Development Challenge The USAID Program Other Program Elements Other Donors Program Data Sheets Summary Tables USAID Search: Lebanon Previous Years' Activities 2002 2001, 2000, 1999, 1998, 1997 Last updated: Wednesday, 29-May-2002 18:51:24 EDT

THE DEVELOPMENT CHALLENGE: Lebanon continues to face challenges as formidable as those following the May 2000 withdrawal of Israeli forces from South Lebanon, when all eyes focused on re-establishing sovereignty, stability, and security; now it must revitalize its economy in a country emerging from two decades of occupation and a devastating civil war. The withdrawal presented a newly elected and reform-minded government with an historic opportunity to rebuild and redefine Lebanon—as a nation intent on liberalizing its economy; a people dedicated to advancing democratic institutions, human rights, and the rule of law; and a partner wedded to achieving regional peace and global prosperity. These remain core priorities for the Lebanese leadership, along with the new, post-September 11^th challenge of combating terrorism. They also form the crux of U.S. national and foreign policy interests in Lebanon.

Lebanon made progress this past year in meeting these challenges. For example, the Government of Lebanon’s (GOL) recent signing of the long-awaited Euro-Mediterranean Partnership, in tandem with upcoming negotiations on World Trade Organization (WTO) membership, are key steps in Lebanon’s bid for an increased share of regional and global trade. A new value-added tax, along with actions favorable to privatization, budget belt-tightening, and administrative streamlining, could add much-needed efficiencies and revenues to the public sector. Elections in formerly-occupied municipalities not only signaled the GOL’s commitment to extend its sovereignty southward, but, for the first time in nearly 40 years, formally activated local government and grassroots decision-making nationwide. Safety and security were also enhanced when Lebanese Armed Forces, working closely with troops from the United Nations Interim Forces in Lebanon (UNIFIL), began de-mining operations and mine awareness campaigns in the south’s most heavily mined areas. Since September 11^th, the GOL has also actively supported U.N.-originated counter-terrorism measures.

Nonetheless, the pace of economic and administrative reform is slow, as are the reintegration and recovery measures in the south. The GOL is broke, and the economy is in crisis. Public debt, rising 20% per year, is at an alarming $28 billion, equaling 170% of GDP. Servicing this debt consumes 90% of public revenues, leaving little for investment. Unemployment and underemployment are believed to exceed 25%, with rural areas particularly hard-hit. Investment law, judicial recourse, intellectual property rights, and business ethics are major challenges, dampening investor confidence and pushing much of Lebanon’s highly talented workforce to the Gulf States and beyond. Remittances from abroad, estimated conservatively at 25% of GDP, are a safety net and at times a lifeline for what many families see as a no-growth economy with few opportunities. There is an increasing reliance on external donor funding for financial and budgetary support, and even basic services.

Complicating this situation are the many religious, regional, political, and cultural differences embedded in Lebanese society—historic, deep-rooted cleavages that fuel gridlock, impede good governance, undercut collective action for the common good, and make "political will" hard to define. Syria’s presence, symbolized by some 20,000 troops, influences all major government decisions and effectively limits Lebanon’s sovereignty. Lebanon’s border with Israel remains contested; entrenched Hizballah forces and Israeli overflights are a constant reminder of the South’s volatility, curbing resettlement, dampening investment, and weakening development efforts. This issue took a new twist when the United States reiterated Hizballah’s place on its Foreign Terrorist Organizations list, requesting the GOL to freeze Hizballah assets. The GOL disagreed, launching a debate with the United States, and with other western and regional partners, on Hizballah’s status as a terrorist or resistance organization. The outcome could have far-reaching effects on Lebanon’s security, stability, and economy, as well as on USAID’s program.

THE USAID PROGRAM: USAID’s FY 2002 program will devote $35,000,000 in Economic Support Funds (ESF) and $600,000 in Development Assistance (DA) funds. USAID is requesting $32,000,000 ESF and $500,000 DA for FY 2003. The program will focus on expanding and adding value to existing activities, as detailed in the Program Data Sheets below and as previously described in the FY 2002 CBJ. Funds will (1) expand small-scale NGO-based income-generating and

The USAID program—known for its balanced, responsive, targeted, community-oriented approach to development—is well positioned to address many of Lebanon’s economic, institutional, governance, environmental, safety, and security challenges.

infrastructure activities in poor rural areas through investments in key productive and service sectors, notably agriculture, agribusiness, tourism, water, dairy, and microenterprises; (2) strengthen the policy, regulatory, and legal environment for Lebanon’s upcoming membership in the World Trade Organization (WTO); (3) promote democracy, good governance, and program sustainability by supporting key institutions, particularly municipalities, Parliament, oversight agencies, the media, and civil society organizations; and (4) improve the health, safety, security, and overall economic well-being of rural residents through appropriate environmental technologies and de-mining activities. Geographic emphasis will continue focusing on areas of high need and good economic potential, recognizing that real recovery, revitalization, and reintegration can only take place with the active support of local and national players. USAID will also promote strategic alliances, particularly in the "Internet for development" arena, to capitalize on Lebanon’s strengths in information and communication technology, and to bring together the best talent and ideas in the private, NGO, university, and host country communities. The FY 2003 program will continue along the above lines, pending the outcome of an upcoming strategy review aimed at defining USAID investments for the FY 2003-2005 period.

ONGOING PROGRAMS FOR WHICH NO FY 2002 OR FY 2003 FUNDING IS REQUESTED: None.

OTHER PROGRAM ELEMENTS: Lebanon benefits from the Leahy War Victims Fund for a number of mine action activities, chief of which is a Resource Cooperative aimed at creating economic opportunities for mine-injured survivors and their families in the district of Jezzine, Lebanon’s most heavily mined and casualty-afflicted area (see SO 268-005 below). USAID will continue to receive War Victims Funds. USAID is also benefiting from FY 2001 FORWARD (Fostering Resolution of Water Resources Disputes) funds for water management activities in South Lebanon.

OTHER DONORS: Donor coordination in Lebanon is active. The most recent United Nations Development Program (UNDP) reports list Arab countries as the main source of Lebanon’s external funding, led by the Kuwait Fund for Arab Economic Development (transport infrastructure); the Arab Fund for Economic and Social Development (human resource development, energy); the United Arab Emirates (de-mining); Saudi Arabia (infrastructure, social services); and the Islamic Development Bank (infrastructure). Also active are the World Bank (broad-based development); the European Union (EU--training, development administration, rural development, trade); France (technical cooperation, training); United Nations organizations (broad-based development); Italy (agriculture, infrastructure, water); Canada (development administration, economic management); and Norway (technical cooperation, social services). Bilateral assistance accounts for 55% of disbursements; multilaterals account for 38% and NGOs for 7%. USAID, while approximately 10th in resource levels, is consistently among the top three in actual spending. USAID’s main donor partners are the World Bank, EU and UNDP for rural development and environmental activities; the EU and UNDP for administrative reform and municipal development; the EU for trade (Euro-Med and WTO agreements); and France for water resource management.

Program Data Sheets

• 268-001  Reconstruction and Expanded Economic Opportunity
• 268-002  Increased Effectiveness of Selected Institutions that Support Democracy


• 268-005  Improved Environmental Practices

	Country Background Information Resources
	CIA Factbook Library of Congress	National Geographic Country Maps State Dept. Country Information