Time to forget the debt

The World Bank should wipe the slate on the US$40 billion the country owes. Although the world is rightly focusing on how to bring a permanent end to fighting between Israel and Hezbollah, attention will soon shift to rebuilding the Lebanon. For the second time in 20 years this tragic but unbroken nation faces a monumental task.

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By  Anil Bhoyrul Published  August 13, 2006

|~||~||~|The World Bank should wipe the slate on the US$40 billion the country owes. Although the world is rightly focusing on how to bring a permanent end to fighting between Israel and Hezbollah, attention will soon shift to rebuilding the Lebanon. For the second time in 20 years this tragic but unbroken nation faces a monumental task. Yet even as the final (hopefully) bombs rain on Beirut, the economists, financiers, developers and politicians must stoically turn away from considering the irreplaceable human cost and cast their eyes over provisional reconstruction plans. At first sight, the challenge looks daunting. By the end of last week, the total damage to the country's infrastructure probably topped US$30 billion – never mind the billions of dollars in tourism revenue that may be lost for some years to come. At least 700 bridges and roads need to be completely rebuilt, several thousands of homes have been totally destroyed and the ecological damage to the country – particularly along the coastline of Beirut – may cost more than US$1.5 billion. But in rebuilding the country, Lebanon – and all the countries willing to help – need to look closely at its pre-war financial situation. Until four weeks ago, the telecom sector was the main source of income for the Lebanese government with total revenues amounting to US$1.3 billion a year. The government was looking to privatise its telecom sector this year in an attempt to shrink the US$40 billion public debt. Such a plan now looks almost impossible in the mid-term – leaving the original debt still in place and growing by the hour. As are the interest charges. Ironically, shortly before the conflict, Beirut had planned a series of meetings aimed at reducing this debt. These were intended as follow up conferences to the Paris I and Paris II meetings which saw 18 Arab and Western countries convene in the French capital, along with eight financial institutions, to determine ways to shrink this debt. Doubtless this “follow-up” meeting will hastily be rearranged. But it needs to go further this time than merely look at ways of reducing the debt burden. Why not follow the example of post-war Iraq, where the country’s entire debt was wiped out? History has shown national debt is the biggest hurdle to economic growth and can quickly lead to national poverty. Lebanon is a prime case for total debt removal. The international community owes it no less. ||**||East meets Middle East|~||~||~|It used to be East and West, but now we may be heading for East and Middle East. Confused? Well, in the next two years all may become clear, as the Gulf’s dependency on trade relations with Europe and the US lowers, and emerging economies such as China and India take a greater slice of the market. This is not just a prediction: the latest figures from the Dubai Chamber of Commerce and Industry appear to suggest this is already happening. As we report this week, exports from the UK to the UAE surged by 100%, and now are close to US$2.5 billion during the first quarter of 2006. Meanwhile, UAE exports to the UK are down 7.1% to US$528 million. According to Steve Brice, regional head of research (MEPA and South Asia) at Standard Chartered bank: “The UK is seen as a close ally of the US, and it is possible that China is seen as more friendly to this region than the West at this moment - and maybe developments in Lebanon are reinforcing that.” He can say that again.||**||Towering figures|~||~||~|If students of property development the world over were asked to name their heroes they probably would consider Donald Trump or some other American or Asian property icon as an inspirational figures. But they would do well to also look at the UAE. This week we carry an exclusive interview with Hashim Al Dabal, the CEO of the towering Dubai Properties. As we reveal, Dabal’s eye for a deal started at the age of ten – and he hasn’t looked back (or down) since. With the likes of Jumeirah Beach Residence under his belt of successes, Dabal has a claim to being one of the world’s greatest ever property developers. In that league, he is, of course, joined by Emaar chairman Mohamed Alabbar, and Nakheel boss Sultan bin Sulayem, responsible for the iconic Burj Dubai and the fabulous “World” islands, respectively. These genuine innovators are likely to go down in history as true greats. Far too much pessimism has been attached lately to Dubai’s property market but this group are three of the best reasons to be optimistic about the future. ||**||

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