and others acting on behalf of EDL without tendering or by rigging bids in favor of particular oil-importing companies, allegedly after paying bribes. One former minister reportedly levied in this way a “personal tax” of 20 percent on fuel purchases for EDL (Blanford 2006, 63). In June 2004, three MIO officials were arrested on similar charges of benefiting from fuel purchases by rigging bids (AN 30 June 2004). Strict tendering requirements were also reportedly ignored in a decision to sell or lease Tabalayn, a 17,000-square-meter plot of land belonging to the stateowned Zahrani refinery (AN 27 July 1996 and 5 March 1999). As early as 1989, a private Lebanese oil importer had obtained permission from a prominent cabinet minister either to lease or to buy the plot in order to build additional oil reservoir tanks, to compensate for the limited capacity of its tanks in Dawra (Beirut). One usually well informed entrepreneur active in Lebanon’s oil sector claimed that this company was in fact owned by the minister, although this information could not be confirmed by other sources (interview, Beirut, 14 April 2000). Regardless, the governor (muhafiz) of south Lebanon intervened, arguing that the plot belonged to the Zahrani refinery and that its lease or sale therefore required a public auction or tender. But in October 1995 the Council of Ministers agreed to an MIO proposal allowing the same company to use the plot but leaving unclear whether the plot would be sold or leased. No tender was held, and in spite of questions raised in Parliament, the government failed to clarify the reasons for and details of the transaction. After a change of government at the end of 1998, the director of the company was summoned for questioning by the judiciary, but no further action was taken (AN 21 April 1999). Furthermore, officials at the MIO are alleged to have designed schemes to gain private benefit from their duties related to the stockpiling and distribution of oil and gas products. For instance, the ministry authorized a joint Lebanese-Syrianowned gas-importing company, which had enjoyed a virtual monopoly since the 1980s ( Picard 2000, 311), to rent nine empty state-owned gas reservoirs from the Zahrani refinery for $1.2 million a year (AN 12 September 1997; Wakim 1998, 261). The deal was concluded without tender at the end of 1992. But the reservoirs remained empty and have not been used since. It was suspected that ministry officials had taken a bribe for helping the gas importer in withdrawing these reservoirs from the market. Capitalizing on limited supplies, the importer allegedly raised its prices to the customer without having to worry that competitors would be able to offer cheaper gas. Indeed, Lebanese businessmen involved in the energy sector complain about the same importer using “unconventional

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methods in deterring business rivals” from encroaching on its dominant market share, including efforts to control Lebanon’s capacity in storing gas in addition to controlling the tanker trade, squeezing credit supplies offered by Lebanese banks, and issuing overt threats (interviews, Beirut, April 2000 and November 2006). In 2005 a newly appointed minister, Hizbullah’s Muhammad Fneish, was assigned to regulate Lebanon’s energy sector. According to one of his advisers, the first phenomenon the new minister and his personal staff stumbled upon was the extraordinary privilege enjoyed by one major gas importer in renting gas reservoirs from the state: We discovered a major private monopoly [in the gas sector] that was made possible and sustained by the actions of state officials. They had leased all our tanks for storage along the Lebanese coast to this one company against some $300,000 a month. As a result, the company maintained a monopoly position, allowing it to charge steep prices to the public. So we terminated its contract for the storage facilities and offered them to other companies. The company acted surprised and begged us to reestablish relations. But we reduced the [official guidelines for] LPG [liquefied petroleum gas] prices, as we had now effectively countered the company’s argument that owing to high storage expenses, prices charged to the consumer had to be equally high. (interview, Beirut, 10 November 2006)

The exact reason why officials at the MIO had hitherto failed to take similar measures is unclear. Nevertheless, Fneish’s adviser and several Lebanese entrepreneurs involved in the country’s energy business implied that they suspected the prime motives were systematic bribery and/or conflicts of interest (interviews, Beirut, April 2000 and November 2006). Similar misgivings were expressed with regard to the same private importer’s conduct when one of its subsidiaries responsible for the distribution of LPG appeared to have cheated in a scheme initiated by the MIO to bolster safety standards pertaining to LPG bottles (interview with adviser to the minister for oil, 10 November 2006). In March 2003 Energy Minister Muhammad Baydun ordered LPG distributors to replace dangerously aging gas bottles in return for a government-endorsed price increase for LPG.11 The company outwardly complied, but according to Fneish’s adviser, it simply reused at least half of its worn-out bottles while benefiting from the official price increase, thereby netting an estimated $10 million in additional revenues per year. Officials at the MIO and its employees tasked with inspecting the bottle replacement failed to act until Fneish was sworn in as minister, thereby suggesting their incompetence, their involvement in the scheme, or both. In April 2006, upon the request 11. MIO Decision 21 (reprinted in AS 17 March 2003).

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of Fneish, the Ministry of Justice sued the company, forcing it to complete the bottle replacement and pay indemnities. Other allegations in the state’s handling of the energy sector have been raised regarding a private company contracted to clean the state-owned oil reservoirs (AN 10, 11, 12, and 18 September 1997; Wakim 1998, 261). According to the Syndicate of Oil Workers, the payment for the service exceeded by $70,000 what it would have cost if public employees working at the defunct Zahrani refinery (134 functionaries netting nearly $4 million annually in wages)12 had done the job themselves. A senior official at the MIO reportedly told a delegation of the syndicate, “I didn’t know that you were able to do this,” that is, carry out the cleaning operations (AN 10 September 1997). Several members of Parliament, including former prime minister Salim al-Hoss, were not satisfied with this casual explanation, not least because the state’s refinery workers had been carrying out such tasks without difficulty for years (AN 17 September 1997). Indeed, they alleged that senior MIO officials and managers at the refinery held a personal interest in the company involved or had otherwise gained from the contract.13 With so many reported cases of corruption in the MIO’s handling of the oil and gas sector, it should come as no surprise that numerous politicians repeatedly underscored the urgent need for reforms. Early in 1999, for instance, the government, led by Salim al-Hoss, singled out this ministry as its first target in a wider anticorruption campaign. But when a former minister became the first politician since independence to be detained on corruption allegations, it sent shockwaves through Lebanon’s political establishment. The minister was arrested on 4 March 1999 together with five high officials of the MIO and an owner of a private oil company, and was accused of (but not formally charged with) abuse of office, forgery, and taking bribes (AN 5 March 1999). Two months later the judiciary seized the minister’s numerous luxurious villas and other property belonging to the politician and his alleged accomplices, claimed to be worth a total of $50 million (AN 18 May 1999). In February 2000 the former minister was released on $2 million bail. But in December 2002 a criminal court dismissed his indictment, citing a lack of jurisdiction involving a former minister, and accordingly asked Parliament to initiate proceedings within the framework of Article 80 of the constitution, which grants Parliament the right to establish a Supreme Court unhampered by legal provisions related to political immunity (Mugraby 2008, 178). Yet the required two-thirds majority of votes in Parliament needed to activate

12. Figure mentioned in an MIO report prepared by Minister of Oil Sulayman Traboulsi and cited in As-Safir (5 January 1999). 13. In response, the MIO accused “aggrieved companies” of spreading false rumors about the ministry (AN 29 September 1997).

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the court failed to emerge. Instead, a parliamentary “investigative committee,” enjoying no judicial powers, was formed, which in July 2005, absolved the former minister of all accusations of wrongdoing (AN 20 July 2005). In the end, the only individual indicted by a criminal court in connection with the numerous allegations involving the MIO was a low-ranking technician who had inspected the tanker load that had been sold as “sludge” in 1997 (interview with oil trader, Beirut, 13 November 2006). Many of those involved in Lebanon’s energy sector believe that he was a scapegoat for what appears to have been a much wider problem (interviews, Beirut, November 2006).

Shipwrecks, Port Works, and Corruption In 1994 a British joint-venture firm was awarded a contract to clear the heavily damaged port of Beirut of over one hundred sunken vessels, explosives, and debris. Yet sweeping the port of bombs proved to be far less cumbersome than the company’s dealings with port management. By the end of 1998, the firm, which had been unable to finish the work, claimed to have lost around $5 million in a succession of contract breaches, unpaid bills, seizures of the company’s equipment, and corruption among high-ranking officials. The affair topped a list of numerous allegations over corruption, bribery, and bid rigging at the port of Beirut. After a highly competitive tender in 1994, the port’s management, the Commission d’Exploitation et de Gestion du Port de Beyrouth, commissioned a joint venture between the British firms SAR Marine General and Mowlem International to clear the port of all debris. By its own account, the joint company, known as Sar-Mowlem, offered a very low price ($4.39 million), as it was eager to add the experience to its track record in order to obtain similar contracts elsewhere in the Middle East (interview with Fadi Saqr Ruhana, Sar-Mowlem’s lawyer, Beirut, 1 June 1999). But in the spring of 1996, after Sar-Mowlem had shipped in its heavy equipment, the Ministry of Transport began expressing its dissatisfaction. On the pretext that a joint venture could not be the appropriate corporate format for carrying out the complicated tasks at hand, the ministry threatened to declare the contract null and void. The ministry referred Sar-Mowlem’s local representative, Hisham Shaqur, to a prominent cabinet minister to discuss the matter (interview with Hisham Shaqur, Beirut, 10 October 2000). The government’s insistence on reopening the negotiations raised some eyebrows at Sar-Mowlem’s headquarters, where it was assumed that all contingencies had already been agreed on in the contract. Alarmed by the ministry’s statements, the company sent two British experts to join Shaqur in meeting ministry officials. It also requested that the British embassy in Beirut send its own delegate. Yet the meeting failed to clear the air.

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According to Shaqur, the ministry in question made little attempt to explain the government’s sudden reservations. Shaqur recalls that at one point during the discussion, the minister began to sing a song—in Arabic—by the Egyptian folk diva Umm Kalthum bemoaning the lack of response to a lover’s overtures. The word “bribe” was never explicitly mentioned, but Shaqur briefed his headquarters in Lancaster that he had the impression that high officials were soliciting a personal reward or bribe before they would allow the project to go ahead (interview with Hisham Shaqur, 10 October 2000). On 28 June 1996 a senior official at the port sent Shaqur a handwritten fax (État Libanais Gestion et Exploitation du Port de Beyrouth 1996). It stated that, at the request of the Ministry of Transport, the port administration was canceling the contract with Sar-Mowlem on the grounds that the latter had failed to submit all the legal documents concerning its registration and judicial status as required by Lebanese law. The fax provoked some serious doubts. Even if the company had failed to meet formal requirements, its failure should have been flagged during the bidding process, not after the contract had been signed. Moreover, such administrative caveats could have been resolved in routine communications between the ministry and the company and certainly gave no sufficient basis for canceling the contract. Apparently the company had indeed failed to meet a requirement, but Shaqur suspected that the real requirement was the one alluded to in the song by Umm Kalthum (interview with Hisham Shaqur, 10 October 2000). Faced with potential losses, as it had already shipped its crew and equipment to Lebanon, Sar-Mowlem reassessed its options. It ruled out litigation, as it questioned the Lebanese courts’ impartiality and feared further costly delays. The company thus continued its communications with the Transport Ministry and the port’s management. In an attempt to break the deadlock, Shaqur lowered the contracted price to $4 million. The offer was ignored for several months until December 1996, when a new contract was signed that was identical, apart from the lower price, to the contract signed seven months earlier. Previous concerns about the company’s status as a joint venture apparently no longer caused any impediment. Meanwhile, the port had come under new management. On its own initiative, it decided to expand the clearing operation to include a fifth dock, paying SarMowlem an additional $700,000 and so bringing the value of the contract back up to $4.7 million (interview with Hisham Shaqur, 10 October 2000, and with Fadi Saqr Ruhana, 1 June 1999). Accordingly, the company was granted extra time to remove additional wreckage. But during the execution of the project, it turned out that the number of wrecks was in fact 106, more than were initially assumed to have sunk in the port. Also, the vessels’ actual tonnage (20,000 tons) proved to be nearly double what cargo documents at the Customs Department

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had indicated (11,900 tons) (Ruhana 1999, 7). Yet Sar-Mowlem was secured by a clause in the contract that granted the contractor more time in case of extra work or new instructions given by the port’s management (État Libanais Gestion et exploitation du Port de Beyrouth 1996, part A7, clause 24). In October 1997 the port management suddenly stopped all payments. By this time 105 vessels had already been removed, and work on the removal of the last wreck, the Ba’albak, was nearly completed. Arguing that the company had violated the contract by failing to meet deadlines, port management ordered the company’s employees to leave the port immediately. After the company refused to comply, the Civil Port Guard seized the company’s vessels and equipment. When the Sar-Mowlem crew still refused to leave, their equipment was taken away, and port guards fired water cannons at the company’s vessels, prompting the crew to send a mayday broadcast from their on-board radio (Ruhana 1999, 12). In what looked increasingly like a siege, Sar-Mowlem called for assistance from the Court for Summary Proceedings, which immediately sent an investigator. The court official issued his report on 21 April 1998, confirming that the company had removed all shipwrecks except for some remaining parts of the Ba’albak (Ruhana 1999, 11).14 Subsequently the Civil Court sent an official to recover the seized equipment, but guards refused him entry to the site. Ensuing orders by the court to hand over the company’s equipment were ignored. Backed by public statements from the Ministry of Transport charging the company with “piracy,” the port management continued to accuse Sar-Mowlem of violating its contract and of “illegally occupying public property” (DS 27 April 1998). But even among high port officials, management’s actions had raised some doubts, especially when it announced that it had arranged a new tender to finish removals.15 A senior official at the port instructed a Lebanese company to remove the Ba’albak (AD 29 April 1998). The terms of this tender remain obscure, if it was even held in the first place. Initially this senior official publicly declared that the Lebanese contractor would be paid between $250,000 and $300,000 to finish the work within forty-five days (AD 29 April 1998). But it turned out that the contractor was actually awarded $1.4 million for the job (Ruhana 1999, 15; DS 14. The court’s findings on Sar-Mowlem’s progress appear to be congruent with a CDR report which stated that by the end of December 1997, “a contract for removal of wreckage from all port basins was signed with the British joint venture SAR/Mowlem and is at present 70% completed” (CDR-PR January 1998, chapter on “ports and airports”). 15. Informed sources at the port say that this tender never took place and that the new contract was awarded after a mutual agreement between the company and the port management (interview with a high official at the port, Beirut, January 2000). This assessment was later confirmed by a ruling issued by an investigative judge in Beirut who referred to the contract as concluded “by mutual consent.” The judge, however, ruled that a senior official at the port had broken no laws in granting the contract on these terms (AN 5 October 2002; AM 5 October 2002).

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13 January 1999). According to Sar-Mowlem, removing what remained of the Ba’albak could not have cost much more than a few thousand dollars, as the work had been nearly completed.16 This incident fed the company’s suspicions that the difference had been divided between the Lebanese contractor and a senior port official. Moreover, the official then allowed the Lebanese contractor to use Sar-Mowlem’s expensive wire cables to dismantle the wreckage offshore; in fact the Lebanese contractor claimed that these exceptionally strong cables had been salvaged from a sunken ship and therefore belonged to the port.17 In the end, it took the Lebanese contractor more than nine months to remove the remaining parts of the Ba’albak. But this time such delays failed to provoke any protest (AN 5 October 2002; Ruhana 1999, 15). Claiming it had suffered $6.8 million in lost income and damages, Sar-Mowlem filed a lawsuit against the port’s senior manager (interview with Fadi Saqr Ruhana, 1 June 1999). The debacle involving Sar-Mowlem appears to fit a much larger pattern of political corruption at the port of Beirut. First, there were numerous reports in the early 1990s that the port continued to function as an outlet for various hard drugs produced or processed in Lebanon, even though the illicit trade had become less robust than in the war years.18 One reliable source recalled that port officials played a facilitating role by storing containers filled with narcotics on the port’s premises and by helping see them on board cargo ships against payment of bribes (interview with senior port employee, 15 January 2000). Collusion between high port officials and smugglers was also reported in relation to the constant theft of containers or parts of their contents in 1992, allegedly implicating officials acting on behalf of Syrian traders dubbed in the press “foreign Mafiosi” (CDL 13 February 1992; AN 12 January 1993). Persistent thefts provoked some international insurance companies to brand the port of Beirut a high-risk destination. A year later, one of the members of the port commission, Elie Stephan, publicly acknowledged that bribery of port officials was commonplace (CDL 21 January 1993). Reports on bribery and corruption in the port continued to accumulate at an alarming 16. Even if the shipwreck had yet to be completely removed, the award appears to have been excessive. Sar-Mowlem’s contract stipulated that the total costs for removing the entire wreck of the Ba’albak alone amounted to only $341,681 (État Libanais Gestion et Exploitation du Port de Beyrouth 1996, “Bill of Quantities”). 17. One Lebanese contractor familiar with the technical operations involved in removing the Ba’albak dismissed the Lebanese contractor’s claim regarding the wire cables as highly unlikely (DS 13 January 1999). In October 2002 an investigative judge appeared to confirm that the Lebanese contractor had used Sar-Mowlem’s wire cables and other equipment by ruling that the contract and related operations “did not cause harm to the state treasury as [they] went at Sar-Mowlem’s expense.” Sar-Mowlem was judged to have failed in meeting the contract’s terms (AN 5 October 2002). 18. By the end of 1992, customs officials admitted that they were still unable to curb the export of these drugs; around 70 percent were shipped via Lebanon’s seaports, foremost among them the port of Beirut (Makhlouf 1994, 175; United Nations International Drug Control Programme 1992, 10 and customs report presented to the United Nations Office on Drugs and Crime, 20–21 October 1992).

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pace. For instance, it was alleged that port workers received bribes from companies not only for speeding up the handling of their cargo but also for deliberately holding up the unloading of competitors’ merchandise (LR Winter 1995). These reports and accusations began to attract the attention of the Ministry of Transport. After his ouster in 1998, former transport minister ‘Umar Misqawi revealed that he had sent a letter to Prime Minister Hariri in March 1993 warning that since January 1991 there had been “clear flaws [khalal] in running the affairs of the port” (AN 6 January 1999).19 In the letter he pointed out that the port’s accounts for 1992 showed that over $3 million “had evaporated” because of superfluous spending, bogus hospitalization claims and travel expenses, and salaries of staff in high positions who failed to show up at work or who were altogether fictitious. In reply, the port’s former financial director Antoine Bechareh disputed the amounts involved, but he acknowledged that substantial sums of money had indeed been “squandered” (AN 12 January 1999). Misqawi again accused the port commission of chronic corruption in a detailed report prepared and issued by the Ministry of Transport in July 1996 (AS 29 July 1996; Eco News 5 August 1996). The commission, the report read, had “failed to put its house in order” and violated many regulations, leading to unprecedented levels of corruption and “waste.” One accusation was that the commission had deliberately overlooked the port’s available equipment and know-how in leasing cranes, containers, and engineers from private companies, costing the port over $24 million from 1993 to 1995. Collusion between the port’s staff and “thirty” private companies had allegedly made tenders meaningless and had driven up the costs of these services to such high levels that it would have been cheaper to buy the equipment instead of leasing it. Furthermore, the report accused members of the commission of granting themselves and other upper-level port officials high salaries and bonuses while failing to justify these expenses in the commission’s accounts. Individual commission members dismissed most of the accusations, but they also pointed out that if money had been wasted as a result of rigged bids, it was because government ministers had imposed particular companies on the commission during the tendering process or had forced the commission to change its choice of company after the fact (AN 9 December 1996). One senior port official confirmed that pressure from individual ministers was commonplace (interview, Beirut, 27 January 2000). Whatever the accuracy of all these allegations, foreign contractors appear to have shared a widespread perception of haphazard policies and a corrupt environment at the port. In the wake of the Sar-Mowlem debacle, in 2001 the Dubai Port 19. Misqawi s accusations need to be regarded critically, however, given the fact that the main subject of his allegations is the port’s former financial director. The latter was also a prominent leader of the port workers’ union, with whom Misqawi clashed more than once over labor and retirement conditions.

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Authority (DPA), which in 1998 had signed a twenty-year contract to operate and manage one of the port’s newly built container terminals, suddenly pulled out of the deal when it was confronted with unexpected demands to bring in its own equipment, including heavy-duty cranes worth millions of dollars (DS 22 January 2003). Another source of dispute was excessive demands for compensation by thirty-two private operators in the port (already mentioned in Misqawi’s report in 1996), most of them linked to key politicians, who risked being driven out of business as a result of the DPA contract. Although the details remain obscure—not least because the DPA never elaborated on its reasons for canceling the contract—one Lebanese business magazine reported that “the DPA was just not able to operate in [the] Beirut harbor, infected as it was by corruption” (Speetjens 2005). Two years later a tender was prepared to find another company, heightening concerns which had by now become common that the process would be riddled with favoritism and corruption, despite the fact that this time the tendering process had been outsourced to a U.S. consultancy group (DS 5 November 2003). The numerous allegations just detailed give us reason to suspect that political corruption at the port of Beirut has been rampant. A broad range of sources suggest that high-level officials—and perhaps even ministers—were involved in using public office for private gain. In the scandal surrounding Sar-Mowlem, it was claimed that senior officials appeared determined to extract illicit gains from public procurement. In June 1999 a former senior port official and a contracted Lebanese entrepreneur were both arrested on criminal charges of participating in an act of theft and obstruction of justice. In addition, the port official was charged with embezzlement of public funds and abuse of office. In response, he launched a campaign in his own defense, denying all accusations and denouncing Sar-Mowlem as a “fictitious company” (shirka wahmiya) that had never intended to fulfill the terms of its contract (AM 12 August 2001; Iskandar 2006, 99–100). Within six months after their arrest, both men were released on bail. The charges against them were finally dropped in October 2002 after an investigative judge concluded that it had been Sar-Mowlem that had breached the contract by causing undue delays in removing port debris (interview with Fadi Saqr Ruhana, 21 November 2006; AN 5 October 2002; AM 5 October 2002). Legally this absolved both men of any guilt. Yet the general impression survives that the port of Beirut had provided fertile ground for corruption.

Eating Mountains: Quarries and Corruption Since the French mandate, Lebanon’s mountains have supplied stone, slate, and sand for construction. More than seven hundred quarries can be found all over

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the country, foremost in Mount Lebanon and the Biqa’, although estimates vary (Sarraf, Larsen, and Owaygen 2004, 19; Dar al-Handasah 1996, 1:1–20; AS 18 April 2006). In the immediate environs of Beirut, large quarries have become a common sight. But with additional supplies needed for intensive rebuilding in the 1990s, quarrying soon became a cause of serious concern. Local residents living close to quarry sites increasingly complained about the immediate effects. Quarry owners also stood accused of blasting their way through Lebanon’s mountain ranges in disregard of the environment and natural heritage, causing pollution and irreparable damage to valleys, rivers, and natural parks. In 2004 a team of World Bank investigators estimated that the damage resulting from unchecked quarrying in Lebanon amounted to $14–16 million a year (Sarraf, Larsen, and Owaygen 2004, 20). “They are eating up the mountains so badly,” commented Abdallah Zakhia, an environmental activist, “that we need to change our geography books” (DS 9 December 1998). Confronted with such complaints, policymakers repeatedly promised to subject the quarrying business to state regulation. By the mid-2000s, however, the industry seemed as unregulated as before, and at most quarries, business went on as usual. To assess corruption in the state’s relations with the private quarry business, I begin by setting out where the state, and the Interior Ministry in particular, has failed to intervene in the sector, notwithstanding existing laws and regulations and despite abundant reports of serious violations of the law. I focus on two basic policy instruments at the government’s disposal: the licensing of quarries, mainly by the Interior Ministry, and a law dating from 1935 stipulating certain minimum standards for the operation of quarries. First, there is ample support for the claim that the Interior Ministry and enforcement agencies persistently failed to enforce the closure of unlicensed quarries. According to a study issued by the consultancy agency Dar al-Handasah in 1996, 55 percent of the country’s 710 quarries were operating without a license (1:1–20). Citing similar numbers almost ten years later, another study, this one by the Ministry of the Environment (MoE), claimed that illegal quarries covered at least three thousand hectares (AS 18 April 2006). As all sorts of licenses and permits originate from various state agencies, the boundary between “legal” and “illegal” is often blurred, causing such estimates to be far from exact. Yet complaints about violations, occurring in or near a large number of villages across Lebanon, exemplify the extent of illegal quarrying and, by implication, the inertia on the part of the Interior Ministry and enforcement agencies. The Internal Security Forces, directed by the Interior Ministry, briefly clamped down on illegal quarrying in the wake of an outright ban by the Council of Ministers on quarrying outside designated areas in October 2002 and again in July 2003 (DS 4 and 9 July 2002; OJ 2 and 4 October 2002). At first the internal security forces appeared

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to be strictly imposing the official ban by systematically closing down quarries, which resulted in shortages and steep price rises (OJ 11 and 12 October, 27 November 2002, 1 August 2003; DS 16 November 2002) as well as fierce protests from quarry owners, truck drivers, and building contractors. In December 2002 the minister of the environment, Michel Mussa, claimed that most illegal quarries had been forced to stop operations except for an unspecified number doing “limited and temporary work” (DS 5 December 2002). Yet unprecedented as the enforcement campaign was, it proved to be short-lived. Soon reports reemerged about extensive sand and stone extraction in illegal quarries all over the country. In addition to the environmental damage caused by unlicensed quarrying, lack of law enforcement in this sector implied a significant loss of state revenues that would have accrued from quarry operators if they had been paying fees and taxes. A study by the MoE in 2006 estimated such potential revenues at around $6 million each year, compared with the mere $9,000 the state treasury actually collected (AS 18 April 2006). A second pattern of violations against which the Interior Ministry and enforcement agencies failed to take action concerns the technical modalities and conditions regarding quarrying operations as laid down by law (Legislative Decree 253 of 1935; Decision 37 of 1974; Urban Planning Council Decision 6 of 1975; Legislative Decree 69 of 1983). Even though environmental activists generally see these legal instruments as outdated and far too lenient, most quarries—whether licensed or unlicensed—systematically failed to comply. For example, the use of explosives is legally limited to sixty kilos of TNT to blow up rocks no more than three cubic meters in volume and to extract rock in vertical—not horizontal— columns (Abu Fadil 1998, 26–27). Yet the Lebanese federation of environmental NGOs, Green Forum, and other sources claim that quarry owners generally opted for much more powerful explosions, applying up to ten metric tons of TNT in horizontal columns in order to speed up the quarrying process and thus minimize costs (DS 3 March and 11 December 1997 and 25 August 2003; Abu Fadil 1998, 29). Local residents complained about massive explosions causing cracks in their houses in scores of both urban and rural locations (AN 1 January and 20 March 1997, 23 March 1998, 13 April 1999). Other persistent violations included quarrying near groundwater resources, riverbeds, and residential areas (Dar alHandasah 1996, 44; Abu Fadil 1998, 29). Also the legally required “rehabilitation” of quarries after their use, in order to prevent danger to both local residents and the environment, has been systematically ignored (Dar al-Handasah 1996, 44). In all these cases the Interior Ministry and law enforcement agencies failed to take action, and no perpetrators were brought to justice. The failure to enforce the law where violations were blatant and well documented raises suspicions that corruption guided the conduct of public officials, in

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particular those of the Interior Ministry and the security forces and gendarmerie under its command. Although the mere failure to act, even if persistent, does not provide sufficient evidence of corruption, the likelihood of corruption increases when a failure to act has been backed up with affirmative steps that supported quarry owners and protected them from a strict application of the law or from limits imposed on their activities. This forms the second part of my argument. That senior officials at the Interior Ministry were not keen on maintaining a clear and solid regulatory framework is evident. Most important, the ministry’s actions obstructed and ultimately helped defeat efforts to prepare a “master plan” to regulate quarrying. Accordingly, a preparatory survey by Dar al-Handasah had been completed in 1994, but the Interior Ministry prevented its publication until January 1996 (interview with a geology expert involved in the survey, Beirut, 3 March 2000). During this period, senior Interior officials simply denied many of the data mentioned in the report, including the proliferation of unlicensed quarries and their negative impact on the environment. Meanwhile, in June 1995, the ministry torpedoed another initiative aimed at imposing strict regulations on quarrying, a decree issued in September 1994 (Decree 5616) by the MoE. The opaque institutional and regulatory setting that resulted from their actions generally allowed senior officials at the Interior Ministry to use or withhold their powers at will. The Interior Ministry also prevented the closure of certain quarries that were particularly detrimental to the environment. For example, following demonstrations by local residents and environmental groups in February 1996, the Council of Ministers ordered the closure of the Abu Mizan, Zabugha, and Nahr Ibrahim quarries within six months (Minbar al-Bi’a February 1998; Abu Fadil 1998, 29). Quarry owners ignored the decision, and no security forces were sent in to enforce the deadline. In October 1996 Interior Minister Michel al-Murr declared that he would refuse to give in to public pressure (and the will of the cabinet) to close down the quarries. Acknowledging his responsibility to enforce the cabinet’s decision, he simply stated that the security forces had been ready to close the quarries but had not done so “because the master plan was not ready” (OJ 12 October 1996). Of course, the cabinet’s decision six months earlier had made no reference to the master plan, and as noted, it was in fact the Interior Ministry that had caused the delay in formulating a master plan in the first place. In any case, the Interior Ministry granted the quarries a new extension to continue operating until March 1997. This scenario was repeated time after time while quarries exhausted their sites and eventually closed down voluntarily. Another way in which the Interior Ministry encouraged illegal quarrying was by supplying explosives to quarry owners. By law the latter can purchase explosives only from the Interior Ministry. It is likely that the ministry has been eager

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to uphold this regulation, given its preoccupation with military security concerns shortly after the war. Consequently, the ministry must have known the identity of licensed and unlicensed quarry owners to whom it delivered explosives. Moreover, the ministry must also have been aware of the use of massive amounts of explosives, in contradiction of the regulations. From this perspective, the ministry not only failed to enforce the law but also was an accomplice in the illegal quarrying business. Finally, in conjunction with senior officials at the governorates, the Interior Ministry began issuing “permits” to quarry owners to clean up their sites before closure. Such “rehabilitation licenses” were in fact often used as cover for the continuing presence of heavy machinery onsite and its use in further quarrying, sometimes at night. Obviously the ministry and the governorates knew why their rehabilitation licenses were in such demand. Moreover, there were sustained reports about cases of abuse—and virtually no quarry owner in Lebanon has ever made an effort to rehabilitate the sites damaged by its operations. On top of all this, rehabilitation efforts are required by law; they do not need a license. The very invention of such licenses seems to have been a deliberate move to encourage illegal quarrying under the guise of environmental concerns. What emerges, then, is that state officials failed to act against illegal quarrying and undertook affirmative steps that had the effect of encouraging such operations or thwarting attempts by others to stop them. The suspicion that such behavior amounted to corruption becomes plausible in the presence of unbridled conflicts of interest, even when they provide insufficient substantiation for individual cases of corruption. Some politicians involved in the decision-making process regarding the quarries had a direct or indirect stake in the sector by owning quarries or controlling quarries through close relatives. Available if incomplete data on ownership shed light on various ministers and politicians who were involved in the decision-making process. Two key players have been reported to own quarries themselves or through their relatives, mainly in their own electoral districts. According to Interior Ministry data, as cited in the Dar al-Handasah report (1996, vol. 2), these men personally owned a quarry in northern Lebanon, although one application for a license was stated to be “under study” by the Interior Ministry. The report also mentions a second quarry whose ownership was shared by the minister’s brother, who also helped organize the minister’s election campaigns before a rift arose between the two brothers in the late 1990s. Another reliable source, the human rights lawyer Abdallah Zakhia, suggested that the two brothers owned many more quarries in the area either directly or indirectly through relatives and political allies (interview, 15 June 1999). Zakhia also pointed out that one of them participated financially in the infamous quarry of ‘Amshit-Hurariya, a site operated by one of the largest quarry owners

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in Lebanon. Finally, the same minister reportedly owned an asphalt factory, which processes quarried stone or grind, in an area where the authorities had been particularly reluctant to shut down illegal quarries (AN 10 October 1996; interview with Habib Ma’luf, environmental activist and journalist, Beirut, 1 June 1999). Other political players in the quarry controversy are similarly reported to have enjoyed—directly or indirectly—financial interests in the sector. One of the biggest quarries in the country, in Siblin, was jointly owned by Prime Minister Hariri, Minister for the Displaced Walid Junblatt, and an unknown third party represented by MP Aladdin Terro (Dar al-Handasah 1996, vol. 2).20 This (licensed) quarry was operated by a Lebanese construction company and a multinational, a joint venture that received a major contract to rebuild Beirut’s international airport. Another individual, the head of one prominent politician’s personal team of advisers, has close relatives who own and operate a large quarry in ‘Atman (Dar al-Handasah 1996, vol. 2). A senior minister and MP also had large financial interests in the quarrying business through his brother. This brother owns quarries in ‘Ain Dara (‘Aley), Dahr al-Baydar, and elsewhere (Dar al-Handasah 1996, vol. 2). Other politicians who were reported to have links to the quarry sector, either directly or through relatives, include a powerful party leader and former minister, allegedly owner of a quarry in Tufayl (interview with senior staff member of Dar al-Handasah, Beirut, 17 October 2006); a minister of state whose close relative owns a quarry in Basir (DS 12 March 1997); an MP who owns a quarry in Kisirwan (Interior Ministry cited in Dar al-Handasah 1996, vol. 2), and his brother, owner of quarries in Abu Mizan, Hrajil-Bsharra, and Shnanir (Interior Ministry cited in Dar al-Handasah 1996, vol. 2);21 another MP and former head of the Metn Federation of Municipalities, who has direct stakes in two quarries in Wadi Zanduka-Metn (Dar al-Handasah 1996, vol. 2); and a Zahle MP and head of the parliamentary Committee for the Environment, who owns a large quarry in Raiit and whose close relative owns a quarry in Rasiit-Zahle, which, according to Dar al-Handasah (1996, vol. 2), failed to obtain a license. Possible conflicts of interest in Lebanon’s quarrying business also involve Syrian operators. Details of ownership here are murkier, but according to a prominent environmental activist and other sources, Syrian businessmen, often connected to or directly engaged with Syrian politicians and security officials, were participating in major quarry sites (interview, Beirut, 12 March 1999; Faddoul 2004).

20. Junblatt stated that he owned 29 percent of the quarry’s capital. In March 1997 he offered to close one smaller quarry in the area after local residents protested, but the main quarry continued to operate (AN 10 March 1997; DS 10 and 12 March 1997). 21. This MP maintained, however, that he had no stake in his brother’s operations (DS 17 and 28 January and 14 September 1998; AN 23 March 1998).

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In some cases Lebanese operators, including one prominent politician and former minister, were alleged to have been acting as a front for Syrian interests (AS 14 January 2006). Such claims are impossible to corroborate. Yet it is clear that Syrian individuals and companies closely linked to Syrian decision makers were keenly interested in the significant revenues generated by Lebanon’s quarrying sector.22 Furthermore, Syrian involvement in Lebanon’s decision making in the quarrying sector was significant, as we shall see in chapter 5. The overlap of private interest and public office at times generated tightly woven networks involving major politicians, senior state officials, and their close relatives, which were used to capitalize on lucrative opportunities in the quarry and construction business. For example, a quarry in Shnanir (near Jounieh), owned by the brother of an MP and minister, provided large amounts of quarried material to a joint venture company that also participated in a quarry firm jointly owned by key politicians. This joint venture carried out major construction works at the international airport of Beirut. This MP’s brother also supplied a highway project between Jounieh and Beirut carried out by a company owned by the brother of another major politician. The MoE strongly objected to quarrying in Shnanir on grounds of the site’s close proximity to residential areas and groundwater reservoirs (DS 11 December 1997, 28 January and 15 April 1998). The MP’s brother admitted that he did not have a license for quarrying but stated that the CDR, which contracted and supervised the building activities at both the airport and the highway, had given permission for his activities in Shnanir (AN 23 March 1998). At the time, the CDR included senior officials formerly employed by a prominent politician’s private company. Repeated requests by Minister of the Environment Akram Chehayeb, a member of Junblatt’s political entourage, to stop quarrying in Shnanir, following residents’ complaints about heavy explosions, were rebuffed by the Interior Ministry, which refused to shut the site down. Instead it granted the MP’s brother a license to “restore the land and remove rocks” (DS 28 January 1998). Concerns about the environmental effects of the quarry in Shnanir were heightened when the local representative of Greenpeace declared that the site was heavily contaminated by toxic waste dumped during the war in what had become known as the “Jelly Wax scandal” (DS 14 January 1998; Hamdan 2002, 182).23 Using rock from this quarry, Greenpeace warned, posed a serious threat to public health. In spite of these warnings, quarrying in Shnanir

22. In 2003 several Syrian individuals and companies, including a major quasi-statal construction firm, applied at the Lebanese MoE for a license to open new sites for quarrying (AS 12 October 2003). 23. In the mid-1980s, Lebanese nationals, most likely linked to a key militia, were paid by a GermanItalian company to allow the dumping of toxic waste in Lebanon. One of the ships carrying the waste was named the Jelly Wax (Hamdan 1996).

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went on, no serious measures were taken to clean up the quarry, and the Interior Ministry failed to halt operations. Real or potential conflicts of interest such as these are not sufficient to support claims pertaining to individual allegations of corruption. Yet they certainly amplify concerns that politicians and senior officials used their positions and influence to safeguard their private interests in the quarrying business and construction sector. Phrasing their assessments in equally broad terms, some Lebanese observers, researchers, and policymakers arrived at similar conclusions. In 1998 Chehayeb accused “44 [unnamed] politicians,” most of them MPs, of having “direct or indirect links” to the quarries and, as a result, making his work at the MoE impossible (AS 25 August 1998; DS 26 January 1999). “Political and private interests in the quarrying sector are seriously intertwined,” a researcher with Dar al-Handasah told me. “As a result, each quarry is protected by a politician. Illegal quarries were closed down only when their mahsubiya [political patronage] was too weak” (interview, Beirut, 21 November 2006). Nabih Berri, the long-standing speaker of Parliament and leader of the Amal Party, concurred: “I know that some owners of quarries enjoy political cover” (DS 19 June 2002). Such views were echoed in the public at large. In August 2003 the Association for Forest Development and Conservation, a Lebanese NGO, surveyed one thousand adult Lebanese; 87 percent of respondents believed that sand and rock quarries in Lebanon were tightly connected to politicians’ personal interests (DS 25 August 2003). Bribery, too, seems to have been common, allowing quarry owners to continue their operations while politicians and senior public officials received a share of the proceeds. Several reports suggest that quarry owners funded the election campaigns of a number of MPs and municipal representatives. In return, these officeholders reportedly endeavored to provide quarry owners with (temporary) licenses from local authorities or made inquiries on their behalf at the Interior Ministry. Chehayeb, when he was minister of the environment, denounced such practices during municipal elections in 1998 (AN 3 June 1996). But according to one informed source, quarry owners were believed to have funded election campaigns during the parliamentary elections of 1992 and 1996, especially those of candidates in areas where quarrying was particularly controversial and susceptible to official clampdowns (interview, Beirut, 8 March 1999). Metn district MP Nassib Lahoud suggested in this context that there had been a relationship between the failure to enforce a cabinet decision to shut down quarries in 1996 and the parliamentary elections held shortly before. According to Lahoud, quarry owners who supported candidates during the elections were “rewarded” through MPs’ good offices (AN 8 October 1996). Given the bloated campaign budgets of parliamentary candidates in Lebanon (Sadir 1998, 507), such allegations seem plausible, especially in regions where quarrying is one of very few sources of revenue,

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as in the Metn and in north Lebanon. Together with politicians’ ownership of quarries, such forms of bribery are likely to have been a main motive for obstruction of the rare attempts to enforce existing legislation and government decisions. Furthermore, quarries were even reported to have played a role in Lebanon’s presidential elections, held by a vote in Parliament. When, on 3 September 2004, Lebanon’s Parliament gathered to vote on the controversial three-year extension of Émile Lahoud’s term as president of the republic by constitutional amendment, one MP and former minister withdrew his long-standing, fierce opposition and voted in favor—after a ban on his profitable quarrying activities was overturned (Blanford 2006, 106). Following the Syrian withdrawal in March 2005, the same MP signed a joint statement with several other MPs claiming that they had been coerced into voting for Lahoud’s extension (UNSC 2006, annex 2). Bribery is also said to have permeated the Interior Ministry’s security forces and gendarmerie. According to Chehayeb, quarries operating at night paid kickbacks to senior officers who had to verify these quarries’ compliance with the rules or shut them down (DS 11 December 1997, 28 January and 6 June 1998). Similarly, violations of legal stipulations on quarrying would be overlooked by security forces in return for a bribe to an officer in charge. Chehayeb also repeatedly accused local authorities, including governors, of issuing “temporary” licenses in return for bribes. These allegations were underscored when, in March 1999, a former governor of Mount Lebanon and his personal adviser were indicted for alleged fraudulent practices involving the licensing of quarries (AN 20 February 2003). The arrest warrant accused the two men of offering quarry owners temporary licenses at discounted prices and pocketing the fees, thereby depriving the state treasury of millions of dollars of income. Both men left the country as soon as judicial investigations began. The question of their guilt or innocence notwithstanding, judicial measures were certainly of a very selective nature, as the practice of ad hoc licensing in return for bribes appears to have been commonplace. According to the environmental activist and lawyer Abdallah Zakhia, several quarry owners admitted to him that they regularly paid kickbacks to officials at both the Interior Ministry and governorates for the purpose of obtaining temporary licenses (interview in ‘Amshit, 15 June 1999). Reports of “brokers” (simsarin) providing “services” at the ministry also suggest that filling in a form no longer sufficed in applying for a license (AN 6 September 1996). Provisional arrangements to issue temporary licenses indeed had the effect of increasing the opportunities to demand bribes from quarry owners. Interestingly, Zakhia recounts a conversation with a high official at the Interior Ministry who objected to an overhaul of the temporary license system (interview in ‘Amshit, 15 June 1999). Zakhia pointed out to the official that temporary licenses only exacerbate the environmental damage caused by quarrying, as operators have an extra

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incentive to do the work as quickly as possible. The official allegedly countered by saying that he preferred temporary licensing because this way “extra charges” (that is, bribes) could be levied more often than when a license was given for a longer period of time. The upshot is that evidence from various sources suggests that corruption in the state’s relations with the quarrying sector was widespread. First, there has been a consistent failure to enforce the law regarding unlicensed quarrying and impose legally stipulated modalities on quarrying operations. The role of the Interior Ministry stands out as significant owing to policies that, in effect, encourage unbridled and illegal quarrying. The common occurrence of conflicts of interest provides additional reasons to suspect substantial corruption among several politicians and senior officials who helped shape state policies toward quarrying. Finally, in addition to conflicts of interest, bribery appears to have permeated the relationships between state officials, local administrators, politicians, and those active in the quarrying sector.

Reconstruction and Corruption Responsible for rebuilding the country’s postwar economy, CDR officials have been accused of violating tendering requirements, overspending projected costs, allowing illegal subcontracting, financing infrastructure facilities for private use, and contracting with companies under conditions of unbridled conflict of interest (Shams ad-Din 1999, 113–130). Such allegations are particularly serious given the fact that, especially in the 1990s, the CDR controlled and managed the lion’s share of the state’s capital expenditures. Documentation in support of these allegations is hard to come by, however, not least because of the CDR’s lack of transparency. At the same time, some of the CDR’s critics were clearly motivated by grievances other than those directly related to incidents of corruption. Nonetheless, in three areas of CDR activities it is possible to obtain some level of detail, allowing for a careful assessment of several of the charges. What follows is a discussion of the CDR’s involvement in road works, waste management, and the rebuilding of the Beirut Central District (BCD).

Road Works Until 2000, when the two agencies merged, the CDR and the Executive Council for Grand Projects (ECGP) shared joint responsibility for the (re)building and rehabilitation of the country’s main roads. As soon as work started in the mid-1990s, it was alleged that contractors were receiving excessive payments and

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projected budgets were systematically overspent. Muhamad Shams ad-Din lists a series of road projects commissioned by the CDR that, he claims, eventually incurred expenses which bore little relation to projected costs (1999, 120–23). Verifying these figures turned out to be difficult. The CDR’s periodic progress reports ( January 1994, August 1995, March and October 1996, July 1997, and January 1998) indeed refer to significant price increases on numerous road projects. But just as frequently these reports note that in subsequent years the projects were divided up into smaller parts, or they suddenly cite expenditures on “consultancy,” thus making it difficult to draw comparisons over time with the original appropriations. Nevertheless, looking back to his experiences regarding road works throughout the 1990s, one former senior official with the CDR conceded that “overspending on contracts was commonplace” (interview, Beirut, 28 October 2006). What is less doubtful is that the CDR’s contracting policies on road building failed to ensure proper cost management. One study cited by Kamal Dib (2005), a Lebanese-Canadian economist, found that constructing one kilometer of highway in Lebanon costs several times more than constructing one kilometer in California. An earlier study by the World Bank reached similar conclusions. Comparing Lebanon’s average expenditure on road maintenance per kilometer with that of other countries, the World Bank experts found that the Lebanese state paid twice as much as Finland, where costs are exceptionally high owing to an extreme climate. Their report blamed these “excessive expenditures” on “inefficiencies” and “a lack of systematic planning and control” (1996, 9–10). One possible explanation for excessive expenditure may involve flawed tendering. Yet if corruption occurred mainly in the tendering phase, for example, by rewarding expensive but bribe-paying contractors, it is difficult to verify, for the CA, which at times reported on such cases elsewhere, generally was not authorized to scrutinize road projects undertaken by the CDR. The court did examine some minor aspects of CDR road rehabilitation that fell under the formal responsibility of the ECGP, including awarding and managing contracts for feasibility studies and technical consultancies. In these fields the court registered serious irregularities in tendering and unwarranted increases in costs (CA 1999, 57–60). What this implies for the tendering process for road-building projects on the whole, and therefore involving the CDR, is far from certain. Yet the CA’s findings strengthen suspicions that the CDR’s failing cost management originated here. One possibility is that, as one road contractor put it, “bids were deliberately kept at unrealistically low price levels in order to win tenders. After this, the real costs were pushed to the maximum” (interview, Beirut, 26 October 2006). This contractor pointed out that the CDR failed to enforce regulations of the Genevabased Fédération Internationale des Ingénieurs-Conseils (FIDIC) stipulating that overspending by a certain percentage of an engineering contracts’ value should

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result in a new tender. CDR officials allowed large cost overruns, and to judge from the CDR’s high expenditures on road building, persistently so. Another related allegation concerned the quality of work that CDR officials appeared to tolerate. Critics claimed that despite around $1 billion spent on road maintenance and construction throughout Lebanon by 2004 (CDR-PR July 2004, 29), many roads remained in bad shape (IIM May 2004). A former MP who followed the CDR’s operations commented that technical “specifications ruling ten centimeters’ thickness for newly paved roads were not adhered to. Some parts would reach ten centimeters, yet others would reach only three centimeters. The inspector, after being ‘greased,’ inspects only the parts that comply with the regulations” (AN 30 May 2000). More generally, the problem seems to be the CDR’s blatant inefficiencies with regard to its road-building projects—including the selection of expensive contractors at the tendering stage, lack of enforcement of rules against overspending, and failure to penalize substandard work. This may have resulted from bribery. It may also have been the result of political interference in a sector riddled with latent conflicts of interest. Critics pointed out that the ownership of the constructing companies involved reads like a directory of Lebanon’s political elite; key ministers, MPs, and other politicians owned the main contracted companies, or were closely linked to these companies by family ties (Wakim 1998, 272).24 In addition, Syrian nationals also held important stakes in its neighbor’s road projects. It should be emphasized that not all politicians concerned were implicated in corrupt dealings. Yet reports on the CDR’s irregularities in combination with general ownership patterns involving major political players certainly give grounds for concern. Though reluctant to delve into details when asked about possible bribery and conflicts of interest, a former senior CDR official confirmed that “most of the corruption [in the CDR] was in building projects, particularly concerning roads and highways to the south, that were agreed on in the Council of Ministers” (interview, Beirut, 28 October 2006). Detailed allegations pertaining to the CDR’s road works have been rare. One such scandal concerned the rehabilitation and building of the coastal road between Tyre and Sidon. Part of the project covered the road from Tyre up to the Qana junction, and another part connected the coastal road up to and including the coastal road at Sidon (al-kornish). Regarding the first project, a feasibility study commissioned by the CDR estimated the costs at $167 million (Shams ad-Din 1999, 112). But in 1995 a Syrian company was awarded the contract for a much higher amount, $206 million (or $6.2 million per kilometer), after a tender in 24. Politicians were also mentioned by the CDR as having received multiple contracts in road construction (CDR-PR July 1997 and March 2000). The CDR stopped publicly identifying rewarded companies after its March 2000 progress report.

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which three companies are said to have participated (Syrian company’s statement, AN 29 December 1995). The second contract, for road works in and around Sidon, was awarded for $67 million (or $11 million per kilometer) to a Lebanese company owned by a prominent politician (Wakim 1998, 272). When these deals leaked to the press, members of Parliament, foremost among them Beirut MP Salim al-Hoss, expressed their concern that both companies had overcharged the state (AN 7 November 1995). In response, the Syrian company explained that it had charged only $6 million per kilometer, not $11 million, as Hoss had alleged (AN 29 December 1995). Moreover, the company stressed that, unlike with most road works contracted by the CDR, it had arranged a loan for the project, the costs of which were included in the cited price. The Lebanese company involved in the second road-building project refrained from making any comments. Yet even when we take into account the financial arrangement mentioned by the Syrian company, the costs were still significantly higher than prices charged by other companies working on the coastal road. For example, as Hoss rightly pointed out, the Damur-Jiyyeh road had cost only $1.5 million per kilometer (Shams ad-Din 1999, 113). Surely such a price difference could hardly be explained by interest payments. Furthermore, even though Hoss did not state that he suspected a conflict of interest to be at the root of this discrepancy, it was implied by the prominence of the two companies’ ownership. The Syrian enterprise is a quasi-state-owned company. Its operations in Lebanon have met with suspicion, as its links to the Syrian state and favored businessmen might easily have been used to pressure Lebanese decision makers, including those of the CDR. The other contractor, as noted earlier, was owned by a prominent Lebanese politician and run by his brother. In March 1996 Minister of Public Works ‘Ali Hrajli announced that “negotiations” initiated by the CDR had resulted in substantial price reductions (AN 19 March 1996). The Syrian company was now said to have agreed to $165 million (or nearly $5 million per kilometer), $41 million less than before. The Lebanese company agreed to $55 million (or $9 million per kilometer), $12 million less than in its original contract. But the CDR never explained why the original contracts had been so costly or, indeed, how prices could have been reduced so drastically following the uproar over the initial costs. The CDR also failed to elaborate on how the reduced prices compared to bids made by other companies in 1995. The question arose whether the rival bids had been so unattractive that they exceeded even the original bids of the two winning companies, which the new deal now showed to have been excessive. Najah Wakim denies that this was the case, citing unnamed contractors who told him that they could have carried out both projects for $3 million per kilometer while still making a profit of $1.5 million per kilometer (1998, 273). If Wakim’s information is correct, then the

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state lost out on more than $100 million in these two deals alone.25 If these estimates are representative of the sector as a whole, given the sizable expenditures on road building, total losses on corruption in Lebanon’s road works may have run into billions of dollars.

Waste Management In 1994 the CDR awarded a three-year contract to a newly established Lebanese company for the collection of waste and street sweeping in greater Beirut. The contract was subsequently renewed several times and expanded to areas outside the capital. Skyrocketing costs, tender violations, and possible conflicts of interest repeatedly prompted accusations that this sector had become riddled with corruption. The value of the waste management contract initially amounted to an annual $3.6 million, subject to fluctuations in the actual volume of garbage collected (CDR-PR January 1994, 27). It was agreed that the CDR would pay for the first year of the contract and the City Council of Beirut for the two remaining years. The contract further stipulated that the CDR would—at its own expense—provide the company with trucks and necessary equipment to carry out the work. Moreover, the contracted company would be able to employ workers from the city’s municipal waste management authority, provided that the company covered their public wages (at significantly lower levels than private salaries). Finally, the contract gave the company the right to make use of a waste dump in Karantina (east Beirut). At this stage, the contract arranged by the CDR was already raising some serious doubts. Earlier, a report prepared for the Beirut city council and presented to the CDR and Prime Minister Hariri had claimed that the city’s own waste management authority, properly reorganized, could collect waste for $1.5 million a year, about half the cost charged by the private company (Antoun et al. 1998, 79; Wakim 1998, 157). Without giving any explanation, the CDR chose to ignore the report. Moreover, the contract with the Lebanese company seemed favorable to the latter, as the company was obliged to pay its workers only a gross salary, leaving additional allowances such as on health insurance premiums and pensions to the city council (Antoun et al. 1998, 79). But in spite of its initial objections, the city council, headed by a senior minister’s former employee, gave in to heavy pressure from the CDR and agreed to the contract.

25. That is, ($165 million  $55 million)  (33km  $1.5 million  6.1 km  $1.5 million) = $102.7 million.

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In subsequent years the Lebanese company would receive other contracts renewing its initial agreement and expanding its operations to street cleaning, waste separation and treatment, and operating incinerators. Suggestions by the Beirut city council that it could have conducted some of these tasks itself for what it claimed would have been substantially lower costs were again ignored by the CDR. Moreover, the CDR granted the company new contracts to conduct waste collection and street cleaning in Beirut’s suburbs, Mount Lebanon generally, and the Chouf region, thereby facilitating a massive expansion of the company’s operations. By 2005, the value of contracts awarded by the CDR in the solid waste sector generally had mounted to $982 million, most of which had gone to this company, its subsidiaries, and partner companies (CDR-PR July 2005, 22). Serious doubts were expressed as to whether these contracts offered good value for the money. Suspicions centered on the stated costs of collecting each ton of waste, which were continuously renegotiated, causing total costs to rise from an initial $15 per ton to $20 per ton in subsequent stages (Shams ad-Din 1999, 126; DS 13 April 1999). On top of this, the amount of waste that the company claimed to have collected continued to be much higher than expected, and the contract for greater Beirut alone, which had started as a $3.6 million operation, was costing the Beirut city council $8 million per year by the end of 1998 (Shams ad-Din 1999, 126). Meanwhile, independent cost assessments presented contradictory data, suggesting that at a charge of $16 per capita per year for the company’s services in the greater Beirut area, the price tag appeared to fall within the typical range for low- and middle-income countries (Massoud and El-Fadel 2002, 625); yet the costs were in excess of those in Tripoli, Lebanon’s second-largest city, where waste management was still overseen by the municipality’s own sanitation department (Massoud 2000, 183–84). By all accounts this contractor had received a lucrative deal. Some observers suggested that bribery or conflict of interest might have facilitated this good fortune, although no solid evidence emerged. Interior Minister Michel al-Murr was quoted as saying that “up to 70 percent of the company’s costs, which is millions of dollars, went as commission to top leaders in the government” (DS 21 July 2003). He did not provide further details or evidence to prove this claim. Yet suspicions that the CDR’s dealings with the private contractor had involved dishonest practices appeared to be corroborated when the CA used its powers to look into the use of funds belonging to Beirut’s city council and the Independent Municipal Fund (ImF). As the waste management contracts had been at least partly financed from the ImF, the CA could indirectly scrutinize the contracts awarded by the CDR. In March 1999 the CA concluded that the contracts had failed to comply with strict rules on tendering procedures and should therefore be considered null and void (AN 1 April 1999, Magazine 9 April 1999). These procedural irregularities, which suggested that the private contractor had been

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granted its expanding contracts without fair competition, gain further significance in light of available data on the company at the outset of its operations. At its establishment in 1994, briefly before it received its first contract, it had had at its disposal only $20,000 in start-up capital, by all standards very little for a company that was to run a multimillion-dollar business requiring substantial capital investment (information obtained at the author’s request from Ort, Masri & Associées, 11 October 2000). One may wonder why the CDR apparently had no qualms about contracting with a company that could not possibly prove, either from its start-up capital or from an established track record, that it could effectively carry out capital-intensive services in waste management. It has been alleged that a key politician and senior minister held a controlling stake in the company, which may have caused the CDR to contract with the company for what turned out to be an extremely profitable operation (interview with MP and former minister, Beirut, 21 October 2006). The company’s own shareholder information does not list this senior minister. Yet its records do identify a major bank that is owned by this politician as the company’s main financer (Ort, Masri & Associées, 11 October 2000). Whether a possible conflict of interest caused an untested and initially capital-starved company to obtain its first contract is difficult to prove. Yet comments made by the manager of the company point to a very thin line between useful political interventions to overcome bureaucratic obstacles and a conflict of interest and favoritism: “Garbage is politics. . . . Politics goes very much with the garbage business. You have to be close with the politicians when you enter that area and they want a service from you. [We] had to be close to [this senior minister] because it is a waste management business where you have to be close to the government” (DS 13 April 1999). In December 1998 the Ministry of Municipal and Rural Affairs (MMRA), in charge of managing the ImF, responded to mounting apprehensions over possible favoritism involving the company by appealing to the CDR to cancel its contracts and to stop payment until further notice (AS 2 October 2001). A former CDR president was briefly placed under investigation and interrogated by the judicial authorities in May 1999 for allegedly violating tendering procedures, but no charges were pressed (OJ 21 May 1999). For its part, the private contractor presented hefty compensation claims for damages while repeatedly calling on the CDR and the government to pay $161.3 million in arrears owed for work in 1998 and 1999 (AS 2 October 2001). Yet as the Hoss government’s resolutions to enable direct municipal management of the waste sector failed to be followed up, the CDR in 2001 once again extended its contract for waste collection and street sweeping in the greater Beirut area, which had expired on 31 December 2000 (CDR-PR July 2005, 113). No further steps were taken to investigate this and other related allegations regarding irregularities in the CDR’s dealings with the private contractor.

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Corruption and Windfall Profits in the Center of Beirut On 7 December 1991 a far-reaching amendment was made to the legislative decree that created the CDR (Decree 5, 31 January 1977) in order to facilitate one of the most controversial reconstruction projects in Lebanon’s history. The amendment, promulgated by Law 117, stipulated that the CDR—at its own initiative but subject to the approval of the Council of Ministers—would set up a private joint-stock company tasked with the reconstruction of the BCD. Following a statutory meeting of its shareholders in May 1994, this joint-stock company, named Solidere (Lebanese Company for the Development and Reconstruction of the BCD), was formally established. The company commenced work in September that same year. Many criticisms have been raised about Law 117 and Solidere, but our concern here relates only to several allegations about the use of public office for private benefit. This will in some cases require brief explorations of the project’s institutional framework, in anticipation of a full discussion in subsequent chapters. The first main allegation concerns the reported bribery of members of Parliament to pass Law 117. The British journalist Nicolas Blanford reports that several MPs received between $50 and $100,000 each for voting in favor of the law, while one MP is said to have received $15 million (2006, 222n22). Similarly, MP Najah Wakim claims that about forty deputies voted in favor of Law 117 after they received bribes, thanks to intermediation by some associates of a key politician (AN 13 December 1994; Wakim 1998, 145–52; Naba 1999, 42). Wakim also alleges that some of these bribes consisted of $50,000 to $100,000 in cash. He adds that other MPs received interest-free loans from a major politician’s private banks—up to $1 million each—that enabled them to subscribe to Solidere’s initial public offering in January 1994 (Wakim 1998, 130–37).26 Wakim recalls in this context how MPs very quickly abandoned their initial opposition and voted in favor of Law 117. Furthermore, he contends that one prominent politician allegedly replied to accusations of bribery involving Law 117 by saying that there had been no legal breaches as the MPs themselves had not benefited from the loans but “only their wives” (AN 13 December 1994). Wakim also claims that when he asked a senior minister about bribing MPs to pass Law 117, the minister replied, “God has blessed me with plenty of money, and if the needy come to me to ask for help, shouldn’t I give some to them?” (AN 13 December 1994). When asked to identify the MPs who accepted money from him, this same minister is said to have remarked that “even the Prophet accepted presents” (AN 13 December 1994).

26. Wakim further alleges that MPs later sold their $100 shares for $140–170, thus making a handsome profit (1998, 130–37).

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It is impossible to verify the authenticity of these statements. Yet Wakim has not been alone in claims related to bribery. Constantine Karam, a lawyer to disgruntled former property owners in downtown Beirut, contended that a major politician’s “friends in politics, deputies, and MPs” were offered credit at very low or no interest in order to subscribe to Solidere shares, which they could sell when the shares had risen significantly: “We discovered it was these politicians who sold. . . . [I]t was a way to bribe the politicians in a legal way, so everyone made $500,000 in four or five months” (Ohrstrom 2007). According to former property owner Costa Dumani, at least two banks with insider knowledge of Solidere’s affairs alerted shareholding politicians when to sell, enabling them to earn between $100,000 and millions of dollars (Ohrstrom 2007). Consistent with these allegations, the aforementioned senior minister’s own ambivalent comments, made in an interview with the weekly Al-Wassat, come very close to justifying bribery and thus confirming the allegations against him. Responding to a question whether accusations regarding bribery and Law 117 were true, he stated: “Talk of bribery in the former Parliament does not target Solidere so much as it shows the lack of credibility of the former Parliament that brought about the Ta’if Accord. In other words, suspicions and doubts implicate the political system itself. It is said that some forty MPs took bribes. . . . This means there are suspicions directed against the majority of MPs and against what they decided under circumstances associated with a despicable [political] system” (AW 27 February 1995).27 Solidere, for its part, dismissed the allegations, accusing Wakim of “misleading public opinion” in an attempt to “sabotage one of the most important projects [designed to] rectify the misstep of war and leaving behind seventeen years of killing and destruction” (AN 15 December 1994). Wakim handed over incriminating documents to the state prosecutor for financial fraud. The latter took no steps to investigate the affair. A second allegation concerns a stipulation of Law 117 which rules that no shareholder in the company may “acquire, directly or indirectly, more than 10 percent of its capital.”28 The original owners of real estate in the area—who were “compensated” by receiving shares in Solidere corresponding to the stated value of their assets—were in this way legally assured that their voting rights in the company would not be overshadowed by a few large stockholders. Critics of Law 117 immediately pointed out, however, that without additional measures to ensure complete transparency of ownership in Beirut’s security markets, this

27. In contrast, Fouad Siniora, a close associate of Prime Minister Hariri and later appointed minister of state for finance, strongly denied the charges (AN 21 December 1994). 28. It further specifies that “the husband and wife of the stockholder and their descendants are deemed to form one single person” (Law 117, 7.1.a/b).

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stipulation was meaningless (AN 21 September 1991). Others argued that Law 117 regards only direct relatives as being one person, thus ignoring the common practice among Lebanese businesses of operating on the basis of capital kept within extended families (Corm 1996, 175). Moreover, Law 117 made it easy to circumvent the 10 percent limit on ownership by financing or delegating a third party to obtain additional shares. According to Wakim, this is exactly what happened (1998, 129–30, 147). Not only were MPs allegedly bribed with interest-free loans to purchase stocks, but also political allies and their relatives were purportedly assisted in buying shares through “fictitious” real estate companies. Wakim alleges that one prominent politician indirectly owned a much larger share of Solidere than Law 117 allowed, despite his declared subscription of only $125 million in shares (about 7 percent of the company’s total capital) in January 1994 (LR February 1994; AW 27 May 1995). It is impossible to obtain independent confirmation of these claims. Yet one does not have to accept the full list of accusations to see that certain politicians’ heavy financial participation in Solidere—within or beyond the 10 percent limit—created fertile ground for conflicts of interest. The clearest example arose from a stipulation in Law 117 (7.4, 5) that reads: The Real Estate Company should, for the account and at the expense of the State, and in accordance with a contract between the company and the CDR . . . finance and implement the infrastructure works such as the water, electricity, sewage water courses and roads’ networks . . ., telecommunications and other public installations and constructions in the concerned area. . . . In accordance with an agreement between the company and the [CDR] and after approval of the Council of Ministers, compensation will be paid to the company for the value of all or part of the works’ expenses and charges.

Consequently, in September 1994 Solidere reached an agreement with the CDR and the Council of Ministers to finance and carry out infrastructure works at an estimated cost of $475 million (Solidere 1995, 23). The state compensated Solidere in kind by granting the company the right to own and exploit half of reclaimed land gained from a 600,000-square-meter landfill (named Normandy) and an additional 79,000 square meters of publicly owned land in the traditional BCD area (interview with senior Solidere official, Beirut, 9 October 2000). Whether this deal between the state and Solidere can be considered fair to both sides is, of course, an extremely complicated question, foremost because in 1994 future gains from the landfill and additional land in the BCD could only be estimated. Such assessments are relevant, however, in that, at the time of the transaction, they provided a background against which privileges granted to the

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company were weighed against the services it was to provide. On the basis of Solidere’s own calculations, the revenues expected to be generated from the landfill amounted to roughly $900 million (interview with senior Solidere official, 9 October 2000).29 For the additional surface area acquired in the traditional BCD, a similar calculation shows additional expected revenues amounting to $237 million.30 Total expected revenues were $1.137 billion. Accordingly, Solidere was set to make a profit of around $662 million on carrying out and financing the infrastructure works.31 Thus, even if we assume the company’s “compensation” to allow for profits (and Law 117 does not make that clear), the profit margin on the entire operation was nearly 140 percent. Solidere officials dispute this assessment. According to the company’s finance department, the real costs of Solidere’s operations carried out on behalf of the state amounted to $900 million, far more than the $475 million budgeted (interview with senior Solidere official, 9 October 2000). On this reading, the company’s profits would not exceed $237 million. But this reasoning seems flawed, for two reasons. First, the original agreement between the company and the state stipulated that “Solidere undertakes to implement at its own expense and responsibility the . . . works whatever their actual costs” (Solidere 1995, 23, emphasis added). Second, the company’s finance department includes $250 million incurred by the eviction of illegal occupants in the BCD (discussed later in this chapter) in its calculation of total expenses on “infrastructure works.” Yet neither Law 117 nor the bilateral agreement of September 1994 includes such expenses in costs incurred by “infrastructure works,” which otherwise were meticulously identified. The fundamental flaw in the state’s contracting of Solidere to implement public works therefore comes down to a serious mismatch between the agreed value of infrastructure works carried out by the company and the estimated revenues the latter, at the time the deal was struck, was expected to generate from landfills and land in the BCD. Solidere argues that at the time of the agreement such estimates had not even been made and that the deal was simply concluded “in good faith” (interview with senior Solidere official, 9 October 2000). This argument is implausible, 29. That is, 300,000 sq. m. (i.e., half of the landfill’s total surface)  3 (i.e., the average number of floors per sq. m.)  $1,000 (expected selling price per sq. m. based on 1994–95 prices) = $900 million. It is assumed here that the area’s build-up factor equals 3. In reality, this is likely to have turned out much higher. 30. That is, 79,000 sq. m. (total surface)  3 (the average number of floors per sq. m.)  $1,000 (expected selling price per sq. m. based on 1994–95 prices) = $237 million. 31. It may be argued that actual profits could have been expected to have turned out lower, given the costs incurred by financing the period bridging the payment of contractors on the one hand and revenue inflows on the other. (For the landfill, for example, sales were not scheduled until 2005.) Such costs, however, are unlikely to measure up against the large profit margin on the project. Moreover, Solidere could temporarily lease land (as it has done) before selling it and gain additional revenues exceeding the approximate amount mentioned here.

