COVID-19 Measure: Read Full Magazine Here. Ziad Hayek is a visionary leader in business and finance who has mastered the new language of wisdom, love and courage while advancing positive initiatives in responsible leadership and corporate social responsibility.
Perfect stability of the business environment is not possible and thus the business leader’s challenge is to anticipate change.
Lebanon’s economy is now in a situation of a sudden stop. Sudden stops are usually followed by a sharp decrease in output, private spending and credit to the private sector, and real exchange rate depreciation.
The import/export imbalance is creating current account deficits of around 25% of GDP. Lebanon macroeconomic fundamentals are the worst among previous crises-stricken countries. It is the third most indebted country in the world, after Japan and Greece, with a Debt-to-Gross Domestic Product (GDP) ratio in 2018 of 150% and currently at 156% according to the International Monetary Fund and a gross public debt of US$ 87 billion. The banking system is completely paralyzed. The banks are no longer able to serve their clients as they relied mostly on the deposits of wealthy Lebanese and especially the diaspora, but this has also stopped. Instead of helping the country get out of this financial mess, the banks are stuck right in the middle of this crisis instead of offering solutions. The consequences of these crises, for Lebanon and all stakeholders involved may be devastating unless urgent policy action decisions are taken, and structural reforms are implemented.
To stop this downfall, the economy will need an immediate injection of at least $25 billion in fresh capital. It is critical that Lebanon begins a process of significant fiscal and monetary adjustments and structural reforms to contain public debt and raise economic growth.
Noting the above, it is important to know that Ziad Hayek was the former Secretary General of the Republic of Lebanon’s High Council for Privatization and PPP from 2006 until he was nominated to be President of the World Bank in February 2019. He is offering Lebanon an important solution to enhance economic and legal reforms that kick-off the cycle of the stagnant economy.
The Lebanese Government withdrew Hayek’s nomination in March 2019. Prime Minister Saad Hariri reported to Lebanon’s Council of Ministers that he withdrew Hayek’s nomination due to external pressure. Hayek continues to be Vice Chair of the Bureau of the United Nations Economic Commission for Europe Working Party on PPP, Head of the International Center of Excellence in PPP for Ports and President of the World Association of PPP Units & Professionals.
Before moving back to Lebanon in June 2006, Hayek was CEO of Lonbridge Associates Ltd., Senior Managing Director of Bear Stearns, President of Banque Indosuez Mexico, S.A.; Vice President at Salomon Brothers in charge of investment banking for northern Latin America (New York); and Vice President of Citibank, NA (New York).
Back at Citibank’s head office in New York in 1988, Hayek devised complex structured finance transactions, leading eventually to debt-for-equity swap in Venezuela and the restructuring and repackaging of the debt of several Latin American countries. Hayek was later promoted to head the International Securitization Department, which developed the securitization of future receivables transactions from credit cards, telecommunications, airline ticket sales, and mineral and oil exports.
Hayek joined Salomon Brothers Inc. in 1992 and while working under Thomas Enders, they established relations with the anti-Apartheid movement in South Africa before the fall of the Apartheid regime. He then played a major role in the re-entry of the country in the international capital markets with the First South African Equity Fund and other initiatives. He also managed the Firm’s relationship with clients in Mexico, Algeria and Russia.
In 1994, Hayek re-joined his Citibank team as Managing Director and Partner in Indosuez Capital Latin America, the partnership they established with Banque Indosuez, Paris. After being named President of Indosuez Mexico, S.A. de C.V. he moved to Mexico and headed the Bank’s corporate finance activities and its equity, fixed income, futures and options trading business. He oversaw the Partnership’s operations in northern Latin America, advised the Mexican Government on the peso crisis[14] and contributed to the return of Mexican companies to the commercial paper market.
Hayek took the position of Senior Managing Director at Bear Stearns in New York in 1997 and supervised the Firm’s emerging markets’ telecom investment banking business. Aside from managing a large number of bond issues, Hayek led the then-largest IPO for a tech company on the New York Stock Exchange for Prodigy Communications Inc. He followed that with a number of M&A transactions for the Grupo Carso subsidiary and for Spain’s Telefónica, S.A. The Firm asked Hayek then to move to London to establish its European investment banking business. There he handled a large number of corporate finance deals, including the bidding for UMTS licenses in Europe for Telefónica, totaling more than US$15 billion. In 2003, Hayek and a group of his Bear Stearns colleagues established Lonbridge Associates Ltd., a boutique investment banking firm specializing in the then-exploding fields of telecom technology and renewable energy. The firm in which Hayek was CEO, split into two entities in 2006 following Hayek’s departure to join the Lebanese Government under Prime Minister Siniora.
On 1 June 2006, the Council of Ministers of Lebanon appointed Hayek to the quasi ministerial-level position of Secretary General of the HCP. As such, he reported to the Prime Minister and was responsible of managing operations of the Council, which is chaired by the Prime Minister and includes the Minister of Finance, the Minister of Economy, the Minister of Labor and the Minister of Justice.
