**USAID/Lebanon**

**Lebanon Revisited: A Transition Strategy**

**2003 -- 2005**

**(extended through 2007)**

**August 2002**

**USAID/Lebanon**

**Lebanon Revisited: A Transition Strategy**

**2003-2005**

**Table of Contents**

**Part I: The Assistance Environment** 1

The Challenge 1

> The Glass Half-Empty 2
>
> The Glass Half-Full 3

Key Planning Assumptions 4

**Part II: Looking to the Future** 6

USAID's Programs and Investments: 1997-2002 6

Programs and Investments for the Future: 2003-2005 7

The Strategic Objectives 10

Strategic Objective 1: Expanded Economic Opportunities 10

The Challenge; USAID's Initial Response: 1997-2002;

> New Opportunities: 2003-2005; Anticipated Results and Impact;

Other Donors

Strategic Objective 2: Strengthened Foundations for Governance 20

> The Challenge; USAID's Initial Response: 1997-2002;
>
> New Opportunities: 2003-2005; Anticipated Results and Impact;
>
> Other Donors

Strategic Objective 3: Improved Environmental Policies and Practices 26

The Challenge; USAID's Initial Response: 1997-2002;

> New Opportunities: 2003-2005; Anticipated Results and Impact;
>
> Other Donors

Program Integration and Partnerships 33

Relationships among Strategic Objectives 33

Gender Considerations 34

Strategic Partnerships and Alliances 35

**List of Acronyms**

AEI American Educational Institution

AUB American University of Beirut

CBJ Congressional Budget Justification

CDP Community Development Project

CDR Council for Development and Reconstruction

CLD Center for Legislative Development

CN Congressional Notification\
CoDeL Combating Desertification in Lebanon

DA Development Assistance

EIB European Investment Bank

ESF Economic Support Funds

FSN Foreign Service National

GDA Global Development Alliance

GDP Gross Domestic Product

GOL Government of Lebanon

IBRD International Bank for Reconstruction and Development

ICT Information and Communication Technology

IFAD International Fund for Agricultural Development

IMF International Monetary Fund

IR Intermediate Result

ISG International Support Group for Mine Action

JICA Japanese International Cooperation Agency

LAU Lebanese American University

LMRC Landmine Resource Center

MERDF Middle East Regional Democracy Fund

MFTR Memorandum of the Foreign Trade Regime

MIS Management Information System

MPP Mission Performance Plan

NISC National Integrity Steering Committee

NGO Non-Governmental Organization

OE Operating Expenses

OTI Office of Transition Initiatives

OYB Operating Year Budget

PSC Personal Services Contract

PVO Private Voluntary Organization

RCDC Rural Community Development Cluster Program

SF Social Fund

SO Strategic Objective

SUNY State University of New York

SWEMP Solid Waste Environmental Management Project

TA Technical Assistance

TAG Transparency and Accountability Grants

UNDP United Nations Development Program

UNIFIL United Nations Interim Forces in Lebanon

**List of Acronyms, Cont'd.**

USDH U.S. Direct Hire

USG United States Government

WB/G West Bank and Gaza

WTO World Trade Organization

**Lebanon Revisited**

**A 2003-2005 Strategy**

*"The most open, tolerant places in the Muslim world today are all
trading centers:*

*Dubai, Istanbul, Bahrain, Amman, Beirut, and Jakarta."*

*Thomas L. Friedman. March 2002.*

Lebanon, perhaps the oldest trading center in the world, is facing
enormous challenges to its economy, society, and security, brought on by
a host of domestic, regional, and global developments. Over the past
five years USAID has been effective in addressing rural poverty, local
governance, and the environment, making inroads in advancing economic
policy reform and building the capacity of Lebanon's American schools
and universities. Over the next three years USAID will build on these
gains, implementing a new strategy that fuses expansion with
integration, targets value-added sectors and reforms, and promotes the
governance, growth, stability, and sustainability that will enhance
Lebanon's stature as a nation, and as a regional and global player.

Key to success will be (1) creating economic opportunities in areas with
high growth potential; accelerating reform and global competitiveness;
strengthening economic and democratic governance; promoting sustainable
environmental and water management practices; increasing safety and
security; and helping victims in landmine-affected areas; (2)
establishing partnerships that meld the interests, expertise, and
resources of the business, government, university, NGO, and donor
communities; and, (3) developing mechanisms that enable a micro-mission
with a macro-mandate to manage its substantial investments efficiently
and achieve significant results.

**Part I: The Assistance Environment**

**A. The Challenge**

Lebanon, like its neighbors, lives in challenging times. Just two years
ago, in May 2000, the country was celebrating the withdrawal of Israeli
forces from South Lebanon after 22 years of occupation and a devastating
civil war. People were excited about resettling, reviving, and
reintegrating the south, and bringing stability, security, and
sovereignty to the entire country. These goals, however, proved
short-lived when Lebanon and Syria disputed the U.N.'s "Blue Line"
border with Israel, reviving the "resistance movement" and putting
recovery on hold. The September tragedies \-- Jerusalem in 2000 and New
York and Washington in 2001 \-- saw the respective launching of the
*intifada* and the War on Terrorism. Both affected Lebanon profoundly --
the former engendering considerable support for the Palestinian cause,
the latter focusing attention on Hizballah as an organization on
America's list of global terrorists, and both putting considerable
strain on Lebanon's relationship with the United States. Today, in the
midst of continued violence, instability, and heated emotions across the
region; and in the wake of the Arab world's proposals for a
comprehensive Middle East peace advanced at the "Beirut Summit" in
March, and President Bush's June framework for the same, our hope is
that the region, and the world, will finally witness the implementation
of a viable and comprehensive plan for peace, and that Lebanon will,
above all, become a positive force in moving it forward.

**The Glass Half-Empty...**

Even with the chance for peace, stability, and recovery on the horizon,
the current situation could dampen the prospects for effective
development assistance to Lebanon. South Lebanon, for example, which two
years ago was to be the showcase for Lebanon's revival, remains volatile
and not fully integrated with the rest of the country. It remains an
area characterized by sporadic and at times fatal cross-border
confrontations between Hizballah and Israeli Defense Forces. Unsafe
habitats riddled with up to a half-million mines, minimal government
presence, UNIFIL forces double the size of Lebanon's southern military
and security forces,[^1] and virtually no economy beyond small shops, a
few dozen olive presses, and subsidized low-grade tobacco characterize
the south. New investment is confined mostly to rebuilding houses
destroyed during the occupation, with help from Kuwait and other Gulf
states. Population levels have plummeted from over 300,000 prior to the
occupation to around 50,000 today, with many residents, mainly those
from the former security zone, working and commuting, and often
residing, in the nearby coastal cities of Tyre and Sidon, or further
north in Beirut and Byblos -- only an hour away by car.[^2]

Nationally, the economy is stagnant, with an alarming level of public
debt -- now at \$29 billion or 178 percent of GDP \-- whose servicing,
along with government operations, consumes all tax revenues and
more.[^3] Huge budget and fiscal deficits are slowing growth to nearly
zero and severely constraining investments in infrastructure, services,
and productive sectors. To help fill the gap the government is borrowing
heavily on international markets and relying increasingly on donors,
many of whom are cautious. Administrative reform, targeted at a bloated
and inefficient civil service, is slow, as is economic reform and the
privatization of publicly-owned assets that could give an immediate and
significant cash infusion to government coffers. Minimal foreign
investment, un- and under-employment approaching 30 percent in the
under-30 cohort, and widespread rent-seeking behavior of public
officials, are eroding confidence, widening the gulf between the rich
and poor, narrowing the range of the middle class, and forcing many
young people to leave Lebanon for work in the region and abroad.[^4]
Beirut, the focus of decision-makers, receives the lion's share of the
public budget; Constitutionally-mandated "balanced development" has yet
to be implemented. Many rural areas have lost their youth, elites and
investors, minimizing the capacity needed for economic take-off.
Disparities between rural and urban areas have increased migration to
the coasts, creating new urban and peri-urban pockets of poverty.

Many of Lebanon's economic woes can be linked to its political
machinery, all too often mired in sectarian and personal issues that
undermine nation-building and collective action for the common good.
Regional administrative structures -- governorates and districts -- are
weak; municipalities -- only recently rejuvenated -- are still too weak
to be a uniform force. "Political will" of the national government is
difficult to define, slowing critical reforms and actions needed to put
Lebanon on a sound financial footing. One indicator: from October 2000
to the end of 2001, Parliament, in eight legislative sessions, ratified
a total of ten laws, of which three to four could be characterized as
reform-oriented. Another factor influencing the political landscape is
external influence and oversight, primarily Syrian, which affects all
major political, economic, and security decisions in Lebanon.

**... and the Glass Half-Full**

Despite these shortcomings, there is cause for optimism and no reason to
jettison a future anchored in sustainable development. The reform-minded
government of Prime Minister Hariri, in place since November 2000, is
making the right moves -- advocating economic growth and investment
nationwide; promoting competitiveness and globalization with a new
Euro-Med Partnership Agreement and planned WTO accession; branding 2002
the "Year of Privatization;" introducing key revenue-enhancing reforms
and a value-added tax that will hopefully add \$500-800 million of
revenues this year. The government is also advocating sound budget
management, promoting good governance, and advancing municipal and
administrative reform. Plans are under discussion to downsize the
government and redeploy thousands of civil servants to priority jobs and
areas; many municipalities, including Beirut, now have accurate tax
registers and are starting to collect more revenues.

Anchoring these moves is a diverse Christian-Muslim-Druze population
comprising one of the most educated, talented, entrepreneurial
workforces in the Arab world, in a capital that has long been the
regional hub for business and banking. Indeed, the private banking
sector, while still conservative in lending, remains resilient and
highly liquid, with assets of \$40 billion -- prompting the Bankers
Association to state that if need be, they could weather a currency
devaluation or default by the state -- their largest customer -- with
limited and manageable adverse consequences to the public. There is
renewed awareness of the importance of exports, with efforts on many
fronts to increase exports and reverse an untenable trade balance. The
post-September 11 hope for renewed Arab interest in doing business in
Lebanon is slowly materializing, with new projects underway, mostly in
the hospitality, retail, and tourism sectors. In a country that has long
been a haven for travel and tourism, "Summer 2002" promises to be the
strongest in more than 25 years.

Equally significant are the estimated 16 million Lebanese, roughly five
times the resident population, living outside Lebanon, who have migrated
and settled around the globe for generations. Over time many have
maintained close ties with Lebanon, creating vibrant social and economic
networks, vital safety nets, and a pool of wealth that has kept the
country afloat, especially during difficult times.[^5] This "second" or
"shadow" economy, which will likely be fueled by today's emigrants, is a
primary ingredient in Lebanon's economic resilience. Side-by-side with
these external family ties are internal ones that play an equally \--
but different \-- central and significant role in the Lebanese society
and economy. These are the first/second/third generation urban settlers
who maintain a *pied-a-terre* in their natal villages, returning on
weekends to refurbish homes, run small businesses, plant fruits and
vegetables, and enjoy the extended family contact. The village, in many
respects, represents constancy, core values and key relationships for
the Lebanese \-- solid anchors that help shape fundamental elements of
Lebanese identities and lifestyles. The urban dwellers, in turn, are the
*pied-en-ville* for their rural families and friends. This rural-urban
symbiosis is a dynamic, vital and vibrant part of Lebanon's social and
economic fabric; it needs to be nurtured and perpetuated. As will be
discussed below, it is a key part of the "growth-pole" focus of this
strategy.