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given the huge amounts of public resources involved, the state’s fiscal constraints, and the scope and importance of the project. A more likely explanation for the fact that the 1994 agreement tilted heavily in Solidere’s favor is that the deal was struck against the background of some serious conflicts of interest. Participants in the negotiations that produced this agreement included the board of directors of Solidere (in which a prominent politician was a major shareholder),32 managers at the CDR (who were formerly employed by a prominent politician’s private enterprise), and the politician himself in his capacity as senior minister. One might expect that negotiations took place in a rather cordial atmosphere, and the company may have received favorable conditions at the expense of the state. The politician acknowledged on several occasions that his substantial participation in Solidere could indeed lead to conflicts of interest. Even before he joined the Council of Ministers, he pledged that his companies would not compete for any projects to be carried out in the BCD, specifically to avoid any conflict of interest (AH 11 July 1991). But apart from the fact that his companies carried out such projects anyway,33 promises like this could not alter the fact that the far-reaching agreement of 1994 was reached in the context of conflicts of interest. The expected outcome of the deal—heavily favorable to Solidere—appears to mirror these conflicts of interest. The actual benefits Solidere eventually generated are unknown. Later, however, Solidere reported in reference to the landfill operation that “early purchasing of sites in the new waterfront district for delivering to investors on completion of land reclamation [contributed to] a boom year” (2005, 7). Allegations were not limited to the bribing of MPs or to potential conflicts of interest in the infrastructure deal but also concerned the scheme designed to compensate original owners and tenants in the BCD. Law 117 (art. 4) stipulates that the properties of between 100,000 and 150,000 owners and tenants in the BCD would be transferred to the Real Estate Company (REC). These owners and tenants were to be compensated with a grant of shares in the REC that equaled the value of their original property rights. In order to determine the value of these property rights, Law 117 called for the establishment of “appraisal committees” presided over by judges and appointed by a decree adopted in the Council

32. This prominent politician’s formal representative on Solidere’s twelve-member board of directors was formerly employed in one of his private companies. At least six other members of the board were either very close to or sympathetic toward this politician (AS 30 December 1992; AA 8 January 1993; AH 20 July 1993). 33. A report by the CDR reads that one of these companies “has been assisting the CDR since January 1992 . . . in most areas of CDR activity” (October 1996, 67). Moreover, the same company supervised and designed the reconstruction of the Grand Serail in the BCD, which houses government offices. The prominent politician privately contributed $6 million to the project (AN 20 August 1998).

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of Ministers. Accordingly, in February 1992, scores of prominent judges were appointed to evaluate the property held by owners and tenants. Here also, serious allegations over conflicts of interest were raised. It remained unclear who or what these evaluation committees actually represented and, accordingly, what authority they exercised. Law 117 leaves the strong impression that the committees should be considered an integral part of the state. Moreover, after the decisions reached by the “committees of first evaluation” had been endorsed by “higher evaluation committees” (also staffed by judges), decisions were to be considered “final and not subject to any remedies at law.” In brief, these committees were effectively granted the powers of a court and were thus part of the judiciary. Accordingly, Solidere consistently referred to the committees as “judicial appraisal committees” (Solidere 1995, 16). In response to a query submitted by Beirut attorney Muhamad al-Mughrabi, however, the Higher Judicial Council (which looks into disciplinary matters within the judiciary) ruled on 21 February 1994 that the committees should not be seen as an integral part of the judiciary, for the simple reason that the council had no part in forming them and had no jurisdiction over them (Mughrabi 1995). This, of course, left two important questions. First, if these evaluation committees had no judicial powers, how could they issue “final” and binding decisions? Second, if these committees were not part of the judiciary, how could judges legally perform their tasks, given the statutory provision that judges are strictly banned from taking up positions or carrying out tasks outside the judiciary, let alone in the private sector? Mughrabi’s questions about these matters to the Higher Council of Judges remained unanswered. If the committees did not represent the judiciary, whom did they represent? The fact that the judges had been appointed by the Council of Ministers suggested that the committees had been part of the state. As Mughrabi (1995) noted, however, the state budget made no specific reference to any fees or salaries the judges received, which reportedly amounted to up to $4,000 per property evaluation (Ohrstrom 2007). On top of this, the committees’ headquarters were located in a building that was neither owned nor rented by the state. Only when details of a conflict between the CDR and Solidere over $3.3 million in overdue payments leaked in July 1999 did it become clear that Solidere had pledged to pay the fees received by judges and other “experts” on the evaluation committees (AlBayan July 1999). Hence, a private company with a direct financial interest in the outcome of these evaluations was paying fees to numerous prominent judges for their extrajudicial (and arguably illegal) consultations. The judges were involved in a serious conflict of interest, or as some critics put it more provocatively, their salaries were tantamount to bribes (Mughrabi cited in AN 16 October 1999; Wakim 1998, 151).

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Conflicts of interest involving judges are likely to have influenced their appraisal decisions in favor of Solidere. Indeed, according to some owners, the appraisal committees grossly undervalued their properties. This accusation is, of course, difficult to substantiate, given the technicalities and expertise involved in evaluating individual properties. A few considerations suggest, however, that evaluations indeed failed to match the market value of the real estate concerned. First, Law 117 stipulates that “the committees shall issue their decision after having inspected every plot situated in the concerned area” (4.3). But the committees often failed to conduct such site visits and instead based their decisions on assessments produced by Solidere (Al-Bayan October 1995; Mughrabi 1995). Second, extensive demolition works in the BCD had already begun in April 1992, long before the committees had completed their appraisals (Makdisi 1997, 674; Schmid 2002). It would thus have been physically impossible for the appraisal committees to inspect all affected properties, as at least some had already been destroyed. Again, appraisal decisions seem to have been based on criteria other than those prescribed by Law 117. Third, Law 117 (art. 1) stipulates that the REC will arrange the reconstruction of the area according to a “master plan” ratified by the Council of Ministers. One could plausibly argue that only when such a master plan had been finalized and ratified could one assess the market value of a specific plot or building in accordance with the expected revenues from the future use of the location. In reality, however, the master plan originally drawn up by Dar al-Handasah in 1992 underwent many changes and amendments until a “final master plan” was eventually adopted in September 1994, long after the evaluation committees had started to operate and after the trade in Solidere shares began on Beirut’s securities market (Eddé 1997, 237–39). The committees therefore valued specific properties even though they were unable to calculate or assess their future worth. Early estimates are for this reason likely to have undervalued plots because later master plans showed a continuous increase of the build-up area in the BCD (Eddé 1997, 237–39; Beyhum 1993–94, 105–07; Corm 1996, 180; LR November 1992). Unsurprisingly, none of the judges protested against these unfair practices by the very company that paid their salaries.

“Political Money” and the Displaced Throughout the 1990s the Lebanese government pursued a large-scale program to encourage and facilitate the return of hundreds of thousands of individuals and families displaced by combat. Two newly created institutions, the Ministry for the Displaced (MfD) and the Central Fund for the Displaced (CFD), spent between 1994 and 2005 a total of $1.2 billion (MfD 2005, 4). Yet in 2005 the plight of

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the displaced was still far from being resolved. Only a tiny proportion had in fact returned to their original homes, thousands of squatters still occupied houses, many destroyed villages had still not witnessed any rebuilding, and the ministry and the fund were faced with an enormous backlog of individual applications for compensation while struggling with severe cash shortfalls. The exact reasons for the failure of the program are manifold and complex (Feghali 1997, 35–40). Yet various assessments, by international and Lebanese aid workers and observers (International Labor Organization 1997; Norwegian Refugee Council 2004; Picard 2002, 168; Assaf and El-Fil 2000), in addition to one important internal investigation launched into the activities of the CFD in 1999 (AN 15 March 1999), all concluded that corruption in the form of political patronage, favoritism, and bribery had helped to undermine the return program drastically. This appraisal is consistent with sustained and more detailed allegations of corruption leveled against both the ministry and the fund ever since their program started in 1992. One of the many complaints raised against the government’s handling of the issue of the displaced concerned the disproportionately high expenditures—until 2005 amounting to $410 million—paid in compensation to evict “squatter” families from homes left deserted during the war (MfD 2005, 4). Several cases suggest that many bogus claimants were paid large sums of money because politicians able to influence the subsidy program saw the financial allocations as a way to buy votes or bolster their general popularity among their constituencies. Perhaps the most notorious case was the attempted eviction of illegal occupants from the Government Hospital and its immediate surroundings in Bir Hassan, in the predominantly Shi’ite suburbs south of Beirut. In 1993 the government decided to spend over $50 million to reconstruct Beirut’s only public hospital there (CDR-PR January 1994, 36). The project was seriously hindered, however, by the presence of thousands of families who, during the war and especially in its last stages, had taken refuge in the hospital’s premises. Some occupied the hospital itself, and other displaced families had constructed temporary barracks surrounding the main building. By the early 1990s the area had turned into a virtual village characterized by “unregulated” building, lack of basic provisions, and extreme destitution (El-Kak 1997, 195). Consultations between Elissar, a newly created quasi-public institution responsible for the area’s “redevelopment,” and the CFD led to a compensation scheme with the aim of evicting squatters and allowing reconstruction activities to begin. Official figures on both the number of evicted families and the amount of compensation they received are unavailable. But the MfD reports that the fund paid nearly $31 million in compensation to squatters in several public buildings in Beirut, including the Government Hospital (1998, 34). According to Shadi Mas’ad, who became director of the Central Fund for the Displaced in January

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1999, “a huge part of this sum” was spent on families in the hospital complex (interview, Beirut, 10 July 1999). Mas’ad also found that many of the beneficiaries had built more illegal structures so they could file new claims with the fund. Other families moved in from surrounding areas as it soon became known that the fund was starting to pay compensation. Many of these applicants were also granted substantial payments, even when the required evacuations never took place (Mas’ad cited in OJ 1 July 1999; AN 2 February 1994; AW 27 June 1994). In 1998 Minister for the Displaced Walid Junblatt acknowledged that the fund’s “money had been wasted,” particularly in reference to the case of the Government Hospital (AN 6 July 1998). One explanation for the fund’s unbridled generosity in Bir Hassan was that the spending spree was aimed at removing local opposition to the real estate company Elissar—a major politician’s brainchild and private investment (El-Kak 1997, 198–99)—and thus expedite the “redevelopment” of the southern suburbs of Beirut. An alternative, or perhaps complementary, explanation suggested an electoral rationale. Kamal Feghali, a former adviser to the CFD, recalled that when he asked his superior at the fund about the reason for the heavy spending on the squatters of Bir Hassan, his superior replied that it was by order of a senior minister (interview, Jounieh, 23 June 1999). In this context, allegations during the 1996 parliamentary elections that this same minister had benefited from the scheme make some sense (interview, Jounieh, 23 June 1999). Determined to have his candidates elected, this minister reportedly mobilized all the resources under his control, including those of the fund, to ensure an electoral victory in Beirut and overcome his weak ties to the city, he being from a different city (Rougier 1997, 123–26.). The fund’s resources—managed by one of his allies, a former employee (Ingels 1998–99, 286)—seem to have been used in an attempt to win the Shi’ite vote in this area, which proved essential to the minister’s political fortunes. Such an interpretation is consistent with other reports of the fund openly using its money to boost politicians’ electoral machines (Sulayman 1997, 163; AS 2 September 1996). Another example of politically motivated spending on the eviction of squatters pertains to evictions in the BCD, the area falling within the mandate of Solidere. In 1992 a report prepared by the General Security Forces estimated the number of families illegally occupying properties in this area at only 2,200 (AL 20 October 1995), mainly residing in Wadi Abu Jamil in what used to be the old Jewish quarter of the city. Perhaps most or all of these families, but certainly no more than this number, could legitimately have claimed compensation from the fund, provided they could show that their occupation of buildings in this area had been a direct consequence of their displacement elsewhere, primarily from the Shi’ite areas of south Lebanon and ad-Dahya, the southeastern suburb of Beirut. But by

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the end of 1997, the fund said, it had paid compensation amounting to $212.5 million to evict a total of 21,063 families from the area (MfD 1998, 35).34 Not only had the squatters’ population miraculously grown nearly 860 percent during five years of relative calm, but also the average compensation paid per family (over $10,000) was much larger than the average compensation of $6,000 paid to squatters throughout the country during 1993–1998.35 Reports by the international press agency Reuters, reprinted in the Lebanese press (AN 5 May and 2 September 1995), provide some clues as to what had happened. The reports quote local residents as saying that the fund’s resolution to compensate squatters in its area triggered a full-scale trade wherein residents of ad-Dahya began selling their ID cards to “ex-militiamen” posing as “brokers” (simsar). The latter acted on behalf of these families in “popular committees” which were founded to defend the interests of the squatters in the BCD vis-à-vis Solidere and the fund. The committees drew up highly inflated lists of claimants for compensation, which were handed over to the fund. Other irregularities occurred when squatters who had already received compensation simply moved to a neighboring building in order to apply for a second or even a third time. The reports concluded that almost overnight, povertystricken Wadi Abu Jamil had turned into a wadi ad-dhahab (valley of gold). One explanation for the fund’s leniency is that a key and influential MP pressured a prominent cabinet minister to urge his allies in the fund to make payouts to all applicants in the BCD, regardless of whether they were entitled to compensation. In this way the MP apparently calculated that he could ensure his political standing in the Shi’ite community at large. In an interview with An-Nahar (12 November 1994), the fund’s official pointed to this MP as ultimately responsible for the decision to evict the squatters from Wadi Abu Jamil. After threatening to resign over the issue, the CFD manager engaged in lengthy negotiations with the MP, thereby confirming the MP’s influential role in the affair (AN 26 October 1994). Finally, the “popular committees” that were instrumental in forcing the fund to pay were indeed run by officials of the MP’s political entourage (AN 5 May 1995). In conclusion, this MP seems to have used his powerful position in Parliament to force the fund to throw money at his Shi’ite constituents, regardless of whether they were genuinely displaced or not. 34. Solidere reportedly claimed to have paid around $250 million for the eviction of eighteen thousand families (Eddé 1997, 247). 35. Even when one disregards the estimate of the 1992 population in the area, the fund’s figures still turn out to be excessive according to a calculation including the area’s population density. The slightly different figures provided by Solidere indicate that the squatters lived on approximately one-fourth of the area’s total surface of 120 hectares, that is, 30 hectares. This means that this area’s population density, if we follow Solidere’s figure of eighteen thousand families (or 108,000 persons), would have been around 3,600 persons per hectare. This seems unlikely, given that the total population of the entire area of the BCD (120 hectares) in 1975 did not exceed 100,000, or 833 persons per hectare (Eddé 1997, 247).

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The cases of Bir Hassan and the BCD are only two examples of a pattern: politicians use influence to force the fund to spend money on their constituencies— whether the recipients are eligible for compensation or not—in order to bolster their electoral chances. Similar incidents occurred when squatters were evicted from the former headquarters of a political party in west Beirut (DS 6 November 1998; AN 7 November 1998); from private housing units in ‘Aley (AN 17 September 1997); in Na’ameh, where no houses were occupied yet “squatters” were nevertheless paid $650,000 (IIM October 2002); in Qantari (AN 29 May 1997); and in Kfarnabrakh (Chouf), where the number of families per apartment jumped as soon as the fund asked residents to register with the MfD (MfD 1998, 37 and 7). Most of the cases listed here were in some way or another related to the electoral campaigns of key decision makers. Yet even some of the CFD’s managers repeatedly stood accused of having used funds under their control to boost their own political careers. In June 1996 one such manager announced his intention to run for election if a certain prominent politician wanted to put his name on his list of candidates for Beirut (OJ 18 June 1996). His candidacy, he hastened to add, should not be interpreted as clashing with his responsibilities at the fund because the compensation scheme would thereafter concentrate on areas other than Beirut. Moreover, this official pledged that he would resign from his post as soon as elections were held, in accordance with the internal regulations of the fund that forbid its officials to take other positions. As the 1996 elections approached, this fund official failed to leave his position formally. According to Feghali, an “exception” was made on the pretext that the electoral law had been adopted only one week before the elections were held, and that the official could therefore not have prepared his resignation in time (interview, 23 June 1999). Moreover, and contrary to his earlier statement, this official ran for election not in Beirut but in a village close to the capital. This mixed Druze-Christian village had in 1983 been the scene of “a bloody carnival” (Hanf 1993, 279), as Junblatt described the violent clashes between his own Druze militia and the Maronite Lebanese Forces at the time. Consequently, the area had suffered as no other region did from the problem of displacement. In this delicate context, the fund official, on whom many of the displaced relied for their livelihood and security, presented himself as a candidate. Several of his electoral opponents in the village, including an established politician, protested fiercely and accused him of using his position to win votes (Nassif and Abu Mansif 1996, 95). One established politician presented a formal complaint when it appeared that several employees of the fund had helped run the CFD official’s election campaign. Unsurprisingly, many inhabitants felt that their votes had become intrinsically linked to the fund’s future decisions about their return to the area (Majid 1997, 260n6). As it turned out, a virtually unknown fund official beat a more established politician and his

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list with great ease. Following the 1996 elections, the fund official did not resign as he had indicated and as the fund’s regulations required. He stayed on as the fund’s “acting director” until 1999, when he was removed from office.36 In some cases, prominent politicians appear to have benefited personally from the fund’s spending, directly receiving allocations for dubious or undeclared projects supposedly serving the displaced. In this context a former CFD employee gave the author a copy of a check dated 8 January 1996 made payable to an MP and former minister, in the sum of $942,000. Mas’ad, the former fund director, explained that the payment was made to rebuild a vegetable market in the politician’s constituency but added that “there appears to have been no justification for allocating the money to [this politician] personally” and that documentation on the case had been removed from the fund’s archives prior to 1999 (interview, Beirut, 23 October 2006). The name of another politician, also an MP and former minister, appears as beneficiary on three other checks from the fund, dated 25 February, 18 August, and 14 October 2004, amounting to a total of $180,000.37 These checks were made payable to a local branch of a charity owned and run by this politician. Yet this charity’s confessional clientele is not represented in the village where the endowment was said to be operating; nor are any internally displaced persons (IDPs) in the village likely to have had a relationship with the charity. This does not constitute conclusive evidence of wrongdoing, but the fund’s checkered reputation caused some observers, including one former fund official, to look at the transaction with suspicion. After all, as this official asked, “why would a charity otherwise openly used for this MP’s political purposes be rewarded by the fund for some services in a village where this charity is unlikely to operate and even less likely to assist IDPs of a different confessional denomination?” (interview, Beirut, 3 November 2006). Subsidies for the restoration of damaged buildings and public procurement by the ministry and the fund also bear the taint of corruption. Many examples suggest that claimants were compensated for damages to properties that never existed and that contractors were heavily overpaid for work under conditions of dubious contracting practices. In greater Beirut, compensation was paid out for repairs on a larger number of housing units than were classified as “damaged.” For instance, the ministry’s statistics show that in the qadha (administrative sub-unit) of Qasqas ninety units were restored, although only sixty-three were recorded as damaged (MfD 1998, 74). According to Feghali, the ministry entered these data in the report to embarrass a major political rival (interview, 23 June 1999). This way, 36. The fund official, of course, saw no problem in this clear conflict of interest: “I’ve given the displaced all my attention and I will remain the MP of their return” (DS 19 September 1998). 37. Copies of the checks were shown to the author by a CFD official.

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the former fund adviser believes, Junblatt was emphasizing that his opponent’s electoral victory in Beirut during the 1996 parliamentary elections had been facilitated by the fund’s spraying money around.38 But ministry statistics also show inexplicable variations in payments to private contractors who removed the rubble from destroyed residential units in the Chouf (MfD 1998, 66–67). Such removals in this region cost on average around $500 per unit, but in some places the fund paid contractors a much larger sum (MfD 1998, 65). Some of these variations may have been due to differences in unit size or in accessibility, but that is not how Feghali experienced the fund’s procurement policies firsthand: There was a meeting [of the fund’s administrators] to discuss the removal of rubble of destroyed houses. One contractor had given a quotation. Although the price was much too high, his offer was accepted. Yes, there were tenders, but nobody checked them. I protested, but to no avail. At other meetings a price was accepted, but when I came to the next meeting, they had changed the price. In the beginning some officials protested, but this stopped when contractors also approached them. On many occasions relatives of members [of the fund’s administrative board] were awarded contracts to remove the houses. And when [a prominent politician] wanted one of his companies or friends to receive a contract, he personally intervened. (interview, 23 June 1999)

Feghali’s testimony is consistent with more general observations about the fund’s procurement policies. The fund’s 1999 internal investigation similarly disclosed irregularities in arranging tenders (AN 15 May 1999). Another report, prepared by the Maronite League, also alleged that contracts awarded by the fund were consistently allocated on the basis of “mutual consent” (bi-turadi), thereby violating requirements regarding competitive tendering (AD 13 June 1996). Available evidence suggests that high-level political corruption has been rampant in the postwar scheme to address the plight of the displaced. Nevertheless, the cases I have detailed—except perhaps those regarding public procurement and dubious checks given to politicians—were distinct from the predominant form of corruption in other institutions, where public resources directly disappeared into the pockets of high officials and politicians. Resources for the displaced were primarily manipulated to buy votes and boost individual political careers. “This is all about patronage [mahsubiyya] and elections—it always has been,” said former fund director Mas’ad (interview, 3 November 2006). For this reason, Lebanese

38. The ministry’s 1998 report does not mention the number of “destroyed units” when listing similar restorations carried out in the Chouf, Junblatt’s regional stronghold.

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commentators and relevant decision makers preferred to describe the embezzlement and fraud at the ministry and the CFD with the term “political money” (AN 15 March 1999). Perhaps because public resources served personal political interests, both ministry officials and fund managers did not deny widespread fraud and embezzlement (DS 1 January 1999; AA 30 July 1995). Apparently, using the scheme’s funds for electoral gain rather than financial gain was seen as more acceptable or even inevitable. “Political money,” however, signifies a particular form of high political corruption. No means—including cheating and other illegal manipulations—were shunned to ensure that the scheme’s public resources rendered personal (if largely nonmonetary) gains for the key decision makers involved. Public office therefore was systematically used for private gain. Such practices made a mockery of the overall aims of the resettlement program and added insult to injury for the genuinely displaced it was supposed to serve. High-level political corruption was rampant in a wide range of institutional contexts in postwar Lebanon. In some cases the evidence for corruption was stronger than in others. Such differences may to some extent be explained by varying motives—and their political weight—for revealing corruption. For instance, if corruption has no direct losers but only winners, it is unlikely to be revealed, as none of the parties involved has an interest in exposing the transactions. Politically motivated revelations can distort accounts of the real course of events, and so I examined the individual cases critically, assessing the plausibility of such allegations. As a consequence, some cases were not included, even when I could not rule out corruption. Such prudence may have rendered my list incomplete, but it strengthens the remaining cases identified in this chapter. What results is a detailed map of Lebanon’s state institutions between 1989 and 2005 designating persistent patterns of high political corruption and displaying its specific manifestations. One key observation is that, as expected, there have been numerous variations on the theme of using public office for private or personal benefit. That may seem like stating the obvious, but when classifying such variations by their common denominator (corruption), it serves as a strong reminder that corruption remains an aggregate term for a wide variety of practices. Indeed, in this light, a disaggregated and qualitative approach to the study of corruption enjoys some methodological advantages over the aggregated and mostly quantitative assessments and surveys referred to at the beginning of this book. When we seek a persuasive causal explanation of rampant corruption, we will have to preserve the disaggregated and distinctive meanings of corruption in different institutional settings. Only when explanations for each of them are proved to have commonalities can we argue that at higher levels of abstraction such practices are rooted in a shared set of explanatory factors. The next chapter provides the first part of this attempt to understand Lebanon’s dismal record of corruption in the post-Ta’if period.

Chapter 3

Public Institutions and Bureaucratic Organization

Our investigation now turns to the qualities of institutions. In this chapter I scrutinize institutions that were especially prone to political corruption. The main question is how the administrative structures of these institutions compare to the essential features of bureaucratic organization explained in chapter 1. I believe that high levels of corruption occurred in institutions with administrative structures at odds with these characteristics. In order to highlight how various problems in institution building resulted in very similar outcomes, I distinguish three broad types of institutions: first, institutions established before 1975 that disintegrated during the war and after 1990 were subjected to various reforms or rehabilitation efforts; second, institutions newly created after the war for purposes not directly related to reconstruction; and third, institutions created to spearhead the country’s rebuilding program in the wake of war-inflicted destruction. In my discussion of political corruption in the preceding chapter, we encountered institutions that originated in the prewar era of the First Republic. These institutional designs built on a framework laid out long before the Ta’if Accord of 1989. Institutional legacies, however, often turned out to be a mixed blessing in the sense that some such institutions were deemed unsuitable or unsustainable in their original forms. In extreme cases, seventeen years of protracted fighting had rendered administrative structures so deficient that they became dormant. In accordance with the general commitment expressed in the Ta’if Accord ( pt. II) to reinstate a “strong state based on national reconciliation,” postwar governments consistently referred to the urgent need for administrative rehabilitation, especially involving public institutions inherited from the First Republic. Yet corruption

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thrived in all these institutions. An inquiry into three such institutional settings offers some important clues as to why this was the case.

Sick Bureaucracy: The Ministry of Health Persistent allegations over corruption in the health care sector concern two central domains of activity involving the MoH: the ministry’s relations with private hospitals and its regulation of the country’s pharmaceutical market. A multifaceted institutional framework allowed these forms of corruption to occur.

The Ministry of Health and Private Hospitals Before 1975 Lebanese citizens on low incomes could count on receiving health care in twenty-five public hospitals, accounting for 15 percent of total hospital beds in the country (Azar n.d., 93). The wars of the late 1970s and 1980s seriously affected the provision of public health care. Many public hospitals and clinics were destroyed, while still functioning units struggled owing to lack of funding, insufficient and unqualified staff, and soaring demand. By the end of the 1980s, only twelve public hospitals (6 percent of total beds) were still able to provide some basic types of treatment, leaving most Lebanese with no choice but to rely on expensive private institutions (World Bank 1994, 5–6). Recognizing these disastrous conditions, postwar governments repeatedly stated their intention to rebuild hospitals, to provide more health care, and to honor the state’s commitment to grant free health care to those unable to afford private treatment (Azar n.d., 138). To these ends, the MoH produced a document in December 1993 titled “The National Strategy for Health,” which identified the government’s policies in the health sector, including strengthening the ministry’s “institutional capability to articulate strategies for public health financing” and the rebuilding of public hospitals to serve lower-income groups (World Bank 1994, annex B). Such medium- and long-term policies were largely overtaken, however, by pressing demands to provide services to low-income groups not covered by private insurance schemes: some 1 million individuals, or 50 percent of the adult population (Ammar 2003, xiii; IIM September 2002). To address these demands, the ministry, in a supposedly temporary arrangement, outsourced public health care to private hospitals and clinics on a contractual basis and against retroactive payment, drawing on an agreed-upon list of costs per specified treatment. Hence, as a result of immediate needs, the overall mandate of the MoH had shifted from running public health care institutions to negotiating with private hospitals, overseeing compliance with contractual terms and conditions, and scrutinizing the financial

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claims made by these private institutions. Such activities were not entirely new. Prior to the war, private hospitals had been contracted to provide specialized treatment not offered by public hospitals. In the very scale of these operations, however, they had now grown to become the ministry’s main preoccupation. By 2002 the MoH was dealing with over 140 private hospitals and clinics for the treatment of thousands of patients who could claim free health care from the state, incurring an ever-increasing annual burden on its budget from $56.9 million in 1993 to $139 million in 2002 (Ammar 2003, 18; World Bank 1994, 7).1 Although the ministry had been forced to change its core focus, no solid institutional framework was put in place to cope with the management and administrative responsibilities resulting from the new and often complex relationship with private health care providers. Perhaps most important, the MoH lacked a way to ensure that quality standards determined which private hospitals were to receive contracts. Executive Decree 9826, dating back to 22 June 1962, gave the MoH powers to “evaluate, classify and accredit hospitals” (Ammar, Wakim, and Hajj 2007, 140). Yet the decree was not designed to identify suitable partners for the MoH, nor was its application binding. The MoH did not create a technical agency tasked with carrying out accreditation until October 2003. As a result, the selection of private hospitals to provide subsidized health care had been left entirely to the discretion of MoH officials. Furthermore, MoH inspectors who oversaw health care standards and verified hospitals’ financial claims were in short supply; only an estimated 10 percent of submitted bills were scrutinized, while the remainder were automatically reimbursed with no questions asked (interview with a senior MoH official, Beirut, 14 October 2006; AA 14 January 2003). Nor was it always clear against what criteria MoH inspectors were to hold hospitals accountable, as many received payments without having a contract (CIB 1998, 71–72). Further confusion was caused by the ministry’s willingness to pay for the full costs of treatment in some cases whereas in other cases it covered only up to 15 percent of these costs; the MoH’s own stipulation that it would cover up to 85 percent of expenses was applied inconsistently if at all (interview with senior MoH official, 13 October 2006). Moreover, little was done to stop hospitals from charging patients an additional fee, even though the ministry was already covering their treatment. Procedures to identify legitimate claimants of public health care were virtually nonexistent, and so almost anyone could expect to be treated in a private hospital without having to pay the full cost—a practice discouraged only by the lower quality of services provided to patients who were not covered by private insurance. A system of hospital registration cards, a carte sanitaire, to be 1. To these figures should be added $199 million in MoH arrears to contracted private hospitals in 2002 (IIM September 2002).

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distributed among all claimants, though promising in theory, resulted in administrative chaos, with no effective, centrally managed database to record the identity and number of patients receiving free or subsidized health care (interview with senior MoH official, 13 October 2006; AN 30 December 2000). Referring to problems ranging from false billing to a disregard for officially set tariffs, a team of experts sent by the World Bank concluded that “at present, [the MoH] is unable to discharge its responsibilities properly due to institutional weaknesses and the Government’s difficulty in enforcing regulations” (1994, 9). Attempts to address such problems—such as limiting the number of contracted hospitals and putting in place a comprehensive system of accreditation to ensure quality and reduce the burden of inspection—were not effective.2 Indeed, six years into the implementation of the government’s National Health Strategy, the World Bank noted in a report dated January 2000 that the ministry had made no progress in properly conducting its relations with private hospitals, thereby contributing to cost escalation at a pace far greater than inflation. In 2005 this situation remained essentially unchanged: administrative disarray continued to characterize the public health care sector. In short, the MoH’s efforts to address the country’s public health care needs lacked clarity and the firm regulations required to function under a de facto privatization entirely paid for by the state treasury. External auditing and controls governing relations between the ministry and private hospitals also faltered. One major problem was posed by the general institutional weaknesses of the state’s watchdog agencies. The CIB, established in 1959 to conduct independent inspections of public service and impose punishment on offending public servants, appears to have been the most active in scrutinizing the MoH’s relations with private hospitals. Yet it struggled with lack of resources and personnel, in addition to having to cope with frequent interference by politicians. The Court of Accounts, established in 1951 following the French example of the Cour des Comptes, faced similar problems. Largely as a result of its own deficiencies, the CA rarely reported on the MoH’s financial relationship with private hospitals. On top of this, the MoH’s accountability was seriously impaired as a result of its own failure to inform these watchdogs which hospitals had been contracted and on what exact terms, as most of these crucial details were improvised and determined in ad hoc fashion (CIB 1998, 71–74). Even if the CIB and the CA had had the capacity to examine the ministry’s dealings systematically, they lacked a clear benchmark against which to conduct assessments. Compounding 2. In February 2002, in light of the results of several quality surveys, the MoH announced that it would contract with only 80 out of 140 hospitals (interview with senior MoH official, 14 October 2006). Enforcing accreditation procedures was delayed, however, until January 2009 (Ammar, Wakim, and Hajj 2007, 144; Ministère de la Santé Publique [Liban] and Haute Autorité de la Santé [France] 2008).

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these agencies’ difficulties, the MoH failed to compile complete data regarding the utilization and costs of health services (Ammar 2003, 56). Feeble external controls contributed to a situation wherein major decisions pertaining to the distribution of public resources were made with high levels of discretion. With few effective mechanisms to detect, correct, or penalize them, senior officials could capitalize on ample opportunities to use their position for private gain. The MoH’s institutional deficiencies were compounded by an ill-enforced separation between public and private interests. Conflicts of interest involved first and foremost some influential politicians who owned most of the private hospitals with which the ministry had long-term relationships (interview with Isma’il Sukariya, 8 November 2000; Shams ad-Din 1999, 47–48). For example, Parliament’s Committee on Health Care and Social Affairs included prominent hospital owners among its members throughout the 1990s and until 2005 (Isma’il Sukariya, himself a committee member, cited in Al-Balad 15 August 2005). In fact, between 2000 and 2005, one-third of the committee’s members held private stakes in hospitals and clinics throughout Lebanon.3 As one senior MoH official observed: “The private hospital sector is owned by politicians. It has been a gold mine for them” (interview, 14 October 2006). Such real or potential conflicts of interest are also likely to have at least indirectly affected and implicated senior officials at the MoH. If hospital owners held key positions in the Council of Ministers, their ensuing powers to appoint senior officials generally, confirmed in the constitution ( pt. V, art. 95b), may have influenced such officials’ conduct at the MoH. Given the stake of key politicians in the health sector, some officials at the MoH were in fact supervising hospitals that belonged to powerful politicians to whom they owed their positions. The World Bank, which provided technical and financial assistance for the rehabilitation of the Lebanese health sector, refrained from making any direct public statements on these conflicts of interest. Nevertheless, in its damning report on the failure of the ministry’s National Health Strategy, the bank stressed that on several occasions, well-connected beneficiaries exerted “political pressure” to overturn in effect any initiative that would make relations between the ministry and the private sector more transparent (2000, 14). Some hospital owners could rely on interventions by allies or even relatives in high positions at the MoH, appointed as a result of politicians’ involvement in their recruitment (interviews with senior CIB inspector, Beirut, 25 May 1999, and with senior MoH official, 14 October 2006). In a similar vein, though shying away from specifics,

3. The committee’s members are listed at http://www.lebanonwire.com/prominent/useful_data/ parliamentary_committees.asp. Matches with founders and/or CEOs of hospitals and clinics cover about one-third of the committee’s thirteen members. See http://www.syndicateofhospitals.org.lb/hospitals/ index.asp.

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Walid Ammar, director-general of the MoH, summed up the core problem that his ministry faced: Providers belong to a diverse set of political and religious influential groups. This was pushing the MoH to contract with almost all the existing private hospitals, including the low-classified ones. Under group pressures, MoH has been continuously increasing the number of contracted beds, irrespective of real needs and financial reimbursement capabilities. . . . Consequently, the government has been protecting mediocrity and encouraging oversupply, leading to the explosive rate in the consumption of hospital and curative outpatient care, without any guarantee for quality. (2003, 68)

Regulation of the Market in Pharmaceuticals The MoH inherited from the prewar period a general mandate concerning the regulation of the import and sale of pharmaceutical products (Azar n.d., 252–68). Accordingly, the ministry was supposed to be involved in two main sets of activities: registering and licensing imports of pharmaceuticals, which included testing them for quality control when such products had not previously been available on the Lebanese market; and designing and implementing price controls. Neither of these core tasks was guided by clear directives, and the absence of solid specified regulations and procedures thwarted effective compliance. In addition, external checks and controls were virtually absent or ineffective, and conflicts of interest undermined the ministry’s bureaucratic integrity. The MoH’s Pharmaceutical Department ( PD), assisted by a technical committee and the ministry’s Inspections Department, bore the main responsibility for quality controls. It was supposed to act on the legal requirement that all unknown medicines proposed for importation had to be tested at the National Laboratory before importers could sell them to local pharmacies. Yet the World Bank described the PD’s regulatory framework as “slow, not sufficiently transparent, lacking the capacity for thorough testing and analysis and not always fair and predictable in its proceedings” (LQU fourth quarter 2004, 5). The main reasons for its unsatisfactory performance appear to have been a lack of technical capabilities and, no less important, persistent confusion over the appropriate criteria for setting pharmaceutical quality standards. When importers submitted requests to import a medicine not yet certified in Lebanon, the PD was to send a sample of the drug for testing to the National Laboratory, an agency attached to the MOH. The National Laboratory, however, had serious capacity problems, in terms of both trained staff and technical capacity, even though it had received significant assistance from the Swedish government

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in 1997 and steady MoH financial allocations thereafter (interview with Isma’il Sukariya, 16 October 2006; Ammar 2003, 59). In reality, the National Laboratory tested very few samples, and when it did conduct analyses, its testing remained superficial. Repeated promises by successive ministers of health to remedy the situation went unfulfilled (OJ 4 April 1997; AN 21 January 2000). Presumably to get around problems associated with the virtually defunct National Laboratory, the PD applied an MoH internal regulation from 1983 requiring pharmaceutical importers to show that their products were already freely sold in the country of origin (Azar n.d., 268). This, the PD seemed to reason, made additional testing in Lebanon largely unnecessary. Yet as a result, the PD gained discretionary powers to decide which medicines deserved to be certified, for the same regulation ambiguously stipulated that “unnecessary medicines” were barred from Lebanon’s market if the “public interest” so required, without clarifying how that necessity should be established (Azar n.d., 268). Moreover, the PD’s makeshift policy merely exchanged the problem of implementing quality for a mystifying array of official lists of medicines deemed essential, and hence eligible for licensing. As early as 1991, the MoH had declared it would base all its licensing decisions on an official list of “essential” products (interview with Isma’il Sukariya, 8 November 2000; OJ 1 October 1998). When this list was first issued in 1993, it contained only 290 items (AN 6 and 7 July 2004). It remained unclear, however, whether products available in Lebanon that did not appear on this list—the number was far larger than the number of products included—were therefore to be regarded as “nonessential” and so barred from entry. Nor did there seem to be any procedure for regular reviews to include new products on the list. Perhaps because of these deficiencies, the list was soon abandoned; the PD itself ignored it when granting licenses for pharmaceutical imports (AN 6 and 7 July 2004; interview with Isma’il Sukariya, 8 November 2000). Years later, in 1999 and 2000, the MoH once again issued lists of “essential” items, but these initiatives met the same fate as the earlier attempt to create a semblance of order in the PD’s procedures (AL 10 September 2005). The ensuing administrative confusion and unpredictability prompted importers and their clients to use alternative avenues to obtain licenses. One way to circumvent the PD’s chaotic quality standards was for hospitals to bypass licensed importers and purchase medicines from abroad themselves under the guise of research. Another way was to obtain legally questionable import licenses from other departments at the MoH, which at least in some cases appeared ready to collaborate (AN 23 May 2002). One corollary of the PD’s haphazard procedures and the MoH’s parallel licensing was that by 2003, over 5,000 medicines had been registered and licensed (Ammar 2003, 59), far more than the 2,400 reported for Saudi Arabia and the 1,800 for Jordan (AN 3 April 2006). Repeated recommendations

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to curb the growing number of licensed medicines, including proposals to adhere strictly to the lists of dangerous and poor-quality medicines issued by the World Health Organization, received some support from the MoH but were not followed up. In one instance, in November 1998, the Parliamentary Committee on Health Care and Social Affairs looked into a proposal by MP Isma’il Sukariya to adopt the WHO list officially; but before any debate could take place, the committee’s chairman, Riyad Sarraf, declared that he saw no reason for concern, as in his view all available drugs were duly registered with the MoH (OJ 27 November 1998). Meanwhile, the PD muddled through with its capacity problems and opaque standards and procedures. Its employees enjoyed wide discretionary powers in regulating Lebanon’s pharmaceuticals market. If the MoH’s framework for upholding quality standards pertaining to pharmaceuticals failed to meet the bureaucratic criterion of clear institutional mandates and regulations, so did its attempts to impose price controls in a market with an estimated turnover of $325 million each year (Karam 2004, 4). By law, the MoH set prices for marketed drugs, taking into account country-of-origin price, shipping costs, customs fees, and fixed profit margins for both importers and pharmacists (Ammar 2003, 60). Straightforward as this arrangement may appear, it suffered from serious ambiguities in its implementation. First, how were prices in the countries of origin to be established? The MoH generally accepted manufacturers’ certifications indicating such prices, leaving importers with a great deal of room to maneuver. After all, as a World Bank comment on Lebanon’s pharmaceutical price regulations noted, a “country-oforigin price . . . in today’s world of multinational companies is difficult to define and control. Companies can keep prices artificially high in markets that are used as reference for setting prices elsewhere” (LQU fourth quarter 2004, 4). On top of that, the MoH had to contend with manufacturers’ certificates submitted by Lebanese importers, a system vulnerable to forgery. To address these weaknesses in the system, beginning in 1998 the MoH repeatedly stated its intention to verify declared country-of-origin prices with its counterparts in exporting countries (AN 6 and 7 July 2004). Yet a ministerial decision to this effect in 2003 was not followed up by executive decrees that, for instance, would have made it compulsory for importers to submit price certificates issued by health ministries in manufacturing countries (AN 6 and 7 July 2004). The initiative came to nothing. A second ambiguity troubling the MoH’s regulation of prices related to the existence of directives adopted in the past. A ministry decree from May 1983 capped pharmaceutical prices relative to prevailing prices in neighboring Arab countries, including Jordan, Saudi Arabia, Qatar, Bahrain, and Oman (AsSiyyad 26 August 2005; AL 10 September 2005). This decree suggested that even when the total costs of importing certain drugs (based on set profit margins and

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shipping fees) exceeded prices in these neighboring countries, the latter would have to apply in Lebanon. In the first part of the 1990s the MoH indeed applied this caveat to reduce local prices, but it did so erratically in relation to all available drugs. In 1994 the MoH stopped updating its lists of neighboring countries’ prices altogether, thereby ending their benchmark status (As-Siyyad 26 August 2005). The 1983 decree, however, remained nominally in force and, depending on officials’ discretion, could be activated to reduce the prices of specific drugs while leaving others unaffected. Then in March 2005 the MoH stated its intention to link local prices of all pharmaceuticals systematically to prices in neighboring countries. This measure, the MoH claimed, would result in an overall reduction of local prices by up to 20 percent (AN 16 August 2005). To this end, a special committee was established to compile neighboring countries’ prices periodically. It is unclear whether the committee actually produced such lists, but it is certain that the MoH failed to issue any detailed inventory of new pharmaceutical prices. As Minister of Health Muhammad Jawad Khalifeh explained, “We lack the organization and coordination” (AN 4 June 2004). Consequently, the ministry’s set prices generally exceeded those in neighboring countries and indeed international reference prices, mostly by a factor of eight (Karam 2004, 9). Meanwhile, haphazard application of the 1983 decree continued. Within the context of growing confusion around the MoH’s price regulation policies, incentives and opportunities grew to circumvent official procedures altogether. The ministry’s equally opaque quality controls, described earlier, contributed to this development. Private hospitals began importing medicines on the pretext of using them in medical experiments and research. MoH officials turned this situation to their advantage by soliciting bribes before issuing licenses to hospitals when the purpose of the purchases could only be commercial. To expedite procedures, the CIB found, within the MoH an ad hoc committee had emerged to study hospital requests and issue authorizations (AN 16 and 17 August 2005). The committee consisted of a leading official in the MoH’s PD, a senior manager in the MoH’s Inspections Department, two pharmacists from the Union of Pharmacies, and a medical doctor. Unhampered by any regulation and devoid of any legal mandate, the committee issued a large number of licenses at will. It is unclear whether the committee continued to exist after the CIB reported on its activities, but the fact that its findings were kept secret until An-Nahar (16 and 17 August 2005) published them gives us reason to think that it did. The MoH’s attempts to reduce pharmaceutical prices by bolstering requirements pertaining to country-of-origin documentation and by linking local prices to those of neighboring countries were not realized and so failed to cut prices. If anything, they contributed to the administrative bedlam. Against this background, the MoH decided in March 2002 to try yet another avenue to push prices

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down, this time abandoning the stipulation that prohibited pharmacies from selling medicines below the prices set by the MoH (OJ 22 March 2002). The idea was to encourage price competition among pharmacies. In turn, it was assumed that pharmacists would then pressure importers to cut prices. Unsurprisingly, pharmacists protested vehemently, arguing that the measure put their profession at the mercy of demand and supply—which they portrayed as at odds with the vital moral service they provided to the nation’s health (OJ 26 February 2004). The measure did not put pressure on importers to lower their prices but rather triggered an unprecedented surge in smuggling, counterfeiting, and tampering with expiration dates, for the prices of legally imported, genuine, and unexpired medicines made them no longer attractive to pharmacists (CIB 2006, 3860). What had been intended to cut prices caused the MoH to lose further control over the pharmaceutical market. For consumers, prices may have gone down somewhat, but at the expense of guarantees that they were buying genuine and effective products. In terms of corruption the consequences were no less significant. Never before had the incentive been so great to bribe MoH officials in return for their complicity in illicitly purchasing and merchandising medicines. In the early 1990s it had become clear that it would not be easy to regulate the private pharmaceuticals market effectively to safeguard quality standards and maintain affordable prices. A to-be-established National Bureau for Medicines (NBM), attached to the MoH, was supposed to offer a way out, provided it was granted sweeping powers to streamline existing legislation and regulations. It was even envisaged that, when deemed necessary, the NBM would directly purchase medicines for state-sponsored reimbursement programs, including the one run by the MoH, in effect bypassing importers. The bureau was formally founded in April 1993, but the bylaws needed to specify the agency’s precise mandate were never passed by the Council of Ministers or by Parliament. Consequently the NBM was never able to address the increasingly common excesses in Lebanon’s pharmaceuticals market. All the same, it continued nominally to exist, receiving budget allocations for staff salaries and expenses but without putting in place effective procedures to ensure that these resources were well spent, and without defining the agency’s authority (interview with senior MoH official, 13 October 2006). In a Weberian bureaucracy, external checks and controls are designed to prevent, deter or detect, and penalize officials who use their positions for personal gain. The MoH’s operations in the pharmaceuticals market lacked such a firm framework. This can largely be explained by the MoH’s poor score on the first criterion of bureaucratic organization. As the MoH shifted its policies and interventions regarding quality and price controls without clearly defining its precise aims and procedures, the state watchdog agencies had little basis on which to pass

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meaningful judgments. Hence, in their few attempts to evaluate the MoH’s operations, the CIB and the CA failed to scrutinize comprehensively the ministry’s policies for guaranteeing quality standards and reasonable prices. The CIB’s and CA’s own limited capacities of course compounded the problem. In the case of private hospitals’ requests to purchase medicines directly for “research purposes,” the MoH’s resort to an ad hoc committee further undermined external surveillance. After all, from the legalist perspective of the CIB and the CA, this committee failed to appear in any organizational chart and therefore did not fall under their jurisdiction. A similar logic applied to the situation whereby MoH departments other than the PD issued import licenses without having the authority to do so. Finally, by enjoying only nominal authority, the NBM likewise escaped external checks and controls, as state watchdogs again had no or very few criteria to fall back on when assessing its activities. In fact, the continuing uncertainty about its bylaws rendered the NBM unable to conduct self-assessments of its basic financial management; no in-house accounting board was established (Safa n.d.). This allowed the NBM’s senior management to decide on expenditures singlehandedly in a discretionary fashion. Conflicts of interest were reported to have tainted handling of the pharmaceuticals sector by MoH officials. Private hospitals probably accounted for a significant portion of total imports of medicines, and so conflicts of interest naturally also left their mark on the MoH’s regulation of the pharmaceuticals sector. Yet politicians generally, and senior officials at the MoH and the NBM in particular, were also believed to be heavily involved in importing pharmaceuticals or even to own pharmacies (interview with CIB inspector, 25 May 1999; AN 16 August 2005). For instance, in September 1998 the CIB sent a letter to the prime minister urging that the government take action against some senior MoH employees who were said to own private pharmacies in violation of both legal stipulations guiding the authorization of pharmacies and the Civil Service Code (Azar n.d., 112). None of the officials involved was reprimanded. Conflicts of interest were also reported in Parliament: some deputies, including members of the Parliamentary Committee on Social Affairs and Health, were believed to have direct or indirect private interests in the pharmaceutical business (interview with Isma’il Sukariya, 8 November 2000).4 Both in its relations with private hospitals and in the regulation of Lebanon’s pharmaceuticals market, the MoH failed to meet the three basic criteria of bureaucratic organization. The formulation of relevant mandates was mostly rudimentary. Procedures and regulations for implementing the ministry’s policies 4. One prominent member was from a family of established traders owning two of the largest drugimporting companies in Lebanon.

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were opaque, contradictory, ambiguous, or, as in the case of the NBM, nonexistent. Closely related to this, external auditing and control mechanisms were virtually absent, if only because state watchdogs had no coherent regulatory framework to use as a yardstick for assessing the conduct of individuals. A sharp demarcation between public office and private interest failed to materialize as high-ranking ministry officials and politicians alike held a stake, directly or indirectly, in the private entities (hospitals, pharmacies, importing businesses) they were supposed to contract with or regulate. In this institutional environment, ample opportunity arose for the use of public office for private gain.

Saving the National Carrier: Middle East Airlines The situation involving Middle East Airlines is different from most cases discussed in this chapter in that it concerns not a full-fledged public institution but a private company in which the state progressively acquired a majority share. This state of affairs originated in the late 1960s, as a result of MEA’s transformation from a private company into a mixed-ownership enterprise. Yet by the mid-1990s the airline had become a parastatal organization with virtually no private shareholders left. It was at this point that a major scandal related to the lease of aircraft highlighted the pervasiveness of corruption at MEA. The peculiar institutional framework for the state’s increasing participation in the airline helped corruption thrive as it failed to comply with the principles of bureaucratic organization. In the early 1990s MEA’s ownership structure reflected a long and complex history wherein the airline’s shares had continued to change hands: 21.5 percent were held by Air France, 62.5 percent by the parastatal Intra Investment Company, and the remaining shares by the airline’s employees and Lebanese small investors (interview with ‘Abd al-Hamid Fakhoury, MEA’s chairman [1992–1995], Beirut, 2 July 1999). Intra Investment Company itself had gone through some turbulent changes following the “Intra crisis” in October 1966, when the privately owned Intra Bank defaulted and was largely taken over by the Lebanese state (which is how the latter became a co-owner of MEA).5 A second Intra crisis occurred in 1989, when one of Intra’s affiliated banks, Bank Al-Mashriq, collapsed owing to highly speculative transactions whereby large sums were channeled into fictitious companies and offshore institutions owned by senior managers (Middle East Reporter 22 July 1989). Fearing a domino effect throughout the country’s banking 5. The Intra Bank defaulted in October 1966, urging a rescue operation led by the central bank. All shares of Intra Bank’s affiliated companies were transferred to the Intra Investment Company, owned by the central bank, the Kuwaiti and Qatari governments, and other former depositors.

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system, the state again came to Intra’s rescue, acting as guarantor in return for an increased stake in the company. By the early 1990s, the central bank and the Ministry of Finance (MoF) owned 47 percent of Intra while the Kuwaiti and Qatari governments held 44 percent, leaving 9 percent to private small investors. MEA was one of Intra’s core assets. With Lebanon’s postwar reconstruction about to begin, the airline’s prospects looked bright, for it hoped to serve the country’s large expatriate community, many of whom were expected to return or at least to strengthen their ties to their home country. To seize on this potential, however, it was necessary to increase the company’s capital, a move that the airline’s shareholders were reluctant to make. It took until November 1997 before the needed capital injection materialized. For reasons to be explained later, the unusual decision was taken to raise MEA’s capital not via Intra but directly through the central bank. The latter provided $100 million in a debt-for-equity swap that wiped out most of the debts the airline had accumulated between 1990 and 1995. In addition, the central bank contributed another $125 million to complete a planned capital increase of $225 million (LR Summer 1996 and Winter 1997; AD 12 November 1997; AN 25 November 1997; Reuters 4 July 1997). As a result, the central bank bought additional shares and became—with 99 percent of shares—virtually the sole shareholder. One might have expected the central bank’s injection of public funds into MEA to have prompted the formation of an institutional framework characterized by clearly defined regulations, procedures, and external auditing mechanisms. But no such framework marked the new relationship between the central bank and MEA. These deficiencies originated in the nature of the state’s intervention. The central bank’s capital injection contradicted Articles 105 and 110 of the Money and Credit Code (Farhat 1995), which stipulate that the central bank cannot guarantee loans to private and/or parastatal companies except for the purpose of safeguarding general financial and monetary stability and for a period not to exceed six months. It cannot be persuasively argued that MEA posed a threat to general financial and monetary stability. With the return of various foreign airlines to Beirut, no other institution would have been directly affected by its financial problems or even possible bankruptcy. Furthermore, the loan’s maturity clearly exceeded six months. Indeed, given the cutthroat competition in the aviation industry, it was doubtful whether the central bank would ever get the money back. Finally, the central bank provided the loan on an ad hoc basis by directly drawing on its reserves. It was not merely a guarantee for a loan in the strict sense, for that move would require that a law be adopted in Parliament. The government failed to submit any such legal proposal. The capital was thus transferred in the absence of any facility for providing this sum.

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Reflecting the improvised manner in which funds were made available, no institutional framework emerged to ensure that the funds were properly used. Relations between MEA’s management and the central bank—which lacked the expertise and the institutional capacity to run an airline—were thus conducted in an ad hoc and improvised manner. Most important, procedures and regulations concerning the purchase or lease of aircraft and other major capital investments were left undefined. Of course, the central bank enjoyed a majority vote in the shareholders’ assembly, but—unless it wanted the company to collapse—it could not withdraw its capital as a sanction. The central bank thus had no means to check or influence management, even when managers contravened its wishes. Within this institutional framework, or lack of it, external auditing and controls were largely absent. For the state’s auditing and inspection bodies, MEA failed to qualify as a public institution, and so it escaped their mandate. Nor could these bodies gain indirect access to the state’s participation in MEA, because the central bank enjoys an autonomous status beyond their jurisdiction. Nor did Parliament have an opportunity to approve and scrutinize the expenditure of public resources, because the capital injection had not taken place by means of a loan promulgated by law. Moreover, the central bank lies outside the jurisdiction of the legislature. Conflicts of interest are likely to have tainted MEA’s dealings with private sector companies. Such became apparent in the Airbus scandal, in which one of the airline’s managers and his immediate relatives were alleged to have a private stake in a Lebanese company involved in the deal with the Asian transport company. In fact, given the company’s ambiguous status, such conflicts of interest may not have been illegal, for MEA’s managers were not required to comply with the Civil Service Code, which bars public servants from taking up employment and/or obtaining a stake in private sector companies.6 Likewise, the appointment of the managers on MEA’s board of directors escaped the scrutiny of the Civil Service Board (majlis al-khidma al-madani [CSB]), the state’s human resources agency, as the airline was not designated as a public institution. Such appointments were entirely political, and subject to continuous bargaining among the country’s main political leaders—including a senior minister who allegedly held a private interest in the airline’s destiny (see chapter 5). In effect, therefore, MEA’s board of directors enjoyed broad discretionary powers in running the airline; and at least some of its managers and politicians involved in the airline’s institutional development are likely to have experienced conflicts of interest. 6. MEA’s internal regulations failed to stipulate any conditions regarding conflicts of interest among its managers (interview with a high-ranking MEA official, Beirut, 24 January 1999).

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The upshot is that the state’s rescue operation for MEA involved considerable public resources while no effective institutional framework met the basic requirements of bureaucratic organization. Clear regulations and external auditing and supervision mechanisms failed to emerge. In addition, the absence of any regulations governing the private transactions of the airline’s management no doubt led to conflicts of interest. Because of this troubled institutional context, especially from April 1996 until January 1998, airline managers had no reason to fear being caught and punished for corrupt practices. This applied to MEA’s operations in general and explains a large number of the corruption cases described earlier. More specifically, the opaque institutional framework helps explain how senior managers at MEA may have capitalized on their wide discretionary powers to facilitate the lease of Airbus aircraft on terms skewed in favor of some private companies.

Wavering between Provider and Regulator: Oil, Gas, and the State Following a reorganization of the state-owned but privately operated Lebanese branch of the Iraqi Petroleum Company (which was nationalized in 1972), the government of Salim al-Hoss issued Legislative Decree 79 on 27 June 1977, which granted to the state the sole right to import crude oil and oil derivatives directly (Mudawwar 1996, 29; AN 8 April 1997; CDL 8 April 1999). With further detail added by Decree 621 on 28 December 1983, the Ministry for Industry and Oil was charged with all transactions involving the import and storage of oil products, and with the setting and supervision of quotas for private companies acting as distributors to domestic consumers. The legal framework foresaw the establishment of a Special Agency that would oversee all buying and selling of oil, subject to deferred auditing by the CA and accountable to the ministry. Decree 79 further specified that in expectation of the formation of the Special Agency, the MIO would carry out its tasks on a “temporary basis” and thus act provisionally as the main state body controlling and regulating the oil sector. During the war and the general breakdown of state authority, especially after the escalation of hostilities in 1982, the MIO failed to carry out these tasks. In fact the state completely lost control of the energy sector. Private oil companies, most of them linked to or owned by militias, mushroomed, and oil supplies were in effect privatized (Cahiers de l’Orient 1988; Picard 2000, 298–303). Several militias capitalized on their control over the sector to secure both income and provisions, which they used for military operations.7 7. About twenty illegal terminals received oil derivatives directly from abroad, while distribution and pricing escaped inspection or control.

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After the demobilization of most armed groups in 1991, the question arose how the state could reassert its control over the oil sector, especially since energy consumption was expected to grow with reconstruction and a related increase in national income. In 1990, in the last few months of fighting, the Higher Customs Council had granted official status to private oil terminals that had mushroomed along the coast, thereby ostensibly legalizing the private importers using these ports ( Picard 2000, 303). The move was primarily intended to allow the state to tax oil imports entering Lebanon. Yet formal recognition by the MIO, needed to abrogate its legal monopoly on such imports, failed to materialize. Under As’ad Rizq, oil minister in Hariri’s first government (November 1992–June 1995), the ministry’s Directorate for Oil Affairs prepared a study to subject private oil importers to a quota system and other regulations, not only for the commercial and domestic distribution of oil but for direct imports as well (Mudawwar 1996, 31, 66). The study was never finalized owing to Rizq’s premature departure from office, but the initiative revealed that the MIO had no immediate intention of pursuing the state’s claim to control the oil sector and to put in place a Special Agency that existed only on paper. After two more years of muddling through, the MIO in August 1994 began issuing temporary licenses to twenty-two private importers, provided they could show that they possessed adequate installations and expertise (AN 7 July 1994). Together these importers supplied about 80 percent of the country’s consumption, leaving roughly 20 percent to the state for supplies to the public electricity company EDL and other public consumers including the Lebanese army (CDL 31 October 1991; Mudawwar 1996, 85). In effect, therefore, the ministry’s designated role as sole oil importer, as stipulated in Decree 79 and Decree 621, was put on hold, to the advantage of private companies, which now supplied the local market. Other legal stipulations were similarly put on hold. Most important, direct state controls on the quality and quantity of oil imports were not applied, both because the ministry’s laboratories in Zahrani remained understaffed and lacked adequate funding and because the MIO’s Special Agency, legally mandated to oversee such tasks, was never established. Under these conditions, test certificates provided by private surveillance companies were provisionally accepted to clear supplies on arrival (interview with Lebanese oil trader, Beirut, 12 May 1999). Such testing was done haphazardly. MIO regulations pertaining to quality standards for importers remained ambiguous, at least until 25 July 1997, when a ministerial decision (Decision 25) at long last stipulated requirements for oil derivatives shipped into Lebanon (World Bank 2004, 78). Yet as it was designated to import oil rather than regulate private importers, the MIO remained ill equipped to function as regulator of market activities. Accordingly, the ministry’s dealings with private surveillance companies continued to be largely improvised (AH 12 February 1999). Nor

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was the MIO’s emerging practice of leasing and/or selling storage space to private companies for oil derivatives and gas in state facilities subjected to clear rules or supervision. No formal regulations prevented officials from favoring certain companies or companies from monopolizing storage to limit supplies. By the mid-1990s the role of the MIO as sole importer seemed to have been transformed into that of a mere regulator of the private oil and gas market, even though such a change was never formalized by law. At the same time, the licensing system could by no means be regarded as formally substituting for a legal framework that had envisaged the state as the sole importer of oil derivatives. In August 1997 the MIO abruptly refused to renew the licenses of two fuel oil– importing companies, the U.S. company Falcon International and the Lebanese importer Uniterminal, on the pretext that “the state strives to ensure revenues for the treasury by restricting private imports according to the law” (AS 29 September 1997). The move created uncertainty among oil importers, as the MIO now appeared to want to revive Decree 79 and reclaim its role as sole importer. The two affected companies contested the ministry’s decision by bringing their case to the country’s highest administrative court, the Advisory State Council (Majlis Shura ad-Dawla). In September 1997 the council ruled that the minister’s “oral decision” was both illegal and unfair to the two importers, which had made large investments to comply with the ministry’s technical requirements for obtaining temporary licenses (CDL 2 October 1997). The Advisory State Council also questioned why the MIO had not presented the matter to the Council of Ministers for the latter to issue a legislative decree. The minister for industry and oil, Shahé Barsoumian, replied that he had only intended to operate in the spirit of Decree 79 and Decree 621 and that his action was therefore sanctioned by law (OJ 30 August 1997). Barsoumian could therefore argue that he did not need to issue a decree to implement the law as it stood. Furthermore, the minister announced that he intended to take similar steps regarding imports of other oil derivatives and thus enforce full compliance with Decree 621 (OJ 30 August 1997). Reflecting the legal confusion over the mandate of the MIO, the Advisory State Council issued a new and contradictory ruling on 28 October 1997 after Falcon and Uniterminal complained that they still had not received a renewal of their licenses (OJ 21 and 29 October 1997). This time around the Advisory State Council confirmed the right of the MIO to monopolize fuel oil imports in accordance with Decree 79 and Decree 621.8 In effect, therefore, the MIO could simply choose between two

8. The resulting confusion lasted until November 1999, when the Advisory State Council annulled the decision of the MIO against both Falcon and Uniterminal. It acknowledged the right of the MIO to claim its role as sole importer, but it ruled against Barsoumian’s decision on procedural grounds rather than on substance (OJ 10 November 1999).

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contradictory regulatory frameworks, one designed to facilitate the ministry’s role as sole importer of oil and the other enabling the ministry to grant temporary licenses to private importers when it failed to conduct such imports itself. In other words, senior MIO officials could grant and withdraw licenses as they saw fit, a decision that left them with significant arbitrary powers. Pending a clear restatement or reformulation of its mandate, the MIO was seemingly expected to function as a regulator. But because of the continuing legal limbo, clear procedures identifying criteria for licensing and regulation failed to emerge. In early 2000, Minister of Economy and Industry Nassir Saidi issued a decree allowing private companies to import fuel oil freely without having to apply for a license, thereby hoping to clarify the situation (AM 24 May 2000). Yet the newly established Ministry of Energy and Water Resources (MEWR), which incorporated the MIO’s energy portfolio that same year, failed to harmonize the MIO’s own murky procedures let alone abrogate the moribund legal framework underlying the state’s formal monopoly on oil imports. Unsurprisingly, Saidi’s decree was never implemented. Legal paralysis essentially left the state’s regulation of private oil importers to the discretion of the senior officials in charge. Arriving at the MEWR in July 2005, a legal adviser to the new minister (Hizbullah’s Muhammad Fneish) described the situation pertaining to the ministry’s regulatory capacities vis-à-vis the oil and gas sector as one of “total chaos and arbitrariness” (interview with ‘Ali Barru, Beirut, 29 October 2006). Predictably the MIO’s institutional ambivalence, inherited by the MEWR in 2000, had a negative impact on the ability of external auditing and control bodies to scrutinize operations. Legally the CA was authorized to audit the transactions of the Special Agency. Yet the Special Agency was never established. Furthermore, even if the CA had had the expertise and manpower to look into the numerous transactions between the MIO and private importers, which it clearly did not, it had no clear criteria to refer to in order to assess whether such transactions were being conducted properly. As noted earlier, the CA tried to pass judgment on the MIO’s controversial transactions with certain private companies (Sabra, Fadil, and Masbanji 1999). But instead of scrutinizing these transactions in all their detail, the CA merely reflected on the ministry’s overall mandate in light of existing legislation and practice. The report lamented that because of the MIO’s failure to uphold the state’s import privileges, the treasury had lost an estimated $90 million annually. The report, unusually broad in scope and lacking real financial scrutiny, demonstrated that the CA had no clear standards on which to base its audits, even though it could voice mild reservations about some of the ministry’s transactions. It did not contribute to accountability. Thus, when in October 2004 a former senior MIO official was arrested on suspicion of corruption, the judicial authorities did not press charges, stating that the CA had reported no irregularities involving

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this official or his colleagues at the MIO (AM 27 October 2004). Likewise, the CIB had no guidelines for assessing the individual conduct of high-ranking officials. It completely ignored the MIO in its periodic reports. Consequently, the MIO was not held accountable to anyone but itself, thereby providing soaring opportunities for corruption. The separation of public office from private interest clearly did not apply to the operations of the MIO. As at the MoH, many of the MIO’s high-ranking officials owed their position to interventions by key politicians, including cabinet ministers and the president of the republic. Many of these politicians had direct or indirect stakes in the oil and gas business and controlled the Lebanese market after they had pushed out mostly foreign-owned traders, including Esso and Mobil, shortly after fighting broke out in 1975.9 Many officials had a personal allegiance to the private importers they dealt with in the course of their jobs at the MIO. In addition to the ambiguous status of the ministry’s daily operations and the absence of external controls, this overlap between ownership of the country’s oilimporting companies and its political elites made it likely that public office would be systematically used for private gain.

Building New Public Institutions Since 1989 remarkably few new institutions have been set up to carry out tasks not directly related to postwar reconstruction. Two such institutions featured in my discussion of postwar political corruption: the port of Beirut and the state’s regulation of the quarrying business. Obviously the activities undertaken by the relevant institutions differ enormously. Yet in both cases one observes a general reluctance or inability to put in place strong institutions, despite pressing reasons to do so. In both cases institution building became an ongoing process with little prospect of durable and clearly defined features. Meanwhile, as in all cases discussed so far, the criteria of bureaucratic organization were not met, leaving ample opportunity for corruption.

The “Illegitimate Son of the State”: The Port of Beirut By the end of 1990 a private concession granted by the Lebanese state in 1960 to the joint-stock Compagnie d’Exploitation et de Gestion du Port de Beyrouth 9. One MP and minister held a majority of shares in various oil-importing companies, while another major politician represented a foreign oil firm after he resigned as managing director of a Lebanese sister company to another foreign firm (interview with Lebanese oil traders, Beirut, May 1999). The latter politician was also believed to have had a stake in other Lebanese oil- and gas-importing companies through his son and in partnership with a Lebanese entrepreneur and a Syrian business tycoon (Naba 2000, 52). A prominent MP, it is finally alleged, owned another importer and wholesaler of petroleum products.

