THE ROLE OF LOCAL GOVERNEMNTS: THE LEBANESE CONTEXT

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1 THE ROLE OF LOCAL GOVERNEMNTS: THE LEBANESE CONTEXT Sati` Arnaout Beirut, Lebanon ECONOMIC DEVELOPMENT AND POVERTY REDUCTION WORKSHOP Mediterranean Development Forum September 3-6, 1998

2 ABSTRACT Marrakech, Morocco This paper provides an overview of the historical development of local government in Lebanon and presents the main sector development issues and key challenges. It reviews the opportunities and constraints facing the move towards decentralisation in Lebanon and the contribution of non-governmental organisations to local development. Disclaimer: The contents of this paper reflect the personal opinion of the author only and does not represent the views of the Government of Lebanon or of the World Bank. 1. BACKGROUND Lebanon has a democratic framework of government within which multi-religious and multi-party groups live together within a free market economy characterized by strong private sector initiatives. The country exhibited remarkable tenacity to survive a 17 year long civil war where Lebanon's social fabric, its economy and physical infrastructure have been severely damaged. The main challenge facing the government in the postwar era is to redefine Lebanon's regional role, rehabilitate the state institutions and secure long-term political stability 1. Since 1991, the government has been focusing on the reconstruction and rehabilitation of Lebanon's damaged socio-economic infrastructure, thus providing the private sector with the facilities for generating economic growth, creating employment and promoting social development. A comprehensive national reconstruction and development program was instituted to rehabilitate and upgrade the country's main infrastructure. In addition, the government has initiated a number of programs to resettle displaced persons and rehabilitate the national administration and government agencies. However, this strategy has prompted a political debate within the country as to the future role of local governments in the development process and the level of government support to the underprivileged and lower income groups in the country. The municipal elections held in May and June 1998 have paved the way for newly elected local bodies to assume a more prominent role in local development and constitute an important step in the decentralisation of Lebanon's economic activity and in the remaking of its civil society. However, a number of issues and policy reforms will need to be addressed if this objective is to be achieved. 2. HISTORIC PROFILE OF LOCAL GOVERNANCE IN LEBANON In Lebanon, the French and Ottoman traditions of public administration have had a major influence in inter-governmental relationships and the idea of central government. Furthermore, the modern history of Lebanon has been marked by a series of destabilising political conflicts that have influenced political consideration to local governance and decentralisation issues. 2.1 The Ottoman Period ( )

3 Local government practice in Lebanon was acquired during the Ottoman period ( ), during which the Caza system of administrative division emerged. The Caza, administered by a Qaimmaqam, was subdivided into Mudiriyas each administered by a Mudir. The smallest administration unit was the village headed by a Mukhtar who was elected by the community. In 1877, the Ottoman Vilayet Municipal Law was promulgated instituting the system of Municipal Councils which were constituted in every village and town, and gave municipalities wide jurisdictions,2,3,4, The French Mandate ( ) During the French mandate ( ) a new municipal law was promulgated (1922) which retained the framework of the Ottoman Municipal Law but with a certain degree of centralisation. Under this law, the municipalities were governed by an elected Municipal Council whose head was appointed by the central government and was both the head of the municipality and an agent of the central government The Post-Independence Period (Post-1943) The post independence period (post 1943) witnessed several modifications aiming at administrative decentralisation and the improvement of the ability of municipalities to discharge functions needed for development. However, during the civil war period ( ), almost all government agencies and municipalities lost their control and could not perform their duties and responsibilities. Political parties and militias interfered in the municipal affairs and replaced municipalities and other government agencies imposing and collecting taxes and fees. Although the above practices did not reflect a democratic and participatory approach to local governance, they succeeded to an extent, in providing locally financed basic and essential services to the local population. With the Taef Agreement (1989) that ended the civil war in Lebanon, the government has reinforced its commitment to the principles of strengthening local government. The Ministry of Municipal and Rural Affairs was established on February 18 th, to represent the interests of the municipal sector in the country. The Ministry is charged with municipal sector development in areas such as resource mobilization, strategic planning, budgeting, programming as well as promoting best practices in municipal management. 2. MUNICIPAL SECTOR CONSTRAINTS AND OPPORTUNITIES 3.1 Local Representation The latest municipal elections held in May and June 1998 represent the first expression of non-sectarian democratic participation in Lebanon for the past 35 years (45 years for the municipality of Beirut). Unlike the legislative elections, municipal elections in Lebanon are free from sectarian constraints. However, this issue has recently raised fears in the country that the new municipal councils would not reflect accurately the confessional composition of the registered electoral base. Only registered voters could participate in the elections and non-registered residents of a given municipality were not eligible for voting (around 40% of the residents of the Beirut southern suburbs were not eligible for voting in their area of residency 8 ). Towns and