In the following exclusive interview with Ziad Hayek, BUSINESS LIFE explores the structural factors that have limited the scope of Lebanon’s economy, the available solutions and opportunities to save the Lebanese banking sector, the Lebanese currency, the current Lebanese situation and the Unprecedented decline in oil prices around the globe.
BL: Ziad Hayek, how do you summarize your milestones and achievements?
Ziad Alexandre Hayek: Well, I wouldn’t call them achievements. I don’t think about what I have done as achievements, I think they are just a normal succession of events in life and much of what we do depends on circumstance, it depends on where we are, who we talk to, how we live our lives. So, I really don’t think that one should consider what one does as an achievement, anything we do is dependent on many factors and many other people that come along the way. The milestones of my life are that I emigrated with my family when I was 17 years old from Lebanon on a refugees’ boat to Cyprus where they kicked us out. Thus, we went to Greece, then we went to France and again they wanted us out. We secured a visa to Mexico and so we went to Mexico. I studied there and eventually continued my education in the US at the University of Houston and later the University of Texas at Dallas. I joined Citibank and they sent me to work in Bahrain, then I was sent to Africa where I worked also for the same bank.
I became a regional treasurer for Citibank, West Africa. I then left for an interim period to work for the Reagan Administration and something called the Enterprise Program for two years. There I worked in Nepal, Egypt, Morocco and various countries of Latin America. I was also liaison for development affairs with the Arab League, then based in Tunis. In 1988 I rejoined Citibank in New York responsible for Structured Finance. I became head of the International Securitization department. And after that, I was recruited by Salomon Brothers and from there, joined Banque Indosuez. I advised the Mexican Government on how to get out of the peso crisis that they had and this is why these days I am trying to help our government with the problem of the Lebanese Lira crisis.
Later, I joined Bear Stearns and then with colleagues from Bear Stearns, I set up an investment banking boutique called Lonbridge Associates Ltd. It specialized in telecom technology and in renewable energy.
In 2006, I was appointed Secretary-General of the High Council for Privatization. I lobbied for the passage of the public-private partnership (PPP) law. At that time everybody was against PPP and by the time I left government all the political parties, everybody, was in favor of PPP. It was long but very satisfying campaign. I spoke about PPP everywhere: Conferences, seminars, universities, social clubs, social gatherings. I didn’t give up and after 10 years of lobbying , my efforts were crowned with the passage of the PPP Law in Parliament in September 2017. Eighteen months later, I resigned from the government because the corrupt politicians in Government did not want to apply the PPP Law and were (and still are to this day) actively trying to circumvent it.
BL: it is said that you left the government because you were under pressure , is it true?
Ziad Alexandre Hayek: I was not under pressure. What happened was that I was against the way that the government of Prime Minister Hariri was dealing with the power sector reform (especially the PPP part of it). I left in March 2019, I was against the various governments’ policies for dealing with the private sector and with economic development from 2009 and onwards. I was hoping that things would be different, every time there was a change of government. I was hoping that things will change but things didn’t change. The same people controlled that ministry and the all the prime ministers wanted to be accommodating and so the reforms that I wanted to implement were never implemented.
For me applying the PPP Law was the right way to deal with the energy crisis. The Government did not want to apply the PPP law so that was one reason for me to resign. The other reason for me to resign was that I was a candidate for the presidency of the World Bank. I was winning that because all the countries in the world that were opposed to President Trump were supporting me. I had the support of all Latin America except Brazil, I had the support of all of Africa, all of Europe except the UK the Baltic States and Ukraine. I had the support of all of Asia including Russia, China, and India, except for Japan and Korea. And so, I was winning that race where it was a two-way race. And when the American government saw that I would win, they pressured Prime Minister Hariri to withdraw my candidacy and when that happened, of course, their candidate won by default. So, when that happened, of course, I had a second reason for resigning. If my government was not willing to apply the law, and my government was abetting corrupt practices, and on top of that, my government was willing to withdraw my candidacy for the presidency of the World Bank when I was winning, then there’s something very wrong with that government and that was not a government which I wanted to continue to be with, so that’s why I resigned.
BL: What do you think of President Trump’s overall decisions?
Ziad Alexandre Hayek: It is sad for America to have a president like President Trump. It is sad for America and for the world to have an incompetent president. Someone who is full of himself and unable to work with others. A president with no empathy. A president who is the president of only part of population of the United States and not president for all Americans. Very sad.
BL: What are the updates on your latest plans in the Middle East especially in Lebanon and the globe? What’s your vision for the next five coming years?
Ziad Alexandre Hayek: My concern has been about infrastructure because there is a huge deficit of infrastructure everywhere. There is a need to build a lot more but there is not enough money in the world and governments have been running very high deficits and very high national debts everywhere. Not only in Lebanon, everywhere. So, governments didn’t have enough money to fund those infrastructure projects and the World Bank estimated that there’s going to be a 30 trillion-dollar deficit in financing infrastructure projects that the private sector had to provide. So, my concern was how is the private sector going to be involved in building infrastructure in the world at the time when most governments around the world ignored proper PPP procedures and practiced corruption. Many government officials are not even aware of what are the best practices for PPP. But after the pandemic, all of this obviously has changed. Of course, we still need infrastructure. We still need the private sector to build infrastructure projects. We need the private sector today even more than we did before because governments have had to deal with the consequence of the crisis. The problem is that the private sector also had to deal with the consequence of the crisis. So, there is no money in the world.