Regarding the security situation in South Lebanon, "Operation Emirates
Solidarity," the multi-million dollar landmine action effort led by \$50
million of United Arab Emirate contributions, is a positive force for
change \-- awarding two demining contracts in May 2002 with the goal of
neutralizing the most heavily-mined areas over the next two to three
years. This pace would indeed bring renewed hope for resettlement,
recovery, and reintegration of the south.

**B. Key Planning Assumptions**

In trying to determine whether Lebanon is filling or emptying the glass,
it is evident that with all its strengths and advantages, the country is
nonetheless confronted with three powerful, ever-present, and
potentially destabilizing forces: conflict in the region, and both
political gridlock and deteriorating economic performance at home. These
and related factors could, in the worst case, precipitate economic
collapse, political crisis, widespread conflict, and pervasive
insecurity. They also could further compromise living standards,
particularly among the rural poor. Such factors include the following:

**External Political and Security Status.** Political and security
conditions in the Middle East have become more volatile. The
perspectives and approaches of key actors seem to have hardened;
terrorist incidents have increased. All these have had a negative impact
on Lebanon's economic, political, and security situation.

**Internal Political Situation.** Lebanon's political system is designed
to maintain stability among different religious-based sects or
"confessions," even at the expense of efficiency and excellence. The
structure and processes of government are tied closely to that system.
This over-riding desire for political balance, which was last made
explicit in the 1989 Taif Accord ending the civil war, has stymied
efforts to implement major institutional or electoral reforms. This will
not likely change anytime soon.

**Domestic Economic Performance.** Lebanon's anemic GDP growth will
continue for at least another year. WTO accession will progress
moderately and support the Euro-Med Agreement. Mounting debt, high
deficits, and cost-cutting austerity budgets will constrain investment
and service delivery, particularly in rural areas.

**International Economic Performance.** Lebanon's trade deficit widened
considerably in 2001, with higher imports spurred by lower tariffs.
Public debt increased significantly and sovereign credit ratings
plummeted. Reversing this will depend on a comprehensive reform program
that includes aggressive privatization measures, administrative and
fiscal reform, and removal of subsidies.

**South Lebanon.** The initial jubilation surrounding the May 2000
Israeli withdrawal has not translated into resettlement, revival, or
reintegration of South Lebanon. USAID's and other donors' investments,
while making a difference in infrastructure and demining, are not able
to stimulate economic activity on any significant scale.

**Rural Development.** The Council for Development and Reconstruction
(CDR), the GOL's version of a National Planning Commission, is pursuing
regional development beyond infrastructure and working with a core group
of donors -- theWorld Bank, EU, UNDP, and USAID \-- to define a vision
and strategy. Since significant public investment may not be
forthcoming, we expect the GOL to request donors to channel
progressively more assistance to productive sectors and poverty-stricken
areas.

**Donor Funding:** While aggregate donor funding is approximately 10
percent of GDP, GOL expenditures of donor funding were 1.1 percent of
GDP in 2000. This low disbursement rate is most often linked to
bureaucratic inefficiencies and program performance issues. This has
created some "donor fatigue" and less willingness to bail Lebanon out
until a reform agenda is adopted. There is ample funding and consensus
for non-controversial projects, such as mine action. USAID funding will
remain at \$35 million annually barring any "breakdown" that could
trigger additional assistance (see Part 3 below).

**Life Beyond Beirut.** Lebanon is often compared to a "City-State" with
all economic, social and political roads leading to Beirut.
Out-migration from rural to urban areas increased during the civil war
and occupation, creating a band of heavily-populated communities around
Beirut and along the coast. Revitalizing rural areas will depend on
developing competitive economic advantages in secondary towns and
cities, with strong links to the urban coastal centers.

**Lebanese Initiative and Outlook.** Whatever growth Lebanon can muster
will be driven by the private sector. Commercial banks, while holding
considerable government debt, are liquid and may gradually increase
lending in growth sectors. The Lebanese have extensive family, business
and educational ties worldwide, and especially in the U.S. They look to
the U.S. and its presence in Lebanon for technical leadership, business
connections, and economic opportunities. Their overall view of America
and the west is, and will remain, favorable.[^6]

**Part II: Looking to the Future**

Understanding and appreciating the strategic choices for the future is
intimately linked to the priorities and programs pursued, and progress
made, under the current strategy.

**USAID's Programs and Investments: 1997-2002**

Nearly five years ago, following a near termination of U.S. development
assistance to Lebanon, the USG decided to revive its bilateral
assistance program. Much of it was a reaction to the Israeli occupation
and continued conflict in South Lebanon, as well as the widening and
very apparent social and economic disparities, especially in rural
areas. There was also growing recognition of Lebanon's role in building
regional economic cooperation and achieving Middle East peace. The
outcome: USAID put in place a five-year \$60 million strategy aimed at

-   revitalizing and expanding economic opportunities in rural areas,
    through small-scale infrastructure and income-generating activities;

-   promoting democracy and good governance, building capacity of local
    municipalities to plan and manage resources efficiently and
    transparently; and

-   improving environmental practices, particularly community-based
    approaches that promote sustainable agriculture and environmental
    health.

Over time four other activities were added: a WTO accession program to
encourage trade and investment, globalization, and broad-based policy
and legislative reform; an "industry cluster" program, to identify and
promote productive sectors for investment; a water resource management
program, to make agriculture more productive and ensure that water
pricing is efficient and equitable; and a landmine action program, to
make all Lebanese aware of hazardous areas and assist survivors in
productive enterprises. From FY 2000-2002 USAID also benefited from an
extra \$20 million annually in development assistance and \$30 million
in proceeds of USDA surplus commodity sales, bringing total resources
for this period to over \$150 million.

Nearly five years later, having operated in an increasingly difficult
development context, we can say, with conviction, that this strategy was
sound and tailor-made to USAID's strengths. Indeed, USAID has built a
reputation as one of the top donor programs in Lebanon, viewed by many
as one of the most responsive, expansive, resilient, targeted,
high-performing, and quick-disbursing -- though far from the largest. We
attribute this to our ***purpose*** \-- promoting equitable, sustainable
development in Lebanon over the long-term; our ***products*** \--
demand-driven, people-focused, affordable, effective, appropriate,
visible and accomplishable in the short-term; our ***partners*** \--
PVOs, NGOs, foundations, universities, business associations, and
corporations \-- who together, often in partnership with the public
sector, form a multi-faceted, highly talented, experienced group capable
of navigating effectively at the highest governmental, corporate, and
diplomatic levels, as well as at the community level; and our
***procedures*** \-- user-friendly, promoting extensive collaboration
with all relevant public and private entities and, in contrast to most
donor programs, channeling resources directly to implementing partners.

Most important are the significant achievements produced by these "4
Ps," which include improving living standards among the rural poor;
stimulating economic policy reform and growth-oriented industry
clusters; supporting Lebanon's accession to the WTO; strengthening
municipal governance; promoting advocacy among NGOs and civil society
organizations; improving environmental practices and technologies for
environmental health; raising awareness of landmines and helping mine
survivors and their families rebuild productive lives; and strengthening
Lebanon's American educational institutions.[^7] The program has also
created important spread effects with other donors and USAID programs.
With a budget averaging \$15 million a year for the first three years,
the Mission leveraged \$60 million of World Bank and European Union
funding for rural development activities modeled on its Rural Community
Development Cluster (RCDC) program, bringing economic opportunities and
services to disadvantaged communities often in conflict or post-conflict
settings. The RCDC has been adopted and adapted by USAID Missions in the
former Republic of Yugoslavia, the West Bank/Gaza, and Jordan.

**Programs and Investments for the Future: 2003-2005**

USAID's intention over the next three years \-- the time we believe it
will take to put Lebanon on a sound path toward sustainable growth and
stability \-- is to build on its current success, melding elements of
the existing strategy into one that: fuses expansion with integration;
targets value-added and growth-oriented sectors, geographic areas, and
reforms; and promotes economic and political governance, environmental
health, and safety and security in ways that enhance Lebanon's overall
well-being, as well as its competitiveness as a regional and global
economic force.

To meet this challenge, the Mission, in close collaboration with
USAID/W, Embassy and State Department colleagues, and with extensive
input from a host of local experts and partners, selected **six
strategic areas** for this next phase...

1.  Expanding economic opportunities \-- in productive sectors and
    "growth poles"

2.  Accelerating economic reform \-- through World Trade Organization
    membership

3.  Strengthening foundations for governance \-- with municipalities and
    civil society

4.  Improving environment policies and practices \-- for water
    management and sanitation

5.  Promoting mine awareness and victims assistance \-- for residents in
    South Lebanon

6.  Strengthening American Educational Institutions \-- as key
    development partners

... grounded in **six anchors:**

1.  A transition \-- from alleviating poverty to creating economic
    opportunity

2.  A focus -- on strengthening growth areas, both geographic and
    productive

3.  A link -- between the rural and urban, inland and coastal

4.  An emphasis -- on governance, reform, and sustainability

5.  An added-value -- from synergies within the program

6.  A reliance \-- on new partnerships and models for economic growth

As shown in the framework on p. 9, these six areas and anchors comprise
a strategy based on one long-term development goal, three strategic
objectives (SO) and their intermediate results (IR), and three
cross-cutting themes. Collectively, the SOs build on, and advance
further, USAID's involvement in economic growth, democratic governance,
environmental preservation, and humanitarian assistance. Together they
support four

Agency Strategic Goals:

-   Encourage Economic Growth and Agriculture Development (SOs 1 and 3;
    strategic areas 1, 2, and 4)

-   Strengthen Democracy and Good Governance (SO 2, strategic area 3)

-   Protect the Environment for Long-Term Sustainability (SO 3,
    strategic area 4)

-   Promote Humanitarian Assistance (SO 1, strategic area 5)

Strategic area 6, "Strengthening American Educational Institutions,"
supports all three SOs and is a key element of the Mission's partnership
strategy, which will be discussed under "cross-cutting themes."

The strategy also fully supports the Mission Performance Plan (MPP) and
its goals:

-   Global Economic Growth -- promoting Lebanon's accession to the World
    Trade Organization (WTO), along with policy, legal, and regulatory
    reforms that promote U.S. commercial interests; expanding economic
    opportunities, key productive sectors, and "growth poles" that
    promote balanced development; and encouraging economic development
    and reform through various information technologies.

-   Regional Stability -- expanding USAID's rural development and
    economic growth, municipal, environmental, and landmine action
    programs to help reintegrate residents in the former Israeli
    security zone into national economic and political life.

-   Combating Terrorism -- expanding USAID's development programs to
    provide a counterweight to Hizballah's social and economic
    activities in South Lebanon and the Bekaa Valley.

The new strategy also dovetails nicely with the Secretary\'s \"Middle
East Partnership for the Future**,**\" targeted at reducing social and
economic inequities, improving the economic and business climate, and
building human capacity across the region; as well as the Agency\'s
Global Development Alliance, a business model that is especially
relevant as the Mission strengthens and expands its network of
public-private partnerships.