4 villages in the Israeli occupied area in the South of country were excluded from the polls, as well as towns in which the residents were displaced during the civil war. The elections were dominated by political rivalries overshadowing any debate over local developmental agendas. In fact, the success level of municipalities in Lebanon is evaluated primarily in terms of their ability to bring in benefits from their personal connections to politicians rather than in terms of the use and allocation of available local resources. However, the municipal elections have clearly contributed to the political and social stability in the country and a bottom-up sector reform process is anticipated as most of the elected municipal council members enjoy strong backing from politicians and political parties. 3.2 Human Resources Municipalities in Lebanon suffer from a lack of qualified and motivated human resource base that can efficiently implement local development projects and use modern municipal planning and management tools. Many municipalities are seriously understaffed and even cities of substantial size have limited number of employees. This is mainly due to the lack of financial resources on one hand and to the very low remuneration offered to municipal staff on the other 1. Declining wages and the rising cost of living have helped to undermine the management and administrative capacity of local governments as the best and brightest civil servants move to join the private sectors, attracted by higher salaries and better benefit packages. A new generation of municipal managers that take a more creative, forward looking and international perspective to local development is needed in Lebanon. Hence, the short-term priority of the government could concentrate on providing capacity building to a number of those presently in management positions at both the local and Ministry's level. Only over time can a core of knowledge, through newly trained administrators be built up to equip their successors to inherit these responsibilities smoothly. One encouraging outcome from the recent municipal elections is the emergence of large number of qualified municipal council members with strong private sector background. They are expected to bring-in their management expertise and make extensive use of their business networks for resource mobilization. 3.3 Economic Base and Financial Viability Historically, the provision of municipal services and the management of growth in Lebanon were catered for by the central government. However, a number of success stories were reported where municipalities became independent from central government financing. Local governments, in turn, had little to do with urban growth management and the supply of infrastructure, housing, employment and community service 1. There are 708 municipalities and 994 villages in Lebanon 9. Considering the small size of the country, this number is far too big. Most municipalities do not have the resources and tax base to sustain the local development needs of its resident population. In many cases the size of municipalities is inadequate making it difficult to develop the critical mass of financial resources required for the provision of acceptable levels of service. On

5 the other hand, a number of villages have grown in size while still dependent on the central government for service provision. However, any policy reform needed to address this issue will have to consider the relevant political and sectarian implications. 3.4 Municipal Revenues Municipalities in Lebanon are highly dependent on statutory transfers from the central government. Traditionally, inter-governmental transfers to support local government activity tended to privilege highly populated and wealthy areas of Lebanon. However, central government transfers have become limited as the government is heavily involved in financing major infrastructure projects that are strategically important for the national economy. At the municipal level, local revenues represent a lower share of total revenues. The tax on rental value is the major source of local revenues for municipalities and local expenditure account for a small share of total government expenditure. However, the absence of a modern and adequate management system for billing and collection and the inability of a large section of the population to pay their municipal taxes is making the task of enhancing local revenues very difficult. Furthermore, fines imposed on overdue payments are not collected and municipalities do not have the authority to efficiently sanction defaulters 10. As Lebanon is turning into a high cost business environment, local and foreign economic investments that could ultimately contribute to municipal revenues are becoming limited. Furthermore, the Euro-Med Association Agreement between Lebanon and the European Community is expected to lead to considerable loss of revenues considering that custom duties account for most of the government's revenues earmarked for funding inter-governmental transfers 11. The above has led to a situation where, in the short-term, municipalities must rely on their own resources while promoting innovative ideas for enhancing local revenues and optimizing on local expenditures. Ideas could include the provision of economic incentives for attracting private sector investments and the promotion of budget neutral and revenue generating projects through public-private partnerships. In the future, the government could contemplate introducing policy reforms that will allow local governments to diversify their capital sources by reaching out different credit markets and investors. The political instability in the past ( ) has created the necessity to limit regional disparities within the country and promote a policy of balanced development. However, considering the tight central government budget control policies and willingness to reduce the fiscal deficit, the government is increasingly looking towards international lending agencies. In its aim to capitalise on the World Bank's experience in best practices in municipal development, the government is seriously considering the initiation of a municipal development project with World Bank assistance. The EU, USAID and UNDP have also expressed interest in supporting the government in this endeavour. 3.5 Decentralization and Private Sector Involvement The main arguments for promoting decentralisation in Lebanon are of political and socio-economic nature. The social and political diversity of Lebanon and the benefits

