Middle East & North Africa
Lebanon risk report
Corruption is a major obstacle for companies operating or planning to invest in Lebanon. Businesses are mostly hindered by entrenched patronage networks monopolizing the economy and impeding competitiveness, but also by petty corruption when applying for basic services. The Lebanese Penal Code criminalizes most forms of corruption; including active and passive bribery and the bribery of foreign officials, however, enforcement of these laws is poor. Offering bribes and gifts are widespread practices and an established way of doing business in the country. Facilitation payments are illegal in Lebanon.
Judicial system Very high risk
The courts present businesses with high corruption risks. Petty corruption is widespread in the institution; bribes and irregular payments are often exchanged to obtain favorable judicial decisions (BTI 2016, GCR 2015-2016). The courts are subject to political interference and their performance and independence are challenged (BTI 2016). Recruitment of key prosecutors and investigating magistrates is also subject to political intervention (BTI 2016). Companies find the ability of the courts to settle disputes and challenge government regulations to be weak (GCR 2015-2016). The courts contend with huge backlogs and judicial procedures suffer from long delays (HRR 2015). Enforcing contracts in Lebanon is more time-consuming compared to regional averages, taking 721 days (DB 2016).
Lebanon is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Police Very high risk
Businesses may contend with high corruption risks when dealing with the police. Despite that authorities maintained control over the institution, police officials acted with impunity due to the lack of public information on the outcome of cases of abuse (HRR 2015). Furthermore, there are no mechanisms in place to investigate and punish corruption within the police (HRR 2015). Reportedly, private security firms are also on the rise in Lebanon; these are usually affiliated with powerful political figures and act with impunity (Al-Jazeera, Nov. 2015). Businesses do not find the police to be reliable in protecting them from crime and in enforcing law and order (GCR 2015-2016). A third of companies identify crime and theft in Lebanon as a major constraint (ES 2013).
Public services Very high risk
The public services sector carries a high corruption risk for businesses. Bribes and irregular payments are often exchanged when applying for public utilities in Lebanon (GCR 2015-2016). While a little more than two in every ten companies expect to give gifts to officials ‘to get things done’ (ES 2013). The use of connections is also a common way to navigate the public administration (BTI 2016). In the same vein, municipalities are sometimes unable to enforce regulations as a result of undue political interference (BTI 2016). Three-quarters of Lebanese perceive the public administration’s efforts to crack down on graft as rather inefficient and almost a third report to have paid a bribe to public services in 2015 (TI 2016). Bureaucratic delays are another important obstacle for investors as is the burden of government regulations (BTI 2016). Starting a business is less time consuming than regional average; taking 15 days and requiring six procedures (DB 2016).
One case of corruption and patronage affecting public services is the trash crisis in Lebanon in 2015, as in July 2015 garbage collection services stopped in some parts of the capital Beirut leading to vast piles of refuse and deteriorations on health and environment (TI 2016). Reportedly, corruption and behind-the-scenes bargains have caused the crisis, which was not solved until February 2016. The case triggered the “You Stink” campaign voicing public dissatisfaction and protesting government corruption (TI 2016).
Land administration Very high risk
The land administration carries high corruption risks for businesses, furthermore, property rights are poorly protected (GCR 2015-2016). Almost half of companies expect to give gifts to officials in order to obtain a construction license (ES 2013). Bribes are also commonly exchanged when obtaining building permits (HRR 2015). Reportedly, several civil servants have been investigated for embezzlement in the real estate sector and for the illegal appropriation of public property (ICS 2016).
Registering property is more time-consuming in Lebanon compared to averages in neighboring countries; taking 34 days and requiring 8 procedures (DB 2016).
Tax administration Very high risk
The tax administration carries a high risk for businesses. Bribes and irregular payments are often exchanged when meeting with tax officials (GCR 2015-2016). Moreover, almost two in every ten companies expect to offer gifts when meeting with tax officials (ES 2013).
The Ministry of Finance launched in 2013 an electronic payment system allowing citizens and companies to file and pay their taxes online (ICS 2015). Indeed, the time required to pay taxes in Lebanon is lower than the regional average; taking 183 hours per year (DB 2016).
Customs administration Very high risk
Businesses contend with high corruption risks when dealing with the customs administration. Transparency at the border is ranked as low and irregular payments are bribes when importing and exporting are widely exchanged (GETR 2014). Corruption is reported to be more associated with importing than with exporting (GETR 2014).
The government introduced remote filing of manifests and declarations to the customs administration in an effort increase transparency (ICS 2015). Yet, the introduction of physical inspections on all incoming shipments – with the aim of fighting customs evasion and fraud and counterfeit goods – has led businesses to complain over long and expensive delays (ICS 2015). These, in turn, could constitute an incentive for bribery and corruption.