There is no money, GDP in every country in the world has gone down into negative territory, so the governments are printing money to be able to keep the economy going, they’re printing money to pay people’s salaries and they’re printing money to help people that are going hungry. Printing a lot of money will devalue the trust in currencies. Eventually, we need to be looking for new currencies and this is what I’m interested in, new cyber currencies that are going to be better stores of value than fiat currency issued by governments.
BL: What are the disadvantages of Cryptocurrency?
Ziad Alexandre Hayek: Of course, this is an exciting field though it is not a field that’s mature. There’s a lot of cyber currencies that are being promoted and then they don’t work either because of technical problems or because theirs are illiquid and shallow markets. Yet I think that this approach is here to stay. Eventually, the entire world will have one cyber currency.
BL: Currently, there are several cyber currencies, what is your view?
Ziad Alexandre Hayek: Yes, now there are many cyber currencies but the world is a small village and so many of the problems we’re facing today pre-date the pandemic. With globalization being boosted by technology, we became a small village too quickly. In the old days, people would travel from one part of the world to another part and they would settle there. That person that would come into a town eventually becomes acclimated and accepted by the town and becomes part of its people. Lately, what happened in the past 20 years is the world has shrunk very fast all of a sudden. Today, with the ubiquity of social media, somebody in Africa could be sitting in my living room, and I could be sitting in the living room of somebody in China or in the US. Bringing all these cultures very quickly together did not give us time to acclimate and everybody became worried about their identity. So, the French are worried about their French identity with North Africans in France; the Americans are worried about their identity with so many Hispanics; the Italians are worried about their identity with so many African boat refugees; and the Muslims around the world are worried about their identity from a globalizing western civilization. Consequently, when people from Japan to China to India to Europe, Africa, North America, and Latin America are going in one direction and the Muslim world is going in another direction, there develops inevitably a crisis of identity and fear. This, in turn, has engendered many crises: from Abu Sayyaf in the Philippines to Boko Haram in Nigeria to ISIS in our region. All of these are crises of identity. Russia has a crisis of identity. Russians see themselves as an Orthodox culture, as do many people in Serbia (where anti-Bosnian sentiments first erupted), in Cyprus, Greece, and elsewhere. So, the world has been going through a crisis of identity, everybody is. Everybody has been worried about how their culture is going to be affected. In addition, there was an economic crisis of globalization because jobs were going to countries where salaries were lower. Now, with the pandemic, we are learning that we may not like our culture to change, but we are a small world and somebody that catches the flu in Wuhan is going to affect people living in Tierra del Fuego in Argentina, or Chili. We live in a small world. We have to deal with it as a small world. We have to deal with climate change, we have to deal with pandemics, we have to deal with issues of identity.
BL: Will the culture change?
Ziad Alexandre Hayek: The culture will change, we cannot stop culture from changing whether we like it or not. Within a hundred years, we’re all going to be speaking mostly one language addressing the same issues, eating the same kinds of food. Already, you can travel the world and you can eat at McDonald’s everywhere in the world. Everybody is going to wear the same kind of clothing. Our buildings are the same everywhere around the world. So, we have to stop thinking of ourselves at a very local level. And the pandemic is driving that, it’s reminding us that we are a small world. I disagree with people saying that this is driving nations to clamp up and there’s going to be less globalization. I think this is very temporary. I think the pandemic is going to drive us to a more globalized world. So of course, we’re going to have one currency and of course eventually we’re going to have one language because we need to communicate. Already, English is the international language. So, if the Lebanese people are smart enough, this is a big “IF” because until now we have not shown it, we would be the leaders of that future and the leaders of globalization. We are the most cosmopolitan society on Earth. This is a society where people speak many languages, every family has somebody, in Latin America, Africa, Asia, Australia, Europe and everybody is connected. We are so connected to the world, and this is our strength; and if we know how to it play right, we can be the leaders of globalization. Unfortunately, until now, we are so stuck in our old fears of sectarian identity. We don’t know how to manage our government, we don’t know how to manage our society.
BL: Currently, what are you doing?
Ziad Alexandre Hayek: Well, Gérard Charvet, a friend of mine and I have come up with a plan to resolve Lebanon current financial crisis. We are trying to talk to everybody that would listen to tell them “look we have experience in dealing with Latin America crisis. I have had the government restructure, the debts of Honduras of Trinidad Tobago and Venezuela and I was adviser to the Mexican government when they had the Peso crisis and so we’re saying we have that experience. We know what needs to be done and unfortunately what is being done today is the wrong thing. So, we are talking to the advisors of the Prime Minister and the advisors of the of the Minister of Finance. We know people in the IMF where we’re trying to tell them “this is the better recipe.”
BL: What are your comments on Lebanon defaulting on $1.2 billion in foreign currency debts? What about the haircut?