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(CEGPB) had come to an end. Attempts to put in place a new administration attached to the public sector were largely unsuccessful. Henceforth the port would be administered by a “temporary” institutional framework, leaving it with a de facto status as a public institution but with no de jure institutional standing as an intrinsic part of the public sector. By all accounts this makeshift framework failed to meet the criteria of bureaucratic organization. Corruption thrived as a result. In anticipation of the expiration of its private concession, the CEGPB, a jointstock company controlled by the financiers Henri Phara’oun and Ibrahim and Hassan Baltaji, had since 1988 been asking the government to renew its concession for another fifteen years, or at least allow for a more limited extension by way of compensation for roughly three years of lost working days due to the war (CDL 15 December 1990). All these requests were ignored or turned down. When the private concession actually expired on 31 December 1990, however, no preparations had been made to install an administrative structure in acknowledgment that the port had now returned to the state. Nor did the government of ‘Umar Karameh (December 1990–May 1992) make any decisions in this regard. Debates within the subsequent government of Rachid as-Solh (May 1992– November 1992) centered on which ministry the port would be attached to. Two contenders—the Ministry of Water Resources and the Ministry of State for Transport—sought full “tutelage” (‘ishraf ).10 The issue was not immediately resolved, and no agreement was reached on the port’s final status. Meanwhile, the former concession holders remained in control. In November 1991 they even created a de facto board of directors representing the formally dissolved Compagnie (CDL 14 November 1991). With the accession to office of Prime Minister Rafiq al-Hariri in November 1992, nearly two years after the concession had ended, there was still no institutional framework for integrating the port into the public sector. In March 1993, however, a “temporary” arrangement was put in place that effectively terminated the private concession. Subsequently the port came to be administered by a “Transitional Commission” (TC) comprising six members. The TC was formally brought under the “tutelage” of the newly created Ministry of Transport. The port’s staff was retained, and thirty-two private contractors continued to perform logistical operations, including crane and cargo handling, employing some five hundred workers (High-Point Rendel 2000; DS 22 January 2003 and 13 January 2004). This formula allowed the port to remain operational, but it left many issues unresolved. Most significantly, the provisional solution produced an institutional arrangement that failed to meet the criteria of bureaucratic organization. 10. All public agencies (such as the CFD) have, in principle, a “tutelage” ministry to which they report. Final political responsibility lies with the ministry concerned (OMSAR 1998b, 26).

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As no final decision had been made regarding the port’s exact status in relation to the public sector, no procedures or regulations were put in place regarding how port managers and personnel were to conduct their daily operations. Such ambiguity extended to personnel matters including appointments, promotions, salary scales, rights pertaining to union membership and industrial action, and accountability. A full-fledged public institution would have required the application of the Civil Service Code, wherein all these issues are, at least in principle, clearly regulated. Falling short of such status, the port simply kept intact the administrative structures that had prevailed under the private concession, even though the institution now belonged de facto to the state. The wide discretionary powers generated by this provisional arrangement were amplified by the fact that the port’s chairman or director-general presided over the TC while at the same time acting as the port’s general manager. This, as noted by High-Point Rendel, an international consultancy firm hired in 2000 to review the port’s institutional framework, “conflicts with modern boardroom procedure and concentrates excessive power in the hands of one individual.” On top of this, it noted the “unusual circumstance where the President and Director General of the [TC] reports directly to the Minister of Transport on a personal basis. . . . This leaves the Department of Land and Maritime Transport within the Ministry with little power or authority” (2000, 12). Ministerial decisions were similarly personalized, as they did not require close consultation with the Transport Ministry’s own senior public servants. The discretionary powers enjoyed by the port’s chairman and the TC affected management of the substantial revenues from fees received from the port’s customers, which reached nearly $80 million per annum in 2005.11 If the port’s status had been made congruent with the Law on Public Enterprises, its revenues would have been kept and managed in an account with the central bank, whether in its own name or that of a “tutelage” ministry, and subjected to the oversight of a financial controller at the MoF (World Bank 2005b, 28). As no such arrangements had been made, the bulk of the port’s revenues were kept in a private bank account even though these clearly were public resources (High-Point Rendel 2000, 12; DS 22 January 2003 and 13 January 2004; ‘Umar Misqawi cited in AN 13 December 1997; AD 16 December 1997). As a result, the port’s finances were not properly audited, and no regulations existed to identify who could legitimately access its resources and for what purpose. Crucially, it also remained unclear whether the port’s TC should be considered a legal entity that could independently become a partner in transactions with the private sector. As two Lebanese consultants hired by the Ministry of Public Works 11. Port of Beirut statistics at http://www.portdebeyrouth.com/french/statistics.asp?x=1, accessed 1 October 2009.

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and Transport observed, “[The TC] has been operating without clear legal powers other than those granted under successive governments since 31 December 1990, as temporary expedients” (Baaj and Issa 2001, 396). This issue, of course, was highly significant as the port undertook several projects involving the private sector to rehabilitate its docks, in addition to leasing heavy equipment and hiring handling services from private companies. Concerning the latter, some involved no written licenses or contracts at all, prompting High-Point Rendel to express concern over “a highly confused system” (2000, 10, 22). In its ambiguous institutional capacity the TC also levied a range of charges on the private sector, on behalf of the state, for using state-owned assets in the port. In 2002 a Lebanese importer, the oil company Medco, challenged the TC’s authority to levy fees for its use of storage facilities located in the port area, arguing that the TC could not legitimately claim to represent the state in imposing such charges. In the ensuing dispute, the Advisory State Council agreed with the company’s argument and absolved it from duties. The decision prompted other importers to refrain from paying storage fees, causing an estimated loss of $1.5 million in port revenues (DS 22 January 2003). Nor did the port’s administrative ambiguity escaped outsiders. In November 1993 the European Investment Bank (EIB) approved a $57 million loan to the Lebanese state in order to rehabilitate and expand the port of Beirut (CDR-PR January 1994, 23). As a condition for the loan, however, the EIB demanded that France’s Port Autonome de Marseilles be granted full powers to manage and supervise the rebuilding works, thereby testifying to how little confidence the EIB had in the port’s existing administrative structures. Other port activities, including the shipwreck removal project described earlier, continued to be managed by the TC even though its operations lacked any clear guidelines or regulations as to how the port should properly conduct its dealings with private contractors. The disagreement over ministerial responsibility or “tutelage” over the port and its commission remained unsettled for years. With the arrival of the TC in 1993, a compromise seemed to suggest that the newly created Ministry of Transport, later renamed the Ministry of Public Works and Transport, held ultimate political responsibility—and influence—over the port. But no attempt was made to clarify this matter once and for all, for example, by formally attaching the port to this or any other ministry’s portfolio.12 The Ministry of Transport could thus dodge all responsibility for any wrongdoing at the port. Many could speak and act in its name, but no one held ultimate responsibility for what happened there. 12. In 2000 the port was briefly attached to the portfolio of the Ministry of Finance. Yet soon thereafter it returned to the Ministry of Transport ( port chairman ‘Isam Bekdash cited in Al-Kifah al-‘Arabi 18 September 2000).

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Given the administrative confusion at the port, solid mechanisms for external auditing and supervision of the commission’s operations failed to emerge. The port’s books and personnel were of no immediate interest to the CA and the CIB because the port did not qualify as a public institution. As a result, neither state watchdog issued any reports on the port. By contrast, the MoF had become curious about the port’s bookkeeping, given its potential contribution to the treasury, but had no access to its private bank account. Once in a while an accountant who had been contracted since the days of the private concession would routinely approve the port commission’s books, after little investigation and ignoring numerous complaints of embezzlement (interview with senior port official, Beirut, 15 January 1999). But even if this accountant had registered irregularities, his findings would have been unlikely to have any impact. Since the private shareholders’ departure, the only persons to see the audit reports were the members of the commission. They could, in principle, invite departmental executives with specialized knowledge to board meetings in order to assess the accuracy and significance of available audits, but they were under no obligation to do so, thereby removing even a minimal level of internal scrutiny (High-Point Rendel 2000, 12). Strikingly, the TC never established an audit commission. In sum, no one checked how the members of the TC and other officials at the port performed their tasks. The port’s ambiguous institutional status meant that the notion of a strict separation between public office and private interest had little bearing on its staff. As long as the port was not formally incorporated into the public sector, regulations barring civil servants from private employment failed to apply. Indeed, the port’s employees continued to be governed by private law (High-Point Rendel 2000, 41). Many TC members and newly appointed port employees openly continued their private sector activities, some of them reportedly related to maritime affairs (High-Point Rendel 2000, 41; AS 3 September 1996; AD 16 December 1997). In fact, most port employees continued to perceive themselves as part of the private sector even though the private shareholders had long since left the scene (interview with senior port official, Beirut, 15 January 1999). In addition, appointments of new members of the TC throughout the 1990s until 2005 were conducted in frantic horse-trading among leading politicians. Yet no formal conditions applied to these candidates for public office (examinations held by the CSB, for instance), as the port, strictly speaking, was not classified as an integral part of the public administration. Hence, even more so than their counterparts in other public institutions, appointees at the TC owed their position entirely to their political patrons. Significantly in this context, many politicians had their eyes set on the port to serve their private ambitions. Hariri, among others, hoped to benefit from a possible privatization of the port’s management, whether in full or in part (see chapter 5). The appointment of Muhib ‘Itani as the port’s chairman in

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April 1997 was important in this respect as he had been an employee of Hariri’s Oger company for years and remained a close confidant to the prime minister. The potential for conflicts of interest was aggravated by reports that some private contractors who were paid to conduct logistical and handling operations in the port had strong links to and in some cases were owned by Lebanon’s leading politicians, including ministers and MPs (interview with senior port official, Beirut, 15 January 1999; DS 22 January 2003). Indeed, many of them had entered the sector during the armed conflicts of the 1980s by operating illegal ports along Lebanon’s coastline that were fully controlled by militia leaders, later turned ministers and MPs. The failure of the port’s institutional framework to meet any of the standards of bureaucratic organization was a direct outcome of the failure, following the private concession’s expiration, to formalize an arrangement congruent with the port’s de facto status as a public institution. The state refused to recognize that the port had become part of the public sector. As one journalist aptly put it, the port remained “the illegitimate son of the state” (AD 16 December 1997). The port’s provisional managers were quick to play down risks that the awkward administrative framework would produce a breeding ground for corruption. “It is unknown today what the final administrative status of the port will be,” port chairman Muhib ‘Itani acknowledged in 1997 (cited in AD 16 December 1997).13 Yet according to ‘Itani, this was nothing to worry about. After all, he reasoned, was the port for all its purported faults not one of the very few public institutions actually making money? “We regard the port as a public service that for all its flexibility resembles a commercial enterprise,” he said (AD 16 December 1997). The dispute involving Sar-Mowlem was about to unfold.

Awaiting the “Master Plan”: State Regulation of the Quarrying Business Plans to subject the quarrying sector to a coherent framework of licensing and controls date back to the early 1980s (Abu Fadil 1998, 26, 29). Two and a half decades later, however, very little that was tangible had been achieved to regulate the business. Few denied the urgency of measures against unregulated quarrying, especially after a comprehensive study by a private consultant demonstrated the devastating impact of the industry on the environment (Dar al-Handasah 1996). But regulation of the industry, which looked from a technical point of view like a straightforward undertaking, turned into a fiasco. Clear policy aims were not set, the distribution of licensing authorities lacked coherence, conditions for 13. ‘Itani’s successor ‘Isam Bekdash similarly described the port as being “no finite legal entity but [having] a temporary actuality” (cited in Al-Kifah al-‘Arabi 18 September 2000).

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obtaining licenses remained opaque or were inconsistent, and the state’s dealings with the sector were riddled by conflicts of interest. Wide discretionary powers combined with the absence of any external checks or controls to prompt alarming levels of corruption. An incident in 1993 triggered a fierce debate about the state’s efforts to minimize the health hazards and environmental threats posed by the quarrying industry. At the end of that year, Bsharra al-Mirhaj, the interior minister, was pressured by residents of Antelias (north of Beirut) to close down several quarries surrounding their houses and the river Nahr al-Mawt. Mirhaj gave the quarries an ultimatum to close. But the date, set for 24 December 1993, passed, and the quarries continued to operate (Abu Fadil 1998, 28). Questions were raised as to whether these quarries, which were frantically digging up the country’s mountains, actually had licenses to operate, and if so, who had granted them and under what conditions. But answering these straightforward questions proved harder than expected. In essence, the following Kafkaesque situation applied. A legislative decree dating back to the mandate period (Legislative Decree 253, 8 November 1935) set some technical conditions on quarrying operations. These conditions, however, were widely perceived as insufficient to address the environmental concerns caused by quarrying on the scale witnessed in the 1990s. Furthermore, Legislative Decree 253 said nothing about licensing procedures and failed to identify the authorities that were to grant such licenses. In practice, therefore, a range of institutions became involved in granting licenses to individual quarries. Local governors (muhafizin) granted licenses, supposedly after consulting other agencies; municipal councils also had their say, occasionally raising objections to quarrying operations in the areas under their jurisdiction. Exacerbating the lack of coordination among these authorities, the Interior Ministry had its own relationship with the quarrying sector and could issue licenses pursuant to its own interpretation of the decree. What made matters even more confusing was that the status of Legislative Decree 253 itself had become uncertain with the creation of the MoE in April 1993. The law that established the MoE (Law 216, 2 April 1993) gave the ministry, at least nominally, the authority to set environmental conditions for granting licenses for quarrying. In doing so, Law 216 abrogated all preceding laws and decrees, which were deemed contradictory. By 1999, however, the ministry’s conditions and procedures concerning its licensing policies were still to be specified in bylaws. Legislative Decree 253—falling short of establishing a clear institutional framework itself—had been put on hold without any alternative being provided. As a result, numerous authorities continued to grant licenses without imposing any coherent set of requirements on the quarries’ operators.

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In an attempt to redress this disarray, the first minister of the environment, Samir Muqbil, issued a decree (Decree 5616, 6 September 1994) which stipulated that the MoE was to be the sole agency granting or rejecting licenses for quarrying, except for an area in the northeast where environmental concerns were deemed less pronounced. In its new capacity the MoE was to rely on the recommendations of the National Council for Quarrying (NCQ), which was to be quickly established and chaired by Muqbil himself and to comprise representatives of several ministries. In turn, the NCQ would base its recommendations on a master plan to be prepared by the Urban Planning Council and approved by all ministries involved in the NCQ. The master plan would identify sites throughout the country (except for the northeastern sector) where quarrying would be allowed and specify the technical requirements pertaining to quarrying and to the rehabilitation of exhausted sites. Muqbil’s decree promised to clear up the unfathomable regulatory framework once and for all. Nevertheless, hopes that the state could now play a more coherent role with regard to the quarrying business were dashed when, in June 1995, the Council of Ministers ruled that Muqbil had overstepped his prerogatives and abrogated Decree 5616. Once again the quarrying sector was left with no clear and coherent institutional framework, and business went on as usual. When Akram Chehayeb succeeded Muqbil in November 1996, the MoE again pushed for a new regulatory framework based on one authoritative master plan. This time around Dar al-Handasah, a private consultancy agency, was contracted to prepare the groundwork for such a plan, which was to be approved by the interministerial NCQ before being put to a vote in the Council of Ministers and in Parliament. Dar al-Handasah issued its comprehensive report in March 1997, but the NCQ failed to authorize a final master plan detailing suitable sites for quarrying and identifying the appropriate licensing authority. Consequently, Chehayeb sent his own master plan directly to the cabinet for discussion (DS 3, 4, and 13 March 1997). Interior Minister Michel al-Murr floated his own ideas, and soon several master plans were circulating (Minbar al-Bi’a February 1998; AN 3 April 1997). Approval failed to materialize for any of them, and the quarrying sector still lacked a coherent regulatory framework. Awaiting an officially sanctioned master plan that never materialized, various state institutions continued their improvised policies vis-à-vis the quarries. On 20 September 1995 the Council of Ministers had decided to allow quarries to operate on the basis of a certificate of “administrative respite” (mahal ‘idariya), in essence a provisional license renewable every six to twelve months, according to the director of the Geotechnical and Marine Department at Dar al-Handasah (interview with ‘Issam Ghala’ini, Beirut, 2 July 1999). Yet it remained unclear which agency could grant this mahal and on what conditions. In practice, an increasing

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number of quarries were granted a mahal by the Interior Ministry, while other agencies including governorates and the Public Works Ministry issued their own (interview with ‘Issam Ghala’ini, 2 July 1999; Dar al-Handasah 1996, 1:24–25; AD 30 June 2002). During some seven years of protracted negotiations over the master plan, such temporary licenses were constantly renewed or granted to new applicants. Between 1995 and 1999 the Interior Ministry even granted three companies full-fledged licenses for quarrying with a maturity ranging from five to twenty-five years (AD 30 June 2002; AS 12 March 1999 and 8 October 2001). Furthermore, in the absence of a master plan, several governorates argued that they could continue to issue licenses as they had before September 1995 (interviews with ‘Issam Ghala’ini, 2 July 1999, and with environmental activists, Beirut, October–November 2006). Consequently, several governorates resumed issuing temporary licenses as they saw fit (interview with Abdallah Zakhia, 3 May 1999). Further adding to the confusion, the CDR in 1998 began issuing its own authorizations to quarries that supplied its building projects in and near Beirut (AN 23 March 1998). Hence, with Legislative Decree 253 kept on hold, Decree 5616 abrogated, and no sign of the cabinet promulgating a final master plan, an assortment of authorities issued licenses according to criteria that were known only to themselves. On 20 June 2002 the Council of Ministers declared that it wished to end the practice of issuing new temporary permits and that existing authorizations would expire in three months’ time, pending the announcement of an entire new set of regulations and procedures related to quarrying (OJ 21 June 2002). On 7 October that same year, Decree 8803 was adopted, which promised a drastic overhaul of state regulation (AN 7 March 2003). It stipulated that quarrying activities were to be conducted freely in the Anti-Lebanon mountain range in the northeast of the country bordering Syria, provided quarry operators owned the plots of land they used. Outside this region quarrying was to be limited and subject to prior permission from the NCQ, chaired by the minister of the environment and incorporating other ministries and the governorates. Only the NCQ would decide applications for licenses, on the basis of a set of environmental, geological, and safety criteria referred to in the decree. All quarrying activity that failed to meet these new regulations and procedures was to be banned, effective immediately. Furthermore, import duties on gravel and cement were to be lifted in order to encourage the building sector to use alternatives. The decree met with stiff resistance from quarry owners who were about to lose their lucrative business. In addition, institutional and legal obstacles foiled effective implementation. For one thing, the exact procedures and criteria according to which licenses could be obtained outside the designated zone in the northeast were not clarified, prompting the minister of the environment, Michel

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Mussa (Chehayeb’s successor), to pledge in a meeting with concerned governors that he would instate a “practical mechanism” as soon as possible (DS 5 December 2002). Yet confusion over procedures continued. Even more seriously, the new regulatory framework lacked the legal muscle to abrogate existing and contradictory legislation. After all, it was only based on a cabinet decree and not put into a full-fledged law signed by the president of the republic and the prime minister and endorsed by Parliament. As a result, agencies other than the NCQ continued to issue temporary permits, claiming that their prerogatives had not legally been affected. Quarry owners soon discovered this loophole. Mussa asserted that Decree 8803 empowered him to terminate licenses granted earlier to quarry owners, including a company associated with MP and former tourism minister Nicolas Fattouch (AD 25 August 2002). The latter challenged this view on the grounds that a cabinet decree could not revoke the twenty-five-year license his brother had obtained by perfectly legal means. On 9 April 2003 the Advisory State Council ruled in Fattouch’s favor, prompting the governor of Mount Lebanon to reinstate the license.14 Other legal obstacles thwarting effective implementation of Decree 8803 concerned landownership issues in the designated area in northeast Lebanon. Much of this area was, in fact, owned by the MoF and the central bank. Neither institution was authorized to sell or lease these plots for commercial purposes except after being instructed to do so by the Council of Ministers and Parliament (AS 3 July 2003). As these instructions never came, only a few new quarries were opened in what was supposed to have been an alternative area to the more densely populated Mount Lebanon and other regions. In fact, quarries that did spring up in the area risked being closed down by the Interior Ministry for property law infractions. The status of Decree 8803 became even less certain when in April 2003 a new cabinet was appointed that included Faris Bouiez as environment minister. Bouiez openly expressed his opposition to the decree and started working on new legislation (AM 7 June 2003; OJ 19 and 21 August 2003). Once again a survey was commissioned to map out Lebanon’s quarrying sector, this time to be conducted by the armed forces. Seemingly in reference to the results of this survey, the Council of Ministers announced in November 2003 that it would allow for the reopening of two quarries in the north and two in the south (OJ 21 and 25 November 2003). Yet a new comprehensive framework to replace the one proposed in 2002 emerged only in August 2004. The Council of Ministers now endorsed a new plan whereby each governorate was to have a restricted number 14. The Advisory State Council subsequently froze the implementation of its earlier decision, causing the Interior Ministry to keep insisting that Fattouch’s quarry be closed. In response, Fattouch pressed for compensation amounting to $220 million. Compensation was formally awarded in 2003, but actual payment continued to be deferred at the request of the Justice Ministry.

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of quarries: four in the north, three in Mount Lebanon, four in the south, and twelve in the Biqa’. The NCQ was to decide on license applications, which could be obtained provided the operator legally owned the land on which quarrying was to take place, the quarry met certain environmental criteria, and its owner submitted a deposit that would be used if he failed to rehabilitate the area after quarrying had finished (OJ 21 and 25 November 2003). Bouiez asserted that the “chaotic practices” pertaining to temporary licenses would now end (OJ 21 November 2003). Yet the cabinet of which Bouiez was a member was dissolved only one month later, after the controversial extension of President Émile Lahoud’s mandate. Bouiez’s successor, Wi’am Wahhab, announced that he would reverse the cabinet decision reached in August and return to the original master plan drawn up by the MoE, although it was not clear which version he had in mind and how this would translate into yet another blueprint for a regulatory framework. “A solution for this dossier will be forthcoming in virtually a matter of days,” he said (OJ 4 January 2005). Meanwhile, the quarrying sector maintained the now ingrained practice of obtaining temporary licenses from a multitude of authorities and agencies. The state’s botched regulation of the quarrying sector and the failure to create coherence presented many opportunities for an inappropriate exercise of discretionary powers and, indeed, for corruption. In the institutional pandemonium pertaining to the quarrying sector, external supervisors and auditors had no chance to assert themselves, even if they were willing and able to do so, because no one could tell for certain which institution had been formally charged with issuing licenses, under what conditions, and following what procedures. All quarry owners had to do was to show some sort of license or authorization obtained from one of the many institutions involved in order to proceed with their works. Licensing authorities could not be held accountable, as there were no rules according to which their policies could be assessed. The state’s control bodies (the CA, the CIB, and the CSB) never commented on the state’s dealings with the quarrying sector, thereby leaving officials’ interventions in the lucrative business to their own discretion. Finally, a clear separation of private interest from public office failed to emerge. Some prominent political actors with a say in the process of institution building held, directly or indirectly, a private stake in the quarrying sector. At least three directly involved ministers held a stake in several quarries, either themselves or through their relatives or political superiors. Junblatt made no secret of his ownership of one of the biggest quarries in the country, in Siblin. And even though the quarrying issue never reached Parliament, government policymakers issued few calls for an increased role for Parliament. It may be significant in this respect that a prominent MP and senior member of the Parliamentary Committee for

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Agriculture and Environment owned a quarry. Other MPs held interests in the quarrying industry, both by owning quarries and by relying on quarried material for many of their private building projects. Two institutions, the CDR and the muhafaza of Mount Lebanon, granted licenses to quarries, and both were controlled by key politicians’ business associates. Policymakers were thus expected to regulate themselves while high-ranking officials were dealing with quarries owned by the politicians to whom they owed their positions. Combined with opaque regulations and ambiguous requirements for operating a quarry, this blurring of public and private interests made a mockery of bureaucratic organization. Lebanon’s postwar efforts in institution building had again provided an ideal recipe for corruption.

Institutions at the Forefront of Postwar Reconstruction Given the intense building activity set in motion by the installation of Hariri’s first government in 1992, hopes ran high that the country would soon be able to regain its former role as a center of financial and other services for the Middle East. But corruption permeated several institutions that played a pivotal role in the government’s postwar reconstruction policies: the CDR, the real estate company for the BCD, and the Ministry and Fund for the Displaced. As in my investigation of other public institutions, I argue that these high levels of corruption were caused by the inadequacies of each of these institutions when measured against the criteria of bureaucratic organization.

“An Island of Efficiency”: The CDR In 1977, when the war witnessed a brief interlude, the government of Salim alHoss (9 December 1976–16 July 1979) took a series of unusual measures. At the center of this early attempt at reconstruction stood a new institution, the Council for Development and Reconstruction. When asked about his motives in establishing the agency, Hoss later commented: The public administration was inefficient, divided by the war, and riddled with corruption. Obviously, if the entire state had participated in the [reconstruction] process, it would have been necessary to launch an enormous campaign entailing far-reaching administrative reforms. But at the time we didn’t want to make the reconstruction plan dependent on the initiation of reforms for which we knew that we didn’t have the means to make it happen. [Hence] that “island of efficiency” [the CDR] at the heart of an administration that was everything but efficient. (cited in Rayes 1997)

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As it turned out, the relative calm that had encouraged the government to make plans for postwar reconstruction proved to be yet another brief truce in a conflict that would last thirteen more years. During this period the CDR carried out some reconstruction projects, but insufficient funding and the general chaos in the country prevented it from having much impact. In the early 1990s, however, the CDR was again singled out as the main agency responsible for reconstruction. Consequently, it grew into an energetic institution in charge of planning and implementing numerous reconstruction projects involving billions of dollars. Legislative Decree 5 established the CDR on 24 January 1977. It granted the council an ambitious mandate. In general terms, its role was to formulate a basic framework for the country’s reconstruction, to attract external loans and grants to finance its operations, and to oversee the implementation of individual projects. To fulfill these roles, Legislative Decree 5 granted the CDR unprecedented powers and tasks, including “planning duties,” “advisory functions,” “executive duties,” “supervisory duties,” and the authority to solicit domestic and foreign loans to finance rebuilding projects. Political responsibility, in theory, lay with the Council of Ministers, to which the CDR was formally accountable. Reports prepared by the CDR during the war years suggest that the concentration of all these functions in one institution was meant to have been merely temporary, awaiting an improvement in security conditions and pending reforms to render the regular public administration more effective. In the early 1990s security conditions radically improved; the CDR was not just left intact, however, but its powers were even augmented, ostensibly because the public administration was still in need of reform (OMSAR 1998b, 25). More than fifteen years after the war, the CDR’s proponents still staunchly defended its prominence in the state’s reconstruction efforts. As long-serving CDR chief Fadil Shalaq argued, “Exceptional tasks needed and still need exceptional institutions” (interview, Beirut, 13 November 2006). Amendments to Decree 5, formalized by Law 117 and issued on 12 December 1991, granted the CDR far-reaching powers single-handedly to solicit, negotiate, and secure reconstruction funding from foreign sources, issue treasury bonds, and finance infrastructural projects carried out by a private real estate company in charge of rebuilding the downtown BCD. Accordingly, the CDR commissioned— or drafted itself—various plans that provided blueprints for the postwar reconstruction efforts.15 Between 1992 and 2005, the CDR spent in total nearly $7.4 billion on contracts involving numerous sectors including infrastructure, 15. These plans included the master plan for the BCD, the Priority Rehabilitation Plan, the National Emergency Reconstruction Plan, and several versions of a general reconstruction plan named Horizon 2000.

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education, public health, electricity, agriculture, waste management, and industry (CDR-PR July 2005, 6). In 1999, when CDR expenditures were at their peak, these sums constituted around 80 percent of the state’s total capital investments, according to CDR spokesperson Wafa Sharaf ad-Din, in a talk held at the Centre for Behavioral Research of the American University in Beirut (8 December 1998). For all these projects the CDR drew up feasibility studies and plans, organized tenders, signed the contracts, secured funding through domestic and international loans, and supervised implementation. Given such vast tasks and responsibilities, it was, of course, vital that the CDR meet the minimal standards of bureaucratic organization. Evidence suggests, however, that the institutional framework of the CDR failed to do so. Let us start with the bureaucratic criterion of clear and coherent procedures and regulations in the execution of the organization’s mandate. In 1991 a report prepared by private consultants from Coopers & Lybrand–Deloitte (cited in International Bechtel 1991, 2–15; Rayes 1997) pointed out a range of procedural and regulatory problems and deficiencies within the CDR. Among the many listed problems were ill-defined procedures for project implementation and monitoring, the lack of procedures for pre-qualification of consultants and subcontractors, lack of standardized contracts and purchasing documents, and the prevalence of restricted tenders and contracting by mutual agreement. Furthermore, the consultants noted mounting political interference in the CDR’s contracting activities and a lack of coordination between the CDR and government departments. In the wake of this damning report some institutional reforms were carried out, but sustained complaints about lack of tendering and flawed monitoring suggest that the consultants’ concerns were not sufficiently addressed. In 1995 yet another consultancy report proposed to establish a Monitoring and Evaluation Unit within the CDR (CDR-PR March 1996, 56–57). This recommendation was never carried out. Moreover, ill-defined and discretionary powers were magnified by the ways in which the CDR’s board of directors was staffed. A majority of its members (including all of the full-time members) were simultaneously senior executives in the agency, thereby undermining the board’s independence and weakening its role in exercising internal oversight (World Bank 2005b, 22). The absence of a solid procedural framework for the CDR’s significant powers is particularly serious given that political checks and controls were equally absent. Most significantly, the CDR’s itemized budget for investments, which included revenues, was separate from the regular central budget and, hence, excluded from the annual budget process involving both the Council of Ministers and Parliament (World Bank 2005b, 22). CDR executives were even granted powers to spend on new projects throughout the budget year as they pleased, subject only to the approval of the MoF and without reference to the cabinet or Parliament

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(World Bank 2005b, 22). In effect, the CDR operated as the executive arm of one political leader, the prime minister, despite its own assertions to the contrary (CDR-PR January 1995, 1). Hariri repeatedly failed to discuss the CDR’s plans and activities with the cabinet and unilaterally ordered individual projects to be carried out (Rayes 1997; Najem 2000, 145–46). Shalaq acknowledged in 2005 that the cabinet invariably failed to discuss the CDR’s reconstruction projects in any detail (AS 8 August 2005). Parliament was similarly bypassed or kept ignorant of the details of CDR projects except when its approval was required to raise new treasury bonds. Finally, the CDR was virtually immune vis-à-vis the cabinet. Until April 2001, when some of the CDR’s legal prerogatives were altered (see the discussion later in this chapter), senior permanent CDR staff, including its president and board members, could not be removed, even by the Council of Ministers, to which the agency was formally accountable. The CDR also escaped effective oversight by the state bodies assigned to audit and control public expenditures and the administration at large. Legislative Decree 5 exempted the CDR from CIB controls and from advance auditing by the CA. The court was authorized to carry out deferred audits of the CDR’s expenditures, but it never reported on its findings, and it appears unlikely that even such limited controls were significant. Responding to criticisms regarding the lack of external auditing, senior CDR officials and Hariri’s political allies in Parliament countered that state auditing of the agency was unnecessary as international donors and other sources of capital already carried out such controls (AN 18 October and 12 November 1994; AS 30 October 1995; OE October 1997; AA 27 October 2004). In this context one former senior CDR official confirmed that foreign donors sent their own auditors to serve on committees within the agencies that were involved in executing sponsored projects (interview, Beirut, 28 November 2006). Yet on the basis of his long experience at the CDR, this retired executive expressed serious doubts about the effectiveness of foreign auditors in curbing dishonest practices: “In principle they were in a position to check how donors’ dollars were spent. Yet they also brought their own corruption. Don’t think corruption was committed only by Lebanese. There were numerous shady deals between donors and companies bribing Lebanese officials in return for contracts” (interview, 28 November 2006). Even if this allegation is rejected, the argument that foreign auditors effectively and fully substituted for domestic state controls does not stand up. Of the $7.4 billion the CDR spent between 1992 and 2005, $5.8 billion came from foreign sources (CDR-PR July 2005, 137). Hence $1.6 billion, mainly raised through treasury bonds, was spent without any auditing, either by foreign agencies or by the state’s watchdogs. Furthermore, around 40 percent of total foreign funding to the CDR was provided by Arab and Iranian donors who were not generally believed to have been stringent in their

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procurement rules and auditing requirements (CDR-PR July 2005; interviews with European diplomats, Beirut, November 2006, and former senior CDR official, 28 November 2006). The CDR often proclaimed that in terms of qualifications and experience, its staff, numbering 270 by 2005, was far superior to that of all other public institutions in the country, earning it a reputation as a body of “technocrats” (CDR-PR March 1996, 57; Ingels 1998–99, 271–76). Yet a clear separation of public office from private interests was certainly not the agency’s greatest virtue. As with the port of Beirut, the CSB had no say whatsoever in the CDR’s hiring and firing of staff. Appointees did not have to pass the examinations held by the CSB or conform to civil service regulations prohibiting private employment. In fact, candidates for employment did not have to take any examination at all (Ingels 1998–99, 261). Instead, both regular and temporary staff were hired on the basis of a discretionary decision by management and the prime minister. Senior CDR personnel were primarily drawn from Hariri’s personal entourage and his business contacts. This was not just the case for the CDR’s highest-ranking managers, including successive chairmen of the CDR. Many middle-ranking officials also reportedly worked for one of this politician’s private companies, and some remained on his private payroll (interview with former CDR official, 28 November 2006). When Hariri was asked about allegations that many of his former employees were filling high official positions while still taking salaries from him (an implicit reference to CDR personnel), he replied by threatening to withdraw those employees from the public service (AH 10 August 1998). Subsequently, other politicians also managed to impose their candidates on the CDR’s board of directors, which fueled additional concerns about potential conflicts of interest, though this time for different reasons. Such appointees included Yassir Mustafa Berri, brother of Speaker of Parliament Nabih Berri, and Yahya Sankari, brother-in-law of Prime Minister ‘Umar Karameh; these two men were appointed CDR vice president and board member, respectively, in December 2004. On 7 August 2000 Law 247 was issued, envisaging a drastic overhaul of the CDR’s institutional features. If this law had been fully implemented, it would have bolstered the agency’s bureaucratic features at all levels. First, it aimed at merging the CDR with two other public agencies marginally involved in reconstruction projects, the Conseil Exécutif des Grands Projets and the Conseil Exécutif des Grands Projets de la Ville de Beyrouth, into one larger unit named the Public Agency for Development and Reconstruction ( PADR). Strikingly, the new law transferred virtually all of the CDR’s sweeping powers to an interministerial body named the Council for Planning and Development (CPD), chaired by the prime minister and including several ministers, to which PADR was made fully answerable. The latter was to be reduced to an executive body. The CPD, in

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turn, reported to the Council of Ministers, which was also to approve itemized budgets allocated for reconstruction projects. PADR board members no longer could serve as executive staff, and strict regulations would prevent senior officials from retaining links to the private sector. The CIB was given full access to the new agency and granted the authority to take disciplinary actions against any staff member detected in administrative wrongdoing. Finally, the Council of Ministers was given the authority to fire PADR board members by decree, at the proposal of the CPD. Law 247 was never applied, however, and was soon shelved. Law 295, issued on 5 April 2001, abrogated the new framework and reinstated the CDR and its institutional features. Law 295 nevertheless retained the merger of the two other agencies into the CDR and, more important, it granted the Council of Ministers the authority to end contracts of senior staff. The CDR was designed to circumvent the many problems Lebanon’s public administration struggled with, such as inefficiency, institutional paralysis, and of course corruption. The postwar reconstruction of the country, it was believed, should not fall victim to such practices. Yet the CDR’s own institutional framework produced precisely these problems. Opaque and faulty procedures and regulations, associated discretionary powers, the lack of external controls, and the confusion of public and private interests involving its personnel made the CDR, not unlike more conventional public institutions, highly vulnerable to corruption. The implications of these institutional deficiencies were particularly serious given the sheer scale of the CDR’s expenditures and because it had practically taken over many of the tasks of ordinary ministries and other public institutions. The CDR had grown into what its critics called a “supra-ministry” or even a “substitute government” (Wakim 1998, 117) that was heavily exposed to corruption.

Rebuilding Central Beirut on Behalf of “Tom, Dick, and Harry” The real estate company created for the rebuilding of Beirut’s Central District presents a highly complex case of institution building. Since its conception in December 1991, the REC’s own institutional structure and activities became embedded in a web of public institutions and state prerogatives. Thus the state, and the judiciary in particular, played a crucial role in the transfer of individual property and tenants’ rights of the original inhabitants of the BCD, estimated at some 100,000 to 150,000 persons (Makdisi 1997, 670n10). Moreover, the building of public infrastructure in the BCD was delegated to the REC, later named Solidere, against the transfer of large sums of public resources. Finally, the REC played a crucial role in city planning, exercising powers that, legally, are in the realm of the state. How did the institutional framework designed to govern relations between the REC and the state compare with the principles of bureaucratic organization?

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In the early 1990s, the Lebanese government was faced with rebuilding Beirut’s heavily damaged business center, known as the BCD. Soon the argument gained currency that ownership and tenants’ rights in the area were so fragmented that, without a centralized initiative, rebuilding would become hostage to a seemingly insoluble problem of collective action. Rebuilding would then be delayed or never even get off the ground. The advocates of the REC scheme argued that such delays would be unacceptable because of both the economic losses and the socioeconomic deprivation these delays would cause. As Shalaq put it: “If we don’t build the center of the capital now, it will become like a wasteland with every Tom, Dick, and Harry [bu’ra mal’iya bi-ma habba wa dabba] turning it into a political and social time bomb” (AH 11 July 1991). Yet at the same time, expropriation by the state, in an effort to kick-start the rebuilding works, was deemed beyond the limited resources at the government’s disposal. The state was fiscally in no shape to take on yet another burden and pay for such work from the current account or by debt financing. In addition, state institutions were deemed inefficient and corrupt. In the short term the state could not take responsibility. The REC scheme presented an attractive alternative. A private joint-stock company would rebuild and manage the district’s private properties and carry out infrastructure works. To this effect, Law 117 was adopted on 12 December 1991 announcing the establishment of a private company charged with the reconstruction of the BCD. Based on the Code de l’Urbanisme of 1962 (as amended in 1983) but diverging from it in important ways (Bureau Technique d’Urbanisme 1992, 6–9), Law 117 stipulated that stocks were to be granted as “compensation” to the original property owners within the BCD after their assets, valued at $1.17 billion, had been transferred to the company. New investors who subscribed in early 1994 to shares worth another $650 million further boosted the company’s capital. Following a statutory meeting of shareholders in May 1994, the jointstock company, named Solidere, was formally established. In September the management of Solidere reached an agreement with the CDR and the Council of Ministers to finance and carry out infrastructural works at a total cost determined at $475 million (Solidere 1995, 23). The regulations and procedures put in place to govern the state’s and the REC’s respective roles and their relations are complex. Yet in essence the regulatory framework for the transfer of property was not congruent with the constitution and Lebanese property laws, with the result that the decision makers involved were maneuvering in a legal no-man’s-land and enjoyed high levels of discretionary power. The other two areas of activity—outsourcing public works and city planning—were similarly marked by a lack of clear regulations and procedures, thereby allowing for high levels of discretion in the actual implementation of Solidere’s mandate.

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THE TRANSFER OF PROPERTY RIGHTS

Law 117 stipulates that the property rights of the BCD’s original owners and tenants were to be transferred to the REC in exchange for shares corresponding to the value of the properties involved. To appreciate the regulations and procedures applied to facilitate this transfer, one needs to know how this form of transfer fits into Lebanon’s overall legal framework concerning property rights. According to the Lebanese constitution ( Preamble F and Article 15), and by extension Lebanese property law, private property rights can be transferred in any of three ways: (1) by voluntary transaction, (2) by inheritance, and (3) by expropriation (istimlak) by the state.16 Obviously, transfer by inheritance did not apply here, thus leaving two remaining possibilities. Under which form did private properties in the BCD become registered in the name of Solidere? The puzzling answers given by the advocates of the REC run as follows: (1) the transfer was voluntary as the property owners were given a choice either to join the REC or to recuperate their property and remain its owner; (2) “transfer” does not properly describe the process called for in Law 117 as the original owners retained their rights through their newly acquired shareholding in Solidere; and (3) the manner in which the transfer took place met all the constitutional requirements for expropriation.17 Before assessing these arguments in their totality, I first examine them separately. 1. The transfer was voluntary. As it turned out, the options offered to the original owners were extremely constrained. Law 117 gave the REC sweeping powers to impose a whole range of conditions for self-recuperation if an original owner wanted to retain his or her property rights. Such conditions ranged from enforcing building plans in accordance with Solidere’s master plan to handing over numerous documents, including building plans, legal certificates, and a comfort letter from a bank. Moreover, these conditions had to be fulfilled in an extremely short period of time, and the recuperation works themselves had to be completed within two years (Solidere 1995, 33; Takla 1992; CDL 2 June 1994). Formally speaking, the original owners were indeed given a choice, but most of them were unable to meet the conditions attached.18 Obviously, lack of financial

16. Accordingly, Article 228 of Decree no. 339 (Real Property Ownership Code, 12 November 1930) provides that the right to register private property ownership derives from any one of six causes: (1) inheritance, (2) gifts and wills, (3) continuous and uninterrupted possession, (4) right of priority between neighbors, (5) passage of time, and (6) voluntary contracts. 17. This analysis has been compiled from several sources containing interviews with or citations from high-ranking officials of the CDR and Solidere (AH 11 July and 20 September 1991; AS 21 July 1991; AN 21 September 1991 and 21 April 1992; CDL 19 September 1991, 11 March and 23 April 1992; OJ 21 March 1992; LR July 1992 and March 1994; Corm 1996, 169-91; Rayes 1996; Kaissy 1994; Beyhum 1993–94; Takla 1992; Kabbani 1992; Khalaf and Khoury 1993). 18. By April 1995, only thirty recuperation contracts had been signed (Solidere 1995, 33).

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resources was for many the most difficult obstacle. But even for those who could quickly mobilize sufficient resources, the chaotic administrative circumstances in the judiciary and the Land Registry were not conducive to prompt delivery of the required documents.19 Such problems were acute in the case of buildings owned by various proprietors who based their rights on ancestry lines dating back to the nineteenth century. Another factor contradicting the supposedly voluntary nature of participating in Solidere relates to the fact that the specific terms of the transfer of property were not set by the original property owner but were imposed by judicial “appraisal committees.” In practice, the property owner had to accept the price these committees set for his property, even if he deemed the price too low. In a transfer genuinely based on a voluntary decision, the property owner could have looked for another buyer offering a higher price or decided against selling altogether. Under Law 117, the property owner had no such option. One could thus argue that the transfer implied in Law 117 was anything but voluntary; it was enforced. 2. There was no transfer of property because the original property owners retained their rights. A second argument raised by Solidere’s advocates was that under Law 117, the original property owner retained his rights, so that, legally speaking, a transfer of rights had not occurred, that is, none of the three legal forms of property transfer applied. On this argument, the original owners and tenants had in fact obtained co-ownership of the REC and, through their vote in the company’s assembly of shareholders, retained control over their property rights while benefiting from expected increases in their value. The original owners had thus been given the opportunity both to influence corporate policies and to reap the benefits from the rising value of their real estate in the BCD (by way of increased dividends on their shares). The claim that original owners were able to benefit from the increased value of real estate is contradicted by the facts. Many original owners and tenants were in reality not able to retain their shares. The need to find alternative housing and a lack of financial resources forced many to sell their shares, thereby losing the opportunity to gain from potential price increases (Kaissy 1994, 13). By implication, the first part of the argument—original owners retain a say in corporate policies—is therefore also of limited validity as property owners lost their voting rights when they were forced to sell their shares. Even more important, in

19. Even in the few cases in which proprietors succeeded in meeting all of Solidere’s demands, the REC simply overruled their rights to retain the properties concerned or finally dismissed their applications on trivial grounds. For example, after one proprietor successfully completed the application procedures, his request to retain his property rights was dismissed on the basis of a “criminal record”: a parking ticket from 1972 (interview with attorney Muhamad al-Mughrabi, Beirut, 10 October 2000).

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May 1994 Solidere’s statutory meeting of shareholders elected a board of directors and approved corporate policies and internal regulations and a master plan for the BCD. This crucial meeting, however, was held before all original owners had been designated shares—and thus votes—in the REC, as witnessed by the fact that property appraisals were still ongoing. Any say in corporate policies was thus effectively restricted to the implementation of goals determined beforehand according to given internal rules and a set master plan—all this under the management of a board that most original property owners had been given no opportunity to vote for. Thus even if one accepts the argument that the rights obtained in the REC were equal in value to the original property rights, such rights were granted too late and after they had lost much of their relevance. As for the company’s dividends, through which former owners were supposed to maintain benefits from their property, it should be noted that since being listed on the Beirut Stock Exchange in 1994, Solidere distributed dividends only twice (DS 6 August 2007). Finally, the minority of original property owners who retained their shares were easily overruled by new shareholders in the company’s general assembly. Major corporate decisions that affected or could affect the value of their stock escaped their immediate control, such as the risky move by the company in April 2007 to invest heavily in real estate projects in Dubai (DS 6 August 2007). The upshot is that a transfer of rights had taken place. 3. The transfer of rights met all the constitutional requirements of expropriation. Article 15 of the Lebanese constitution stipulates that “no one can be expropriated except if such serves the public interest [utilité publique], in cases specified by law, and in return for a fair and prior compensation.” In their justifications of the REC scheme, high-ranking officials repeatedly referred to these constitutional requirements, but they simultaneously denied that expropriation had taken place. Thus the transfer of private property to the REC was described as directly serving the public interest because it would enable reconstruction to the benefit of the national economy. As CDR chief Fadil Shalaq pointed out, “The importance of reconstructing the BCD transcends that of the question of [private] property rights, knowing that [the project] will revitalize economic life in the whole of Lebanon” (AS 21 July 1991). Moreover, advocates of the REC argued that transfer had occurred “in cases specified by law,” citing the adoption of Law 117. Finally, the “compensation” to the original property owners was, in their view, indeed fair because the shares the owners subsequently obtained would enable them to participate in the REC and benefit from its future revenues. The argument regarding fair compensation is an alternative formulation of the claim that the original property owners retained their rights, an argument that I have already suggested had little validity. But in addition, advocates of the

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REC scheme failed to quote the entirety of Article 15, which includes the word “prior” in reference to “compensation.” Even if all the original property owners had been able to enjoy the benefits of their shares fully (and they could not), this form of “compensation” could only have paid off in the future if Solidere’s stocks increased in value. Hence there was no prior compensation. Furthermore, in Solidere’s initial stages, its shareholders had little opportunity to gain from such hypothetical increases because of the limited liquidity of these shares. In violation of Law 117, which called for the immediate trading of REC shares on the Beirut Stock Exchange, the exchange did not begin listing Solidere shares until October 1996, long after many original property owners had been forced to sell their shares in order to buy housing elsewhere (Fattouh and Leenders 1996; CDL 8 June 1995). It is of course impossible to say with certainty whether Solidere and the transfer of private property really served the “public interest” by contributing to the development of the country at large. Some critics argued that the reconstruction of the BCD, as carried out under Solidere, treated the area as an island with no linkages to the economy outside Beirut where economic development was much needed (Makdisi 1997, 701; Charif 1994; Corm 1996, 88–89; Beyhum 1993–94, 101–2; Hamdan 1997b, 262). In the view of such critics, the project thus failed to serve the “public interest” as conceived by Shalaq and others. The term “public interest” itself, however, was subject to different interpretations. From a legal perspective, as one of Solidere’s lawyers acknowledged, the term required clarification (Takla 1992). But even more important is who is to define the “public interest”; certainly not a private company that benefited from the project to rebuild the BCD, unelected technocrats at the CDR who enjoyed largely unaccountable prerogatives to carry out reconstruction activities, or a French constitutional lawyer who was flown in to justify the REC scheme along these lines (AN 21 April 1992). In fact there was very little public debate as to how the BCD scheme served the country. On procedural grounds, however, the problem with the argument over the “public interest” served by the REC lies in the fact that the alleged utilité publique of the REC scheme was not included in Law 117 or otherwise put to a vote in or decreed by the Council of Ministers. In this sense, the “public interest” that the REC scheme supposedly served was never made explicit or formal, thereby rendering the legal argument that the transfer of property was done in accordance with this constitutional requirement shaky at best. But the most peculiar aspect of the third argument is that it claims that the REC respected constitutional requirements for something that, according to this same view, had not occurred at all: expropriation. Again from a legal perspective, one can agree that the transfer of property in the BCD did not equal expropriation, if only because a private company, not the state, was at the receiving end of

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the transfer. But in that case it is no longer relevant that the transfer respected the constitutional requirements of expropriation (which, in any case, it did not). One can only suspect that these references to the constitution merely served as a quasilegalistic justification for a project that was ultimately beyond the reach of the law. The transfer of property to Solidere involved a transaction enforced on the original property owners; it entailed a transfer of property rights; and it was not in accordance with the constitutional notion of expropriation. In other words, the sort of property transfer Solidere relied on is, in Lebanese law (the constitution, property law, and the Code de l’Urbanisme), nonexistent. In effect the REC was above the law. Naturally this had far-reaching implications for the procedures and regulations governing the transfer. By implication, all judicial procedures and regulations pertaining to the ownership and transfer of private property were invalidated. Bereft of a legal framework, the actions taken by officials and managers of both the state and Solidere concerning the transfer of property had, in fact, become dangerously arbitrary or discretionary. Two examples serve by way of illustration. First, because the “appraisal committees”—whose task was to appraise all properties transferred to Solidere—operated in a legal vacuum, they could set property prices as they pleased. Law 117 detailed a procedure of evaluating property by obliging the members of these committees to visit the properties concerned. No clear criteria existed, however, as to how the properties’ value should be assessed. For example, if the master plan allocated a road where a building remained intact, should the lack of damage be taken into account in its final price? If a building was located next to where a road was to be built, no rule or law applied to incorporate the expected higher value in the final calculation of compensation. In the absence of clear regulations governing evaluation, the requirement that the committees physically visit the property became meaningless; and indeed the committees often saw no reason to carry out site visits. This also explains why the committees were, in many cases, able to assess the value of properties after they had already been destroyed or before the master plan had been finalized. Without regulations as to how such factors had to be taken into account in the final evaluation of a property, the price eventually set by the committee was based on an arbitrary decision. On top of this, the original property owner had no right of appeal in any court in the country against the decision or against the procedure that led to the decision. He could only bring his case to yet another “judicial committee,” which operated under the same conditions. With this restriction on the fundamental right of appeal, the arbitrariness of the appraisal process was complete. A second example concerns the political authority used to effectuate transfers. After Law 117 had been adopted and most of the appraisal work had been completed, the question arose as to who would use political authority to order

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the Land Registry (Cadastre) to carry out a transfer that, by law, did not exist. Apparently this problem was recognized by the head of the Cadastre, Yusif Khalil, who seemed reluctant to act without explicit instructions from the government. In December 1994 a prominent cabinet minister issued an order—handwritten on the back of a legal report on the issue—to the Land Registry to transfer all properties concerned to Solidere.20 The authority on which this decision was based was that of a minister of state managing a portfolio that bears no obvious relation to real estate ownership in the BCD and for which this politician did not even carry full ministerial responsibility. But as it happened, this minister of state did not need formal political authority to tell the Cadastre what to do. Presumably, within Solidere’s extralegal order, his instruction was simply based on the discretionary powers he enjoyed by virtue of his personal relationship with an influential politician. THE OUTSOURCING OF PUBLIC INFRASTRUCTURE WORKS

Solidere received compensation in kind for carrying out public infrastructure works in the BCD by obtaining the right to own and exploit the surface of a landfill and formerly state-owned land in the BCD for commercial purposes. In addition, Solidere was exempted from paying taxes for a period of ten years. Given the considerable public resources involved, one could reasonably expect the state to insist on an explicit and agreed-on formula to calculate the cost and benefits incurred by both parties. Such a formula would surely include techniques to estimate the value of the land Solidere would receive in compensation, an itemized budget for the cost of works carried out, and a procedural framework to deal with the possibility that the budget would be overspent. But none of these mechanisms was put in place. When asked how the value of land granted to Solidere was determined, a senior company official replied: “We didn’t look at it that way. We never isolated the public infrastructure works from the general project to rebuild the BCD. . . . The deal was, in fact, concluded in good faith” (interview, Beirut, 9 October 2000). By contrast, the value of the public works to be carried out by Solidere was determined, at $475 million, as was the definition of “public works” (Solidere 1995: 23). Yet both Law 117 and the contract left unclear whether the “compensation” took into account a profit margin for Solidere and if so, at what level a profit margin should be established. Finally, no mechanism was put in place to deal with possible rising costs. Lacking such a mechanism, Solidere simply added the cost of other unrelated expenditures to the cost of public works, so it could 20. A copy of the report (31 May 1994) is in the author’s possession. It states that it was written in response to questions raised by the head of the Land Registry.

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argue that, in hindsight, the costs incurred by the company exceeded the revenues it did or would receive from the acquired compensation. Thus, when asked why Solidere considered the costs of public works to have exceeded the costs agreed on in the contract, a senior Solidere official presented a breakdown of expenses, which included expenditures on the eviction of squatters in the BCD (interview, 9 October 2000). Such questionable bookkeeping, of course, is possible only when procedures governing the assessment of costs and benefits are unclear or not even formulated. In other words, the deal between the state and Solidere was left to the discretionary actions of the two parties involved. Regulations and procedures governing the execution of public works were left equally obscure. The state had no guarantees that Solidere would indeed carry out public infrastructure works worth $475 million. Given the CDR’s role in reconstruction in general and in the creation of the REC, one would expect the CDR to have played a pivotal role. In 1995, however, the CDR commented that its role in the infrastructure works in the BCD had been “mainly at the early planning stage. The works now going on are the province of Solidere, which has itself awarded the major construction contracts and consultancies necessary for the infrastructure in the area” (CDR-PR August 1995, 66). As Hashim Sarkis pointed out: “In effect what this has meant is that the main private organization in the building industry has taken over the official planning advisory body. The agency that the government used to control private development has now reversed its role” (1993, 114). Nor were other public institutions with mandates related to city planning and public works involved in supervising or checking the works on public infrastructure in the BCD (discussed in the next section). Solidere could spend the public funds allocated to it for the rebuilding of public infrastructure as it saw fit. Again, discretionary powers—not regulations or procedures—governed the REC’s relations with the state. CITY PLANNING

Tasked with rebuilding the entire BCD, Solidere inevitably became involved in urban planning. Consequently the REC entered the domain of various public institutions whose mandates included urban planning. Again, the regulations and procedures put in place to coordinate such tasks and govern relations between the REC and these public institutions left Solidere with vast discretionary powers. In 1991 the CDR commissioned the private consultancy group Dar al-Handasah to prepare a master plan for the BCD. The $2.5 million study was completed in October 1992 but was several times amended until finally approved by the Council of Ministers in September 1994. In the process, public institutions other than the CDR were effectively marginalized. The municipality of Beirut duly endorsed the master plan and played virtually no role thereafter. Its passive attitude

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is no doubt related to the fact that at least until 1998 no measures were taken to reactivate municipal governance. The Higher Council for Urban Planning did raise some technical objections to the master plan, but it failed to challenge the sweeping prerogatives of the REC (AS 25 July 1992). In any case, even such limited criticisms were overruled. After the master plan had been ratified in 1994, both institutions were completely shunted aside. Conflicts between Solidere and other public institutions occurred frequently. But Solidere was rarely forced to change its decisions on city planning. For example, in the autumn of 1996 the General Directorate for Urban Affairs (GDUA) strongly objected when Solidere unilaterally applied changes to the master plan at the request of a private client. Hariri personally intervened in support of Solidere. Hervé Dupont, head of the company’s Urban Development Section, explained, “Although we respect the detailed master plan, the [GDUA] can’t just impose on us their opinions on aesthetics, something subjective by definition” (Rayes 1997). The adjustments were maintained, causing Sa’d Khalid, one of the GDUA’s board members, to complain bitterly about Solidere’s far-reaching prerogatives (Rayes 1997). The picture that emerges is that the planning mandate granted to Solidere was superimposed on existing (albeit ill-functioning) institutions. In effect, Solidere marginalized all other public institutions with related mandates in urban planning, and conflicts were suppressed by personal interventions of key politicians. As a result, Solidere was virtually alone in deciding matters related to city planning, and no checks ensured that planning in the heart of the capital conformed to the policies or wishes of public institutions established for the purpose. It may already be clear that external state controls on Solidere’s handling of public resources and state prerogatives were nonexistent. Putting the REC above the law concerning the “expropriation” of the original owners effectively neutralized the judiciary. The CDR played a role only in the initial stages of the project. Other relevant public institutions were also marginalized. The state’s control and auditing bodies were sidetracked regarding the outsourcing of public infrastructure works, which were left fully to Solidere, a private entity. On top of this, Law 117 exempted the REC from the legal obligation (Code de Commerce, art. 101) set for all joint-stock companies and holding companies in Lebanon to submit externally audited annual accounts in order to register with the Chamber of Commerce. Consequently, Solidere’s financial position has been scrutinized only by its own auditors, and the company has not been obliged to give any public access to the auditors’ findings in any meaningful detail. Finally, relations between Solidere and the state have been riddled with conflicts of interest. Given the complex and extralegal institutional framework for interactions between the state and the REC, a clear separation between public office

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and private interest became virtually impossible. As we saw earlier, such conflicts of interest mainly concerned the judiciary’s involvement in the “expropriation” of the original owners in the BCD (Solidere paid judges for evaluating property that was transferred to the company) and the outsourcing of public infrastructure works to Solidere (by way of conflicting interests held by a key minister, CDR staff and managers, and board members of Solidere). In addition, conflicting interests marked the urban planning process. The BCD master plan prepared by Dar al-Handasah was entirely financed by a prominent politician with high stakes in the project. According to the chief architect hired for the project, this politician and his personal advisers walked into his office time after time to demand all kinds of changes to his designs (Eddé 1997, 236). Furthermore, public institutions that failed to put up any real resistance to their marginalization in urban planning were similarly riddled with conflicts of interest. Most strikingly, the city council of Beirut and the Higher Council for Urban Planning were both staffed by a key minister’s business associates and former employees (Kabbani 1992, 22). In conclusion, the institutional framework governing the relations between the REC and the state failed to meet any of the criteria of bureaucratic organization. The “expropriation” of the original owners in the area was done in such a way that the REC was effectively set above the law. The procedures put in place could not address this major deficiency, turning the use of discretionary powers into a hallmark of the entire project. No procedures or regulations governed the outsourcing of public infrastructure works, and the REC was granted powers superseding all existing institutional arrangements concerning urban planning. External controls or audits to keep track of public resources and to check the application of state prerogatives were absent, and relations between Solidere and the REC were rife with conflicts of interest. As Saree Makdisi points out, Solidere became “the ultimate expression of the dissolution of any real distinction between public and private interests or, more accurately, the decisive colonization of the former by the latter” (1997, 672). High levels of discretionary powers, arbitrariness, and lack of accountability were the result. This left the door wide open for those seeking opportunities for corruption.

Discretionary Relief: The Ministry and Fund for the Displaced The 1989 Ta’if Accord recognized the problem of the displaced as a major obstacle to national reconciliation and postwar recovery. For this reason the accord ( pt. 2, art. 4) called for a “strong and effective state” that would both guarantee the displaced their “right of return” and “provide the means to rebuild [their] devastated areas.” In this spirit, a new ministry and a fund were created in January 1993. Both institutions were responsible for the allocation and payment of

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subsidies and compensation while overseeing numerous projects to restore basic infrastructure in designated villages and urban neighborhoods of return. High levels of corruption soon marked their activities. The institutional framework established to govern the allocation of significant public resources provides important clues as to why this happened. If decision makers and bureaucrats are to be held accountable, it should be clear what they are expected to accomplish. The mandate of the MfD and the CFD failed to provide such clarity. Law 190 (4 January 1993) charged both institutions “with all matters related to the displaced in all Lebanese territories, in particular securing their return to their regions and their villages and improving their conditions in all social and economic aspects and enabling them to enjoy stability in their places of residence.” But if this mandate is a yardstick against which to evaluate the actions of decision makers and officials, a definition of who was “displaced” is essential. Strikingly, Law 190 does not offer any such description, nor has any official text, decree, or bylaw been adopted to specify the supposed beneficiaries of its policies. Echoing this state of affairs, no reliable data exist on the exact number of IDPs. Casual descriptions of the term “displacement” can be found throughout the ministry’s output of brochures and reports. Yet none of these descriptions had any binding force, and all were vague and often contradictory.21 The door was wide open for conflicting interpretations of what the ministry and the fund were meant to accomplish and whom they were supposed to serve. Hence, one could argue—as officials at the ministry and the fund did—that persons who for economic reasons illegally occupied property belonging to the “displaced” epitomized one of the many negative repercussions of the problem of displacement that needed to be addressed. According to this logic, these “squatters” should receive financial compensation for their forced evacuation. Moreover, one could argue that as long as the Israeli occupation was forcing families to leave their homes in the south (at least until the Israeli withdrawal from the area in May 2000), the war was still ongoing. These individuals were entitled to receive financial compensation from the ministry. Finally, one could argue that the deteriorating economic situation in the country should be blamed on damage caused by the war and ongoing Israeli military actions in the south. Consequently, the Ministry and the Fund for the Displaced were to solve virtually every socioeconomic problem that, in one way or another, could be linked to warfare, such as general deprivation, poverty, the decimation of the middle classes, regional disparities, the problem of squatting, and so on. As the ministry’s director-general

21. See especially MfD 1996, 5; and 1998, 11.

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Hisham Nasr ad-Din put it, the “issue of the displaced is an integrated problem” (interview, Beirut, 7 July 1999). The term “displacement” meant everything and nothing at the same time, leaving it to the individual official to decide who was to benefit from the state’s support. Behind a façade of objective criteria and scientific tables and figures, the ministry and the fund made arbitrary and discretionary decisions the hallmark of their multimillion-dollar aid program. Those in control of resources for the displaced jealously guarded their discretionary powers against pressures to clarify their criteria for allocating large amounts in subsidies and compensation. For instance, Law 190 called for establishing a National Council for the Displaced to enable “representatives” of the displaced to participate in formulating a unified strategy. Despite repeated calls for its formation, mainly by Maronite groups and parties, the council was never created. On top of these problems, it remained unclear what tasks and prerogatives were assigned to, respectively, the ministry and the fund. According to Law 190, the ministry was supposed to formulate a general strategy for the return of the displaced, whereas the fund was meant to carry out the ministry’s suggestions concerning individual applications for subsidies and provide the financial resources for reconstruction projects. In carrying out these functions, however, the fund was responsible not to the ministry but directly to the prime minister’s office. The fund’s director, Antoine Andraus, explained the institutional setup as follows: “The ministry looks at the issue [of the displaced] from a political angle and the fund from a technical and financial point of view” (AA 30 July 1995). In practice, however, such a clear distinction was impossible to draw. The vaguely worded law that regulated relations between the two institutions enabled Andraus to claim that the fund was legally entitled to “set its own spending priorities” and ignore the ministry’s applications for compensation (OJ 18 June 1996; DS 7 August 1998). In doing so, the fund’s managers derived their far-reaching decisions from expanding “discretionary powers” (as-salahiyat al-istinsabiya), a term that featured repeatedly in a highly critical report on the fund’s internal management prepared in 1999 (AN 15 March 1999). In the absence of both a clear mandate and an unambiguous demarcation of ministry and fund prerogatives, external controls or audits became close to impossible. This deficiency was compounded by the fact that fund expenditures escaped such controls as a result of a stipulation in Law 190 that granted it full financial autonomy. In effect, the fund was exempted from external auditing or controls by state watchdogs. “Our books,” Andraus proclaimed, “are secret,” adding, “We just audit ourselves, twenty-four hours a day” (AS 30 October 1995). The MfD, by contrast, was like any other ministry formally subjected to controls by the CA and the CIB. But thanks to the hazy demarcation of responsibilities between the two agencies, the ministry could lay full accountability for the ways

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its resources were managed on the fund. Under these conditions, external checks were rendered meaningless. Faced with such institutional complexities, none of the state’s auditing and inspection agencies covered the MfD in its reports. Against this background, and given rising public anxiety about the failure to resolve the problems of the displaced, calls were repeatedly made to subject both the ministry and the fund to closer scrutiny. The state’s worsening fiscal straits added urgency to these proposals. For example, in March 2002, Finance Minister Fouad Siniora vowed that state spending on the return of the displaced ought to be brought “under control” via “serious criteria” imposed by external auditors (DS 14 March 2002). No such suggestions were followed up. We have already seen that the program for the displaced suffered from conflicts of interest in that one of the fund’s senior managers throughout much of the 1990s, previously an employee of a key politician’s private company, successfully ran his election campaign in an area particularly hard hit by the problem of displacement. In addition to this gross violation of the separation between public office and private interest, the fund was staffed by many business associates of a key cabinet minister. All of these associates were appointed by senior staff who—given the fund’s exemption from controls by the CSB—could hire and fire employees as they pleased and grant them significantly higher salaries than others filling positions of similar rank (AN 15 March 1999). Law 190 also exempted the MfD from the professional standards of the CSB, ostensibly because the ministry was merely a “temporary” agency to be dissolved after it completed its mission (OMSAR 1998b, 8). The impermanent status of the ministry, and indeed the fund, was repeatedly confirmed as, from 2001 onward, government proposals began to circulate to eliminate both institutions. Meanwhile, however, the minister for the displaced enjoyed full discretionary powers in appointing his staff and determining their salaries. Predictably, the ministry’s personnel, including its senior staff, were primarily drawn from the minister’s personal associates, particularly former staff members of his stronghold employed in his parastatal administration during the war in the 1980s. As if to underline the muddled separation between public office and membership in this minister’s entourage, the ministry’s headquarters during much of the 1990s relocated from Beirut to a location close to his fiefdom. The institutional framework for facilitating the return of the displaced failed to meet any of the criteria of bureaucratic organization. High levels of discretionary powers both in the ministry and in the fund were primarily associated with the lack of a clear notion of who was supposed to receive government support. Procedures and regulations to guide officials in granting indemnities and other forms of subsidy further broadened the discretionary powers and political interference in daily operations. The relations between the MfD and the CFD were not clearly

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defined, allowing fund managers to spend vast amounts of resources according to criteria known only to themselves. External checks and audits were virtually absent; the ministry failed to admit to responsibility for how its resources were spent, and the fund was exempted from such controls by law. Finally, a strict separation between public office and private interest failed to materialize in an institutional setting that allowed political leaders to staff both the ministry and the fund with their former employees, business associates, and political supporters. Once again, faulty institutional design had proved a fertile ground for corruption. A range of state institutions in postwar Lebanon suffered from very low levels of bureaucratization. Furthermore, these weaknesses strongly correlated with a high incidence of political corruption. More precisely, widespread corruption occurred when these institutions failed to meet the minimal criteria of bureaucratic organization. Regarding the first criterion of bureaucratic organization, in all institutions where political corruption was found to be rife, mandates and regulatory arrangements guiding routine decision making and implementation suffered from ambiguity or were left undefined. In some institutions, ambiguity characterized the institution’s mandate as formulated following the Ta’if Accord. A more common phenomenon, however, was that existing institutional frameworks were, for one reason or another, put on hold, often “temporarily,” but without alternative regulations and procedures serving to guide routine operations. The immediate result was the proliferation of discretionary decision making and, consequently, of opportunities for corruption. External checks and controls were persistently undermined or circumvented. In most institutions, ambiguous mandates and undefined procedures and regulations paralyzed attempts to carry out checks and controls. When mandates and the rules governing routine decision making were unclear, so were the criteria according to which state auditors and inspectors could assess officials’ decisions and actions. In effect, many institutions were unscrutinized, as witnessed by the failure of the state’s control bodies to report on them. For this reason, the first criterion of bureaucratic organization can be seen as effective external checks and auditing, a necessary—if insufficient—condition. Regarding the country’s postwar reconstruction program, all institutions involved failed to enforce such checks and controls, perceiving them as posing obstacles to quick implementation of the government’s policies. By institutional design, therefore, accountability was sacrificed to the conviction that quick results count more than principles of bureaucratic organization. Lack of accountability may indeed on occasion have simplified policy implementation, but it also created opportunities for corruption. Some, including the Office for the Minister of State for Administrative Reform

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(OMSAR), argued that resistance to the state’s control bodies was provoked not by their supervision and audits but by their cumbersome, legalistic, and overly bureaucratic approach (Iskandar 1996, 68–69; Ingels 1998–99, 28). This argument, however, fails to convince. No or very little effort was made to put alternative arrangements in place or render existing checks and supervision more compatible with concerns about effectiveness. The trend was directed more against accountability in general, as illustrated by simultaneous efforts to insulate public institutions from political and parliamentary controls. These strategies diminished political accountability and exacerbated high levels of discretionary power. Discretionary powers and the lack of accountability meant that no action was taken against unbridled conflicts of interest. Hence, none of the institutions under study upheld a strict separation between public office and private interest. At a political level (ministers and MPs), cabinet members held portfolios in which they had strong private interests. Some prominent MPs who may have been able to influence government policies failed to defend the interests of their constituencies and instead concentrated on state policies that affected their own private concerns. Which factors can be held responsible for Lebanon’s unfortunate experience with bureaucratic organization—and hence indirectly account for the country’s dismal corruption record? The question calls for an examination of the emergence and shaping of such faulty institutions. In the next two chapters I suggest that these processes of institution building were highly dependent on the nature of Lebanon’s postwar political settlement.

