Since the outbreak of the civil war in Syria, the government of Lebanon has been struggling to deal with the economic, social and other consequences of the conflict on Lebanon, including refugee inflows of unprecedented magnitude.
Lebanon, already the region’s most densely populated country, has borne the main brunt of the refugee crisis to become the largest host nation both in absolute terms and when considering the limited size of its territory and its small population.
In this crisis, the people and government of Lebanon, at great cost and sacrifice, have shown considerable solidarity with, and compassion toward, the plight and desperation of the Syrian refugees. Yet with Syrian nationals already accounting for over a quarter of the resident population, and increasing in number, it is imperative that rational policies emanating from a strong national consensus be adopted, and effective solutions be devised, so that adequate resources can be marshaled to manage and contain the deleterious, and potentially irreversible, effects of the massive refugee inflow that is becoming an increasingly divisive issue that could dent social cohesion within Lebanese society, and create a growing gulf of discord and enmity between refugees and host communities.
2. The spillover of the war in Syria, regardless of the refugee issue, has direct and indirect effects on Lebanon’s economy in terms of a fall in investment, loss of employment, disruption of trade routes, unwelcoming environment for tourists, and decline in government revenues. The negative effects are substantial given the economy’s large dependence on the services sector which accounts for 75 percent of economic output, and is highly vulnerable to political and security risks.
3. The prime minister of Lebanon asked the World Bank and the United Nations to help the Lebanese authorities measure the multi-faceted economic impact of the situation, and improve the flow and effectiveness of the international community’s support to Lebanon in dealing with, and sharing in the burden of, this major crisis. In assessing the impact and cost of the crisis, the World Bank looked at both the short and longer-term development aspects, with a focus on: the effect of the conflict on economic output; the state’s eroding capacity for service delivery and the programs needed to keep up with ever-growing demand in education, health and infrastructure; and the public finance implications of the crisis. The study did not address humanitarian aid which, it is assumed, will continue to be provided by the specialized humanitarian aid agencies. Security issues and cost implications were beyond the study brief.
4. The main conclusions of the World Bank assessment in terms of economic and fiscal costs over the period 2012-14 are sobering, even more so as they reflect the present conditions of a crisis that is still unfolding, with no visibility as to when the situation will stabilize. The conflict translates: (i) for the overall economy into $7.5 billion in foregone gross domestic product; and (ii) for the Treasury in a total cost of $5.1 billion of which: $1.1 billion in direct current budgetary outlays associated with service provision to refugees (such as medical care in public hospitals, public schooling for children, and electricity and other subsidies); $2.5 billion in incremental capital investment needed to maintain access to, and quality of, services (such as number of hours of electricity supply a day) at their 2011, pre-crisis levels for 4 million resident nationals and 1.2 million refugees; and $1.5 billion shortfall in government revenues resulting from the weaker economy.
5. The social costs are equally devastating as the massive influx of refugees adds substantially to labor supply and puts downward pressure on the level of wages. For Lebanese citizens, this will have dire welfare implications in: (i) driving up unemployment rates to nearly double their current levels, particularly among the unskilled in the poorest regions (north and Bekaa Valley) which by the hazard of geography have the highest concentration of refugees; and (ii) adding 170,000 to the 1 million Lebanese living in poverty.
6. The alarming conclusions of the analysis in terms of magnitude of costs should raise, in the mind of policymakers and donors alike, serious concerns about the sustainability of the current policies regarding the programs of assistance hitherto offered to refugees in light of spiraling costs driven up by ever-mounting human inflows. These conclusions point to the compelling need for the government of Lebanon to reassess its policies, inter alia as regards: the nature and content of the package of services provided across sectors; and the governance and organizational setting within which assistance is provided. Further, the government of Lebanon must explore new financing mechanisms and tools that could enhance and optimize the meager flow of external funding Lebanon has so far received.
7. In conclusion, to ensure sustainability of the refugee aid program, changes to the package of services offered need to be built on the premise that refugees are in Lebanon on a temporary basis pending their return home. The Lebanese authorities’ moral duty during this anticipated limited period is to offer in the critical sectors, to those who duly qualify as war refugees per criteria set and verified by the Lebanese authorities, an affordable level of basic services consistent with standards applied to war refugees in comparable world distressed situations. Public and social services to which Lebanese citizens have been entitled can no longer be, in terms of access and quality, the benchmark off which the assistance given to refugees is defined.
8. Were it to be pursued, such an unaffordable policy would be equivalent to nothing short of promoting economically motivated, as opposed to security-driven, Syrian immigration into easily accessible neighboring Lebanon – where standards of living, measured by per-capita income, are three to four times higher than Syria’s, and where Syrian nationals who so wish can, through mere registration, have access to free or heavily subsidized public services. To illustrate how the package of services offered hitherto to Syrian refugees could effectively encourage immigration into Lebanon regardless of security considerations, consider that on average, education costs per Syrian pupil ($2,300), added to health care costs per refugee ($400), equal or now possibly exceed on their own the average per capita income of a Syrian national.
Samir El Daher is adviser to the prime minister for economic affairs and development.