Ziad Alexandre Hayek: They’re saying the government cannot pay. They cannot pay the banks, who are the bond holders, and so the banks cannot pay to the depositors. What they are currently talking about is something called the haircut on the debts and on the deposits, which means I owe you $100 but I’m only going to pay you $50. Well, yes, this solves the problem of the Government and of the banks immediately but it does not solve the problem of the depositors, because at the end of the day they are the ones who are left holding the loss. They lose their money, Not only that, but this process damages big time every investor’s confidence in Lebanon, and there’s no way we are going to be able to grow our economy when investors, who create jobs, no longer trust the country. The current thinking, spread and promoted by the political parties, is that the bank shareholders are at fault so let them lose their equity and we will compensate depositors by giving them equity in the banks. It is called “the bail in”. So the big depositors become the bank owners but that doesn’t solve anything, because yes, the shareholders go home, the big depositors become the owners of the banks -- but these are bankrupt banks, they have no money. So Mr./Mrs. Big depositor, you are the new owner of a bankrupted bank. Even though you are the shareholder of it you cannot make loans, you cannot operate it because you don’t have capital. You have nothing.
And there’s no trust in anything, so people will hoard money at home. When money is not circulating in the banking system, there is no credit multiplier effect, which is what pumps money into the economy.
Our plan is different. Our plan says “No, the Government owes money, the Government has to pay the banks and the banks have to pay the depositors.”
BL: How?
Ziad Alexandre Hayek: With time, you need to give everything time and you need to use the assets of the State, the State has a lot of assets and it cannot say I cannot pay when it has the assets, it has to use the assets it has.
BL: Does it mean that the Government has to sell some of its assets?
Ziad Alexandre Hayek: Yes, the Government should sell some of its assets but now it is not the time for selling in this current market and it is not the time for privatization. What it can do, is it can put these assets in trust for the benefit of the banks. The trustee can be a trustworthy entity that can take care of these assets. The banks are the beneficiaries of these assets, so immediately, the banks don’t suffer a loss on their balance sheets. They exchange 1 dollar of Government debt for 1 dollar of trust certificates, so their balance sheets are fine, no one loses all their equity. The banks are still functional, they may not have liquidity, but the central bank can get liquidity from the IMF and from the gold reserves that it has, by borrowing against them, and it can inject that liquidity in the banking system so it works again. The depositors’ money is still at the bank. They cannot withdraw it, but we can give it liquidity by converting it to CDs (certificates of deposit). These can be long-term CDs, for 5 years and 10 years, and so now people know that they have a bank CD and that CD is in their hand and they can sell it to somebody else. They can trade it. So the money stays at the bank but the people can sell the CDs and get cash. And as these CDs are tradable, they’ll become the new nucleus of our capital markets. Today, our capital market is the Beirut Stock Exchange which has the shares of Solidere and 3 banks or something like this. It is a very small stock exchange. Now, if we were to put 75 billion dollars’ worth of new financial instruments (i.e. CDs, convertible bonds, preferred shares) to trade, then our capital market becomes big. We create depth, volume and liquidity for it. Investment can come back, depositors can get money from their CDs and the banks can keep the money for 10 years until they can sell the assets of the State and be able to repay the CDs. So, nobody loses, everybody wins. Some people want the banks to lose the money, some people are against the Government. Everybody is out there to take revenge on somebody, but this is the wrong attitude, we should not be taking revenge on each other, the situation we are in is everybody’s fault; it is not only the fault of the banks, it is not only the fault of the Central Bank. It is also the fault of the Government that was responsible. The Government was supposed to be overseeing this. Our Parliament was supposed to be overseeing the activities of the Central Bank. They didn’t. Our Government was supposed to oversee the activities of the Central Bank but they didn’t either. Every ministerial statement they had issued said: “We are going to preserve the value of the Lebanese Lira.” Every successive Government had this as their policy, so they are also responsible. People are responsible because people are the ones who elected these politicians, and they never held them accountable for anything. We have the most irresponsible political class in the world. Our politicians can do anything they want and their followers shout ”hail the leader”. We can never hold them accountable for anything. Even when we had elections last time and we knew that the country was in a bad shape, we still elected the same politicians. So people cannot say it’s not my fault. Yes maybe the little depositors did not know what risk they were taking when putting their money in the bank, but the small depositors knew that they were electing somebody that they should not elect. I’m not trying to blame the people alone, I’m just saying that we are all to blame. Accordingly, today is not the time to blame others. We are on a ship and the ship Is sinking. We can blame the captain but now is not the time to vote in another captain. We need to close the hole because the water is coming in. Some people say we need new regulations and reforms. I say today is not the time to agree new regulations on the ship, today is the time to close the hole in the ship, and then we can do the reforms. Today is the time for the financial rescue plan and once we’ve rescued the country financially, we can do institutional reform, we can find the stolen money, we can fix the judicial system, we can do this, we can do that, and we should.
BL: How can you rescue the country while keeping the current leaders who already made catastrophes in the treasury of Lebanon?
