by Me. Roger Eddé – 15/03/2018
President Lebanese Peace Party “Assalam Party”
1-Governments can’t properly finance and efficiently manage, neither infrastructure nor ”bankrupt” social security, education, or promoting their countries’ tourism, industries, financial sectors, cultural heritage. Government’s role should be focused, on what the Private Sector can’t do!
2-Lebanon’s Government failed miserably in every sector it got involved in, to the extent that national security, by the DEPLORABLE admission of its President and Speaker, is relying on a militia affiliated to Iran’s Revolutionary Guards and widely accused of terrorism and organized crime.
3- In fact, when it comes to national security the Government should absolutely have the monopoly of providing it at whatever cost and help from allies who can provide Lebanon with financial assistance, hardware, training with no affiliation to ANYONE. That’s an exclusive domain of sovereignty.
4- Let’s focus today on ”FINANCING INFRASTRUCTURE THROUGH THE PRIVATE SECTOR”, as it has been initiated by Lebanon’s Government to resolve the huge electricity deficit in supply as well as in PILING UP SOVEREIGN DEBTS to the limits of markets’ tolerance!
The President reports $35 billion Government losses in providing “poorly”, at high cost, an unstable supply of electricity.
I say it’s closer to $90 billion.
5- October 10/11, 1994 the Herald Tribune, together with World Bank and IFC hosted a conference in Athens on The Middle East and Eastern Mediterranean: economics, business and politics, where I concluded my keynote speech “investing in the Future” with a strategy to provide twice the needs of Lebanon’s electricity consumption, that was 1500MW.
I offered to finance (BOT or BOO) 3000 MW for 6.5cents the KW. Because every KW in excess can produce $3 exports.
6-It’s not intelligent for Government to choose BOT (BUILD OPERATE and TRANSFER), because a power plant becomes OBSOLETE after 10 years.
In the meantime, the investor has made his profits in 7 years and will almost break even afterwards!
Government is getting back a plant just good for scrap!
As is the case now, with all of Government’s ”loosing plants”.
7-As with BOO (Build Operate and Own) the investor is forced to plan and start modernizing his power plant, because it’s in his interest to sell power with minimal fuel/maximum energy, as is the case with a car’s fuel efficiency mileage!
BOO is more competitive, because of its higher equity market value.
8-The BOT idea was not stupid, when Turkish President Turgut Ozal invented it in order to privatize the energy sector in a Turkey that inherited STATISM ideology before leaping forward, developing airports, bridges, tunnels financed and operated by the private sector, with HUGE success.
9-To finance and operate INFRASTRUCTURE in “partnerships with Governments” critical reforms are inevitable!
First, a stock market that attracts the international market investors as well as Lebanese!
Equity investors (25% to 40%) project VALUE are MOTIVATED with HUGE MARKET PROFITS and an ”EXIT STRATEGY”.
10- Investors and international lenders are concerned by CORRUPT POLITICS meddling in their business, especially in a country with a terrible reputation in that area!
It’s VITAL to protect them legally from all kinds and forms of abuse!
Like bureaucratic harassments and/or arbitrary taxing.
11- WE MUST CREATE a BUSINESS-FRIENDLY MENTALITY, and environment, especially NOW at the START, when investors and international operators are doubtful of Lebanon’s politics!
That in addition to securing, an “international investment fund” that invests 5 to 10% of the equity required in each of Lebanon’s INFRASTRUCTURE PROJECTS.
12- I WOULD ADVISE OUR Government to focus at the Paris4 gathering, on the priority of setting up that INFRASTRUCTURE FUND that can be a WIN-WIN situation for the donors, as well as a guarantee for the Lebanese people, that the international community is on their side fighting corruption and backing up development.
13- Lebanon’s “sovereign guarantee” needs a substantial enhancement to allow the international banking community to finance power plants relying on PPA (Power Purchasing Agreement) with the Government.
For that, let’s start with the re-privatization of INTRA Bank and its holdings in MEA, the Port and Casino. It’s huge!
14- THAT Central Bank portfolio isn’t central banking business.
In fact, it has opened the door to all kinds of political corruption! While privatization can give each of those once leading private institutions a chance to regain past glories, to employ, expand, diversify, conquer markets, and bring in Billions, in investment, profits, taxes.
15-Today the Casino business is more about family-oriented theme parks, major convention centers for hundreds of thousands, attracting millions of tourists year-round.
Gaming comes in third today in Las Vegas!
The investment in casino resorts is sky high! Over $1.5 billion.
That can start by a bidding process attracting giants!
16-As for the port and airport business, the investment of private sector developers/operators can be unlimited. Allowing Lebanon to join in the world competition. As is the case with Turkey’s and Dubai’s private operators.
