Observations from an increasingly shattered Lebanon
- Middle East
- Investment Support
Observations from an increasingly shattered Lebanon
Ashley Halabi, Researcher
On a trip back home, Control Risks’ Lebanon analyst saw the rising risks of infrastructure failure, crime and unrest amid socio-economic collapse and the aftermath of the Beirut Port explosion.
- The port explosion will exacerbate pre-existing socio-economic grievances, undermine economic recovery, strain provision of public services and create further political instability over the coming months.
- Electricity cuts and poor internet service have been a daily struggle for decades. The economic crisis and port explosion will further limit service provision and pose significant challenges to businesses.
- Although relief efforts will temporarily mitigate power outages and basic commodity shortages, poor utility management and the ongoing economic crisis will reverse such progress once efforts eventually stop.
- The rates of crime and violent protests will increase as public grievances rise. Business personnel will be exposed to petty crime, roadblocks and indirect security threats during protests.
From economic to humanitarian crisis within minutes
When I returned to Lebanon after six months away, the country’s economic, public health and political environments had so rapidly deteriorated since 2020 began that it seemed like a different country. The changes were stark: most traffic lights were off, street beggars had increased in numbers, many businesses had permanently closed and electricity was only provided for a few hours every day. The political atmosphere had grown increasingly tense, and anti-government protests and criticism of the elite in the media became more frequent. It was a matter of time before entrenched corruption among officials and the political elite’s negligence would contribute to catastrophe – the devastating explosion at Beirut’s port a case in point.
The blast on 4 August – which killed 180 people, injured 6,000 and displaced more than 300,000 – could not have come at a worse time for people already struggling to survive amid an economic and political crisis. The country’s main port, where 85% of the country’s grain is imported and where the country’s entire grain reserves are stored, was destroyed, further hindering Lebanon’s ability to import goods. Businesses will struggle to resume operations, as some will need to rebuild their offices or stores from zero while dealing with a spike in the prices of building supplies, a potential newcoronavirus disease 2019 (COVID-19) lockdown that would force stores selling essential building supplies to close, and an absence of government compensation or guidance. Businesses across the capital will continue to face operational disruption from roadblocks and rebuilding efforts.
The explosion led to a spike in the prices of basic food and building supplies, which had already been on the rise due to the economic crisis. The price of nylon – which is in high demand to fix broken glass – is now six times higher in Mount Lebanon governorate, where vendors sold 14kg for LBP 300,000 (USD 200) compared with LBP 50,000 (USD 33) before the blast.
Rebuilding efforts are largely being led by local civil society groups and volunteers. However, these efforts will continue to be duplicated in the absence of adequate coordination from the Beirut municipality and the caretaker cabinet. Damaged and destroyed buildings will remain that way for years. The country will not be able to comprehensively rebuild most of the affected infrastructure despite support from some countries such as Kuwait and France, which have pledged to aid in rebuilding the port. Companies in Beirut with sustained damage will continue to face high prices of building commodities, as well as delays in receiving compensation from the municipality.
The buildings used by utility providers will likely remain damaged for months due to slow rebuilding efforts. The country’s sole waste management company will face challenges in tackling the scale of damage over the coming weeks. Following the explosion, trash and broken glass piled up in the streets for days, and waster collectors struggled to cover most areas. I saw some workers attempting to pick up glass in busy streets. Smaller streets were left for more than a week.
Electricity was out in Beirut for days until relief efforts, including fuel shipments, restored power provision. Prior to the explosion, electricity provision had already been minimal across the country, with 14 hours of daily outages across most of the country due to fuel shortages. These prolonged outages caused traffic lights in Beirut to be turned off intermittently throughout June and July. Although relief efforts will lead to partial electricity provision for a few months, the economic crisis will hinder fuel imports and outages will resume, thereby further challenging business operations.
COVID-19 will continue to loom
As the capital deals with the aftermath of the explosion, the country’s response to COVID-19 will collapse rapidly. Enforcement of social distancing and lockdown measures will fail, and the public will prioritise maintaining their livelihoods and businesses over preventing the virus’s spread. The security forces will not have sufficient capacity to stop and prosecute all violators.
The economic crisis will present one of the main obstacles to compliance with COVID-19 measures. Those earning in Lebanese pounds will continue to see their salaries diminish in value; the black-market exchange rate will continue to fluctuate, sometimes drastically. Rising food prices and the high cost of imported items will further burden low-income families despite government subsidies on some basic necessities.
Two options for the public: crime and protests
Public anger over the elites’ negligence that likely led to the port explosion will result in more organised and violent protests over the coming months. Many previously peaceful protesters are now more likely to provoke the security forces and become violent. When I spoke to some participants of the 8 August protests, in which demonstrators broke into several ministry buildings, many people told me that they used to criticise those who engage in violent unrest but that they are now convinced that violence is the only remaining option to changing the political status quo. Protests will mostly target government centres and local banks rather than foreign businesses. However, foreign businesses in Beirut will face incidental security threats from violent protests and riots over the coming months, as well as operational disruption, such as delays to the movement of their staff or supplies, owing to roadblocks across the country.
Already high crime rates will rise further. Looters will use the explosion as an opportunity to pretend that they are volunteers or security personnel to steal items from damaged stores and houses. Delays to rebuilding houses and replacing broken store fronts will put local and foreign businesses and the residences of staff at risk of burglaries over the coming months, as some desperate workers who lost their jobs or businesses in the explosion will resort to crime. Rising inflation and unemployment will also sustain these elevated crime rates over the coming months.
People and businesses will therefore continue to face crisis after crisis in Lebanon, where socio-economic conditions will only further deteriorate.