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André Sleiman, is a governance and public policy practitioner specialized in local governance, the rule of law, and anti-corruption.


April 2021
The Port and the City: The Foundations of the Redevelopment of the Beirut Port

Eight months after its destruction due to an enormous explosion, the Port of Beirut is gaining international attention again. On April 6–9, four specialized German firms—Hamburg Port Consulting, Colliers International, Fraunhofer Institute, and Roland Berger—presented a comprehensive multi-billion-dollar proposal to the Lebanese authorities to rebuild and redevelop the Port of Beirut and surrounding areas. If adopted, the plan would be funded by the European Investment Bank.
 
Several actors have expressed interest in the reconstruction of the port. These include governments (mainly France and Germany), port authorities (Rotterdam, Hamburg, and others), international donor agencies (UN, World Bank, to name just a few), national and international NGOs, unions (Order of Engineers, Order of Contractors), and experts (Beirut Urban Declaration).[1] The position of the Lebanese central government and the municipality of Beirut as the prime decision-makers will be key in determining the outcome of the proposed plan.
 
To dissipate mounting speculation about German-French competition over reconstruction efforts, Germany’s Foreign Office clarified that the proposal—which is expected to be publicly released soon—is being presented by private German firms, not by the government. On the other hand, the French government and the French container shipping group, CMA CGM, have both expressed interest in rebuilding Beirut’s damaged port. In either case, the international community insists that, in order to unlock foreign funding, Lebanon must quickly form a new government with a firm mandate to implement socio-economic reforms, overhaul the wasteful power sector, and root out corruption.
 
Until these reforms materialize, a vision for the reconstruction of Lebanon’s greatest economic asset must be developed regardless of the party that will ultimately be responsible for implementing it. A comprehensive approach addressing the perpetuation of collective memory, the integration of the port into the urban fabric, the role of trade and tourism, the environmental impact, among many other issues is necessary. This article, however, will focus on the issue of governance, and the necessity of radical institutional change in the port’s reconstruction plans.
 
The Port of Beirut: An Extractive Institution
It is hard not to view the physical destruction of the Beirut port as a symbol for the downfall of Lebanon’s precarious state and its shrinking authority. In a way, the tragic explosion on 4 August 2020 was the culmination of the dysfunction that has plagued the public sector since the end of the civil war in 1990. Whether the event was the result of negligence or a terrorist attack, the tragedy was preventable.
 
Smuggling, tax evasion and bribery were just a few of the common violations reported at the Port of Beirut, which has been consistently criticized for corruption and mismanagement, even by Lebanon’s own ruling elite.[2] Writing in the Lebanese English-language newspaper, The Daily Star, in 2012, Elie Sakr reports that the “Beirut Port, Lebanon’s key trade hub which accounts for 80 percent of some $1.5 billion in yearly customs fees and another $1.5 billion in Value Added Tax revenues to the state Treasury, is a striking example of corruption in state institutions. Public Works and Transportation Minister Ghazi Aridi estimated tax evasion at Beirut Port at $1 billion annually.”[3]
 
Among all public institutions in Lebanon, the Port of Beirut stands out as the most typical example of organized and systematic elite capture. For the past three decades, the port was left at the mercy of political factions vying for state resources, yet they were bound together by an overarching cross-party entente, which aimed to preserve their otherwise competing interests. This equilibrium fostered an ecosystem of lawlessness, absence of oversight, and a culture of impunity.
 
In this aspect, the port mirrored the country at large.[4] Patronage arrangements and political consensus decided the allocation of public posts. At the port, all sectarian parties enjoyed a generous share of the pie due to their ties to customs and port officials.[5]
 
The reconstruction of the Beirut port is an opportunity to dismantle the extractive institution that the Beirut Port Authority (BPA) had become, and remold it into an inclusive one.[6] Reconstruction efforts must prioritize a radical institutional redesign based on a revamped governance framework, rather than mere technical and infrastructural considerations. However, curbing corruption at the Beirut port and “Building Back Better” will remain buzzwords of the ruling elite without an overhaul of the system.
 
Weak State Control at the Roots of the Port’s Governance Deficit
The governance deficit at the port has been both the cause and the consequence of the absence of the state’s full sovereignty over the port. During Ottoman rule, the Beirut Port was run by a French company, Compagnie du Port, des Quais et des Entrepôts de Beyrouth. In the following years, further concessions and autonomy were granted to the company in managing the port. After the proclamation of the State of Greater Lebanon in 1920, the country quickly grew as a merchant republic, while its capital Beirut developed into a port-city extolled as the main gateway to the Levant. In 1960, the concession ended, and a 30-year concession was given to a Lebanese company named Compagnie de Gestion et Exploitation du Port de Beyrouth (CGEPB, later simply known as the Beirut Port Authority).
 
During that time, the Lebanese state had a short-lived, yet still limited, control over the port. During Lebanon’s 1975–1990 civil war, the port fell under the control of various sectarian militias. At the end of 1990, GEPB’s concession charter expired, and the seaport came under direct ownership of the Government of Lebanon. Since then, it has been run by a transitional committee called the “Temporary Committee for Management and Investment of the Port of Beirut,” representing the country’s main sectarian political groups.
 
The temporary committee has been responsible for managing all port operations, including maintenance and expansion works, as well as the financial accounts, under the purview of the General Directorate of Exploitation at the Ministry of Public Works and Transport. Initially formed to manage the port temporarily, the committee has remained in place. Ever since, the awarding of public tenders, although bound to follow a competitive process, have ultimately depended on the approval of the Minister of Public Works and Transport, which allowed restricted tenders and direct awards. The “temporary” committee currently has seven members who were appointed in 2002.
 