**Chart - 1**

**The Strategic Objectives**

The following presents the strategy's three Strategic Objectives. Each
SO discusses (1) the development challenge in the sector and the
rationale for USAID's engagement; (2) USAID's involvement during the
1997-2002 period; (3) new opportunities for the 2003-2005 period,
focusing on intermediate results and the activities/indicators that are
most relevant;[^8] (4) anticipated results and impact, both for the
proposed 3-year phase and over the longer-term, to answer the question
"What difference will this SO make in the lives of the Lebanese
people?;" and, (5) USAID's involvement and collaboration with other key
donors in the sector.

**Strategic Objective 1: Expanded Economic Opportunities**

**A. The Challenge**

Of the many challenges outlined above that affect expanding economic
opportunities in Lebanon, there are three where USAID has made
significant contributions and has a solid comparative advantage for
continuing assistance in this next phase. They are:

**Making Lebanon Competitive.** Lebanon, with its long history of
entrepreneurship and trade regionally and globally, still does not have
an internationally recognized status, i.e., membership in the World
Trade Organization, that would enable it to be fully integrated into the
world economy and the multilateral trading system. Many trade and
investment-related laws are either antiquated or too general to take
advantage of current realities in the world's marketplace; others often
undermine key factors, specifically the rule of law, good governance,
effective enforcement and predictability, which are crucial to
attracting foreign investment and maximizing Lebanon's competitive
strengths. Complicating this is a public that is not well-informed
about, and at times fearful of, "globalization;" and a corps of elites
who perceive WTO membership \-- and all the legal, policy, and
regulatory changes it entails \-- as a threat to personal interests, as
well as those of the State.

**Making Lebanon Productive.** Lebanon's productive sectors were all
adversely affected by the civil war and occupation; only limited
progress has been achieved in restoring their competitiveness. The
agricultural sector, which employs or affects nearly 40 percent of
Lebanon's workforce, is in disarray \-- fraught with costly subsidies,
protectionism, land-labor-crop distortions, and porous borders that
together hamstring farmers, processors, and marketers. The light
industry, tourism, and services sectors are similarly deterred by poor
policies, a lack of confidence, an absence of economies of scale, and
investments in non-productive areas, e.g., real estate and government
securities. Limited income-earning opportunities in rural areas, coupled
with a lack of any coherent rural development vision or set of
investments by the government, exacerbates rural-urban migration and
undermines the productive capacity of Lebanon's natural, cultural,
historical, and human resources.

**Making Lebanon Safe.** Lebanon's civil war and the Israeli occupation
left a trail and legacy of "silent killers" \-- landmines and other
unexploded ordnance -- that rendered a large portion of South Lebanon
and the West Bekaa unsafe for habitation and cultivation. An estimated
500,000+ mines, most of which are strewn along the Blue Line and within
the former Security Zone, have dampened the goals of immediate
resettlement, recovery, revitalization, and reintegration of the south,
especially when current capacity to disable them does not exceed 200 per
day. What was a permanent residence to 300,000 people before the
conflicts now numbers less than 50,000, of whom an average of six are
killed or injured every month from mine accidents. While there are no
reliable data quantifying the devastating impact of landmines on
Lebanon's economic growth, there is no question that it is significant.

Given these challenges, the rationale for expanding economic
opportunities in Lebanon is that an innovative, revitalizing strategy
\-- which fuses legal and policy reforms with productive sector
initiatives \-- is fundamental to creating and expanding new economic
opportunities, competitiveness, and growth. To succeed it must reflect a
balanced approach to rural-urban dynamics and capacities, with linkages
and networks, public and private, that can work together effectively. It
must also recognize the critical importance of human safety and security
in fostering development, and that no major segment of the population or
region of the country can be "off-limits" or "closed for business" and
hope to prosper.

**B. USAID's Initial Response: 1997-2002**

USAID began addressing several of these challenges under the current
strategy, making progress in a number of areas. For example:

-   On global trade and investment, technical assistance for WTO
    accession enabled Lebanon to hit a key milestone in May 2001 with
    the submission of its Foreign Trade Regime Memorandum (MFTR),
    launching the accession process and setting the stage for initial
    negotiations in September 2002. This also stimulated work on
    copyright, trademark, foreign investment, competition and
    intellectual property laws, scheduled for passage in late 2002.
    USAID assistance also helped create awareness of the WTO and its
    implications for Lebanon, holding seminars for the public and
    private sectors, NGOs, the media, and universities; and a National
    Forum on WTO accession.

-   On rural economic development, approximately 150,000 families,
    representing about 70 percent of rural Lebanon and 30 percent of
    South Lebanon, benefited from over 1,300 small-scale infrastructure,
    income-generating, and environmental activities in over 400 villages
    representing 40 geographic and economic "clusters," with communities
    and municipalities contributing 40 percent of the \$35 million cost.
    This was carried our under USAID's pioneering Rural Community
    Development Cluster (RCDC) program, which focuses on improving
    living standards among the rural poor. On the growth side, good
    progress was made in expanding high-value agriculture crops,
    agricultural infrastructure, dairy production, and marketing
    facilities; with policy inroads and several pilot activities in
    tourism and "internet for development."

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-   On access to credit, USAID's microfinance partners, one of which has
    partnered with and leveraged \$2 million of capital from two
    commercial banks, have provided over 38,000 clients operating 3,000
    businesses nationwide with nearly \$20 million of microenterprise
    loans and financial services. Repayment averages 97 percent,
    providing a boost to economic activity among Lebanon's vibrant class
    of small entrepreneurs -- many of whom are located in the RCDC
    clusters.

-   On productive sector development, USAID identified and promoted
    three "industry clusters" which have high growth potential
    nationwide and together comprise 25 percent of Lebanon's GDP:
    agribusiness and light agro-industry (12 percent), tourism (seven
    percent), and information and communication technology (ICT) (six
    percent). This effort, which dovetailed nicely and nascently with
    the RCDC program, expanded active collaboration among the industry
    stakeholders and launched a series of "growth and competitiveness"
    initiatives for the marketplace. The investment climate for these
    sectors will benefit from reforms carried out under the WTO
    accession program.

-   On safety and security, USAID, with over \$20 million of "rural
    cluster" investments in the South, leads the GOL/Donor/NGO
    "International Support Group (ISG) for Mine Action" in focusing
    attention on socio-economic constraints in mine-affected areas. With
    additional support from the Leahy War Victims Fund, USAID has played
    a lead role promoting landmine awareness activities to over a
    million Lebanese, helping some 2,000 landmine survivors and their
    families rebuild productive lives through a Victims Assistance
    Center; and strengthening the capacity of Lebanon's Landmine
    Resource Center (LMRC) to conduct surveys on affected families.

**C. New Opportunities: 2003-2005**

The new strategy will continue and complete "unfinished business" under
the WTO and landmine action components; and begin an innovative,
growth-oriented program that merges the two cluster components (rural
and industry) with microfinance activities. The Intermediate Results,
along with some illustrative activities and indicators, are as follows:

**Intermediate Result 1.1: Improved Enabling Environment for Trade &
Investment**

USAID is Lebanon's principal source of technical assistance for WTO
accession. TA to the multi-ministerial WTO National Committee will focus
on gaining WTO membership for Lebanon by mid-2004. This will consist of
helping the Government bring its foreign trade regime into conformity by
drafting remaining laws on agricultural standards and safeguards, trade
and customs remedies, foreign investment, competition policy, goods and
services, technical regulations, and intellectual property; possibly
providing assistance for working party meetings bilateral negotiations;
building understanding of and support for WTO accession among public and
private stakeholders, particularly Parliamentarians and advocacy groups
engaged in enacting all required legislation; and building institutional
capacity to enforce and implement WTO commitments and related laws.
While accession is anticipated in the first 18-24 months of the new
strategy, USAID assistance in implementing the reform agenda will likely
extend the full strategy period.

**Illustrative Activities:**

-   Training Lebanese negotiators on working party procedures and
    formalities

-   Training enforcement institutions on new laws and regulations

-   Organizing public awareness seminars for private and public sector
    officials

-   Completing a public education CD on WTO membership and disseminating
    it to the private sector, academia, municipalities, media, NGOs,
    libraries, and diplomatic missions

**Illustrative Indicators:**

-   Progress on WTO negotiations

-   Number of WTO-related laws and regulations passed and enacted

-   Number of WTO-related policy constraints identified and addressed

-   Trade and investment benefits from new laws and policies

**Intermediate Result 1.2: Improved Competitiveness & Growth of Targeted
Sectors**

**Intermediate Result 1.3: Increased Rural and Industry Cluster
Opportunities**

**Intermediate Result 1.4: Enhanced Access to Credit**

The Lebanese need good jobs and incomes, not just in Beirut but in other
cities, towns, and communities. Melding the two "cluster components" of
the current program \-- rural development clusters and industry clusters
\-- and ensuring that beneficiaries have access to credit, can help make
this happen by integrating and promoting productive sectors and regions
with the greatest potential for growth \-- creating economies of scale
and more robust impact. These sectors are:

-   **Agribusiness and Light Agro-Industry** \-- from cultivation to
    processed foods, catering to "niche markets" for high-value fresh
    and processed foodstuffs, including dairy, to replace imports and
    expand exports. Lebanon's soil, water resources, and topography can
    support a wide range of crops not cultivable in neighboring
    countries; food processing plants exist in many regions. Also,
    growth in domestic supply for local and export markets can reduce
    Lebanon's large food deficit, currently \$1.27 billion annually in
    imports and only \$165 million in exports. This is turn will help
    stabilize and encourage the re-population of (or discourage
    out-migration from) rural areas, and create valuable rural-urban
    linkages.

-   **Tourism** \-- the best prospect for near-term growth. Lebanon's
    tourism sector is making steady gains, with tourist arrivals \--
    mainly from Arab countries \-- 13 percent higher this past year,
    notably for cultural and historical tourism, ecotourism, and
    business travel. While the number of visitors remains one-third of
    pre-civil war levels and half the number visiting Jordan and Syria,
    there is steady growth. Hotels and other tourist establishments are
    continually coming on-stream, with \$2 billion of investment over
    the past decade. Growth in tourism will spur substantial employment
    opportunities for women and disadvantaged groups, as well as foreign
    exchange receipts.[^9] There are also excellent new prospects to
    extend tourism activities to areas outside Beirut.

-   **Information and Communication Technology (ICT)** -- a relatively
    new industry, but one in which Lebanon is well-positioned for
    expansion, both domestically and regionally. Lebanon's IT industry
    is relatively advanced technologically and competitive by regional
    standards; it can take advantage of the natural spread of ICT
    throughout the Middle East. ICT can also serve as a catalyst for
    linkages among different regions in Lebanon, as "value-added" for a
    wide range of economic activities. Overcoming the digital divide and
    providing relevant business and market information to rural areas
    can reduce their isolation and foster new income-generating
    activities in agribusiness, tourism, and other industries.

While merging these rural and industry cluster programs can, in theory,
encompass any rural region in Lebanon that can support new economic
opportunities in the three targeted sectors, USAID will place particular
emphasis on those areas with a high potential for growth. These will
include, but are not limited to, some or all of the existing rural
clusters. What is key will be identifying, developing, and expanding
"growth poles," i.e., those geographic areas that have the economic
foundation (natural and human resources, technology, capital,
infrastructure) to capitalize on these productive sectors, and that can
serve as centers of growth for industry activities.

