Growing up in war-torn Beirut, I experienced the Lebanese Civil War from a childlike perspective. I was in middle school at the time when a power outage lingered for months on end. Reviewing textbooks and doing homework at night was no easy task. The flickers of candlelight reflecting on the glossy pages of my textbook made reading very laborious—not to mention how it compromised my safety and shrank my attention span. I was 12 years old at the time. Today, I am 34. It has been 23 years since the war ended and power shortage in Lebanon remains.
In the aftermath of the civil war, there was a national consensus to privatize and decentralize the power sector in Lebanon. Decentralization would shift control from the ministerial level to distinct municipalities across the country. Privatization in particular would help the power grid expand to meet the growing demands of population increase. Both moves would involve inflows of foreign direct investment, and open up competition, and create more jobs. However, political disagreements erupted around the intricacies of privatization policies and decrees and any further attempt to privatize or decentralize has floundered.
Today, Electricite du Liban (EDL), a state-owned enterprise run by the Ministry of Energy and Water controls 90 percent of power generators, transmission, and distribution services in the country. A surge of demand after the civil war has pushed EDL to further expand the power grid.
Grid expansion was deemed difficult to maintain, however. Frequent fuel shortages caused by soaring costs of fuel imports, deteriorating electrical equipment, illegal connections to the power grid, and inefficient billing collections further exacerbated EDL’s ability to reduce the deficit and expand the grid. Consequently, Lebanon has been in the dark for up to 12 hours a day. Recently, private power generation companies have emerged as an alternative. Yet, these unregulated companies impose highly expansive and burdening billing costs on the average user. The outcome is an increase in the cost of living that also impacts business development and success on the micro level.
In the absence of any political solution at the national level, a reduction to the losses that EDL incurs may at least provide a short-term solution. Here at MIGA, we just issued a guarantee of $35.5 million for an investment in power distribution by Butec International of Cyprus and El Sewedy Electrometer Group of Egypt. MIGA’s guarantees cover the risks of breach of contract by the government of Lebanon, and war and civil disturbance.
Butec and El Sewedy’s contribution will help EDL reduce technical losses. New meter installations will help EDL track power loss across the grid. The outcome is efficient management across the power grids, and an increase of efficient billing collection. The project will create an estimated 350 jobs. I was pleased to see the Agency support this investment—MIGA’s first guarantees in Lebanon.
Power shortages restrain economic growth and, education. They severely impact society and its capital. I hope future generations in Lebanon will have more power to illuminate their economic path—and their textbooks.
- Middle East and North Africa
- Private Sector Development
- Public Sector and Governance
- Social Development
- Political Risk Insurance
- breach of contract
- Multilateral Investment Guarantee Agency
- foreign direct investment
- non honoring of financial sovereign obligations