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Pandora papers: as ordinary Lebanese suffer, elite secretly drain off billions
Few Lebanese people will be surprised that the latest leak of offshore financial documents alleges senior Lebanese figures, including the current prime minister, have used offshore tax havens (although Najib Mikati, a businessman who took the top job in July, has denied this). That the so-called Pandora Papers lists Lebanon as a world leader in the most offshore companies – 346 – further highlights the industrial scale of corruption in the state.
The Pandora leaks into the extent of money laundering and use of offshore havens are poor timing for Lebanon’s political establishment. The country is currently experiencing an unprecedented economic and political crisis.
Lebanon’s economic collapse is ranked by the World Bank as among the three most severe seen anywhere since the mid-19th century. According to the UN, the crisis has left more than three-quarters of the population below the poverty line and hyperinflation has massively devalued salaries and savings.
The Pandora revelations show that, as ordinary Lebanese citizens continue to suffer, the state’s elites are draining billions of dollars into secret offshore tax havens and businesses.
The fact that Mikati is alleged in the Pandora Papers to be using offshore companies appears to contradict his image as a reformist statesman willing to confront the state’s corruption problem.
Mikati is seen by the west and its institutions as an acceptable leader able to spearhead economic and structural reforms supposed to be key to creating stability in Lebanon.
Snouts and troughs
Corruption in Lebanon has involved billions of dollars. It has featured senior political leaders and their cronies using government ministries and offices as individual fiefdoms to enrich personal fortunes.
The political elites who run powerful ministries hand out lucrative contracts to private companies either owned by themselves, their families or allies, who are required to give enormous financial kickbacks in return. A study published by Chatham House in June 2021 found a lack of transparency in the awarding of contracts for major infrastructure work going back decades.
The context in which grand corruption occurs in Lebanon is the legacy of the civil war and the sectarian power-sharing system set up at its end. The end of the civil war permitted the reinvention of warlords responsible for violence as democrats in a sectarian power-sharing government.
Power sharing is meant to give guarantees of representation to Lebanon’s various sects in government and the public sector. The main outcome of Lebanese power sharing, however, is what is called the “muhasasa” (allotment) state. The allotment state means that major political and public offices are apportioned to the sect-based leaders in a system that is more pie sharing than genuine power sharing.
The sectarian carve-up of ministries and posts – the spoils of peace – has allowed such figures and their associates to amass obscene fortunes for themselves and their close allies. Grand corruption covers almost all sectors: transportation, health care, energy, natural resources, construction and social assistance programs.
The scale of grand corruption further impedes the development of democratic institutions and statebuilding. This claim is evident in how political leaders use corruption to create patron-client relationships with their communities. By essentially controlling many key services through public and private networks the political leaders make many Lebanese citizens reliant on them for daily survival.
In seeking healthcare, food and other basic services, Lebanese citizens often need to go to their communal leaders rather than to the state. Political leaders who distribute these services expect their communities to reciprocate by giving their support at the ballot box. Corruption is thus central to the survival of sectarian politics.
Mired in corruption
The capacity of the Lebanese state to effectively deal with grand corruption is limited. While political leaders give lip service to establishing anti-corruption measures, the agencies overseeing the process are toothless. Political leaders deeply mired in corruption have no incentive to create policies that seriously tackle corruption.
In recent years no senior Lebanese politician or statesman has been charged let alone convicted for corruption. Only low-ranking public officials have been successfully prosecuted for bribery.
Lebanon’s judicial system is not immune from interference by the political leaders who use all of the powers at their disposal to slow or close down investigations into grand corruption or into processes seeking to condemn impunity. The Beirut blast port probe that has recently encountered massive political obstruction is widely said to be a case in point.
What this means for ordinary citizens
Lebanon’s 2019 revolutionary episode or thawra sought to dismantle this apparatus of sectarian pie sharing in which sectarian warlords vie for fortune and power. Protesters took to the streets for months calling on political leaders to step down. But other, compounding, crises – ranging from the pandemic, the Beirut blasts and the economic meltdown – have restricted people’s ability to organise and mobilise on the streets.
Lebanese political scientist Karim El-Mufti calls this the “zombie syndrome”, whereby people are thrown into exhaustion and despair. The landscape of the revolutionary uprising has increasingly become fragmented, and people are busy thinking about their livelihoods. With an economy in tatters, the dilemma on everyone’s mind is whether to stay or to leave.
Does this mean that Lebanese people have no agency? With the upcoming parliamentary elections scheduled for March 2022, various informal platforms and citizen-based parties have been hoping to draw on the momentum to turn the tide. The Pandora Papers constitute yet another piece of evidence that change is as urgent as ever.