BrazilMcKinsey delivers 1,000-page report to government of Lebanon
Global strategy and management giant McKinsey and Company has handed the government of Lebanon a 1,000-page report of recommendations following the firm’s enlistment in January to help jump-start the country’s troubled economy.
The five-year economic plan seeks to slow Lebanon’s runaway debt levels – currently at 150 percent of economic output and projected by the International Monetary Fund to reach 180 percent five years from now – which has prompted action from certain sections of the international community following the historic Council for Economic Development and Reconstruction (CEDRE) investment conference in Paris in April this year.
Lebanon’s tenuous economy has until recently, sustained itself through remittances from the two thirds or more of its population living abroad, along with record foreign reserves of around $43 billion, and despite constant political turmoil and the lack of a domestic budget for the twelve years up until last year. This economic model, however, has been placed under increasing pressure with the influx of some 1.5 million refugees since 2011, in a situation akin to that of the ongoing crisis in Jordan with unemployment sitting above 20 percent.
In an effort to address the spiralling debt-to-GDP ratio, which sees the nation placed alongside Greece as one of the three most indebted countries on earth, and a trade deficit which was pushing $12 billion in the fourth quarter last year, the government of Lebanon earlier this year brought in global strategy firm McKinsey, the assumed or acknowledged architect behind the suite of radical national transformation programmes currently underway across the GCC.
Engaged for a six-month term, the McKinsey turnaround mission is a considerable one, with Lebanon’s Economy and Trade Minister Raed Khoury, a former Barclays Wealth banker and founder of Cedrus Invest Bank, stating the government’s aim is to boost real GDP growth to 6 percent in the coming three years, while slashing the unemployment rate by half and raising the production sector’s contribution to GDP from 14 percent to 25 percent in just five years.
The proposed path toward these goals is now in the hands of Lebanese president Michel Aoun, delivered by the consulting firm in a hefty 1,000-page document. Contained within are a number of ‘quick wins’ to give the economy an initial push, including the development of a wealth-management and investment-banking hub, the establishment of a construction zone for prefabricated housing (which can help in the reconstruction of Syria and Iraq), the push for greater tourism, and the promotion of legalised marijuana into new markets – the local crop since described by the Economy and Trade minister ‘as one of the best in the world’.
The McKinsey roadmap, however, will still need to be ratified by the new, as yet formed cabinet – an uncertain prospect as to ongoing political machinations in Lebanon. Khoury has said the general implementation of the recommendations is critical, especially with respect to the release of the $11 billion worth of development grants and soft loans pledged during CEDRE, which the government has already begun allotting to a range of projects – including a digital consultancy contract awarded to KPMG and the redevelopment of Beirut’s Rafik Hariri Airport.
