Thursday, January 27, 2011

Reading the Mikati leaves

In a previous post, I argued that a Hizbollah-inspired government will have to try harder than a Hariri-led government on the economic front. This is because they have no track record, and because some of their views on economic issues have been worrisome (especially those of the Aoun clan).

Furthermore, if the new government were were to flaunt UN resolutions, they will also kill the possibility of international financial support. This raises the stakes on the economic front in a country where most of the debt is of very short maturities.

All of this implies there is no room for waffling.  It is time to take a close look at Mikati's platform.  His website spells out his views under the "Beirut Pact" section, which was put together for his brief stint as PM in 2005. Below is what the website says, with my  comments in bold italics.

"Najib Mikati and his team of economists gave a brief summary of their “Road to Beirut Pact”, a document covering all available options aimed at boosting the country’s national economy."

Given the circumstances under which he was appointed as Prime Minister, "Road to Beirut Pact"is a title that recalls Friedrich von Hayek's Road to Serfdom.

"The Pact is not, as the tam [sic] puts it, ‘sacred’, but could be revised and amended in order to make it a source of agreement between various political and economic bodies."

Some flexibility is good, but suggesting flexibility without clearly spelling out principles to anchor the discussion means that this plan is best titled Road to Nowhere.   

"Experts from the World Bank and the International Monetary Fund have already discussed and debated The Pact, later presented to the Council of Ministers and all representatives of various economic commissions."

Experts from the IMF and World Bank have discussed a lot of things. For example, they have discussed Myanmar's interest rate policy.  What is more interesting is to know what they had to say. 

"Premier Mikati reiterated that The Pact will be available online to all Lebanese should they wish to read it and voice an opinion. All interested parties will receive a copy of The Pact in preparation of a final document to be presented to the international committee to rally support."

There are some bullet points available in Arabic, but where is the detailed pact? Is that it? 

"Premier Mikati summed up the broad headlines of The Pact:
  • Lebanon’s economy to be perceived as based on long term growth strategies, providing equal job opportunities to improve the standards of living"
Right. I have yet to hear any policymaker say the opposite. 
  • "Major economic and social challenges to be addressed with their various options and conclusions
  • A methodology of work to comprise various work commissions implementing detailed reforms, to be later compiled in a comprehensive socio-economic program"
What does this mean? Seriously! Priorities like growth and employment are fine, but vacuous. Everyone wants them. What are the policies that you think will achieve that? 

"Premier Mikati indicated that in order to achieve economic growth, concessions must be made to Cabinet by all political, economic, and social parties on a series of interrelated policies, on legislations, and on various reform measures.

He said this should encourage Cabinet to move forward, as the moment is propitious for Lebanon, with the ongoing support of the international community, following the democratic drive of the Lebanese. This would achieve long-lasting results, averting the various pressures presently exerted on Lebanon.

Lebanon, says Premier Mikati, and since the Taef Agreement, has always been subjected to calls for economic reforms. Some of these reforms were only partly implemented, with no fruitful results, while other major achievements were made in other fields. One of the major causes of not promoting drastic economic reforms was political bickering. This resulted in some economic reforms being implemented while others have not, and all for political benefits."

I still can't understand what reforms Mikati likes and what he doesn't like!  For example, the Arabic section of the text mentions "assessing privatisation" (تقييم فرصة خصخصة)  - but does this mean he is for or against privatisation?  You can't be neutral on this one. 

"Premier Miakti [sic] concluded by saying that the “Beirut Pact” should be legalized, becoming a binding agreement after ‘all partners of Lebanon and with no exception’ agree on all its points. This “Pact’ is a not measure imposed on Lebanon by a regional or an international party but a global contract, reached by consensus between all Lebanese parties. It could be labeled as ‘The Taef Accord for Economy and Growth’."

If he expects everyone to agree on all policies you can be sure that all he will achieve is meaningless. You can't run financial policy by consensus. All you can create is a series of regulatory and financial loopholes.   

Everyone wants to fight corruption, and everyone wants to see economic growth, but there are differences between the parties on the nature of the policies to reach these goals. You need to take a stand, and take a side. You can't be neutral on this one too.

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