Chapter 4

The Political Settlement of the Second Republic

During the 1990s and until 2005, the Ta’if Accord and concomitant amendments of the constitution were to become a focal point around which Lebanon’s sharply divided political elites would build strategies to preserve their own interests and outmaneuver their rivals. The politics of institution building rarely produce striking revelations. Yet the deals struck in Ta’if undoubtedly were a constitutive moment, informing the everyday conflicts, seemingly trivial incidents, and routine decision making in Lebanon’s Second Republic. In this chapter I prepare the ground for the argument that the politics of formation can explain the general failure to build sound bureaucratic institutions in Lebanon. More precisely, the qualities of the institutions reflected the specific traits of the political settlement, that is, the ways in which public decision making has been arranged and conducted to manage conflicts. Accordingly, I identify five main trends that can be viewed as distinctive of the precarious and fragile political settlement from 1989 until 2005.

The Constitutive Moment: Ta’if and the 1990 Amendments Political debate over Lebanon of the 1990s has largely evolved around the Ta’if Accord, or the Document of National Reconciliation (wathiqat al-wifaq al-watani), as it was officially named. Few contested that the accord marked a watershed, signaling the beginning of the end of Lebanon’s protracted wars while setting off a dramatic improvement in the country’s security conditions. Most also agreed

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that Ta’if facilitated the reconstitution of the Lebanese army and the state’s control over most of the country’s territory, thereby putting an end to the reign of total lawlessness, random killings, and the stranglehold of armed militias. Yet the consensus on the accord’s significance stopped here. Some unreservedly opposed the accord on the grounds that it consolidated a faulty political system marking the return of state-endorsed political confessionalism, that it debilitated state attempts to address widening social and economic inequalities, or that it legitimized the country’s occupation by Syrian troops. Others formulated their critique in milder terms and argued that the Ta’if Accord needed adjustments. In the words of former MP Nabil Yunis, “national reconciliation cannot be attained through the Ta’if Accord as it stands now, because it has itself developed into a central issue of national discord in domestic, regional, and international domains” (AN 30 June 1998). Some supporters of the Ta’if Accord, such as Salim al-Hoss, were quick to stress the temporary nature of political confessionalism, contending that the accord at large constituted “a necessary step toward a Third Republic without confessional divisions” (Hoss 1991, 102). Yet others unequivocally stressed Ta’if ’s virtues and dismissed the politics of the 1990s as an uninterrupted series of violations of the political arrangements foreseen by its signatories. As one prominent MP who took part in the Ta’if negotiations put it, politics in the 1990s constituted “a coup against Ta’if ” (Mansour 1993). Hussein al-Husseini, another longtime MP present at Ta’if and a former speaker of Parliament, largely agreed, stressing the ever-widening gap between daily political practice and the rules of the game envisaged in Ta’if (AN 7 November 1994; DS 21 October 2000). Nawaf Salam, a Lebanese jurist and diplomat, held a middle position. While acknowledging that “a distorted, partially implemented Taif failed to put Lebanon on track to build a state,” he argued that “it is doubtful whether this [state-building] can now be achieved just by putting Taif back on track” (2003, 51). Regardless of the Ta’if Accord’s exact significance, it is clear that the document played a central role in the political controversies of postwar Lebanon. In three ways it marked a constitutive moment in the emerging political settlement. First, as argued by Joseph Maila, “the political accord corresponds to an optimal political equilibrium among the various confessional forces that fought one another over antagonistic programs, but none of which succeeded in achieving victory for its own demands, not even by making them accepted by all components of its own group” (1991, 14). Like the stalemated wars of the late 1980s, the Ta’if Accord was to produce no clear and immediate winners or losers. It therefore stressed political inclusion while engaging numerous procedural devices to prevent anyone from gaining lasting supremacy. Furthermore, the accord reflected the political elites’ continuing or perhaps growing reliance on confessionalism to muster political support and legitimacy. Finally, the accord replicated

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the political dominance of the Syrian leadership, increasing since President Elias Sarkis formally invited Syrian troops in 1976 to counter the military advances of the Palestine Liberation Organization ( PLO) and its Lebanese allies. Ta’if may have been intended to mold political interaction into more peaceful forms, but in doing so it reflected the power constellations of the time. In this sense, we can read the Ta’if Accord as an inventory of the new matrices of political and economic interaction that followed. Second, the Ta’if Accord was the main background to the drafting and signing of other important documents that set out rules pertaining to public decision making. As observed by Nawaf Salam, “Taif constitutes a major political turning point in the history of independent Lebanon because of the importance of changes it introduced in the Lebanese political system through constitutional reforms” (2003, 43). In addition, it resulted in the signing of nearly fifty agreements between Lebanon and Syria, including the Lebanese-Syrian Treaty of Brotherhood of 1991 and the adoption of various policy blueprints, such as the 1993 law launching an ambitious program of support for those displaced by years of warfare. Together these texts effected real outcomes in the process of institution building, both enabling and constraining political elites in their pursuit of their own interests and their attempts to court their political rivals. Even in cases in which political elites clearly acted in violation of constitutional requirements, such violations presupposed the centrality of the constitution, thereby affecting relations among political contestants and their collective ability to build sound institutions. Third, as both the Ta’if Accord and the new constitution were riddled with ambiguities about routine decision making, both triggered numerous conflicts and stalemates among participants. Accordingly, the fundamental and historical divisions between Lebanon’s political elites made their way into the daily decision-making process. At the same time, the imperfections of both texts affected such divisions, which now took the form of endless squabbles over constitutional interpretation.

The Road to Ta’if and the 1990 Constitution In March 1989 the Arab heads of state convened in Casablanca to discuss how they could help halt the protracted armed conflicts in Lebanon. Hopes for a peaceful solution were not high, not least because all earlier efforts by the Arab League and others had failed to curb the violence, let alone restore the authority of the Lebanese state. On top of this, the political and military stalemate prevailing in early 1989 presented an extremely discouraging context for conflict

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resolution, even by the standards of war-torn Lebanon. Since the end of President ‘Amin Jumayil mandate on 23 September 1989 and the failure to hold new presidential elections, the country in fact had two rival governments, one led by Michel Aoun, the commander of the Lebanese Armed Forces, and the other led by Salim al-Hoss. Neither controlled much territory. In fact Lebanon was partitioned between Israeli troops occupying the south with the help of their proxies, the South Lebanon Army; Syrian troops controlling predominantly Muslim areas in the north in conjunction with several militias, including Amal (the Lebanese Resistance Detachments) and the Progressive Socialist Party; and the Lebanese Forces (LF), controlling their Maronite enclave north of Beirut. The political and military impasse appeared complete. With the looming prospect of Lebanon’s disintegration, the Casablanca summit charged an Arab Tripartite High Commission (ATHC), consisting of the Algerian, Saudi, and Moroccan heads of state, to prepare the ground for a comprehensive peace settlement. The assistant secretary to the Arab League, Lakhdar alIbrahimi, acted as chief negotiator. After numerous meetings with the parties to the conflict, excluding Israel, and several cease-fire agreements, Ibrahimi seemed to achieve a major breakthrough by the end of May. He obtained the consent of virtually all Lebanese political actors (with the notable exception of General Aoun) and Syria to convene the surviving sixty-five members of Lebanon’s ninety-nine-member Parliament in Ta’if. Fighting flared up again, however, when General Aoun called upon his forces to raise arms against the forty thousand Syrian troops in Lebanon in what he termed a “war of liberation.” Meanwhile, the ATHC cited major disagreements with Syria over its future role as the main reason for the failure to press ahead with peace talks (Hanf 1993, 579). In September 1989 the ATHC resumed its mediation efforts, this time with greater success. On 1 October members of Parliament began their negotiations in Ta’if. The deliberations started with a heated debate on the causes of the war; some stressed foreign factors, others emphasized the failure to accommodate change and sectarian conflicts (Mansour 1993, 31–67). After the plenary session, several subcommittees were formed to draw up proposals on specific issues. The subcommittee on questions related to Lebanon’s cultural identity had no major difficulty in reaching the conclusion that Lebanon was foremost an Arab country holding membership in the Arab League. More problems emerged in the subcommittees on political reforms and on Lebanese-Syrian relations. Nevertheless, drawing on earlier proposals, the subcommittee on political reforms finally managed to present a comprehensive reform package which, according to one of its members, left “everyone . . . dissatisfied, but [which] almost everyone found acceptable” (Hanf 1993, 584). In contrast, the subcommittee on Lebanese-Syrian relations continued to struggle with Syria’s insistence on its own draft wording

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and its refusal to allow the MPs to suggest any substantial alterations. But with the prospect of ultimate failure looming, the MPs finally accepted Syria’s demands after the ATHC promised to act as the “moral guarantor” of Lebanon’s sovereignty with regard to its “special relations” with its neighbor (ATHC 1989–90, 129–33). The Ta’if Accord was signed on 22 October 1989 by fifty-eight MPs. Amid fierce opposition from General Aoun and his supporters, Lebanon’s Parliament met again on 5 November in Qulay’at (in the Biqa’) to ratify the accord and elect a new president. Nine months later, on 21 August 1990, forty-eight members of Parliament voted in favor of various constitutional amendments in accordance with the Ta’if agreement, with two members abstaining and one voting against. Aoun’s “war of liberation” lasted until October 1990, when it was finally crushed by concerted heavy shelling by Syrian troops and armed operations by the LF, which had turned against Aoun. By early 1991 the Second Republic could finally be put to the test. Security was improved, and armed hostilities were now limited to isolated incidents.

The Ta’if Reforms and the Constitutional Amendments The reforms formulated in the Ta’if Accord and the amendments to the constitution suggest a strong conviction among signatories that the country’s armed conflicts since 1975 had been rooted, at least partially, in the country’s prewar political system. Consequently, the reforms included some major alterations. Yet the accord also contained sections detailing relations with Syria.

A Political Blueprint Virtually all signatories to the Ta’if Accord acknowledged that the predominant mode of decision making and the distribution of power according to the constitution of the First Republic were at least partly to blame for the political turmoil of the mid-1970s. One argument frequently raised by proponents of the accord was that the country’s political elites had in important ways departed from the spirit of the 1943 National Pact, an unwritten agreement between representatives of the Christian and Muslim communities to respect the principle of “communal coexistence” as the foundation for governing a society divided along confessional lines. Yet pre-1975 politics in Lebanon had culminated in an unacceptable degree of political domination by the Maronite community and its leaders at the expense of the Muslim (Sunni, Shi’ite, and Druze) communities, epitomized by Maronite control over key positions. In this sense, as one of the Ta’if signatories

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put it, the political reforms formulated in Ta’if were aimed at a transition “away from governance by subjugation and hegemony, and toward a form of governance based on the principles of reconciliation and participation,” all within the general framework set by the National Pact (Mansour 1994, 249). Even a cursory look at the accord and the 1990 constitution indeed reveals the desire to broaden the base of government, to avoid excluding any group, and to prevent domination by any other. The accord states that “the political system is based on the principle of the separation of powers, their balance, and their cooperation” (TA I.1E). Cabinet decisions should, whenever possible, be made “amicably” (tawafuqiyan) before being put to a vote (TA I.2D.6). The accord also called for a government of national unity to be formed as soon as possible in order to “create a strong and effective state based on national entente” (TA II). As Salam puts it succinctly, the accord reflected the spirit of “a give and take process of compromise [resulting in] a package deal [with an] underlying logic of symmetry and reciprocity” (2003, 42). The Ta’if Accord (and later the amended constitution) explicitly referred to the National Pact and confirmed that “political confessionalism” should, at least in a “transitional period,” provide the basis for “proportional representation” in key public institutions, including the Council of Ministers and Parliament, and apply to all high-ranking positions in public administration (TA I.2A.5A,B,C; const. 95). The ways in which this was to be done did not strictly reflect demographics. Indeed, the absence of exact data on Lebanon’s current confessional composition makes it impossible to determine the extent to which the arrangements reflected reality.1 More generally, however, the new key to the distribution of seats in Parliament and senior positions in the state bureaucracy did reflect Muslims’ greater numbers. Thus, Muslims and Christians now equally shared the total number of seats (TA I.2A.5A, B, C; const. 24.A, B, C), thereby putting an end to the fixed six-to-five Christian majority prior to Ta’if. Similarly, the “three presidents”—the president of the republic, the president of the Council of Ministers (the prime minister), and the president of the National Assembly (the speaker of Parliament)— would continue to be drawn from, respectively, the Maronite, the Sunni, and the Shi’ite communities. Yet the role and prerogatives of each of the presidents and their institutions were redefined, ostensibly to provide a balance of power better suited to allow all confessional communities to take part in decision making. One of the most striking reforms propagated by the Ta’if Accord related to the role of the president of the republic. Conventionally a tool of domination

1. In the absence of reliable figures derived from a census, the author obtained rough approximations drawn from Lebanon’s population registry: Shi’ites (29.5 percent), Sunnis (25 percent), Maronites (23 percent), Druze (5.4 percent), and others (17 percent) (interviews with officials at the Lebanese Interior Ministry, Beirut, April 2005).

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by the Maronites, the president now had to surrender many of his powers. Most important, executive power was now to be exercised by the Council of Ministers collectively. The president’s powers were curbed in forming and dismissing the government, taking part in the legislative process, and negotiating and signing international treaties. Yet in spite of these adjustments the president remained able to leave his mark. Chiefly, he could veto a bill passed by Parliament and request its reconsideration until an absolute majority of all MPs voted for it (const. 57). Although he lacked a vote in the cabinet, the president retained power to influence its proceedings by his right to preside over meetings and include matters on the agenda (const. 53–11). He could also address Parliament whenever he saw fit. Moreover, the Ta’if Accord and the constitution contained a great deal of ambiguity related to the powers of the president, which he could interpret in his own favor. For example, the president’s role in the formation of a new government—and the assignment of a prime minister—may be much less ceremonial than appears at first sight. Although the constitution stipulates that the president nominates a prime minister on the basis of “binding consultations” with Parliament, transmitted by the speaker, it does not say that the president has to abide by a vote in Parliament on this issue (const. 53.2). This left some scope for bargaining between president and speaker, notwithstanding the binding nature of the consultations. In order to interpret this and other ambiguities in his favor, the president could have referred to the broad responsibilities given to him by the constitution, which include acting as “the head of state and the symbol of the country’s unity” and “safeguarding respect for the constitution, [and] safeguarding the independence of Lebanon, its unity and territorial integrity” (const. 49). Indeed, if the president is to fulfill these broad tasks and to be held accountable for them, the signatories of the Ta’if Accord and the constitution were parsimonious in the powers they granted him. To assert his role in the decision-making process, the president was therefore likely to use all avenues to bolster his prerogatives, use his remaining powers whenever possible, and interpret in his own favor articles left ambiguous in the constitution. The Ta’if Accord and the constitutional amendments of 1990 empowered the Council of Ministers collectively by granting it the executive powers formerly held by the president (const. 17 and 65; TA I.2D). With the additional stipulation that the cabinet (in terms of ministerial posts) should reflect parity between Muslims and Christians, the signatories appear to have been aiming at a state of affairs in which no confessional community could monopolize the executive. Instead, executive powers were to be shared in the cabinet. In this sense, transferring executive power to the cabinet as a whole can be seen as the result of a compromise between, on the one hand, those who advocated a less dominant role for the (Maronite) president and, on the other hand, those who feared that the (Sunni)

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prime minister would simply replace the president in exercising sweeping executive powers (Menassa 1995, 37). In Ta’if, therefore, the notion developed that government should be not by “individuals” (as exemplified in the dominant role of the president prior to Ta’if) but by “institutions” (Mansour 1994, 258). The envisaged transition toward “institutional government” (hukm mu’assasi) was thought to be enhanced by granting the cabinet collective executive powers and responsibilities. Thus the country would be ruled by what became known as “collegial governance” (sirat al-hukm al-jama’iyya). Consequently, cabinet meetings required a quorum of two-thirds of all members, and all decisions were to be made on the basis of a “consensus.” If this proved impossible, or when “fundamental issues” were at stake, including the dismissal of individual ministers, voting would require a two-thirds majority of attending members (TA I.2D.6; const. 65.5). Furthermore, within this collegial governance, the prerogatives of the prime minister were restricted to ensure that his role in the cabinet would not exceed that of a primus inter pares. Indeed, the constitutional mandate that distinguished the prime minister’s role from that of regular ministers and the president did not go beyond his prerogative to set the agenda of weekly meetings of the Council of Ministers (const. 64.6). As with the president of the republic, these reduced powers contradict the otherwise grandiose mandate granted to the prime minister by the Ta’if Accord, which described him as “the head of government [by] representing it and speaking in its name . . . and by being responsible for the implementation of the general policies defined by the government” (TA IC). As a result, the prime minister was equally likely to cite his weighty tasks and responsibilities to justify augmenting the few powers granted to him by the constitution and to capitalize on any ambiguities regarding his constitutional role. Finally, the role of Parliament and its speaker were significantly upgraded. Both the Ta’if Accord and the revised constitution stipulated that Lebanon is a “parliamentary democracy” wherein, inter alia, Parliament—as an independent legislative body—exerts control over the executive ( TA I.1C; const. Preamble c). Consequently, Parliament was to play a decisive role in the formation of the government while enjoying full checks over the government’s budgetary policies, in addition to the right to withdraw its confidence in the government or in individual ministers (TA I.2B.6; const. 53.2, 82, 69–70). At least on paper, the government was virtually incapable of acting against a Parliament that had turned against it. Most important, the cabinet formally enjoyed the right to dissolve Parliament, but the conditions under which dissolution could occur were virtually impossible to meet (TA I.2D5; const. 65.4). The accord and the Constitution reinforced the position of the speaker of Parliament. As the speaker was by custom a Shi’ite Muslim, the signatories of

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the Ta’if Accord and the revised constitution singled out this position to grant this community some additional powers vis-à-vis those held by Maronite and Sunni leaders. They thereby recognized the Shi’ites’ augmented demographic weight in the confessional composition of the population. Reforms to this effect had long been a key demand of Shi’ite political leaders and of political movements dominated by Shi’ites, including Amal, even if such reforms fell short of Amal’s (stated) goal of “deconfessionalizing” all state institutions (Hoss 1991, 106; Hanf 1993, 92). Perhaps the most significant change was to extend the speaker’s renewable mandate from one to four years to match the prime minister’s mandate, and to counterbalance the president’s nonrenewable six-year mandate (TA I.2.A1,2; const. 44). The caveat was added, however, that after two years Parliament could, though only during its first ordinary session, withdraw its confidence in the speaker by a two-thirds majority and elect a successor (const. 44). As a result, the speaker could continue to exercise his powers even if, after two years, an absolute majority in Parliament no longer supported him. This provision, of course, granted the speaker a very strong position and a large degree of maneuverability. He was likely to direct Parliament’s enlarged powers against the executive and in this way truly become the “third president” in the political arrangement at large. The political reforms set out in Ta’if and enshrined in the constitution were explicitly designed to rid Lebanon of the hierarchy that was perceived to have caused widespread resentment over Maronite domination and Muslim marginalization. The Muslim community saw its presence in the country’s main institutions upgraded, but not to the extent warranted by demographics. At the same time, no confessional group received powers sufficient to overshadow any of the others. The result was a political arrangement that enabled all confessional groups to be represented in all state institutions, that was careful to prevent any confessional community from gaining the upper hand within these institutions, and that incorporated numerous checks and balances to ensure that none of the main centers of power (the presidency, cabinet, and Parliament) would predominate. In all respects, therefore, the new political arrangement appeared to mirror the no clear winners/no clear losers outcome of the wars since 1975.

Defining Lebanese-Syrian Relations Two sections of the Ta’if Accord defined Syria’s role in postwar Lebanon, reflecting the powerful position gained by Lebanon’s neighbor by the end of the 1980s. In fact, these proved to be the most controversial issues in Ta’if. Yet Syria reportedly showed no tolerance for MPs’ reservations and rejected all counterproposals aimed at safeguarding Lebanon’s sovereignty. Signatories were given a simple

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choice: either accept the pre-drafted version of the accord’s section on Syria’s role or face the collapse of the entire accord and risk new hostilities (AN 11 November 1994; Mansour 1993, 38–39, 267). It is against this background that LebaneseSyrian relations were part and parcel of the formal political arrangement. The Ta’if Accord stipulated that Syrian forces would help the Lebanese state restore its authority during a maximum period of two years following ratification, the election of a new president of the republic, the formation of a government of national unity, and the adoption of the required constitutional amendments (TA II 4). Thereafter the Ta’if Accord envisaged that the two governments “will decide on the redeployment of Syrian troops to the Biqa’ region . . . and, if necessary, to other areas that are to be determined by a joint Lebanese-Syrian military committee” (TA II). Finally, the accord stipulated that an agreement between the two governments would determine “the dimensions and duration of the presence of Syrian troops” in Lebanon (TA II). Several remarks are in order. First, the Ta’if Accord called only for the “redeployment” (i’da tamarkaz) of Syrian troops and thus failed to identify any procedure for their complete withdrawal. Second, the nature and timing of this “redeployment” was left undetermined, delegating this crucial issue to a secondary agreement between the two governments. Third, the purpose of Syria’s military presence was not made clear. While the accord stipulated that Syria would “help” to restore the state’s authority in the country (that is, Syrian troops would merely assist in military and security operations), the conditions that had to be fulfilled to set in motion the redeployment of troops were linked to developments on a different level: that of implementing the constitutional reforms foreseen in Ta’if. This left two issues unresolved. It was unclear whether the Lebanese state needed to exert its authority over all its territories—including the Israeli-held area in the south—before redeployment would take place. Equally indefinite was whether Syrian troops were assigned to actively help ensure the implementation of Lebanon’s constitutional reforms or whether these reforms were mentioned merely in order to identify a timetable for Syria’s redeployment. In other words, the Ta’if Accord failed to lay down both the exact time frame of and framework for the Syrian presence. In addition to endorsing Syria’s continuing military presence in Lebanon, the Ta’if Accord called for “fraternal relations” between Lebanon and Syria, requiring “coordination and cooperation in all fields” (TA IV). Of course at the time, the exact implications of this stipulation were not known. Yet the ambiguities regarding both Syria’s military presence and the two countries’ relations gave the Syrian leadership a great deal of room to maneuver in consolidating its powerful position in Lebanon and ensuring that its own interests would prevail. Naturally this would have broad implications for how the accord and the reforms would work in practice.

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Trying to Make the Unworkable Work: The Political Settlement After the conclave of its deputies in Ta’if, Lebanon embarked on the “reconciliation” process as laid down in the Ta’if Accord. Yet with fierce fighting continuing between Aoun’s supporters and the LF, the transition to the Second Republic was far from smooth. On his seventeenth day in office, in November 1989, the newly elected president, René Mouawad, was killed in a bomb blast. Elias al-Hrawi, a little-known Maronite politician from the northern town of Zahleh, was immediately elected Mouawad’s successor. Hrawi asked the veteran Sunni politician Salim al-Hoss to form a new cabinet. After the defeat of Aoun by massive Syrian shelling, a broad-based government of national reconciliation was formed on 24 December 1990. Its prime minister was ‘Umar Karameh, brother of the late prime minister Rachid al-Karameh. Karameh’s government began an ambitious program to disarm the country’s militias and regain state jurisdiction over the territories under their control. The government lasted until May 1992, when the prime minister was forced to resign in the wake of widespread socioeconomic unrest and the collapse of the Lebanese pound. His government was succeeded by the cabinet of Rachid as-Solh, which began preparations for parliamentary elections to be held in August and September 1992—the first elections since 1972. In October 1992 a new government was formed by the Lebanese-Saudi business tycoon Rafiq al-Hariri. Until his violent death in February 2005, Hariri led five governments, interrupted only from November 1998 until October 2000, when President Émile Lahoud, himself elected in November 1998, assigned Hoss to form a government, and from October 2004 on, when Karameh presided over the last government of the period under study. Lebanon’s political elites—and Syria’s growing interventions—established a political process that can be characterized in reference to five (interrelated) patterns. Together they constitute the political settlement in which Lebanon’s political elites maneuvered to achieve their preferences and reach policy decisions. What follows is a discussion of these patterns.

Institutional Gridlock Getting the political arrangement of Ta’if to work turned out to be a daunting task. Undoubtedly the accord’s arsenal of devices for guaranteeing consensus, inclusion, and parity was the main reason why most contestants eventually took part in “reconciliation.” But from the beginning of the implementation of the Ta’if Accord, the three presidents—the president of the republic, the president of the Council of Ministers, and the president of the National Assembly—engaged

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in a tug-of-war over their prerogatives. As a result of ambiguities in the Ta’if Accord and the constitution and the balance of power both texts prescribed, each of the three presidents aimed to redefine the rules of decision making by trying to maximize his own powers. The result was a chronic incapability of the political process to yield decisions. Immediately after his election in November 1989 it became clear that President Elias Hrawi would not be content with a “ceremonial” role for the presidency, as some readings of the Ta’if Accord would have it. His successor after October 1998, Émil Lahoud, acted similarly, although the circumstances had changed. Trying to stretch the boundaries of the president’s powers as much as possible, both men found themselves in fierce conflicts with the prime minister and the speaker of Parliament. Most of these confrontations touched on seemingly trivial issues, but together they struck at the heart of the Ta’if Accord and its political reforms. Ta’if and the constitutional amendments may have transferred most executive powers to the cabinet, but they had left a range of avenues for the president to reassert his authority. Both Hrawi and Lahoud insisted on presiding over all cabinet meetings, and each proclaimed himself the undisputed chairman of the executive. Both men simultaneously claimed the allure of an all-powerful presidency by demanding leadership of the armed forces,2 by addressing Parliament and the public at large to express detailed opinions on all sorts of political issues (Maila 1991, 57; Hoss 1991, 153), and by establishing and expanding various institutions aligned with the presidency, including the special Presidential Security Forces (Mansour 1993, 122–25; OJ 22 February 1993). In doing so, Hrawi and Lahoud both hoped to create the impression that they—and not the prime minister—effectively led the government. Arguably, Lahoud went further in this effort. Not only did he insist on chairing cabinet meetings, but also he asserted the constitutional right to halt the discussion of any agenda item unless he knew about it “clearly and unequivocally” beforehand (DS 26 March 2004). With the clear aim of boosting his authority during meetings of the cabinet and dominating its proceedings, Lahoud surrounded himself with a large number of advisers and staff who produced detailed policy studies and plans to prepare him for cabinet discussions on economic policy and budgetary matters. Many of these staff members were drawn from the military, where Lahoud, the country’s former armed forces commander, enjoyed considerable clout. Bitter rows over competence between the president and prime minister soon paralyzed the entire decision-making process. An early example of the continuous 2. The Ta’if Accord (I 2D 2 and 3) and the constitution (49 and 65) are ambiguous on this issue (Maila 1991, 57; Hoss 1991, 179; CDL 15 August 1996).

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quibbling over prerogatives pertains to Hrawi’s assertive behavior in September 1990. While Prime Minister Hoss had been attending a UN meeting in New York, major clashes had broken out between forces loyal to Aoun and LF combatants. Hrawi pressed for an emergency meeting of the cabinet, as he was entitled to do under the provisions of Ta’if. The emergency meeting, however, took place without the knowledge and approval of Hoss, as required by the accord. When the prime minister, on his return to Lebanon, found out that the cabinet had convened in his absence, he fiercely protested and accused Hrawi of trying to encroach on his prerogatives. The issue was never resolved. Much later, in March 2004, the president and the prime minister continued to clash over who, in effect, led the government. Hariri complained that President Lahoud consistently overstepped his constitutional prerogatives by presiding over every cabinet session. Lahoud snapped back by stating that “whoever says this and believes in it should simply hand in his resignation” (DS 26 March 2004). Such conflicts of competence also resulted in a dispute over the appropriate location of cabinet meetings. Hrawi insisted on building a new presidential palace to house both the presidency and cabinet headquarters (Hoss 1991, 157–59). But sensing that such a move would present a symbolic challenge to the transfer of executive power from the presidency to the Council of Ministers, Hoss rejected the idea. The cabinet agreed with Hoss, and an architect was approached to design a separate building. The project stalled, however, as Hrawi refused to give in, triggering a major crisis in which each man accused the other of trying to curb his prerogatives. The conflict lasted until the accession of Hariri as prime minister. In January 1993 it was decided that the cabinet would “temporarily” and by turns convene at the presidential palace in Ba’abda and the prime minister’s office in Sanayya, Beirut (AN 8 December 1998 and 29 January 1999). Six years later the official venue for cabinet meetings finally moved to its own building in Mathaf, Beirut. Heated controversy also evolved around the appointment of senior public servants. Both Hrawi and Lahoud claimed a direct say in this matter through the presidential guardianship over the state and their position as the highest-ranking Maronite politician. Initial objections by Hoss that, according to the Ta’if Accord, such decisions needed to be made by the Council of Ministers (in which the president had no vote) were to no avail. Hoss’s successor, Karameh, adopted a more pragmatic stand and presented Hrawi with a proposed list of administrative appointments according to confessional affiliation. Hrawi, however, insisted on a larger share for the Maronite community, a dispute that resulted in what one minister called “endless Byzantine debates” (OJ 19 October 1991). With sharp disagreements over the confessional distribution of administrative posts, negotiations repeatedly broke down, even prompting Hrawi provocatively to send back a

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government bill submitted to Parliament proposing the temporary appointment of a number of municipal councils (OJ 8 November 1991; Maila 1991, 57–58). The appointment controversy was eventually carried over to the next cabinet. Solh also failed to reach an agreement with Hrawi. Meanwhile, a large number of senior positions within the state administration remained vacant (Dagher 2002, 14). Only later in 1993 would an agreement emerge between Hrawi, Hariri, and the newly elected speaker Nabih Berri, who had also begun to intervene in the matter. Yet the issue continued to cause serious tensions whenever new appointments had to be made, prompting lengthy negotiations and often gridlock that caused senior positions to go unfilled for years. The unremitting tug-of-war over the nature and scope of the president’s powers compared to the privileges held by the prime minister reached a climax under Lahoud’s presidency. Immediately after his inauguration, Lahoud capitalized on an ambiguity in the constitution (53.2) pertaining to Parliament’s designation of a prime minister to form a new government. Although this provision of the Constitution seemed to reduce the president’s role in this process to a largely ceremonial one, it did not explicitly state that the prime minister ought to be selected by a majority of votes. Against this background, Lahoud managed to persuade a number of MPs to “delegate” their choice of prime minister to him, so that the president would gain leeway in designating the prime minister. The latter, of course, would then become more dependent on and owe subservience to the president, a relationship that would directly contradict at least the spirit of the Ta’if Accord. In response, Hariri declined to form a new government. In hindsight, this decision merely delayed the ferocious clashes between Lahoud and Hariri. In October 2000, after Hariri had been reinstated as prime minister, he embarked on an aggressive campaign to secure foreign financial assistance to alleviate the country’s straits. An ambitious donor conference took place in November 2002, named the Paris II meeting. Eighteen countries and several international financial institutions pledged to send Lebanon over $4.4. billion in soft loans and to reschedule its debt burden, net public debt having risen to $30 billion, or 173 percent of Lebanon’s estimated GDP, between the mid-1990s and the end of 2002 (Lebanese Republic 2002, 1). In return, Lebanon committed itself to far-reaching fiscal and structural economic reforms, including privatization and cutting government expenditure. From 2002 until 2005, however, virtually all these resolutions became hostage to relentless wrangling between Lahoud and Hariri. Although Lahoud regularly cloaked his opposition to the specifics of the reform package in terms of substance, few observers doubted that the constant disputes over competence served as the main backdrop to presidential obstruction. Not coincidentally, some privileges enjoyed by the prime minister—including his influence over the CDR and the Higher Council for Privatization ( both

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formally attached to the prime minister’s office)—were particular targets of President Lahoud’s wrath. Using all the powers at his disposal and liberally interpreting ambiguities in his favor, Lahoud raised incessant obstacles to key economic reform policies, including the renegotiation of the terms under which private companies were to be granted a license to operate the country’s lucrative mobile phone sector, the privatization of the state-owned fixed-line phone sector, and the restructuring and privatization of the state-owned electricity company EDL. Hariri, in response, dug in his heels, giving rise to continual verbal mudslinging between the two men and a near-complete derailment of the decision-making process generally. Between the Paris II conference and 2005, the only major government policy to materialize had to do with the introduction of a value-added tax in February 2002; most other reforms were buried in the incessant quarreling between Lahoud and Hariri. These conflicts of competence between the president and the prime minister were compounded by the powers and status granted by the Ta’if Accord to the speaker of Parliament. On the pretext of balancing the executive and legislative branches of government, the speaker tried to stretch his powers to satisfy the demands of Shi’ites that their own “president” enjoy a standing equal to that of the Sunni prime minister and the Maronite president. Thus, on the occasion of his reelection as speaker in October 1990, Hussein al-Husseini, a long-standing za’im (community leader) of the southern Biqa’, publicly demanded his “share of power” and his “right to participate in decision making” (OJ 17 October 1990). Subsequently, relations between the prime minister and the speaker repeatedly broke down over seemingly minor issues. For instance, a political crisis erupted in November 1990 when Hoss proposed to appoint a director-general for a newly created office of the prime minister. Husseini fiercely opposed the move and argued that the prime minister could not have his own office, since the Ta’if Accord had not granted him any special status vis-à-vis all other members of the Council of Ministers (Hoss 1991, 154–55). Legal experts were hired to find a way out, but to no avail. Controversy soon shifted to other issues. Husseini demanded that the prime minister send him the minutes of all cabinet meetings; Hoss flatly rejected the demand and emphasized the separation of powers between the executive and legislative branches of government. Meanwhile, Hoss complained about the sheer impossibility of the government’s labeling bills “urgent,” given the ambiguity regarding this matter in the Ta’if Accord (I.2.A3) and the Constitution (58) (Menassa 1995, 75–78). Hoss argued that this gave the speaker an unreasonably advantageous position, which—together with the stringent conditions for dissolving Parliament—made the executive dependent on the whims of Parliament and the speaker’s bids for more power (Hoss 1991, 103–4).

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Battles of competence among the three presidents intensified when Nabih Berri succeeded Husseini as speaker of Parliament in 1992. Even more so than Husseini, Berri made no secret of his desire to use his powers to act as the country’s true “third president” and to force his rivals to treat him on an equal if not superior footing. Thus Berri constantly attacked Hariri for running a “one-man show” while he tried to impose himself on virtually all daily decision making within the executive. More often than not, the decision-making process ground to a halt as a result. For example, in the autumn of 1994, Berri refused to put the government’s bill regarding its reconstruction policies on Parliament’s agenda. In doing so, he was capitalizing on constitutional ambiguity, thereby confirming Hoss’s earlier fears. A similar incident occurred in 1998, when Berri failed to persuade Hariri to raise the salaries and pensions of public servants (AS 6 March 1998). Consequently, Berri orchestrated numerous debates in Parliament and encouraged opponents of the government to express their criticisms on virtually all aspects of the government’s policies. Once more Berri blocked all government bills, and for months the decision-making process was stalled in complete deadlock. Relations between Hariri and Lahoud already held up much of the decisionmaking process after 2001, and Berri added obstacles of his own by skillfully capitalizing on the rifts between his two rivals to boost his own clout. Thus, special parliamentary committees, over which Berri held significant sway, chronically failed to reach swift agreement on the government’s annual budget proposals, contributing to the government’s reliance on temporary monthly budgets based on the previous year’s funding (DS 24 December 2002; IIM February 2003). On numerous occasions Berri reportedly used his powers to delay the budget process and the vote on essential legislation in order to solicit concessions from the other two “presidents” or from the government more generally. For instance, amid recurrent delays in Parliament’s processing of the annual budget proposal by the end of 2002, Berri publicly and repeatedly pressed for a change of government. He had witnessed his own power in the cabinet decline as a result of the suspension of two ministers from the Amal Party following accusations of corruption. Two years later, in January 2004, Berri appeared deliberately to hold up the passage of legislation to activate foreign loans, mostly from the World Bank, reportedly because of a quarrel with Prime Minister Hariri (DS 23 January 2004). To judge from complaints by the World Bank (LQU second quarter 2003), such delays in parliamentary ratification of loans was a standard element in Berri’s repertoire of tactics for imposing his will on the decision-making process. The gridlock caused by continuous quarreling among the three presidents was passed on to the Council of Ministers, where it was underpinned by that body’s own unresolved power struggles and institutional rigidities. One major reason was that, after Ta’if, the government’s decision making was supposed to

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include representatives of the six main confessional communities (TA II; const. 95,95a).3 Postwar cabinets—mostly up to thirty ministers—were already for this reason extremely large and heterogeneous. Yet while the Ta’if Accord defined the main lines of division merely in terms of confessional identity, grounds for ensuing demands for representation went much further. To meet the requirement of a national unity government, the splits within each confessional group had to be reflected in the composition of the Council of Ministers. Throughout the 1990s and until 2005, this was accomplished by including a large number of political elites from an array of backgrounds. Naturally the result was to create even more divisions in the cabinet. Thus the prewar zu’ama (community leaders), drawn from traditional families (aqtab), could no longer claim hegemony within their respective communities. Especially within the Shi’ite community, leaders of militias such as Amal had largely supplanted the zu’ama. Within the Sunni community, zu’ama had to share leadership with businessmen-turned-politicians, most of them former émigrés who had amassed fortunes in the Gulf countries when economic opportunities in wartime Lebanon had been curtailed. On top of this, Syria’s rising influence in Lebanon further fragmented the political elites as Syria insisted on the inclusion of its nearest allies. Although most elites had close relations with the Syrian leadership, some had earned their political ascendance solely from Syrian influence and without enjoying much domestic support. After Bashar al-Assad’s rise to power in Syria in 2000, pro-Syrian dependents witnessed a further boost in their careers, prompting a mounting share in cabinets thereafter. Finally, additional fault lines within this amalgamation of political elites were associated with regional rivalries and individual leaders’ alliances with or animosity toward their coreligionists holding one of the three “presidencies.” The formation of all governments of national unity took into account the fragmentation of elites alongside and within the confessional communities. This resulted in extremely large and heterogeneous cabinets. In such a mixed gathering, an unruly variety of interests and policy preferences made it virtually impossible to reach compromise on issues that came to the executive’s attention. On top of this, because cabinets were so large, the vote or weight of each member counted for much less, something that frustrated all members even before the business of government had begun. Discontent was also caused by the fact that owing to the sheer number of cabinet members, not all ministers could be given a portfolio, forcing many to be content with the status of minister of state without running a ministry. For these and other reasons, individual boycotts of cabinet meetings and loud opposition campaigns by individual ministers were common, further hampering the daily decision-making process. 3. These communities are the Shi’ites, the Sunnis, the Maronites, the Greek Orthodox, the Greek Catholics, and the Druze.

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Because the Ta’if Accord and the constitution gave only limited powers to the prime minister, he predictably failed to enforce even a limited degree of cohesion on the cabinet. As all ministers were supposed to share equally in executive power, epitomizing the principle of “collegial responsibility,” the prime minister’s hands were tied. There was little he could do when individual ministers systematically obstructed the general course of government, for example, by repeatedly using their effective veto power. After all, dismissals required the consent of two-third of all ministers and, by implication, an agreement among the three presidents. Requests by the prime minister for the dismissal of obtrusive ministers were therefore rare and were never honored. Not having to fear the consequences, disgruntled ministers repeatedly went on record expressing their disapproval of the government as if they had no part in it. Crisis characterized the cabinets’ normal state of affairs. Frustrated by “ministers who considered ministerial solidarity of little concern to them,” (AW 27 February 1995) Prime Minister Hariri resigned or threatened to resign in the midst of his tenure on numerous occasions, thereby adding his own contribution to government paralysis. As Salam argues, the outcome of all this bickering was structural paralysis: Ministers seldom feel bound by the constitutional principle of “collective responsibility.” As a matter of fact, in the post-Taif era there have been numerous instances of ministers publicly criticizing the composition of the cabinet to which they belong, condemning positions taken by their colleagues, disapproving of the actions of the president of the council of ministers, denouncing the general orientation of the cabinet, or even boycotting cabinet meetings. . . . In brief, the council of ministers as a constitutional collegium has been incapable of becoming a policy-making—or even a decision-making—body. (2003, 49–50)

The built-in deadlock of the political arrangement prescribed by the Ta’if Accord and the amended constitution reflected the political and military stalemate of the late 1980s. Yet with its emphasis on inclusion, its distribution of almost identical powers to all players of the political game, and its plethora of measures to counter any form of hierarchy, the political arrangement soon proved to be every decision maker’s nightmare. Perpetual institutional gridlock became one of the defining traits of Lebanon’s political settlement.

The Troika’s Politics of Muhasasa The Ta’if Accord and the Constitution put in place a political system that granted the “three presidents” almost identical powers. If the ensuing institutional gridlock was to be broken and any decisions were to be made, a supplementary

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arrangement was needed. This arrangement was found in the shared domination and deal making within the troika. The outcomes of their incessant bargaining followed a logic of partitioning the spoils of public office, privileges, and resources, a phenomenon called muhasasa (allotment). The troika made its first public appearance in October 1991, when Prime Minister Karameh, President Hrawi, and Speaker Husseini failed to agree about who was to represent the country at the UN General Assembly meeting that year ( Perthes 1992, 415). All three attended, in order to keep one another in check rather than, as it was portrayed, to demonstrate the country’s newfound unity. But the three presidents had already developed a habit of meeting regularly to try for compromises on long-standing controversies such as the appointment of senior public servants. Faced with this new development, even some of the staunchest supporters of the Ta’if Accord expressed hope that the troika would facilitate improved cooperation (Mansour 1993, 210). This optimism quickly evolved into outright condemnation, however, when it became clear that the troika was marginalizing and even supplanting the cabinet and Parliament. On top of this, the troika proved to be far from effective in breaking the chronic deadlock. This was already apparent in its early stages prior to 1992. For instance, it was not until Hariri’s first cabinet that a compromise was reached on the appointment of public servants. During the first three cabinets of the post-Ta’if period, very little progress was made in planning, let alone executing, policies to rebuild the country’s devastated infrastructure and its economy. This situation improved after Hariri and Berri came to office toward the end of 1992. Meetings among the three presidents began to take place more regularly, and numerous compromises were reached, propelling Lebanon’s postwar recovery program through the 1990s. Yet after October 2000 the escalating animosities between Lahoud and Hariri began to damage the backdoor dealing associated with the troika, causing the arrangement to fall into increasing disarray. Reduced to its essentials, the troika constituted a quasi-continuous mode of ad hoc decision making among the three presidents on all issues related to policymaking and institution building. No clear rules guided its continuing bargaining, but in practice, the threat that each president could block the formal decisionmaking process (in the cabinet and in Parliament) formed its raison d’être and provided an incentive to all three members to keep it in place. Although the ways in which compromises were reached depended on the specific issue, in general, the outcome was a partitioning of the spoils of public office and resources. Accordingly, the troika members openly bargained for their share (hissa) in the appointment of high-ranking public servants and struck numerous deals, mostly after long and complex negotiations. More generally, the members of the troika divided the state apparatus into domains and recognized one another’s spheres of

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influence. Hariri gained a relatively free hand in dealing with matters of overall reconstruction with emphasis on Beirut, especially by way of the CDR. In turn, Berri enjoyed near autonomy in running the reconstruction and relief program for the south, via the Council of the South. Hrawi enjoyed privileged access to matters related to oil and gas through his allies in the MIO. Lahoud’s sphere of influence was less circumscribed, yet it included the military and security apparatus and the Ministry of Defense. Lahoud also made strenuous efforts to add to his sphere of influence matters related to telecommunications through his ally Jean-Louis Qurdahi, the minister of telecommunication; in this he had more limited success. A second characteristic of the troika system was that the bargaining and decisions by the three presidents often preceded or supplanted the decision-making processes laid out in the Ta’if Accord and the constitution. Both the Council of Ministers and Parliament became increasingly marginalized in that they were presented with faits accomplis or were kept in the dark about the troika’s decisions altogether. As a result, concerns about separating executive and legislative powers were increasingly overshadowed by the political imperative of allowing each president to participate in the exercise of executive power.4 Yet the institutions represented by each president did not lose their relevance. On the contrary, the attributes and powers of each of the presidents enabled them to threaten institutional gridlock if their demands failed to be met. Bargaining within the troika was far from smooth. At least until 2001, and notwithstanding its undesirable implications, the troika may arguably have facilitated decision making. Yet in many instances the rigidities of the formal political arrangement and the political stalemates of the day were simply transferred to the troika itself. On several occasions lasting disagreements resulted in a breakdown of relations, with the three presidents declaring the “death” of the troika and arguing that the phenomenon was unconstitutional in the first place (LR Spring 1997; OE February 1997). In 2002, when Lahoud and Hariri were at loggerheads over the implementation of the reforms envisaged in Paris II, the malfunctioning of the troika became chronic. This prompted assessments that the formula had failed to fix the deadlock in formal decision making and was itself “foster[ing] mutual obstruction” ( Picard 2002, 158).

4. The fading separation between executive and legislative powers was also reflected in newly created institutions such as the Lebanese-Syrian Higher Council, put in place after the signing of the Treaty of Brotherhood on 22 May 1991. Whereas the treaty identified the Higher Council as a body enjoying full executive powers (art. 6.1.c), it also stipulated that its members were to include not only the representatives of the Lebanese executive but also the speaker of Parliament. See Treaty of Brotherhood, Cooperation, and Coordination Concluded between Lebanon and Syria on May 22, 1991 (art. 6.1.A).

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On occasions when the troika malfunctioned, a third characteristic became apparent: the crucial role of the Syrian leadership as arbiter and referee in Lebanese postwar politics. The origins, nature, and evolution of Syria’s interference are complex and will be discussed later on. Here, suffice it to observe that for years Syria’s leaders used the troika as a vehicle for influencing and controlling the decision-making process in order to safeguard their policy interests. Given the troikists’ frequent standoffs, each president tried to get the Syrian leadership on his side to resolve scores of issues, including a clear demarcation of the prerogatives of each. For instance, in January 1992 the Syrian foreign minister and vice president ‘Abdul Halim Khaddam visited Beirut to tell the troikists publicly how to interpret the Ta’if Accord and the constitutional stipulations guiding relations among them (AS 15 January 1992). Following the accession of Hariri at the end of 1992, Syria’s stand vis-à-vis the troika witnessed some changes. After Syrian officials had made it clear that they were no longer prepared to solve every petty disagreement (AS 5 May 1992), the Syrian leadership seems to have aimed at a more durable and stable political settlement. In the words of Tom Pierre Najem, “the essence of this accommodation was that Hariri was to be given free rein to deal with economic issues, while the larger political and military issues, including the redeployment of Syrian troops and the disarming of Hizbullah, were to be decided by Syria” (2000, 47). To some extent, this new arrangement—combined with Hariri’s initial popularity across broad sectors of Lebanese society—smoothed relations in the troika. Subsequently, the three presidents began to routinize muhasasa within the constraints set by the Syrians. Yet in spite of this new arrangement, recurring disagreements continued to demand Syrian intervention to calm things down. From 2000 on, the Syrian leadership progressively settled for a different strategy, one that, instead of carefully stage-managing the troika and upholding the spheres of influence enjoyed by its members, emphasized support for its closest allies among Lebanon’s political elites, above all President Lahoud. These Syrian maneuvers upset the delicate balance of power within the troika and ultimately weakened the system.

Dodging the Political Arrangement Faced with the virtually insurmountable obstacles raised by their rivals, all participants in the decision-making process complained bitterly about their inability to carry out their duties. Hariri and Hrawi repeatedly argued for adjusting the political arrangement to grant them enhanced powers. For instance, in October 1995, upon his acceptance of another three years of his mandate, Hrawi called for

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revising the constitution and addressing some “lacunas” in the decision-making process in order to strengthen his position vis-à-vis the Council of Ministers (AN 7 April 1999).5 Predictably, with his co-presidents jealously protecting their prerogatives, such demands were never honored. Hence, each member of the troika gained a strong incentive to look for alternative ways to make his policy preferences prevail, foremost by trying to circumvent the political arrangement altogether. This phenomenon marks the third main characteristic of the political settlement after Ta’if. Prior to Hariri’s first government, it was mainly President Hrawi who sought to bypass the prime minister and the cabinet. Thus in the summer of 1990 Prime Minister Hoss was carefully preparing a peaceful solution for the increasingly bloody conflict with Aoun, informing the French ambassador in Beirut that the general would receive amnesty, and perhaps even a ministerial position, if he agreed to lay down his arms (Hoss 1991, 134–36, 178–79). The cabinet had even adopted a broad plan to this effect, with many ministers ostensibly fearing that reliance on Syrian military force would undermine the legitimacy of the political arrangement laid out in Ta’if (Hoss 1991, 179, 140–42). Hrawi ignored the cabinet’s policies and began publicly ruling out any solution that fell short of unconditional surrender. Backed by the Syrians, Hrawi acted as if the Ta’if Accord had changed nothing regarding the president’s powers, and enforced his own preference. Encouraged by his successful maneuver to circumvent the cabinet, Hrawi began presenting himself as a full-fledged policymaker. Thus, in his role as “guardian” of the state, Hrawi capitalized on ambiguities in the Ta’if Accord and the constitution regarding the president’s relations with the state administration (TA I.2C.8; const. 64.8). He began arranging his own meetings with state bureaucrats, ignoring protests from individual ministers and the prime minister who claimed that the president had no right to do so (Mansour 1993, 121–25). The issue remained unresolved, giving the president ample opportunity to bypass the cabinet and instruct senior officials as he pleased. Upon accepting office in October 1998, President Lahoud called on Lebanese citizens to report their complaints about public servants’ corruption and misconduct directly to him, in what was widely seen as an attempt to justify his surprise visits to various state institutions and agencies to see for himself how the public administration was faring. Subsequently, and until the end of 2000, Lahoud went even further by repeatedly sending military officers and members of the Presidential Guard to confiscate and check key administrative documents held by senior public servants and managers of the CDR, in what 5. Looking back at his time in power up to 1998, Hrawi similarly called for stronger constitutional powers for the president, “as there cannot be three presidents” (AN 11 May 1998).

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one of them described as a “full-blown campaign of intrusion and intimidation” (interviews with CDR staff, Beirut, November 2006). The president countered complaints about overstepping his authority by arguing that upholding the rule of law and his campaign to end corruption necessitated extraordinary measures. The prime minister, too, had good reason to go it alone. With his hands similarly tied, the nominal head of the cabinet designed all sorts of ways to get around the institutional gridlock in the cabinet and avoid the cumbersome bargaining within the troika, especially after Hariri rose to power in 1992. As recalled by one of his closest confidants, Fouad Siniora, after Hariri’s death in February 2005: “If he [Hariri] doesn’t succeed in one way, he goes around it, tries to develop other ways and means to re-explain his point of view. He would always try and find some way around a problem. That really was an important trait in him. And that’s how he dealt with Lebanon’s problems” (Blanford 2006, 29). One such method was Hariri’s reliance on an “inner cabinet” of his most loyal ministers, who met regularly in order to present other ministers in regular cabinet meetings with a fait accompli regarding a wide range of policy issues—often without informing the affected ministers (AS 19 February 1993). Hariri capitalized on his powers to set the agenda for cabinet meetings at the last minute to prevent his rivals from preparing meaningful interventions (interview with former minister, Beirut, 2 October 2006). As a result, many key decisions were made before all cabinet members had a chance to study the relevant documentation. Lebanon’s signing of the far-reaching economic and financial association agreement with the European Union in June 2002 was a case in point (interviews with former minister and foreign diplomat, Beirut, January 2005). Many times Hariri was in this way a step ahead of other ministers and his co-troikists, thanks to the ever-increasing allocation from the state budget to the prime minister’s office, which turned the latter into a quasi-ministry rivaling formal state agencies (Hitti 1998, 48; Perthes 1993, 92). Another related strategy was Hariri’s focus on the CDR, which quickly grew into a parallel institution with unprecedented powers, independent from ministries with overlapping mandates. Finally, efforts to outmaneuver his rivals were also facilitated by Hariri’s reliance on his private employees who worked in what became known as “the bureau” and by his string of advisers who helped him outwit his rivals (Mulhaq in AN 19 June 1996). Hariri’s use of his vast private resources to bypass the regular decision-making process was in direct response to the debilitating rules on public decision making. Such practices became a hallmark of Hariri’s time in power. At a very early stage Hariri discerned that his policies would face fierce resistance in Parliament, particularly from the powerful speaker. Consequently, the prime minister began thinking of ways to circumvent the legislature. Berri warded off a first attempt—a request by Hariri in May 1993 to obtain powers to issue legislation on a certain matter by decree (AS 27 May 1993). According to

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Hariri’s confidant Nouhad Mashnouq (AH 12 May 2005), the Syrian leadership rejected a simultaneous request by the prime minister to grant his government special legislative powers to enable it to kick-start postwar reconstruction and stabilization. Subsequently, Hariri reportedly summoned his advisers to prepare a legal study to identify alternative ways in which he could legislate and act without excessive parliamentary interventions (AN 13 May 1993). The results of this study are not publicly known, but it may have identified some of Hariri’s subsequent legal tricks to neutralize Parliament. For instance, Hariri’s wish to provide an injection of capital into the ailing national airline, MEA, was facilitated directly through the central bank and not by the more conventional means of a loan. In this way Hariri was able to circumvent Parliament and weaken Berri’s powers, for a loan would have required parliamentary approval. For similar reasons, Hariri on many occasions avoided the full-fledged privatization of state-owned enterprises and other state assets by opting instead for build-operate-transfer (BOT) contracts involving state assets with maturities as long as forty-five years (Investment Development Authority 1996; Wetter 1999, 9–10). Unlike privatization in the strict meaning of the term, these schemes did not need a special law passed in Parliament. After privatization was finally accepted in principle by Parliament’s approval of Law 228 (31 May 2000), Hariri tried to reinvigorate the Higher Council for Privatization, which was attached to his office, and announced that it would complete most privatization projects by the end of 2002 (AN 19 January 2002). He encouraged the council to implement privatization targets swiftly, starting with the termination of the existing contracts of two cellular phone companies, without debate or a vote in Parliament or in the cabinet (IIM February 2003). As related earlier, this attempt faltered largely because of heavy resistance from President Lahoud, who insisted on the need to vote on each privatization effort. Owing to his qualitatively different powers in comparison with the other two presidents, the speaker of Parliament had little interest in circumventing the political settlement. On the contrary, Berri’s strategies chiefly aimed to render the decision-making process as inclusive as possible so as to activate his powers in and over Parliament. Yet on some occasions he also participated in practices that effectively bypassed the regular proceedings of decision making in the Council of Ministers. For instance, all troikists undertook efforts to appoint new public servants as consultants on limited contracts. This way they managed to get allies into key positions in the public administration while evading the recruitment procedures of the CSB and circumventing the Council of Ministers, whose approval is required for permanent appointments.6 Nevertheless, when Berri was not content

6. In 2005 approximately 40 percent of all ministry personnel were reportedly hired on temporary contracts outside the control of the CSB (World Bank 2005b, 57).

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with his own share, he was quick to denounce as a violation of the Constitution his co-troikists’ tendency to select candidates without resorting to the CSB.7 Attempts to bypass both the cabinet and Parliament failed to resolve the problems associated with decision-making gridlock. Yet in a significant number of cases such strategies offered an effective avenue for getting decisions passed more quickly and without serious opposition.

Vulnerability of the Elites Many political elites who actively took part in the political process between 1989 and 2005 were extremely weak and often lacked significant support among their own constituencies. Such weakness affected their negotiating positions and bargaining styles. Their weakness was principally associated with dramatic shifts in the leadership within each confessional community, particularly the fragmentation of these political elites during the 1970s and 1980s. Yet the application of the Ta’if Accord and the revised constitution, or indeed their violation, exacerbated the vulnerability of these elites with regard to their constituencies. Most important, as we shall see, policymakers were urged to act as champions of confessional, regional, and local rights and privileges. It is in this sense that elite vulnerability left its mark on the political settlement at large. Accordingly, four interrelated mechanisms contributed to this vulnerability and weakness: (1) the enlargement of Parliament, (2) the selection of appointed MPs in 1991, (3) the electoral system and gerrymandering, and (4) the ways in which Presidents Hrawi and Lahoud were appointed and their tenures extended in, respectively, 1995 and 2004.

Enlarging Parliament, Appointing MPs In Ta’if it had been agreed that the number of seats in Parliament would be divided equally between Muslims and Christians. In order to allow for this new distributive key, the number of parliamentary seats (99) had to be changed to an even number. Other considerations came into play as well, rendering this issue one of most controversial negotiations on domestic political reforms in Ta’if (Hanf 1993, 585). First, Maronite MPs in Ta’if demanded that the new key to the distribution of seats should not deprive the Christians of any existing seats. Hence the Ta’if

7. For example, in December 2001 Berri accused Hariri of “acting like Louis XIV” by ignoring the CSB in a series of new civil service appointments. He alleged that “the biggest scandals” were occurring in privatization (khaskhasa) and the allotment (hashasa) of public sector appointments (AN 28 December 2001).

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Accord raised the number of seats to 108 (TA I.2A.6), the minimum to create parity without Christian MPs losing their seats. Yet as soon as the first government of national unity was assembled, several ministers began pressing to raise the number of MPs to at least 128. In particular, those who had made their political careers since the outbreak of war in 1975, including militia leaders such as Nabih Berri, likely calculated that a larger Parliament was apt to be more welcoming to their supporters and allies and would thus shift the balance of power in their favor. During and after the negotiations in Ta’if, Syria also expressed its own preference for increasing the number of seats, ostensibly because this would make it more likely that some of its own allies (such as supporters of the Lebanese branches of the Syrian Socialist Nationalist Party and the Ba’ath Party) would be represented in Parliament. In 1992, when regional developments allowed Syria to tighten its grip on Lebanon, the Syrian leadership was in a position to impose its preference. Thus on 22 July, Parliament voted for an electoral law that raised the number of seats to 128. Consequently, entrance to Parliament was no longer restricted to leaders who enjoyed significant popular support. In accord with the general emphasis on political inclusion, Parliament became an extremely heterogeneous gathering of representatives, of whom only a few were able to muster major support from their constituencies. A related factor involved the temporary appointment of MPs in June 1991. In Ta’if it had been agreed to fill vacant and newly created seats by appointment “for one time only” and until new elections could be held (TA I.2.A6). Yet the Syrians heavily influenced the selection of candidates (LR July 1991; Maila 1991, 45). Predictably, all but four of the forty appointees had very strong links with Syria or represented pro-Syrian parties. Indicative of the Syrian diktat was Elie Hobeika, filling the Maronite seat for Beirut, which was left vacant after the death of Pierre Jumayil, founder and former leader of the Kata’ib Party. Hobeika was anything but the political heavyweight Jumayil had been. In fact, having made his career as a warlord during the 1980s, he was known to have been Syria’s staunchest ally in the later phases of the war. Mainly for this reason, he enjoyed very little popular support within the Maronite community. Similarly, other appointees, such as Ba’ath chief ‘Abdullah ‘Amin, had virtually no power base beyond Syria’s desire to include them in Lebanon’s political elite. The significance of the appointments of 1991 reverberated far beyond Parliament until the autumn of 1992, when Lebanon’s first postwar elections were held.

Elections and Insecure Elites Lebanon’s electoral system acquired its own hallmarks that contributed to a wide sense of insecurity among candidates. Such features commonly failed to generate

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a fair chance for the most popular candidates, who, as a result, saw their seats taken by less firmly rooted politicians. In order of importance, these hallmarks included the winner-take-all formula of electoral laws, gerrymandering, and clientelist practices, combined with outright fraud. One such hallmark related to the winner-take-all principle applied to the allocation of winning seats in the country’s multimember electoral districts. To muster a maximum number of votes, contestants compiled lists of candidates, which were distributed to voters and used as paper ballots. Yet in the fairly common situation in which several rival lists were competing, a list could win a plurality—and hence all seats—by receiving a minimal number of votes, leaving the majority of voters disenfranchised. In the 1996 elections, 70 percent of successful candidates gained their seats despite receiving fewer than 50 percent of the votes in their district (Saad 2005–6). As a result, many voters felt unrepresented in Parliament, causing MPs to defend the interests of a local constituency from which a sizable minority had been excluded. Gerrymandering aggravated the tendency of parliamentary elections to produce political elites who did not enjoy solid popular support. In close consultation with the Syrian leadership, Lebanese authorities manipulated the elections of 1992, 1996, and 2000 by adjusting the size of the various voting districts. In this way, the electoral laws violated the Ta’if Accord (I 3C) by abandoning the governorate, or muhafaza, as the universal and only basis for electoral districts. For instance, the north and south of the country adopted a system whereby representation was based on a much smaller administrative unit, the qadha. Other areas, such as the Beirut governorate, stuck to the muhafaza district but divided adjacent areas, comprising greater Beirut, into separate voting districts. The political and sectarian implications of these “uneven multi-member constituencies” were complex and have been analyzed in detail by others (El Khazen 1998). In essence, persistent gerrymandering significantly increased the chances of certain elites’ being (re-)elected, particularly those newly appointed to Parliament, including Berri, Hobeika, Sulayman Franjieh, Elias al-Khazin, ‘Abdullah ‘Amin, Faris Boueiz, and others. In many instances winning candidates gained their seats without having to muster a large number of votes as MPs did, who ran in larger voting districts. In practice, the losers from gerrymandering included zu’ama who, at a local level, rivaled these core elites of the post-Ta’if period. Furthermore, leaders of Maronite groups who were already skeptical of the Ta’if process or who were complete rejectionists were similarly disadvantaged. Careful redrawing of electoral districts had made all such potential candidates dependent on Muslim voters, who were likely to vote for other and less popular (Maronite) candidates allied with their own leaders and, as always, preferred by Syria. It was mainly for this reason

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that a call within the Maronite community for a boycott of the 1992 elections, both active and passive participation, was widely followed (Nassif and Munsif 1996, 257; Bahout 1993, 60–64). In most districts with mainly Maronite populations voter turnout was extremely low, and fifty-four candidates were elected unopposed or without real competition (El Khazen 1998, 35–42). In consecutive elections in 1996 and 2000 the Maronite boycott was abandoned. Yet the drawing of voting districts continued to produce a foregone conclusion, in which Maronite leaders with real clout more often than not failed to gain a significant number of seats, or any seats at all. Meanwhile, those who did manage to obtain seats often lacked the popular support to claim that they fully represented their constituencies. A third determining factor in post-Ta’if elections relates to clientelist practices and straightforward vote rigging or electoral fraud. Naturally, such practices generated election outcomes that did not necessarily reflect a genuine expression of the popular will. Rather, they resulted from candidates’ talents and resources for mobilizing voters or, indeed, for engaging in foul play. Not all such practices were strictly illegal. Wealthy candidates promised to fund the construction of a mosque or a school, a church, or a clinic privately, or to make a generous donation to a local sporting club (interviews with aspiring candidates, Beirut, 7 and 18 June 2005). Politicians who ran extensive charity networks reminded beneficiaries of their assistance and made sure that they were brought to the polling place on election day. Estimates of how much was needed to run an effective election campaign in Lebanon range from $100,000 to well over $1 million per candidate, on top of the $6,666 required for official registration (interviews with Hussein al-Husseini, Shmaystar, 12 June 2005, and Abdu Sa’ad, elections analyst and pollster, Beirut, 21 June 2005). Much of the money was used in get-out-the-vote campaigns and in transporting voters, since they were required to cast their ballot in their place of origin. Candidates often provided free transport, busing voters in or paying them for the cost of fuel, either in cash or through vouchers valid at local gas stations (interviews with voters in Beirut, the Biqa’, Zahleh, and various villages and towns in south Lebanon, May–June 2005). In some instances, it was alleged, candidates distributed vouchers for sums that exceeded the cost of fuel, allowing voters to cash in the difference, suggesting some form of vote buying. The mobilization of election workers was another important resource. Candidates with abundant funds, such as those on Hariri’s lists, typically employed thousands, paying each as much as $100 a day. These workers handed out ballots at polling stations, oversaw the voting process, and filed complaints in the event of irregularities. Through their presence, and given voting procedures, they were in a position to verify how individuals voted, thereby allowing for intimidation or bribery. Moreover, should a voter remain for a prolonged period of time in

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the voting booth, it could be assumed that he or she was substituting write-in names for those appearing on the list. There were other forms of verification: lists handed out to particular groups (for instance, members of an extended family) were sometimes printed in a distinct, recognizable font; campaign workers could readily check during the vote count whether these were in fact being used by family members. Through these various means, campaign workers could both pressure individuals to vote in a certain way and threaten them with retribution if they did not (interviews with voters and election observers in Hasbayya, Nabatiyyeh, Aley, and Zahleh, 5 and 12 June 2005). While these instances fell in the gray zone between legitimate and questionable practices, such was not the case for so-called election keys (mafatih intikhabiyya). An election key is a local businessman, typically running a travel agency or newspaper stand, who collects voting cards from local residents, shows them to an interested candidate, and promises to instruct their owners to vote for him in exchange for a financial reward (interview with Abdu Sa’ad, 21 June 2005). Proof is almost always lacking in these instances: many voters see no problem in practices that have become habitual; hard evidence is difficult to obtain; and unsuccessful candidates themselves often are guilty of the very same practices. Independent and functioning grievance procedures are absent, which discourages individuals from filing complaints. While in principle the Interior Ministry was charged with this task, in practice it remained a political institution and gave no indication that it would seriously pursue a case. The Constitutional Council, another possible avenue of recourse, was also staffed by political appointees and was weakened after 2002 when the terms of many of its judges expired but no replacements were named. Repeated suggestions to establish an independent election commission failed. The manipulation or even fabrication of electoral outcomes resulted in extreme levels of elite vulnerability, whether by the enlargement of Parliament, the appointment of MPs, the winner-take-all formula in elections, gerrymandering, or clientelistic practices. As a result, many MPs simply lacked strong political or family ties with the constituency they were supposed to represent, and some were virtually unknown to their electorates. Never in Lebanon’s history had the legislature—and consequently the country’s cabinets, which recruited most of their members from Parliament—been so unrepresentative and so vulnerable to charges of illegitimacy.