Despite being a major source of revenue for the state (more than $250 million per year),[7] the port was kept outside the purview of oversight authorities (such as the Ministry of Finance and the Court of Audit), in the absence of any clear legal and regulatory framework.[8] In 2012, the BPA did not register any proceeds to the Lebanese government. The next year, it transferred only 30 billion LBP ($20 million at the time) in fees to the Treasury, or less than 7% of its revenues.
 
To fill these gaps, the reconstruction of the Beirut port should make a clean break with the port’s shaky institutional legacy, and redesign this institution on sound governance grounds.
 
The Need for a Strategic Vision
Beyond the narrow confines of the Lebanese state, the reconstruction of the Beirut port has a wider regional and geopolitical significance. The Mediterranean is home to the world’s busiest shipping routes, making up for around one-third of global merchant shipping. Hence, the reconstruction and redevelopment of the port should be aligned with a regional ambition that considers the port’s growth potential, and its ability to compete with other ports and regional markets.
 
The future of the Beirut port is also affected by the normalization of relations between Israel and Arab countries. Normalization agreements between the United Arab Emirates and Israel will facilitate cooperation in the maritime and aviation sectors in line with strategic geopolitical concerns.[9] Following the agreement, Israel Shipyards Ltd and Dubai Ports World, a multinational logistics company which is owned by the Emirati government and operates facilities around the world, submitted a joint bid proposal on the privatization of Haifa Port in October 2020. Earlier, in January of that year, the Israeli government had approved a plan to privatize the Port of Haifa to attract new investment and increase competition. This momentous decision was followed by the 2019 award of a 25-year concession to the Shanghai International Port Group to operate Haifa’s new Bay Terminal starting 2021.
 
If the port of Beirut can be compared at all with that of Haifa, the surrounding events point to a geopolitical shift of “privileged relations,” further away from the Lebanese capital. For the Beirut port to reclaim its defunct role as a “gateway” of the Middle East, some form of public-private partnership should be seriously considered.
 
Because the significance of the Port of Beirut goes beyond the narrow administrative confines of the capital, the development of a strategic vision for the port should be the prime responsibility of the central government, as part of a comprehensive reform agenda. The visioning process of the port’s redevelopment should be a participatory process that is open to key policy actors, particularly the municipality of Beirut, civil society organizations, academic institutions, with input from specialized international firms.
 
While the central government is expected to play a strong regulatory and enforcement role, the direct management of the new Beirut Port Authority should not be assigned to the municipality of Beirut or the Lebanese government. Under close government scrutiny and oversight, a revised governance structure should facilitate private sector participation to ensure efficient management of port operations, and allocate responsibilities based on accountability and transparency. It should be abundantly clear to the Lebanese authorities that good governance principles are an essential prerequisite for national and international investors to have confidence in, and contribute to, the reconstruction process.
 

[1] “Which Future for the Beirut Port?” Online Panel Discussion organized by the Beirut Urban Declaration, 13 March 2021. Available at: https://www.facebook.com/110013351140005/videos/203529058197337.
[2] Sakr, E. (13 November 2012). “Corruption widespread, deep-rooted at Beirut Port.” Beirut: The Daily Star. Available at: https://www.dailystar.com.lb/Business/Lebanon/2012/Nov-13/194820-corruption-widespread-deep-rooted-at-beirut-port.ashx.
[3] Ibid. These lines were published in the Lebanese press exactly one year before the ammonium nitrate-laden Rhosus anchored in Beirut.
[4] Nakhoul, S., Francis, E., and Georgy, M. (28 October 2020). “In Beirut port, all of Lebanon’s ills are laid bare.” Beirut: Reuters. Available at: https://www.reuters.com/article/uk-lebanon-crisis-port-insight/in-beirut-port-all-of-lebanons-ills-are-laid-bare-idUKKBN27D1JF.
[5] Agence France Press. (16 September 2020). “Dockside dealings: smuggling, bribery and tax evasion at Beirut port.”
[6] An extractive institution excludes citizens from political decision-making and income distribution, favoring the ruling elite and allowing them to extract resources and opportunities for the benefits of their loyal followers. Inclusive institutions foster, and are reinforced by, an unbiased system of laws that allows all citizens to participate in economic relations for the benefit of all. See Acemoglu, D. and Robinson, J. (2012). Why Nations Fail: The Origins of Power, Prosperity and Poverty. New York: Crown.
[7] Akleh, T. (6 August 2020). Beirut port: irreplaceable importance in the middle of Lebanon’s geography. Arabian Business. Available at: https://www.arabianbusiness.com/politics-economics/450512-beirut-port-irreplaceable-importance-in-the-middle-of-lebanons-geography.
[8] Nassereddine, H. (12 August 2020). The Management of the Beirut Port. Maharat News. Available at: https://www.maharat-news.com/portbeirutmanagement.
Jreissati, S. (n.d.). The Legal Status of the Beirut Port (Arabic). Al-Bina’. Available at: https://www.al-binaa.com/archives/article/29333.
Verdeil, É. (12 October 2020). “Les enjeux de la reconstruction de Beyrouth après l’explosion du 4 août – la question de la place de l’Armée.” Rumor. Available at: https://rumor.hypotheses.org/5025.
[9] Telci, I. N. (29 November 2020). “Israeli-Emirati Normalization and the Strategic Cooperation in Maritime and Aviation Sectors.” Al-Jazeera Centre for Studies. Available at: https://studies.aljazeera.net/en/analyses/israeli-emirati-normalization-and-strategic-cooperation-maritime-and-aviation-sectors.








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