Europe’s major operators are now hunting everywhere for these opportunities.
17-The list is unlimited to make Lebanon another Singapore (the world’s highest per capita income) on the Mediterranean!
Let’s do it! We can!
As for our poisonous Zouk power plant, it’s not worth a penny. It should be phased out and sold in bidding as soon as private power is developed.
18- Through systemic privatization, Government and politics are kept at bay!
Thus we limit the scope of leadership corruption!
We provide the economy with endless funding through our financial market that can grow in volume and liquidity with each privatization!
GOOD PAYING Jobs will be provided as well as new management SKILLS.
19-As for the prospects of finding oil and gas on our shores,
they should be quantified rapidly and be assigned to back up our growing debt!
That could allow us, at a certain point, to lower the cost of servicing our treasury bonds, as well as extending their maturity to 30 years plus.
Especially when accompanied by drastic measures limiting Government’s WASTE and management of business.
20-Tax and spend, is feeding the cancer of corrupt Government from top to bottom!
Lebanon went down that “ROAD TO SERFDOM” to intolerable levels!
P.M. Mr Saad Hariri reminded me lately of President George H. Bush infamous READ MY LIPS NO NEW TAXES that helped him win the Presidency in 1988 and loose re-election in 1992.
21-Lebanon’s economy is taxed to death NOW!
Hariri’s martyred father wanted to abolish ”income tax” in exchange of TVA
The ”stupid left” ideologues resisted!
The best economist he picked (Bassel Fleyhan), died with him in the terrorist attack on February 14, 2005, that’s still on trial in The Hague!
We need to lower and abolish TAXES.
22-My vision on TAXATION for Lebanon:
1- Abolishing the DEATH TAX immediately, because it’s unfair and CORRUPT!
2- Abolish either the INCOME TAX or TVA (Added Value Tax).
WE SHOULDN’T KEEP BOTH.
It’s UNBEARABLE!
3- We can’t tax Real Estate land assuming that any ”EFRAZ” dividing (land for any purpose) makes you a taxable ”REAL ESTATE MERCHANT”.
23-Taxation shouldn’t exceed 8%!
Pres. Reagan’s “Grace Commission” (headed by Dow Chemical prestigious CEO, Peter Grace) concluded that’s all what America needs as a Super Power!
If we choose TVA it should start at 1%, and increase ”in brackets” to 8% MAX, because that’s not a tax on profits, it’s taxing losses as well. That’s truly CRAZY!
24-Same rates can’t be applied to all sectors!
For example, high-taxing statist France, limits to MAXIMUM 5% TVA on hotels, resorts, to encourage tourism, and because they are labor intensive with ripple effects on many sectors of the economy as agriculture….etc.
For Lebanon, it can’t exceed 2,5%.
25-On TVA fine tuning, the same principle (2,5%) should apply to industries, low and high-tech! As well as for agro-industries based in Lebanon, to encourage national production, that’s already like tourism industries, are loaded with prohibitive electricity cost, unlike their competitors!
26-By lowering TVA’s PUNISHMENT we can generalize 2,5% MAX low taxation to all businesses and regions.
Which is not the case now.
And that’s highly DIVISIVE along regional and confessional lines.
We can’t tax to bankruptcy successful, law-abiding businesses while their competition isn’t taxed at all.
That’s unfair, disruptive, uneconomical.
27-If we choose income tax instead of TVA, we should keep it, very low as well, starting with 0,5% up to 8% MAX.
That with 16 brackets (the first lowest bracket being $100,000 going by doubling each bracket 2,4,6, etc.) Profits below the first bracket are taxed 0%.
Low income tax is fair & easy to swallow! It reduces drastically CHEATING, in contrast with higher taxes or tariffs that invite CHEATS.
28-In conclusion, with privatization and lower taxes, we can have an economy that can start the first step on
THE ROAD TO FREEDOM by contrast to THE ROAD TO SERFDOM which we are NOW drowning in!
Lebanon can recover with a rate of growth that can rapidly reach 7 to 11% yearly! And may go up to 17% in “the catch up period”.
Bye Bye to KLEPTOCRACY!
Bye Bye Big Government as if we were a super power.
Bye Bye UNBRIDLED SPENDING.
We can cut Embassies’ cost by 2/3 following Ireland’s example.
Bye Bye for soldiers to be servants or bodyguards to officers and their families
Bye Bye fake employments.
Every waste of people’s energy is waste of public money that can and should be criminalized, as any theft is criminal .
Bye Bye luxury cars from top to bottom with armies of bodyguards paid on taxing Lebanon‘s economy and people.