Presidential Perils From 1989 until 2005 the president’s office was filled by a politician either previously unknown or who became immensely unpopular when the facts of his rise to power turned into a source of embarrassment. In either case, both President

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Hrawi and President Lahoud completed their terms with extremely little popular support, if indeed they had ever enjoyed any. The process by which the incumbents were selected increased their vulnerability, which proved a serious liability when they maneuvered to consolidate their position in the incessant bargaining typical of Lebanon’s post-Ta’if politics. Hrawi, an unremarkable legislator and a modestly successful chicken farmer from Zahleh, clearly was Syria’s choice. Given the ubiquitous gerrymandering and rigging of elections, the voting public was never given the opportunity to show how little they supported him. But after his son Roy failed to turn these manipulations to his advantage and lost the 1992 elections in Zahleh, few could deny Hrawi’s unpopularity. Hrawi epitomized many Maronites’ feelings of resentment or alienation (ihbat) toward the political order established after Ta’if. Not only did the Maronites have to give up many of their constitutional privileges, including a potent presidency, but also they even failed to be represented by a strong delegate of their own choosing. Furthermore, the Second Republic was built on the ruins of Aoun’s defeat and the persecution of his primarily Maronite supporters. As pointed out earlier, Hrawi had been instrumental in crushing Aoun’s revolt and this way had proved himself a staunch ally of the Syrians. Obviously this did little to boost his popularity within the Maronite community. To add insult to injury, Hrawi was given another three years in office in violation of the constitution (art. 49). This decision “for one time only” was approved by Parliament in October 1995, mainly in response to Syrian insistence. Enjoying a reputation as the weakest president in Lebanon’s history and one of Syria’s closest collaborators, Hrawi soon occupied an untenable position. Even his supporters began to resent Hrawi’s weak maneuvering in the troika, where he held the position of “least among equals.” When his extended term in office ended in September 1998, many breathed a sigh of relief. Initially expectations were set high that Lahoud—a forceful military professional and at least physically more imposing than his predecessor—would be up to the task. Although he had similarly been implicated in the battle against Aoun on behalf of the Syrians, he subsequently had proved himself a leader in his own right. He even enjoyed a small but significant following among army officers. Designated president in Parliament in October 1998, Lahoud began his tenure with a potent inaugural speech wherein he promised to fight corruption and restore law and order, while hinting at a hands-on approach to his tasks as president despite constitutional impediments (AN 25 November 1998). Although he at first mustered some support, particularly among Christian Maronites hoping for a strong representative of their community in the state’s highest echelons, Lahoud’s term in office started off with a dent in his constitutional legitimacy. His election required an amendment—again “for one time

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only”—of the constitutional stipulation (art. 49.3) that senior state employees, including in the military, may not be elected president during their term in office or within two years after their resignation. Given the rate at which the constitution had been amended for political convenience, the change did not raise many eyebrows at the time. Yet it sat uneasily with Lahoud’s own insistence on upholding the rule of law, a charge that would soon haunt him when his critics pointed at the widening gap between the president’s self-declared principles and his behavior. Regardless of the genuineness of Lahoud’s proclamations, he was never a shrewd political tactician. Perhaps the first serious blow to his popularity was facilitated by his own insistence on deposing Hariri and appointing the much weaker and less inspiring Salim al-Hoss as prime minister in December 1998—all, of course, in close consultation with the Syrian leadership. At the height of Lebanon’s economic and financial crisis, this move was tantamount to focusing all criticism of and discontent with collapsing living standards onto himself. Hoss’s government and Lahoud, rightly or wrongly, were widely blamed for the country’s economic doldrums. In the economic context, according to Muhammad Hussein Shams ad-Din, the choice between “the party of reconstruction without cleanliness” (that is, Hariri’s forceful but often non-transparent approach) and the “party of cleanliness without reconstruction” (referring to Lahoud’s and Hoss’s emphasis on bureaucratic procedures and the rule of law in government and business) was clear (Mulhaq in AN 16 January 1999). When Hariri subsequently made his dramatic return in the elections of October 2000, it was widely viewed as a serious setback to Lahoud, who had done everything to evict Hariri from the country’s political landscape. During these elections, the meagerness of Lahoud’s own base of popular support also began to show, in his failed attempt to obtain a sizable bloc of loyal candidates elected in Parliament. Even more harmful to Lahoud’s standing, however, was rapidly spreading resentment over Syria’s hard-nosed interference in Lebanese politics, particularly after 2001. Lahoud was viewed as Syria’s imposition, not only at the expense of the Maronite community but also to the detriment of virtually all confessional and political leaders. Harsh reprisals by security forces against anti-Syrian activists and critics prompted widespread denunciation. As a result, Lahoud became more and more discredited because of his overt association with the Syrian security entourage headquartered in Anjar. The damage was sealed when, before his six-year tenure expired, the constitution was once again amended on 3 September 2004 to allow him renewed tenure beyond the legal limit of six years. The event set off a succession of dramatic developments that drew Lebanon into a deep political crisis and, in combination with mounting international pressure, helped push Syrian forces out of the country in a matter of months.

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Fallout of the Elites’ Vulnerability In a bid to compensate for the absence of strong and genuine support from their constituencies, political elites capitalized on their acquired positions to build political clout. Aggressively defending narrow local and confessional interests became one way to beef up political careers. Perhaps most blatantly, pro-Syrian appointees scrambled to convert their influence in Parliament into political currency immediately after they were granted their seats in 1991. As many of the appointees, such as Nabih Berri, had been leaders of sizable militias, their sudden career move into Parliament allowed them to press for the inclusion of former fighters into Lebanon’s armed forces and its public administration ( Picard 1999). In turn, these moves helped them to muster sufficient votes to get elected a year later and become entrenched in the state administration (Bahout 1997, 30; Joseph Warda in AH 21 October 1996). In particular, Berri’s Amal movement managed this way to recoup its standing in the Shi’ite community despite active political support for the movement being in steady decline and overshadowed by Hizbullah. In subsequent years Berri jealously guarded his movement’s share of public sector appointments while using his political position to secure material rewards and public services for his voters. In the words of one Shi’ite cleric, Amal became “the Shi’ites’ gatekeeper to the state and its perks” (interview, Beirut, 3 March 2005). Other politicians, suffering from legitimacy problems of their own, engaged in similar practices, albeit to varying degrees. Most MPs concentrated on providing their local constituencies with an assortment of services and favors, including public sector jobs, public investments (such as schools and roads), and assistance in land disputes or in dealings with tax and judicial authorities, as well as personal security.8 Against this background, elite vulnerability directly reverberated in the decision-making process as MPs and political leaders frantically jockeyed for narrow constituency interests. Such behavior was especially apparent during the always cumbersome and often gridlocked process of drafting and adopting the state’s annual budget. As a study by the World Bank put it: “MPs bring a highly regional interest to the budget review process, delving deeply into specifics that affect their regional interests. . . . As a result, their time horizon is short term, and it is difficult to get a substantive focus on longer term issues” (2005b, 70). Even if some MPs might have preferred to concentrate on nationwide issues, their voters reminded them to pay close attention to narrow and local interests, often of a trivial nature. Championing confessional sentiments became another characteristic of the post-Ta’if elites’ weak grounding in their own constituencies. Though common 8. Commenting on his own involvement in such clientelist practices, Junblatt explained: “It’s an old tradition. . . . It’s been that way for centuries, and it’s not going to change now” (quoted in Washington Post, 28 May 2005).

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among most political elites, it was especially apparent in the ways in which the era’s two presidents resorted to crude sectarianism while being besieged for their inability to represent the Maronite community effectively. Not unlike other weak elites in Parliament and in the Council of Ministers, Hrawi tried to conceal his lack of popular support and his full reliance on the Syrians by posing as a champion of his community’s rights and privileges. In fact, influential Maronite community leaders, including Patriarch Nasrallah Sfeir, publicly pressed Hrawi to use his presidential powers to the fullest extent in order to safeguard the community’s interests. In his desperate and ultimately unsuccessful attempts to meet such demands, Hrawi spent most of his time in the troika trying to win petty victories that he hoped would make him look like a staunch defender of the Maronite cause. As a result, he never became the “symbol of the country’s unity” that the constitution (art. 49) had envisaged for his position. For his part, Lahoud repeatedly steered toward confrontation with his co-troikists, and Hariri in particular, when confessional interests were perceived to be at stake. Most fervent in this respect was Lahoud’s aggressive response in 2002 to a cabinet decision to annul the so-called Exclusive Agency Law on commercial imports, which Maronite elites perceived as a Sunni conspiracy and a major blow to their interests. Against a backdrop of growing antipathy within the Maronite community toward Lahoud, the resultant outcry against Hariri constituted a rare instance of Maronite support for an otherwise ostracized president.

Syria in Lebanon: The Rise and Demise of a “Brotherly Occupation” Driven primarily by its foreign policy interests, the Syrian leadership heavily intervened in Lebanon’s political process, becoming an integral part of its neighbor’s political settlement. Principally, Syria sustained a political arrangement that proved largely incapable of managing intra-elite conflicts and generating authoritative decisions regarding all sorts of vital issues, including institution building. Syria applied various instruments to ensure that its own interests prevailed. The nature of its interventions, although habitually cast in the consensual language of the Ta’if Accord and the Lebanese-Syrian Treaty of Brotherhood, carried strongly coercive features. Yet Lebanon’s political elites, incapable of facing up to their domestic rivals, had no qualms about capitalizing on the Syrian presence. More often than not, Lebanon’s elites encouraged Syria to intensify its interventions as long as this boosted their jockeying for power at home. The main result was that, at least until 2001, Syria’s “brotherly occupation” faced no effective challenge. Yet the growing resentment of elites over a change in Syrian tactics, rather than any intrinsic objections to Syrian meddling, considerably complicated Syria’s role

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in Lebanon, a process that culminated in Syria’s pulling out of the country after external powers, including the United States and France, added their weight to growing demands for a full withdrawal.

Syria’s Interests and Its Role in Lebanon During the 1990s through 2005, and within the context of Syria’s long-standing territorial disputes with Israel, the Syrian leadership was keen to bolster its bargaining position by maintaining its influence in Lebanon. From a Syrian perspective, the rationale for doing so was made all the more pressing as Syria’s armed forces had proved no match for Israel’s military might. Thus for the Syrians, Lebanon essentially served as a bargaining chip by pressuring the Israelis to make fundamental concessions in return for, among other things, efforts by Syria to use its military presence and influence in Lebanon to put a halt to or contain Hizbullahled attacks against Israeli occupying forces in the south. Israel’s withdrawal from the area in May 2000 (without ending its near-daily incursions into Lebanese airspace), though trumpeted as a dramatic victory for Hizbullah, changed little in this strategy. Hizbullah continued to hit Israeli targets at those parts of the demarcation line (the Blue Line) that remained in dispute, including the Shab’a Farms. Syria meanwhile condoned and supported Hizbullah’s operations in an attempt to bolster its own demands vis-à-vis Israel. Additional motives for tightening its grip came into play as Syria consolidated its position in the country throughout the 1990s. Syria’s influence in Lebanon reaped financial benefits (through extensive networks of Syrian and Lebanese businessmen), social benefits (through hundreds of thousands of Syrian workers in Lebanon), and economic benefits (through Lebanese purchases of Syrian agricultural products). In the 1990s strong business ties developed between Syria’s leadership, often through sons dubbed the affluent awlad al-mas’uliyin (children of those in power) and Lebanese political elites holding sizable stakes in business. For example, Ali and Nizar Dalloul, sons of a former Lebanese defense minister, held a majority share in LibanCell, one of Lebanon’s mobile phone companies, but they were reportedly fronting for close relatives of Syrian vice president ‘Abdul Halim Khaddam and Syria’s chief of staff Hikmat Shihabi. This network is also likely to have included Hariri, if perhaps indirectly, as Mohsen Dalloul had become one of his closest allies. Strong ties also connected Syrian and Lebanese business interests through Lebanon’s comparatively developed and free banking sector, with an estimated $3–4 billion held in Syrian assets by Lebanese private banks in early 2005 (interview with Lebanese banker Ghassan al-‘Ayyash, Beirut, 7 May 2005). As for the exact number of Syrian workers in Lebanon and the magnitude of their remittances, estimates vary considerably (Leenders 2006, 197–98). Yet it is clear

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that Lebanon offered Syria’s ailing economy a welcome outlet for its labor surplus, especially when Lebanon was spending massively on reconstruction and building works. Syrian exports of agricultural products to Lebanon were clearly helped by the fact that Syria’s state-subsidized agricultural products often entered Lebanon under unregulated or even illegal conditions of cross-border trade, allowing Syrian producers to dodge tariffs and customs fees (Ministry of Agriculture 2005; FAO 2003). It is widely believed that the Syrian economy gained disproportionately from its growing links to Lebanon, much more so than the other way around (Dagher 2001). The protection of Syria’s interests in Lebanon required at the very least a loyal leadership in Beirut over which Syria held control. From the early 1990s on, Syrian interference in Lebanon became more overt. The circumstances that allowed this to happen were mainly related to Syria’s position in the region. Its rising prominence in Lebanon since the early 1990s coincided with major changes in the balance of power in the Middle East, caused by the Gulf War and the announcement by the United States that it would sponsor regional peace talks in Madrid. From the perspective of Syria, these events presented both opportunities and a need to enlarge its control over Lebanon and its political leaders. In return for their support for the U.S.-led coalition against Iraq, Syrian leaders correctly assumed that the U.S administration would be less willing to confront Syria about its increasing tutelage over Lebanon. Moreover, as the Gulf War had strongly divided members of the Arab League, no forceful reaction would be likely from the ATHC, even if Syria’s policies offset its promise to act as the “moral guarantor” of Lebanon’s sovereignty. Both opportunities served a need that, with the U.S. peace initiative of 1991, had become increasingly urgent: to strengthen Syria’s negotiating position before peace talks began with Israel. As long as its territorial claims vis-à-vis Israel failed to be met, the Syrian leadership was adamant about keeping Syria’s military presence in Lebanon, supporting Lebanese resistance against the Israeli occupation of the south, and preventing any Lebanese government from reaching a separate peace deal with the Israelis.

Syria’s Manipulations of Lebanese Politics The fragmentation of Lebanon’s political elites and the failure of the post-Ta’if political arrangement to solve the country’s internal divisions served as the background to Syria’s manipulations of Lebanese politics in three basic ways. The troubled relationship between the troikists and their calls for Syria’s support allowed Syria to make itself indispensable as an arbiter or referee, in return for unconditional support for its foreign policies. Frequently unable to settle their own differences, the troikists repeatedly requested that Syria prop up their individual

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positions. Hrawi understood this trade-off like no one else. Initially, therefore, he eagerly portrayed himself as a full supporter of the Syrian stance regarding the armed revolt by General Aoun. Appreciating the president’s position,‘Abdul Halim Khaddam, then Syria’s foreign minister, began supporting the president’s overtures on the Lebanese domestic scene at the expense of both Prime Minister Hoss and Speaker of Parliament Husseini. On 13 December 1990 Hrawi went again to Damascus—his eighth visit there since taking office—to express to Syria’s president, Hafiz al-Asad, his exasperation over his dealings with Hoss (Maila 1991, 41). In this meeting the decision was made to get rid of Hoss and ask ‘Umar Karameh to form a new government. The following day the Syrian media declared the fall of the Hoss government, even before Hoss could offer his government’s formal resignation. The incident demonstrated that Hrawi’s bargaining tactics were clearly designed to take full advantage of Syria’s role as Lebanon’s main power broker. Syria’s role in the troika underwent some changes with its backing of Hariri after November 1992 and an evolving distribution of influence in domestic and foreign policies. Yet the Syrian leadership occasionally changed course when Hariri appeared to challenge Syria’s interests. On such occasions the Syrian leadership allowed conflicts among the troikists to continue, ostensibly to weaken Hariri’s position. In essence, therefore, Syria’s policy vis-à-vis the troika, at least until 2000, was to pose as the ultimate but far from disinterested arbiter that, at any point, could intervene to make its own preferences prevail. Syria’s record of divide and rule in Lebanon since the mid-1970s thus gained a new twist by sustaining the troika leadership in Beirut. A second instrument of control involved Syria’s successful efforts to implant its most loyal supporters in key public positions such as in the cabinet and Parliament. Taking full advantage of the fragmentation of Lebanon’s political elites, Syria faced little effective opposition to its insistence on appointing scores of its allies to Parliament in 1991 and facilitating their careers thereafter. Likewise, the Syrian leadership enforced its decisions and its choice of Lebanese leaders even when considerable misgivings were shared across Lebanon’s elites. For example, Syria’s intelligence chief in Lebanon, Ghazi Kana’an, reportedly ordered reluctant MPs to attend a reception in Tripoli to celebrate the extension of President Hrawi’s term in office (AH 2 October 1995). Concurrently, Syria vetoed the participation of dissenting groups and individuals, such as supporters of General Aoun and the LF, in the political process. Syrian intelligence officers reportedly pressed individuals disliked by the Syrian leadership to stand down as candidates for parliamentary elections. Yet until 2000 Syria was careful not to rely too heavily on particular political figures. In a sense, it acted like a stockbroker who minimizes his risks by holding a large portfolio of assets and by reshuffling them when some threaten to become a liability (Michael Young in DS 9 January 1999). The Syrian leadership

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had been called in as a fixer, but it made sure that the balance of power among Lebanon’s political elites would never reach equilibrium, thereby making Syria’s own continuing role indispensable to Lebanon’s political settlement. Third, all participants in the political settlement knew that their maneuvering was ultimately constrained by Syria’s ability to use its armed forces and secret services in the country, including about thirty thousand troops, to enforce compliance with its leaders’ wishes. In this respect, Syria’s harsh actions throughout the 1990s against Aounists and supporters of the LF perpetuated a general climate of fear. As many among the weak political elite in Beirut also felt threatened by such groups, on the whole they silently approved. Yet the repressive actions also served as a warning to all elites who might consider crossing Syria’s foreign policy interests. Not only did Syria become a fundamental part of Lebanon’s political settlement, but also it added an element that was unmistakably authoritarian. As Farid El Khazen (2003) put it succinctly, the creeping “syrianization” of Lebanon’s fragmented political process contributed to the rise of a disturbing amalgam: “authoritarianism by diffusion.” At least until 2000, the Syrian leadership by and large managed to safeguard its interests in Lebanon by skillfully handling its political assets and forcefully confronting meaningful dissent. Calls for the “redeployment” of Syrian troops were for years dismissed as flawed interpretations of what had been agreed on in Ta’if.9 Even after Israel withdrew its forces from the south in May 2000, the Syrian troops stayed on. Furthermore, Lebanon’s foreign policy statements often consisted of little more than celebrations of “brotherly relations” with Syria. In a similar sign of submission, consecutive Lebanese governments until 2003 signed over 120 bilateral agreements and protocols stressing a perfect match between the national and foreign policy interests of the two countries and rhetorically celebrating the tight relations envisaged in the 1991 Treaty of Brotherhood (IIM April 2005). In the process, at least until the early 2000s, Syria successfully manipulated Lebanon’s political process, which largely failed to generate decisions or settle the country’s internal divisions on its own. By doing so, Syria left a distinctive mark on the political settlement.

Bashar’s Domestic Struggles Played Out in Lebanon From the late 1990s on, a complex interplay of developments in Syria, in Lebanon, and in the region more broadly prompted a gradual change in the ways in

9. Shortly before expiration of the two years since the constitutional amendments of September 1990, Foreign Minister Khaddam of Syria was asked whether September 1992 would indeed witness the “redeployment” of Syrian troops. Khaddam replied, “I have the Ta’if agreement in front of me, but I don’t find the word September” (OJ 16 July 1992).

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which the Syrian leadership handled its “Lebanon file.” This change underscored Syria’s second and third instruments of control over Lebanon—enforcing authoritarianism and inserting dependents—and marked a shift away from its tested divide-and-rule strategy. The first indication that Syria would alter its modus operandi in Lebanon came with the appointment in 1998 of Bashar al-Assad to oversee Syrian interests in Lebanon, a task previously performed by Khaddam. Most probably the move was designed to prepare Bashar to succeed his ailing father, Hafez al-Assad. Bashar’s carefully staged rise to power coincided with purges in Syria under the banner of an anticorruption campaign aimed at neutralizing real or potential rivals associated with the regime’s “old guard.” Significantly, army chief of staff Hikmet Shihabi was the first key confidant of Bashar’s father who was forced to resign, although his full ouster was delayed until two years later. Bashar’s response to Lebanon’s often unruly and murky politics was to invest his hopes in a new face, Émile Lahoud, who was to be nurtured as a loyal strongman who could face up to Lebanon’s elites. Bashar appeared to think that his perceived Syrian adversaries’ ties to Lebanese elites were instrumental for entrenching themselves in Lebanon. Most prominently, Hariri was known to enjoy reasonably good relations with Syrian intelligence chief Kana’an and business ties with Khaddam, while Junblatt had a friendly personal rapport with Shihabi. Consequently, Bashar tried to alter the political settlement in his favor and set out to boost Lahoud’s position at the expense of Lebanon’s more established political elites. Sensing Bashar’s tactics, Hariri declined to form a new cabinet following Lahoud’s inauguration as president in November 1998. This prompted Hoss’s designation as prime minister and the formation of a cabinet consisting of both technocrats and dependable pro-Syrian allies. Equally significant, Junblatt lost his ministerial portfolio in the new cabinet. Together Lahoud and the Hoss cabinet targeted the political entourages of Hariri and, to a lesser degree, of Junblatt for alleged corruption and mismanagement during their time in office. Hariri and Junblatt fought back. Hariri first used his ties to Syrian officials who felt they were being excluded from the narrowing networks around Bashar. In 2000 Syria’s domestic intelligence chief, Ghazi Kana’an, threw his support behind an electoral law that strongly favored Hariri, thereby paving the road for the former prime minister’s comeback in parliamentary elections held that same year. Meanwhile, Bashar and his supporters were preoccupied in Damascus with succession struggles following the death of Hafez al-Assad in June. As he had failed to prevent Hariri’s return as prime minister, Bashar, now Syria’s new president, stepped up his campaign to prevail in Lebanon. From Bashar’s perspective, a more assertive approach in Lebanon was all the more pressing because he and his circle saw the leverage of “old guard” contenders in Damascus as dependent on their personal and financial ties to Lebanese elites (interview with Syrian government adviser, Damascus, 4 February 2005; Blanford 2006, 56).

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Only one month before Hafez al-Assad’s death, Syrian state-owned newspaper reports had suggested that Shihabi would be prosecuted for corruption in arms purchases for Syria throughout the 1990s. Shihabi, who was in Lebanon at the time, instantly fled to the United States amid loud protestations from his friend Junblatt regarding the Syrian regime’s treatment of the general. After Bashar had formally succeeded his late father, pro-Syrian Lebanese media also targeted Kana’an for his supposedly corrupt association with Lebanese elites (As-Shira’ 30 December 2000), a charge unlikely to have been publicized without active backing in Damascus. It took nearly two more years, however, before Bashar, in an effort to consolidate his power, replaced Kana’an as Syria’s intelligence chief in Lebanon with the fully dependable Rustum Ghazali.10 Shortly thereafter, several Syrian intelligence and military officials were forced into retirement and replaced by younger, mostly Alawi officers (interview with Syrian government adviser, Damascus, 15 December 2004; Perthes 2004; Akhbar as-Sharq 28 November 2004). In Lebanon, these changes translated into greater Syrian heavy-handedness. The Syrian regime frustrated daily policymaking by its intense support for Lahoud’s incessant attempts to undermine Hariri; it insisted on including ever more proSyrian allies in Lebanon’s cabinet ( prompting a government reshuffle in April 2003); and it summoned Lebanese elites to its intelligence headquarters in Anjar to toe the line set in Damascus. With its approach to Lebanese politics becoming less consensual, Syria relied more on repressive measures in Lebanon, whether by Lebanese security forces or Syrian intelligence agents. The change was particularly apparent in its response to widening criticisms of Syria’s role in the country. In 2000–2001 predominantly Maronite groupings and community leaders critical of Syria’s role began to organize more effectively and, even more significantly, started to gain support from other leaders and elites, including Junblatt. Even Salim al-Hoss, until then not known as a critic of Syrian policies, called for more “balanced relations” with Syria (Franjieh 2001). Bans on protest meetings, violent clampdowns on student demonstrations, and the arrests of supporters of Aoun and the LF followed in tandem with additional Syrian efforts to reinforce Lahoud in the daily bickering with his rivals. Apparently hoping to let the steam out of the growing opposition, the Syrian regime carried out limited “redeployments” and a reduction of its troop presence on several occasions, starting in June 2001. Yet Lebanese disenchantment with Syria’s policies continued, and in 2003 gained support from the Bush administration, which, for reasons related to its increasingly belligerent approach to Iraq, was embarking on its own collision course with Damascus. In response, the Syrian regime dug in its heels. Bahjat Sulayman, a senior Syrian 10. In October 2005 Kana’an was found dead in his apartment in Damascus, an alleged suicide.

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security chief close to Bashar, warned in an unusual op-ed in a Lebanese newspaper (AS 15 May 2003) against impending chaos if further pressure forced Syria to withdraw, noting that Syria served Lebanon by controlling the Palestinians in the country and by preserving a balance of power between Lebanese factions formerly at war. His analysis was widely interpreted as a thinly veiled threat to unleash violence if Syria’s position continued to be challenged. The Syrian leadership increasingly turned a cold shoulder to the fragmented Lebanese elites who had once been instrumental in sustaining its supremacy.

Syria On the Way Out Under the guise of rationalizing the Lebanese-Syrian relationship, Lahoud in effect was seeking to substitute a direct link between his office and the Syrian presidency for the patchwork of individual connections that had emerged over time. Bashar’s own strategies for withstanding domestic challenges matched and encouraged this approach. Yet the flip side, of course, was that Syrian policies in Lebanon became dangerously dependent on Lahoud. Concurrently, the decision in 2004 to extend Lahoud’s mandate—in contravention of the constitution and in defiance of strong U.S. and French opposition—seems to have been perceived by the Syrian president as essential to consolidate his position in Lebanon and, by implication, at home (interview with Syrian government adviser, Damascus, 3 February 2005). On 26 August of that year Hariri was reportedly summoned to Damascus to be notified of the decision to extend Lahoud’s mandate while demanding his support (New York Times 20 March 2005; Fitzgerald 2005). In a lastminute attempt to thwart Syria’s plans, the UN Security Council, guided by the United States and France, on 2 September passed Resolution 1559, which called on “all remaining foreign forces to withdraw from Lebanon”—a clear reference to Syria—and insisted that Lebanon’s presidential elections be free and fair. One day later, and despite these mounting pressures, a combination of Syrian threats and inducements pushed a two-thirds majority of Lebanese MPs to endorse the required amendment of the constitution. Though still not speaking publicly of any possible misgivings about the Syrian leadership’s behavior, Hariri declined under these conditions to form a new government. The next step was the formation of a cabinet in Beirut led by ‘Umar Karameh and composed essentially of little-known politicians closely allied with Syria and with Lahoud, to the detriment of Hariri and Junblatt loyalists. While a broadening range of politicians and activists, with the notable exception of influential Shi’ite leaders, were working on an unprecedented and coordinated effort to withstand Syria’s intrusion, a bomb struck the car of Marwan Hamadeh on 1 October. The blast seriously wounded Junblatt’s closest associate and former minister and killed his

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bodyguard. Junblatt and indeed much of Lebanon’s political spectrum laid the blame directly on Damascus. On 14 February 2005 Hariri was assassinated while driving through central Beirut. More than twenty others were also killed instantly in the huge blast, and former minister Basil Fuleihan succumbed to his injuries two months later. Again, accusing fingers were pointed at Damascus despite Syria’s denials that it was behind the attack. Regardless of whether Syria was actually involved in Hariri’s assassination, the outpouring of anger among ordinary Lebanese and political leaders alike, in addition to strong condemnations from abroad, triggered a series of dramatic events culminating in the withdrawal of Syria’s troops and the dismantling of its security and intelligence headquarters in Anjar and its branch in Beirut. Mass protests in central Beirut, particularly on 14 March, expressed years of pent-up anger over Syria’s meddling, yet pro-Syrian parties and their supporters, including Hizbullah, staged counterprotests, peaking on 8 March. Opposition protests caused Prime Minister Karameh to hand in his resignation on 28 February. By the end of March a hastily established UN fact-finding mission into the assassination of Hariri had issued a damning (and, as some argued, prejudiced) report wherein Syria was treated as the prime suspect (Fitzgerald 2005).11 Amid this barrage of condemnation and mounting pressures to withdraw, the last Syrian troops left Lebanon on 26 April. Although far from terminating Syria’s influence in Lebanon, the pullout ended a twenty-nine-year military presence in the country and marked a fundamental shift in the post-Ta’if political settlement. The political settlement following the Ta’if Accord in 1989 set in motion a process that significantly reduced the anarchy, random violence, assassinations, bombings, and kidnappings that were so common in the 1980s. Yet the political settlement failed to put in place a viable solution to the country’s internal divisions and facilitated continuous meddling in Lebanese affairs by Syria. When, on top of this, economic growth ground to a halt in the mid-1990s and everyday existence became for many unbearable because of material deprivation and poverty, large segments of the population turned their backs on the political elites and their endless quarrels. Until 2005 very little fundamentally changed in this respect, as the political process remained largely immobilized. One of the major characteristics and indeed flaws of the political settlement was that it converted

11. Though initially also accusing Syria, the Special Tribunal for Lebanon, formally established in May 2007 to bring the assassins of Hariri and others to justice, eventually shifted its attention to Hizbullah. In June 2011 it issued arrest warrants for four Hizbullah operatives whom it accused of being behind the bomb attack. In a heavily redacted indictment made public in August that year, Syria’s alleged culpability was no longer mentioned.

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the political and military stalemate of the late 1980s into a new arrangement for public decision making that was similarly characterized by gridlock and fragmentation of power. As a result, the political process had great difficulty in generating authoritative decisions in public affairs. Five interrelated features of the political settlement stood out in shaping the process of decision making in the Second Republic: (1) an extreme dispersal of power and associated quasi-permanent gridlock in the decision-making process; (2) the predominance of the troika and the politics of muhasasa; (3) continuous attempts to circumvent the built-in stalemates of the political arrangement laid out in the Ta’if Accord; (4) extremely weak popular support for political elites, exposing them to confessionalist strategies and narrow, local agendas; and (5) the overriding role of the Syrian leadership’s interests in Lebanon, its manipulation of the country’s differences, and its growing resort to authoritarian interference. Although the Second Republic built on similarly cumbersome politics as that associated with the National Pact prior to Ta’if, these five features combined in a political settlement that was much more diffuse, lacking in hierarchy, and even less capable of addressing the country’s differences than ever before. It was within these broad outlines that efforts were made to build new public institutions and to reform existing institutions in postwar Lebanon.

Chapter 5

The Politics of State-Building and Corruption

At the end of sixteen years of protracted warfare, successive Lebanese governments insisted that the country needed a massive reconstruction program. The private sector was to play a leading role in this effort. Yet it was equally acknowledged that high levels of efficiency, transparency, and accountability were required of public institutions in order to build a revitalized and thriving economy based on private enterprise. Cabinets duly paid tribute to building sound public institutions and implementing far-reaching administrative reforms. Very little was actually achieved in this respect. Why did Lebanon’s political elites fail to produce sound and effective institutions that could have withstood endemic corruption? I address that question by putting their efforts in the context of the country’s postwar political settlement.

Muzzling the State’s Watchdogs The inability of the state’s watchdogs—particularly the CIB and CA—to guard the bureaucratic qualities of state institutions strongly correlates with unremitting political interference. At the start of the 1990s, the CIB and the CA suffered from two main predicaments. First, as a result of war-induced emigration and the failure of the CSB to hold entrance examinations for new public servants, severe personnel shortages in the CIB and the CA had virtually put a halt to their operations. Second, politicians pressured both agencies to refrain from taking disciplinary actions against public servants or from revealing administrative irregularities.

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Since the early 1970s the presidents of the CIB and the CA and their senior staff no longer enjoyed immunity from dismissal by the president of the republic and, under the new stipulations agreed to in Ta’if, the Council of Ministers.1 The state’s watchdogs made an uneasy start to the postwar era and seemed ill equipped to oversee the state’s mounting responsibilities and operations in the 1990s. Following the Ta’if Accord no adequate steps were taken to restore the capacity and independence of the CIB and the CA. By 1998 the CIB still employed only 90 inspectors to monitor the entire civil administration, a colossal task requiring, according to estimates by OMSAR, at least 300 to 350 inspectors (Ingels 1998–99, 22). In 2005 the CIB still had a vacancy rate of 32 percent (CIB 2006). The CA suffered similar personnel shortages (AN 10 June 1993; interview with Samir Shankir, adviser at OMSAR, Beirut, 6 May 1999). Continuing vacancies were mainly the result of the inability of the troikists to agree on candidates. Continual bickering over public sector appointments also affected the watchdogs’ most senior positions. Because of frequent disagreements among the troikists, the CIB’s presidency remained vacant for long periods of time, at one point up to sixteen months, leaving the agency’s general operations in limbo. A similar fate befell the CA. For instance, in May 1995 the troikists finally agreed on a compromise candidate, ‘Afif Muqaddam, to lead the CA after the position had been vacant for over a year (AN 23 May 1996; Ingels 1998–99, 227–29). Delays like these caused such serious backlogs that many transactions undertaken by state institutions and ministries under the CA’s jurisdiction failed to be subjected to any auditing at all. Moreover, when the troikists did finally agree on a candidate, it often was a civil servant who was unlikely to pose a challenge to any of them (interview with senior CA official, Beirut, 27 May 1999). Similar mechanisms characterized the appointment of many of the CIB’s senior inspectors, causing chronic vacancies and eventually prompting the appointment of compromise candidates with little intention of taking their vocation seriously. Appropriate qualifications to carry out the job were another casualty of the heavily politicized pork-barrel practices of the troika. For instance, the World Bank (2005b, 59) found that none of the CA’s senior staff had completed certified training in auditing practices, and most were found to be ignorant of common auditing techniques. As the state’s inspectors and auditors could limit the troikists’ maneuverings in the public administration, political allegiance clearly took precedence over professional merit. The lack of qualified staff seriously hampered the two agencies’ activities. Thus the number of disciplinary actions taken by the CIB against individual public servants, a measure falling well within its mandate, remained negligible (CIB 1998, 42; IIM November 2002). As a result of its inability to cope with its workload, the 1. President Sulayman Franjieh lifted this immunity in 1972 (Decree 3169, 29 April 1972).

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CA concentrated on pre-audits at the expense of more significant but laborious post-audits. This tendency earned the CA a reputation of being overly legalistic and out of touch with the state’s responsibilities. As Fouad Siniora, then minister of state for finance, put it, the CA is “obsessed with form and has no eye for substance” (AN 18 January 1995).2 Beyond deleterious recruitment policies and unfilled vacancies, the political settlement had other far-reaching consequences that undermined the state watchdogs’ independence. With the troikists at one another’s throats, the Council of Ministers gridlocked, and Parliament increasingly marginalized, even a glimmer of independent activity at the CIB and the CA was quickly perceived as a threat to political elites. For the same reason the two watchdog agencies were at times singled out by the troikists and other political elites in ferocious attacks against their opponents. Thus, during the cabinet of Salim al-Hoss (1998–2000), President Lahoud was widely accused of prompting the CIB and CA to pursue and discredit Hariri and his allies with allegations of corruption in order to forestall their return to power. By the same token, heavy political pressure on the state watchdogs to halt investigations or suppress their findings became commonplace. Inspectors complained about political interference in their work, mainly by the troikists, causing hundreds of incriminating dossiers to be marked en attendant (to be processed) for years (interview with senior inspector, Beirut, 25 May 1999). Few of these dossiers were ever published, let alone featured as evidence in the country’s courts. Delays in the release of inspection and auditing reports appear to have been as much the result of active political pressures as of the agencies’ general paralysis. In the case of the CA, political pressures to suppress or delay the publication of certain reports were equally common (interview with Samir Shankir, 6 May 1999). In 1993 Hussein Hamdan, then the agency’s president, was even forced to retract a report publicly because an unnamed minister had disliked its contents (Ingels 1998–99, 243; AN 1 December 1994). In July 1997 Hariri reportedly summoned the president of the CIB to delay releasing an annual report that contained data the prime minister deemed perilous to the reconstruction effort (AA 7 July 1997; AN 22 July 1997). Subsequently, the ways in which the state watchdogs were muzzled became more subtle, but with the same effect: curtailing testimony about corruption and fraud in the state administration at large. A particularly contentious report released by the CIB in 2002, which detailed bribery and wasteful practices throughout the state administration, prompted so much resistance that Hariri

2. Siniora argued that given its focus on pre-audits, reactivating the CA would be futile as the latter was “obsessed with form and ha[d] no eye for substance” (AN 18 January 1995).

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in July 2003 formed a special ministerial committee to “find solutions to the problems raised” in the report (DS 9 July 2003). Predictably, the committee concluded three months later that the CIB report’s accusations had been unfounded and deemed them unconstructive, a clear signal to the CIB inspectors to retract their findings and restrain their investigative ambitions (AN 4 September 2003). The threat of dismissal or reprimand formed a persistent backdrop to inspectors’ and auditors’ failure to stand up against such practices. In an attempt to appease continuous complaints about muzzling, an initiative in March 1996 restored immunity to the presidents of the CIB, the CA, and the CSB. It was decreed that the occupants of these positions could no longer be removed except by court order. The move did little, however, to boost the watchdogs’ independence. Senior inspectors and auditors, on whom the groundwork for incriminating investigations depended, remained vulnerable to political pressure and risked losing their jobs or being suspended or transferred to unattractive positions (interview with CIB inspector, Beirut, 12 October 2006). Under these debilitating circumstances, both the CIB and the CA succumbed to the stalemated politics, the fiercely contested prerogatives claimed by the troikists, and extreme elite insecurities associated with the post-Ta’if political settlement. Lamenting this development for the CIB, one long-serving inspector even concluded that this agency had become complicit “in the categorical denial of administrative irregularities and corruption in the state’s institutions at large” (interview, 25 May 1999). Naturally, the erosion of the independence and capabilities of the state’s two main watchdogs had a profoundly negative effect on Lebanon’s public administration. A large number of ministries and public agencies now lacked essential checks and controls. Yet as will become clear, when it came to individual institutions, the postwar political settlement had much more in store that would undermine, weaken, or circumvent the CIB’s and CA’s few remaining capabilities.

Unhealthy Politics The failure to put in place bureaucratic organizations in the health sector epitomized the constant and largely unresolved conflicts of competence and associated stalemate typical of the political settlement. Interested parties who opposed institutional reforms aligned themselves with key players entrenched in the political process. On top of the paralyzing influence of troika politics and political gridlock, external controls on the MoH’s relations with private sector providers of health care and pharmaceuticals were tainted by institutional chaos at the MoH and by particularly aggressive political interference in the CIB’s work.

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Subsidized Health Care If reform of the public health care system was a mere technical or managerial affair, as the World Bank (1994 and 2000) portrayed it, then the MoH simply had to choose from a fairly limited set of options. In the short term it could have reduced the number of contracted hospitals to enable public servants to control these hospitals more effectively. In the medium and long term, a complete overhaul of the system could have been considered. The state could have built public hospitals with the capacity to serve all those eligible for free or subsidized health care. Alternatively, given the limited resources available, the state could have moved toward full privatization of the health care sector with fixed quotas and price tags for public beds. Yet the strong interests and effective veto powers of interested parties meant that no such measures were really in the cards. Many politicians, as we have seen, owned or held a personal stake in the very hospitals that benefited from the MoH’s improvised arrangement to provide the public with free and heavily subsidized health care. Two leading politicians had a particular interest in the status quo, in which the state set no limits on financing treatment in private hospitals. Prime Minister Hariri does not appear to have had such interests. Yet any reforms that Hariri may have had in mind were nipped in the bud as long as his rivals would not allow restructuring of the state’s relations with the private hospitals. The real options for the MoH were reduced simply to safeguarding funds to pay the bills submitted by the private hospitals. Any step that threatened this status quo had little hope of success. The first serious attempt by the minister of health, Sulayman Franjieh, in 1997 to reduce the number of contracted hospitals and improve the ministry’s control over the sector was almost immediately reversed owing to pressures from Berri and Hrawi and their allies (OJ 6 December 1997). Institutional reforms never seriously commenced. Instead, the political process was consumed by quarrels over the distribution of the spoils generated by institutional chaos at the MoH. Hariri nonetheless tried to challenge his opponents’ blockade of institutional reforms, especially when, after 1997, hospital bills soared far beyond the state’s fiscal means. Hariri’s ill-fated efforts to curb these expenses illustrate the power held by his rivals. Formal cuts in the budget allocations for the MoH were out of the question, for this would have exposed Hariri to retaliation from his two rivals in the troika, such as budget cuts on institutions under the prime minister’s control. Hariri thus instructed the MoF, led by his ally Fouad Siniora, to delay issuing treasury bills earmarked for financing expenditures by the MoH (OJ 30 April 1998). The maneuver was ill advised, as it merely turned a potential ally, Franjieh, and indeed the public at large, against Hariri. The debate over much-needed

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reforms of public health care, which was stalled within the troika, thus became overshadowed by a conflict over the MoH’s cash flow problem. The gridlock in the decision-making process had found a new casualty. Perhaps even more disastrous was the failure of the state watchdog agencies to investigate the MoH’s dealings with private hospitals and verify their compliance with the terms of their contracts. To some extent this failure was due to opaque arrangements in the ministry itself. Among other problems, some hospitals were never reported to the CIB or the CA as having a relationship with the ministry. Calls by the CIB to state clearly which hospitals had been contracted with and under what terms were largely ignored (OJ 13 November 1998). Yet the inability of the CIB and the CA to impose external controls also related to a general malfunctioning of these agencies. Paralyzed by political interference and crippled by a high vacancy rate for medical inspectors (CIB 1998, 13), the CIB was not up to the task of inspecting the chaotic transactions between the MoH and 140 private hospitals and clinics. Wittingly or unwittingly, the troikists had paralyzed yet another fundamental trait of bureaucratic organization. Time after time, attempts to put in place effective institutions in the health sector were frustrated by the political settlement. All sorts of temporary arrangements resulted, but few of them met the criteria of basic bureaucratic organization. When they did, such initiatives were diluted or deferred as the political settlement interfered with decision making. Pressured by a World Bank offering loans in an increasingly cash-starved environment, the MoH made clear that institutional bedlam was not to be blamed on a lack of initiative. In October 1998 the ministry once more presented a plan to simplify and regulate its relations with the private hospitals. It introduced a system whereby bills for health treatments would no longer be reimbursed but would rather be paid in advance according to a fixed quota for each hospital. At the same time, Franjieh announced that contracts would not be renewed with almost one-third of private hospitals (Ammar 2003, 99). Yet again the plans ran up against gridlock. Several cabinet members made it clear that they expected Franjieh to present draft legislation for his proposals and threatened to withhold their approval if the proposals were not watered down (interview with senior MoH official, 13 October 2006). Members of the parliamentary Committee on Health Care and Social Affairs similarly made it clear that they would fiercely resist the suggested changes; their resistance would likely find support from Speaker of Parliament Berri (interview with senior MoH official, 13 October 2006). Consequently, the fixed quota system never saw the light of day, and the MoH was forced to renew all existing contracts with private hospitals and clinics, notwithstanding serious misgivings about their quality and integrity. Walid Ammar, the MoH’s director-general, admitted defeat, saying, “Some people—a few hospital owners, doctors and politicians—abuse the current system

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and, of course, they will resist any changes” (OJ 14 October 1998). Meanwhile, the MoH’s 1994 reform paper continued to gather dust. Another and slightly more successful attempt to streamline the state’s relations with private hospitals started in 2001. This time Franjieh ordered comprehensive surveys into the state of private health care provision in Lebanon, which he proclaimed would form the basis of a stringently applied accreditation system (Ammar, Wakim, and Hajj 2007, 142–44). Only when hospitals and clinics met a set of professional and safety criteria would they be considered eligible for contracts with the MoH. Meanwhile, the ministry established a Committee for Evaluation, Classification, and Accreditation of Hospitals, mandated to perform key assessments. Initially, as would be expected, resistance was fierce. In the first survey, held in September 2001, only 47 out of 178 hospitals received a score that made them eligible for accreditation (Ammar, Wakim, and Hajj 2007, 142–42). Ammar and some of his colleagues at the MoH reported that “during the survey, a number of hospitals were declared closed for major renovations or declined to participate,” with the result that the survey covered only 128 hospitals. Moreover, they noted an “aggressive religious- and politically-mediated campaign against the program carried out by some disadvantaged hospitals which seriously challenged the political commitment to accreditation” (Ammar, Wakim, and Hajj 2007, 147). The final survey was completed in October 2004. Out of 144 hospitals included, 85 eventually received accreditation. This number, much larger than before, may have muted some of the loudest voices of protest. Yet several wellconnected hospital owners still managed to slow down the pace of reform as the mandatory aspect of accreditation was now formally delayed until January 2009. Although the step toward an accreditation system should be viewed cautiously as positive, overall the MoH faced an uphill battle in trying to introduce institutional reforms under the debilitating conditions set by the political settlement. As a result, by 2005 it still was hopelessly ill equipped to negotiate the state’s relationship with private hospitals, oversee compliance with contractual terms and conditions, and scrutinize financial claims.

Pharmaceutical Politics Continuous political standoffs resulted in chaotic relations between the MoH and the private hospitals. Similar infighting caused the state’s regulation of the domestic market for pharmaceutical products to be at best selectively applied or, worse, reduced to a series of resolutions on paper. The National Bureau for Medicines, which was formally attached to the MoH, was particularly incapable of carrying out quality controls and regulating imports and sales of pharmaceutical products in accordance with safety standards. This state of affairs was underpinned by

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fierce conflicts of competence within the troika. Efforts by the MoH to erect an alternative regulatory framework to enforce quality and price controls suffered a similar fate. After protracted negotiations, the troika finally agreed in May 1993 on appointing seventy-two senior, first-grade public servants according to the principle of muhasasa. Among the appointees were several who were to manage the newly established NBM. Chosen as bureau president was Qassim Hamadi, a close ally of Nabih Berri and a former member of Amal’s politburo. Two other board members were close to Hrawi and Hariri. In effect, therefore, and as elsewhere, the bureau was to be managed by a “mini-troika.” With the necessary staff finally in place, the minister of health, Marwan Hamadi (unrelated to Qassim Hamadi but a close associate of Junblatt), declared that the bureau would soon take up its functions, develop a clear regulatory framework, and “put an end to the anarchy” prevailing in the pharmaceuticals market (OJ 9 February 1993). Hariri and Hrawi, however, apparently resented the overall appointments as disproportionately favoring the speaker (OJ 21 May 1993). As a result, both began obstructing Minister Marwan Hamadi’s proposals to draw up bylaws that would specify the NBM’s mandate and responsibilities. Time after time, Hamadi announced that in a couple of months the NBM would commence operations—if only the Council of Ministers would approve its bylaws (OJ 15 July 1994, 26 July and 23 September 1995, 14 February 1996). But the issue never reached the cabinet’s agenda, let alone being put to a vote. Sensing an attempt by his two rivals to undermine his influence, Berri instructed his allies in Parliament to demand an explanation for the lack of action, but to no avail (OJ 1 March 1995). In effect, Berri controlled an institution that could exist only on paper as long as his rivals prevented him from expanding his power into the medicines sector. Marwan Hamadi’s successor, Sulayman Franjieh, did not fare much better. Two months after he assumed office as minister of health in November 1996, Franjieh announced that the NBM would soon take up its role as the government’s watchdog for the pharmaceuticals market, which, he admitted, was free of any coherent government controls (OJ 15 January 1997). He presented his own bill to the Council of Ministers to formalize the bureau’s internal regulations, arguing that it would also lead to a stronger role for the National Laboratory (AS 14 April 1997). Berri’s opponents, however, still opposed any measure to give the bureau the teeth it needed. In fact, pending a clear formulation of its mandate, the bureau had only a board of directors and no significant number of personnel. In December 1997 Franjieh replied to criticisms in Parliament over the paralysis of the bureau by snapping at MPs allied to Hariri and Hrawi that if Parliament had allowed him, he would already have banned most of the medicines available on the Lebanese market (OJ 18 December 1997). Divisions in the troika and their

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debilitating effects on the decision-making process had left the NBM—and with it the MoH’s policy regarding the pharmaceuticals market—in limbo. After five years of inaction, the troika’s wranglings reached a climax in July 1998. Fierce conflicts within the troika focused on the appointment of scores of new senior public servants (OJ 16 July 1998). Determined to include the NBM in an overall deal, Hariri and Hrawi started a campaign to get rid of Berri’s protégé. Only one day before the Council of Ministers was to discuss a new series of appointments, three of the bureau’s board of directors—including Ghanim Zughbi (a Hariri ally) and Elias ‘Azar (a Hrawi ally)—resigned to protest alleged administrative irregularities and corruption involving a key bureau official. The affair triggered a crisis in the troika, with pressures mounting on NBM director Hamadi to resign. Health Minister Franjieh promised to look into the matter. But probably sensing that Hamadi’s dismissal would only cause further delay for the NBM, he also expressed his discontent over the timing of the scandal (OJ 15 and 16 July 1998; DS 27 July 1998). Berri put up stiff resistance and managed to prevent the resignation or dismissal of Hamadi. Thus were his co-troikists deprived of a clear victory. Yet the NBM was now even more paralyzed than ever, leaving Berri to complain to anyone who would listen that the “pharmaceuticals mafia” was hampering his reform plans (AN 7 July 2004). Berri’s accusation contained a grain of truth, for pharmaceuticals importers certainly benefited from the affair, but the real and immediate reason for the institutional bedlam lay elsewhere. It had much more to do with the power games in the notoriously gridlocked political settlement involving the three “presidents,” including Berri, who were all equally eager to prevail, whatever the cost. Interestingly, the opposition to Berri’s control over the NBM continued after Lahoud succeeded Hrawi and Hariri was temporarily sidelined during the Hoss cabinet (December 1998–October 2000). A senior NBM official was arrested in May 1999 on corruption charges, although his political backer in Parliament managed to get him off the hook. Meanwhile, Karam Karam, successor to Franjieh at the MoH, repeated a now familiar theme in complaining about the refusal at cabinet level even to discuss the NBM’s bylaws (AN 21 January 2000). It is very likely that Berri’s two new partners in the troika—Lahoud and Hoss (already portrayed as the weakest partner)—had no appetite for seeing Berri embolden himself at their expense. In response, the NBM’s opponents, above all in the private pharmaceuticals sector, hailed the victory of “free market principles” over market meddling attributed to the NBM (AN 27 January 2004). Yet the real struggle involving the ill-fated NBM had never been over such matters of principle, even if the outcome had such implications; rather, it involved an everlasting turf war that the country’s political settlement could not manage. The inability of the MoH Pharmaceutical Department to impose clear quality and price controls originated in the NBM debacle. With the ministry’s focus

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firmly set on the NBM to cover most if not all of the tasks and responsibilities for such controls, there was no incentive to craft a solid framework of rules and regulations to guide the PD’s activities; temporary improvisation and stopgap measures would do until the NBM became operational. Nor was Berri likely to allow such a permanent framework to emerge, for it would have undermined the rationale for empowering the NBM in the first place. Consequently, Berri for years tried to get the NBM revitalized by adopting the necessary bylaws. Only after April 2003, when Muhammad Jawad Khalifeh, one of Berri’s Amal associates, was appointed minister of health, would the NBM cease to be the subject of political wrangling. It was simply abandoned, as it no longer served the needs of its main political backer. Against this background, hopes rose that efforts to streamline the MoH’s regulatory powers over the pharmaceutical sector would be boosted now that the alternative had reached a dead end (interview with senior MoH official, 13 October 2006). Indeed, the MoH witnessed an increase in activity and initiatives regarding price and quality controls. A sudden and far-reaching institutional overhaul was not to be expected, however, in a climate dominated by vested private interests, collusion with senior public servants, and a hodgepodge of accumulated regulations and administrative habits. Last but not least, such an overhaul was inconsistent with a political settlement that in its final two years proved particularly incapable of generating decisions on virtually anything of importance. Given the drawn-out paralysis regarding the NBM and the improvisations of the MoH, there was little that external control bodies could do. Its hands tied by the troika, the MoH failed to heed occasional calls by the CIB to put in place a clear-cut regulatory framework that could be effectively monitored (OJ 13 November 1998). Furthermore, the CIB’s own institutional flaws undoubtedly helped stop it from playing a more active role. In fact, subsequent developments suggest that political interference in the CIB’s activities was particularly prevalent when it came to the board’s investigations into the pharmaceuticals sector. In the spring of 1999 the CIB finally sent a file containing incriminating information on the pharmaceuticals market and the NBM—based on information it had received from MP Isma’il Sukariya—to the General Financial Prosecutor’s office (OJ 20 May 1999; DS 20 May 1999). Yet the judiciary was never given the chance to assess the submitted evidence, let alone prosecute perpetrators for any administrative wrongdoing: heavy political pressure soon terminated the investigation. Meanwhile, another CIB inspector was working on a bulky report encompassing a solemn assessment of administrative wrongdoing, abuse of power, corruption, and negligence in the MoH’s handling of the pharmaceuticals sector (AN 18 August 2005). The report, dated April 1999, met a similar fate. Political pressures forced the CIB to hush up its contents until more than six years later, when excerpts were leaked to the press. All in all, Lebanon’s political elites had once again made a mockery of the urgent need to control and audit bureaucratic organizations.

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Flying Full Circle: Hariri’s Rescue Plan for Middle East Airlines Lebanon’s national airline is a prime example of how strategies for circumventing the political settlement prevented the building of sound institutions. As we have seen, the state’s increasing participation in MEA by way of the central bank failed to match standard principles of bureaucratic organization. Troubles within the troika and Hariri’s strategies in return were directly responsible for deficient institutional structures that eventually allowed for high levels of corruption. After two years of inertia during which sheer political survival prevailed over such complicated issues as MEA’s ownership, the government of Rachid as-Solh (May–November 1992) agreed with President Elias al-Hrawi to appoint a new board of directors for MEA chaired by ‘Abd al-Hamid Fakhoury. Most of the board members, including Fakhoury, were aviation experts who had been with MEA for a considerable period of time and were widely considered professionals rather than political appointees. Intra—then still a major shareholder in MEA—was represented by two members, one of them its chairman, Lucien Dahdah. The consensus seemed to be that the board should draw up plans to rehabilitate the airline and suggest ways to expand its operations without political interference. A mere two months after the new board had begun preparing plans for the airline’s future, the prevailing optimism began to show cracks. Nabih Berri, still minister of state but about to become speaker of Parliament, started a loud campaign against the board, branding its appointment illegal and politically biased (AN 8 August 1992). Berri, clearly unhappy that he had not been consulted about MEA, seemed to interpret the appointment of its managers as a maneuver by Solh and Hrawi to curtail his rising political influence (interview with ‘Abd alHamid Fakhoury, 2 July 1999). Berri’s anger was particularly directed against one member of MEA’s board, Khattar al-Hadathi, representing Intra, and a nephew of President Hrawi. After several heated debates in the cabinet, the conflict subsided. Yet this early incident showed that Berri was already thinking about the airline as a platform for his power struggles. Meanwhile, the board of MEA submitted a five-year plan to revive the airline, proposing a capital injection of $150 million. In May 1993 Dahdah, who was about to complete his chairmanship with Intra, and major shareholder Air France approved the plan. At the same time, MEA’s rights to fly as the sole Lebanese passenger carrier in and out of Beirut International Airport, which had formally expired in 1989, were renewed until 2012. Thus even though the source of the proposed capital injection remained to be identified, the board felt that the tacit support of the president of the republic allowed MEA to look ahead with some confidence (interview with ‘Abd al-Hamid Fakhoury, 2 July 1999).

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With the advent of Hariri’s first government in November 1992, the board of MEA found its five-year plan held up and finally shelved; a political tug-ofwar had developed within the troika, and control over the airline was a major source of contention. The board’s relations with Intra began to deteriorate sharply when, following the first major troika deal over public appointments in May 1993, Mahfuz Skayni, a close ally of Berri’s, was appointed chairman of Intra and consequently took a seat on the MEA board.3 Hrawi was still represented at Intra by his ally Shawqi Fakhoury, the former minister of transport. In November 1993 Hariri’s onetime financial portfolio manager Riyad Salameh was appointed governor of the central bank. With Salameh’s influence at Intra, the prime minister also gained a foothold in MEA, if only indirectly. Having injected their allies into MEA’s management, it was only a matter of time before the troikists extended their competition to the airline. Hariri fired the opening shots, but the prime minister’s approach was marked by extreme caution. An important development was that in January 1993, Intra had sold the Lebanese cargo carrier Trans Mediterranean Airlines (TMA), one of the assets of the liquidated Bank Al-Mashriq.4 Its buyer was Farid Raphael, who served as minister of finance in the mid-1970s, owned a major share in Banque Libano-Française, and was a known associate of Hariri. From a purely commercial point of view, buying an airline that by law was restricted to cargo flights may have seemed a curious investment.5 But the real commercial value of TMA may well have lain elsewhere. After all, TMA could become a convenient vehicle to press for private participation in MEA, which held a potentially lucrative monopoly on passenger rights. Shortly after assuming office at the end of 1992, Hariri appointed several committees to study a merger between MEA and TMA (Abou-Jaoude 1996). MEA chairman Fakhoury was not necessarily opposed to the idea, but as he suspected the assets of TMA were of limited value, he insisted that such a merger could be considered only on the basis of an expert valuation. At the same time, Fakhoury resented the fact that the TMA issue only seemed to be holding up his five-year plan despite his repeated calls to “give the national airline a well-deserved chance” and his increasingly open criticism of Intra’s failure to consider MEA’s proposals (AS 26 September 1994; CDL 2 March 1995; OJ 30 March 1995). 3. Berri succeeded in controlling Intra further by the appointment of his brother Mahmud as senior adviser to Intra’s chairman. 4. TMA had acquired cargo rights in 1968 for twenty years. It was granted another twenty years in 1992. 5. Technical developments had for some time allowed international airlines with passenger rights to include cargo operations at much lower costs. Moreover, apart from holding cargo rights, there was little of value in the company in terms of either its capital reserves (in fact it was heavily indebted to Bank Al-Mashriq) or its fleet of six aging Boeing-707s, which had been banned from most international airports. TMA faced serious financial difficulties in 1996 (AN 19 May 1996).

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Fakhoury’s request for an impartial evaluation of TMA was essentially turned down (interview with ‘Abd al-Hamid Fakhoury, 2 July 1999). Furthermore, an offer by Air France to lease much-needed aircraft to MEA, reportedly on very favorable terms, was flatly rejected by the government (Reuters 25 November 1994). But to facilitate the merger with TMA, Hariri seems to have concluded that the sitting members of the MEA board had to be removed. Faced with possible countermoves by his political rivals, he realized that this desired change of management could take place only after the board’s mandate expired in September 1995. In his farewell speech, Fakhoury acknowledged the board’s failure to facilitate a long-overdue capital injection and bitterly complained about “political obstacles and vetoes on MEA’s management, which has cast doubts over its work and weakened its institutions” (AN 2 September 1995). That same year MEA was hit by major financial losses. The departure of the board triggered a tug-of-war among the three leaders of the troika, even resulting in several visits to Damascus to ask for arbitration by the Syrian leadership (AN 2 September 1995; Abou-Jaoude 1996). These lengthy negotiations produced a board whose composition reflected the general dominance of the troika in the political settlement. Hrawi kept Khattar al-Hadathi on the board, and Berri remained largely in control via Intra and through another ally. Hariri was only partially successful in his quest to gain the upper hand by getting Khalid Salam, a nephew of MEA’s founder Sa’b Salam, appointed chairman. Salam was not perceived as a close associate of Hariri, but he seemed sympathetic to the prime minister. Youssef Takla, a lawyer for Solidere and protégée of Hariri, was also appointed to the board. Like many other state institutions, MEA became partitioned among the country’s main political leaders. The compromise on new appointments helped to speed up the implementation of rehabilitation plans that had been on hold for three years. In October 1995 a consultancy agency hired by the government recommended increasing MEA’s capital (Abou-Jaoude 1996). In March 1996 the board of MEA issued a general restructuring plan asking for a capital injection of $225 million and calling for a shareholders’ meeting one month later. The political elites who now controlled MEA appear to have at last reached a consensus on how to revive MEA. Berri seems to have felt secure about his grip on MEA and enthusiastically spoke of a bright future for the airline (interview with ‘Abd al-Hamid Fakhoury, 2 July 1999). Hariri, however, had other plans. He staged a carefully designed coup to circumvent the troika and ensure his full control over the airline. When in April 1996 the shareholders’ meeting was postponed—officially because of Israeli military actions in Lebanon—signs appeared of a new rift between Hariri and Berri. If Berri was the main obstacle to Hariri’s plans for MEA via his hold on Intra, it

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followed that Hariri needed to marginalize the role of Intra in MEA. To this end Hariri suggested raising MEA’s capital through the central bank and not Intra (LR Summer 1996 and Winter 1997; CDL 23 May 1996; AS 10 March 1997). The move was a clear example of the prime minister’s efforts to circumvent the debilitating political settlement. Berri, undoubtedly aware of the political consequences of Hariri’s maneuvering, put up fierce resistance and urged Skayni, Intra’s chairman, to boycott the shareholders’ meeting, thereby depriving it of a quorum (Reuters 4 July 1997). Yet this time Berri was politically isolated, since most board members, the Kuwaiti and Qatari shareholders, and even some influential officials at Intra supported the plan. Intra officials argued that its participation in MEA had never been a success and that another scandal or even the bankruptcy of Intra would be fatal to the airline. Hrawi also endorsed the idea of the central bank injecting the needed capital, very likely because he shared Hariri’s eagerness to minimize Berri’s influence on MEA. When Riyad Salameh, the governor of the central bank, also publicly advocated a direct injection of capital to save the airline from bankruptcy, Berri was forced to give in. If there is one conclusion to be drawn from Lebanon’s postwar attempts to build institutions, it is that one state entity after another was drawn into the political quagmire of the troika. The case of MEA clearly illustrates the debilitating results, initially by frustrating the airline’s attempts to capitalize on investment opportunities after the war. Its expansion plans faced serious delays because each troikist tried to secure his own position in the airline, albeit in different ways. MEA was largely paralyzed until a new route was found to inject capital into the airline, but only after Hariri had gained full assurance that his rivals could be excluded. This background makes it clear how the troika caused MEA’s capital injection to come through the central bank. A more conventional route would have been to turn the airline into a state-owned company, build an appropriate institutional structure, and raise capital via treasury bills or a syndicated loan. Strikingly, this route was not chosen, very likely because Hariri calculated that it would have required the approval of Parliament, and thus the involvement of his rival Berri. Yet as an important side effect of Hariri’s maneuvers, no clear-cut institutional arrangement sustained the new financial relations between the central bank and MEA. Hence, principles of bureaucratic organization were sacrificed for political aims. Following the deal with the central bank, the political battle over MEA’s final status changed course, but it was far from being won by any of the protagonists. Hariri had loosened Berri’s grip on MEA while gaining widespread sympathy for having come to the airline’s rescue. More praise for Hariri’s strategies resulted when MEA, against all expectations, started to experience a financial recovery

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under the chairmanship of Muhammad al-Hut. In 2003 it managed a net profit of $22 million (up from $87 million in losses in 1997).6 Yet if Hariri’s maneuvering against Berri had been designed to prepare for full control over MEA and a merger with TMA, he had failed. As it now had a direct and massive financial stake in MEA, the central bank was even more likely to insist on a fair valuation of TMA’s assets, exactly as Fakhoury had done earlier (interview with a senior official at MEA, 24 January 1999). Such a valuation would have damaged any merger, because TMA’s six years of operations had resulted in annual losses (AS 2 October 1998; DS 27 January 2001). Interestingly, the possibility of a merger between MEA and TMA was never raised again. TMA was reported to have filed a request in 2001 to operate its own passenger service from Beirut; it was not approved (DS 10 March 2001). In 2008 TMA was sold for one dollar to a businessman prepared to settle its debts (DS 12 December 2008). Furthermore, Berri may have lost the ability to determine MEA’s future status, but he could still slow down or even thwart any move toward privatization by using his strong position in the airline’s trade union (interview with Marwan Iskandar, Lebanese economist and business consultant, Beirut, 17 November 2006).7 As for Lahoud, the new troikist since 1998, his hostility toward privatization generally and his tendency to use every opportunity to thwart Hariri’s plans did not bode well for those still hoping for MEA’s privatization. Perhaps for these reasons no serious attempt was made to put MEA up for privatization. The International Finance Corporation, the private sector branch of the World Bank, recommended privatization (IFC 2000). Yet the initiative led nowhere and was soon forgotten. Ironically, MEA’s sharply improved financial performance also tempered the perceived need for privatization: the airline now became too profitable to sell (Now Lebanon 20 November 2008). In a sense, Hariri’s ambitions were still constrained by the fact that his control over MEA was premised on the airline’s loose integration into the public sector. With all possible alternatives effectively ruled out by the troika, MEA muddled through as a parastatal. MEA was for the moment left in the capable hands of Hut and the central bank. Yet it was still an institutional setup without strong bureaucratic safeguards against political corruption.

Energy and Power: The Politics of the Importers’ Cartel So far we have seen the influence of the Syrian leadership on Lebanese politics– the fifth characteristic of the postwar settlement—mainly occurring indirectly,

6. MEA data at http://www.mea.com.lb/MEA/English/Corporate/HistoryandNetwork.htm. 7. During the 1980s MEA was forced to absorb low-skilled labor in the wake of pressure and intimidation by several militias.

