As part of our quest for highlighting possible future avenues of progress in the Lebanese Republic, Executive discussed the issue and importance of the 2017 budget with Alain Bifani, director general at the Ministry of Finance. In the course of the interview, the general director also commented on the systemic aspects of the public administration’s work to draft the budget and diligently reconcile national accounts, on planned revenue measures and on the benefits that an efficient civil service can bring to Lebanon.
E Is the Ministry of Finance, like all Lebanese public institutions, short of qualified manpower?
We are very short on manpower in general and on qualified manpower in this regard [for auditing]. One of the main things that was achieved [in reconstruction and reconciliation of national accounts] was to again provide the ministry with knowledgeable people. The function of the public accountant had disappeared, because it was not taken seriously in the past. So while people were on the job, we had to teach them how to be a public accountant and state of the art [practices] for handling public accounts.
E So you created a subspecies of a very important profession?
Absolutely.
E Was there any evidence from your work on the accounts that there was any large-scale corruption occurring in the years which you examined?
My job as a public servant is to provide Lebanon with proper accounts. I am not a judge to audit and I am not an MP to question. What matters to me has nothing to do with the political debate that is taking place. What matters to me is that when I am done, Lebanon will have proper accounts. It is mandated by law that we send the accounts to the Court of Accounts when we are done with them. Then they go to Parliament. It is up to them to decide if this was on purpose, if it was wrong or right, when mistakes happened.
E What about suspicious contracts when amounts suddenly go up?
This should have already been [scrutinized]. When it comes to contracts, you have ex ante and ex post control from the Court of Accounts.What we are doing is reconciling and reconstituting accounts, for instance if you have a revenue that was not registered as a revenue but is still pending in a temporary account. Or say something was paid to enterprise A and has been registered as paid to enterprise B.
E So you would not judge if something occurred because of incompetence, misinformation, or laziness as opposed to corruption, but you could say if there were incorrect numbers in the accounts?
Yes, I think everybody agrees that there is an enormous amount of incorrect [data] but it is not my job to determine why. My job is to correct and to flag [incorrect statements]. I have to say that the civil servants that we have, have done a fantastic job in reconstituting these accounts and this in itself should send a very positive message to the Lebanese and the whole world. We are improving the system and we mean business.
E I recall that at the time of debating the introduction of value added tax (VAT), there was a lot of doubt among the Lebanese public and international observers that the Lebanese Ministry of Finance could institute a VAT and supervise the implementation on time, but the ministry succeeded surprisingly fast.
I love this example because introduction of the VAT was my first main challenge at the ministry. We started working on the VAT system at the moment I joined and when we introduced it, I still remember that this was the first time the public had to acknowledge that civil servants in Lebanon accomplished this task alone and introduced a VAT, without consultants and huge outside teams. We also have been providing technical assistance to at least seven countries in this region on VAT, through our civil servants, and even consultants have asked for assistance from our civil servants. This totally contradicts the story of the inability of the public sector in Lebanon.
E My understanding is that the remuneration of Lebanese civil servants is not exactly at the top of the world.
No, it is not (smiles).
E When Lebanese civil servants thus go to help with a VAT project in the region, is there some special remuneration or honorarium?
There are two formulas. When they are still civil servants and go somewhere [for such a project], they are not paid [anything outside their salary]. The only thing paid is ticket and hotel by the host country. The second way is for a civil servant to take a leave of absence and they are then taken on by the World Bank or similar institution on a short-term contract. But this doesn’t happen often. Most of the time we just send people because we want to strengthen our ties with those countries.
E Would you say you are a model ministry of Finance for the Arab region?
In a few aspects, yes. Let’s not push it too far. We are aware of the fact that there is still corruption in our system and that there is still inefficiency. What I like to compare is where we are now and where we were a few years ago, and I do this comparison every year. Most taxpayers will tell you that it is amazing how different tax authorities have become. What we want in the end is not to be liked by people, but to be respected because we are doing our job properly.
E Why in the world did you join the Ministry of Finance? Was it the money or reputation?
It was definitely not the money. I was not programed to be a civil servant. When the position was proposed to me, I was 31 and I thought that it would be a fantastic exposure at my age. I was not planning to stay for long when I joined, but you are caught up in the huge number of projects that you have to do and I see myself as a permanent project manager. On the other hand, I am very proud to be a civil servant. There is nothing wrong with coming from the public sector; one has to be proud of serving his country. The two facts – challenging projects and that you are serving your country – made me stay.
E When I think of civil servants, they did not have the reputation of being the most industrious in mid-20th century Germany of the, but the Prussian work ethic of the duty-bound civil servant and their system of managing state accounts was in the background of success in building a national entity back in the time when Germany was an assembly of mini-states.