Beirut, for example, has always represented the core growth pole for
Lebanon in its role as a regional center of finance, commerce and
tourism. Before the civil war and Israeli occupation, certain economic
activities \-- agricultural production and food processing, but also
tourism and trading \-- were carried out in outlying regions. Beirut
served as the Lebanese "hub," with other areas acting as "spokes." Two
decades of internal conflict broke down this system, isolating Beirut
from other regions whose infrastructure and factories were destroyed and
business activity disrupted. Many firms relocated to greater Beirut,
leaving the city congested and rural areas lacking human and capital
resources. Just as some growth poles emerge naturally over time, others
are established or expanded through concerted efforts of public and
private sector stakeholders.

While in many ways Beirut remains Lebanon's "City-State," there is no
question that growth potential exists in Lebanon beyond Beirut's
borders. One could envision a secondary city or town, or even a "primary
rural cluster," being a "hub" for a certain industries or activities,
with other communities or clusters integrated as "spokes" in a
production, processing, marketing, exporting, or service network. These
growth poles would in turn be linked to key Beirut-based industries
through collaborative initiatives engaging key partners. The objective
is to achieve the absorption of labor in productive economic activities
carried out by private sector firms. Firms and cooperatives of all sizes
(micro, small, medium, and large scale) could participate in various
initiatives.

It is likely that certain initiatives will encompass more than one
region. This model \-- regional hubs-with-spokes linked to key
Beirut-based industries \-- will stimulate rural-urban linkages and
networks that promote balanced, equitable, sustainable development. In
time, boundaries currently defining rural clusters will blur and
disappear, replaced by initiatives driven by functional activities and
market forces rather than by locale.

In addition to clusters, targeted sectors and geographic locales,
stimulating economic growth in rural areas cannot happen without access
to credit. USAID will support microfinance activities in particular, as
well as linkages to small and medium credit facilities, working with
local lending institutions and financial intermediaries to enable small
entrepreneurs and businesses in "growth poles" to invest in enterprises
that support, directly or indirectly, these industries.

While growth poles could be uni-dimensional in terms of productive
sectors, crops, processing and marketing facilities, historical
attractions, internet services, or numerous other activities, maximizing
their economic potential, particularly their capacity to create
economies of scale, might warrant a multi-dimensional, integrated set of
activities. Thus, the following illustrative activities, while relevant
to particular sectors, should not be viewed as a prescription or vision
for creating growth poles.

# 

**Illustrative Activities:**

**Agribusiness and agro-industry activities could include:**

-   Establishing effective "rules of engagement" between growers and
    cooperatives, and traders, retailers and processors

-   Revitalizing/creating cooperatives as supply sources for food
    processors and markets

-   Introducing high-value food crops and forage varieties

-   Providing market information systems and linkages to export
    facilities

-   Creating awareness of WTO-related agricultural laws, policies, and
    regulations

-   Conducting training on food standards and processing technologies

-   Revitalizing central markets and market outlets

-   Developing private institutions (associations, universities) for
    extension services

-   Promoting low-cost technologies and renewable energy sources for
    food production and processing

# 

# Tourism activities could include:

# 

# Identifying and developing historical, cultural, and ecotourism attractions

# Extending tourism to remote areas

-   Engaging municipal governments in regional tourism development

# Developing day trips and overnight packages with tour agencies

# Promoting nontraditional lodging facilities (e.g., bed and breakfast establishments, campsites)

# Identifying crafts and food products that can be sold to domestic and foreign tourists

# Establishing tourism information centers and promoting tourism marketing

# Expanding domestic supply of goods and services to major hotel facilities

# Nurturing strategic alliances to extend tourist stayovers

**Information and Communication Technology activities could include**

-   Using ICT services to promote agro-industry and tourism

-   Establishing ICT hookups in rural areas, with education and training
    activities

-   Expanding industry-university ties to improve the quantity/quality
    of ICT graduates

-   Developing incubators for ICT start-ups

-   Expanding strategic alliances between Lebanese and U.S. ICT firms

-   Promoting Lebanon as a source of ICT services within the region

-   Providing assistance on ICT-related policy, legal, and regulatory
    reform

**Microfinance activities could include:**

-   Providing loans and business services for agribusiness, tourism, and
    ICT activities

-   Establishing strategic partnerships between NGOs and commercial
    banks

-   Training commercial bank loan officers in microfinance lending

-   Expanding access of farmers, cooperatives, and artisans to
    microfinance

**Illustrative Indicators:**

-   Growth in output, income and employment in each of the three sectors

-   Number of new public/private partners actively cooperating

-   Municipalities engaged in growth pole initiatives and investing in
    support services

-   Number of enterprises/individuals using microfinance and other
    credit facilities

-   Trends in rural-urban dynamics and migration

**Intermediate Result 1.5: Increased Safety and Victims Assistance in
Landmine Affected Areas**

Lebanon's Humanitarian Demining program has four prongs: Mine Awareness,
Victims Assistance, Social and Economic Recovery, and Demining
Operations. USAID plays a leadership role in the first three and
coordinates closely with the Lebanese military on the fourth. To improve
safety and prevent further mine accidents, mine awareness activities
(i.e., recognizing landmines, mine fields, clearance operations) will
continue outreach, through gatherings and the media, to communities,
schools, and other key groups, with special focus on South Lebanon and
the Bekaa. To help landmine survivors and their families become active
and productive members of their communities, USAID will assist members
of the newly-created Victims Assistance Center in Jezzine \-- the
northernmost point of the formerly occupied Security Zone, home of
largest number of landmine deaths and injuries in Lebanon, and a
potential "growth pole" for the South. This Center, which is the first
of its kind worldwide, is an income-generating cooperative specialized
in agri-based products. Finally, continued socio-economic analyses by
the Landmines Resource Center will help the Government and donors
identify priority areas for future assistance and investment. This
component will be implemented in collaboration with cluster and credit
activities in the South.

**Illustrative Activities:**

-   Conducting mine awareness campaigns all over Lebanon focusing on the
    South and West Bekaa

-   Training Jezzine Co-op members in new agri-based technologies

-   Organizing workshops to identify mine-affected areas for priority
    clearance

-   Conducting regional development seminars to identify investment
    opportunities

**Illustrative Indicators:**

-   Average number of mine victims (civilian) per year

-   Number of individuals accessing landmine information and awareness
    activities

-   Jobs and incomes generated from the Victims Assistance Center

-   Communities transformed from mine-affected to mine-free

**D. Anticipated Results and Impact**

Besides the broad economic and political assumptions discussed in Part
I, there are three additional ones that will influence the performance
and overall success of this SO:

-   On improving the enabling environment for trade and investment, we
    assume that Lebanese leadership has the political will to enact all
    WTO-related measures within the next two years. One boost may be the
    recently-signed Euro-Med Partnership Agreement, which requires many
    of the same reforms.

-   On enhancing competitiveness and growth in targeted sectors and
    locales, we assume that the Government, with its limited resources,
    will not make significant investments outside urban areas; nor will
    it perpetuate current or create any new disincentives for private
    sector investment in selected growth poles.

-   On increasing safety and assistance to landmine-affected areas, we
    assume that the Government, with continued donor support, will make
    mine clearance a top priority for revitalizing and reintegrating
    South Lebanon; and that targeted areas will reflect the greatest
    population concentrations and potential for growth.

**How will Lebanon be different as a result of this SO? Results over the
strategy period** will show renewed confidence in Lebanon's economy from
WTO accession, with enforcement of laws in key growth sectors; a
business environment increasingly in conformity with best international
practices; and gains in predictability, transparency, and
accountability. Stakeholders in the targeted industries will be
implementing integrated action plans and growth-oriented initiatives.
Regional cluster and industry cluster stakeholders will be collaborating
in developing rural-based income generating activities in targeted
growth poles. Economic benefits (e.g., increased jobs, incomes, output,
exports, investment, services) derived from these efforts will be
relatively substantial, indicating that the transition from economic
deterioration to growth is indeed viable.

On a sector basis, recognizing that the selection of growth poles and
their activities is still in process, we expect conservatively that this
component can achieve the following:

**In agribusiness and agro-industry:**

-   Fulltime employment will increase from roughly 200,000 in 2000 to
    230,000 by 2005

-   Imports will decrease from \$1.27B in 2001 to \$900M in 2005

-   Exports will increase from \$165M in 2001 to \$250M in 2005

-   The trade balance will decrease from \$1.1B in 2001 to \$650M in
    2005

-   Contribution to GDP will increase from 12 percent in 2001 to 14
    percent in 2005

-   Growth in Value-Added will increase from one percent (96-01) to
    three percent (02-05)

**In tourism:**

-   Fulltime employment will increase from 24,000 in 2000 to 35,000 in
    2005

-   Tourist arrivals will increase from 741,000 in 2000 to 1.2M in 2005

-   Average expenditure per visitor will increase from \$1,050 in 2001
    to \$1,700 in 2005

-   Contribution to GDP will increase from seven percent in 2001 to 10
    percent in 2005

**In Information and Communication Technology:**

-   Fulltime employment will increase from 5,000 professionals in 2000
    to 7,000 in 2005

-   Internet users will increase from 262,500 in 2000 to 400,000 in 2005

-   Personal computers will increase from 250,000 in 2000 to 375,000 in
    2005

-   Contribution to GDP will increase from six percent in 2000 to nine
    percent in 2005

-   Growth in value-added will increase from six percent (96-01) to
    eight percent (02-05)

Mine clearance will be completed in and around key towns in South
Lebanon and the West Bekaa, re-opening tracts of agricultural land and
laying the foundations for growth-oriented industries. The Jezzine
Victims Assistance Center will be profitable, with shareholders
increasing from 350 to 2,000. Mine accidents will be reduced to an
average of three per month.

**Long-Term Impact,** i.e., ten years ahead, based on the above
assumptions and an economy set in a growth mode, will be seen in four
areas.

-   From a globalization perspective, Lebanon will be fully integrated
    into the world economy, with increased levels of trade and
    investment that will rejuvenate public coffers and catalyze
    productive sectors.

-   From an industry perspective, the three targeted industries, along
    with their up-stream suppliers and downstream customers, will be
    dynamic, internationally competitive, and expanding on a sustainable
    basis. These sectors, along with other clusters such as
    financial/business services and high-end manufacturing, will be
    engines of growth for employment, income, tax revenues and foreign
    exchange earnings \-- providing export earnings sufficient to
    decrease aggregate trade deficits, and tax revenues sufficient to
    reduce fiscal deficits and levels of national public debt. There
    will also be a marked increase in higher-impact, growth-oriented
    investments in South Lebanon and the West Bekaa.

-   From a geographic standpoint, all rural "growth pole" regions in
    Lebanon will be integrated economically with Beirut and hopefully
    other coastal towns and cities. This will help maximize national
    economic potential, establish income-earning opportunities
    throughout the country, and reduce the imbalance of opportunities
    between Beirut and outlying rural areas. Spillover impacts will
    include increased fiscal stabilization from higher tax revenues; and
    decreased economically-induced sources of political instability.
    Excessive urbanization of the Beirut metropolitan area will slow;
    rural-urban linkages that favor balanced, equitable, and sustainable
    development will solidify.

-   From a safety and security standpoint, all priority population and
    growth areas in South Lebanon and the West Bekaa will be safe from
    landmines and re-populated to pre-occupation levels. Mine accidents
    will be negligible.