Ziad Alexandre Hayek: Well, rescuing the country is a technical matter. Today, rescuing the country is about our financial decisions. If we had a dictator, our plan can be done in 24 hours time, and then we can go after all the politicians and do all of the things we want; but because we don’t have a dictator and we have to go through Parliament, we’re saying it may take several months. If they really want to do it, it will take no more than a few months. Within less than 6 months we can finish with everything and people can have their money again, people can have their jobs, people can go to work. And then people can demonstrate and bring down the Government if they so choose. But today, you go to a demonstration and this means you’re not eating tonight, because you didn’t work.
Today, you go to a demonstration and you wait for somebody to bring back the stolen money, and your kid is not going to school, it doesn’t help. I’ll give you an example, we are like somebody who decided to get a business manager to manage our business -- like we, the Lebanese people got the politicians to manage our affairs. Then after a while, this person finds out that the business manager has mis-managed or stolen his money. He also finds out that he owes the bank money and he owes the school his kids’ tuition. The bank has stopped the service of the credit card machine in his store and is refusing to open a letter of credit for him to import merchandise. The school has asked his kids to go home. He has no money, so what should he do? Should he close down his business and take his children out of school? Of course not. Should his first priority be to sue the business manager to get his money back? Of course not, that will come later. His priority should be to use a land he owns to settle his loan with the bank and hock his wife’s jewelry to pay the tuition fee. Once this crisis is dealt with, he can now rebuild his business and sue the business manager, What the Government needs to do now is to use its assets to settle its debt to the banks and borrow against the gold reserves it has, which are after all meant to be just that: reserves for a rainy day. There will then be time enough to do reforms and to seek the return of the stolen funds. So, this is what we need to do.
BL: You mentioned about the CDs solution, but don’t you think that the Lebanese people want their money in cash immediately?
Ziad Alexandre Hayek: There’s no money now.
BL: Therefore, there’s a problem. People need cash but CDs won’t give them an immediate cash solution, what are your comments?
Ziad Alexandre Hayek: With our plan, 40% of all funds across the board can be released to depositors. If you’re a small depositor, maybe a hundred percent of your money can be freed. If you have a hundred thousand dollars in the bank, maybe 90% of your money can be freed. If you have five hundred thousand dollars in the bank, maybe half of your money could be freed. And if you have 10 million dollars in the bank, maybe 10% of your money can be freed. So it’s not the same for everybody. The more money you have, the more money is blocked. The less money you have the less money is blocked. On average 40% of the funds can be liberated, 60% are held in CDs, but these CDs are tradable. So maybe you have a 10-million-dollar deposit and they have freed for you two million dollars, you don’t need two million dollars to live but instead of keeping these two million dollars in the bank, you can buy a CD from somebody else to earn more money on it, because you don’t need the money immediately and It’s a tradable instrument.
Consequently, whoever has a CD now can get cash from the person that doesn’t want the cash. You create a market, this is what markets are about: I can make shoes, but I cannot eat the shoes and you can make some food, but you need shoes. So, we exchange. This is the idea.
BL: What do you think of the current Government?
Ziad Alexandre Hayek: you know, there are so many good things about them and so many bad things. Nobody is perfect. Obviously they want to succeed but every Government before them wanted to succeed. Even the bad Ministers we had were ministers that wanted to succeed and to succeed they wanted to do something that the people will say ”Well done! you are fantastic!”. So they want to succeed they want to do well, but the problem is they don’t have the experience to do well and so they mess things up for themselves and for others.
BL: What about the exchange rate of the Lebanese Lira?
Ziad Alexandre Hayek: I don’t know where it’s going to be but it should be freed, it should be devalued and freed, because we need to know what is the real value of our money. This is the only way we can budget properly. The only way we know how to manage our financial affairs, going forward in the future.
BL: Is there going to be further devaluation?
Ziad Alexandre Hayek: Of course, it’s happening every day. The problem is: are we going to let it happen like this, with black market thievery, or are we going to stand up to our responsibilities and free the exchange rate officially? I think we have to be responsible and free it officially.
BL: What do you think of Central Bank Governor, Riad Salameh? Is it high time for him to quit?
Ziad Alexandre Hayek: I am surprised he wanted to stay. If I were him, I would have left a long time ago. I think that the Government back in 2010 when our economy was doing very well and we had growth rate of 8%, should have switched form a fixed peg to a crawling peg, letting the Lira devalue in a controlled way against the US Dollar. Unfortunately, they didn’t do that.
BL: Ziad Hayek, what about working from home? What are the its advantages and disadvantages?
