Rebuilding Lebanon's shattered economy
By Jorn Madslien
Business reporter, BBC News


With a truce between Israel and Hezbollah raising hopes of peace in Lebanon, much of the focus is moving towards the task at hand: how to rebuild the country and how to pay for it.

Throughout the conflict, a string of world leaders have vowed to help once the fighting had stopped - not only with humanitarian aid but also by helping pay for restructuring efforts.

Now they will be asked to put their money where their mouths were.

Tunisia's president has called for an emergency summit of Arab leaders, urging collective support for the rebuilding of the war-torn country.

And Sweden has taken a lead in the West by organising a donor conference on 31 August, which some 60 countries and aid agencies are expected to attend.

"The world community now has to give its support to Lebanon's recovery and to the Lebanese people who have been severely affected," says Swedish Foreign Minister Jan Eliasson.

Logistical nightmare

As yet, no reliable estimate for the cost of rebuilding Lebanon exists.

One thing is known, however: much of the $50bn (£26bn) injected into the country during the past decade to rebuild after the 1975-1989 civil war was spent on roads and power lines, schools and sport centres, hospitals and airports.

Many of these are now in ruins.

"Huge areas of the south and Beirut are flat," says Christian Aid's Graham McKay.

"Rebuilding the infrastructure, rebuilding the 600 kilometres of roads that have been destroyed, rebuilding the 150 bridges that have been destroyed, [there is going to be a] huge bill for that."

The Lebanese government estimates the infrastructure damage alone could amount to US$2.5bn.

Beyond the economic burden, carrying out the work is going to be a logistical nightmare that will take up valuable manpower - and require energy supplies which, in many cases, have yet to be restored.

On top of that comes the need to rebuild houses and public buildings to allow people to move back into their communities.

Lebanon's economy ministry says about one in five of the country's million or so refugees have been rendered homeless by the war, and estimates that the total cost of the damage to houses might even be greater than it was during the civil war.

Hopes dashed

In the longer term, repairing Lebanon's commercial sector will prove yet another mammoth task.

Dozens of factories have been crushed in bombing raids during the last few weeks.

Commercially-driven construction sites have been deserted as foreign investors have fled.

And as for the country's tourism industry, which until early July had been forecasting more than 1.6 million visitors this year, there are no hopes of a quick recovery.

Consequently, Lebanon will find it increasingly hard to service its $35bn debts.

The government had been planning economic reforms including the privatisation of its power and telecoms sectors, tax rises and a tighter grip on the government's purse strings. These plans may now have to be shelved.

Few, if any, dare to hope for a return to the good times of the early 1970s, when Lebanon was still a Middle Eastern banking and trading hub.

Commercial opportunity?

Nevertheless, there are those who expect the reconstruction efforts to spiral into a commercial bonanza - for some, at least.

Paying for post-war reconstruction tends to involve pulling money out of one bag and stuffing it into another, and the stock markets provide a good indicator of who stands to gain.

Shares in cement and steel companies have shot up as investors predict that demand for their products will soar.

"Maybe the cement companies and the steel companies will be able to export quite a bit into Lebanon on the back of this peace initiative that's going on," says Yasser Hassanein of Dynamic Securities in Egypt.

For the people of Lebanon, the suffering is far from over. For those rebuilding this shattered country, the real struggle is about to begin.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/4794739.stm

Published: 2006/08/15 23:00:25 GMT

© BBC MMVI