Israel Launches Attacks on Lebanon; Lebanese Government Strives to Rebuild Trust with Donors
Rebuilding Beirut: A Challenge Faced with Corruption and Mistrust
Beirut, Lebanon is grappling with a five-year economic crisis, a crumbling lira, and the daunting task of post-war reconstruction after the 14-month conflict with Israel. The estimated cost of reconstruction stands at $11 billion, but trust from donors and transparency in the rebuilding process are major hurdles.
During the war, more than 4,000 lives were lost, and approximately 10% of the homes in Lebanon - about 163,000 units - were damaged or destroyed, alongside over $1 billion in infrastructure damage. Foreign aid will likely be needed, as it was during the previous war in 2006, but donor interest is scattered among Lebanon, Syria, and Gaza, and major donors like the United States are pushing for Hezbollah group's disarmament as a prerequisite.
Beirut, the southern suburbs, and the eastern regions bore the brunt of Israel's offensive, comprising most of Hezbollah's supporters. The restoration of their homes and livelihoods is precipitous for Hezbollah, meaning that foreign donor nations have leverage during the reconstruction process.
However, a significant issue standing in the way is corruption. Politically affiliated companies overcharged the state's main infrastructure buyer, the Council for Development and Reconstruction (CDR), by 35% between 2008 and 2018, according to The Policy Initiative's 2022 study. The primary contracting regulation was also beset with exceptions, with just 5% of tenders under the Central Tenders Board's oversight.
These issues culminated in 2020, when a massive blast in Beirut's port prompted donors to halt funding to the national authorities or treasury due to their lack of trust in the existing mechanisms. Instead, donors primarily controlled spending directly or via a World Bank-managed trust fund or worked through NGOs.
The government spent just $38 million on physical investments in 2020, a significant drop compared to the $1.1 billion spent in 2018. In an attempt to address this, Lebanon passed a landmark contracting reform in 2022 that aimed to unify the public sector, abolish the classification system that excluded contractors without political connections, and establish the Public Procurement Authority (PPA).
However, despite the law's promise, public investment continued to dwindle, decreasing below $10 million in 2022. The PPA, established to bring transparency and accountability to the procurement process, has so far only boasted a single member and five employees tasked with overseeing 1,400 purchasing bodies.
The lack of progress in staffing the PPA is a concern for those pushing for reform. Jean Ellieh, the regulator's president and sole member, has made a request for new hires and expressed optimism, assuring donors of the PPA's capabilities.
To achieve a corruption-free reconstruction process, Lebanon must establish independent oversight bodies, implement transparent procurement processes, strengthen governance and legal frameworks, ensure fiscal transparency and accountability, engage civil society, media, and the public, and cooperate with international organizations. Without addressing these issues, donors may remain reluctant to fund reconstruction initiatives, and the Lebanese people may continue to bear the consequences.
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Civil unrest erupts in Beirut as residents demand greater transparency and accountability in the reconstruction process, citing political corruption and inefficiency.
- The economic crisis in Beirut, Lebanon, is an overburdened challenge, as the city struggles with post-war reconstruction worth $11 billion.
- The war and the resulting conflict between Lebanon and Israel have caused damage amounting to over $1 billion in infrastructure and 10% of homes in Lebanon, with approximately 163,000 units affected.
- Foreign aid is likely to be needed for reconstruction, but interest from donors is dispersed among Lebanon, Syria, and Gaza, with major donors stipulating Hezbollah group's disarmament as a requirement.
- Rebuilding Beirut is not just a matter of economics; it's also essential for Hezbollah's support bases in the city.
- Corruption is a significant issue in the reconstruction process, with politically affiliated companies overcharging the Council for Development and Reconstruction by 35% between 2008 and 2018.
- After the 2020 port blast, donors have primarily bypassed national authorities and treasury, favoring direct spending or working through NGOs due to lack of trust in existing mechanisms.
- To regain donor trust and accelerate the rebuilding of Beirut, Lebanon needs to establish independent oversight bodies, implement transparent procurement processes, and foster a culture of accountability.