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through Syria’s interference in the internal battles of the troika. The regulation of the oil sector was similarly affected by internal bickering within the troika. Yet Syria’s own economic interests in the oil business increasingly turned Syrian officials into players in their own right, leaving a direct imprint on the ways in which the sector was organized in defiance of bureaucratic principles. In the early 1990s Lebanon’s oil-importing companies were in no hurry to see the tasks and obligations of the private sector and the MIO clearly defined. Some core members of the postwar elite had themselves acquired large stakes in the business and together constituted a cartel that held the market firmly in control. In fact the main players were able to keep decisions about the role of the MIO gridlocked because of their relations with the troika. Hrawi perpetuated this situation through his alliance with Shahé Barsoumian, who served as minister for industry and oil throughout the 1990s. Barsoumian made no serious attempt to design an institutional framework that would clarify the ministry’s role, either as an importer of oil derivatives or as a regulator of a business left to private companies. Why did key politicians oppose an institutional overhaul of the sector? Without taking into consideration the peculiarities of Lebanon’s postwar settlement, one might have expected most private companies to prefer that the government legalize their role as both importers and distributors of oil derivatives by abrogating the legal framework that gave the state a monopoly on such matters. With official recognition of their role as importers, private companies would have operated in a largely unrestricted market. And indeed some private companies did advocate that the role of the state be reduced to that of a regulator on the basis of clear and predictable guidelines and in respect of “Lebanon’s traditional adherence to free trade and liberal values” (OJ 10 November 1999). Yet Lebanon’s political realities made the situation more complex. To begin with, the oil-importing and distribution business was and remains firmly in the hands of only a few companies (World Bank 2004, 21). For politicians and state officials who had a stake in oil-importing companies, the prospect of a regulated market contained dangers. Most important, if a clear institutional framework permitted the MIO to grant import licenses according to technical or universal criteria, the cartel was likely to face serious challenges, for newcomers would at least hypothetically have an equal chance to obtain a market share. Institutional change was therefore likely to threaten the cartel. As a result, few decision makers were in a hurry to alter the messy framework in which the MIO operated. Institutional disarray at the MIO served the interests of the cartel, as its ambiguous mandate could be used as a tool to remove competitors. It is in this light that we should interpret the MIO’s discriminatory ban against two oil companies in the summer of 1997. The incident was also significant in that the MIO issued an oral decision—rather than a decree or a law—to enforce its decision. MIO officials thereby circumvented the Council of Ministers, whose approval would otherwise

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have been required to pass effective legislation. Indeed, council members challenged the cartel’s interests and were keen to undermine their rivals’ control. Hariri was faced with a situation, not unlike his position with regard to the state’s relations with private hospitals, wherein his rival troikists guarded their interests by maintaining the state’s inability to define its role vis-à-vis the private sector. Both Hrawi and Berri could block any suggestion to clarify or change the mandate of the MIO put to a vote in the Council of Ministers. Yet even more than in the health sector, the prime minister seemed determined to break open the cartel that his political rivals had put in place. Hariri typically took all sorts of ingenious avenues to enforce change, and in this case the prime minister embarked on two projects designed to break the cartel and marginalize the role of its protector, the MIO. As Hariri lacked financial control over any of the companies that benefited from the state’s dealings with the oil-importing business, he aimed to allow entrepreneurs other than members of the cartel and their political backers access to the oil market. He seems to have calculated that his rivals could be cornered by manipulating the country’s oil supply routes. In 1993 he encouraged the CDR to commission a feasibility study on the repair and modernization of the two stateowned refineries in Zahrani and Tripoli (CDR-PR May 1994, 52). An earlier study prepared by the U.S. company Bechtel had dismissed this option as too costly (CDL 24 September 1992). Yet Hariri did not seem to be primarily interested in the profitability of refining crude oil. His calculation appears rather to have been that if crude were directed to the refineries in Zahrani and Tripoli, it would alter the main sources and routes of oil supplies as well; this in turn would loosen the grip of the cartel. After all, a significant proportion of the country’s supplies of refined oil derivatives came from Syria’s state refineries in Baniyas and Homs,8 rendering Lebanese oil traders dependent on their relations with Syrian officials. If refining could be relocated to Lebanon, such supplies would become less important or perhaps even redundant. In Hariri’s scenario, crude oil would come from overseas, allowing new importers to enter the market. Hariri’s initiative seems to have been geared toward breaking the oil cartel by bringing other players into the sector. This interpretation of Hariri’s maneuvers is confirmed by a simultaneous attempt by a U.S. oil company to obtain a twenty-year BOT concession for the

8. Official Lebanese-Syrian trade data mostly exclude oil and oil derivatives. Lebanon’s reliance on supplies from Syria, however, is generally believed to be significant. One Lebanese media report estimated that 40 to 50 percent of Lebanon’s oil derivatives were imported from Syria (AS 15 August 2001). Syria’s official bureau of statistics provides scant detail about Syria’s “mineral fuels” exports to Lebanon. Yet for 2009, exports reportedly amounted to 3.8 billion Syrian pounds (or about $76 million), the equivalent of nearly one-fourth of Lebanon’s total oil imports that year (Syrian Arab Republic, Central Bureau of Statistics 2010, trade statistics table 14).

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refineries in Zahrani and Tripoli. Hariri fully backed its plans (AN 17 June 2004).9 The company’s negotiator presented the scheme as a way to replace existing supplies “via pipelines”—that is, from Syria—adding, “The companies that now import oil can then buy it from us” (CDL 14 September 1992). The scheme, in other words, would damage the importers’ cartel, reduce their role to that of local distributors, and allow the refineries to choose their own suppliers. This, Hariri could argue, would be in the spirit of Legislative Decree 79 (1977), which granted only distributive tasks to local companies. Furthermore, a BOT scheme— as opposed to a full-fledged privatization scheme—would effectively neutralize any attempt by Berri or other dominant forces in Parliament to defeat the project, as such schemes did not need parliamentary approval. Hariri’s efforts seriously threatened the market control enjoyed by the oil importers and their political backers. They nervously opposed the idea of rehabilitating Lebanon’s refineries (interview with oil traders in Beirut, May 2000). But more important, Hariri’s initiatives failed to please Syria’s leadership. To them, getting the Lebanese refineries back in business risked losing a loyal customer and cutting back a steady flow of income. Backed by this powerful convergence of interests, Hrawi managed to put off Hariri’s challenge. The president instructed his ally Barsoumian to reject the U.S. company’s overtures and express strong reservations about the rehabilitation of the refineries (AN 26 March 1996).10 Furthermore, Hrawi threw his weight behind strengthening “full cooperation” between Lebanon and Syria regarding oil supplies, culminating in the creation of a LebaneseSyrian Commission for Oil Affairs in January 1997. For now, the prime minister’s challenge to the cartel and its political protectors had been effectively thwarted. Despite the seemingly insurmountable obstacles, Hariri was not discouraged. The prime minister seems to have reasoned that even if he could not do much directly about the cartel’s market control, he should try to marginalize its protector, the MIO. He was unlikely to do so by presenting bills in the Council of Ministers; Hariri’s rivals would simply block such initiatives by evoking the Ta’if rules on collegial decision making. Hence, Hariri presented his second major challenge under the guise of a proposal to separate the portfolios of industry and oil, which were now merged into one ministry under Barsoumian’s leadership First, the prime minister presented Nadim Salim, a Greek Orthodox minister of state, as a candidate to lead a new Ministry of Industry. In this way Hariri capitalized on resentment among the political leaders of the Greek Orthodox 9. Significant in this respect is that reportedly the company’s general manager for the Middle East was the brother-in-law of a key Lebanese politician (Wakim 1998, 258). 10. The Lebanese press also reported that the company’s condition that it gain full control over all imports of crude oil was rejected by “some political authorities” (AS 7 February 1997); in the parlance of the Lebanese media, otherwise not hesitant to name names, this was likely a reference to Syria.

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community over their rather modest participation in the government of national unity. Furthermore, Salim was an MP from Jezzin (south Lebanon) and was known to be on reasonably good terms with Nabih Berri. Hariri apparently calculated that Berri could not deny his ally a ministerial position, even if he would otherwise have opposed Hariri’s moves. Second, some MPs, especially those with ties to either Lebanese industrialists or the trade unions (in which Amal and Hizbullah were heavily represented), had complained for years about the government’s relative neglect of the country’s productive sectors. A specialized ministry to cater to these concerns was therefore hailed as a sign that the government was at long last promoting the country’s ailing industrial sector. Finally, the balance of power that emerged after Hariri had assumed office included a tacit agreement regarding a division of labor between the Syrian leadership and the prime minister. Hariri was effectively given a free hand in all matters related to reconstruction and economic revival, and so it made sense to include the industry portfolio in Hariri’s sphere of influence. On the basis of these various considerations, the prime minister was likely to bet on the approval of the Syrian leadership—and by implication the troika—in revamping the MIO. Initially, Hariri’s strategy met his immediate aim of ending his political isolation vis-à-vis the MIO and its powerful backers. In December 1996 the Council of Ministers approved Hariri’s plan and sent a bill to the Parliamentary Commission for Administrative Affairs and Justice. Debates in the commission subsequently underscored Hariri’s political intentions. Muhammad Fneish, the commission’s chairman and a Hizbullah MP, fired the first shots in what became a frontal attack against the MIO and Barsoumian. Agreeing that the dire straits of the country’s productive sectors warranted the creation of a special Ministry of Industry, Fneish openly wondered whether there was still a need for a minister for oil whose role consisted only of fixing oil prices, protecting a cartel of private importers, and paying the salaries of employees at defunct refineries (OJ 3 February, 9 April and 14 May 1997). He continued by raising the rhetorical question whether discussion of the government bill might also be a good moment to eliminate the Ministry for Oil altogether. In a plenary debate in Parliament, MP Jamil Shammas, a staunch ally of Hariri, echoed Fneish’s reasoning and similarly advocated the abolition of the Ministry for Oil (OJ 22 May 1997). Barsoumian responded furiously, no doubt because he sensed that Hariri had managed to launch an unexpected backdoor assault on his ministry. Fiercely opposing the idea of abolishing it, he lashed out against “some MPs” whom he accused of having no idea about his ministry’s technical operations and its supervisory role in the oil sector (OJ 16 May 1997). He also rejected the plan to create an “artificial ministry” (the Ministry for Industry) as a sinister plot fed by sectarianism. Barsoumian reasoned that if any new ministry had to be created or

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reactivated, it should be the Ministry of Planning.11 In May 1997 the controversy reached a climax in Parliament. When MP Shammas suggested abolishing the Ministry for Oil, Barsoumian burst out in anger, to the point where both politicians were ready to settle their differences in a fistfight (OJ 22 May 1997). In spite of Barsoumian’s ferocious counterattacks, the bill to create the Ministry for Industry was approved by Law 642 (16 June 1997), very likely because the troika had reached prior agreement on the issue. Hariri’s appeal to sectarian sentiments may have paid off. Yet the attempt to eliminate the Oil Ministry faltered, very likely because the Syrian leadership—and Hrawi—disapproved of the prime minister’s designs. But the tumult had shown that Hariri no longer stood alone in his opposition to the cartel and its political guardians. Barsoumian’s position appeared weakened, and he now had to watch his step to avoid giving his opponents an opportunity to challenge his ministry or, indeed, himself.12 After 1998, Syria’s meddling in Lebanon’s energy policies intensified. Earlier attempts to build or improve the institutional framework pertaining to oil and gas had been frustrated primarily by internal wrangling. Now Syria’s direct vetoes became more frequent and definitive. The departure of one political leader from politics had raised some serious questions about his family’s role in the oilimporting sector and, by extension, the role of his Syrian counterparts. Lahoud was not known to hold a stake in the sector; yet his actions had to be carefully watched, as they likely reflected the policies of Bashar al-Assad, who regarded the new Lebanese president as his main asset in Beirut. For his part, Bashar was preoccupied with preventing any challenge to his preeminence in Syria; his approach in Lebanon was dominated by these concerns, as his rivals were believed to have hooked up with Lebanese elites in order to bolster their positions back home. Although it is impossible to say with any certainty, the period 1998–2000 appears to have been marked by Bashar’s attempt to shake up the oil-importing sector in Lebanon to force Lebanese traders and Syrian middlemen to realign themselves with the new regime in Damascus. At the same time, it was clear that the days of Syria’s decentralized approach in Lebanon, involving the keen cooperation of an array of Lebanese elites, were over. Against this background Lebanon’s anticorruption campaign, initially pursued so forcefully by President Lahoud and the Hoss cabinet, targeted the oil sector. Perhaps because Bashar still lacked leverage in 1998 and 1999, the main traders, whether Syrian or Lebanese, were left

11. Barsoumian’s suggestion about reactivating the Ministry of Planning was of course a sneer at Hariri, who had always opposed this idea. 12. It was likely Barsoumian’s precarious position after the adoption of Law 642 that prevented him from again invoking his stated policy to “reclaim” the state’s monopoly on all imports of oil derivatives, which he had announced with so much fervor only a few months earlier.

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untouched. Neither did arrest appear desirable as long as they switched allegiance and preserved the supply routes from Syria’s state-owned refineries. At any rate, it was easier to showcase the real or alleged wrongdoings of former senior officials and some of their confidants at the Ministry for Oil and start prosecuting them for offenses that threatened to expose the main players in the trade. These officials, whether guilty of corruption or not, clearly became scapegoats, an unpleasant example for anyone unwilling to accept Bashar’s eminence. Meanwhile, Lebanon’s new oil minister, Sulayman Traboulsi, was outwardly given free rein to embark on policy reforms that promised to take on the oil traders. In a report issued in January 1999 Traboulsi accused the “cartel of oil importers” of imposing a monopoly in the sector and of charging excessively high prices for fuel (AS 23 January 1999). Calculating that the state treasury was losing $50 million annually in its purchases of fuel oil for EDL alone, the report proposed a Syrian-Lebanese importing company, at least 51 percent owned by the Lebanese state, to get around the oil merchants. As for the state-owned refineries, Traboulsi did not rule out their rehabilitation. Yet he strongly argued against selling them to the private sector. After all, the report stated, privatizing the refineries would incur further costs for the state because “a monopoly of those having capital and financial capabilities” were likely to seize the opportunity to enrich themselves, a reference to those who already had shown an interest in the refineries. Traboulsi’s report, coinciding with legal action taken against Barsoumian, stirred as much enthusiasm among anticorruption campaigners as it caused concern among oil traders. It seemed that the state was now seriously addressing importers’ malpractices and profiteering, even to the extent of evoking the long-forgotten idea of a special agency to supply the state’s own fuel needs. As dramatic as the proposed reforms sounded, however, they were short-lived and hastily abandoned. In fact, very little initiative was witnessed from the Oil Ministry thereafter, to the extent that local media started to lament the absence of any public debate about energy policies despite ever-increasing fuel prices (AS 6 November 2000). Business continued as usual, with the important difference that the main beneficiaries had now adjusted to the demands of new players in Damascus. Probably as a result, those new players no longer seemed interested in a radical institutional overhaul of their neighbor’s energy sector. Upon Hariri’s return and the formation of his fourth government of national unity in October 2000, the oil portfolio, now integrated into the MEWR, was granted to Muhammad ‘Abd al-Hamid Baydun, a senior member of Berri’s Amal Party. Baydun immediately started to explore the possibility of reconstructing the state’s two refineries through a BOT scheme financed entirely by private capital (AM 30 March 2001; AS 5 April and 15 August 2001). The idea was similar to what Hariri had suggested years earlier, yet with the important difference that

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now a Syrian company, yet to be identified, was to be offered the contract (AS 15 August 2001). Very probably the scheme was designed to avert a Syrian veto. Yet it remains unclear exactly why Baydun, and by extension Berri, revived the idea of reconstructing the refineries, even when Baydun used as a rationale a steadier and cheaper supply of fuel oil for EDL’s power plants (AM 30 March 2001). Whatever his underlying motives, Baydun’s proposals hit a wall in Damascus, causing him to protest bitterly against the oil importers’ stranglehold over the Lebanese economy and to blame them for ever-increasing energy prices and regular fuel shortages at EDL (AS 5 April 2001; DS 17 April 2002).13 Nearly a year later, in apparent exasperation, Baydun announced draft legislation to end the state’s formal monopoly on oil imports and to allow for private sector imports with the aim of “creating competition between the companies” (DS 17 April 2002), a reform project as unlikely to materialize as his earlier suggestion to refurbish the refineries. In the spring of 2003 Baydun became the target of largely unspecified corruption allegations, purportedly causing his position to become untenable. More likely, however, Baydun had caused too much irritation in Damascus. He was replaced by ‘Ayub Humayid, another Amal official, in the cabinet reshuffle of April 2003. The institutional arrangement governing Lebanon’s energy sector may have been improvised, nontransparent, and ambiguous; yet as long as it facilitated fuel supplies, there was unlikely to be any effective change, a status quo that was sustained by Syria’s veto power. The ability of the arrangement to sustain fuel supplies was seriously questioned that summer 2003, however, when EDL began to face serious fuel shortages, causing electricity blackouts all over Lebanon amid steep increases in the price of fuel. EDL’s own mismanagement and its chronic financial straits may have been an explanatory factor, yet supply problems no doubt played an equal if not a more significant role. Because of Syrian interests and importers’ alliances with Syrian partners, Lebanon’s energy supplies had come to depend to a large extent on fuel imports from Syria. But official data show that Syria’s own oil production had been in steady decline since 1997 (U.S. Energy Information Administration 2009). As a result, in 2003 Syria consumed as much petroleum as it was able to export, an alarming regression in comparison to earlier years. Syria’s declining oil production did not immediately result in declining exports to Lebanon. As Syria’s own oil production was falling, its relations with Iraq under Saddam Hussein warmed considerably, especially with Bashar’s accession. In direct violation of the UN embargo, Iraq began to export oil to Syria in 2000, partly at heavily discounted prices and partly in exchange for Syrian goods. During this 13. Interestingly, Basil Fuleihan, minister for the economy and trade and a close associate of Hariri’s, echoed Baydun’s accusations vis-à-vis the oil importers in a defense of “consumer rights” (AS 26 May 2001).

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period, between 150,000 and 200,000 barrels of Iraqi crude were delivered to Syria daily (International Crisis Group 2004, 16). Not only were the cash transactions for this elaborate scheme conducted in Beirut (at a Syrian-Lebanese private bank), but also the Lebanese capital became a major destination for Iraqi crude (Meyer and Califano 2006, 166). Refined in Homs and Baniyas, Iraqi supplies were offsetting Syria’s own flagging production. According to most estimates, Syria netted a profit of around $1 billion annually by reexporting Iraqi oil, including to Lebanon (interview with Nabil Sukkar, Syrian economist, Damascus, 4 May 2004; Meyer and Califano 2006, 164). Syria’s lucrative intermediary role lasted until March 2003, when U.S. forces invaded Iraq and overthrew the regime of Saddam Hussein. As a result, Syria’s declining production of crude started to take its toll, prompting a sharp fall in real exports (or reexports) that hit its main market outlet in Lebanon. Against this background, Syria’s opposition to proposals to diversify Lebanon’s energy imports became increasingly untenable. Not wanting to waste an opportunity to lay the problem at Syria’s doorstep, Hariri negotiated an accord with Kuwait to supply EDL with fuel, reportedly on much better terms, for fee-charging middlemen were cut out of the transaction (Blanford 2006, 90). Predictably, with Lahoud and other pro-Syrian politicians firmly positioned to thwart the prime minister’s initiative, the Council of Ministers turned down the deal (Blanford 2006, 90). Media rumors alleged that Syria had been rejecting similar transactions with alternative suppliers, including Qatar (AN 1 November 2003). Such reports, combined with Hariri’s moves, certainly added to the embarrassment of the Syrian leadership and of those who resisted swift measures when large parts of the country were cut off from electricity. An agreement reached on 22 October 2003 was ingenious but showed Syria’s heavy footprint. The government-approved plan announced the immediate rehabilitation of Lebanon’s two refineries by a mixed public-private company, to be established by Lebanese and Syrian partners (AN 4 November 2003). In addition, the scheme envisaged the short-term conversion of EDL’s power plants to natural gas, to be imported from Syria. The first measure effectively gave a green light to new supply routes for crude and oil derivatives from countries other than Syria, with the important caveat that Syrian entrepreneurs were to be included among its beneficiaries. According to Oil Minister ‘Ayub Humayid, EDL’s conversion to gas would be beneficial, as it would profit from Syria’s discounted prices while improving Lebanon’s environmental record (AN 4 November 2003). Nevertheless, as forecasts of Syria’s gas production were at the time widely cast in optimistic terms (Alexander’s Gas & Oil Connections 1 May 2003; IMF 2005), the move seemed more likely designed to reinforce and prolong Lebanon’s reliance on Syrian energy resources and to boost some of the same Lebanese and Syrian traders who had controlled the country’s derivatives market for over a decade (interview

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with Lebanese oil trader in Beirut, 12 October 2006). The government plan appeared innovative, yet it threatened merely to deepen the monopolistic structures characterizing the country’s energy market. Any enthusiasm that the government plan to address Lebanon’s 2003 energy crisis may have prompted was tempered considerably only one year later. With regard to the plan to reconstruct the refineries, very little progress had been made. Lack of finance seems to have been one reason, especially after a World Bank assessment (2004, 30–32) raised serious questions about feasibility. Yet local media reports also suspected that unnamed politicians were colluding with major importers in their opposition to a project that endangered their market control. These reports charged that Lebanon’s energy sector was governed by a “state of beneficiaries” at the expense of consumers and the rule of law (AN 16 June 2004). The plans to convert EDL power plants to Syrian gas also stalled, even causing construction activities on the gas pipeline from Syria to northern Lebanon to be halted in January 2005 (AN 7 January 2005). Explanations varied. Some argued that Syria’s gas reserves had been overestimated and that Syria could not deliver as expected (interview with MEWR official, Beirut, 16 October 2006).14 Others suspected that Syria was capitalizing on the promised gas supplies to pressure Lebanon’s political elites amid mounting demands that Syria withdraw from Lebanon (interview with Marwan Iskandar, 13 March 2005). The urgency of the gas conversion scheme may also have lessened, as the Iraqi interim government had agreed to resupply Syria with crude at discounted prices (AH 20 July 2004; AN 26 November 2004). If Iraqi oil supplies reached a significant volume, Syria would again function as a transit country for Lebanon’s energy needs. Such a scenario would also have cast doubts on the necessity of resuscitating Lebanon’s refineries, as Iraqi crude could more readily be received at the refineries in Homs and Baniyas. Yet whatever the underlying motives and explanations, Lebanon’s energy sector was still in disarray when the Syrian era came to an end in 2005. In a political context of quibbling decision makers and chronic deadlock, energy sector reforms had been taken hostage in a relentless fight between Lebanese elites and entrepreneurs struggling to control a highly lucrative market. Since 1998–2000, the Syrian regime, first prompted and then led by Bashar al-Assad, increasingly imposed its will on Lebanon’s energy policies. Syria’s increasingly dominant role in Lebanon’s political settlement had direct repercussions for the structuring of Lebanon’s energy sector. Real institutional change had been given

14. The World Bank argued that exactly because of Syria’s limited gas reserves, EDL’s conversion to gas would allow for more competition between suppliers (LQU second quarter 2004). Though desirable from the World Bank’s economic point of view, this would have caused the project to lose much of its appeal for Syria.

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little chance to materialize let alone to acquire the traits of bureaucratic organization. The arbitrariness of state policies regarding the oil-importing business and the wide discretionary powers enjoyed by the MIO, later renamed the MEWR, continued unabated. Within this institutional environment, dubious and indeed corrupt deals proliferated with impunity.

The Port Feud In most of the cases of institution building discussed so far, the troika and its politics of muhasasa constituted the main obstacle to bureaucratic development. When other members of the political elite also held strong preferences, the outcome was even more at variance with bureaucratic standards. Under these conditions, extreme dispersal of power and chronic gridlock in the cabinet paralyzed institution building. The debacle of the port of Beirut is a prime example of the persistent inability of the political settlement to generate the authoritative decisions necessary to erect strong institutions. Inviting former militia leaders to take part in Lebanon’s postwar governments of national unity may have made sense in that it helped persuade warring factions to lay down their arms. Yet such former warlords appeared much less willing to give up the economic windfalls from violence and state collapse. Under the government of ‘Umar Karameh (December 1990–May 1992), the state’s refusal to extend the concession to the CEGPB or to grant it some extra years by way of compensation for its war losses was heavily contested by the former chief of the LF militia—turned minister of state without portfolio—Elie Hobeika. He pressed his agenda by appointing a delegate on a hastily created “provisional board” representing the formally dissolved Compagnie in November 1991 (CDL 14 November 1991). This board began to challenge the legality of the concession’s termination and demanded legal arbitration over the issue. Hobeika’s strategy seems to have been designed to take control over the port by claiming its assets, which during the war years had fallen into the hands of his rival, LF leader Samir Gaegea (As-Sunduq al-Watani fi al-Mantiqa as-Sharqiyya n.d.). At first glance, Hobeika’s approach appeared to have some chance of succeeding. With Gaegea gradually being marginalized in the post-Ta’if balance of power ( Picard 1999, 24–6), Hobeika may have calculated that if he could prevent Gaegea from taking up important portfolios in the cabinet, he could also claim to be the rightful heir to the militia’s assets. When other warlords in the cabinet sensed Hobeika’s intentions, the situation became complicated. If the Compagnie (and thus indirectly Hobeika and his supporters) were granted another concession, other former militia leaders would feel that they could demand legalization for the ports they

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themselves controlled. Subsequently, various calls were made to legalize all ports on grounds of “promoting regional development” and “economic decentralization” (LR May 1991; AH 3 June 1993). As a result, the future of the port of Beirut was held hostage to the fate of illegal ports along Lebanon’s two-hundredkilometer coastline, all operated and controlled by militias. Yet allowing the militias to build their fiefdoms around their ports was anathema to Prime Minister Karameh, who, although himself not without a past of militia activity, controlled no such ports. In fact, Karameh had proclaimed the dismantling of the militias as a priority for his government. The Lebanese army, and by implication the Syrian leadership, whose credibility was similarly dependent on countering the militias, would not support such a scenario either (Mansour 1993, 148–52.). As a result, Hobeika’s attempts to extend the private port concession faltered. With so many different interests at stake and with all contenders entrenched in their new positions, all possible alternative schemes for the port of Beirut were vetoed. Sale of the port to the highest bidder in a full-fledged privatization scheme met with fierce resistance. Less resourceful entrepreneurs and their political backers (including former warlords) knew they would stand little chance against certain private contenders, including Hariri, who as an enterprising businessman had made no secret of his aspirations to run such an important strategic asset (interview with senior port official, 27 January 2000). Others resisted a complete state takeover, arguing that the corruption and inefficiencies deemed characteristic of the public sector would lead to paralysis of the port’s activities and constitute a further drain on public finances. Such resistance to new state commitments gained ground after the fiscal crisis of May 1992 and the downfall of the Karameh government (Yashu’i 1995, 72; CDL 23 April and 24 September 1992). With a renewal or extension of the private concession no longer in the cards, conflict over the port began to be waged by different means. First, Minister of Electricity and Water Resources Muhammad Yussif Baydun (an ally of Hoss) and Minister of State for Transport Shawqi Fakhoury (an ally of President Hrawi) each claimed authority over the port (CDL 13 August 1992). Preoccupied with more pressing issues such as restoring law and order in the country, the new government of Hariri simply agreed to disagree when it came to the port’s status. The political deadlock over the issue, it was argued, made a provisional arrangement the only politically feasible move. Thus in March 1993 the port came to be administered by a makeshift agency, the Transitional Commission, not to be confused with Hobeika’s “provisional board,” which had been dissolved. As if to underline that all options were still open, all contenders were granted seats on the TC. The conflict of ministerial supervision was resolved by provisionally granting the newly established Ministry of Transport tutelage over the port. The meaning

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of this conciliatory gesture seemed limited, however, as both the minister of electricity and water resources and the minister of transport were still strongly positioned to leave a mark on the port’s future status, which remained undetermined. Moreover, the new minister of transport was the little-known ‘Umar Misqawi, an MP appointed for Tripoli with no apparent links to any member of the troika. He seems to have been a compromise candidate and was unlikely to have a strong say in the expected controversies over the port. Similarly, the first director-general of the port under the new arrangement was Sa’ad ad-Din al-Mudallal, a low-profile public servant who was approaching the age of retirement. The port of Beirut became the first institution in which the troika applied the practice of muhasasa that was about to impregnate virtually the entire state apparatus. By implication, the port’s management became dependent on power struggles within the troika. Controversies first broke out when Transport Minister Misqawi, trying to consolidate his new position, increasingly leaned toward Hariri and sought to increase control over the port by appointing scores of new employees, including some of his own relatives (AS 3 September 1996). These moves were clearly resented by commission members aligned with other politicians. Indicative of the growing polarization, the troikists failed to agree on a successor when Director-General Mudallal resigned over his lack of authority to reprimand port employees for not showing up at work (CDL 26 August 1993; AN 10 August 1993). His post remained vacant, leaving Antoine Rayyis, a career public servant, provisionally in charge as caretaker chairman of the TC and the port’s highest official. None of the troikists or their allies in the TC was prepared to give an inch. Misqawi returned to the core issue by expressing his view that, given the commission’s administrative problems, it would be better to privatize the port (CDL 1 December 1994). At the same time, Hariri pushed to expand the port by adding a large container terminal, to be built and operated by a private holding company that included investors widely regarded as very close to the prime minister (CDR-PR October 1996, 52; OJ 30 March 1995). Unsurprisingly, both ideas met with fierce resistance. A contract to carry out a feasibility study on the port’s expansion, commissioned by the CDR, was canceled, according to one TC member, for “political reasons” (CDL 16 February 1995). A related problem was that for the additional dock to be built, residents of Karantina, an area bordering the port, would have to be evacuated. Berri’s Amal movement was particularly strong in this area and likely had a hand in the residents’ refusal to cooperate (AN 21 November 1997). For now, privatization was flatly rejected. Hariri’s political rivals were joined in this rejection by a skeptical Hizbullah (which had a considerable number of supporters in the port’s union) and the port’s acting chairman, Rayyis (AN 1

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December 1995; CDL 1 December 1994). Although Hariri and his supporters continued to refer to the need for privatization and private sector–led expansion, their maneuvers to shake up the port’s ambiguous institutional status continued to meet resistance. Subsequently Hariri seems to have abandoned the idea temporarily. Instead he launched a plan to build a large container port in his hometown of Sidon. An expanded and modernized port of Sidon would appear to be in direct competition with the port of Beirut, slightly more than forty kilometers away, although maritime experts at the port of Beirut consulted by the author considered the initiative merely a prestige project at the prime minister’s “fiefdom” with no real consequences (interviews in Beirut, May 2000). It may have been exactly for this reason that the plan was approved by the cabinet without much controversy (CDR-PR July 1998, 18). After more than three years of political wrangling, it became clear that the port of Beirut had been drawn into an enduring political stalemate. Consequently, new political overtures had to be made within the framework of the “temporary” arrangement that had marked the port’s institutional setup since 1993. Any drastic proposals, such as full-fledged privatization, were likely to run into a veto by one of the troikists. Yet the port’s untenable institutional arrangement meant that there always was scope for new conflicts. In the wake of their failure to steer the port of Beirut toward full-fledged privatization, Hariri and Misqawi changed strategy, first by trying to strengthen their influence at the port and to seize control over its finances. The attack was launched from two positions. Misqawi started calling in July 1996 for the dismissal of all TC members and their replacement by “capable” professionals with experience in commerce and port management (AS 30 July 1996). Minister of Finance Fouad Siniora, another close ally of Hariri, opened a second front. As the port was now part of the public sector, he argued, there was no good reason for the TC to keep its revenues in a private bank account (interview with senior port official, Beirut, 7 October 2006). He called on the commission to forward all revenues to the MoF. Clearly, both moves would bolster Hariri’s influence. Yet neither the cabinet ministers nor President Hrawi had any reason to relinquish their sway over the port. All Hariri accomplished was that, much later, in April 1997, his rival troikists agreed to appoint a close ally of Hariri, Muhib Itani, as chairman of the port in a wider deal on senior public service appointments throughout the state administration (interview with senior port official, 7 October 2006). All other members of the “temporary” port commission were sent home. In their place nine new members were appointed, yet still according to the principle of muhasasa, thereby causing the TC to be as heavily politicized as before. If Hariri had hoped his maneuvers would alter the status of the port, his strategy appears to have failed. Soon political controversies again focused on the port’s finances (DS

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25–26 December 1997) and on the alleged favoritism characterizing the hiring of personnel (interview with senior port official, 7 October 2006). In October 1998, only weeks before Hariri’s term in office came to an end, it was announced that an agreement had been reached with the Dubai Port Authority company to refurbish and operate the port’s main container terminal in a bid to expand the port’s capacity dramatically. On behalf of the Lebanese state, Itani had signed a deal granting the DPA a twenty-year furnish-operate-own (FOO) contract, citing the company’s expertise and its willingness to make significant investments to get started. The initiative appeared to be a last-minute attempt to present Hariri’s rivals with a fait accompli that was certain to keep the option of privatization high on the political agenda even in Hariri’s absence. Hariri seems to have calculated that if full-fledged privatization of the port was likely to face continued opposition, partial steps might prepare the ground for such a change in the future. Assuming power in December 1998, the Hoss government, however, had different plans. First, it embarked on a vicious anticorruption campaign targeting a range of Hariri allies, including officials at the port of Beirut. They were stripped of their duties in January 1999 and replaced by allies of Lahoud, the two other troikists, and the new minister of transport, Najib Miqati, a businessman who was well connected to the Syrian regime. Prosecutions of dismissed port officials and their alleged accomplices in the Sar-Mowlem affair consumed much of the government’s attention vis-à-vis the port for the rest of that year. In July 2000 Miqati announced that he had commissioned an international consultant, High-Point Rendel, to prepare a comprehensive study identifying all available options for institutional reform at the port of Beirut. The new port chairman, ‘Isam Bekdash, stated that he had embarked on his own study of the benefits and drawbacks of privatization, emphasizing that the TC and the government were aiming at a “final status” for the port as soon as all options had been carefully considered (Al-Kifah al-‘Arabi 18 September 2000). Yet even if the Hoss government was genuinely aiming for a more secure institutional arrangement for an asset as important as the port, its studies and resolutions failed to translate into clear policy. High-Point Rendel (October 2000) duly listed various options for change, but its report prompted no government decisions. In fact, Lahoud and prominent members of the government seemed more concerned about eradicating another policy legacy of the Hariri government, the FOO contract granted to the DPA. As soon as the DPA entered into its contract, it encountered a range of obstacles. By 2000, a major dispute had unfolded with thirty-two private operators in the port, most connected to or owned by politicians, demanding steep compensation payments for loss of business resulting from the DPA’s operations. Under these conditions, and given the port’s indistinct legal status, the DPA appeared reluctant to bring in the expensive gear, including heavy-duty cranes,

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needed to expand the port’s handling capacity—a commitment that had helped earn it the contract in the first place. The DPA eventually pulled out in mid-2001, leaving the container terminal without equipment and with no management to operate it. Even if the Hoss government had not categorically ruled out the option of the port’s ( partial) privatization, the incident illustrated once again that Lebanon’s politicians were determined to dictate terms that favored their own private interests and those of their business associates. Hariri’s return to government in October 2000 initially failed to bring about any changes. His hands were tied. Bekdash, supported by Lahoud, remained in his position as chairman of the TC, and Miqati retained his post as minister of transport. The port was frequently mentioned in the escalating arguments between Hariri and Lahoud over privatization. But while these plans smoldered in the power standoff between the two leaders, concrete steps to privatize the port failed to emerge. Nor did Hariri manage to prevent the DPA from being overwhelmed by a barrage of demands raised by rival politicians and contractors. Miqati, meanwhile, was working on yet another report assessing “the legal and commercial framework [of the port] that will make it possible for Lebanon to regain its position as a transit point for maritime trade” (AN 12 November 2001). In March 2002 Hassan Qraytem, another Hariri confidant, was appointed chairman of the port’s TC as part of a wider deal among the troikists on public service appointments. The resulting shift in power at the port led to a resumption of Hariri’s efforts to push for privatization. Supported by foreign donors who expected the Lebanese government to deliver on its commitments to privatization, Qraytem declared that he would issue a tender to find a private company capable of operating the port’s container terminal, a step that would “send the port halfway into privatization” (AM 10 June 2002). This time around, however, the contract would be on a build-operate-transfer basis, implying that the terminal would revert to state property after a renewable period of “three to five years” (AM 10 June 2002). Meanwhile, Qraytem purchased cranes worth $27 million, using the port’s own finances (DS 8 and 22 January 2003). It is reasonable to assume that both moves were designed to dilute or circumvent political opposition to privatization and to avoid a repeat of the DPA affair, wherein the DPA had run intolerable financial risks as a result of the port’s politicized climate and its legally insecure status. A call for bids, however, was repeatedly postponed between the initial date of March 2003 and July 2004. Clearly Hariri’s attempt to placate his rivals had failed, and they were using their veto powers to ensure that the tender would suit their interests. There were two main problems. First, affected contractors raised demands for compensation before a conversation about the terms of the tender could even commence. Qraytem had already discussed the issue with several of these contractors in early 2003 but had failed

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to reach agreement. He therefore delegated the matter for the cabinet to decide (DS 13 June 2003). By November it still was unresolved, prompting Elie Zakhour, head of the Beirut-based International Chamber of Shipping, to call on the country’s “top leaders” to reach a political decision swiftly (DS 25 November 2003). Yet at the political level, gridlock reigned, continually delaying a cabinet discussion of demands for compensation. Consequently, although ordinary workers were unlikely to see much of the compensation payments, the contractors and their political backers, including Berri’s Amal Party and Junblatt’s Progressive Socialist Party, recast the problem as an issue of labor rights in order to exert further pressure. On 12 October 2003 workers employed by the port’s contractors staged a one-day strike and threatened to prolong labor action if demands for compensation continued to be ignored (OJ 14 October 2003). A new round of strikes paralyzed the port on 12 January 2004. More than two months later, still with no agreement on compensating the contractors, Bishara al-Asmar, the head of the port’s employees’ union, warned that his members would obstruct any further progress on the tender and oppose privatization plans (DS 30 March 2004). In July 2004 the issue remained unresolved; local contractors stated that they were in the dark as to whether they would be compensated or not (OJ 1 and 10 July 2004). Second, Hariri’s rivals in the cabinet and their associates in the private sector strongly resented the terms proposed by Qraytem. Ironically, the port’s costly acquisition of cranes had rendered the contract even more interesting to them, for the contractor would no longer have to use significant start-up capital to buy such equipment. More Lebanese companies could now hope to gain a foothold in the contracting process. Regardless, these same contenders were still not happy with the requirement that any prospective operator had to secure a performance bond, or bank guarantee, amounting to $5 million (DS 22 October and 5 November 2003). As most Lebanese contractors could not meet this criterion and hence stood little chance of winning the contract, political pressure mounted on Qraytem and Hariri to lower the amount (OJ 29 October 2003; DS 16 September 2003). When no immediate response was forthcoming, accusations were raised that the tender was tailored to wealthy bidders, including a certain foreign company suspected of partnering with a “prominent politician” in Lebanon (DS 5 November 2003). Miqati eventually intervened and arranged for the performance bond to be reduced, thereby raising the number of eligible contractors (DS 22 October and 5 November 2003). Critics of the scheme, however, now shifted their objections to the issue of labor rights and tried to reduce the required amounts further. The tender for the container terminal seems to have been subjected to endless haggling among politically backed contractors, and the now familiar gridlock involving the troika and the cabinet blocked immediate solutions.

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The tender for operating the container terminal was finally issued in July 2004. Foreign companies submitted most of the bids. That same month the port’s TC announced that a U.S.-U.K. joint venture had won the tender and that agreement with the company had been reached on a five-year contract including a profit-sharing formula (CDR-PR July 2005, 124; OJ 21 July 2004). The fairness of the tender was immediately contested by one of the losing short-listed companies; yet Qraytem firmly and publicly rejected these complaints (OJ 9 August 2004). Subsequent developments remain murky. Nevertheless, after seemingly tough negotiations with the TC, the U.S.-U.K. joint venture registered a new consortium in Lebanon. The consortium, in turn, reached an agreement with other companies to establish jointly a separate entity, which eventually started to operate the container terminal in early 2005. The exact reason why this complex formula was chosen after the contract had already been won was never made public. Significantly, however, the newly created entity included unnamed “Lebanese investors” (Qraytem 2005). In other words, Lebanese contractors managed to enter the arrangement after years of pressure on the port to maintain ties to these Lebanese companies or to compensate them for loss of business if they failed to win the contract. Perhaps it is no coincidence that contractors’ compensation claims were no longer raised after the summer of 2004, and the port’s union abruptly stopped rallying around the issue. After a tug-of-war and a political stalemate lasting nearly seven years, an intricate compromise had emerged on the quasi-privatization of a division of the port’s operations. Given the cumbersome process, it is no surprise that the port’s overall status, and the nature of its “transitional” management, were still to be defined. This did not discourage Hariri and his allies in their tireless, enthusiastic campaign to subject the port to privatization. In the final days of Hariri’s last cabinet, Finance Minister Fouad Siniora firmly stated that the state budget for 2005 would include measures to “shut down the avenues of legal waste,” including by privatizing the port (OJ 29 September 2004). Yet nearly fifteen years of bickering had proved that the iron grip of the political settlement consistently prevented such an outcome. Trapped in the logic of the troika and multiple vetoes, the port had been left in a perpetual state of institutional ambiguity. Asked at the end of 2004 about the future status of the port, Qraytem declined to answer, stating that this was up to the government to decide. He added, “From where I stand, I optimize the opportunities of a partnership between the public and private sector; I try to think of the port as a private company belonging to the state” (OJ 27 December 2004).

Quarreling over Quarries Perhaps no controversy captures the institutional paralysis associated with Lebanon’s postwar political settlement better than the one regarding the quarrying

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industry. Attempts to regulate the sector by means of a licensing system based on a comprehensive allocation plan (the master plan) were largely unsuccessful and failed to produce a framework in accordance with the principles of bureaucratic organization. At the root of this failure lies an intricate conflict involving diametrically opposed interests in the political settlement. The resulting impasse in decision making prevented the institutionalization needed to halt the improvisations and ambiguities in state authority associated with common disregard for the environment and, indeed, with the use of public office for private gain. To understand how the political settlement prevented the formation of workable bureaucracies, it is necessary first to recall that key players in the decision-making process held material interests in the industry. These interests can reasonably be expected to have affected their attitudes toward state regulation of quarrying. The steep transportation costs associated with the business determine much of one’s fortunes in the quarrying sector. As shown in the surveys conducted by Dar al-Handasah (1996), most parts of Lebanon witnessed signs of quarrying activity. Yet as construction heavily concentrated on the greater Beirut area (and to a lesser extent other urban areas such as Tripoli and Sidon), those quarries close by, in the Mount Lebanon range, became very lucrative. In contrast, quarries in more remote areas, such as the northeastern mountain range bordering Syria, could hardly compete. From an environmental perspective, the reverse applied. In fact the closer they were to the capital, the more quarries needed to be shut down for environmental reasons. By implication, quarry owners close to the capital would likely oppose or resist state regulation, unless environmental considerations could somehow be overruled. For their part, owners of more remote quarries were likely to be staunch advocates of state regulation that banned quarrying in Mount Lebanon, as such measures would likely enhance their business fortunes despite the higher transportation costs. Complicating matters further, business interests in the quarrying sector were shaped by other factors. Politicians with a stake in the construction sector would have preferred no environmental regulation, which would translate into higher transportation costs. Several politicians and well-connected entrepreneurs set hurdles for any attempt to subject the industry to state regulations informed solely by environmental concerns. Yet this fact alone does not offer an adequate explanation for the institutional chaos characterizing the sector from the early 1990s through 2005. If one set of interests had prevailed, then some sort of state regulation could have emerged, however biased and imperfect in terms of environmental standards. In fact, a coherent institutional framework was consistently thwarted by the debilitating nature of the political settlement. As multiple locations across Lebanon lend themselves to quarrying, any attempt to regulate the sector was bound to cause controversy over the regional

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distribution of resources. Given their generally vulnerable position vis-à-vis their own constituencies—on top of the private interests they held—the post-Ta’if elites were under great pressure to defend the industry and guarantee its survival in the regions they were supposed to represent. Because of the sector’s largely unregulated or even illegal nature, no reliable data exist on the total number of people whose livelihoods depended on quarrying. Estimates by the Lebanese Association of Quarry Operators put the number of direct employees at 1,650, in addition to 2,500 truck drivers and an unknown number of day laborers (AD 1 July 2002). Real numbers are likely to have been much higher, as the association included only its registered members, who all claimed legal permission to carry out their work. The sector’s turnover is unknown too. Yet to judge from data used in the judicial proceedings of Nicolas Fattouch’s 2003 lawsuit demanding compensation for the forced closure of his quarries, total annual proceeds of the quarrying sector must have run into the millions of dollars, if not billions (AS 29 April and 21 October 2006). Obviously, thousands more were dependent on the fate of the quarrying sector. The postTa’if political settlement had granted political elites very little legitimacy of their own, so many MPs and other political elites took a keen interest in state plans and activities for the quarrying sector. Most strikingly, when in 2003 and 2004 the government increasingly clashed with quarry owners over possible compulsory closures, many MPs, including widely respected politicians such as Boutrus Harb (MP for Batroun), rallied behind the industry (DS 7 July 2003). Once changes in government policy appeared imminent, quarry owners and their employees were quick to remind their local representatives and indeed the entire country of the material interests they represented. For example, between 2003 and 2004, scores of sit-ins, demonstrations, and road blockades were held to protest newly announced measures against quarrying outside a designated zone in the northeast of the country. These protests became especially effective when the Lebanese Contractors’ Association joined in. In February 2004 the Contractors’ Association threatened to suspend all construction activity in the country if the government did not amend the price of building contracts to reflect increases in the price of quarried materials, price hikes the association blamed on government restrictions on quarrying (DS 11 February 2004). MPs and other political elites representing regions with significant quarrying activity (see table 5.1) were especially responsive to the sector’s local interests and receptive to its dislike for government restrictions. In this context, the economic considerations that had turned Mount Lebanon into the country’s biggest quarrying pit gained sectarian relevance as the areas involved ( particularly ‘Aley, Kisirwan, and Jbayl) were predominantly Christian-Maronite. Bereft of political legitimacy and suffering from a sense of marginalization, Maronite MPs and leaders regarded the fortunes of the

TABLE 5.1. Density of quarries (number per 1,000 hectares) throughout Lebanon Density of quarries ( per 1,000 hectares)

Provinces

Districts

Number of quarries

Biqa’

Ba’albak

36

0.15

Rashaya

15

0.28

Western Biqa’

29

0.70

0

0.00

Zahle

58

1.38

Total

138

‘Aley

81

3.03

Ba’abda

20

1.01

Chouf

38

0.80

Jbayl

87

2.11

Kisirwan

82

2.38

Metn

59

2.20

Total

367

Hermel

Mount Lebanon

North Lebanon

South Lebanon

Average: 1.87

‘Akkar

28

0.35

Batroun

59

2.14

Basharra

19

1.18

Kura

14

0.77

Tripoli

21

7.85

Zghorta

13

0.74

Total

154

Jizzin

11

Sidon (Saida)

Nabatiyya

Average: 0.32

Average: 0.95 0.45

3

0.11

Tyrus (Sur)

18

0.45

Total

32

Average: 0.35

Bint Jbayl

6

0.22

Hasbaya

2

0.09

Marja’yun

1

0.04

Nabatiyya

10

0.33

Total

19

Average: 0.18

Source: Sarraf, Larsen, and Owaygen 2004, 34.

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quarrying business as vital for their own political survival. Maronite elites who held their own private stakes in the sector could successfully present themselves as communal guardians. One MP for Kisirwan, for instance, phrased his position on quarrying in confessional terms as he professed to be safeguarding the financial and social interests of the Maronite community (OJ 18 February 1997; DS 17 January 1998). In presenting such arguments, this MP and others even received the blessing of Maronite patriarch Nasrallah Sfeir, who reportedly dismissed the government’s attempt in 2003 to shut down quarries on environmental grounds as disingenuous (OJ 25 July 2003). The political settlement amplified the stakes involved in any policymaking vis-à-vis the quarrying sector because of elites’ extreme exposure to local interests. Meanwhile, the settlement’s inclusive nature and multiple veto powers plunged the political process into perpetual gridlock. Attempts to formulate a master plan to identify the country’s main quarrying sites began in 1994. Subsequent bargaining took place primarily within the Council of Ministers, the interministerial National Council for Quarries (NCQ), and the Parliamentary Commission for Agriculture and the Environment. From the beginning, however, the process was overshadowed by a battle of competence between the MoE and the Interior Ministry. To a large degree it reflected elites’ resentment over the shares they had been allocated in the government. Following Ta’if, Junblatt had set his hopes on obtaining the MoH but failed. Instead he was granted the newly established MoE, whose tasks and prerogatives were precarious at best. Indeed, a general impression suggests that the ministry’s main purpose was to assign Junblatt a nominal ministerial post and persuade him to take part in a government of national unity (interview with Abdallah Zakhia, 15 June 1999). Disgruntled over what he perceived as his marginalization, Junblatt was determined to turn the ministry, run by his associate Akram Chehayeb, into a force that his rivals could not ignore. A leading role in state regulation of quarrying would be the ministry’s main strategy for establishing its prominence. Yet with similar gusto Michel al-Murr, the interior minister, defended what he viewed as his ministry’s rightful authority vis-à-vis the quarrying sector. Junblatt’s political considerations appear to have outweighed any other concerns or interests he may have held. As he had a personal stake in a large quarry in Siblin, Junblatt may have had his own reservations about state restrictions imposed on environmental grounds. It is impossible to say whether he ultimately would have sacrificed his private interest for his political strategy. By 2002–3, when the state briefly banned quarrying inside Mount Lebanon altogether, the quarry in Siblin had been virtually exhausted. More important perhaps is that Junblatt’s constituency in the Chouf is unlikely to have had a strong interest in the industry, given its low density of quarries in comparison with other parts of Mount Lebanon. Murr,

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by contrast, had a powerful interest in sustaining the quarries in his constituency, the Metn, and on the riverbed of Nahr Ibrahim. The district featured a very high concentration of quarries, some of them privately owned by key politicians from the region. Murr would oppose any coherent state regulation, as this would likely result in the closure of quarries in his constituency. At the same time, however, he would rise in prominence if the Interior Ministry became the regulator of the industry. The upshot was that Murr pushed for a better-enforced licensing system for quarries dominated by his ministry while at the same time resisting the clear demarcation of sites on purely environmental grounds, as this was bound to exclude the Metn area. The two men were at loggerheads for years, with a predictable negative effect on policy. Junblatt’s political strategies failed to pay off, for the MoE remained a neglected and largely powerless player in the Council of Ministers (Shams ad-Din 1999, 78–79). In fact, the ministry became fully dependent on other state institutions, foremost the Interior Ministry, to enforce its decisions regarding the closure of quarries. Any attempt to upgrade the nominal powers of the MoE and give it real authority evoked protests from other ministers who feared that this would upset the fragile balance of power in the government of national unity (Sa’b 1999, 13). At one point Junblatt even expressed his regret that he had let “a socialist” (Chehayeb) take over “a powerless ministry” (AN 10 March 1997). For Chehayeb, the only option left was to count on Junblatt and his bloc in the Council of Ministers and pursue the same strategy as everyone else: veto any proposal that fell short of the master plan and comprehensive zoning. Murr, by contrast, could claim a dominant role for the Interior Ministry by granting licenses at will, or by refusing to carry out closure orders issued by the MoE. To key officials at the Interior Ministry, the institutional chaos pertaining to quarries served as a perfect pretext for augmenting their discretionary powers. Ideally, of course, Murr would have formalized his ministry’s predominance by adding quarries to his portfolio. He clearly sensed an opportunity in this respect after the change of government in December 1998. Murr, who unlike Junblatt and Chehayeb had retained his ministerial post, immediately pressed for the MoE to be abolished and turned into a directorate of the Interior Ministry (DS 29 April 1999). These attempts faltered, however, as the new leadership in Damascus for its own reasons put its weight behind very different plans. If the troika’s interests had converged, perhaps some sort of decision or policy regarding the sector might have evolved. Yet at least until the end of 1998, no such scenario materialized. Hrawi’s alliance with Maronite politicians such as MP Rachid al-Khazin and Foreign Minister Faris Bouiez suggests that the president needed to take into account the interests of quarry owners in Mount Lebanon, including those operating in Kisirwan and Nahr Ibrahim. More generally, Hrawi’s

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weak standing within the Maronite community is likely to have informed his position on quarrying in Mount Lebanon owing to the significant employment and revenues generated by the industry in this primarily Maronite region. Proposals for closing the quarries in the region could expect little support from the president. Prime Minister Hariri held a private stake in at least one major quarry and had a strong interest in the continuing supply of inexpensive quarried material for building projects primarily in Beirut. Accordingly, he was unlikely to press for nationwide zoning. For his part, Berri may have been concerned about the industry’s fortunes, but in his own constituency of the south and Nabatiyyeh, many quarries were controlled by other political elites, including some of his rivals. Perhaps more important, during the 1990s the fate of the quarrying sector failed to attract the speaker’s attention, largely because the issue was not as essential to him as it was to many Maronite politicians. After all, Berri’s constituency registered a very low density of quarries. Furthermore, confronting his co-troikists could have been risky or an embarrassment. Many influential MPs held strong opinions on the issue or owned quarries themselves. In other words, during the 1990s the troikists did not share an interest in the quarrying sector, nor was it to the advantage of any of them to steer toward a full-blown confrontation on the issue. Anyone hoping for some sort of policy on quarrying, or indeed for any advance in the chaos that characterized the state’s relations with the sector, was likely to be stopped by the enduring standoff between the MoE and the Interior Ministry or to be frustrated by strongly held positions in both the cabinet and Parliament. In this context attempts to evade the political settlement became a natural response. Such attempts met with varying degrees of success, yet they never contributed to a sound institutional framework. The MoE attempted on two occasions to force through institutional reforms without solid legislation, which was bound to be shot down. In September 1994 Minister of the Environment Samir Muqbil unilaterally decreed that his ministry had sole authority to issue licenses to quarries outside a designated area in the northeast. Muqbil clearly hoped to circumvent the Council of Ministers, President Hrawi (whose endorsement would have been required for a legislative decree), and Parliament (whose agreement would have been necessary if the policy measure abrogated or changed existing legislation on the issue). Muqbil’s initiative faltered in June 1995, when it was contested in the Council of Ministers on legal grounds and abandoned. By contrast, Decree 8803 of 7 October 2002, which contained renewed measures against unbridled quarrying, did receive cabinet approval. Yet soon arguments were raised that to transcend existing legislation, the measures would have to be cast not in a mere decree but in a law, which of course required Parliament’s approval (AS 3 July 2003). In other words, the strategy appeared to have been designed to get around Parliament’s likely opposition.

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Regardless, Environment Minister Michel Mussa insisted that all licenses granted to quarry owners in the past were now null and void, and he called on the owners to “respect the law” (AD 25 October 2002). In April 2003 the Advisory State Council ruled against this argument, stipulating that the government’s policies had failed to attain the status of law. The ruling effectively threw state policy on quarrying back into limbo while Nicolas Fattouch, the plaintiff, now backed by Parliament, accused both the MoE and the Ministry of Justice of violating court verdicts (DS 3 July 2003; OJ 16 July 2003). Yet another effort to circumvent the bickering and gridlock was the third attempt since 1994 to shield controversial decision making on licensing and zoning issues from obstacles raised in both the Council of Ministers and Parliament, this time by empowering a newly established NCQ. Especially under Environment Minister Chehayeb, the idea clearly was that the NCQ as a quasi-technocratic body would reach decisions based on the “scientific” data supplied by Dar alHandasah and supported by its “technical” consultancies (OJ 14 April 1997; DS 12 July 1997). Yet the NCQ included all ministries and state agencies dealing with the quarrying business. Interested parties simply communicated their positions to the council, which was overloaded with proposals, counterproposals, demands, and even threats. It soon mirrored the gridlock in the cabinet and in Parliament.15 Scientific recommendations would be heard only if they coincided with the interests of the strongest player, or perhaps even all players in the quarry game. Ministers of the environment strove to curtail quarrying by circumventing the gridlock of the political settlement; so did those who wanted licenses in areas widely viewed as unfit for quarrying. Most prominently, Prime Minister Hariri found various avenues for serving his agenda. As he had close allies in the governorate of Mount Lebanon, Hariri took advantage of the institutional chaos to have these allies issue makeshift licenses, thereby overruling environmental concerns raised by local residents and the various versions of the master plan, and ignoring MoE calls to halt quarrying in the area. Among quarries licensed in this way were those supplying sand and rock to contractors working at the airport and to a company managed by the brother of a prominent politician for works at several road projects in and around Beirut (AN 31 December 1996; OJ 18 September 1997, 21 January and 31 October 1998). In defense of his actions, one senior official at the governorate remarked that as long as the master plan was still being discussed in the cabinet, quarrying in Mount Lebanon should continue to 15. According to a geology expert who was involved in the NCQ’s deliberations, some quarry owners exerted heavy pressure on the experts of Dar al-Handasah, sometimes with threats of force. This way they hoped to have their quarries included in the master plan (interview, Beirut, 3 April 1999).

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meet the needs of reconstruction (OJ 17 June 1996). The CDR similarly provided a path for Hariri to circumvent the Council of Ministers and Parliament. When in early 1998 local residents and the MoE called for the closure of a quarry in Shnanir (Kisirwan), its owner produced a license given to him by the CDR allowing him to continue quarrying until works at the Beirut-Juniyyah highway were completed. Subsequent arguments in the Council of Ministers failed to result in any action, and requests issued by the MoE to close down the quarry were ignored by the governorate of Mount Lebanon (AN 23 March 1998). In all instances, Hariri’s strategies for bypassing the political settlement exacerbated the disarray in the state’s policies. Finally, Syria’s role left its own mark on the Lebanese approach to quarrying. Its constant interference raised additional hurdles against a more coherent regulatory framework. As noted, several quarries, particularly in the northeast, were reported to involve Syrian investors. Perhaps most prominent were the quarries operated by a certain MP in Dahr al-Baydar. This context may make it clear why earlier versions of the master plan allowed for quarrying in this area despite evidence of a profoundly negative environmental impact. Unsurprisingly, the MP presented himself as a staunch supporter of the master plan, citing environmental reasons for its immediate application (OJ 10 August 1999; AN 3 April 1998; Minbar al-Bi’a February 1998). Syrian meddling may also have been instrumental in his exceptional achievement, between 1995 and 1998, in obtaining licenses with a maturity of up to twenty-five years while most other quarry owners had to be content with a temporary mahal. Evidently other contestants, including MPs and ministers, resented his position, and they made the point publicly that quarrying in Dahr al-Baydar caused as many environmental hazards as anywhere else (AN 13 March and 5 August 1998, AS 17 August 1998). Yet no action was taken against this MP’s expanding quarrying business in the 1990s, suggesting that he enjoyed the protection of powerful circles linked to Damascus. Indeed, Syrian influence was rumored to go as far as dealing in the licenses nominally issued by various Lebanese state agencies and ministries (interview with Joe Faddoul, Beirut, 13 November 2006). Syria’s approach to its neighbor’s quarrying policies underwent a gradual change during the late 1990s and early 2000s, when Bashar al-Assad and his allies tightened their grip on Lebanon. Initially the new Syrian leadership seems to have had no strong interest in the quarrying issue. It is possible, however, that the “old guard” elements associated with Hafiz’s rule managed to maintain their influence while Bashar was preparing for the presidency. In the Hoss cabinet formed in December 1998, the MoE was given to Arthur Nazarian, a little-known Armenian industrialist who simultaneously became minister of tourism. One of his first decisions was to renew several licenses for the quarries of the Syrian-linked MP in

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Dahr al-Baydar (DS 9 December 1998; AS 12 March 1999). Otherwise, Interior Minister Murr appeared to enjoy free rein in anything related to the sector. No or few initiatives emerged from the MoE. This changed drastically, however, when Hariri returned as prime minister in November 2000, five months after Bashar had been sworn in as president. This time one of Berri’s long-serving allies, Amal Party official Michel Mussa, was appointed minister of the environment. Mussa’s bold and far-reaching policies promised to put some significant checks on the quarrying business. Yet his approach was remarkable in that he had managed to obtain the cabinet’s endorsement of legislation to ban virtually all quarrying in Mount Lebanon and shift production to the northeast. Although I believe that Syrian pressures were critical in the policy shift, Berri’s motives were also significant to the MoE’s reinvigorated approach. In a twist of irony resulting from the continuous power play dictated by Lebanon’s political settlement, Berri between 2000 and 2003 found himself in a position very similar to Junblatt’s a few years earlier. He felt that his share in government, by way of minister positions allocated to his associates, was unduly modest, a situation that only worsened when two Amal ministers were rendered inactive owing to corruption allegations. Nor did the MoE prove a strong contender in the battle over prerogatives vis-à-vis the Interior Ministry. In fact, between 1998 and 2000 Murr had unquestionably tilted the balance of power in his own favor, even if he had not succeeded in scrapping the MoE altogether. Berri inherited the gradual marginalization of the MoE by the Interior Ministry, a situation Berri seemed determined to reverse by reinvigorating Mussa’s clout in quarrying. Moreover, given his own limited involvement and the south’s modest profile in the sector, a bold policy on quarrying was unlikely to harm Berri’s private interests or damage constituency support.16 On the contrary, measures against quarrying in the south promised to harm the interests of local rivals who had managed to gain a foothold in the sector.17 Finally, Mussa’s determination to concentrate quarrying in the northeast conveniently matched one major politician’s reported ownership of a quarry in Tufayl, one of the areas explicitly designated by Decree 8803 as suitable for quarrying (AD 25 August 2002). Berri’s preferences may explain Mussa’s agenda, but they do not explain why his ally managed to impose his policy proposals, at least initially. After all, Berri 16. After the May 2000 withdrawal of Israeli forces from the south, environmentalists and several voices in the media expressed concerns that the region might have to swap the occupation for the bulldozers of quarry owners. Several new quarries were indeed opened in the area but not to the extent feared. 17. Mussa’s closure orders issued between the end of 2002 and the spring of 2003 were often directed against quarries in the south and Nabatiyya (OJ 5 December 2002 and 30 June 2003). Several nonAmal MPs from the region openly joined the quarry owners’ protests against Mussa’s policies (DS 12 July 2003).

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was also held hostage to the cabinet’s chronic failure to reach agreement on any issue of significance, just as Junblatt had been in earlier years. The real source of the change is likely to have been Damascus. The lucrative joint ventures in quarrying may well have been viewed as an obstacle to Bashar’s supremacy in Lebanon, and ultimately his consolidation of power. Predictably, President Lahoud, Bashar’s main ally in Lebanon, supported Mussa’s aggressive policies against quarrying from the beginning (DS 4 July 2002). As a result, the fate of Lebanese partners of “old guard” Syrians seemed to be sealed. For the first time, the MoE’s policies posed a real threat to their quarrying interests and, it should be added, those of their Syrian partners. By 2002–3, Mussa set out to strip one MP of his licenses and close down his quarries. The parliamentarian appears to have lost his Syrian protection, very likely because his Syrian friends were no longer in favor in Damascus. Significantly, this MP responded not by criticizing Mussa or Berri but by aggressively singling out President Lahoud. He attacked the president directly and at a very early stage publicly expressed strong objections to the extension of Lahoud’s mandate—a move that already was rumored to enjoy Bashar’s support (DS 16 July 2003). Furthermore, Mussa’s policies on quarrying promised not only to put the biggest owners in Lebanon out of business but also to benefit the Syrian regime directly. To address possible shortfalls in gravel and sand resulting from the closure of quarries, Mussa proposed to import such materials from abroad. When shortages started to hit during the spring of 2003, prompting price increases, it became clear that Syria was to become the main supplier. In July, Public Works and Transport Minister Najib Miqati went to Damascus to discuss with his Syrian counterpart, Makram Obeid, a plan “to fulfill the market’s need of sand and gravel from Syria until the Lebanese government draws a final solution to the issue of quarries” (DS 24 July 2003). As prices of quarried materials continued to rise and the government showed no sign of changing course, criticisms started to mount. More specifically, MPs, quarry owners, and contractors pointed out that government measures had clearly benefited Syria’s commercial interests and those of a select group of middlemen in Lebanon (AN 1 December 2003; DS 11 February 2004). Indeed, even the new environment minister, Faris Bouiez—demoted from his position as minister of foreign affairs after the cabinet reshuffle in April 2003—openly expressed his opposition to imports from Syria, for his ministry had calculated that they were too costly (AM 7 June 2003). In fact, Bouiez, no stranger to defending quarry owners’ interests (OJ 18 February 1997), increasingly took a position against Decree 8803 and the policies he had inherited. Accordingly, he repeatedly aired proposals for a new, comprehensive master plan on quarrying. For now, however, Syrian pressures appeared to hold him back. This resulted in a peculiar situation wherein the minister of the environment publicly disapproved of policies directed against quarrying while others, including

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President Lahoud, vowed to shut down illegal quarries even if that required the use of the Lebanese armed forces (OJ 10 October 2002 and 12 July 2003). An episode following Mussa’s maneuvering against quarries outside the northeast illustrates how Syria’s interests helped sustain policies that otherwise were unlikely to have been contemplated. Syria’s interference clearly seems to have been informed by Bashar’s efforts to outwit his rivals in Syria and their allies in Lebanon. Yet it also revealed the limitations faced by the new Syrian regime in its efforts to influence policies inside Lebanon. In August 2004 Bouiez initiated his own, much more lenient zoning plan for quarrying throughout Lebanon, in direct contravention of Decree 8803. On a different level, measures against a prominent MP with ties to Syria’s “old guard” had persisted, and his calls to renew his quarrying licenses or receive full compensation continued to fall on deaf ears. Yet months of protests and sit-ins by quarry owners and their employees, in addition to strike warnings by the Contractors’ Association (DS 11 February 2004), threatened to paralyze the construction sector. These demonstrations were even attended by representatives of some of Syria’s closest allies in Lebanon, including the Syrian Socialist Nationalist Party and Hizbullah (DS 10 July 2004; OJ 19 August 2003). This gave opponents of strict measures against quarrying, including Hariri, a strong argument for ending the government’s confrontational policies. Yet whatever the underlying motives of the contenders may have been, no clear and sound institutional framework regulating the quarrying sector had emerged by early 2005. When the MPs gathered in Ta’if, they designed a political framework stressing inclusion, “national unity,” and consensus. Each and every party to Lebanon’s conflicts needed to be represented, co-opted, and appeased in a new political arrangement watched over by Syria. In the political settlement that resulted, various elites and Syrian decision makers worked hard to maximize their powers, especially when their own material interests were at stake or when their political vulnerability vis-à-vis their own constituencies risked exposure. In this debilitating context, the decision-making process with regard to quarries failed to reach a conclusion. Pending an authoritative decision on a master plan or regulation, elite complicity in the destruction of Lebanon’s environment continued unabated. After years of fruitless campaigning, environmental activists and sympathetic journalists became exasperated and began to wonder if all politicians endorsed state regulation but the quarries continued to operate, “who then rules Lebanon?” (AN 3 July 1998).18 The answer was certainly not a “state of law and institutions.”

18. “Who rules Lebanon?” (Man yahkum Lubnan?) is an allusion to Eliya Harik’s similarly titled study (1972) of Lebanon’s power elites in the 1960s and early 1970s.

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Hariri and the “Presidents’ Club”: The Politics of Reconstruction The story of the CDR and Solidere is largely the story of Hariri’s remarkable rise to power and his skillful maneuverings in the country’s political settlement. The political strategies that accompanied his growing prominence in the reconstruction process since the early 1990s were largely an extension of his endeavors as an influential businessman in his hometown of Sidon, applied on a much grander scale. More precisely, the postwar political settlement provided conditions under which Hariri could expand his strategies in Sidon to a national level. He would leave a lasting impression on the main institutions established to spearhead the government’s reconstruction program.