Ziad Alexandre Hayek: I think anything can be done working from home, and working with modern communications is of a tremendous importance, especially to a country like ours. I’ll tell you why. If you go back to pre-1992, we didn’t have the functioning telephone system until Lebanon set up its cellular network in the early nineties, so for anything you needed to do, you needed to get in your car and drive and see if the person that you wanted to talk to was there. Sometimes you drove and the person wasn’t there, so you had to go back home and drive again the next day. Imagine how much fuel was being wasted at that time. Nowadays, we have telephones that work. We don’t have to get in our car and drive to get somewhere to talk to someone. So we did very well with cellular telephony. Now, in the meantime, we increased the number of cars in Lebanon to the point where we have traffic jams everywhere almost all the time. That fuel is being burnt for nothing. Especially commuters to work. Commuting in the morning, commuting in the evening. The fuel bill for our economy is tremendous, especially that we’re not an oil producing country. The pollution is tremendous, and road communication in our country is very poor to start with, so, if you are living in North East Lebanon in Hermel or Baalbek, getting to the capital to work then is a torture. So, for all these reasons, we need absolutely to encourage anything that can be done in this regard. Video conferencing, and online communications can help us eventually create jobs in rural areas. This would be a major achievement, which we are not able to service well today.
BL: What’s your advice to the Lebanese Government?
Ziad Alexandre Hayek: My advice to the Lebanese government is to pay attention to expertise. Ministers need to surround themselves with experts. Ideally those experts would be from within the public administration, but seeing how poorly staffed it has become, with clientelism, not merit being the main determinant of who get hired, that expertise needs to be sourced from outside the administration for the time being. I say Ministers need to surround themselves with true experts. The emphasis is on the word “true” – not generic so-called experts whose main qualification is “loyalty”, not “expertise”.
BL: How to end corruption in Lebanon?
Ziad Alexandre Hayek: I personally don’t believe in people not being corrupt. They say that Winston Churchill is famous for having told someone who kept wanting to bribe him, with ever larger sums “I never want to see you again”. “Did I offend you?”, said the man. “No”, said Churchill, “but you got very close to my price”. So, everybody can be corrupted and therefore it’s just a matter of how much. So for example, they said that they need to increase the salaries of the judges so that the judges will not be tempted anymore. So, they doubled the salaries. Say they went from $5,000 to $10,000 a month. If the bribe is going to be $20,000, maybe the judge will reject it. But if the bribe is $50,000, what will happen? So, what difference does it make? The important thing is for us to trust in systems, not in people; because the system has multiple layers of checks and balances. For example, at the airport, we have a system of checks and balances, you show your passport to somebody before you get to the passport control. At the passport control, they see your passport and they stamp it, before you get on the plane a third person reviews your passport to make sure that they stand correctly and we don’t know who is the person that is going to be at the door of the plane, so this is a system, where you don’t know who is the person that you’re going to be dealing with and there’s going to be multiple check points along the way. That is a system to fight corruption. Another way to fight corruption is of course what everybody talks about: Disintermediation, where we can avoid personal contact and therefore the opportunity of bribing or being bribed.
Digitalization Is important and if you cannot digitalize, you need to have a multiple layer system of checks and balances.
BL: You are famed for your ability to come up with important financial solutions for countries that have serious financial problems, how can you help your country?
Ziad Alexandre Hayek: Currently, I’m trying, with the financial rescue plan, to help the Lebanese Government. I don’t have any official position. I’m not getting paid for it. I consider it my civil duty to go around and tell people “look, this is one way to deal with our financial crisis, that doesn’t let depositors lose their money and doesn’t let our banking system fail”. So, you know, the only thing anyone of us can do is try to bring people around to a certain level of understanding and so to raise awareness. I think raising awareness is the most important thing in politics. In a democratic system, if you take a decision, there’s going to be many people that are going to say it’s the wrong decision, if you explain why you made this decision, there’s going to be much less people arguing with you. Among our politicians, we have one politician who explains and therefore, convinces people of his argument, and that’s Hezbollah leader Hassan Nasrallah who is able to spend an hour on TV and takes you to where he wants to; and even if you’re against him sometimes, you say “Ok, he’s right in a way”. Consider his approach as opposed to that of politicians who go on TV and tell you this is how it should be, and then you say “Why?” I mean, in your mind, you have many reasons why it should not be like that. But if the person has explained why and has refuted all the opposing argument you could think of, you feel at least intellectually (if not emotionally) convinced. Basically, I’m trying to say that it is very important for politicians, for leaders in general to explain their position, and therefore lead instead of sheepishly following opinion polls.
BL: How to avoid the current global recession during this pandemic and post the pandemic?
