Could the COVID-19 outbreak be an opportunity for the Lebanese economy? The “Arab Spring” which was earlier seen as the most disruptive event which shook the Middle East to its core since the fall of the Ottoman Empire, with presidents-for-life ejected from office, three countries descending into civil war and the de-facto balance between the governments and those that are governed turned upside down, has now been overthrown from the top spot.
The Middle East now faces a significantly more challenge, with destructive cascading economic impact which has the potential to ripple through and wreck sectors and industries, devastate populations and bring the economies of hostile and friendly nations to their knees.
The Wuhan coronavirus impact on Lebanon’s economy comes at a time when Beirut is straddled with a major financial crisis. The speed with which the virus is spreading across the globe is likely to add ferocity to the existing harsh financial crisis and potentially cripple the state’s ability to fight back a health crisis, which has been labelled as a global pandemic by the World Health Organization.
Since September 2019, Lebanon’s unfolding financial crisis which caused dollar shortages is now likely to restrict its ability to import critical, life-saving medical supplies, including masks, protective gear, gloves, ventilators and spare parts.
With the government yet to reimburse public and private hospitals for bills, including that of military health funds and that of the National Social Security Fund, these institutions would find it challenging to source and purchase vital medical supplies, procure essential protective gear and hire additional staff to lessen the burden on overworked doctors and nurses who are at the frontline fighting the disease that is COVID-19.
“The COVID-19 outbreak has placed additional strain on a health care sector already in crisis,” said Joe Stork, deputy director of the Middle East at Human Rights Watch. He went on to add, “The Lebanese government has taken swift and broad measures that bought it time, but its ability to manage the outbreak will depend on how it uses this time to secure necessary supplies and provide health care workers with the resources they need.”
Ramping up preparedness for COVID-19
The first case of the Wuhan Coronavirus in Lebanon, which causes the COVID-19 disease, was registered on February 21, 2020. After twenty days, the government banned flights from COVID-19 hot zones including China, South Korea, Iran and Italy. Before imposing a ban on Lebanese citizens wanting to return to the country, the government gave four days for expatriates to return to the country before imposing a ban on all travel to countries that witnessed significant outbreaks, such as the United Kingdom, Spain, France, Syria, and Iraq.
In order to contain the outbreak in the country, Lebanese Prime Minister Hassan Diab called on public administrations and municipalities to split employee shifts, with the country going into three days of lockdown.
Schools and universities along with the Parliament building were asked to temporarily close down for disinfection, on the direction of the Education Ministry.
Nightclubs, pubs and dance places were also temporarily shutdown for a week by the Tourism Minister as a measure to curb the spread of the dead disease.
Bank employees were also advised to take basic preventive measures, such as wearing gloves, using hand sanitisers and wearing a mask. Banknotes were also disinfected by the central bank, the Banque du Liban, as a measure to curb the spread of the outbreak.
Medical preparedness
Despite the adopt of these measures, 15 nurses, frontline fighters of the disease, contracted the viruses, said Mirna Abi Abdallah Doumit, the head of the Order of Nurses.
According to Salim Adeeb, a professor of epidemiology and community medicine at the American University of Beirut, as of March 14, there had been deaths in Lebanon as a result of COVID-19. Going by confirmed cases which account for 15% of actual cases, the number of undiagnosed cases in Lebanon could be at least 450, given that every infected person can infect two or three people on average.
According to a medical source who spoke on the condition of anonymity, the Rafik Hariri University Hospital in Beirut, has allocated 140 beds for coronavirus patients with a separate emergency entrance and corridor. Doctors and nurses entering quarantine rooms wear disposable N95 masks, gloves and a hazmat suit, which they discard at the end of their shift. The hospital is also equipped with sterilization tools, including those used by nurses for showering before they leave the hospital.
It is impossible to fully dedicate hospitals for the treatment of coronavirus patients since hospitals receive around 8,000 patients on a daily basis, some of which are serious cases, said Suleiman Haroun, president of the Syndicate of Private Hospitals.