A Prelude to “Harirism” Immediately after the Ta’if Accord, a consensus within the governments of Hoss and Karameh pointed to reconstruction and economic recovery as warranting absolute priority. Yet how this was to be done and by what institutions was soon overshadowed by bickering over the distribution of the spoils within the national unity government and the troika. As a result, neither government was successful in producing a workable blueprint for postwar reconstruction, let alone in kick-starting rehabilitation projects. In this context Hariri, then still a businessman-philanthropist, started pressing for reviving the CDR, which had become defunct owing to a lack of funds and political infighting. He made it clear that he would help finance the CDR, for example, by providing funds to prepare a master plan for the BCD and, indeed, an overall plan for the entire country’s infrastructure. He argued that the business-oriented and highly qualified employees of his Oger enterprise would be suited for the purpose. In June 1991 Prime Minister Karameh backed Hariri’s candidate, Fadil Shalaq, to lead the CDR, thereby unwittingly preparing the businessman’s ascendance to national attention. Hariri’s optimism and can-do approach were a stark contrast to the attitude of the political elites. Prime Minister Hoss insisted first on a major administrative overhaul of the CDR to render it more transparent and accountable. At the time his demand seemed overly cautious in view of the pressing need for reconstruction. Similarly, suggestions to revive the Ministry of Planning, scrapped when the CDR was created in 1977, appeared cumbersome, anachronistic, and insensitive to widespread calls for urgency. As the national unity government showed itself increasingly incapable of reaching any decisions, the idea of an institution insulated from the elites’ political quarreling and a largely dysfunctional bureaucracy regained its appeal. The currency crisis of early 1992, and the social unrest it

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triggered, underscored the appearance of government incompetence.19 It provided Hariri with political momentum. After more than two years of muddling through, intra-elite quarrels over the exact meaning of the Ta’if Accord, and associated institutional gridlock, the realization had set in that the country could no longer afford to delay (Yashu’i 1995, 72; CDL 23 April and 24 September 1992). All eyes were on Hariri, who, as a successful and internationally well-connected businessman, evoked confidence and offered a viable alternative to the endless bickering of the Ta’if elites. Sensing the changed atmosphere, Hariri made it clear that he was ready for the premiership. As the Syrian leadership tightened its grip on Lebanon’s political elites, Hariri received a green light to enter national politics and give the economy the boost it needed so desperately. In October 1992 he formed his “government of economic salvation.” Hariri was careful to avoid the pitfalls of the political settlement that had boosted his rapid ascent to power. Crucially, he was aware of his own weaknesses vis-à-vis the various elites in government. After all, he lacked their political resources, such as communal status or authority (za’ama) and the means of violence at the disposal of former warlords. Consequently he refrained from direct conflicts with Lebanon’s more established elites. Hariri appears to have learned some lessons from his experiences during the 1980s. On a national level, Hariri’s overtures in politics then had remained largely unsuccessful. Most noticeable was his botched attempt in 1988 to bankroll the voluntary departure of President ‘Amin Jumayil and to facilitate as his successor a candidate who was to support Hariri’s appointment as prime minister (Bu Habib 1992). Meanwhile, however, the future prime minister was making significant progress in his hometown, where he gained increasing importance in local politics. Hariri conquered Sidon despite the political dominance of established elites, foremost by rising in prominence parallel to those elites rather than by taking a position among—let alone against—them (Bonne 1995). Hariri would later acknowledge his status as a relative outsider by asserting, “I do not belong to the tradition of the presidents’ club” (AW 27 February 1995). In the early 1990s, Hariri’s deliberate distancing of himself from the “presidents’ club” gained new significance, now at a national level. His main rivals were not merely the local zu’ama and political bosses of Sidon but heterogeneous elites who desperately clung to the prerogatives granted to them in the post-Ta’if settlement. Hariri seems to have been acutely aware of the ways in which the country’s

19. The value of the Lebanese pound to the dollar dropped by more than half in a matter of weeks, causing the consumer price index to rise by nearly 70 percent. The resultant decline in real income for most Lebanese triggered the most severe riots Lebanon had witnessed since the early 1970s (Banque Audi Quarterly Economic Report, second quarter 1992).

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elites dominated and obstructed the political process (AN 14 July 1992). Echoing his methods in Sidon, he set out neither to match the Ta’if elites nor to confront them but rather to circumvent whenever possible the effective veto powers that the political settlement had granted them. The CDR and Solidere were to become the prime minister’s main instruments in pursuing this strategy.

Reconstruction Despite the State: The CDR By reviving and revamping the CDR, Hariri got around the cumbersome and divisive politics of the decision-making process. It is in this sense that the CDR constitutes a prime example of the third characteristic of the postwar political settlement: the prevalence of attempts to circumvent the stalemates built into the political arrangement. Syrian support was crucial to thwart challenges from other elites in the troika and the cabinet. This became painfully clear when Syria’s support waned from 1998 onward. Hitherto Hariri had been forced to make some concessions regarding the CDR’s insulation from the practice of muhasasa, but the agency’s lack of bureaucratic structures remained an important precondition for his sway over reconstruction efforts. In the direct aftermath of the monetary and economic downturn of 1992, Hariri faced little effective resistance. The World Bank’s support for the CDR reinforced Hariri’s image as an internationally respected manager who did not waste his time on squabbling over Ta’if or on constitutional stipulations regarding the distribution of power (CDL 13 August and 31 December 1992). As we have seen, Hariri used this period to bolster the CDR by granting it new authority and mounting budget allocations. This is not to say that the Ta’if elites did not resent Hariri’s inroads to power. On the contrary, several ministers and MPs began to view Hariri’s strategies as a plot to do away with their politics of muhasasa. At the same time, the prime minister, and by implication the Sunni community, was perceived as gaining an unreasonably generous slice of the pie. Soon, Ta’if elites began to view the wealthy outsider as a threat. Disgruntled ministers started to criticize the prime minister for his unbridled “authoritarian attitude” in the Council of Ministers (AS 19 February 1993). Other ministers complained that since the revival of the CDR, their own ministries had been reduced to empty shells (Rayes 1997). Similarly, various ministers and MPs argued that the CDR’s wide-ranging prerogatives were justified only in times of war; as the war was now over, the Ministry of Planning needed to be resuscitated (AN 18 October 1994; Rayes 1997; AN 1 December 1998). Members of the opposition and several intellectuals in Beirut echoed this growing resentment. As one observer wrote in reference to the CDR, “Reconstruction should occur within the framework of the state and not by its dismantlement”

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(Corm 1991, 110). Furthermore, proposals to subject the CDR to stringent auditing and supervision stirred debates both within the cabinet and in Parliament. The state watchdogs themselves, such as the CA and the CSB, complained bitterly about being made irrelevant in the government’s reconstruction policies (interviews, Beirut, May 1999; AD 1 February 1995; AA 7 July 1997). At one point the recriminations against the CDR were so fierce that a columnist commented, “If these arguments had taken place during the war, we would have witnessed one of the heaviest rounds of shelling” (Middle East Reporter 4 November 1995). Despite increasing resentment of Hariri’s strategies of sidelining the Ta’if elites and the institutions they controlled, the CDR continued to thrive, at least until 1998. It controlled ever-increasing budgets and expanded its staff while most other state agencies faced a profound lack of resources and high vacancy rates. The main explanation lies in the nature of the political settlement. The proposals of Hariri’s opponents failed to provide a viable alternative to the CDR. Given the political settlement, its inherent gridlock, and its tendencies toward muhasasa, most state institutions and ministries that fell under the control of the Ta’if elites were hopelessly inefficient and had turned into bastions of patronage and professional mediocrity. Many believed that a revived Ministry of Planning would become equally paralyzed by such practices. Hariri and his managers never tired of stressing the debilitating effects of the country’s political divisions and the resultant immobility of the public administration (CDL 23 April 1992). In their view, the “flexibility” of the CDR and its highly qualified staff enabled it to respond to the needs of the private sector. The CDR could be disposed of only after the state administration had been subjected to far-reaching and timeconsuming reforms, for which the country’s political elites did not seem prepared. Many entrepreneurs shared these views, as witnessed by sharp responses on the country’s currency markets to Hariri’s changing fortunes in government. For Hariri’s opponents, such market volatility served as a constant reminder that the prime minister was widely perceived as indispensable to the economic recovery. Time after time, the Ta’if elites seemed to prove Hariri’s justifications for the CDR’s prominence. For example, government attempts in December 1992 to dismiss about five hundred public servants accused of corruption and accepting bribes faltered because of fierce resistance from their political patrons (AN 3 December 1993; Ingels 1998–99, 161–63). Similarly, the creation of a quasiministerial portfolio for administrative reform, OMSAR, in 1995 failed to improve the quality of the public administration. Even if resentment in the troika and the cabinet against the CDR had been sufficiently strong to override the economic imperatives of Hariri’s role in reconstruction policies, the political settlement would have made it hard to introduce an alternative institutional framework to carry out reconstruction. The cabinet’s

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collegial responsibility and the gridlock in the troika discouraged any individual attempt at institutional change, for opponents were likely to veto any proposals that would reshuffle the distribution of power. Furthermore, until 1998 the Syrian leadership was not likely to tolerate a political coup as long as it believed that Hariri’s use of the CDR to deal with issues of reconstruction served its interests. Criticisms were tolerated, but not to the extent of setting in motion the drastic institutional changes each of Hariri’s rivals would have preferred. Yet even before Bashar al-Assad took over the “Lebanon file,” Syria’s support for Hariri—and by implication the political insulation of the CDR—was neither absolute nor unconditional. For example, in 1995 the Syrian leadership gradually became weary of Hariri’s unsolicited initiatives in foreign policy. These Syrian apprehensions had implications for the CDR, as Hariri’s rivals now felt that their bargaining position had improved. Thus Berri protested strongly when in the autumn of 1995 the CDR’s newly appointed board of directors again tilted heavily in favor of Hariri’s allies (Wakim 1998, 118). Meanwhile, the speaker increased pressure on Hariri by encouraging a debate in Parliament on external checks and auditing of the CDR. Berri’s campaign ended when his brother Yassir was appointed a board member of the CDR. Subsequently, Berri also appeared to have considerable sway over CDR projects. Looking back at this period, former CDR chief Fadil Shalaq omitted the word muhasasa but acknowledged that the CDR was no stranger to “different factions [at the CDR board] bargaining a lot” (interview, 13 November 2006). Thus even in its heyday the CDR was vulnerable to muhasasa. Yet until 1998 the political elites’ otherwise unrestrained bargaining over resources and influence did not penetrate the council to the extent of stripping away its insulation from the debilitating politics of the troika. It is for this reason that Shalaq described the agency paradoxically as a “technopolitical organization” (interview, 13 November 2006). Given the strong preferences of Lebanon’s international creditors, and lacking a viable institutional alternative, Syria’s leadership and Hariri’s rivals in the troika and cabinet surrendered to the view that the prime minister was indispensable to the postwar recovery. In return, Hariri gained some latitude in pursuing his policies via the CDR, thereby institutionalizing his power vis-à-vis the “presidents’ club.” As long as this arrangement suited most parties to the political settlement, considerations of bureaucratic organization were far down anyone’s list of priorities. After Lahoud’s election as president and the formation of the Hoss government in 1998, the CDR’s “technopolitical” qualities became the target of a vigorous campaign aimed at undermining Hariri’s prominence. This movement was prompted by Bashar’s gradual rise to power in Damascus and his increasingly aggressive endeavors to undercut his rivals’ ties to major Lebanese politicians. It is no

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surprise that the CDR was to bear the brunt of these efforts. In the words of one long-serving staffer at the CDR, Lahoud and Hoss “viewed us as the enemy, convinced as they were that we were wasting money and giving Hariri a prominence he should be denied” (interview, Beirut, November 2006). A former CDR president soon stood accused of violating tendering procedures. His predecessor was accused of administrative irregularities and corruption. Similar suspicions over wasteful policies and corruption were directed at CDR staff in general. Military officers attached to the presidential palace were sent on repeated surprise visits to the CDR’s offices, where they scrutinized documents, photocopied invoices, and subjected staff to relentless questioning about past projects. Meanwhile, the CDR’s entire board of directors was replaced, and Mahmud Usman, a former CIB public servant viewed as close to Lahoud, was appointed the agency’s new president. Meanwhile, the Hoss government prepared for a drastic overhaul of the CDR’s institutional features which, at least on paper, promised to subject a new entity, into which the CDR was to be merged, to much more stringent controls than the CDR had ever experienced. Legislation adopted to this end (Law 247 of 7 August 2000) reflected years of resentment over Hariri’s use of the CDR’s quasi-autonomous status. Hariri’s landslide victory in the 2000 parliamentary elections turned the cards back in his favor. Capitalizing on Lahoud’s weakened position and leaning on his still influential allies in the Syrian regime, Hariri swiftly introduced new legislation (Law 295 of 5 April 2001) that annulled Lahoud’s attempt to scrap the CDR’s special status and remove its sweeping authority. Significantly, the CDR’s new legal framework now allowed the Council of Ministers to fire senior CDR staffers, including its president. In January 2002 the CDR’s board was removed, and its president, Usman, was fired and replaced by Jamal ‘Itani, a Hariri confidant. Lahoud fought back, however, just as the new regime in Damascus resumed its actions against potential defectors and their allies in Lebanon. A series of relentless disputes followed concerning the CDR’s budget allocations, the agency’s political accountability vis-à-vis the Council of Ministers, and new staff appointments. Finding itself in the middle of a vicious standoff between Lahoud and Hariri, the CDR soon became crippled by the paralysis affecting most other state institutions. Without Syria’s protection, Hariri was no longer able to preserve his, and by extension the CDR’s, place alongside the “presidents’ club.” After Lahoud’s term in office was renewed and Hariri resigned as prime minister, the new Karameh government in December 2004 once again removed Hariri’s allies from the CDR. Ironically, it used the same legislation that had allowed Hariri to fire Usman nearly three years earlier; Itani was removed and replaced by Fadil Shalaq, who since 2001–2 had been on increasingly bad terms with Hariri. Years of relentless efforts to curb Hariri’s influence had successfully targeted the prime minister’s sway over

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the government’s reconstruction policies. None of these efforts, however, had strengthened the CDR as a bureaucracy; they merely diminished a vibrancy that had pushed the reconstruction process during the 1990s.

When the State Is Big Business’s Best Friend: Solidere and Downtown Beirut The creation of the REC, or Solidere, involved similar rationales and mechanisms. Also, insulation from existing public institutions served here to circumvent the debilitating effects of the political settlement. The institutional framework for rebuilding the BCD went one step further, formally granting the REC private status despite the public nature of its activities. But the REC relied on the power of the state to enforce the scheme and bring about an involuntary transfer of property. Only by balancing on the threshold between the public and private sectors could Hariri and his associates apply the power of the state to enforce the scheme while simultaneously keeping a safe distance from the political settlement. The politics of Solidere’s creation and functioning reveal Hariri’s endeavors to minimize the political elites’ room to maneuver. Lebanon’s economic slowdown of the early 1990s gave an enormous boost to the skeptics regarding state intervention in the economy. Continuous conflicts among the greedy politicians who governed the state’s institutions, and the resulting failure to formulate any coherent policy for reconstruction, were widely perceived as posing insurmountable obstacles to economic growth and development. Hariri’s allies argued that economic salvation had to come from the country’s private sector and its thriving entrepreneurship, of which Hariri was himself a shining example (AH 11 July 1991; Corm 1996, 83). Moreover, utilizing these private assets for Lebanon’s postwar recovery was consistent with the country’s reputation for laissez-faire economics. By mobilizing the private sector, it was further argued, Lebanon would also fall neatly in line with the “Washington consensus,” in which market forces triumphed over a statism characterized by wasteful bureaucracies, corruption, and retarded growth (Hariri 1999, 40, 64). Thus the colossal task of rebuilding the country’s center of commercial and financial activity should be entrusted to the private sector. “After studying all the alternatives [such as state expropriation or istimlak], we propose to go ahead with the concept of a private real estate company in light of the state’s current deficits,” announced Shalaq in 1991 (AH 11 July 1991). A few critics who disputed such claims, such as the economist Georges Corm (AH 9 November 1991), were brushed aside with the argument that any form of state investment would require an efficient state bureaucracy and, hence, require painstaking reforms that would take years to complete. The REC, therefore, was the ultimate expression of

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Hariri’s distrust and animosity vis-à-vis the state and its political elites (Beyhum 1993–94). Some commentators have argued, approvingly or disapprovingly, that Hariri’s scheme for the BCD was a huge triumph for the private sector and that the state had been marginalized completely. This view is mistaken. The REC scheme required a degree of state intervention that—both in scale and in nature—Lebanon had never witnessed before. After all, the state was enforcing a massive transfer of private property to the company. Hariri’s advocacy of the private sector was thus only qualified, for state power was indispensable. In this sense, “Harirism” was as much directed against small ownership and middle-class capitalists as it was hostile to state institutions. The reason was not merely related to the problems of collective action posed by scattered ownership of real property. Hariri’s sponsorship of the private sector required the state to force open the intricate ownership structures inside Beirut, because only then could property in the area be accessed for development and exploitation. Despite Hariri’s statements to the contrary, the state was for a short but crucial moment the businessman’s best friend. The state intervention that was required also needed to withstand potentially damaging maneuvers by Hariri’s opponents, who were otherwise highly successful in using their veto powers to claim their “share” (hissa) of virtually every state institution, with the collateral result of paralyzing the entire decision-making process. The reconstruction of the BCD was different, as Hariri needed only the state’s authority—not the state’s institutions—to issue a law that would transfer all property in the area to the REC. As soon as that was accomplished, the debilitating nature of the political settlement and Hariri’s own weak position dictated that the entire BCD scheme would have to steer away from state institutions as quickly as possible. Launching the scheme through the CDR (by Law 117) was only the beginning of this strategy. Virtually all state institutions whose mandates touched on the operations of Solidere were marginalized when it came to the REC’s activities in city planning and the building of public infrastructure. Such tasks were simply taken over by the REC without genuine accountability to anyone else. Yet the transfer of property still required the cooperation of the judiciary. Because judges, like their colleagues in the public administration, were appointed on the basis of their confessional affiliation, the Ta’if elites had a potential way to frustrate Hariri’s designs with regard to the BCD and subject the spoils of the REC to their practices of muhasasa. For this reason, it appears, a highly unusual framework emerged: a select number of judges were literally taken out of their institutions (the judiciary) and placed in the quasi-judicial “appraisal committees” financed by Solidere itself. To minimize any outside political interference, the original property owners were denied their constitutional right to appeal in court

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against these committees’ decisions In effect, the judicial power of the state was used to endorse the transfer of property, but at the same time it was divorced from the institutions designed to exercise judicial power. The Ta’if elites were effectively circumvented. Consequently, Hariri could embark on his ambitious plans for the BCD despite his weak position in the political settlement and operate with full discretion parallel to the state institutions as long as the latter were affected by gridlock and muhasasa. None of these designs allowed for the emergence of strong bureaucratic features. With so many resources at stake, both public and private, one may wonder how the Ta’if elites could be so easily sidetracked. One would expect them to have been more protective of their prerogatives when it came to what was arguably the most dramatic form of state intervention in postwar Lebanon. Three interrelated reasons may explain this state of affairs. The political settlement was indeed unable to produce the rather straightforward policies needed to rehabilitate the country’s public infrastructure, let alone generate an institutionally complex solution for the BCD. Against this background, there seemed to be no viable alternative to Hariri’s designs—not because intellectuals, lawyers, economists, architects, and engineers failed to suggest alternatives, but because the political settlement did not allow for agreement on such options. The economic slump of 1991–92 seemed only to underscore the inefficacy of the Ta’if elites and the urgency of taking Hariri’s proposals seriously. Intense lobbying by Hariri’s associates in Parliament did not fail to bring these factors to legislators’ attention (Eddé 1997; 136; LR July 1992). Hariri’s gambit was made easier by the fact that, unlike in the oil sector and the quarrying business, most Ta’if elites in the early 1990s did not own a significant stake in the BCD; middle-class professionals and families on modest incomes did (Hamdan 1995). A few zu’ama owned property in the BCD, but as shown earlier, they were the weakest link in the political settlement chain. Moreover, the REC scheme posed no direct threat to warlords-turned-politicians. On the contrary, they had pounded the area during the war, and now new ownership structures would offer them some lucrative investment opportunities, for instance, in laundering illicit war profits and benefiting from the initial boom in the company’s shares (interview with Progressive Socialist Party official in Beirut, 7 July 1999; Picard 1999, 38n52). In any case, and despite the fierce criticisms raised against the REC, Solidere’s public offering of shares in 1994 was oversubscribed. Though politically outmaneuvered by the inventive scheme for the rebuilding of the BCD, Lebanon’s political elites had become its stakeholders and, hence, had everything to lose from its demise. Finally, as soon as the establishment of the REC appeared inevitable and the transfer of property was about to begin, the Ta’if elites had some leverage to force

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concessions from Hariri in exchange for their passive support. For example, certain ministers reportedly negotiated privileges that enabled them to retain their personal interests in the BCD (Eddé 1997, 232; AA 8 January 1993). Even more flagrant, however, was one key politician’s successful attempt to squeeze $250 million out of Solidere by forcing the company to pay “compensation” for the eviction of real or alleged IDPs among his constituents. Although Hariri’s political fortunes plummeted with the election of President Lahoud at the end of 1998, Solidere was able to sustain the argument that no viable alternatives existed to rebuild and manage the BCD. Indeed, Solidere kept repeating that its continuing existence was necessary, and the campaign removed much of the initial vibrancy of the public debate over Solidere that had raged throughout the 1990s (Schmid 2006). At the beginning of 2000, disgruntled former property owners temporarily intensified their own challenge to Solidere, calling on the Hoss government to “put an end to Solidere’s empire so that the city center could again play an effective role in favor of the national economy instead of being preyed upon by speculators” (OJ 18 January 2000). Yet the Hoss government, which included some of Solidere’s strongest critics (including Finance Minister George Corm), and Lahoud failed to terminate Solidere’s special status, despite investors’ initial fears, which caused a steady decline in the value of Solidere shares in 1999–2000 (IIM January 2005). Lahoud and the Hoss government certainly intensified such apprehensions. In July 2000 a special interministerial committee was established with the stated aim of modifying the master plan for the BCD. Yet ultimately it did not challenge Solidere’s status, instead proposing an overhaul of the institutional structures of the CDR, which at that stage had lost much of its leverage over the REC anyway (OJ 28 September 2000). In November 1999 the Hoss government even waived a $533,000 fine imposed on Solidere in August 1998 for allegedly failing to register a contract with the municipality of Beirut in connection with its works on the premises of the UN (Information International 2000b, 7). Most likely Solidere had gained too many influential stakeholders for anyone to risk undermining the company’s standing. Lebanon’s political settlement both urged and allowed Hariri to embark on his curiously designed project to rebuild the BCD. In doing so, he presented political elites with a fait accompli. The sheer disregard for bureaucratic structures that resulted from his approach reached such alarming proportions that even in formal terms, the REC’s institutional designs defied a clear distinction between the state and the private sector. Because of his limited room for maneuvering within the political settlement, the prime minister had in fact constructed his own sphere, mixing public and private to conquer his own place alongside the “presidents’ club.”

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An Arranged Marriage for the Displaced If the resolutions in the Ta’if Accord concerning postwar reconciliation are to be taken seriously, the return of the country’s large number of IDPs was a priority. Yet, as elsewhere, the institutions created for this task reflected the deadlock built into the political settlement. In this case, the post-Ta’if imperative of highly inclusive cabinets proved particularly detrimental to the formation of bureaucratic institutions. At first, political discord prevented institution building altogether. Later, interministerial rivalries transformed the political stalemate into a fierce conflict of competence between the prime minister and the minister for the displaced. The ensuing failure to follow basic principles of bureaucratic organization was exacerbated as both politicians channeled large amounts of state funds to allies and constituencies in order to compensate for their vulnerabilities under the political settlement. With the arrival of the Karameh government, a ministerial committee was formed to study the return of thousands of refugees to their original homes. The committee included the ministers of state Elie Hobeika, Nabih Berri, and Walid Junblatt and was presided over by Prime Minister Karameh. The committee convened twice but soon fell into disarray as its members engaged in their ongoing tug-of-war over the distribution of power. Indicative of the growing tendency toward muhasasa, Junblatt even called for establishing a Ministry of the Mountain, referring to his own stronghold in Mount Lebanon, and comparable to the Ministry of the South, created on Berri’s insistence in 1984 ( Picard 1994, 49–70). When such calls went unheeded, Junblatt declared a boycott of the committee’s meetings. The committee’s credibility was further undermined by fierce attacks from ministers belonging to the Kata’ib Party who resented Hobeika’s designated role as representative of mainly Maronite refugees (OJ 23 July, 27 September, and 8 October 1991). Meanwhile, Junblatt presented himself as the conciliatory leader whose role was indispensable in addressing the problem of the displaced in Mount Lebanon and the Chouf. The region had been particularly hit by sectarian violence in the 1980s that drove thousands of Maronite and Druze villagers out of their homes. Capitalizing on revenge killings and political tension between refugees and squatters, Junblatt posed as a moderating force, calling for calm and meeting with religious and political leaders of the Maronite community, including Patriarch Nasrallah Sfeir and Dory Chamoun (OJ 27 September 1991). He argued that the government was to blame for any incidents of vengeance because of its ineptitude in dealing with the displaced and its failure to create a specialized ministry to handle the issue. Gridlock in the Council of Ministers continued to affect decision making about the displaced. Setting up a special ministry was out of the question as long

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as former militia leaders in the cabinet refused to give rivals, including Junblatt, the chance to lead a ministry as long as they themselves were deprived of the opportunity. The need for action became more urgent, however, as vengeance killings proliferated. Another disaster was also in the making: the courts were flooded with expulsion requests from property owners whose homes were occupied by refugees (OJ 25 June 1991). Exasperated by his quarreling ministers and pressed to take action, Prime Minister Karameh assigned Hobeika to survey the magnitude of the problem and to suggest solutions. The initiative ended in fiasco when many refugees in the Maronite and Druze communities refused to deal with Hobeika because of his lack of credibility within his own constituency and because of his wartime reputation for brutality (interview with Kamal Feghali, 23 June 1999). Junblatt further limited Hobeika’s room to maneuver by publicizing his own ambitions regarding the displaced and initiating his own “reconciliation” efforts parallel to the government’s (OJ 12 September 1992; LR October 1992). Under the subsequent government of Solh, Hobeika was given the title of minister of state for the displaced, but the deadlock continued. Embarrassed over the failure to come up with any substantial progress and fearing electoral repercussions, Solh urged Hobeika to hold a conference on the displaced and invite all parties and political leaders who were involved (OJ 26–27 June 1992). In July 1992 the Solh government publicly announced “the first stage of the return of the displaced.” But with no detailed plan, the initiative was widely dismissed as window dressing and, as one newspaper commentary put it, as proof of the government’s naïveté in thinking that “the return can be achieved by simply pressing a button” (OJ 8 July 1992). More than two years of political infighting in the cabinet had made it abundantly clear that without changes in the political balance, the return of the displaced would not even commence. As we have already seen, the parliamentary elections of the summer of 1992 were manipulated to bolster the position of a select group of elites. Helped by gerrymandering and small electoral districts, Junblatt managed to defeat all his coreligionist rivals, including za’im Talal Arslan, whose electoral chances would have been far better if the constituency had been based on the larger unit of the muhafaza, or governorate. The elections underlined Junblatt’s aspirations to become undisputed leader of Mount Lebanon and the Chouf, where the problem of the displaced was particularly pressing, and his bargaining position in the next cabinet improved significantly. The first Hariri government in November 1992 forced a breakthrough in policies regarding the displaced. Two political changes were instrumental in the establishment of the Ministry and the Fund for the Displaced. Former militia leaders, hitherto represented in the government of national unity only as ministers of state without portfolio, were now promoted to full-fledged

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ministers. The horse-trading this implied effectively removed their veto against Junblatt. Yet their consent was made conditional in that the newly created MfD would control resources not exceeding the budgets of the other, mainly serviceoriented ministries (including electricity, transport, housing, and public works, among others) led by Junblatt’s rivals (interview with Shadi Mas’ad, Beirut, 10 July 1999). The expenditure of hundreds of millions of dollars necessary to address the problem of the displaced was in this respect likely to provoke vetoes from other ministers whose own budgets hardly exceeded $40 million a year. Here the second major modification of the political settlement comes into play: the ascendance of Hariri in national politics. It took several months to negotiate a solution that appeased all members of the cabinet with regard to Junblatt’s hissa. The outcome was Law 190 (4 January 1993), whereby the MfD was to be separated from its own resources with the establishment of an autonomous fund attached to the prime minister’s office (interview with Kamal Feghali, 23 June 1999). The president of the fund, Antoine Andraus, later described this formula as an “arranged marriage,” explaining, “One partner [Hariri] takes care of the money because of his credibility, and the other partner [Junblatt] takes charge of the political dimensions because of his influence on the ground” (OJ 18 June 1996). The return of the displaced could finally begin. As his prerogatives in the new cabinet were jealously contested, Junblatt was pressed to grant Hariri the role of treasurer. Yet in other respects Junblatt’s stance toward his rivals and the troika had been firm. The MfD was to be considered his hissa, in which he would have the final say, even if that occurred clearly at the expense of principles of bureaucratic organization. Junblatt pointed at the autonomous status of the Council for the South, a Berri-controlled agency, which was equally exempted from external checks and audits (AN 12 November 1994). To prevent interference by Junblatt’s rivals, the ministry was freed from the controls and regulations of the CSB and the CA, on the pretext that it was there only temporarily and that it would be dissolved as soon as “the return” was complete, a process that at the time was expected to take no longer than two years (AH 9 January 1993). Junblatt staffed the ministry with his supporters, and Hariri did the same in the fund. To increase Junblatt’s discretionary powers, the broad-based National Council for the Displaced, mentioned in Law 190, never saw the light of day, for it might have allowed rivals to challenge Junblatt’s control. Instead, Junblatt encouraged the formation of local committees for the displaced—the “return committees”—that were easier to control or, if necessary, to ignore (OJ 2 December 1992 and 16 January 1993; AW 27 June 1994; AN 12 November 1994). Initially this elaborate design seemed to please most members of the cabinet, foremost Junblatt himself (OJ 21 December 1992 and 2 February 1993). Yet soon relations between Junblatt and Hariri would sour. The main cause of friction

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related to Hariri’s repeated refusal to release funds (OJ 6 and 10 September 1993; AS 30 August 1995 and 10 July 1997; AN 8 September 1995; AL 9 October 1995). The prime minister, whose powers in the cabinet were severely curtailed by the stipulations of the Ta’if Accord, saw a chance to use his financial control to reinforce his position vis-à-vis his ministers in general and Junblatt in particular (AS 10 July 1997). Moreover, Hariri capitalized on the ambiguous distribution of tasks and prerogatives between the ministry and the Fund for the Displaced, forcing Junblatt into submission within the cabinet and thus imposing a hierarchy that the Ta’if Accord had failed to provide. The consequences were far-reaching. The strategy turned the government’s policies regarding the displaced into a series of ad hoc spending sprees following murky deals dictated by the short-term calculations of Junblatt and Hariri. Ultimately, for Junblatt the recurring suspension of funds turned into a major embarrassment that risked his leadership in Mount Lebanon and the Chouf. His anxieties were shared by many Maronite MPs, who were increasingly called on to press Junblatt to expedite the return of Christian refugees to their original homes. Consequently, a growing number of MPs, political leaders, and the displaced themselves began attacking the MfD for mismanagement and double standards, and for failing to address their plight. Against this background, the ministry’s applications to the fund were overshadowed by attempts to control the political damage caused by Hariri’s strategies. Thus when financing resumed, Junblatt felt compelled to direct expenditures toward his most influential critics.20 In turn, Hariri used his control over funding by making a resumption of cash flows conditional on the payment of compensation to potential voters in Beirut or even channeling funds to reconstruction projects that bore no direct relation to the issue of the displaced, including CDR road works (interview with Kamal Feghali, 23 June 1999; Wakim 1998, 123–24). After years of haggling and muddling through, the conflict between Hariri and Junblatt reached a climax in July 1998 when the Druze leader organized a National Conference on the Displaced in his stronghold of Beiteddin. A broad range of Hariri’s opponents and critics were invited to pour out their hearts against what Junblatt described as the prime minister’s “political blackmail” and “sectarian backwardness dating back to the times of Ibn Taymiyya” (AN 6 July 1998). As one commentator put it, the “arranged marriage” had now ended in a “typical divorce à la Libanaise” (OJ 6 July 1998). But although many Ta’if elites may have approved of Junblatt’s harsh words, his calls to scrap the fund and place

20. In an ironic twist on the political bickering between Junblatt and Hariri, the ministry filed numerous applications for compensation on behalf of Hariri’s own constituency in the (Sunni-dominated) Iqlim al-Kharub region in order to embarrass the prime minister for appearing to deprive his own followers of financial support (AN 6 July 1998; OJ 6 July 1998; DS 7 August 1998).

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its resources under his sole authority continued to fall on deaf ears. It was in nobody’s interest to boost Junblatt’s role in the country’s postwar politics, and the political settlement provided ample opportunity to prevent it. By the late 1990s, the disputes over who was to lead the state-subsidized program for the displaced were surpassed by growing fiscal deficits. The government could afford only to pay public sector salaries and service debts. The Hoss government appointed Anwar al-Khalil, an MP from Hasbaya-Marjayun who had allied himself with Berri’s parliamentary bloc, as minister for the displaced and a new head of the Fund for the Displaced, the little-known technocrat Shadi Mas’ad. In December 1998 both men set a target for the return of all displaced by 2001 and persuaded the government to pledge another $750 million to achieve this aim (Assaf and El-Fil, 2000). Expenditures by the ministry and the fund accelerated but never again reached the levels of the mid-1990s (IIM September 2005). This trend continued after the MfD returned to Junblatt’s sphere of influence when his close associate Marwan Hamadeh was appointed minister in November 2000. By the end of 2002 the funds for the displaced had dried up, and widening calls for abolition of the ministry and the fund merely confirmed that both institutions had lost their relevance. Hariri clearly had no intention of providing new funds as concerns over Lebanon’s fiscal crisis and ailing economy predominated. Consequently, during the Paris II Conference in November 2002, no appeal was issued for international donors to help complete the return of the war displaced. On the contrary, an official document submitted at the conference to sum up Lebanon’s main accomplishments during “ten years of reconstruction and recovery” made the outlandish claim that “the displaced had returned to their homes” (Lebanese Republic 2002, 5). Junblatt protested against the financial squeeze, and by implication his own political marginalization, even staging a street demonstration against the government’s budget in December 2002. His campaigns were joined by disgruntled IDPs and increasingly anxious Maronite MPs, who were constantly reminded that lack of funds for the displaced might cost them reelection. Yet their objections failed to secure a steady supply of new funds. In April 2003 Junblatt allowed a Maronite partner, Abdallah Farhat, to become minister for the displaced in an apparent attempt by the Druze leader to bolster his alliance with Maronites and so reinforce his appeals for more funds. All Farhat could do was continue his predecessor’s unrelenting complaints over the lack of resources. Junblatt did manage to thwart plans for eliminating the ministry and the Fund for the Displaced, a resolution formalized by law in 2001 (Law 295 of 5 April 2001) and duly reiterated in the government’s annual budgets since. Applying the logic of muhasasa with equal measure to matters of fiscal austerity, Junblatt argued that if the ministry and the fund were scrapped, the same thing would happen to the Council for the South (interview with Shadi Mas’ad, 29 October 2006)—a move nervously opposed by Berri. Yet without sufficient funds to run their programs, both the ministry and

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the fund were empty shells. Sensing that for now there would be no new resources to aid the displaced, Lebanon’s political elites shifted their disputes to other institutions. The ministry and the fund were left to serve as symbols of the political settlement’s failure to address a violent past in an effective and accountable manner. The main features of Lebanon’s postwar political settlement resulted in diverse institutional outcomes, yet none of these satisfied the criteria of bureaucratic organization. Because the settlement granted most if not all political actors veto powers over the decision-making process, conflicts over the creation of new institutions and institutional change often resulted in gridlock. Quasi-permanent cabinet crises and standoffs among the troikists frustrated and often defeated attempts to put effective institutions in place. Consequently, institutions continued to operate without clear mandates, lacked external checks and audits, and became riddled with conflicts of interest. As bitter conflicts over institutional change continued unabated, institutions became paralyzed by direct interventions from political elites in general and the troikists in particular. Enduring intra-elite conflicts in the decision-making process were transferred to state institutions themselves and resulted in fierce competition over each political leader’s hissa, or share of resources and influence. In addition, and given the extreme dispersal of power in the settlement, elites adapted by pressing for institutional designs that would shield them from the debilitating influence of their rivals. Yet the institutional outcomes of these strategies also flouted bureaucratic safeguards against corruption. External checks and controls were readily sacrificed to prevent political rivals’ access to insulated institutions, whereas conflicts of interest proliferated with efforts to hire trusted administrators. Furthermore, the Ta’if settlement turned political elites against the creation of bureaucratically organized institutions that might highlight or exacerbate weak support from their constituents. Elite vulnerability had a significant impact as elites tried to compensate for their lack of popular support by providing services and material privileges. For the same reason, they often used their veto powers to prevent bureaucratic institutions from emerging. Finally, Syria’s own interests in Lebanon combined with its tight grip on the country prompted it to intervene heavily in its neighbor’s muddled process of institution building, mostly by exacerbating Lebanon’s divisions and perpetual tendency toward gridlock, often in pursuance of Syria’s own direct financial interests. In sum, Lebanon’s postwar political settlement both obstructed bureaucratic organization and provided incentives for political actors to look for alternative institutional arrangements. In either case the result was that numerous state institutions failed to satisfy bureaucratic standards of government. Against this cacophony of conflicting interests and perpetual deadlock, the Lebanese state became riddled with political corruption.

Chapter 6

Corruption and the Primacy of Politics

This book has vindicated the widely held view that corruption permeated Lebanon’s state institutions throughout the post-Ta’if period. My aim−to understand why corruption levels were so profound—was rooted in the belief that causal explanations make sense only if we analyze incidences of corruption in their immediate institutional and political contexts. Much of this book has been devoted to the stories of particular institutions as I have assessed their susceptibility to corruption, looked into their bureaucratic organization, and analyzed the underlying politics of their evolution. Having followed this journey through the politics of Lebanon’s corruption-prone state institutions, I can now aggregate my findings.

Corruption, Institutions, and the Political Settlement I have sought to analyze the extent and the political causes of high-level political corruption—the use of senior public office for private benefit—in postwar Lebanon. I have disaggregated incidences of corruption and situated them in their institutional settings, enabling me to analyze the political underpinnings of each individual case. From this process, several generalizations emerge. First, all the institutions under study failed to meet essential criteria associated with bureaucratic organization and derived from its Weberian ideal-type, that is, a clear mandate governed by procedures and regulations with external checks and controls to ensure accountability, in addition to a separation of public office from private interest. Often institutional frameworks were “temporarily” put

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on hold with no alternative arrangements made to subject routine operations to unambiguous regulations. The result was a proliferation of discretionary decision making. In virtually all Lebanese institutions, ambiguous mandates and ill-defined procedures effectively paralyzed attempts by the state’s watchdog agencies to carry out external checks and controls. Moreover, where mandates and procedural rules remained unclear, so did the criteria by which the state’s audit and inspection bodies could assess officials’ decisions. In addition, the state watchdog agencies failed to implement checks and controls, for they lacked the capacity to do so or were perceived as obstructing the speedy implementation of reconstruction. Finally, discretionary powers and lack of accountability fueled unbridled conflicts of interest. This was particularly evident where cabinet ministers and key politicians held portfolios or intervened where they had a strong private interest. The politicization of public sector appointments also systematically confused public office with private interests. In some instances it was even impossible to draw a clear distinction between the state and the private sector. In sum, the main reason for endemic political corruption in the period under study was that practically no public institution could claim to have fulfilled the criteria of bureaucratic organization. The qualities of institutions, I proposed, should be viewed as outcomes of the rules and their application governing the political decision-making process. I referred to these complex mechanisms through the shorthand of the “political settlement.” Since the 1989 Ta’if Accord, the political settlement entailed five main interrelated traits: (1) high levels of inclusiveness and an extreme dispersal of power resulting in quasi-permanent gridlock in the decision-making process; (2) the predominance of the elites holding the country’s key political positions (the troika) and the associated politics of apportionment (muhasasa); (3) continual attempts to circumvent the built-in stalemates of the formal political arrangement enshrined in the constitution; (4) weak popular support for political elites, which generally resulted in the vulnerability of those filling high political positions; and (5) the overriding role of the Syrian leadership’s interests in Lebanon and particularly its manipulation of the country’s internal differences. The characteristics of Lebanon’s political settlement go a long way toward explaining why public institutions in postwar Lebanon failed to meet the criteria of bureaucratic organization—and thus became exposed to high levels of political corruption. The effective veto powers held by a large number of actors in the decision-making process negatively affected bureaucratic institutions even when political differences appeared trivial. On top of this, persistent gridlock in decision making was transferred to the state institutions themselves, resulting in fierce competition over each political leader’s hissa, or share of resources, at the expense of their bureaucratic features. Furthermore, given the wide dispersal of power in the political settlement, elites pressed for institutional designs to shield them from their

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rivals and to preserve their foothold in the political settlement. Finally, by turning institutions into bastions of privilege for their supporters, political elites tried to compensate for the weak support of their constituencies. This process both hindered the building of new bureaucratic institutions and undermined existing ones. The upshot of all these factors is that the political settlement countered the formation, rehabilitation, and maintenance of bureaucratic institutions, thereby leaving the door wide open for those seeking opportunities for corruption. If the lack of bureaucratic organization—and the underlying political settlement that produced it—is indeed the main cause of the high incidence of political corruption, one should be able to turn this argument on its head. I would expect to see the absence of corruption when institutions do fully comply with the criteria of bureaucratic organization. In methodological terms, such an exercise would be tantamount to finding a control group by which the main hypothesis can be validated. Given my subject matter, however, this is extremely difficult if not outright impossible. First, nearly all public institutions in postwar Lebanon reportedly suffered from at least some degree of corruption. Second, virtually no public institution in postwar Lebanon can claim to have fulfilled all the criteria of bureaucratic organization. Yet one can argue that some public institutions, which scored relatively higher on the variable of bureaucratic organization, had lower levels of corruption. In other words, Lebanon’s empirical realities force me to qualify my argument on the causal relations among corruption, bureaucratic organization, and the political settlement by rephrasing it in probabilistic terms. Before putting my findings into perspective and turning to their implications, I need to attend to an anomalous case.

The Central Bank Anomaly The Lebanese central bank presents a positive if relative exception both to the nearuniversal failure of Lebanon’s state institutions to meet basic bureaucratic criteria and to widespread corruption. It is an important check on my generalizing claims regarding the qualities of institutions and their roots in the political settlement. The Lebanese central bank is not a bureaucratic organization in the fullest sense of the word. Only in relative terms is its score on the three criteria for bureaucratic organization significantly higher than that of most other public institutions. Most unusually, the central bank enjoys a clear mandate and a strong regulatory framework that binds the implementation of the bank’s conservative monetary policies to strictly imposed procedures (Karam 1993–94). Within the central bank’s board of directors, there may have been differences over some aspects of policy—for example, defending the Lebanese pound at all cost—but

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no senior official at the bank appears to have seriously challenged its strict adherence to the regulatory framework guiding its currency dealings, its handling of treasury paper, gold, and foreign currency reserves, and the regulation of private banks (interview with senior central bank official, Beirut, 7 June 1999). Even during the 1980s, as one former board member remarked, “such adherence to the rules was remarkably strong, as if there were some implicit agreement that when the essentials of the economy are at stake, administrative wrongdoing cannot be allowed” (interview with former central bank official, Beirut, 3 March 2000). This assessment is congruent with most observers’ evaluations of the central bank’s institutional performance, both during the armed conflicts of the 1980s and thereafter (Makdisi 2004, 45, 147; El-Hafez 2004, 143). As an autonomous and formally independent institution, the central bank is not checked or audited by any external state body or agency. Its own inspection department is unusually active, however, and it has a reputation of zero tolerance for corruption involving bank officials. For example, in 1993 one high-level employee of the bank was found guilty of “attempting to institutionalize corruption” and was immediately sacked, in spite of the protection he received from one of the country’s most powerful politicians (interview with senior central bank official, 7 June 1999). Especially in light of this politician’s loud protests, the official’s removal was unprecedented and would in most other public institutions have faltered or been avoided. Furthermore, when asked about external checks and supervision, several senior officials at the central bank pointed to the immediate consequences of any wrongdoing, or even rumors thereof, on the economy as a whole and the stability of the Lebanese pound in particular. One former board member commented in this context: “The best check on what we are doing is that—unlike for most other public institutions—the repercussions of corruption are there for everyone to see. The slightest hint of irregularities or dishonesty at the central bank will be immediately translated into the loss of the public’s confidence in the pound. Indirectly, therefore, every economically active person in Lebanon is our auditor” (interview with former central bank official, 3 March 2000). The central bank cannot claim that its senior staff is free from any potential conflicts of interest. Also the bank’s top managers are appointed by the Council of Ministers on the basis of their confessional and political affiliations. Consequently the central bank also appears to have fallen victim, at least to some extent, to the pervasive pattern of patronage in the imposition of political appointees on state payrolls.1 Some of the bank’s senior managers had close relations 1. According to The Economist magazine, Lebanon sustains one of the world’s largest numbers of central bank employees relative to population, 32 per 100,000 inhabitants, compared to, for example, 3 per 100,000 in the United Kingdom (cited in DS 30 January 2006).

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with individuals who had a strong private interest in the bank’s policies.2 Yet as long as these private interests coincided with the bank’s general and unambiguous mandate, such potential conflicts of interest generally do not appear to have translated into the use of public office for private benefit. Moreover, board members have been particularly keen to monitor one another for potential conflicts of interest, fearing that any transgression would undermine the bank’s reputation and endanger the economy as a whole (interview with former central bank official, 3 March 2000). Generally, therefore, with regard to the three criteria of bureaucratic organization, the central bank scores higher than other public institutions, even though its record is far from perfect. This institutional environment explains why the central bank rarely featured in credible allegations of high-level corruption, although some unsubstantiated reports to this effect emerged in the early 1990s, in the context of the currency crisis of March 1992 (OJ 30 March and 8 May 1992), and at the end of the period under study, involving the al-Madina Bank default (Abi Najem Tony in AN 30 April 2005; Prothero 2006). Nevertheless, the Airbus scandal did constitute a serious incidence of corruption in which the central bank was involved, if indirectly. Indeed, by transcending the bank’s mandate and transforming it into MEA’s main shareholder, the incident burdened bank employees with tasks for which there was no clear regulatory framework. In this institutional vacuum, the central bank failed to tie its newly acquired partners at MEA to its own standards of proper fund management and administrative conduct. Indeed, for this reason most of the bank’s board of directors resented the financial rescue operation from the beginning (interview with Ghassan al-‘Ayyash, former central bank official, Beirut, 22 June 1999). On the whole, however, and thanks to a relatively strong regulatory framework, the central bank succeeded in keeping its employees free from corruption. Why was the central bank largely spared the debilitating effects that the political settlement imposed on all other institutions under study? The reasons center on the postwar governments’ evolving strategies in financing a rapidly accelerating public debt. These strategies allowed for the exceptional insulation of the central bank from bickering political elites. In the early 1990s the central bank risked losing its independence, just like all other state institutions that had been affected by the political settlement after Ta’if. To the surprise of even its own managers, the central bank had to this point largely succeeded in keeping political pressures and corruption at bay (interview 2. Riyad Salameh managed Hariri’s private portfolio at Merrill Lynch in London and Paris before his appointment as governor of the central bank in 1993. Salameh himself denied being guilty of any conflicts of interest by pointing out that he had never worked for Hariri’s Oger company (OE July 1997).

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with former central bank official, 3 March 2000). During the armed conflicts of the 1980s this achievement earned the Central Bank an almost mythical reputation as “the banker in the bunker” (‘Ayyash 1997, 173), for it was virtually the sole public institution that survived amid the prevailing anarchy of violence, war profiteering, and lawlessness. According to the bank’s chronicler, Ghassan al-‘Ayyash (1997, 170–73), one of the most important factors that explained the central bank’s relative immunity from the war was that, lacking central authority, the state and the country’s political and military elites were in no position to challenge its policies. Although the board of directors felt occasionally obliged to give in to politicians’ pressures, providing credit advances by drawing on the bank’s foreign reserves, such practices were limited. Then, with the first postTa’if government led by Hoss, this situation changed radically. Suddenly, various ministers were instructing the central bank’s governor Edmond Na’im to release credit advances to finance a whole range of projects, such as basic repair work on electricity installations and road building, which mostly benefited these leaders’ own constituencies (interview with former central bank official, 3 March 2000). Initially Na’im tried to steer away from full-blown confrontations, sometimes allowing credit advances for the most urgent projects while discouraging political leaders from turning such requests into a habit. But when requests kept pouring in, it became clear that the central bank’s autonomy was under serious challenge. In early 1990, when one minister once more ordered the bank to provide cash immediately, a senior central bank official raised the alarm with Prime Minister Hoss. Hoss explained that, given his weak powers as prime minister, he was unable to discipline ministers who perceived the central bank as a cash cow for their projects. The credit advance went through (interview with former central bank official, 3 March 2000). In February 1990, when another minister requested a cash advance (OJ 15 March 1990), the bank’s directors decided they had had enough. The bank refused to comply, in accordance with its right under Article 33 of the Code of Money and Credit (OJ 19 March 1990). The decision provoked a furious reaction from the requesting minister, who promptly ordered security forces to raid Na’im’s office and force the governor to comply (OJ 16 March 1990). Subsequently, the central bank became the stage for a major confrontation, with both central bank employees and private bank personnel going on a joint protest strike and Prime Minister Hoss demanding the resignation of the interfering minister. The problem of political interference was aggravated by the fact that cabinet ministers, the speaker of Parliament, and the president were already heavily engaged in their politics of muhasasa. They saw no reason why the central bank— whose assets were, after all, state property—should escape their demands for their own share of resources and influence. Hence, only a few of them objected when

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President Hrawi vetoed Hoss’s call for the interfering minister’s resignation. Junblatt even visited Hrawi to express his full support for the president’s position in the affair (OJ 17 March 1990). Mohsen Dalloul, then minister of agriculture, called on the central bank “to adjust itself to the new realities of the Ta’if Accord and acknowledge the fact that there is now only one legitimate government, whose decisions have to be carried out at all levels” (OJ 20 March 1990; ‘Ayyash 1997, 188). Speaker Hussein al-Husseini offered his own interpretation of the central bank’s autonomy. Arguing that Parliament was the only institution with the right to stand up against the government, Husseini said: “The central bank is one of the institutions of the state, and it was set up by a law that was issued in Parliament, whereas both the [central bank’s] governor and his deputies are appointed by the cabinet. So how can it be that Juha [the son in a folktale] grew bigger than his father?” (cited in ‘Ayyash 1997, 186).3 In sum, in 1990 the central bank ran a serious risk of being swallowed up by the post-Ta’if political settlement, with political elites insisting on their hissa of the bank’s assets and the prime minister lacking the power to discipline his ministers. The mounting pressures forced Michel Khoury, who succeeded Na’im as governor of the central bank in January 1991, to be more lenient about subsequent demands for credit by various ministers, resulting in rapidly increasing claims on the public sector (‘Ayyash 1997, app. 5). Under these conditions, the bank’s claim to autonomy had become untenable. Yet by 1992 a new set of factors came to the central bank’s rescue, providing conditions under which its autonomy could be maintained despite the debilitating effects of the political settlement at large. First, the collapse of the Lebanese pound that year seemed to confirm a widespread view about the government’s fiscal irresponsibility, especially given its reliance on inflationary policies.4 With the currency and the economy in ruins and the central bank’s reserves being rapidly depleted, the habit of pressing the bank for cash advances was no longer viable. Second, with the arrival of Hariri in power at the end of 1992, the opportunity was created to change the country’s public finances radically. The institutional features of the central bank no longer needed to be violated or molded to make it function as the political elites’ cash cow. Instead, treasury bills eagerly sought by the country’s commercial banks were to become the main debt instrument to finance reconstruction. As soon as the Lebanese currency and the economy stabilized, with Hariri’s reputation serving as personal collateral, the trade in treasury bills turned into 3. Juha is a character from Lebanese folklore resembling Tom Thumb. 4. The IMF (2 July 1993) blamed the crisis mainly on the government’s excessive drawing on the Central Bank’s reserves. For alternative views, see AN 30 July and 4 August 1992.

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a growth industry.5 In other words, the Ta’if elites found an alternate and much less cumbersome way to finance public projects allocated according to the ever-shifting alliances within the political settlement. They lost interest in the central bank, as witnessed by declining volumes of direct credit advances to finance public expenditures.6 As an unintended result, the central bank largely kept its independence and, despite the crippling effects of the political settlement elsewhere, maintained its exceptional reputation within the public administration. With the expansion of the market in treasury bills, political elites also gained a positive and personal interest in upholding the central bank’s independence. This can be explained by the demand for treasury bills, the vast returns involved, and the role of the central bank on which the market relied. Most of the treasury bills were bought by domestic commercial banks, which thus became the state’s main financial backers. As interest rates were extremely high—in some cases even reaching 38 percent (depending on maturity dates)—revenues generated from the trade in treasury bills reached exorbitant proportions.7 Hence, Lebanon’s commercial banks made vast and easy profits. Most of Lebanon’s political elites greatly benefited from these revenues thanks to their ownership of or participation in the commercial banks (Najem 2000, 182; Maasry 1988; Johnson 1986, 201; Hamdan and ‘Aql 1979, 59–71; Hamdan 1997a; interviews with private bankers in Beirut, May 2000 and November 2006). Hence, in a rare convergence of interests and at striking variance with all other public institutions under study, the central bank received strong political backing for its independence from across the entire political spectrum.8 The main task of the central bank, after all, was to defend the Lebanese pound, in which the treasury bills were commonly denoted. It could do so only by maintaining high levels of impartiality, solvency, and professionalism that virtually no other public institution ever reached. Once again, “the banker in the bunker” survived, this time shielded not from warfare but from a political settlement that crippled other public institutions.

5. See the figures on the growing real volume of treasury bills since 1992 provided by the central bank, http://www.bdl.gov.lb. 6. See the figures on rhe total volume of the central bank’s credit advances to the public sector listed by the central bank, http://www.bdl.gov.lb. 7. The 38 percent yield was recorded for treasury bills with a maturity of twelve months in September 1995 (figure taken from central bank, http://www.bdl.gov.lb). By 2000, proceeds from treasury bills amounted to more than half of commercial banks’ total revenues (Association of Lebanese Banks 2001, 83). 8. This rare instance of intra-elite consensus seems to match Clement Henry Moore’s earlier prediction. Analyzing the role of Lebanon’s banking sector in the country’s armed conflicts, he speculated: “It may still not be too late for the warlords to patch together some settlement. Were the political miracle to occur, the banking system would indirectly contribute to the new equilibrium” (1987, 213).

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The Lebanese “Allotment State” At the start of this book I suggested that a study of corruption could offer a window into the nature of Lebanon’s postwar state. I expected that the very separation between the public and private spheres—implied or presupposed by the notion of corruption—would shed light on what constituted the Lebanese state and where its boundaries with society were to be drawn. Interestingly, many Lebanese observers and segments of the public alike have all along sensed the significance of corruption for their country’s statehood. For them, debating corruption constituted primarily a discourse on the state and its institutions, in terms of both how they experienced the state and how they would have liked its institutions to be developed. During the course of my fieldwork, I found that the word corruption (fasad) was generally used to refer to the abuse of office in politics, public institutions, government, and the state at large. Assertions that the very notion is foreign to Lebanese society or generally ill understood seem unfounded. High awareness and a clear understanding of political corruption were also suggested in a major opinion poll held in 1999 among the Lebanese adult population (Information International 1999, 33), although other smaller-scale surveys found that some subscribed to wider and rather looser definitions (Fayyad 1994; Mona Fayyad in Mulhaq in An-Nahar 16 January 1999). As I pointed out in the first chapter, the Lebanese state has received relatively little scholarly attention. Some observers may even argue that widespread corruption confirms that there is no need to study the state, for other factors and dynamics, such as sectarianism and patron-client relations, are more important. Yet it would be a mistake to conclude that the failure of bureaucratic institution building implies that the state has no significance. Even when bureaucracy looked like window dressing for the ruthless pursuit of private interests, the state was allimportant to political elites, not least because it determined access to resources and business opportunities. In fact the division between the public domain and private interests made political corruption possible. Without the notion of bureaucratic organization, there would have been no proceeds from manipulating it. Neither would there have been the opportunity for political elites to grant privileges and exceptions from the supposedly universal currency of bureaucracy, for the use of public office for private gain still relies on the application of bureaucratic rules and procedures. As many cases have illustrated, political elites applied these rules selectively and for particularistic purposes in order to serve their own interests. Hence, the state in postwar Lebanon was not just “weak” or virtually absent. On the contrary, the state’s omnipresence constituted a major ingredient of the elites’ strategies aimed at self-enrichment and political outmaneuvering of their rivals. To capture these processes, it is perhaps useful to describe the Lebanese

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state as a state of muhasasa, or an allotment state in which fierce struggles over the building of state institutions coexist with an utter disregard for the universal application of bureaucratic rules. This contradiction is reflected in the initially puzzling views of many Lebanese who in one breath praise the country’s tradition of “laissez-faire” and at the same time denounce stifling statism. That coexistence is characteristic of the allotment state, where bureaucratic rule is exercised selectively, turning Lebanon for some into a heaven for business and entrepreneurship and for others into a hell of suffocating state regulation.

Corruption and Its Causes through Lebanese Eyes I have already noted a strong congruence between the conceptual understanding of political corruption proposed in this book and the ways in which many Lebanese understand the notion. It may be instructive to compare my findings on the causes of rampant corruption in postwar Lebanon with some key Lebanese voices on the subject. Such opinions—obtained from media sources, interviews, personal encounters, and a few academic works—do not constitute a scientific or representative sample. Nevertheless, a brief discussion may be useful. As many Lebanese have similarly associated corruption with the quality of state institutions, it may come as no surprise that many causal explanations for rampant corruption have focused on matters related to bureaucratic organization. Two criteria receive special attention. The lack of oversight mechanisms and external controls has been commonly lamented for facilitating impunity among corrupt officials. Yet even more attention has focused on politicians’ conflicts of interest and their detrimental effects on administration. Hariri’s considerable wealth and his involvement in countless business enterprises both in and outside Lebanon fostered the general impression of political elites in ruthless pursuit of self-enrichment at the expense of a “state of institutions.” Furthermore, some Lebanese observers pointed at the political process following Ta’if as being responsible for the general failure to build solid bureaucratic institutions that could withstand the lure of corruption. The politics of the troika and muhasasa have been particularly blamed for undermining the “rule of law” and “the public interest.” Yet most such analyses were presented to condemn—rather than analyze—such practices. In this context very few established a link between the peculiar politics of the troika and the formal political arrangement originating in Ta’if. On the contrary, common disapproval of the troika’s politics of muhasasa was generally accompanied by a call to respect the constitution and honor the Ta’if Accord (Mansour 1993). Much closer to my approach is Da’ud as-Sayigh’s article “In Search of Authority [sulta] in Lebanon” (AN 7 April 1999), which blames the

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volatile and unconstitutional politics of the troika on the constitution itself. That document, he argues, failed to identify clearly a workable balance of power or “center of gravity” in the decision-making process. Yet Sayigh does not explicitly make the connection between these flaws and muhasasa or corruption. Finally, some Lebanese observers also have suggested ways to characterize the Lebanese state against the background of failing bureaucratic institutions and rampant corruption. Although the discourse on Lebanon’s “weak state”—and its opposite, a (strong) “state of institutions”—prevails, Albert Dagher, a Lebanese economist, suggested a categorization that, at least outwardly, approximates my suggested notion of the allotment state. The Lebanese state, he argued, should be viewed as a “distributive state” wherein effective policymaking is surpassed by a game of fromagisme (a French term akin to the expression “dividing up the pie”) that impels decision makers “to be content with simply spending public resources without paying attention to their origins” (2002, 24). Accordingly, Dagher concluded, state policies to promote economic productivity have been conspicuously absent. At least at a general level, a few Lebanese observers and commentators therefore appear to share my own analysis of corruption. Yet one-dimensional causal explanations—whereby corruption is linked to just one phenomenon believed to capture Lebanese politics—have been much more common. Widespread corruption has been exclusively blamed on, variously, engrained sectarianism (ta’ifiyya), the country’s long-established politics of patronage (mahsubiyya) and clientelism (zaba’iniyya), its (civil) wars, the massive wealth accrued by businessmen-turnedpoliticians, Syria’s occupation, the lopsided nature of the Lebanese economy, and a culture that condones corruption. I do not have enough space to take issue with each of these diverging views. Indeed, they are often advanced with aims different from those of an academic account of the causes of corruption. Yet a few remarks may help clarify the main arguments of this book. Most important, while some of these claims may have explanatory value when it comes to individual cases of institution building and corruption, none of them suffices to explain all cases and associated institutional qualities. An exclusive focus on war-related factors and their legacies, Syria’s role, or sectarianism may be echoed in my analysis of this or that particular institutional setting. Yet they certainly do not cover all cases. Thus, for instance, sectarianism indeed played an important role, but it did not determine institutional outcomes and corruption levels in all cases. Sectarian differences were only one way in which elites diverged. Other fault lines included regional conflicts, competition between old and new elites, and contests between elites in control of certain state resources versus elites with private assets and interests. Indeed, political alliances frequently formed between elites from different sectarian backgrounds, as, for example, in the oil business.

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Common to most if not all of these arguments is that they do not differentiate among specific forms of corruption. Consequently, they do not follow the distinction proposed in this book between high and low political corruption. Indeed, if the manifestations and underlying mechanisms of different forms of corruption are similar, then the differentiation may not be warranted. On closer examination, however, it turns out that many Lebanese arguments on corruption deal only with low political corruption. This seems particularly true for analyses that lean on patron-client approaches or “(neo-)patrimonialism” (Hamzeh 2001). Such approaches emphasize the particularistic nature and vertical structure of Lebanese politics, which one can indeed argue resulted in “patrons” providing state jobs, services, and/or favors to their “clients” and involved corruption. Yet patrimonialism does not focus or reflect on intra-elite relations, whether these are of a conflictive, cooperative, or collusive nature. As shown throughout this book, most high political corruption in postwar Lebanon originated at this level and much less so at the level where “patrons” catered to the needs of their subservient “clients.” In this context corruption in postwar Lebanon differed in nature and scope from the patronage-induced corruption in Lebanon’s First Republic prior to 1975, as analyzed by Michael Johnson (1986), Marun Kisirwani (1971, 1974, 1978), Michael Hudson (1985), Samir Khalaf (1977), and others. This is not to say that patron-client relations in postwar Lebanon had no significance. Surely one of the features of the postwar political settlement—vulnerable elites—provoked processes that resemble those of patrimonialism. Yet none of the corruption cases explored in this book can be reduced to these terms, and patrimonialism does not explain all or even most of them. As my own analysis has been informed by New Institutional Economics, it may come as no surprise that an approach closely matching my attempt to conceptualize Lebanon’s allotment state (Dagher’s “distributive state”) was developed by an economist. Otherwise there is little affinity between my analysis and economic or indeed economistic understandings of corruption. Most economists (both Lebanese and foreign) commenting on unbridled corruption seem more or less to agree that Lebanon’s state apparatus is excessively large as elites stuff the public administration with their followers and supporters, which in turn fosters corruption. Yet this claim is questionable even if one accepts the proposed correlation between excessive public sector employment and corruption. Measured in terms of the number of public sector employees relative to the labor force in general(12.5 percent in 2004), postwar Lebanon’s public sector employment does not stand out as excessively large, certainly not in comparison with other Arab states (Ministry of Social Affairs 2007, 85; Schiavo-Campo et al. 1997, 38; Garner 2003; World Bank LQU second quarter 2005). Of course, the right or optimal size of public sector employment in any economy is a matter of fierce debate, as

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are the ways to measure it. Yet the available data tell us that Lebanon simply does not have a bloated bureaucracy. The elites’ reliance on getting their supporters appointed to state jobs played a qualitative role in fostering corruption, not because it resulted in state obesity. Furthermore, many Lebanese economists also echo the dominant view that excessive and unproductive state interference in the economy is the main cause of corruption. This argument cannot be corroborated in the Lebanese context either. The corruption cases explored in this book were not limited to incidences of statist excess, and indeed I encountered patterns of corruption in areas where the state did not interfere heavily at all. Wasteful or interventionist policies may incidentally have prompted high levels of corruption (as, for example, in the state’s major subsidies for IDPs). Yet as we find corruption in policy areas where the state did not interfere (or, depending on one’s perspective, failed to do so), “statist” excess cannot be regarded as a prime cause of corruption. A final fundamental difference with economists’ readings is that I believe that corruption is rooted in the ways in which politics, not economics, is conducted. Because of this fundamental divergence, the correspondence between Dagher’s “distributive state” and my characterization of Lebanon as an allotment state ultimately breaks down. Dagher views the main source of national income—external rents—as the chief causal factor in his analysis of failing developmental policies and corruption, not the country’s political settlement (Dagher 2002, 25). In the Lebanese context this argument seems hardly persuasive. After all, the country’s external rents—consisting mostly of remittances from the sizeable Lebanese diaspora—accrue not to the state but rather to private households. In short, Lebanon’s society may arguably be a rentier economy, but it does not follow that a rentier economy inexorably generated a “distributive state.”