**E. Other Donors**

USAID has coordinated closely with other donors in targeting areas for
expanding economic opportunities. The key donor partners as follows:

-   The European Union, through its 2002 Euro-Med Partnership Agreement,
    provides assistance on regional trade and investment reforms,
    notably agriculture and services, that support WTO accession. The
    UNDP is providing three advisors to the Ministry of Economy for
    trade and investment matters.

-   The \$20 million World Bank "Community Development Project," and the
    EU's \$30 million "Social Fund," both coming on-stream in 2002, are
    modeled on USAID's RCDC program. The CDP will focus on small-scale
    infrastructure, and the SF on microfinance and income-generating
    activities. IFAD is engaging in agri-based regional development
    programs, with a substantial microcredit component. The EU is
    considering assisting farmers (i.e., "rural poor") and agro-industry
    in developing export crops for the European market, along with
    marketing, storage, and handling methods. The World Bank has just
    approved a \$56 million tourism project targeted at restoring
    Lebanon's principal historical sites.

-   The International Support Group for Mine Action (ISG), a 20+
    multi-donor group led by a \$50 million contribution from the United
    Arab Emirates, is involved in all four prongs of mine action.
    USAID's principal partners are UNICEF for mine awareness and the
    UNDP for socio-economic recovery.

**Strategic Objective 2: Strengthened Foundations for Governance**

**A. The Challenge**

The above foundations for economic governance go hand-in-glove with
democratic governance, especially as the benefits of a performing
economy spread through society, with people and structures empowered to
make decisions about capturing and investing resources for the common
good. However, as Lebanon's U.N. agencies have recently pointed out,
"weaknesses in the development performance of the nineties can be
ascribed largely to governance issues" \-- limited democracy in action,
insufficient transparency and accountability, and marginal participation
of women and other disenfranchised groups at the political
decision-making level.[^10] Of the many challenges involving governance
writ large, there are three critical ones where USAID is having a
positive impact that warrants increased involvement. They are:

**Making Municipalities Effective:** Lebanon's 712 municipalities \--
the most basic level of interaction between citizens and government \--
were rejuvenated between 1998 and 2000 after 35 years of dormancy.[^11]
While municipalities have legal responsibility for providing citizens
with the lion's share of services, e.g., public health, education and
safety, planning and investment, infrastructure and waste management,
environmental protection, and cultural activities, they currently have
neither the wherewithal nor the political mandate to fulfill their role.
Excessive centralization; ineffective Municipal and Decentralization
Laws; lack of human and financial resources; chaotic planning, budget
and revenue-generation systems; rampant corruption and unequal treatment
of citizens have thus far impeded the vast majority of municipalities
from being all they should be.

**Making Civil Society Proactive:** With respect to transparency and
accountability \-- key elements of good governance \-- the Government
established a National Integrity Steering Committee in 2000 to help
devise a strategy and action plan for fighting corruption. Two years
later the NISC has proved ineffective, unfunded and unrecognized, with
no clear mandate. While such creations, coupled with administrative
reform, may someday be useful in promoting good governance, the real
pressure-point for advocacy and change lies in a vibrant civil society.
With one reliable poll estimating that corruption is adding nearly ten
percent to the cost of today's goods and services in Lebanon, there is a
critical unmet need to address this problem through both public and
private channels.

**Making Parliament Responsive**: Lebanon's 128-member Parliament, while
not yet an independent legislative force and counterbalance to the
Administration, nonetheless has a key role in representing the interests
of constituents and overseeing GOL operations. A major challenge to
responsiveness is strengthening parliament's structures and processes;
creating or amending laws that promote economic investment and growth,
decentralized government and sustainable development; and enhancing the
relationship between the public and parliament. This last point reflects
the need to create an active dialogue and exchange of information
between legislators and civil society groups, communities and
municipalities on all matters relating to Lebanon's development.

Given these challenges, the rationale for strengthening foundations for
governance is two-fold. First, the pragmatic benefits gained from
municipal councils, civil society groups and Parliamentarians being
actively engaged in promoting USAID's economic growth and environmental
objectives; and second, the less tangible but no less important benefits
of citizens having confidence that their public institutions and
officials are indeed working for them with their interests in mind; and
that there exists a viable, productive partnership between the Lebanese
people and their government.

**B. USAID's Initial Response: 1997-2002**

Under the current strategy approximately 90 percent of USAID's
governance funds were used to promote legislation and built capacity for
effective, decentralized local government, recognizing the renewed role
municipalities were to play in Lebanon's development. Having gone
through a three-year period of testing, installing, and tracking
computerized management information systems (MIS) in three urban and 79
rural cluster (RCDC) municipalities, USAID received a major boost in
August 2001 with a landmark agreement with the Ministry of Interior and
Municipal Affairs that gave the Mission a mandate to expand its
pioneering program nationwide to all 712 municipalities.

New leadership in the Ministry recognized that newly-reactivated
municipalities must play major planning and decision-making roles if
economic revival and growth were to occur. That USAID had already made
strides in promoting this vision, and had helped numerous municipalities
design and implement modern management systems and e-government
procedures that fit their needs, catapulted the Mission's activities
from relatively low-key back-stage "pilots" to a highly visible
center-stage program. Indeed, USAID, working with SUNY's Center for
Legislative Development (CLD), has emerged as the leader in
strengthening municipal government and governance nationwide \-- the
lynchpin for local development in Lebanon. Some examples of progress:

-   Municipal revenue and budget systems have increased revenues in 40
    municipalities from \$26 million in 2000 to \$39 million in 2001,
    resulting in more local investment and constituent services.

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-   Customized, automated management information systems now help
    elected officials and civil servants in over 100 municipalities plan
    and manage their resources more efficiently, with effective
    oversight of funds and staff, and reliable information they can
    share electronically with other local, regional and central
    government units.

-   Tax records can now be accessed in ten minutes, not six weeks; tax
    refunds can be processed in three steps, not 13. Licenses and
    permits that once required several desk-to-desk stops and multiple
    bribes can now be acquired at one-stop Customer Service Counters in
    minutes, with set fees published on websites and in *Citizen
    Guides.*

-   Dozens of municipalities have taken over the operation and
    maintenance costs of hundreds of infrastructure projects built under
    USAID's rural cluster program.

On promoting a politically active civil society, USAID, in 1999, was the
first donor agency to raise the issue of corruption with the GOL,
prompting an initial nationwide campaign. With assistance from the
Office of Transition Initiatives (OTI), the Mission initiated a
"Transparency and Accountability Grants" (TAG) program in mid-2001 aimed
at strengthening anti-corruption advocacy at a grass-roots level. Grants
to AMIDEAST totaling \$500,000, coupled with \$242,000 of leveraged
funds, enabled 29 local organizations across Lebanon to produce
innovative products that are gaining considerable local and national
recognition. A "Corruption" board game developed under the program is
presently being distributed to 1,500 schools as part of a new civics
curriculum; codes of ethics for NGOs led by the Lebanese Transparency
International affiliate; standardized business practices for members of
the American-Lebanese Chamber of Commerce; a financial procedures manual
for NGOs; booklets explaining citizens rights, government transactions,
and public budgets \-- all in user-friendly Arabic \-- to name just a
few. In March 2002 USAID awarded AMIDEAST a follow-on grant to expand
this program through 2004.

On Parliamentary responsiveness, USAID has provided technical assistance
to a number of Committees to help them pass rational budgets and craft
progressive legislation; and to work with NGO leaders under the "NGO
Parliamentary Forum" on public policy issues. SUNY/CLD was instrumental
in helping the Judicial Committee draft the Municipal Law, which will
reduce administrative and financial controls of the central government;
and the Decentralization Law, which will devolve many central-level
decisions to districts and municipalities. Both should come to a vote in
2002.

**C. New Opportunities: 2003-2005**

The new strategy will expand the municipal-capacity building activities
nationwide and add a new "Think Entrepreneurial" component to encourage
municipalities to seek out new investments in USAID's three targeted
productive sectors, as well as others with growth potential. It will
also expand the TAG and Parliamentary programs, the latter focusing on
enabling legislation for economic, municipal, and environmental
activities. Intermediate Results, along with some illustrative
activities and indicators, are as follows:

**Intermediate Result 2.1: Improved Municipal Governance**

Municipalities, to be relevant, need to raise revenues, attract
investment, and provide services to their constituents. With few
revenues coming from the GOL's Municipal Fund, most municipalities, as a
first step, must regularize and computerize taxpayer lists for efficient
tax collection.[^12] USAID, through its e-government program, will
extend its municipal revenue and other management systems to all
municipalities by the end of 2005, enabling them to expand the taxpayer
base, improve municipal administration, enhance the role of municipal
councils, and improve the relationship between citizens and their
municipalities.[^13] The program will also forge links with district,
regional and central authorities, particularly those oversight agencies
(General Accounting Office, Civil Inspection Board, Civil Service Board)
that have financial and administrative responsibilities at the municipal
level. USAID will also assist municipalities in their planning,
budgeting, and service-delivery activities, with an eye toward building
the infrastructure, capacity, and incentives needed for "growth poles"
and value-added investments. In the long-term, all municipalities must
create more opportunities for private sector investment to meet the
ever-growing demands for basic services. By doing so, good governance
will help create a positive environment for economic expansion.

**Illustrative Activities:**

-   Strengthening core management information systems and e-government
    services

-   Sensitizing municipal councils to growth and investment
    opportunities

-   Creating inter-municipal councils focused on "growth pole"
    activities

-   Expanding ICT to provide services and information to constituents

**Illustrative Indicators:**

-   Amount of resources raised by municipalities through various taxes
    and fees

-   Number of municipalities benefiting from modern management
    information systems

-   Number of municipalities issuing annual financial statements

-   Number of municipalities acting as partners in industry cluster
    activities

-   Public confidence in municipalities[^14]

**Intermediate Result 2.2: Expanded Role for Civil Society Advocacy**

The current success of the TAG program, coupled with an expansive
follow-on grant, are setting the stage for expansion of activities that
will build capacity of NGOs, civil society organizations, the media, and
private groups to promote transparency and accountability and combat all
forms of corruption. The government, at all levels, is neither uniformly
capable nor willing to address corruption, nor is the corporate sector
\-- often reliant on government services and goodwill \-- in a strong
position to protest various forms of rent-seeking behavior. Numerous
civil society groups and a growing segment of the media are poised to
"make noise" in a responsible, professional manner.[^15]

**Illustrative Activities:**

-   Strengthening public-private partnerships in improving government
    services

-   Expanding local civic organization participation in public policy
    issues

-   Improving investigative journalism on topics of high citizen
    interest

-   Increasing the number of public forums showcasing TAG
    accomplishments

**Illustrative Indicators:**

-   Number of corrupt and unethical practices exposed

-   Improvements in government services resulting from TAG-related
    activities

-   Public awareness and support of anti-corruption activities

-   Public confidence in government

**Intermediate Result 2.3: Increased Responsiveness of Parliament**

Whether putting in place a legal framework for WTO accession, municipal
operations, or environmental reforms, Parliament plays a key role in
creating the enabling environment for much of what USAID and other
donors do "on the ground." USAID, which thorough SUNY/CLD assistance has
maintained a solid working relationship with Parliament since 1993, will
continue strengthening parliamentary structures and processes, including
the administrative and research skills of parliamentary committees and
staff; and their ability to (1) update and amend outdated legislation
through the Lebanese Parliamentary Forum; (2) rationally analyze and
modify budget proposals submitted by the Finance Ministry; (3) enhance
cooperation between various governmental institutions; and (4) enhance
the relationship between Parliament and the public.