6 that can be obtained by bringing government nearer to people are the main reasons behind the endorsement of decentralisation in the Taef Agreement (1989) 1. Decentralisation coupled with improving local municipal finances can reverse the urban migration out of villages and smaller towns and contribute to poverty alleviation through the provision by local governments of essential social and economic infrastructure. In the Lebanese context, local governments are in a better position to determine the optimum allocation of fiscal resources. Hence, providing services at the lowest level of government will ensure that the local economy is more easily taxed, local priorities are appropriately met and service delivery satisfy local preferences 12. Adequate mechanisms for financial and political accountability will need to be in place in order to create the necessary incentives for good expenditure decisions at the local level. However, limited range of service responsibilities and high control on investment planning, budgeting and expenditure decisions are currently impeding the move towards decentralization in Lebanon. This is further impaired by the weak administrative capacity at the regional and municipal level and by the concentration of the public administration in the capital Beirut 1. In its effort to promote the decentralisation and private sector involvement in municipal service provision, the government could contemplate encouraging the municipalities to institute a regional approach to service delivery while encouraging the privatization of municipal services. Considerable economies of scale could be achieved in areas such as solid waste collection and treatment, maintenance of municipal sewerage systems and street lighting. Services that can be better provided by municipalities and financed through local revenues rather than inter-governmental transfers must be decentralised first. Local taxes must be set in order to reflect the level of service provided by the municipality. However, the institutional setting and legal arrangements defining the role and responsibilities among levels of governments and between municipalities could limit the involvement of the private sector in the financing of local municipal infrastructure and services. Furthermore, the limited recourse to user charges for service provision and the limited fiscal autonomy of municipalities in setting rates and tax bases reduces further the set of options available to design and honour agreements with the private sector. 4. PARALLEL STRUCTURES As local government institutions are constrained by a weak administration and limited resources, a number of parallel structures such as NGOs, PVOs, local advocacy groups, universities and private sector institutions could be tapped on to assist municipalities and support local development efforts. 4.1 Non-Governmental Organizations The number of NGOs in Lebanon grew significantly during the period of the civil war ( ) and played a major role in relief and humanitarian aid. Over one thousand NGOs, PVOs, welfare associations and co-operatives and around twenty foreign NGOs are currently working in Lebanon 13. The activities of NGOs have been largely concentrated in urban areas, however, in some rural communities, community groups such as local community committees are existent, however, these are mostly project committees formed in response to a specific project 1.

7 A wider collaboration between the municipalities and the NGO community could lead to large benefits to municipalities in areas such as environmental management, health, education, training and cultural and recreational activities. However, issues of credibility, reliability and expertise of the retained NGOs must be closely evaluated by the municipalities. International PVOs who are better equipped financially and administratively to implement projects could be also solicited. However, working through PVOs is more expensive and may be subjected to political considerations Universities Closer co-operation between the municipal sector and universities in Lebanon could be promoted in areas such as training, field surveys and needs assessment as well as the formulation of solutions and plans of actions. Universities could be encouraged by the Ministry of Municipal and Rural Affairs to design multidisciplinary training programs for urban managers on topics such as economics, finance, geography in and urban and environmental planning and management, etc. 5. LESSONS LEARNED In preparation for the establishment of a Social Fund for Lebanon in 1994, a rapid needs and capacity assessment was conducted by a local NGO in a sample of thirty municipalities and villages in Lebanon. The assessment covered the six Governorates in the country and used participatory rapid appraisal techniques with the aim of obtaining a wider perspective of the needs of rural areas in Lebanon 14. Below is a summary of the main findings that could establish the key design features for a municipal development project for Lebanon: Rural-urban gap 15 Population Health Safe water Sanitation Rural : 13% 85% 88% 8% Urban : 87% 95% 96% 81% Design features The identified priority community needs included potable water; sanitation; irrigation; internal roads; health facilities and agricultural roads. On the other hand, factors affecting community awareness included the following: (a) Literacy (b) Presence of religious and political groups (c) Rate of migration and immigration (d) Presence of social clubs and co-operatives (e) Proximity to District and Governorate capitals (f) Type of agricultural (i.e. irrigated cultivation0 (g) Economic condition (h) presence of contractors, engineers and skilled labour in the community Institutional framework : Municipal development projects in Lebanon shall reflect the political and institutional context of Lebanon. The Social Fund Project considered in was abandoned because of the difficulty in identifying an appropriate institutional framework to develop the program: As the Ministry of Municipal and Rural Affairs is entrusted with municipal sector development in the country, integrating the project into the above Ministry responds to a politically sensitive issue of not creating additional institutions within the government but

8 rather to reinforce directorates that already exist. Being also actively involved in the implementation of the project, the Ministry s staff will benefit from the training component and gain valuable experience in managing similar activities in the future. Project focus: Constraints and limitations A municipal development project for Lebanon shall focus on promoting higher fiscal discipline and better understanding of budgeting requirements; improved expenditure forecasting and stricter rules for the definition of investment priorities; coherent approach to expenditure allocations through increased local participation; and the promotion of an integrated development approach The potential projected constraints could be as follows: (a) Limited institutional capacity within the implementing sector ministry (b) The need to build consensus among the various political and religious stakeholders. In Lebanon, this factor is crucial in the design of regional development programs 6. CONCLUDING REMARKS The institutional framework to manage urban growth and support local development in Lebanon is still facing serious challenges that could undermine the benefits of the reconstruction programs. Firstly, municipalities are not being prepared to manage modern infrastructure and resolve environmental and development conflicts. Second, government initiatives to promote regional growth are still weak due to the absence of a national development strategy. Thirdly, public participation is not conceived as an essential tool for planning and hence planning is maintained as a top-down approach. Municipal sector development is the corner stone for strengthening democracy and promoting economic development in Lebanon. A sector reform and development strategy that focuses on community participation in decision making, private sector involvement in service provision and the improvement of municipal management systems including revenues and cost recovery should be promoted by the government. Time is pressing for definitive action before the glamour of reconstruction fades away.

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