Ziad Alexandre Hayek: We want the economy to recover and ironically this time the economic recovery has more to do with healthcare than it has to do with economic measures. Even if we take as good economic measures as we want and if the people are dying and they are worried about showing up to work, and people are mistrustful of the judgment of the Government, then the economy is going to be in a very bad shape. Hence, the first line of defense against economic recession are the smart, preventive healthcare measures like social distancing that requires a high level of civic awareness. Interestingly, we seem to be doing rather well on that front, compared to other countries. So, that’s something for us to be proud of, and now, as soon as the curve slopes down, and we get beyond the healthcare emergency, the measure that needs to be taken is injecting a lot of liquidity in the financial system. In every economy, one way of injecting liquidity is basically to print money. As a result, many countries are printing more money now, and they are distributing the money in ways that sometimes are efficient and other times are inefficient. As they print money and increase liquidity, there are two things they should not forget. The first is to beware of inflation. Not every time that you increase liquidity and print money, you will get inflation. Sometimes you don’t, because there are many other factors in the economy. But if you start seeing that inflation is creeping up you need to establish some strict price controls and start managing the interest rates and I think most central banks today around the world are very familiar with ways to combat inflation. The second aspect is less obvious, and it is usually forgotten, and that is the involvement of people and civil society. This can play a very important role in economic recovery and in easing the pain of adjusting to a new reality. It basically goes back to the principle of solidarity. The society that shows more solidarity, will do much better than societies that don’t, and the type of solidarity that I’m talking about is in itself of two different types. The first type is one that we are very familiar with in our country and that is family cohesion. So, somebody is not doing well, their brother, sister and family take them in and help them out. We have been used to this during Lebanon’s wars and this is an amazing thing that many other societies don’t have because they don’t have family cohesion. This will help us get on our feet faster. The other type of solidarity is through the actual institutions of civil society, through all the NGOs that deal with children, poor families, and orphans. These things are very important, and we have seen in Lebanon how during the past few weeks there has been so many different entities that have come up with packages of food for families in need. NGOs that are usually devoted to child safety have done that, as have NGOs that belong to religious orders, churches and mosques. I really believe in the power of civil society. We are very lucky in this country to have this advantage.
BL: What’s the role of the public and the private sectors in dealing with the current conditions to overcome this crisis?
Ziad Alexandre Hayek: I don’t think that the private sector can play a big role. Unfortunately, the private sector is not the best placed to deal with social crises. The private sector does very well when the conditions for its development are good. It can then produce a lot of wealth and well-being. But it is not the best at emergencies, like a financial crisis and a pandemic. This is when the public sector must step in. Why do we need the public sector? We don’t need the public sector to give us electricity. Electricity can be provided by any private company. We don’t need the public sector to provide us with water, telecoms, etc. We really need the public sector to safeguard our lives and livelihood, i.e. provide for common defense, enforce the rule of law, regulate our social interactions, facilitate the growth of our economy, secure our sustenance and provide for our healthcare. In other words, the priority of the public sector should be our National Security. Unfortunately, we don’t have this concept in Lebanon and we don’t operate our Government on that basis. National security is anything that might threaten people, even food supply and of course, the coronavirus issue. I’m trying to say that in times of crisis we need the public sector even more than ever. It alone can provide what none of us alone can provide. Of course, we all know anecdotes of how the private sector has reacted and helped. We have companies that were manufacturing paper towels got into manufacturing masks. I sit on the board of The Holy Spirit University of Kaslik (USEK) and during the crisis it teamed up with the university medical hospital of Maounat Hospital in Jbeil and with a company called Technica to create a respirator. It’s a small size respirator that can be moved to patient’s room or to the ICU and it’s very compact, and this is fantastic. But this is not enough. We need the public sector.
BL: How do you see the post Coronavirus era?
Ziad Alexandre Hayek: I’m always optimistic. I like to be optimistic. I think people are going to realize that we live in one world and we need to pull together. I’m hoping that in the post corona era, we will see people cooperating. Of course, they’ll continue to cooperate on pandemic fighting, but I hope to see them fighting for climate change, which is an important issue today though we don’t feel it but our planet is really suffering and it’s suffering in so many ways, like the death of bees, especially in countries like ours that is becoming ever more urbanized. We’re covering our land with cement. The bees have a very hard time surviving and that means that our flora is going to be in danger. That means we’re not going to be able to have proper agriculture. I mean it’s an ecosystem. I really think that this is the silver lining of the pandemic. The other thing is that, we have the perfect storm between political crisis, financial crisis, and health crisis. As per the saying: What doesn’t kill me makes me better. I think we’re going to be a better society. We’re going to learn a lot of lessons. We’re going to be better prepared. It’s a time for us to learn.
Of course, I think from an economic social perspective, there is going to be hardships along the way. Let’s say, Lebanon loses 25% of its GDP in this crisis and our GDP then normally grows at around 2 percent. We’re going to need something like 20 years to be able to get back to the GDP we had before the crisis. That’s a lot of time lost. Sadly, we may have a lost generation. This is going to be a very difficult period of adjustment around the world. Now, what’s important about managing the aftermath of this pandemic is whether we are going to have a V-shaped recovery or are we going to have a U-shaped recovery? What decisions we take along the way is what’s going to determine the shape of the recovery. In my opinion, governments should take decisions that are going to create a V-shaped recovery. Otherwise, the suffering will drag for a long time and more of our young men and women will be affected by it economically and socially, as they try to build their lives. My financial rescue plan for Lebanon today is designed to create a financial V-shaped recovery as opposed to the current Government plan, which creates a U-shaped recovery. These are the differences.
BL: What do you think of the collapse in oil prices?