**Illustrative Activities:**

-   Strengthening committee procedures for annual budget reviews

-   Improving systematic reviews of legislation key to economic and
    municipal reforms

-   Regularizing meetings with civil society groups via the
    Parliamentary Forum

-   Facilitating internet connections between parliamentarians and
    constituents

**Illustrative Indicators:**

-   Quality, quantity, and speed of laws passed or amended

-   Number of parliamentary committee meetings producing tangible
    results

-   Useful information disseminated among committees and to the public

**D. Anticipated Results and Impact**

USAID is optimistic, but sober, on achieving quick results under this
SO, recognizing that key elements of the "enabling environment" \-- many
of which are beyond USAID's sphere of influence \-- are not yet in
place. As with other components of this strategy and "Lebanon's
Development" in general, GOL financial difficulties have created a
double-whammy for municipalities: little or no operational resources
from the Municipal Fund, and a prohibition from hiring permanent staff
until the GOL, in their effort to reform the bureaucracy, decides how to
redeploy, reduce, or release excess government staff. While municipal
councils are exerting formidable pressure on both fronts, these two
constraints \-- limited finances and staff \-- could lead to a
bottleneck in nationwide expansion of the program if not resolved in the
coming six to12 months.

On Parliamentary responsiveness, it is certainly in the interest of
central government to pass the draft municipal and decentralization
legislation as a means to transfer authority (and financial
responsibilities) to the local level, thus reducing pressure on the
central budget. We assume both internal and external pressures for
economic reform, prior to any cataclysmic event, will accelerate new and
improved legislation, and eliminate some of the current gridlock within
the government and among legislators. We see no barriers to a vibrant,
responsible, and politically active civil society.

**How will Lebanon be different as a result of this SO?** **Results over
the strategy period** will indicate that at least 80 percent of
municipalities have effective, transparent, and accountable planning and
management systems, responsive to citizen needs and capable of
sustaining development projects. Municipal councils will have increased
revenues (personal taxes, rental and service fees) by at least 40
percent, and started to collaborate with industries and investors in
growth pole regions. Coordination with GOL institutions on
centrally-planned projects will also have improved. Parliament will have
the analytic capacity to pass rational budgets and craft progressive
legislation, with increased input from advocacy groups. Citizens will be
more informed about corruption and other controversial issues by a
responsible press and respectable websites; opportunities for corruption
and tax evasion will be reduced. Watchdog organizations, anchored in
civil society, will have identified improvements in government services,
and will have targeted corrupt practices openly, without fear of
reprisal or concern for judicial indifference.

**Over the longer-term,** i.e., ten years ahead, municipal governments
nationwide will be fully functional following modern systems and
practices, with democratic milestones (transparency, accountability,
citizen participation) met. Municipalities will be the engines of local
and regional development, with inter-municipal councils, public-private
commissions, and other institutionalized planning and investment bodies
bringing jobs, investments, and prosperity to increasingly viable growth
poles. Municipal revenue increases will permit substantial investments
in economic development initiatives; citizen confidence in local
government will be at the 80 percent level nationwide. Civil society
groups will be widespread and supported primarily through foundations
and private benefactors, focusing attention on public policy and
progressively less on public waste, fraud and abuse. Parliament, whose
members will be accountable to constituents, will take an active
interest in crafting rational budgets and passing timely legislation for
the public good, ensuring that both are fully implemented and enforced.

**E. Other Donors**

USAID coordinates closely with the European Union (EU), the World Bank,
and the United Nations Development Program (UNDP) on several aspects of
governance and administrative reform:

-   The EU, with \$6 million of grants to the Ministry of Administrative
    Development, is helping to create a "Union of Municipalities" as
    both an implementing and lobbying block; and a link with district
    and regional authorities. The EU has also provided 59 computers and
    basic computer training to 50 municipalities in South Lebanon who
    are about to install and be trained in USAID's management
    information systems.

-   The World Bank has initiated an \$80 million Municipal Loan Fund
    whereby each municipality can access funds annually for small-scale
    infrastructure projects, mainly electricity, potable water, and
    roads. Designed as a complementary source of funds to the GOL
    Municipal Fund, it has become a "lifesaver" that has largely taken
    its place.

-   The UNDP is investing \$400,000 to assist select municipalities in
    North and South Lebanon with planning small-scale development
    projects; and Parliament with developing a code of ethics and
    strengthening policy debates at the national level.

**Strategic Objective 3: Improved Environmental Policies and Practices**

**A. The Challenge**

Lebanon's environment is in peril. Decades of neglect and misuse, fueled
by rural-urban migration, population increases, chaotic urbanization,
insufficient land use planning, and inefficient management of natural
resources, has resulted in the depletion and degradation of land, water,
air, coastal, and natural resources. USAID's current involvement in the
environmental sector falls into three challenging niches:

**Making Water Manageable:** Lebanon, compared to its neighbors, has
abundant water resources, blessed by the highest level of precipitation
in the region.[^16] Yet an estimated 70 percent of its water is lost to
evaporation and runoff. Of the remaining 30 percent, about 30 percent
goes to domestic use, currently at excessive levels, i.e., 160
liters/day per capita; 60 percent to agriculture, which is currently low
in productivity yet expected to double in hectarage over the next 25
years; and about ten percent to industry, which could increase in the
next 5-10 years in the agro-industrial sector. Current GOL investments
are concentrated more on expanding large-scale infrastructure for water
supply (dams, diversions, stations) and less on water demand management
that would entail long-range planning, conservation, trade-offs, and
efficiencies. As a result, water experts forecast conservatively that
Lebanon will be in severe water deficit within the next 10-15 years,
which could not only jeopardize its own citizens, economic prospects,
and security, but also those of its neighbors.

**Making Water Valuable:** Linked to water usage is water pricing, which
today provides every incentive for excess use and waste. Ninety percent
of total water consumption is subsidized, 31 percent for agriculture and
39 percent for domestic use. Inefficient water authorities charge prices
considerably below the cost of supply -- flat fees not exceeding four
cents/m3.[^17] Residents take advantage of illegal connections and wells
\-- both of which can be obtained (or ignored) through rent-seeking
behavior. Potable water losses are now reaching 60 percent due to faulty
distribution systems. There are no laws governing domestic use and
distribution of water; agricultural water distribution relies on
outdated and inappropriate codes dating from Ottoman rule, or force. On
the positive side, the Ministry of Water and Energy has just issued a
10-year management plan addressing projected water shortages. Also, the
southern coastal city of Sidon recently installed individual water
meters, enabling its water authority to recover 80 percent of its costs
during the first year.

**Making the Environment Healthful:** Wastewater and solid waste
management threaten health and environmental quality. Water quality is
rapidly deteriorating from inadequate residential and industrial
treatment facilities, misuse of pesticides, and rapid urbanization.
Water pollution is adding millions of dollars to health care and
clean-up costs annually, reducing real estate values and affecting
tourism, fishing, and recreation. Similarly, poor collection and
disposal of solid waste, particularly in rural areas, has led to open
dumping in 80 percent of villages and open burning in 20 percent. The
GOL's wastewater management master plan theoretically covers 75 percent
of Lebanon's population \-- Beirut and 35 secondary cities \-- only
seven of which have facilities under construction, with the remainder
under study and under-financed. The master plan for solid waste
management, basically landfills contracted to a company with a modern
fleet of waste disposal trucks and equipment, covers 40 percent of the
population living in greater Beirut and large coastal cities. Both
plans, in a nutshell, represent costly, time-consuming solutions for the
urban elite, neglecting 25-60 percent of the population living in
non-urban areas. Making the environment healthful also requires that
efforts be directed towards forest conservation and ecosystem
restoration. Data on forest resources in Lebanon is old and outdated
dating back to 1966. However, all experts agree that abusive felling,
over-grazing, urban development, fires and pests threaten Lebanese
forests. Overgrazing is threatening Juniper forests and endangering its
regeneration. Urban development and forest fires are affecting the pine
forests. Between 1998 and 2000, approximately 35 square kilometers of
forests were recorded as affected by fires. Forest management is the
responsibility of the Ministry of Agriculture (MoA). It manages 31
forest monitoring stations and is planning for the construction of 14
monitoring towers to provide early warnings of forest fires and allow
quick intervention. Many reforestation efforts are at the grass roots
and government level; however, they are scattered, do not follow any
plan, and their overall sustainability and environmental impact remain
questionable. The survival rate for transplanted trees is believed to
oscillate between 10 and 40 percent. In 2001 responsibility for national
reforestation campaigns was transferred to the Ministry of Environment
(MoE), which developed a \$3.3 million annual project implementation
plan for the next five years.

**B. USAID's Initial Response: 1997-2002**

In 1997 USAID, through its rural cluster program (RCDC), began its
environmental activities by helping villages put in place environmental
management plans and adopt technologies for protection, reforestation,
land terracing and reclamation, and drainage. PVO partners created
awareness of environmental problems facing rural areas, offering
solutions through a number of demonstration activities at local and
national levels. To date some 400 small-scale projects have helped over
250 villages renew and reclaim over 14,000 hectares of forest and
agricultural land, much of which has already resulted in increased crop
production and incomes.

By 1999 the single largest quality-of-life demand in rural areas
centered on wastewater and solid waste disposal. Communities had no
services or technologies appropriate for their needs and lifestyles;
municipalities had neither the expertise nor means to engage in costly
treatment and disposal facilities. Recognizing that GOL master plans
omitted the word "rural" from their near-term priorities, USAID, working
through its PVO partners and with assistance from AUB's nascent Core
Environmental Lab and Water Resources Center, began experimenting with
cost-effective, environmentally-sound, appropriate solutions for
wastewater and solid waste disposal. In the past two years this team has
developed pioneering technologies that currently serve the needs of 14
rural cluster communities of 3-5 villages each, with 30 additional
projects scheduled for completion this year. These small-scale solutions
have already begun improving health and sanitation conditions in rural
areas, as well as the quality of streams and certain rivers. There is
currently a back-log of demand that will take at least three years to
fill. In addition, USAID allocated significant resources under the
community development program for reforestation that were integrated
within the objective of introducing improved environmental management
plans in rural communities.

Why such a demand? At \$50,000-\$200,000 a system, whether wastewater
treatment or solid waste recycling and composting, these technologies
represent a quick, affordable, maintainable solution. Costs range from
2-5 times cheaper than government systems and contracting; a ton of
solid waste, for example, costs \$35 to dispose of in the most remote
area of the North's Akkar region, compared to \$119/ton in Beirut and
\$66/ton in Tripoli. Skeptical at first, the Ministry of Environment has
now endorsed and even inaugurated these RCDC technologies, and is
exploring financing to disseminate them to all regions.

