Mckinsey 15-year vision published on the economy ministry website

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Govt publishes damning McKinsey report

BEIRUT: The Economy Ministry has made public a damning macroeconomic report from U.S. consulting firm McKinsey that reveals serious deficiencies across Lebanon’s public and private sectors, while also setting out a detailed 15-year vision aimed at prosperity. The 1,200-page report, which was posted on the ministry’s website Wednesday and watermarked as “internal,” includes a sector-by-sector analysis of the country that lays plain the abysmal situation in Lebanon’s economy, infrastructure and quality of life.

Caretaker Economy Minister Raed Khoury and other Lebanese officials have increasingly warned the country is heading toward economic collapse and financial crisis if serious reforms are not undertaken.

Khoury did not respond to a request for comment on his ministry’s decision to publish the report, which it originally said it would not do until the report was approved by Cabinet. He told The Daily Star last fall that if the report had been published at the time, “maybe the new Cabinet will want to change something,” and “people will start to ... distort it.”

Civil society activists had criticized the delay in publishing the long document - a preliminary version of which was completed six months ago.

For many of Lebanon’s residents, the publication - which cost the country $1.3 million - will put numbers to the experience of daily life in the country.

Lebanon’s residents spend 50 percent more time than necessary on congested roads, only 15 percent of which are in good condition, and the country has the world’s fourth-worst quality of electricity, behind only Haiti, Nigeria and Yemen.

Lebanon’s infrastructure ranks 113th out of 137 countries; perceived corruption has increased by 26 points since 2012, from 120 to 146 out of 180.

Gross domestic product per capita today is only 30 percent higher than it was in 1980 - five years into Lebanon’s Civil War, which devastated the country.

The negative appraisal can at times feel overwhelming - and in some cases is worse than many might expect.

The educational system that many Lebanese officials praise for producing bright minds is classified as low quality, and declining: It teaches skills that don’t fit the requirements of the labor force, at least in part because the curriculum hasn’t been updated since 1997, the report found.

The Lebanese state even fails on the Lebanese diaspora, which officials regularly lionize over a perceived propensity for success.

Lebanon’s relationship with members of the second- and third-generation diaspora is “withering,” and the report says there is no “active approach to reinforce Lebanese identity abroad.”

What money the diaspora does funnel back to Lebanon - about $6.9 billion in remittances - is largely not channeled into productive areas.

To change the country’s course, McKinsey offers a “clear recipe to develop the economy” in the next 15 years, focusing on five sectors where the state can take concrete steps to drive economic growth and increase quality of life.

AGRICULTURE

McKinsey envisions Lebanon’s agriculture sector as the “Middle East’s high value crop bread basket.”

The sector currently lags because modernization has been limited, and farms, most of which are small in scale, receive little state support and use bad techniques.

For instance, Lebanese farmers use more than three times as much fertilizer as those in other countries in the Organization on Economic Cooperation and Development, and food controls are described as being “poor.”

McKinsey’s proposals include introducing new technology, focusing on high-value crops like avocado and legalizing Cannabis production for “high added value medicinal products with export focus.” (The report does not discuss legalizing the drug for recreational use.)

Such moves could help quadruple revenue from agricultural exports by 2025 - Ffrom $175 million to $750 million.

INDUSTRY

McKinsey says Lebanon should focus on four “high-value and creative” subsectors of industry - food processing, perfumes and cosmetics, pharmaceuticals and construction of prefabricated housing - and focus on the reconstruction of Iraq and Syria. Lebanon should also develop six industrial parks to foster high competition.

Industry is currently held back by low competition, a failure to implement international standards and high costs of production - tied to the cost of electricity and inadequate infrastructure.

TOURISM

The tourism sector, which Lebanon relies on heavily, requires serious reform if the country is to be transformed into “the up-and-coming Mediterranean Riviera,” the report says. McKinsey envisions Lebanon attracting tourists from a core of 15 European and Arab countries, as well as those with a high diaspora presence, to three main hubs: Beirut, Jbeil and Tyre.

While the tourism sector is currently on an upswing, McKinsey said low occupancy rates in hotels is deterring private-sector investment. The “limited hospitality infrastructure” caters to the “luxury segments” of the industry, while the price and inconvenience of air travel prevent larger numbers of middle-income European travelers from coming to the country.

Caretaker Tourism Minister Avedis Guidanian previously told The Daily Star that he and large tourism operators were working together to promote tourism from Europe, and that he planned to establish a joint commission to bring together public- and private-sector industry components.

FINANCIAL SERVICES

McKinsey’s plan for Lebanon’s financial services sector is titled: “An Off-Shore Hub Targeting Mid-High Net Individuals.”

In other words, the firm sees Lebanon attracting investment from wealthy people who want to place their money offshore.