Ziad Alexandre Hayek: The collapse in oil prices was something that was bound to happen. It’s like every commodity. At one point in time, we have a lot of use for it and then we don’t. For example, natural rubber was obtained from trees in Southeast Asia, and there were a lot of rubber plantations and then when we develop synthetic rubber, natural rubber lost much of its value. It still exists and it still has some uses, but it’s no longer the hot commodity it used to be. Oil is the same thing. We have maximized our use of oil for everything. We used it for energy, for plastics, for all kinds of uses even in medicine and food, and now we are using much less of it for energy, because we’re starting to learn how to capture solar energy better, wind energy and renewable energy in general. Therefore, we’re reducing our use of oil. We’re reducing its consumption for transportation. So, the use for oil that’s going to remain is going to be mainly for materials like plastics etc. Eventually, that was going to happen anyway. The decline in oil prices that happened recently was mainly because of the pandemic, but there was already another factor at play and that’s the hydraulic fracturing (or fracking) of shale rock. Fracking meant, for instance, that the U.S., which used to be the largest importer of oil in the world. It became now became a net exporter. These are huge changes in the industry. I think they’re going to continue. I don’t see them stopping but as the price of oil declines, there’s going to be less and less producers that can produce it efficiently. So, Saudi Arabia, which has the cheapest cost of producing oil in the world, will continue to do very well. The U.S., which has a very high production cost, will not do well in the long term. In Lebanon, if we’re going to discover oil below 1500-meter depth in the sea, we’re not going to be competitive. So, there are going to be countries that are very successful and others not.
BL: How can we promote industry and job creation for Lebanon?
Ziad Alexandre Hayek: We need to deal with our financial crisis immediately. We do not have a day to waste. Once it stabilizes, we need to enact all the social, economic, political, judicial, legislative and sectoral reforms everyone talks about. In the longer run, we need to focus on building our infrastructure, hopefully using the CEDRE monies if they will still exist. Infrastructure is the most important job creator, not only because the projects employ a lot of people at all different levels, but also because infrastructure is the bedrock on which we can build competitive industrial, agricultural, and service-oriented job-creating enterprises.
BL: How do you see the future of the Arab Gulf States?
Ziad Alexandre Hayek: I think they will continue to do well. Like I said, the cost of oil production there is low in relative terms. I think their populations have developed a kind of maturity, which is certainly greater than our own society’s. Many Saudis, Emiratis and Qataris, are highly educated. They have studied abroad and they speak better English than most of us do. They have learnt to deal with globalization much better than we have, because they have had foreign workforces, they’re working with all kinds of nationalities, and that is very enriching. Today people living in the Emirates, Oman, Qatar and to a certain degree Kuwait and Saudi Arabia, are experiencing more international interaction than we are. They’re learning skills. They’re acquiring more information every day.
BL: How long do you think the current Government will stay?
Ziad Alexandre Hayek: I don’t think it’s going to change until we have new elections.
I don’t feel that there is a strong enough opposition that can bring it down at this point in time. Our opposition is fragmented. Lebanese people did not learn how to build a united opposition. Some people want money for everybody, some people want to change the politicians,.. I mean everybody wants something different, and they haven’t learnt how to present a cohesive plan. Anyway, Lebanon is not the kind of place where you can have a revolution because we’re so divided. We have to wait for the elections.
BL: How do you see the next President of Lebanon?
Ziad Alexandre Hayek: I hope that the next President of Lebanon will not be like the presidents we’ve had since the civil war. The first president after the war was a small-time politician. After that we had a successive line of army generals. I have nothing against army generals, but that’s not the kind of leadership we need. We need a statesman for a president. We need leadership that’s cosmopolitan, open to the world. We have a government in the middle of a pandemic and in the middle of a major financial crisis needing IMF help and we don’t have anybody in our Government that has the proper experience, let alone the proper stature, for communicating with world leaders. Our Prime Minister has not met with any head of state. Our president is boycotted by many countries because he’s not the right person to represent Lebanon. We need a president who makes us proud and I don’t think we have had presidents that made us proud.
BL: Do you think that the IMF will grant Lebanon a loan?
Ziad Alexandre Hayek: I think it will be with some tough conditions. Ironically, I believe, the conditions are going to be more of a political nature than of an economic nature. The U.S. has a big say in what the IMF does. There’s no interest in financing Hezbollah at this point in time nor is any country in Europe going to agree on financing Hezbollah. They’re going to influence the IMF. They can stop the IMF from helping Lebanon. Right now, our politics take us in the wrong direction. We cannot be antagonistic to Arab countries and get them to help us, we cannot be antagonistic to Europe and get them to help us, and Russia carries a big stick but economically they’re a no-show, and China doesn’t care, it doesn’t even see us. I think the IMF will help but, it’s only after we accept some very harsh conditions.
BL: Do you have any point to add?
Ziad Alexandre Hayek: We need to have our young generation start on matters other than politics. We need to get that disease of politics out of our society. The other countries, their young people enjoy sports, they identify themselves with this team or that team and they go to sport events. In our country, young people identify with this political party or that political party. They carry the colors of the parties instead of carrying the colors of sport teams. This is so destructive, it puts people in these mind frames, where they think they’re right and everybody else is wrong. We need our young people to face reality. Everybody has a bit of truth. My dad used to say: “There’s no head that isn’t wise. Even an insect can find food and even a bird can build a nest out of twigs”. Therefore, each one of us has a lot of wisdom and we need to listen to everybody. We should learn to appreciate other people.