On water issues, in late 2000 USAID requested a FORWARD team to assess
whether AID assistance could be valuable in areas of water management
and water valuation.[^18] This was prompted, first and foremost, by a
recognition that USAID's nascent irrigated agricultural activities in
South Lebanon had adequate infrastructure but no management, with both
surface and groundwater being tapped at will; and second, that there
existed no rational system for water pricing, let alone cost recovery.
Working with RCDC and AUB partners, and in close collaboration with the
Ministry of Water and Energy, FORWARD recommended, and USAID endorsed,
two areas of involvement: (1) developing on-farm water management and
"collaborative planning" methodologies for water users and providers, to
maximize the use of scarce water resources, particularly in South
Lebanon; and (2) broadening private sector participation among Lebanon's
four water authorities and developing water pricing policies for
improved cost recovery. Both activities formally started in June 2002.

**C. New Opportunities: 2003-2005**

The new strategy will capitalize on the initial success of and
heightened demand for environmental conservation and health activities,
and institutionalize collaborative water management and water pricing
policies. Focusing on these three areas, USAID is filling critical gaps
that neither the GOL nor other donors are addressing, working on
"balanced development" at a national level through an inter-related set
of policies and programs. Intermediate results, along with illustrative
activities and indicators, are as follows:

**Intermediate Result 3.1: Increased Use of Appropriate Environmental**

> **Management Practices**

USAID's innovative environmental activities, now benefiting some 70,000
families in rural Lebanon, have emerged in many rural municipalities and
the Environment Ministry as a viable alternative to large-scale
infrastructure and costly service-delivery schemes. One goal over the
strategy periods is to integrate these appropriate technologies into GOL
master plans as *bona fide* solutions rather than stop-gap alternatives.
Increasing local participation and ownership in environmental health and
water management activities, coupled with PVO-AUB "technical excellence"
partnerships, will ultimately enhance the capability of communities and
municipalities to manage their environmental resources effectively. We
estimate that waste management facilities are still needed in about 600
rural communities. Available USAID/Municipal resources will cover about
100, with World Bank and EU funds hopefully financing another 200.[^19]
USAID possible intervention in reforestation and ecosytem restoration
would focus on testing and refining policy issues and options through
implementing pilot activities in target areas. Programs would emphasize
the need to strengthen municipal and local community capabilities by
promoting best management practices and introducing appropriate
techniques. This initiative builds on USAID's previous investments under
the rural community development cluster program in reforestation
projects.

**Illustrative Activities:**

-   Expanding appropriate waste water and solid waste treatment
    facilities

-   Testing and improving the efficiency and effectiveness of pilot
    technologies

-   Linking environmental enhancements to tourism "growth poles"

-   Demonstrating new, cost effective techniques through implementing
    pilot reforestation and ecosystem restoration activities in target
    areas

-   Strengthening municipal and local communities capabilities in
    implementing environmental management activities

**Illustrative Indicators:**

-   Number of waste management facilities operating effectively

-   Number of municipalities implementing sound environmental practices

-   Number of hectares benefiting from environmental enhancements

**Intermediate Result 3.2: Improved Participatory Approaches in Water**

> **Management**

Collaborative planning activities will focus on domestic water
management issues in communities where two decades of turmoil and
migration have made water resource management -- and agricultural
productivity \-- increasingly challenging. Initial activities will focus
on working with diverse stakeholders by introducing collaborative
planning techniques and developing mechanisms for resolving disputes
over water. Success could yield positive benefits and spread-effects for
other integrated systems, recognizing that the more sensitive and
contentious transboundary issues, for which there is little accurate
data, will likely remain off limits during the strategy period.

**Illustrative Activities:**

-   Build skills of various stakeholders over water management issues

-   Linking irrigated agricultural production to agribusiness "growth
    poles"

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-   Exploring of data needs, concerns, and opportunities in the water
    sector

**Illustrative Indicators:**

-   Number of communities/systems implementing effective water
    management activities

-   Number of water management issues resolved

-   Increased productivity and agricultural sales from irrigated systems

**Intermediate Result 3.3: Increased Effectiveness of Water Authorities,
Laws and Policies**

The GOL's restructuring and consolidation of 22 water authorities into
four, with the expected reliance on experienced private companies for
operations and management, opens the door for broadening private sector
participation in water management activities, and increased
harmonization of water distribution and pricing policies. New water
legislation would enable the newly established water authorities to
recoup their costs (estimated in the tens of millions of dollars),
upgrade service delivery, and operate independently at a profit. While
pricing policy and cost recovery are still at the drawing-board stage,
the GOL is interested in exploring the Jordan experience as a point of
departure.

**Illustrative Activities:**

-   Developing best approaches for water authority restructuring and
    private sector participation

-   Developing options for pricing water services and restructuring
    tariffs

-   Visits to or delegations from other countries with relevant
    experience in private sector participation, and pricing policies.

**Illustrative Indicators:**

-   Progress achieved in implementing private sector participation
    policies

-   Progress achieved in implementing water pricing policies and
    regulations

-   Ability of water authorities to raise revenues and cover costs

-   Number of consumers served by privately operating water systems

**D. Anticipated Results and Impact**

Expanding appropriate waste disposal technologies to rural areas \-- as
legitimate technical solutions reflecting the will of local-level
decision-makers \-- assumes the backing of both the Environment and the
Interior/Municipal Affairs Ministries. This is under discussion, noting
that the Interior Ministry prefers diffusing nationwide what they
believe are "economies of scale" of the central/urban waste collection
model. Our analyses indicate this will not be cost-effective or
sustainable in rural areas, given that this type of waste collection is
already a severe drain on urban municipal budgets. Our hope is that the
impending passage of the Municipal and Decentralization Laws will place
such decisions at the municipal level.

On water management and pricing, we assume that the current will of the
Water and Energy Ministry to dismantle vested interests in maintaining
water subsidies, low prices, ineffective water authorities, illegal
outlets and wells; and to promote private sector participation in the
new authorities, will prevail in the Council of Ministers and Parliament
when politically difficult policies and unpopular reforms come to a
vote. We also assume with irrigated agriculture that the collective
financial benefits derived from collaborative planning and water-sharing
will outweigh any individualistic management approaches.

**How will Lebanon be different as a result of this SO?** **Results over
the strategy period** will show around 100 to 150 new rural communities,
at least 75 of which are integrated into growth poles, implementing
sound environmental management plans by using appropriate waste/water
disposal technologies, benefiting from access to clean water and
waste-controlled environments, and demonstrating sustainable
reforestation and ecosystem restoration programs. Four newly-created
water authorities will have prepared and are implementing integrated
water management plans that reflect the rational use and distribution of
domestic, industrial, and agricultural water. New water pricing policies
will be in effect in at least one authority, with appropriate
infrastructure, billing, and other safeguards to encourage increased
water use efficiency and improved collection performance. Ten irrigated
agricultural systems, at least half located in South Lebanon, will be
producing marketable, value-added crops generating an average of 10 - 15
percent additional income, based on collaborative planning methods using
either extensive (field) and/or intensive (greenhouse) technologies.

**Over the longer-term,** i.e., ten years ahead, sustainable
reforestation and appropriate waste/water disposal technologies will
have expanded nationwide, providing healthful and environmentally-sound
solutions to rural communities and municipalities. Modern water pricing
and collection policies will be in effect in all water districts. Water
distribution networks will be at 70 percent efficiency; water revenues
will cover water distribution costs and water authorities will be
operating profitably. Rural and peri-urban municipalities in growth-pole
areas will be fully engaged in environmental planning and management,
focusing on increasing benefits from tourism and other sources of
investment and revenue. Water use efficiency, the subject of intense
awareness campaigns, will have increased at least 20 percent above 2002
levels. Regional talks and negotiations on trans-national water sharing
will be in progress.

**E. Other Donors**

-   ***Solid Waste Management:*** A three year solid waste management
    project \-- Solid Waste Environmental Management Project (SWEMP) \--
    was launched in 1998 to cover the Greater Beirut Area. Supported by
    a \$55 million loan from the International Bank for Reconstruction
    and Development (IBRD), SWEMP supported the construction of 15
    sanitary landfills, the closure of waste dumps, and the construction
    of two composting plants and one incinerator. However, SWEMP was
    reduced drastically as a result of political turmoil and public
    dissent. It resulted in one landfill built in the Bekaa valley
    (Zahle). Under the LIFE program UNDP funded four community-based
    solid waste management projects worth \$100,000.00.

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-   ***Waste Water Management:*** The government waste-water master plan
    divides Lebanon into two regions: Greater Beirut and outside Greater
    Beirut. Within Greater Beirut, two main collectors have been built
    (Southern and Northern side) but remain idle because no funding has
    been secured for the treatment plants. Outside Greater Beirut,
    large-scale waste-water plants have been identified in 35 secondary
    cities of which 25 have secured funding and seven are under
    execution. Sources of funding vary from French Protocol (five under
    execution, one under preparation), Italian Protocol (12 under
    preparation), European Investment Bank, Japan (one under execution),
    Islamic Development Bank (two under preparation), and the
    International Bank for Reconstruction and Development (one under
    execution, one under preparation).

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-   ***Water Management:*** At the policy level, requests to privately
    operate the Northern Water Authority through a management contract
    have been launched. Three bidders have shown interest. In addition,
    the Lebanese Higher Council for Privatization has requested a
    private bank "Societe Generale" to assess private sector
    participation and privatization of Beirut and Mount Lebanon Water
    Authority operations, and the World Bank is exploring a management
    contract for private sector participation for the Bekaa Water
    Authority. The Japanese International Cooperation Agency (JICA) is
    conducting a study aimed at establishing a Water Resources
    Management Master Plan. The work consists in collaboration on data
    collection and analysis.

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-   ***Reforestation:*** The German Agency for Technical Cooperation
    (GTZ) is funding vast reforestation campaigns as part of the project
    for Combating Desertification in Lebanon (CoDeL).

**Program Integration and Partnerships**

This strategy, if it is to produce significant results, cannot be
conceived or implemented as three separate objectives linked to an
overarching goal. A major part of its vitality and sustainability stems
from relationships and themes that cut across the program, along with
the partnerships that will ultimately make it succeed.

**A. Relationships Among Strategic Objectives**

This is an integrated strategy in which the success of each SO is
linked, in varying degrees, to the success of the other SOs.
Relationships among them \-- some of which have developed over time,
others of which are in gestation \-- are designed to produce results
that are greater than the sum of the individual IRs or activities. While
there is a risk in relying on this kind of synergy, USAID's experience
in Lebanon indicates it is a risk well worth taking. Some of the key
linkages are the following:

-   Expanded economic opportunities (SO 1) will strengthen the
    foundations for governance (SO 2) by expanding the tax base and
    raising revenue streams to both municipal governments and the
    national government.

-   Strengthened foundations for governance (SO 2) will enhance the
    potential for expanded economic opportunities (SO 1) by reducing
    constraints to productive activities and stimulating initiatives for
    government organizations to encourage new, income-generating
    activities.

-   Expanded economic opportunities (SO 1) will expand the capacity of
    municipalities and communities to improve environmental policies and
    practices (SO 3) through increases in the revenue base, and
    recognition that sustainable agricultural and tourism activities
    require sound environmental practices.

-   Improved environmental policies and practices (SO 3) support
    sustainable tourism and agricultural activities (SO 1), as noted
    above, and also improve the quality of life in targeted regions,
    which in turn will promote resettlement and deter out-migration.

-   Strengthened foundations for governance (SO 2) will enhance the
    capability of both the national government and municipalities to
    improve environmental policies and practices (SO 3). Modern
    management information systems will help in land use licensing and
    permitting, monitoring effluents, and adopting common standards.

