Lebanon Must Escape and Avoid the Remittance Trap

Workers remittance is defined as the money migrants send home to their families. Cross country analysis supports positive findings related to remittance as it enables recipient family members meet the burden of rising living costs.

0
Lebanon Must Escape and Avoid the Remittance Trap


Workers remittance is defined as the money migrants send home to their families. Cross country analysis supports positive findings related to remittance as it enables recipient family members meet the burden of rising living costs. A recent article by IMF on “Remittance Trap”[1], “supports the notion, that if invested wisely remittance has the potential to spur economic growth through greater investment in human or physical capital or by way of financing new businesses”. I disagree with this notion- here is why? Remittance dependence does play a pivotal role in the battle against fighting poverty, it has lifted tens of millions of people out of deprivation, and contributed to increased rates of emigration as more highly skilled workers seek high paying jobs abroad. However, remittance has no significant bearing to a country’s economic growth.

A case in point –holds true for Lebanon’s sectarian political system, which is not only grim, but is slow. Slow to hold elections, pass budgets, and elect a President. A slow brewing precarious economy where economic stagnation, weak governance, and staggering inequality is plagued by rising uncertainty of another war with Israel, more reason to believe why, a country like Lebanon relies so heavily on remittance to finance its rising fiscal deficit.

Indeed, Lebanon’s leaders continue to show solidarity with the Lebanese in times of crisis, but that is not enough. Like all successful functioning democracies, Lebanon too needs a government that acts fast and pushes boundaries to resolve the most pressing issues clouding the country in despair. [2]The people of Lebanon realize turning to religion in times of hardship is not enough, they demand and deserve a government that is for the people.

Prime Minister Saad- al Hariri, knows better that if he wants a prosperous, stable Lebanon, then he must focus on the cause and not the symptom. And so, he has through the reaffirmation of Lebanon’s “dissociation policy”, established in 2012, aims to keep the deeply divided states out of regional conflicts such as the civil war in neighboring Syria. In his interview with the [3]World Economic Forum, in his own words, Hariri said, “The dissociation policy will save Lebanon”. The big question is whether the “dissociation policy”, which bars Lebanon from meddling in other country’s stately affairs, is effective enough to stabilize the political turmoil facing Lebanon. Will the dissociation policy help end rising corruption, and attract foreign investment, but above will it help end the remittance trap?

Here are the areas Hariri should focus on to achieve long- term economic growth and prosperity.

First, Hariri must establish a pro- growth agenda inclusive of measures that will drive capital accumulation. Capital accumulation can be achieved by obtaining high rates of investment and domestic savings. Corruption must be tackled to increase foreign investment, and build a sense of safety net. If Lebanon wants to expand its domestic and international ties it must improve its ease of doing business with global market. According to a recent[4]World Bank report, Lebanon ranks 142 out of 190 countries on ease of doing business. Rest assured Hariri is taking necessary steps to revive the economy by signing a circular requesting the ministers to bring down their budgets by 20 %, because Lebanon needs to save more and spend less as a country, that is if it wants to add economic growth and reduce political instability. The crippling infrastructure of Lebanon requires immediate attention. The Hariri administration understands this conundrum and is working with the IMF and the World Bank to curb the fiscal deficits, and revive the fractious economy. According to a recent report by the[5] World Bank the quality of the Lebanon’s infrastructure is in dire need of repair. In fact, Lebanon ranks 130 out of 137 countries in the quality of overall infrastructure.

Secondly, Lebanon needs to continue attracting and retaining the best and the brightest minds. Job creation alone will not help resolve issues related to increase in exports in human capital. Lebanon needs to put an end to emigration brain drain. Lebanon needs better competition policies that will create an impetus for productivity growth.

Lastly, Lebanon must work closely with its allies and partners to find a prudent solution to curtail the force of refugees entering Lebanon and extending their stay. Currently, Lebanon is a safe haven for over million and half refugees, these refugees have been in Lebanon for the past six years. Refugees add to the growing economical strain, hence creating an upward pressure in pricing, which results in increased cost of living.

A through assessment of Lebanon remittance trap indicates that remittance is temporary fix to a much bigger conundrum facing Lebanon. Arguably, remittance should not be discouraged given its importance in lifting millions out of poverty and deprivation. Indeed, remittance does help shoulder the burden of the rising living costs in countries like Lebanon, but keep in mind that it does little or nothing to spur economic growth. A permanent fix in the form of escape and avoidance of remittance will curb the dependencies and emigration brain drain. Hopefully, Lebanon has fired up the growth engine and now it just needs to keep the flame burning to enlighten the people of Lebanon, and that of other countries where the remittance trap is a growing issue.

North Atlantic Policy Center working papers are circulated for discussion and comment purposes. They have not been peer reviewed or been subject to the review.

Notes:

[1] Is There A Remittance Trap

https://www.imf.org/external/pubs/ft/fandd/2018/09/pdf/is-there-a-remittance-trap-chami.pdf

[2] Miracles are on the Rise in Lebanon

 https://www.economist.com/middle-east-and-africa/2018/12/15/miracles-are-on-the-rise-in-lebanon

[3]A conversation with Saad Hariri President of The Council of Ministers of Lebanon

https://www.youtube.com/watch?v=vPuSK6220hA

World Bank Report: Doing Business:

[4] https://www.worldbank.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2019-report_web-version.pdf

[5] Strategic Assessment: A Capital Investment Plan for Lebanon

https://www.worldbank.org/en/country/lebanon/publication/strategic-assessment-a-capital-investment-plan-for-lebanon



Summary
Article Name
Lebanon Must Escape and Avoid the Remittance Trap
Description
Workers remittance is defined as the money migrants send home to their families. Cross country analysis supports positive findings related to remittance as it enables recipient family members meet the burden of rising living costs.
Author
Publisher Name
The Policy Times

LEAVE A REPLY

Please enter your comment!
Please enter your name here