Lebanese hospitals are also equipped with 850 devices including respirators, although 10% are not operational for want of spare parts. Of the roughly 750 devices, 500 are for regular patients while 250 is specific for coronavirus patients.
In contrast to the deluge of negativity news stemming from the Wuhan Coronavirus, Lebanon’s population is relatively young compared to other countries that are seeing major outbreaks. COVID-19 has mostly spared the young and has killed thousands of elderly people. 40% of the Lebanon’s population is below 35 years old, said Adeeb.
Financial constraints
A lot more on the medical front requires to be done to contain an outbreak which is acting as a financial burden. Tests for COVID-19 are performed at the Rafik Hariri University Hospital for 150,000 Lebanese pounds (roughly $100).
There is a shortfall of protective medical protective gear such as gloves and masks. Importing them would be an expensive affair. According to Salma Assi, a representative of a group of importers of medical supplies and tools, Lebanon requires more masks and gloves and medical supplies worth $20 million a month. Because of existing financial constraints, Lebanese hospitals have been able to transfer $10 million to suppliers abroad over the past five months.
According to a source from the Health Ministry, the World Bank has agreed to give the Health Ministry a loan of $120 million of which $39 million will be allocated to equip government hospitals to fight the Wuhan Coronavirus and treat COVID-19 patients.
According to a source at the RHUH, “the more our system is tested by a larger number of cases, the more we will struggle to cope.”
Even hospitals that are not at the forefront in the fight against COVID-19 need essential protective gear, lest they themselves fall prey to the disease in case a staff comes into contact with an infected patient.
“We are suffering,” said Dr. Mohammad Khadrin, the director of the Abdallah al-Rassi public hospital in Halba in northern Lebanon. “We need to at least secure protective gear – today before tomorrow.” Given the existing shortage of respirators, gloves and protective suits, the hospital had to buy them at inflated prices from the black market, said Khadrin while adding, funds disbursed by the Health Ministry hardly cover their salaries let alone for purchasing equipment needed to deal with the COVID-19 outbreak.
According to Ali Fakih, member of the infection control committee at the Sir al-Dinnieh Public Hospital, hospitals had trouble getting medical supplies even before the COVID-19 outbreak, the situation now is worse since gloves and masks “have disappeared.”
The situation is the same for private hospitals as well. The supply shortage of exacerbated by the government’s failure to make payments. Private hospitals owe medical suppliers $350 million which have been accrued over the last two years, said Assi.
“Unless Lebanon urgently takes measures needed to import vital medical supplies, there is a risk of the virus overwhelming the already struggling health care system,” said Stork.
One of the ways to stop the COVID-19 from increasing its footprint is enforcing compulsory quarantine for people coming from countries that have witnessed significant outbreaks of the virus. While the Health Ministry is asking citizens to isolate themselves in a room and use a private bathroom, there are many who live in a two-bedroom apartment with their families, which poses a fresh problem. One of the ways to mitigate this would be to empty an hotel and house Wuhan coronavirus patients in it.
Existential crisis
Lebanon is facing a two-in-one crisis. On the one hand it is facing an existential crisis with its economic motors that drive the country being in ruins. On the other hand, it is facing a medical catastrophe, wherein it will be forced to essentially send its foot soldiers, doctors and nurses who attend COVID-19-afflicted patients, to war without sufficiently arming them with protection and weapons.
“The coronavirus effect will be catastrophic on the world economy, and the Lebanese economic situation will be more and more catastrophic, amidst the halt of economic activity,” opines Elie Yachoui, an economist. “We can say that the middle class in Lebanon will be totally extinct. They will be the new poor”.
The economic downturn facing Lebanon, will level the playing field between the haves and the have-nots, the well offs with those who are economically downtrodden. Even those who have funds in their bank accounts may not be able to fully access them due to problems in banking and the ability to gain access to hard currency. Only the cream of the social order, the top 10% who have accounts outside of Lebanon, are likely to find themselves better off, opened Yachoui.