Public procurement Very high risk
Corruption is rampant in public procurement presenting businesses with very high risks (ICS 2016). Companies report that bribes are often offered to obtain a government contract or license (GCR 2015-2016). Favoritism towards well-connected companies and individual is also widespread among procurement officials (GCR 2015-2016). Thus, businesses often offer bribes and cultivate relations with politicians to secure public procurement contracts (FitW 2015). Likewise, companies perceive the diversion of public funds due to corruption as common (GCR 2015-2016).
Lebanon lacks a law regulating all aspects of the public procurement processes (ICS 2016). Public contracts are often awarded by mutual agreement between government administrations and companies, without calling for a tender and with no clear procedures for the process (ICS 2016).
Lebanon has a comprehensive legal anti-corruption framework in place, yet the government did not enforce the relevant laws effectively (HRR 2015). The Penal Code criminalizes active and passive bribery, the bribery of foreign officials, extortion, embezzlement and money laundering. Passive bribery is punishable by a three-year prison term and a fine equal to three times the value of the bribe (ICS 2016). Facilitation payments are also illegal. Gifts are hospitality are regulated under the civil service regulations, nonetheless, these are inconsistently applied (U4 Anti-Corruption Resource Center, Oct. 2012). Public officials including the president, ministers, judges and civil servants, are subject to financial disclosure laws yet information is not available to the public (HRR 2015). Government officials are described as beyond the law and thus engage in corruption with impunity (BTI 2016). When prosecutions of corruption occur, these are mostly politically motivated (BTI 2016). Since the country’s independence in 1943, the political system has been based on power-sharing among the elite, which in turn has fostered the distribution of wealth and services through a system of clientelistic networks (Transparency International: Unmask the Corrupt).
In some effort to fight corruption, ministries have undertaken a few initiatives. For instance in the Ministry of Public Health launched a mobile application and a hotline allowing citizens to report on corruption (ICS 2016). Lebanon is party to the United Nations Convention against Corruption (UNCAC).
Freedoms of speech and press are provided by law and the government generally respects these rights in practice (HRR 2015). Despite that the media environment in Lebanon is considered among the freest in the region, journalists witnessed several restrictions during 2014 as the conflict in neighboring Syria spilled into Lebanon and compounded with domestic issues (FotP 2015). Journalists are victim of recurrent harassment, physical attacks, and arrests (FotP 2015). In a defamation case in February 2014, the newspaper Al-Akhbar, as well as a journalist working at the newspaper, were each fined USD 7,910 with interest of USD 9,900 for reporting on judicial corruption (FotP 2015). Another journalist from the same outlet also faced defamation charges for publishing an article investigating corruption and embezzlement in the Ministry of Finance (FotP 2015). Authorities cracked down on internet freedom and restricted communications over social media (HRR 2015). There are reports that political groups harassed and intimidated individuals and activists for their online postings (HRR 2015). The public does not enjoy access to government information under Lebanese laws (FotP 2015). The media environment is described as ‘partly free’ (FotP 2015).
Lebanon has a long tradition of civil society organizations and freedoms of assembly and association are protected under the law, however, these rights have been restricted in practice (BTI 2016). The Lebanese Transparency Association set up the Lebanese Advocacy and Legal Advice Center to raise awareness of corruption among citizens, inform them of their rights, and encourage them to report on cases of corruption (ICS 2016). Civil society activities do not have a significant impact on policy-making in Lebanon, only on rare occasions has civil society involvement resulted in legal change (BTI 2016). Nonetheless, during 2014 several NGOs launched anti-corruption initiatives such as the launching of the “Sakker al Dekkeneh” (Close the Shop) portal, where citizens can report on corruption (FitW 2015).
- World Bank & IFC: Doing Business 2016.
- Transparency International: People and Corruption: Middle East & North Africa Survey 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- Bertelsmann Foundation: Transformation Index - Lebanon 2016.
- US Department of State: Investment Climate Statement - Lebanon 2016.
- US Department of State: Investment Climate Statement - Lebanon 2015.
- US Department of State: Human Rights Practices Report - Lebanon 2015.
- Freedom House: Freedom in the World - Lebanon 2015.
- Freedom House: Freedom on the Press - Lebanon 2015.
- Al-Jazeera: ‘Tackling Lebanese corruption – one photo at a time’, 29 November 2015.
- World Economic Forum: Global Enabling Trade Report 2014.
- World Bank Group: Enterprise Surveys - Lebanon 2013.
- U4 Anti-Corruption Resource Center: Overview of Corruption and Anti-Corruption in Lebanon, 15 October 2012.
- Transparency International: Unmask the Corrupt.