It is very interesting that you say that. To everybody who is telling me that “you cannot change this country and we have always been corrupt and inefficient”, I say, “Look at Europe in the 19th century”. Europe in the 19th century was basically about very corrupt administrations and weak states, and it was only this push towardspublic administration that made them what they are today. If it took them decades [to build an efficient administration], nowadays it can take less time and we really have to believe in that.
E In hindsight then you don’t regret the length of time you have spent at the ministry?
I don’t regret the length of time. I only regret that everything that should not require a lot of time [to accomplish] takes a whole lot of time. For example, when we worked on the debt administration, I wrote the first law to create the debt management directorate in 2002. This was passed in 2012. The first draft law that I wrote after I joined the ministry was about insider trading, about which there was no law in Lebanon. It was finally voted upon in 2011. Sometimes it was very frustrating but all together, it was worth it.
E There are many activities happening on the levels of cabinet and Parliament now after a long hiatus, for example with regard to the rent law. How do you adjust the planning when such a thing happens like adoption of a law with consequences on costs and finance?
Whether you have new expenditures or new revenues, it has to go through a law. Every time there is a new law, we immediately begin work to assess the impact of the law and propose the budgetary lines that come with it. Normally we would also try to find revenue with the law.
E Are there proposals for new revenue measures then?
Yes, and many of them have already been approved by MPs but not been voted upon. This is because many were discussed when MPs were discussing the salary and wage rate of the public sector.
E So this will be revenues in order to finance the public sector salary scale or the needs related to the rent law?
This is how the media and the politicians sometimes talk about it but there is no allocation for revenue in our system.
E So it is fungible money all the way?
Everything is fungible and meant to finance the whole budget.
E Can you specify some of the revenue proposals?
Yes. The public knows most of them. There is the story of taxing real estate capital gains for individuals. These are totally tax free, which is totally not logical. Then there is the increase of the 5 percent tax on interest rates and a slight increase on the income tax from 15 to 17 percent.
E For individuals or corporations?
This is on corporations. Plus there are issues with [increasing] stamp duties.
E VAT?
We don’t know yet if the government is going to be willing to talk about VAT, but for the time being it is not an approved measure. As far as I know, there is nothing yet in this regard.
E How about treasury advances and arrears that need to be balanced in the accounts. Is that a problem?
No, we have already balanced all of this to the penny. There is legal action that needs to happen and that is to close the advances. It will happen either now or with the closing of the accounts.
E Does the issue of the salary scale for public servants at this point give you still any headaches or sleepless nights?
The salary scale is a distortion from the past. Had the government in those years [when salary increases were suspended] respected the law and given the salary increase every year, we would have never had this problem today. Now we have the problem of an administration that is not paid properly. This is a fact and if we want Lebanon to again become a leading country in this region, we have to fix the situation of the administration.
E What makes you say this?
Because if the administration is of a lesser quality, then automatically the whole economy becomes of a lesser quality. It reflects on the private sector. What we need to do quickly is to provide Lebanon again with the means to become a hub and reference for the region. This has to start with the public sector. This does not mean we have to overpay people, or pay them to do nothing, or have bloated administrations. It means that people [in civil service] have to earn what allows them a proper and respectable life. It is unthinkable to tell civil servants “either you live on what you have and are miserable, or become crooks and take advantage of your position because you are not going to be paid a decent salary”.
E It was the impression already in the early 2000s that there was not so much large-scale corruption as much as petty corruption stemming from putting civil servants in a position where they have to become enterprising in some way because they cannot survive on their salaries. How do you see this?
It is also true that it is in the culture and [thus it is also an issue of building a culture of honest and respectable public service]. When you have honest people, it is true that even if they starve, they remain honest, and if you have crooks, they remain crooks even if you pay them well. But [you have to take care of] the vast majority that is in between [perfect honesty and total corruption]; you have to reassure them. Once they are reassured [in their positions], they have the resilience to say no [to corruption] and declare “we want to be recognized as decent people”. It is so difficult to all the time be accused without reason, simply because you work as a civil servant.
E A fair wage for rank-and-file public servants is long overdue, but do you think that would drive reform for the larger structural changes Lebanon needs?
Take the whole problem of this country. Why has Lebanon not been able to reform itself? Why are we not able to change whatever needs to be changed? It is because typically the part of the population that [drives and implements reforms and change] is the middle income group. The poor are unable [to effect change]. The very powerful don’t need to change anything. The simple fact is that the whole public sector, which includes the military and all [similar agencies] makes up a huge chunk of the Lebanese population and is not paid according to what it should be paid. If we had a strong middle income [segment in the population] this would boost [both] the administration and the private sector. Recreating the middle class in Lebanon is absolutely critical for this country. One point of entry to [the process of] doing so, and also for the private sector to become vibrant again, is to correct the wages and salaries in the public sector. This is critical.