His assessment of the crisis is not the lone voice in the dark. Roy Badaro, also an economist, shares and supports his point of view. In a recent warning by the World Bank on poverty levels in the country, notes Roy Badaro, saw an increase from 30% to 50%. With Lebanon now facing a two-in-one crisis, this is likely to further rise to 80%. “I expect an 80 percent poverty level,” said Badaro. “Only 5 percent of families will be able to keep the same level of consumption, and another five percent or so will be okay—all the rest will suffer a lot.”
While the scale of economic suffering will vary, today’s relatively poor will become very poor, and the middle class could see a new low. Lebanon is staring at a serious threat of starvation in around in the next three months. Burdened with economic recession, Lebanon’s manufacturing industry, a significant driver of its economy, is facing stagnation. The Wuhan Coronavirus outbreak is acting as a force multiplier to this economic challenge, thus dramatically boosting the odds facing the country.
“It is indeed a very dramatic situation. We [industrialists] are all primarily concerned about public health and of the health of workers in industry and the whole [manufacturing] chain”, said Fady Gemayel, president of the Association of Lebanese Industrialists (ALI).
The immediate challenges facing the manufacturing industry, in addition to the human impact introduced by the Wuhan Coronavirus, have operational and economic dimensions. “We see that things are unfolding very dramatically as industry has been requested to limit their operations to basic sectors of food, pharmaceutical, necessary consumer product industries, and what is needed in the production of these products,” explains Gemayel.
Not only is production affected, but every aspect in its supply chain, every stakeholder has to take extra precautionary measures in order to survive.
“At the same time, there is a challenge as far as going ahead into the future as most [enterprises] are not working,” said Badaro. “This poses serious [economic] problems because it [compounds on] the previous problems that we had. As if we needed that.”
Silver lining
A few subsectors of industry however are seeing a silver lining. Those who have a stake in the digital realm and are orientated toward exporting their goods and services are seeing silver linings on their horizons, despite the economic and the Wuhan Coronavirus crisis.
“We are doing okay,” opined Fadi Daou, CEO of Multilane, a wholly export-oriented company which supplies infrastructure components for the global data centre market. “Everybody is, of course, working from home, not just here (at the Lebanese manufacturing site) but also in our global offices in the US etc. The company is still on a steady path.”
Although the Wuhan Coronavirus has affected his work flow and its international supply chain, he has been able to cope with its impacts, said Daou. “We are affected by global supply chain delays,” said Daou. “Much of our supply chain is sourced from southern China and some from Taiwan. That has been impacted.”
He has been able to mitigate the disruption to Multilane’s supply chain because the origin of the electronic components came from southeast China rather than the Midwest, where the Hubei province is situated, from where the Wuhan Coronavirus has emerged. A management decision to stock components given the vagaries of importing materials to Lebanon, has also aided the company. “We do have one to two months delay in our supply chain,” explained Daou. “That could, of course, be increasing—and we would be impacted—but since we operate in Lebanon we typically don’t rely on [just-in-time] supply chain but keep two to three months buffer of material.”
One of the things the Lebanese government could do to remedy this two-in-one crisis is to defer the payment of taxes which will help mitigate the economic repercussions of the coronavirus pandemic. The adoption of such a measure could also be a “lifeline for industry and for people,” said Gemayel. “I think the government should be very responsible in the sense of addressing the issues of dues to the public sector. What can they do with reference to this issue? [But also] there is a social issue that needs to be addressed, [and] a liquidity issue that needs to be addressed. How can the government [respond to these needs] and where can they bring funds from? I think it is necessary to solicit any specific aid from donor agencies that are not necessarily politically connoted.”
Now, more than ever, Lebanon needs to rethink its economic strategy and this fundamental strategic task demands a bipartisan effort, regardless of political stands and spin. This humongous task demands focussed, bipartisan collaboration across political and economic decision-makers irrespective of partisan political concerns, economic and other interests on national level or international levels or exclusionary views.
There is an unique opportunity in the play introduced by these twin challenges. Lebanon has the opportunity to follow a different path rather than tread in the circling economic and political patterns that it has historically followed. “We need to reengineer our minds as well [as our strategy for finance and economy], and our relation with nature and with the Earth”, said Joe Hatem, CEO of Profiles, a Lebanese software house.