The Illusory Quest for Administrative Reform Although anticorruption policies and related “administrative reforms” are not my prime subject, my findings evidently carry implications for such efforts. Indeed, bringing politics and institution building back into the analysis of corruption makes it clear why Lebanon’s attempts at administrative reform to combat corruption have been widely regarded as a failure (El-Saad 2001, 15; El Ghaziri 2007, 6; Ingels 1998–99; World Bank LQU fourth quarter 2003; Iskandar 1996; Adnan Iskandar in AN 12 July 2005). The various anticorruption plans and strategies developed since the early 1990s put different emphases on ways to tackle corruption. Most important, disagreements evolved around the World Bank’s stress on “managerialism” (El Ghaziri 2007, 274). In brief, the World Bank and some of its Lebanese converts, primarily among Hariri’s entourage, advocated “transforming

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public sector approaches and operations in line with practices in private business management” (El Ghaziri 2007, 274). Others, including leading figures in the state’s watchdog agencies, argued for a more legalist approach: existing laws and procedures needed stricter implementation without necessitating an overhaul of state bureaucratic structures. Notwithstanding these differences, the various reform proposals presented a strikingly consistent set of measures. By and large, many of these proposals appear compatible with my argument that corruption is likely to flourish in institutional environments that fail to satisfy the key criteria of bureaucratic organization. The proposals include clarifying, standardizing, and streamlining state agencies’ mandates and procedures; introducing “e-governance”; strengthening oversight mechanisms by independent state watchdogs; establishing a “republican ombudsman” answerable to the public; fully including in the national budget all items of state expenditure; and addressing conflicts of interest by obliging politicians and public servants to declare their wealth prior to assuming office. Most of these suggestions are compatible with my stress on bureaucratic organization. Yet virtually none of the projected reform measures acknowledged the essential political underpinnings of institution building let alone attempted to alter such dynamics. The envisaged reforms appear to have been superimposed on Lebanon’s political settlement while ignoring the possibility that the settlement is incapable of generating the desired institutional changes. In this way, administrative reform in Lebanon has been a routinized effort to bolster the capacity of institutions to withstand corruption without an attempt to remove the principal political obstacles to reform. Put differently, the proposed reforms failed to address causes of corruption that are political to the core. To their credit, many Lebanese critics realized from the start that for this reason the official anticorruption drive was doomed to fail. Indeed, postwar Lebanon has not suffered from any shortage of plans to overhaul the state’s institutions drastically; yet very few survived the process of political decision making, and those that did were incapacitated by the political settlement. For example, Hassan Shallaq, former minister of state for administrative reform (1998–2000), claimed that out of thirty administrative reform proposals he submitted to the government, twenty-four were rejected (AN 6 November 2000). Nisrine El Ghaziri likewise concluded in her study of OMSAR and administrative reform in postwar Lebanon that “very few administrative reform studies were translated into draft laws; and even fewer were endorsed by the executive or legislative authorities” (2007, 5). Although it was a key proponent of the politically sterile universe of “ administrative reform,” the World Bank acknowledged that “reform talk” in Lebanon failed to have much impact, as it “can get too esoteric, too removed, given too much technical jargon” (LQU first quarter 2006, 3). Yet even such moments

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of reflection offered no understanding of the underpinnings of reform in the country’s political settlement. Arguably, the World Bank’s supposedly apolitical mandate hindered its engagement with a more politically informed assessment of the reasons why its reform proposals went largely unheeded. Consequently, the World Bank shied away from such an analysis, preferring instead to wait for the reform process to be “unstuck” by “the Lebanese, through their rich tradition of tolerance for public debate” (World Bank LQU fourth quarter 2003, 7). Accordingly, all that the World Bank’s discourse allowed for in terms of political analysis was to call for more “political will” or for building “political support” to implement far-reaching administrative reforms and to hammer home the message that the continuing failure to achieve reform would harm the economy (World Bank LQU first quarter 2004 and fourth quarter 2005). Curiously, Lebanese actors who faced no such limitations, or far fewer—including OMSAR, Lebanese experts on public administration, and some economists—echoed the World Bank’s esoteric discourse and duly adopted a terminology that in Lebanon’s political context proved to be devoid of much meaning. Perhaps unwittingly, the World Bank thus helped define a debate on anticorruption reforms in Lebanon that mostly failed to unveil let alone address the political dynamics thwarting reforms. To claim authority or expertise on matters of administrative reform was, it seemed, to strip reform of its political content. While imagining that their anticorruption initiatives were exogenous to the political process, the advocates of administrative reform were themselves mired in the country’s political settlement. For instance, human resource policies at the World Bank, the UNDP, and the EU resembled the strategies of Lebanese politicians, deliberately circumventing the cumbersome political arrangement by directly recruiting and paying staff members and experts hired to spearhead Lebanon’s administrative reforms. OMSAR’s entire staff injected into the MoH and the MMRA were directly paid by foreign donors and never went through the CSB’s supposedly mandatory examination and recruitment procedures (El Ghaziri 2007, 279–80; interviews with World Bank appointees, Beirut, October 2006). Even more seriously, however, the mantra of administrative reform provided political elites with a convenient pretext for purging their rivals. After all, elites were firmly entrenched by virtue of the inclusiveness and multiple veto powers associated with the country’s political arrangement. Accordingly, the most tangible effects of administrative reform were the numerous attempts to neutralize or eliminate political opponents amid accusations of corruption. The political arrangement otherwise allowed for no or few meaningful mechanisms for alternating or indeed concentrating power. Such purges occurred in 1993, when the first Hariri cabinet dismissed over five hundred public servants and replaced them with new appointees deemed loyal to the new political elites. The purges were

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widely viewed as a patent attempt to consolidate the Hariri government’s power after the shaky start of post-Ta’if governments in the three preceding years (Safa n.d.; Hala Homsi in AN 17 September 2003). Many of those purged were reinstated in their jobs after the Advisory State Council ruled that the government had failed to gather evidence of administrative wrongdoing. In 1999 the Hoss-led government and President Lahoud went after various former ministers and senior public servants associated with the Hariri government. Though initially receiving some support, the firings became widely regarded as a witch hunt to break Hariri’s power, if only because the campaign failed to target officials associated with incumbent members of the government. This scenario was repeated following the formation of the Karameh government at the end of 2004. Numerous attempts at combating corruption in postwar Lebanon failed because the political underpinnings of institution building were routinely discounted. The discourse of administrative reform aggravated this tendency because, divorced from politics, its otherwise valid proposals to strengthen state institutions failed to gain traction. Exactly as the World Bank feared, suggestions for reform became esoteric, to the extent that they resembled the method of the architect in Gulliver’s Travels who tries to build houses by beginning at the roof and working downward to the foundation. If genuine attempts at combating corruption are to have any chance to succeed, this foundation needs to be rebuilt. In essence, this means a comprehensive revision of the Ta’if Accord and its political settlement in order to address the debilitating nature of decision making associated with high levels of corruption. The exact design for such dramatic changes deserves separate study. Nor can one expect such political reforms to be achieved overnight. Yet what is certain is that only under these fundamentally altered conditions will the “roof ”—solid bureaucratic institutions—withstand rampant corruption.

Corruption and the State in Postwar Recovery I have avoided making grand claims about the causes of corruption in settings other than postwar Lebanon. Instead I have presented a single case steered by conceptual tools and a methodology derived from a critical reading of the general literature on corruption and the state. I do hope, however, that this book inspires other studies. Researchers working in different countries or contexts may be persuaded by my argument that an effective study of corruption requires us to distinguish among different kinds of corruption and disaggregate them in order to analyze causes accurately. It is, I hope, a counterweight to the increasingly common approach to corruption in undifferentiated and merely aggregate terms, heavily relying on opinion polls, surveys, and indices. Likewise, my emphasis on

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the primacy of politics and the political settlement in understanding bureaucratic institutions and corruption may be read as a critique of the politically sterile universe of “administrative reform.” Yet one area deserves to be explored a little further. It concerns the implications of my findings for the comparative study of postwar recovery. Corruption is a recurring and common phenomenon troubling postwar countries attempting to recover from intransigent conflicts, particularly in subSaharan Africa, the Balkans, Central Asia, and the Middle East (ScharbatkeChurch and Reiling 2009; Le Billon 2008; Large 2005; Ball 2002). Accordingly, the nexus between armed conflict and corruption, and ways to overcome both, have received increasing consideration among academicians and policymakers alike. My emphasis on Lebanon’s state institutions is in tune both with the growing realization that postwar recovery strategies need to pay close attention to rebuilding states and with ample indications that such endeavors mostly turn out to be a thorny and frustrating experience. Nevertheless, some studies of postwar corruption and state building have attributed rampant corruption to the nature and scale of reconstruction policies, often concentrating on infrastructure, which is believed to be especially prone to bribery, cheating, and graft (Galtung 2005, 6–7; Maxwell et al. 2008, 13–16). My study of postwar Lebanon cannot corroborate this belief. Corruption thrived in a host of policy areas, including but not exclusively physical reconstruction. Others have suggested that high levels of external aid, especially in postwar settings, generate a “rentier effect” and invite widespread corruption (Bolongaita 2005; Svensson 2000). Yet postwar Lebanon did not receive extraordinarily high levels of aid compared to other countries in the region and to recipients in, for example, sub-Saharan Africa (World Bank 2007). Nor did external aid play a prominent role in all or most of the corruption cases examined in this book. Against this background I suggest that we broaden the discussion of corruption in postwar recovery by searching for parallels and trends in the political settlement underlying fragile peace and stability in postwar societies. It would be presumptuous to claim that all postwar peace building produces identical political settlements. The written and unwritten rules governing decision making and institution building are bound to be highly context specific, and any serious single-country study needs to approach them as such. Since the early 1990s, however, power-sharing agreements “whereby government posts are distributed across the most powerful political parties or groupings” have become an increasingly common approach to channeling postwar politics in a host of countries (Spears 2000, 105). Proponents of the “liberal peace” have recommended building toward political systems “in which the parties to the conflict feel they have a stake, thus in a very positive sense co-opting all parties—government and

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rebels—in a new creation” (Zartman 1995, 22–23).9 In addition to the requisite inclusiveness of grand coalitions, peace agreements are also widely claimed to benefit from efforts to grant conflicting parties or groups “mutual vetoes” and a degree of “segmental autonomy.” Many such strategies have been implemented around the world. To a large extent, such approaches to postwar peace building are based on or loosely inspired by the still influential model of “consociational democracy” developed by Arend-Jan Lijphart (1977 and 1969). Warning against the perilous effects of majoritarian political systems in “deeply divided societies,” Lijphart argued for a more inclusionary, consensus-based approach to decision making, allowing for grand and inclusive coalitions, multiple veto powers, and a large degree of autonomy for the main actors in the political process. Many contemporary students of conflict resolution still point to these consociationalist devices as the best or even the only feasible option available to war-torn societies that aspire to peace (Binningsbo 2006; Sisk 1996; McGarry and O’Leary 1993, 36–37). Lebanon, it has been argued, shares all or some of the features of a “consociational democracy.” Yet it is not always clear whether postwar Lebanon is a full-fledged consociational political system. My own characterization of the country’s postwar political settlement suggests a close but imperfect match with the consociational model. On the one hand, the model’s grand coalitions, political inclusiveness, and mutual veto powers appear to match Lebanon’s political settlement. Yet on the other hand, Syria’s dominant and coercive role in the country suggests an element of authoritarianism in the Lebanese political system that most consociational democrats would find hard to swallow. The same applies to Lebanon’s inadequate electoral politics, which features habitual gerrymandering and vote rigging. With these reservations in mind, my analysis may still hold some relevance for the study of consociationalist and inclusionary power-sharing formulas in postwar societies. Elsewhere consociational democracy has been strongly criticized for both its analytical and normative flaws and its shortcomings. Most commonly, consociational devices are blamed for exacerbating identity-based conflict, as it tends to favor elites who capitalize on and fuel communitarian fears (Sartori 1994, 72). Others have generally blamed consociational politics for causing political gridlock, immobility, and paralysis in public decision making (Dahl 1971, 119;

9. In his textbook on peace building in postwar societies, Ho-Won Jeong similarly expresses the common view that “an internal consensus on democratization and transition from conflict should reflect a wide representation of groups. Representatives of major religious, professional, and political interest groups can work together toward forming a new political culture based on compromise and negotiation” (2005, 90).

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Van den Berghe 1981, 189; Pappalardo 1981, 368; Scholten 1980, 334). My conclusions broadly support these views but add another major cause of concern. If indeed Lebanon’s postwar political settlement resembles the consociationalist model, the latter may undermine bureaucratic state institutions and contribute to widespread political corruption. In that sense, this book should be uncomfortable reading for those who insist that consociationalism is to be recommended to divided societies trying to recover from armed conflict. Accordingly, postwar Lebanon does not appear to be unique. Time after time, postwar countries pursuing inclusive political strategies have witnessed extraordinarily high levels of corruption. A few prominent examples include post1995 Bosnia-Herzegovina (Devine and Mathisen 2005), post-2002 Afghanistan (USAID 2009; Asian Development Bank et al. 2007), and post-2003 Iraq (International Crisis Group 2011; Leenders and Alexander 2005). Many of these countries built complex institutional arrangements marked by grand coalitions, consensus building, and multiple veto points; and in the main, political deadlock, failed institution building, and rampant corruption resulted. Iraqi critics of widespread corruption even borrowed from Lebanese political jargon the notion of muhasasa to describe the inclination of their own unruly political class toward pork-barrel politics as deadlock foiled public policymaking (International Crisis Group 2011, 21; Al-Mada 25 May 2010; Visser 2009; Az-Zaman 26 February 2004). Some argue that corruption may simply be a necessary collateral cost of building stability in divided societies, especially during postwar transitions—a price worth paying (Le Billon 2003; Uvin 2009; Bardhan 1997, 1394). Perhaps so; but like Lebanon, none of these “postwar” countries can claim to have reached genuine peace. All they are experiencing is the unstable respite of a truce.

Epilogue

In 2011 popular uprisings swept through the Arab world. Two authoritarian and kleptocratic regimes—those of Hosni Mubarak in Egypt and Zine El Abidine Ben Ali in Tunisia—collapsed. Mu’amar al-Qadhafi died while putting up a last fight against rebel forces in Sirte, while Ali Abdullah Saleh in Yemen continued to haggle about the terms of his exit from power. In Syria, Bashar al-Assad’s regime was using brutal force to repress mass demonstrations and, increasingly, to quell armed resistance that was spreading across the country. To judge from the banners carried by angry protesters, a wide range of grievances was prompting mainly leaderless crowds to take to the streets and public squares of the Arab world to demand the overthrow of their rulers. Arguably, popular anger over pervasive corruption—and the injustice and countless malicious effects ascribed to it—has been at the root of the uprisings. Regime crooks personifying regime corruption—such as the Trabelsi family in Tunisia, Ahmad ‘Izz in Egypt, and Rami Makhlouf in Syria—were among the first targeted by activists, in slogans, revelations on Facebook, and attacks on their businesses. Following the overthrow of Ben Ali and Mubarak, transitional governments immediately permitted prosecution of some strongmen of the ancien régime on charges that included corruption and embezzlement. And in those Arab countries where authoritarian rulers still managed to hold on to power, anticorruption reforms—or rather, renewed promises to that effect— were part of the attempt to mollify popular rage. Never before have hopes been so high about ridding the Arab world of bad, authoritarian, and corrupt governance.

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Immersed in its own problems, Lebanon remained largely sidelined by the wave of popular protests and the vibrancy of the “Arab Spring.” Playing on the now famous slogan of protesters throughout the Arab world—As-Sha’ab yurid isqat an-nizam! (the people demand the downfall of the regime)—a few hundred demonstrators gathered in Sanaya (Beirut) during the first months of 2011, carrying banners that read As-Sha’ab yurid isqat an-nizam at-ta’ifi! (the people want the downfall of the sectarian system). Their protests soon fizzled out. The contrast with the days when the last Syrian soldiers left Lebanese territory in April 2005 could not have been greater. Then, jubilant crowds had gathered in Beirut’s Martyrs’ Square to celebrate the coming of a new era. All eyes were on a new political order that would put an end to sectarian conflict once and for all and restore the country’s independence. As Samir Kassir put it, the general “desire was to turn the end of the tutelage by the Ba’athist Syrian regime into a starting point for the restoration of a modern Lebanese state, a state that would guarantee the respect for the citizen-elector to which the latter is entitled” (2006, 39). Politicians aligned with the 14 March Movement—a coalition of Syria’s critics in Lebanon named after the large demonstration held that month—promised swift reforms. In Washington and Paris the mood was also festive, as officials praised what they called Lebanon’s “Cedar Revolution” as the first in a projected series of popularly led regime changes, or at least changes in regime behavior, across the region. That joyous atmosphere in Lebanon has turned unmistakably sour. Gone are the Lebanese flags draped over Beirut’s balconies. In place of these symbols of national unity, sectarian tensions have been running high. Gone, too, is the optimism over comprehensive political and economic reform. In its place came exasperation at perpetual political bickering and socioeconomic stagnation. Most alarmingly, Lebanon’s designation as a “postwar” society was shattered as significant outbursts of political violence hit the country in rapid succession, first in the summer of 2006 when Israeli combat planes and troops bombed Lebanon’s infrastructure, then barely one year later when violent confrontations broke out between the Lebanese armed forces and Fatah al-Islam, a murky gathering of Islamist militants who barricaded themselves in the Palestinian refugee camp in Nahr al-Bared, near Tripoli. Next, heavy fighting between Hizbullah gunmen and pro-government fighters in May 2008 triggered renewed fears of civil war. Meanwhile, a dozen politicians, journalists, and security officials were killed in assassination attacks, and scores of civilians died in sectarian clashes and the bombing of several public places. All told, Lebanon has not been moving in the direction of modern state-making that Kassir had envisaged shortly before his own assassination on 2 June 2005. It is beyond the scope of this book to detail exactly how Lebanon’s political settlement has adjusted and will adjust itself to the departure of Syria’s troops.

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What is clear, however, is that these adjustments have themselves become the source of ongoing disputes and instability, and have still not fully crystallized. Syria’s interference in its neighbor’s internal politics is no longer directly overseen by Syrian security officials within Lebanon. Yet the meddling has not ended. The Syrian regime can still count on a critical mass of support in Lebanon among the members of the so-called 8 March Movement, those parties led by Hizbullah that on that date in 2005 staged their own mass rallies against what they feared was Western encroachment on their country’s independence and their agenda of continued resistance against Israel. Consequently, Syria’s leadership soon regained confidence as Lebanon remained at the epicenter of Syria’s sphere of influence. With the subsequent mass protests at home, starting in March 2011, shaking the foundations of the Syrian regime, the consequences for Lebanon could indeed be severe. After months of demonstrations and a ruthless but inconclusive clampdown, Syrian president Bashar al-Assad in October that year warned that Western intervention “would cause an earthquake” and “burn the whole region” (Sunday Telegraph 30 October 2011). Few doubt that Lebanon would be hit first. More generally, foreign meddling and micromanagement of Lebanon’s internal affairs intensified. A host of regional and extra-regional actors stepped up their support for and guidance of their Lebanese allies’ maneuvers on a dazzling number of thorny issues. Under these conditions the Syrian regime has come to share its hegemony over Lebanon with Iran, the United States, France, Saudi Arabia, Qatar, and a multitude of UN organizations, observers, and rapporteurs. While each of these external actors has been pulling Lebanon’s elites in different directions, the unremitting tendency of the country’s political settlement to generate deadlock on virtually every policy matter of importance reached unprecedented heights. Political gridlock was now more overtly driven by outsiders’ agendas than ever before, and so Lebanon’s political settlement acquired new significance in its failure to absorb, let alone accommodate, regional conflicts. International calls for Hizbullah to disarm or to be disarmed were the first to reinvigorate the time-honored propensity of Lebanon’s political settlement to generate political impasse. Initially most Lebanese critics of Syria’s policies had carefully steered away from this issue, but the UN Security Council, led by the United States and France, took a less subtle position when on 2 September 2004 it combined its demand that Syria withdraw from Lebanon with equally strong calls for all armed groups, including Hizbullah, to lay down their weapons. This move set Hizbullah and its allies on a collision course with those who had demanded Syria’s withdrawal, for they now perceived the latter as puppets serving the hostile agendas of the United States and other Western nations. Since staging its own mass rallies in the spring of 2005, Hizbullah has been driven by its determination to preserve its arms under the rapidly changing conditions marked by Syria’s

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withdrawal. In July 2005, following elections held two months earlier, Hizbullah abandoned its long-standing refusal to take part in Lebanon’s government and accepted two ministerial posts in a coalition cabinet of members of both the 8 and 14 March movements. Some observers hailed this step as an indication of Hizbullah’s willingness eventually to turn itself into an ordinary civilian party, but Hizbullah officials made it clear that their motivation was the exact opposite (Al-Manar 14 June 2005; interview with Hussein Nabulsi, Hizbullah spokesperson, Beirut, 14 June 2005). Decision making in the cabinet was effectively taken hostage by Hizbullah’s determination to continue its armed “resistance.” Efforts to establish an international tribunal to prosecute Hariri’s assassins similarly stumbled on Lebanon’s gridlocked decision making. When external actors stepped up their demands that the tribunal receive sweeping powers, they aggravated Lebanon’s political impasse. Members of the 8 March coalition suspected that the U.S. administration was using the judicial process as a way to control Lebanese politics. The United States, of course, posed a direct danger to Hizbullah’s agenda of armed resistance. Consequently, the cabinet failed to reach a consensus on the tribunal’s mandate. Regardless, on 10 November 2006, the UN commission of inquiry into Hariri’s murder submitted a draft proposal to the Lebanese government for the tribunal’s statutes. The 14 March members of the government ratified it in the absence of five Shi’ite ministers who had requested a delay in the decision. Nor did President Émile Lahoud—himself the target of allegations that he had been complicit in Hariri’s assassination—approve the statutes. Sensing a dangerous precedent wherein decisions of international importance were reached by majority vote and in violation of the president’s constitutional prerogative to co-sign international treaties, Hizullah and its allies pulled out of the government. A lengthy standoff ensued, with Hizbullah and its allies contesting the cabinet’s very legality for failing to pay heed to the constitutional rule (stated in the preamble) that each government ought to include representatives of all major sects. Supporters of the 8 March coalition staged a months-long picket-line demonstration in downtown Beirut to give further weight to the demand of Hizbullah and its allies that they be granted a “participating minority,” or one-third of the government’s ministerial posts plus one. Oblivious to the confrontation it had helped ignite, the UNSC approved the tribunal’s statutes on 21 November. An added source of stalemate concerned the fate of President Émile Lahoud. Some 14 March members were eager to impeach the president, either because they accused him of playing a role in Hariri’s assassination or because they viewed him as the prime symbol of Syria’s influence. Yet the 8 March parties insisted that until there were guarantees that Lahoud’s successor would be equally sympathetic to the agenda of armed resistance, the president would have to stay. In preventing the impeachment, Hizbullah skillfully played on Maronites’ anxieties about losing

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the final say on who was, for better or worse, still “their” president. The result was a political standoff that continued after Lahoud’s extended mandate expired in November 2007, leaving the country without a head of state for months. This time around, Speaker of Parliament Nabih Berri, himself part of the 8 March Movement, repeatedly refused to convene Parliament to elect a new president, on the pretext that the compulsory quorum of two-thirds for such a session could not be attained in light of the mounting misgivings of the 8 March parties. This issue was to be resolved only six months later, when Lebanon’s rival parties reached tentative agreement on a range of contested issues at a carefully mediated conference held in Doha. Prior to 2005 Hizbullah had lost no opportunity to lambaste the country’s quarreling elites for their inability to govern. Its dislike of the elites’ political bickering and corruption had bordered on contempt for the entire political system and its main players. As a commentator wrote in the party’s official organ in July 2003, “It is not that the system in Lebanon is corrupt but rather that corruption has become the system” (Al-Intiqad 11 July 2003). By contrast, Hizbullah set its priorities on resisting Israeli occupation. Yet in the wake of Syria’s withdrawal, Hizbullah was forced to change course. It now shielded itself and its arms behind the same debilitating rules of governance so as to ensure that no decisions could be made to disarm the movement despite continuous UNSC resolutions. Hizbullah had found a substitute for Syria’s protection of the “resistance,” but not without aggravating the political settlement’s propensity for unrelenting gridlock on virtually any issue of importance. The political process essentially became paralyzed, and outsiders stepped up their political and financial support to their Lebanese allies in attempts to shift the stalemate in their favor. Accordingly, the 14 March Movement received increasingly overt support from the United States and France, while its Sunni component, the Future Movement, led by Sa’ad al-Hariri, son of the late Rafiq al-Hariri, was propped up by Saudi Arabia and other Arab countries. In turn, the 8 March Movement solicited the backing of Syria and Iran. Predictably, different camps accused one another of serving foreign agendas at the expense of the country’s independence. Positions hardened as the 14 March forces accused Hizbullah of having provoked the Israeli onslaught of the summer of 2006, whereas Hizbullah charged the 14 March forces with having betrayed the country in time of war. A showdown resulted, plunging the country into violent confrontations between Hizbullah and 14 March supporters in May 2008. Hizbullah’s siege ended when Lebanon’s conflicting parties hastily convened in Doha and under the auspices of the Qatari emir agreed on a truce and on steps to escape the institutional impasse. The Doha Agreement was the first attempt to adjust Lebanon’s political settlement to the new situation after the Syrian withdrawal in 2005. To a large extent,

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however, the agreement merely confirmed the political arrangement already in effect. It reiterated the Lebanese political leaders’ “commitment to the principles enshrined by the Lebanese constitution and the Ta’if Accord” (Blogging Beirut 2008). Notably, the two parties that had hitherto been most critical of Ta’if— Hizbullah and Michel Aoun’s Free Patriotic Movement—now formally endorsed the pact. Approving the election of a new president, the compromise candidate and former army general Michel Sulayman, the Doha Agreement specified a formula for a new government of national unity of thirty ministers while stipulating that parliamentary elections, scheduled for June, were to be held according to a reformed election law. Long-standing complaints in the Christian community about having to enter electoral alliances with non-Christian candidates were addressed by using the smaller qadha districts as the basis for new electoral districts. Another adjustment pertained to the composition of the Council of Ministers. While the practice of carefully chosen cabinets had hitherto ensured a sectarian and regional balance, it was now stipulated that on top of these distributional keys, the “majority” (the 14 March Movement) was to gain sixteen ministers, the “opposition” (the 8 March Movement) eleven ministers, and the president three ministers. This, in turn, reinforced the president’s political leverage compared to the pre-2005 period. Yet the arithmetic of muhasasa had not changed; the Doha Agreement may have merely complicated it even more. A year later elections were held on the basis of an election law that skewed the results in favor of the 14 March coalition. Political wrangling resumed as efforts to form a new government took months in the conventional atmosphere of mutual distrust and stalemate. Formed in November 2009, the new government of “national unity,” awkwardly comprising both the 8 and 14 March camps, lasted until January 2011, when Hizbullah and its allies walked out amid indications that the international probe into Hariri’s assassination was about to indict Hizbullah operatives. In June, just before the Special Tribunal for Lebanon issued four arrest warrants, a new government, led by pro-Syrian Sunni politician and business tycoon Najib Miqati, was formed. Its composition was heavily tilted in favor of the 8 March Movement and Hizbullah but also included ministers from Walid Junblatt’s entourage, who had abandoned support for the 14 March Movement. Now bolstered by control over the cabinet, Hizbullah no longer needed to fear any policy or decision that could jeopardize its interests, with regard either to the tribunal’s extradition demands or to calls to lay down its arms. In response, members of the 14 March Movement—infuriated by Hizbullah’s alleged involvement in Hariri’s assassination and now sidelined from government—had every reason to sabotage the new cabinet’s policies whenever their remaining prerogatives in Parliament and the state bureaucracy permitted them to do so.

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Evidently the unfolding political crisis after the Syrian withdrawal in 2005 has made policymaking and governance virtually impossible. Hizbullah’s tactics significantly raised the stakes involved in the political process, and foreign tutelage became widespread; as a result, policymaking, institutional reform, and urgently needed measures to address the country’s economic malaise were relegated to second-tier importance. Yet for those who observed institutional gridlock between 1989 and 2005, the political stalemate following the Syrian withdrawal must feel depressingly familiar. Sweeping economic and administrative reforms were vociferously advanced at international donor conferences after the 2006 war. Yet very little change materialized. The tendency of Lebanon’s political elites to circumvent the debilitating rules of the settlement—a striking feature of pre-2005 politics—continued. One example concerns the way in which the 14 March Movement responded to the task of reconstruction following the devastation caused by Israeli military action in 2006. Instead of seeking a broadly supported plan for reconstruction and establishing a transparent way to implement it, Prime Minister Fouad Siniora sidelined the CDR (which no longer enjoyed autonomous status) and granted far-reaching powers to the Higher Council for Relief (HCR), an obscure and largely dormant state agency directly attached to the prime minister’s office and headed by an official sympathetic to the 14 March Movement. In addition, Siniora established a Recovery Unit to oversee the reconstruction process, led by a former employee of Hariri’s business group in Saudi Arabia and answerable only to the prime minister. On a wider level, the cumbersome formal political process and the paralysis of its core institutions were increasingly viewed as an impediment to rather than a platform for decision making. For instance, efforts to agree on the country’s key contested issues were entrusted not to the Council of Ministers or to Parliament but referred to an ad hoc “National Dialogue” initiated in March 2006 involving fourteen political leaders; when they met behind closed doors, they even dodged the state’s responsibility of providing a podium for arbitration. Regardless, the National Dialogue failed to agree on much. Under the aggravated stalemate after 2005, Lebanon’s conflicting parties have sidelined not just the country’s formal political arrangement but the state altogether. Elements of this strategy were, of course, already apparent during the 1990s, when key state attributes were readily privatized—to be seen, for instance, in the rise of Solidere. Yet never before was the state marginalized as much as it was during and after the 2006 war. While Lebanon’s political camps were accusing one another of reckless behavior and treason, Lebanese and foreign donors were funding and initiating relief and reconstruction efforts in disregard of the Lebanese state. The result was a building and relief frenzy primarily designed to outdo similar efforts by rivals but sharing a common determination to

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circumvent the state (Quilty 2006; Quilty and Ohrstrom 2007). Explaining his Iranian-funded relief effort, Hizbullah leader Hassan Nasrallah said that his party and the state would from now on work “in two parallel tracks” (Al-Manar 14 August 2006). The 14 March Movement and its backers responded in kind. As one former CDR official put it: “After the dysfunctional state-led reconstruction of the 1990s, we now have privatized reconstruction, a form of de-building the state’s institutions. But no society can function without a state, corrupt or not” (interview. Beirut, 28 November 2006). With a political settlement that preserves many traits of the pre-2005 period, one might expect that state institutions would similarly fail to withstand high levels of corruption. Yet a mitigating factor against such a development is Lebanon’s declining state resources, now mostly consumed by servicing the country’s colossal public debt (162 percent of GDP in 2009) and paying public sector salaries— hardly an ideal environment for those seeking opportunities for corruption (IMF 2009). This may explain how it is that at least in terms of perceived corruption levels, derived from Transparency International’s Corruption Perceptions Index, Lebanon’s corruption record after 2005 does not appear to have worsened, while in 2007 it may even have witnessed a slight improvement. Relatively few new corruption allegations have been aired since 2005. More recent allegations feature reports on widespread fraud and vote buying during parliamentary elections in both 2005 and 2009 (European Union Election Observation Mission 2005 and 2009; Newsweek 9 June 2009; New York Times 23 April 2009). Damning allegations of bribery focused on the judiciary (Mugraby 2008, 189). The MoF was accused of running a $213 million “slush fund” allowing collected fines for minor infractions to be paid out to favored officials, consultants, and unknown persons (Al-Akhbar 19 May 2011). The World Bank blamed Lebanon’s wasteful state management of the poorly performing electricity sector on “corruption in payment flows or procurement, . . . buying of votes through free electricity, [and] profiteering from energy shortages” (2008a, 16). Most other corruption allegations concerned officials’ conduct during and immediately after the 2006 war. Various Lebanese NGOs accused the state of a lack of transparency and accountability in its distribution of relief supplies, including those provided by foreign donors (Samidoun Media Centre 2006). They charged that the HCR apportioned medical and food supplies according to political considerations, with most aid going to Amal and the Future Movement while non-affiliated relief groups received much less (Quilty 2006, 85). An MoH official and two of his colleagues were briefly detained on suspicion that they had embezzled medical relief supplies and sold them privately (Quilty 2006, 88–89). For the removal of destroyed buildings the HCR contracted with a construction firm owned by a relative of a bodyguard in Hariri’s security entourage who had

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died in a bomb blast in February 2004. As it was paid according to the volume of rubble removed, the company allegedly bulldozed both ruins and damaged houses that could still be repaired. Likewise, state agencies reportedly turned a blind eye to private owners who deliberately destroyed their houses because compensation for fully demolished units was higher than for homes that were merely damaged (interviews with European diplomats, Lebanese foreign affairs official, and Lebanese contractors, Beirut, October 2006). Even when most of the reconstruction in the south was planned, designed, and executed directly by private or foreign donors, government officials were still (allegedly) trying to get their hands on the funds involved. In the polarized climate following 2005, assertions of widespread corruption primarily served as a convenient rallying point, a way to discredit one’s opponents rather than to solicit serious suggestions for drastic change. Especially during the hostilities of 2006, Hizbullah launched fierce accusations against its 14 March adversaries, contrasting its own relatively clean reputation with the endemic corruption of the country’s established political elites (Hassan Nasrallah on Al-Jazeera 20 July 2006).1 Yet concrete proposals by the party to address rampant corruption failed to materialize. Hizbullah’s memorandum of understanding with Aoun’s Free Patriotic Movement—signed in February 2006 to formalize the two parties’ political alliance—was conspicuously short on measures to achieve the goals of “building a modern state” and “addressing corruption at the root.”2 The 14 March forces did not offer many helpful solutions either. Primarily addressing anxious donors at international fund-raising conferences after the 2006 war, the Siniora-led government promised policy steps drawn from the mantra of “administrative reform” (Lebanese Republic 2006). In all, no serious attempt was made to reduce corruption or, one could argue, to establish genuine peace. As I have argued in this book, the groundwork will have to involve a redesign of Lebanon’s political settlement. Short of that fundamental change, flawed state institutions and corruption are bound to flourish, just as Lebanon’s political elites will reap the spoils of yet another truce.

1. Hizbullah’s “clean” reputation took a hit, however, when, in September 2009, details emerged of a $200–400 million pyramid scheme masterminded by a businessman with strong ties to Hizbullah. Local newspapers were soon calling him “Lebanon’s Bernie Madoff ” after the corrupt billionaire investor convicted of mass fraud in the United States earlier that year. 2. See http://www.mideastmonitor.org/issues/0602/0602_3.htm.

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Index

accountability, 6, 12, 89, 92, 116, 118, 120 – 21, 164, 214, 223 – 24, 249 accountant, 94 activists, environmental, 43 – 44, 47, 50, 98, 206 ‘Addum, Adnan, 28 administrative irregularities, 164, 167, 212 administrative reform, 13, 101, 120, 210, 235 – 39, 248, 250, 261 Advisory State Council (Majlis Shura ad-Dawla), 88, 93, 99, 202, 238 Afghanistan, 241 agriculture, 101, 103, 156, 199, 229, 260 Airbus scandal, 27, 29, 85, 227 Air France, 83, 174, 176 allotment state (dawlat al-muhasasa), 231 – 35 Amal (Lebanese Resistance Detachments), 49, 125, 130, 137 – 38, 153, 171, 173, 182, 184 – 85, 190, 194, 204, 249 ‘Amin, ‘Abdullah, 147 – 48 Ammar, Walid, 19, 77 Andraus, Antoine, 118, 219 anticorruption, 3, 10 anticorruption campaign, 36, 159; background of Lebanon’s, 183 Aoun, Michel, 15n10, 125 – 26, 132, 134, 143, 151, 157, 158, 160, 247, 250 appraisal committees (Solidere), 62 – 64, 109, 112, 214 Arab League, 124 – 25, 156 Arab Tripartite High Commission. See ATHC

Arab uprisings, 242 – 43; and Lebanon, 243 Arslan, Talal, 218 Asmar, Bishara al-, 194 Assad, Bashar al-, 138, 158 – 61, 183 – 85, 187, 203 – 6, 211, 242, 244 Association of Lebanese Banks, 230 ATHC (Arab Tripartite High Commission), 125 – 26, 156 auditing, state’s, 17, 85, 119 auditors, 21, 100, 104, 115, 165, 167, 226 audits, 89, 94, 104, 116, 118, 120 – 21, 219, 222 Ayyash, Ghassan al-, 228 ‘Azar, Elias, 172 Ba’albak shipwreck removal, 39 – 40, 198 Ba’ath party, 147, 243 Baltaji, Ibrahim and Hassan, 91 Bank al-Mashriq, 83, 175 Barsoumian, Shahé, 32 – 33, 88, 179, 181 – 84 Baydun, Muhammad ‘Abd al-Hamid, 35 – 36, 184 – 85 Baydun, Muhammad Yussif, 189 BCD (Beirut Central District), 51, 58, 60 – 62, 64, 66 – 68, 101 – 2, 106 – 11, 113 – 14, 116, 207, 213 – 16 Bechareh, Antoine, 41 Beirut: downtown, 59, 245; municipality of, 114, 216 Beirut Central District. See BCD Beirut city council, 55 – 56, 116

268

Index

Beirut International Airport, 48, 174 Beirut spring, 243 Beirut Stock Exchange, 110 – 11 Bekdash, ‘Isam, 93n12, 95n13, 192 – 93 Berri, Nabih, 137, 140 – 41, 144 – 46, 148, 153, 168, 171 – 78, 180 – 82, 201, 204 – 5, 211, 221 Berri, Yassir Mustafa, 105 bids, 52, 54, 153, 192 – 93, 195 Biqa’, 20, 43, 100, 126, 131, 136, 149 Bir Hassan, 65 – 66, 68 Bosnia-Herzegovina, 241 BOT (build-operate-transfer) contract, 145, 180 – 81, 184 Bouiez, Faris, 99 – 100, 200, 205 – 6 bribery, 6, 10, 21, 24, 37, 40, 49 – 51, 53, 56, 58 – 59, 65, 149, 166, 239, 249 bribes, 4, 23, 25 – 26, 34, 36, 38, 40 – 41, 50 – 51, 58 – 59, 63, 210 build-operate-transfer. See BOT bureaucratic institutions, 217, 222, 224 – 25, 233 bureaucratic organization, 11 – 14, 72 – 73, 75, 77, 81 – 83, 85 – 87, 95, 101, 103, 105 – 7, 119 – 21, 223, 225, 231 – 32, 236; criteria of, 9, 11 – 12, 90 – 91, 101, 116, 119, 222, 224 – 25, 227 bureaucratic rules, 231 – 32 CA (Court of Accounts), 21, 52, 56, 75, 82, 86, 89, 94, 100, 104, 118, 164 – 67, 169, 210, 219 cabinet, 45, 97, 99 – 100, 103 – 4, 128 – 30, 132 – 35, 137 – 40, 143 – 46, 159, 188, 194 – 95, 201 – 2, 209 – 11, 218 – 20, 245, 247 cabinet meetings, 129, 133 – 34, 136, 138, 144 cabinet ministers, 34, 37, 67, 90, 113, 191, 224, 228 Cadastre (land registry), 113 Caisse des carburants (fund for fuel), 30 carte sanitaire, 74 – 75 cartel, 32, 179 – 83 CDR (Council for Development and Reconstruction), 7, 22, 48, 51 – 58, 60, 62 – 63, 98, 101 – 8, 111, 114 – 15, 135, 143 – 44, 203, 207, 209 – 14, 248 – 49 CDR and Prime Minister Rafiq al-Hariri, 55 CDR officials, 51, 53 CEGPB (Compagnie d’Exploitation et de Gestion du Port de Beyrouth), 90 – 91, 188 central bank, 7, 27 – 29, 83 – 85, 92, 99, 145, 174 – 75, 177 – 78, 225 – 30 Central Fund for the Displaced. See CFD Central Inspection Board. See CIB

CFD (Central Fund for the Displaced), 64 – 66, 69, 71, 91, 116 – 19, 221 Chamoun, Dory, 217 charities, 22 – 24, 69 Chehayeb, Akram, 48 – 50, 97, 199, 200, 202 Chouf, 68, 70, 198 – 99, 217 – 18, 220 Christians, 127 – 28, 146 CIB (Central Inspection Board), 19 – 25, 74 – 75, 80 – 82, 90, 94, 100, 106, 118, 164 – 67, 169, 173, 212 city planning, 106 – 7, 114 – 15, 214 Civil Service Board. See CSB Civil Service Code, 12n9, 82, 85, 92 clientelism, 231, 233 – 34 clinics, 19, 24, 73 – 74, 76, 149, 169 – 70 collegial governance, 129, 139, 181, 223 commercial banks, 229 – 30 Committee on Healthcare and Social Affairs, 76, 79 committees, joint Lebanese-Syrian military, 131 Compagnie d’Exploitation et de Gestion du Port de Beyrouth. See CEGPB concessions, private, 90 – 92, 94, 189 confessional communities, 127 – 28, 130, 138, 146 conflicts of interest, 7, 11 – 13, 18, 21, 35, 46 – 48, 51, 53, 60, 62 – 64, 68 – 69, 76 – 77, 82, 85 – 86, 90, 94 – 96, 100 – 101, 115 – 16, 119, 168 – 69, 196, 222, 226 – 27 Conseil Exécutif des Grands Projets, 105 Conseil Exécutif des Grands Projets de la Ville de Beyrouth, 105 consociational democracy, 8, 240 – 41 Constitutional Council, 150 contractors, private, 56 – 57, 70, 91, 93, 95 control bodies, state’s, 100, 120 – 21 Coopers & Lybrand-Deloitte, 103 corruption, 3 – 11, 15 – 19, 21 – 23, 29 – 31, 35 – 37, 39 – 47, 51 – 53, 69 – 73, 164 – 67, 209 – 13, 221 – 23, 225 – 27, 231 – 39, 249 – 50, 252 – 59, 262 – 64; as a window into state-building, 7; analysis of, 233, 235; debating, 17, 231; defined, 9, 231; difficulties of studying, 15 – 17; economic approaches to, 9, 234; economic impact of, 6 – 7; high-level, 29, 227; high levels of, 18, 72, 101, 174, 238, 241, 249; in pre-war period, 234 corruption allegations, 36, 166, 204, 249; post-2005, 249 corruption in post-conflict countries, 239, 241 corruption levels, 3 – 4, 223, 233 Council for Development and Reconstruction. See CDR

Index Council for Planning and Development. See CPD Council of Ministers, 34, 43, 60, 62 – 64, 97 – 99, 106 – 7, 127 – 29, 134, 136 – 38, 145, 165 – 66, 171 – 72, 179 – 82, 199 – 201, 212, 247 – 48 Council of Ministers and Parliament, 99, 103, 127, 141, 202 – 3 Council of the South, 141, 219, 221 counterfeit drugs, 23, 25, 81 Court of Accounts. See CA courts, 16, 20 – 21, 33, 37, 39, 52, 63, 104, 112, 124, 214, 218 CPD (Council for Planning and Development), 105 – 6 crude oil, 32, 86, 180 – 81 CSB (Civil Service Board), 85, 94, 100, 105, 119, 145 – 46, 164, 167, 210, 219, 237 currency crisis (1992), 207 – 8, 208n19, 229 customs, 31, 38, 40n18, 79, 87, 156 Dahdah, Lucien, 174 Dahya, ad-, 66 – 67 Dalloul, Mohsen, 155, 229 Damascus, 157, 159 – 62, 176, 183 – 86, 200, 203, 205, 211 – 12 Dar al-Handasah, 43 – 45, 47, 49, 64, 95, 97 – 98, 116, 196, 202 decision-making process, 14, 46, 128, 133, 136 – 37, 141 – 43, 145, 153, 163, 169, 172, 196, 206, 209, 222, 224 Din, Hisham Nasr ad-, 117 – 18 discretionary powers, 11, 78 – 79, 85 – 86, 92, 96, 100, 103, 107, 113 – 14, 116, 118 – 19, 121, 188, 200, 219, 224 displacement, 64 – 66, 68, 101, 116 – 19, 217 – 21 Doha Agreement (2008), 246 – 47 DPA (Dubai Port Authority), 42, 192 – 93 drugs, 24 – 25, 40, 77, 79 – 80 Dubai Port Authority. See DPA Dumani, Costa, 59 Dupont, Hervé, 115 ECGP (Executive Council for Grand Projects), 51 – 52 economy, 6 – 7, 9, 14, 89, 111, 140, 185, 208, 213, 226 – 27, 229, 234 – 35, 237 Eddé, Henri, 116 EDL (Electricité du Liban), 33 – 34, 184 – 85 EIB (European Investment Bank), 93 elections, 4, 49, 68 – 70, 131 – 33, 147 – 52, 216, 218, 245, 247 elections keys (mafatih intikhabiyya), 150

269

electoral laws and system, 148 – 50 Electricité du Liban. See EDL Elissar, 65 – 66 elites, 138, 146, 148, 154, 158, 160, 199, 206 – 9, 218, 222, 224, 231, 233, 235, 237, 240 endemic corruption, 7, 250 enforcement agencies, 43 – 44 enterprises, 5 environment, 7, 43 – 45, 47, 49, 95, 97 – 98, 101, 196, 199, 204 – 5 environment minister, 99, 205 European Investment Bank. See EIB evaluation committees, 63 – 64 Exclusive Agency Law on Commercial Imports, 154 Executive Council for Grand Projects. See ECGP expropriation, 107 – 12, 115 – 16 Fadi Saqr Ruhana, 37 – 38, 40, 42 Fakhoury, ‘Abd al-Hamid, 83, 174 – 76, 178 Fakhoury, Shawqi, 175, 189 Falcon International oil company, 88 Farhat, Abdallah, 221 Fattouch, Nicolas, 99, 197, 202 Fédération Internationale des IngénieursConseils. See FIDIC Feghali, Kamal, 65, 68 – 70 FIDIC (Fédération Internationale des Ingénieurs-Conseils), 52 finance, 59 – 60, 93, 102, 107, 166, 175, 187, 191, 193, 207, 228, 230 Finance Minister Fouad Siniora, 119, 195 Fneish, Muhammad, 35 – 36, 89, 182 FOO (furnish-operate-own) contract, 192 foreign companies, 28, 33, 194 – 95 foreign donors and assistance, 104, 193, 221, 237, 248 – 50 France, 155, 161, 244, 246 Free Patriotic Movement, 247, 250 fuel, 7, 29 – 30, 184 – 86 furnish-operate-own contract. See FOO contract Gaegea, Samir, 188 gas, 29 – 30, 33 – 35, 86, 88, 141, 183, 186 – 87 GDUA (General Directorate for Urban Affairs), 115 General Directorate for Urban Affairs. See GDUA gerrymandering, 146, 148, 150 – 51, 218 Ghazali, Rustum, 160 Government Hospital, 65 – 66

270

Index

government of national unity, 127, 131, 138, 182, 199 – 200, 207, 218 governorates, 46, 50, 98 – 99, 148, 202, 218 Greenpeace, 48 Hadathi, Khattar al-, 174, 176 Hafez al-Assad, 159 – 60 Hamadeh, Marwan, 161 – 62, 221 Hamadi, Qassim, 171 – 72 Hamdan, Hussein, 166 Harb, Boutros, 197 Hariri, Rafiq al-, 104 – 5, 134 – 37, 140 – 45, 152, 154 – 55, 157, 159 – 62, 166, 168, 171 – 72, 175 – 77, 180 – 86, 189 – 95, 202 – 4, 206 – 16, 219 – 21; accession of, 134, 142; allies and confidants, 172, 192 – 93, 211 – 13; assassination, 162, 245, 247; opponents and rivals, 181, 192, 194, 210 – 11, 214, 220; return to power, 159, 184, 193; strategies, 174, 177, 182, 203, 209 – 10, 220 Hariri, Sa’ad al-, 246 Harirism, 207, 214 HCR (Higher Council for Relief), 248 – 49 health, minister of, 20, 168, 171 health care, 73, 76, 79, 167, 169; subsidized, 19, 74 – 75, 168 Higher Council for Privatization, 135 – 36 Higher Council for Relief. See HCR High-Point Rendel, 91 – 92, 94, 192 historical institutionalism, 14 Hizbullah, 15, 142, 153, 155, 162, 182, 244 – 47, 250 Hobeika, Elie, 147 – 48, 188 – 89, 218 hospitals, 19 – 20, 22 – 24, 65 – 66, 74 – 78, 80, 83, 168 – 70; contracted, 75, 168 Hoss, Salim al-, 36, 54, 123, 125, 132, 134, 136, 143, 152, 157, 171, 160, 192, 212, 229 Hrajli, ‘Ali, 54 Hrawi, Elias al-, 132 – 35, 141 – 43, 151, 154, 157, 168, 171 – 72, 174 – 77, 179 – 81, 183, 200, 229 Humayid, ‘Ayub, 185 – 86 Husseini, Hussein al-, 123, 136 – 37, 140, 149, 157, 229 Hut, Muhammad al-, 29, 178 ‘Itani, Jamal, 212 ‘Itani, Muhib, 94 – 95, 191 – 92 Ibrahimi, Lakhdar al-, 125 IDPs (internally displaced persons), 69, 117, 216 – 17, 221, 247

IFC (International Finance Corporation), 178 illicit wealth law, 16 ImF (Independent Municipal Fund), 56 – 57 IMF (International Monetary Fund), 7n4 import licenses, 23 – 24, 78 importers, 22 – 23, 25, 34, 77, 79, 81, 87 – 88, 90, 93, 179 – 81, 185, 187; private, 22, 30, 87, 89 – 90, 182; sole, 88 – 89 imports, 22 – 23, 26, 29, 33, 77, 86 – 89, 181, 183, 205 independence, Lebanon’s 243 – 44, 246 Independent Municipal Fund. See ImF industry, 32, 43, 88, 95, 103, 179, 181 – 83, 196 – 97, 199 – 201 infrastructure works, 60 – 61, 107, 114; outsourcing of public, 115 – 16 inheritance law, 108 institution building, 14, 72, 101, 106, 121 – 22, 140, 154, 188, 222, 233, 235, 239 institutional gridlock, 132, 139, 141, 144 institutional reforms, 103, 168, 170, 192, 201, 248 institutions, state of, 232 – 33 Interior Ministry, 43 – 51, 96, 98 – 9, 150, 199 – 201, 204 Internal Security Forces, 43, 45, 50, 152, 160, 228 internally displaced persons. See IDPs International Finance Corporation. See IFC International Monetary Fund. See IMF Intra Bank Crisis, 83 – 84, 174 – 77 Iran, 104 – 5, 244, 246, 249 Iraq, 186 – 87, 241 Isma’il Sukariya, 23, 76, 78, 82 Israel, 125, 155 – 56, 158, 244; occupation of south Lebanon, 15n10, 117, 156, 204n16, 246; war in Lebanon (2006), 246 Israeli forces, 15, 204 Jelly Wax scandal, 48 Jounieh, 48, 66 judiciary, 16 – 17, 27 – 28, 34, 36, 39, 62 – 64, 106, 109, 115, 173, 214, 249 Jumayil, ‘Amin, 125, 208 Jumayil, Pierre, 147 Junblatt, Walid, 47 – 48, 68, 70, 100, 153, 159 – 60, 162, 171, 199 – 200, 204 – 5, 217 – 21, 229 Kana’an, Ghazi, 157, 159 Karam, Constantine, 59 Karameh, ‘Umar, 91, 105, 132, 134, 140, 157, 161 – 62, 189, 212, 217 – 18

Index Kata’ib party, 159, 217 Khaddam, ‘Abdul Halim, 142, 155, 157, 158n9, 159 Khalid, Sa’d, 115 Khalifeh, Muhammad Jawad, 80, 173 Khalil, Anwar al-, 221 Khalil, Yusif, 113 Khazin, Elias al-, 148 Khazin, Rachid al-, 200 Khoury, Michel, 229 Kuwait, 83 – 84 Lahoud, Émile, 49, 133 – 37, 140 – 41, 143, 151 – 52, 154, 159 – 61, 172, 178, 183, 186, 192 – 93, 205, 212, 216, 246 Land Registry, 109, 113 LDCs (less developed countries), 6, 11, 13 Lebanese army, 1, 87, 123, 189 Lebanese banks, 230, 253 Lebanese Contractors’ Association, 197 Lebanese Forces. See LF Lebanese pound, 132, 208, 225 – 26, 229 – 30 Lebanese society, 142, 231 Lebanese state, 7 – 8, 52, 83, 90, 93, 124, 131, 184, 192, 222, 231, 233, 243, 248 Lebanese-Syrian Commission for Oil Affairs, 181 Lebanese-Syrian Higher Council, 141 Lebanese-Syrian relations, 124 – 25, 130 – 31, 161 Lebanese-Syrian Treaty of Brotherhood, 124, 154 Lebanese traders and Syrian middlemen, 183 Lebanon, fragmentation of, 156 – 57 Lebanon’s corruption record, 249 Lebanon’s history, 58, 150 – 51 Lebanon’s sovereignty, 126, 130, 156 legislation, 16, 50, 81, 89, 99, 137, 144, 201, 204, 212 legislative decree, 12, 16, 44, 58, 88, 96, 98, 102, 104, 181, 201 legislative powers, 141 LF (Lebanese Forces) 125 – 6, 132, 157 – 58, 160 loans, 21, 54, 58, 84 – 85, 93, 137, 145, 169; interest-free, 58, 60 Madina Bank default, 227 market, 11, 34, 77, 79, 179 – 80, 205, 230 market prices, 24 – 25, 31 Maronite community, 126, 134, 147, 149, 151 – 2, 154, 199, 201, 217 Maronite politicians, 200 – 201

271

Maronites, 127 – 28, 138, 148, 151, 154, 221, 245 Mas’ad, Shadi, 65 – 66, 69, 70, 221 Mashnouq, Nouhad, 145 master plan, 45, 64, 95, 97 – 98, 100, 102, 110, 112, 114 – 15, 196, 199 – 200, 202 – 3, 206 – 7, 216 MEA (Middle East Airlines), 26 – 29, 83 – 86, 145, 174 – 78, 227 Medco oil company, 93 medicines, 22 – 24, 77 – 82, 171 Medicines Pricing Committee. See MPC MEWR (Ministry of Energy and Water Resources), 89, 184, 187 – 88 Mf D (Ministry for the Displaced), 64 – 65, 67 – 70, 117 – 19, 219 – 21 Middle East Airlines. See MEA militia leaders, former, 188, 218 militias, 86, 125, 138, 178, 189 Minister of State for Transport, 189 ministerial posts, 128, 200, 245 Ministry for Industry and Oil. See MIO Ministry for the Displaced. See Mf D Ministry of Agriculture, 156, 260 Ministry of Energy and Water Resources. See MEWR Ministry of Finance. See MoF Ministry of Health. See MoH Ministry of Justice, 36, 99 Ministry of Municipal and Rural Affairs. See MMRA Ministry of Planning, 183, 207, 209 Ministry of Public Works, 92, 98 Ministry of Social Affairs, 234, 260 Ministry of State for Transport, 91 Ministry of the Environment. See MoE Ministry of Transport, 37 – 39, 41, 91 – 93 ministry officials, 20, 34, 71 MIO (Ministry for Industry and Oil), 30, 87 – 90, 101 – 2, 183 – 84 Miqati, Najib, 29, 192 – 94, 206, 247 Mirhaj, Bsharra al-, 96 Misqawi, ‘Umar, 41 – 42, 190 – 91 MMRA (Ministry of Municipal and Rural Affairs), 57, 237 mobile phone sector, 136, 145, 155 MoE (Ministry of the Environment), 43 – 45, 48 – 49, 96 – 97, 100, 199 – 204 MoF (Ministry of Finance), 26, 84, 92 – 94, 99, 103, 168, 191, 249 MoH (Ministry of Health), 18 – 25, 73 – 82, 90, 167 – 73, 199, 237, 249

272

Index

MoH inspectors, 20, 22 – 25, 74 MoH officials, 22 – 24, 74, 80, 82 Mouawad, René, 132 Mount Lebanon, 43, 50, 56, 99–101, 196, 199–202, 204, 217–18, 220; governorate of, 202–3 MPC (Medicines Pricing Committee), 25 Mudallal, Sa’ad ad-Din al-, 190 Mughrabi, Muhammad al-, 63 – 64 muhasasa (allotment), 139 – 40, 163, 171, 188, 191, 209 – 11, 214 – 15, 217, 221, 224, 228, 232 – 33, 241, 247 Muqaddam, ‘Afif, 165 Muqbil, Samir, 97, 201 Murr, Michel al-, 45, 56, 97, 199 – 200, 204 Mussa, Michel, 44, 99, 202, 204 – 6 Na’im, Edmond, 228 Nasrallah, Hassan, 249 – 50 National Bureau for Medicines. See NBM National Council for Quarrying. See NCQ National Council for the Displaced, 118, 219 national dialogue, 248 National Laboratory, 23, 77 – 78, 171 National Pact (1943), 126 – 27, 163 National Pharmacies Syndicate, 23 – 24 National Strategy for Health, 73, 75 – 76 Nazarian, Arthur, 203 NBM (National Bureau for Medicines), 19, 22, 26, 81 – 83, 170 – 73 NCQ (National Council for Quarrying), 97 – 100, 199, 202 New Institutional Economics. See NIE NIE (New Institutional Economics), 11, 13 – 14, 234, 261 Normandy landfill, 60 – 62, 113 Obeid, Makram, 205 Office for the Minister of State for Administrative Reform. See OMSAR officials, high-ranking, 37, 90, 101, 108, 110 Oger company, 95, 207, 239n2 oil, 29 – 30, 32, 35 – 36, 86 – 90, 141, 179 – 84 oil companies, 32, 179 – 80; private, 32, 36, 86 oil derivatives, 86 – 88, 179 – 80, 183, 186 oil importers, 34, 87 – 88, 90, 179, 181, 185 oil minister, 87, 184, 186 oil sector, 32, 86 – 87, 179, 182 – 83, 215 OMSAR (Office for the Minister of State for Administrative Reform), 91, 102, 119, 121, 165, 210, 236 – 37 opinion surveys, 3 – 5t1.1, 20, 49, 231, 238 origin, countries of, 24 – 25, 79

overspending, 51 – 53 ownership, 27, 46 – 47, 50, 53 – 54, 59 – 60, 90, 100, 107, 112, 214, 230 PADR (Public Agency for Development and Reconstruction), 105 – 6 Paris II donor meeting, 135 – 36, 141, 221 parliament, 36, 49 – 50, 59, 81 – 82, 99 – 100, 103 – 4, 127 – 30, 135 – 37, 140 – 41, 144 – 48, 150 – 54, 171 – 72, 181 – 83, 201 – 2, 228 – 29, 246 – 48; members of, 16, 36, 54, 58, 126 parliamentary elections, 2, 24, 49, 66, 70, 132, 148, 157, 159, 212, 218, 247, 249 patients, 19 – 20, 23, 74 – 75 patrimonialism, 233 – 34 PD (Pharmaceutical Department), 77 – 79, 82, 173 Penal Code, 16 petty corruption, 9, 9n7, 17, 234 Phara’oun, Henri, 91 Pharmaceutical Department. See PD Pharmaceutical Inspection Department. See PID pharmaceuticals, 25, 77, 79 – 80, 167 pharmaceuticals market, 81, 171 – 73 pharmaceuticals sector, 82, 173 pharmacies, 24 – 25, 80 – 83 pharmacists, 22 – 23, 79 – 81 PID (Pharmaceutical Inspection Department), 25 planning, 102, 115, 140, 183, 207, 209 – 10 plans, five-year, 174 – 75 political arrangement, 123, 130, 132, 139, 142 – 43, 154, 156, 163, 206, 209, 237, 247 political corruption, 2, 6 – 13, 16, 18, 40, 42, 72, 90, 120, 178, 222, 224, 231 – 32, 241; high, 9, 17 – 18, 71, 234; high incidence of, 120, 225; high-level, 70 – 71, 223; low, 9, 234 political elites, 2, 123 – 24, 132, 138, 146 – 48, 153 – 59, 162 – 64, 166, 197, 207 – 8, 210 – 11, 213 – 16, 222, 224 – 25, 229 – 32, 237 political money, 71 political reforms, 125, 127, 133, 238 political settlement, 14 – 15, 121 – 23, 131 – 33, 145 – 47, 153 – 55, 157 – 59, 161 – 64, 166 – 67, 195 – 97, 201 – 4, 206 – 11, 213 – 17, 221 – 25, 229 – 30, 234 – 41, 243 – 44 political violence, 1 – 2, 15, 243 Port Autonome de Marseilles, 93 port commission, 40 – 41 port management, 37, 39, 191 port of Beirut, 31, 37 – 42, 87, 90 – 95, 105, 188 – 95, 253, 255

Index port officials, 39 – 40 port workers, 41 postwar, defined, 14 – 15 postwar countries, 239 – 43 presidency, 130, 133 – 34, 138, 203 presidential palace, 134, 212 presidents club, 207 – 8, 211 – 12, 216 prices, country-of-origin, 79 prime minister, role and powers, 129, 139 private hospitals, 18 – 24, 73 – 77, 80, 82, 168 – 70, 180 private sector, 5, 22, 26, 63, 76, 92 – 94, 106, 164, 179 – 80, 184, 194 – 95, 210, 213 – 14, 216, 224 private sector companies, 85 privatization, 94, 135 – 36, 145 – 46, 168, 178, 190 – 93, 195 products, pharmaceutical, 24 – 25, 77, 170 Progressive Socialist Party. See PSP properties, 36, 62 – 64, 69, 106, 108 – 10, 112 – 13, 213 – 15; transfer of, 107, 109, 111 – 12, 214 – 15 property owners, 59, 108 – 9, 216, 218 property rights, 62, 108 – 10, 112 proprietors, 109 PSP (Progressive Socialist Party), 125, 194, 200 public administration, 11 – 12, 94, 101 – 2, 106, 127, 143, 145, 153, 165, 167, 210, 214, 230, 234, 237 Public Agency for Development and Reconstruction. See PADR public infrastructure, 106, 114, 214 – 15 public infrastructure works, 113 – 16 public interest, 78, 110 – 11 public servants, 12, 16, 85, 92, 134, 137, 140, 143, 145, 164 – 65, 168, 171 – 73, 190, 212, 236, 238 Qraytem, Hassan, 193 – 95 quarries, 42 – 50, 96 – 101, 195 – 206; closure of, 200, 205; illegal, 43 – 44, 47, 49, 206 quarry owners, 43 – 46, 49 – 50, 98 – 100, 196 – 97, 200, 202 – 6 quarrying, 43 – 46, 48 – 51, 96 – 98, 100, 195 – 97, 199, 201 – 6; state regulation of, 196, 199 quarrying activities, 98, 196 – 97 quarrying business, 43, 47, 49, 90, 95, 97, 199, 202, 204, 215 quarrying operations, 44, 51, 96 quarrying sector, 48 – 49, 51, 95 – 97, 100, 196 – 97, 199, 201, 206

273

Raphael, Farid, 175 Rayyis, Antoine, 190 real estate, 59, 64, 109 Real Estate Company. See REC REC (Real Estate Company), 60, 62, 64, 66, 101 – 2, 106 – 12, 114 – 16, 213 – 16 reconstruction, 2, 6 – 7, 15, 51, 58, 62, 101 – 2, 110 – 11, 141, 152, 207, 209 – 11, 213 – 14, 248 reconstruction projects, 102, 105 – 6, 118, 220 refineries, 32, 36, 180 – 81, 184 – 87; state-owned, 180, 184 reforms, 36, 72, 101 – 2, 126 – 27, 130 – 31, 136, 141, 163, 168 – 70, 184, 236 – 38; anticorruption, 10 – 11, 237, 242 refugees, 217 – 18. See also IDP regulator, 30, 86 – 89, 179, 200 revenues, 35, 48 – 49, 61, 88, 92, 103, 110, 114, 191, 201, 230 Rizq, As’ad, 87 roads, 51 – 54, 60, 112, 124, 153, 159 Ruhana, Fadi Saqr, 37, 38, 40, 42 Saidi, Nasser, 89 Salam, Khalid, 176 Salameh, Riyad, 28, 175, 177, 227n2 Salim, Nadim, 181 – 82 Sankari, Yahya, 105 Sarkis, Elias, 124 Sar-Mowlem company, 37 – 40, 42, 95 Saudi Arabia, 10, 78 – 79, 244, 246, 248 Second Republic, 2, 122 – 23, 125 – 27, 129, 131 – 33, 135, 137, 139, 141, 143, 145, 147, 149, 151, 163 security forces, 45, 50, 152 Sfeir, Nasrallah, 154, 199, 217 Shalaq, Fadil, 102, 104, 107, 110 – 11, 207, 211 – 13 Shallaq, Hassan, 236 Shammas, Jamil, 182 – 83 Shaqur, Hisham, 37 – 38 Shihabi, Hikmet, 155, 159 – 60 Shi’ites, 126 – 27, 130, 136, 138, 153 Shnanir quarry, 47 – 48, 203 Sidon, 53 – 54, 191, 196, 198, 207 – 9 Skayni, Mahfuz, 175, 177 sludge, 32, 37 Solh, Rachid as-, 132, 218 Solidere, 58 – 64, 66 – 67, 106 – 16, 113 – 15, 176, 207, 209, 213 – 16, 248 south Lebanon, 15, 15n10, 125, 131, 148 – 49, 155 – 56, 158, 182, 201, 204, 250 South Lebanon Army, 15, 125

274

Index

speaker of parliament, 105, 123, 127 – 30, 133, 136 – 37, 141, 144 – 45, 171, 174, 211 228 Special Agency (at Ministry of Industry and Oil), 86 – 87, 89, 184 Special Tribunal for Lebanon, 162, 247 squatters, 65 – 68, 117, 217 state budget, 63, 144, 195 state capital investments, 7 state expenditures, 26, 236 state hospitals, 22 state institution building, 13, 232 state jobs, 234 – 35 state property, 193, 228 state treasury, 19, 26, 40, 44, 50, 75, 184 state watchdog agencies, 21, 81 – 83, 94, 118, 166, 169, 210, 224 Stephan, Elie, 40 subsidies, 30, 69, 117 – 19, 235 Sukariya, Isma’il, 21, 23, 79, 173 Sulayman, Bahjat, 160 – 61 Sunnis, 126 – 28, 136, 138 Syndicate of Oil Workers, 36 Syndicate of Pharmaceutical Importers, 24 Syria, 3 – 4, 10, 98, 124 – 26, 130 – 32, 138, 141 – 42, 147 – 48, 151 – 52, 154 – 62, 179 – 81, 183 – 87, 205 – 6, 222, 244 Syrian exports of agricultural products to Lebanon, 156 Syrian interference in Lebanon, 156; after 2005, 244 Syrian involvement in Lebanon, 48 Syrian leadership, 124, 131, 138, 142, 145, 147 – 48, 152, 154 – 59, 161, 176, 182 – 83, 186, 189, 203, 208, 211 Syrian leadership on Lebanese politics, 178 Syrian leadership’s interests, 163, 224 Syrian policies in Lebanon, 161 Syrian redeployment of armed forces, 131, 142, 158, 160 Syrian regime, 160, 187, 192, 205 – 6, 212, 244 Syrian Socialist Nationalist Party, 147, 206 Syrian troops, 2, 15, 123 – 26, 131, 158, 162 Syrian withdrawal from Lebanon, 15, 162, 246, 248 Syrian workers in Lebanon, 155 Syria’s allies in Lebanon, 138, 147, 153, 157 – 60 Syria’s interests in Lebanon, 156 – 57, 206 Syria’s military, 131, 156 Syria’s role in Lebanon, 131, 157, 160, 203, 233

Tabalayn depot, 34 Ta’if Accord (Document of National Reconciliation), 1, 6, 14 – 15, 59, 72, 116, 120 – 43, 146 – 48, 151, 154, 158, 162 – 63, 165, 199, 206 – 9, 217, 220, 227, 232 Takla, Youssef, 176 TC (Transitional Commission, Port of Beirut), 91 – 94, 189 – 93, 195 temporary licenses, 50, 87, 89, 98, 100 tenants, 62 – 63, 106 – 9 TMA (Trans Mediterranean Airlines), 175 – 76, 178 Traboulsi, Sulayman, 184 Trans Mediterranean Airlines. See TMA Transitional Commission. See TC transport, 37 – 39, 41, 91 – 93, 175, 190, 192 – 93, 219 transport minister, 28, 41, 92, 190, 193 treasury bills, 168, 177, 229 – 30 Tripoli, 15, 30 – 31, 56, 157, 180 – 81, 190, 196, 198, 243 troika, 140 – 44, 151, 154, 157, 163, 165, 168 – 69, 171 – 79, 182 – 83, 188, 190, 194 – 95, 207, 209 – 11, 219, 232 – 33 troikists, 142, 145, 156 – 57, 165 – 67, 169, 175, 177 – 78, 190 – 93, 201, 222 truce, as better term than postwar, 15 Turkey, 30 – 31, 33 tutelage ministry, 91 – 92 Tyre, 53 UNDP (United Nations Development Program), 237 UNSC (United Nations Security Council), 50, 245 – 46 United Nations Development Program. See UNDP United Nations Security Council. See UNSC United States, 12, 156, 160 – 61, 244 – 46, 250 Uniterminal oil company, 88 urban planning, 114 – 16 Usman, Mahmud, 212 votes, 24, 50, 65, 68, 70, 85, 97, 109 – 11, 127 – 28, 134, 137 – 38, 145, 148 – 50, 153, 171, 249 voting districts, 148 – 49 Wadi Abu Jamil, 66 – 67 Wakim, Najah, 58 – 60 war damages, 1 waste management, 48, 55 – 57, 103

Index Weber, Max, 11 – 12, 223, 264 WHO (World Health Organization), 22, 26n1, 79 World Bank, 6, 11, 13, 16 – 17, 22, 25, 43, 52, 73 – 77, 103 – 4, 137, 168 – 69, 178 – 79, 187, 234 – 39 World Health Organization. See WHO

Zahleh, 132, 149 – 51 Zahrani refinery, 30, 34, 36, 87, 180 – 81 za’im (zu’ama pl.), 136, 138, 148, 208, 215, 218 Zakhia, Abdallah, 43, 46, 50, 98, 221 Zughbi, Ghanim, 172

275