BELIEF, Debt Crisis, Fiscal Deficit, Economic Update

Proposal to Transfer State-Owned Enterprises to Private Management Sparks Controversy

11:15 | 30 March 2023LIMS output
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Proposal to Transfer State-Owned Enterprises to Private Management Sparks Controversy

Lebanon is currently exploring the possibility of establishing an independent institution to manage government assets in conjunction with the private sector, sparking debate among the country’s citizens. Proponents argue that such a move would optimize asset performance, increase revenue, and facilitate the reimbursement of depositors who have suffered losses. However, critics have decried the proposal, characterizing it as “selling the nation’s assets” and warning that it would only serve to benefit the wealthy at the expense of future generations and the poor.

LIMS explained that the proposed plan is not tantamount to selling off national assets but rather aims to enhance their value. State-owned enterprises (SOEs) could be transferred to private sector management without losing their status as part of Lebanon’s national wealth. The crucial question is whether these assets are currently serving the needs of the Lebanese population. In reality, SOEs are currently delivering a bad service to the population and inflicting a debt burden on future generations.

LIMS supports the concept of transferring SOEs to private ownership or management. However, such models have been subject to cronyism, high costs, and poor service provision in Lebanon in the past. Therefore, LIMS advocates for separation between SOEs and the sectors in which they operate and argues for opening the sectors to competition. For example, the public sector could retain ownership of the national electricity company, EDL, while private firms could be invited to compete with EDL in electricity. The same principle applies in telecommunication, air transportation, casino, tobacco, etc. 

Lebanon has experimented with different economic models, and those based on competition between public and private institutions, or exclusively among private companies, have generally delivered outcomes better than public monopolies, private monopolies and Public-Private- Partnership monopolies. Competition is a crucial driver of productivity and efficiency, prompting businesses to innovate, lower costs, and improve quality to attract customers.

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