Money could also be captured in a strong, diverse investment management sector with niches like investment research.

Currently, the firm sees financial services as highly centralized in banking, which controls more than 95 percent of assets.

It also says Lebanon has an incomplete regulatory framework and a subpar legal framework that needs to be fixed.

KNOWLEDGE ECONOMY

McKinsey thinks Lebanon can be the “Silicon Valley of the Middle East” by leveraging technology to become an information-driven economy. It would see Lebanon create outsourcing hubs in regional cities. The goal is to increase the number of start-ups from 200 to 2,000 by 2025.

But this requires an improvement in the technical skills of local populations, which start-ups McKinsey spoke with said were lacking, despite locals’ high creativity levels.

Source: Govt publishes damning McKinsey report

Read the full 1274 pages PDF report here: https://www.economy.gov.lb/media/11893/20181022-1228full-report-en.pdf
 
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  • D

    Deleted member 73465

    Guest
    Amazing report with numbers and facts that monetise and quantify the deep s**t we are in.
     
    CitizenOfTheRepublic

    CitizenOfTheRepublic

    Legendary Member
    So basically, everything is lacking.
     
    CitizenOfTheRepublic

    CitizenOfTheRepublic

    Legendary Member
    Shocking!
    I know, who would have guessed after the stellar governance of the likes of Berri, Jumblatt Murr, Lahoud, Hrawi Suleiman Mikati and the Hariris for more than 2 decades. Thank God we now have Hassan Khalil and his likes to protect us from actually improving.
     
    S

    Saj

    New Member
    This report really put out some interesting and upsetting statistics. Unfortunately I’m not confident most of this advice, even if taken, will not be monopolized by our long time crooks in power.

    Lebanese who have the money should invest in Syria’s redevelopment. Damascus is doomed to Solidere-like development, I’m also hearing lots of new night clubs are popping up and Syria is trying to gain a reputation for its nightlife. Property is also dirt cheap.

    Christians should invest there especially, because we know the Shia will and Tripoli is already being set up as a reconstruction hub. No reason why Christians should miss out on an inevitable cash grab. Here’s a chance for Lebanese to benefit from Syria the way they benefitted from us after the war.
     
    D

    Deleted member 73465

    Guest
    I know some people might not like my comment but this report shows the achievements that the “Marounia Siyyasiya” did before the war. All the prestige remaining now could not hold (yet) without the laws and the institutions during that golden era. Today we live in Mafia era where no governance is the norm.
     
    Iron Maiden

    Iron Maiden

    Paragon of Bacon
    Staff member
    I know some people might not like my comment but this report shows the achievements that the “Marounia Siyyasiya” did before the war. All the prestige remaining now could not hold (yet) without the laws and the institutions during that golden era. Today we live in Mafia era where no governance is the norm.
    No surprise, the whole of the lebanese state was built by chamoun and shehab administrations, all who held power afterwards whether maronites or sunnis or now shiias governed on a self interest basis and maximizing their group’s milking share...
     
    Le منشار

    Le منشار

    New Member
    Amazing report with numbers and facts that monetise and quantify the deep s**t we are in.
    The deep shit you are currently in was engineered after the Lebanese civil war so that Lebanon doesn't regain the economic prosperity it had before 1975.
    the problem is that some people refuse to recognize this reality and enter in a never ending "jadal bizanteh" that leads to nowhere.
     
    D

    Deleted member 73465

    Guest
    The deep shit you are currently in was engineered after the Lebanese civil war so that Lebanon doesn't regain the economic prosperity it had before 1975.
    the problem is that some people refuse to recognize this reality and enter in a never ending "jadal bizanteh" that leads to nowhere.
    No mate. The problem is the political system that talks non-sense and do nothing to correct the situation. And hilariously when they do their job they promote themselves. Just watch the useless local news (and skip the first 3 mns introduction in every news)
     
    Le منشار

    Le منشار

    New Member
    No mate. The problem is the political system that talks non-sense and do nothing to correct the situation. And hilariously when they do their job they promote themselves. Just watch the useless local news (and skip the first 3 mns introduction in every news)
    exactly !! where does the political system come from ?!! .. where does it come from ?!! who's supporting it ?
    I can't believe how obsolete your minds are !! this ****ing region has not known peace ever since the existence of Israel !! and Lebanon was the first prototype model of the "creative chaos" vision. here we are in 2019 and all Arab regions have become like Lebanon !!! all of them !!
     
    D

    Deleted member 73465

    Guest
    Did you read the report? Arriving at the airport and going through the security check and then to taxi is a horrible experience. I once had a bunch of Lebanese pilgrims at the security checks who were shouting to proclaim their faith. I am not sure why u mentioned Israel. Did you get paperwork done with a clear procedure or online? This is a culture of chaos and mafia where the rulers are the Abaday and the Azaar.
     
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