-   Improved environmental policies and practices (SO 3) represent a key
    function at all levels of government, and hence serve as a litmus
    test for strengthened foundations for governance (SO 2). Also,
    assuming that improved environmental practices will stimulate local
    economic opportunities, notably agribusiness and tourism (SO 1),
    municipalities will access additional tax revenues to support
    further investment and good governance.

**B. Gender Considerations**

The status of women in Lebanese society, while certainly not homogeneous
or easily pegged, is another study in contrasts \-- one that a melds a
modern-day appreciation for the role women play in the society and
economy, along with an inherent conservatism on their upward mobility
and political empowerment.

On education, for example, the Lebanese place high value on educating
their children irrespective of sex. Aggregate school enrollment and
adult literacy rates reveal less than an eight percent gap among the
sexes; both rates are the highest in the Arab world.[^20] The UNDAF 2000
Report also notes that over the past five years girls are enrolling in
schools and universities in greater numbers than boys, and are entering
new fields and specialties.

The two major areas of gender disparity are first, the growing gap in
both primary and secondary enrollment in the urban and more remote rural
areas; and second, the percent of non-agricultural jobs nationwide
occupied by women, roughly estimated at 20 percent.

The glass ceiling still exists within government service and politics.
Participation of women at the political decision-making level is
marginal -- three of 128 Parliamentarians, and less than 15 percent of
municipal council members. Women continue to occupy low- and to some
extent mid-level civil service jobs, but only two of over 30 Directors
General positions in ministries. Nor does the GOL unconditionally
support ratified international human rights conventions affecting women,
the most noticeable being the government's reservations on nationality,
marriage and family life, and domestic arbitration in the Convention for
the Elimination of all forms of Discrimination Against Women (CEDAW).

USAID tracks these and other gender equity issues and has taken numerous
steps to address them over the past five years. The rural cluster (RCDC)
program for example, has not only promoted women's economic
opportunities and raised women's incomes in hundreds of villages
nationwide, but has ensured that women's economic empowerment translates
into political voices on village decision-making committees and
newly-elected municipal councils. Similarly, the municipal
capacity-building and civil society advocacy programs have sought out
women for leadership roles, many of whom are making a real difference in
their municipalities and organizations, and serving as role models for
the next generation.

The new strategy, which will continue many of these activities, will
also branch out more extensively into agri-business, tourism, and the
ICT/service industries, where women are already active. The challenge is
to make these programs more responsive to their skills, ensuring that
they have the training and knowledge, means of production and marketing,
and access to credit that will enable them to compete in specific
economic niches. We will also continue forging links between economic
and political leadership, with a view toward "masking" the differences
so that women can have more active involvement in the economic
development of their communities. Finally, at the policy level, we will
continue monitoring potential adverse affects of globalization and WTO
accession on the rural poor and other disadvantaged groups.

On the issue of trafficking in persons, the State Department's Tier 3
rating for Lebanon, characterized as a destination country for
trafficked persons, focuses mainly on the status of commercial sex
workers and domestic help. While we do not minimize concerns about their
sexual and economic exploitation, they comprise a very narrow spectrum
of urban life and as such have no direct bearing on this strategy. If
this Tier 3 status extends into 2003 and triggers sanctions for Lebanon,
it is still unlikely that USAID's program would be adversely affected,
given the legislation's focus on terminating "non-humanitarian and
non-trade-related assistance."

**C. Strategic Partnerships and Alliances**

The impact of this strategy rises and falls on the quality of our
partnerships. USAID's current partners \-- PVOs and NGOs, private
companies, business associations, donors and government agencies, and
American Educational Institutions, are fully engaged in our program and
instrumental in helping achieve results. Each has spheres of influence
and competitive advantages that are critical to success. These partners
\-- many of whom are already part of a web of alliances, others who will
become so \-- are all an integral part of conceptualizing and
implementing this strategy. The chart on the following page points out
their major roles and responsibilities with respect to USAID's six
strategic priorities.

One of these partners is worth singling out in terms of their
contributions to the USAID program, as well as their future importance
to U.S. national interests and foreign policy goals. Lebanon's American
Educational Institutions (AEIs), specifically the American University of
Beirut (AUB) and the Lebanese American University (LAU), are two of the
premier institutions of higher learning in the region. Over the past
three years USAID has cultivated an excellent partnership with them,
based on common development priorities that span the entire USAID
program. Faculty are fully integrated into WTO, ICT, tourism, rural
development, governance and environmental initiatives; and increasingly
engaged in public policy debates that support our development
assistance. Indeed, they give considerable added-value to various
partners and projects.

Equally important, these AEIs, along with two primary/secondary schools
\-- the American Community School (ACS) and the International College
(IC), are showcases, in Lebanon and the Middle East, for tolerance,
openness, free inquiry, and critical thinking \-- values which the USG
obviously wants to promote in the wake of September 11^th^. USAID's core
support to these four institutions enables them to offer scholarships to
needy students who reflect Lebanon's diversity, often from areas
dominated by anti-western/anti-American sentiment. The State Department,
as part of their FY 2002 Supplemental Budget request, is proposing
increased support for the AEIs \-- targeting youth, education and
training as priorities. This is an opportunity to promote student body
diversity, focusing on disadvantaged communities in Lebanon's rural
areas, as well as students from the other countries in the region. USAID
and the Embassy firmly believe these AEIs are well-positioned to take on
this important role.

A second key partnership is represented in the Agency's Global
Development Alliance, a business model that is especially relevant as
the Mission strengthens and expands its network of public-private
partnerships. We currently have one GDA activity under our belt \-- a
"Mobile Education Center" for South Lebanon which was developed under
our rural cluster program and co-financed with Microsoft and AUB. This
multi-purpose "internet for development" activity holds great promise
for expanding community-based information technology activities in
priority areas, i.e., those where rural and industrial cluster
activities come together. We view the GDA as an integral, value-added
part of our program, and will seek to tap into the Bureau's "Mission
Incentive Fund" this year and throughout the strategy period.

Finally is The Secretary's Middle East Partnership for the Future which,
with its focus on building human capacity, reducing social and economic
inequities, and improving the business climate, plays to the strengths
and priorities of our development assistance program in Lebanon. Two
sectors in particular \-- Information/Communication Technology (ICT) and
Microfinance \-- have enormous potential to expand economic
opportunities to a broad spectrum of Lebanon's population. Both are an
integral and high-performing part of USAID's strategy; over-subscribed
for available ESF funding; and models for leveraging additional
resources in the business, banking, and university communities, as well
as private foundations. While funding decisions for FYs 2002-03 are
still pending, additional funds would stimulate business activity and
create much-needed jobs and incomes in high-priority areas, both rural
and urban.

USAID Lebanon's Strategic Partnership

[^1]: United Nations Interim Forces in Lebanon, positioned in the
    southern border area since the Israeli invasion in 1978. They
    currently number 3000+ troops, but their number is expected to
    shrink to 2000 by the end of 2002.

[^2]: There are no accurate census figures in Lebanon, the last official
    census dating to 1932. 50,000 is a "consensus" figure, noting that
    movement between inland and coastal settlements in the south is very
    fluid.

[^3]: See Annex 3, "Background Notes on Lebanon," for other core
    information.

[^4]: Information International's Nov. 2001 survey "Lebanese Emigration:
    Characteristics of Emigrants" indicates that the causes of
    emigration are primarily economic, not political or sectarian. The
    estimated 20,000 annual emigrants are increasingly "brain drain"
    university graduates and specialized workers.

[^5]: While there are no official figures on remittances and capital
    flows from abroad, economists estimate that it accounts for \$3-7
    billion of Lebanon's \$16+ billion annual GDP.

[^6]: A March 2002 Gallup Poll in nine Islamic countries showed that
    Lebanon has the highest favorable opinion of the U.S. at 41 percent,
    followed by Turkey at 40 percent; Kuwait at 28 percent; Indonesia at
    27 percent; Morocco and Jordan at 22 percent; Saudi Arabia at 16
    percent; Iran at 14 percent; and Pakistan at nine percent.

[^7]: For details of these and other accomplishments, see the following
    section and discussions of "USAID's Initial Response: 1997/2002" for
    each Strategic Objective; and the "Performance Narrative" and
    Congressional Budget Justification Sections of USAID/Lebanon's *FY
    2002* *Annual Report.*

[^8]: The Agency requires that strategies only present "illustrative
    activities," on the assumption that actual activities will be
    determined during implementation. This strategy merges the two into
    "illustrative," recognizing that some activities are ongoing and may
    continue in this next phase.

[^9]: The World Tourism Organization estimates that Lebanon will need
    over 70,000 workers in the tourism industry by 2010, which will
    generate twice as many additional jobs across the economy.

[^10]: From "United Nations Development Assistance Framework for
    Lebanon: A Platform for Collaborative Action 2002-2006," Beirut,
    January 2002.

[^11]: 647 municipalities, including 97 in South Lebanon, held municipal
    council elections in 1998, the first since 1963. The remaining 65,
    located in the previously occupied security zone, held their
    elections in September 2001, sixteen months after the Israeli
    withdrawal.

[^12]: In 2000 the funds collected by the central government on behalf
    of municipalities totaled \$60 million. This "Municipal Fund"
    represents anywhere from 20-80 percent of a municipality's total
    revenues. To date municipalities have received only 15-20 percent of
    this amount, with no funds paid from 2001 or 2002 receipts. Put
    simply, the GOL is broke and is using funds owed to municipalities
    for other purposes.

[^13]: The MIS package also includes budget preparation, budget
    execution, document tracking, personnel management, payroll, and
    citizen complaint systems, with options for Citizen Services
    Counters, Citizen Forums, and Municipal Websites.

[^14]: A recent before-and-after poll of residents in Choueifat, one of
    three urban municipalities installing the MIS package and new
    customer services, showed the "Effectiveness of the Municipality"
    ratings jump from 10 percent to 60 percent on efficiency of
    municipal procedures, responsiveness to citizen requests, provision
    of information on projects, speed in completing transactions, and
    improvements in municipal infrastructure.

[^15]: Note that there is interest among State/AID decision-makers for
    the "Middle East Regional Democracy Fund" to expand the TAG concept
    to other countries with an AMIDEAST presence (see Annex 4).

[^16]: Recent estimates of per capita water availability show 1,600 m3
    per year for Lebanon; 610 m3 for Syria; 470 m3 for Israel; and 260
    m3 for Jordan. Annual rainfall in Lebanon is 8.6 billion m3,
    charging 40 major rivers and streams (17 perennial, 23 seasonal) and
    more than 2000 springs.

[^17]: This is in contrast to Morocco at \$1.35/m3; and Israel at
    \$1.00/m3.

[^18]: Fostering Resolution of Water Disputes (FORWARD) was an
    innovative effort by USAID to raise awareness of trans-national
    water issues in the Middle East and to develop water conflict
    resolution mechanisms as part of the Middle East Peace process.

[^19]: Funds would be accessed through the World Bank's \$80 million
    Municipal Fund and \$30 million Community Development Project; and
    the EU's \$30 million Social Fund. The latter two are dedicated to
    assisting impoverished rural areas.

[^20]: Various sources note a Gender ratio of 97.7 girls to boys at the
    primary and secondary levels; and literacy rates of 92.3 percent for
    men and 84.6 percent for women, which vary regionally and socially
    (see Annex 3).