The Chinese Dragon in Turbulent West Asia: Evidence from Lebanon

For a long time, China was Lebanon’s principal trading partner. The sale of cheap and high-quality Chinese items is a key source of income in Lebanon. A partnership between Lebanon and China was forged in 2017, when Lebanon officially joined the Belt and Road Initiative (BRI). Lebanon’s strategic location and open economy make it an ideal partner for China in the eastern Mediterranean. China and the Arab world have recently increased their cooperation, with Lebanon playing an important role. The declared Chinese goal is to establish commercial ties with the MENA region.

The strategic importance of Lebanon to China’s BRI cannot be overstated. Chinese geopolitical interests are well served by Lebanon’s strategic location. Trade between Lebanon and China is a permanent fixture in the region’s economy. China may discover a Mediterranean substitute for Lebanon; however, the economic connection between the two countries is indispensable.

Politicians in Lebanon cannot ignore or destroy this long-standing connection with the People’s Republic of China.

For its role in the reconstruction of Syria, China regards Lebanon as important. Several BRI projects were recently proposed to Lebanon by a high-level Chinese delegation; however, the Chinese endeavors failed due to:

1. External pressures (particularly Western);
2. Lack of enthusiasm by some Lebanese groups to establish a strategic partnership with an Eastern country (known as communist and having troubled relations with the United States).

Thus, it is not that easy for China to cooperate with Beirut because of its many allegiances outside of Lebanon.

CPPCC (the Chinese People’s Political Consultative Conference) vice-chairman, Luo Fuhe, said that China wants to expand its commercial relations with Lebanon. The goal of China’s strategy in Lebanon is to increase cooperation in business, technology, and science. Since the establishment of diplomatic relations between China and Lebanon in 1971, many achievements have been made, and trade relations and political communication have developed significantly.

Chinese-Lebanese Partnership in the Shadow of a Bizarre Reality

Sino-Lebanese collaboration was established following Lebanon’s involvement in the Belt and Road Initiative in 2017. To establish a partnership with a large economy, it is vital to provide the proper economic, political, and security conditions. With regional tensions and internal strife, China’s intentions for Lebanon are being called into serious question, since the US has maintained its tough stance toward Iran, and Lebanon’s infrastructure is no longer suitable.

In order for China’s desire to partner with Lebanon to succeed, it must adapt its strategy to the current reality. Another way to say it is that China cannot follow the same rules as other countries. The situation in Lebanon is one-of-a-kind and extremely complicated. With Hezbollah and other militant groups operating in Lebanon, the country is also plagued by terrorism and an on-going conflict with Israel. Uncertainty does not entice inbound FDI (Foreign Direct Investment), note that Lebanon is on the border with Syria, where terrorist groups and numerous armies’ nest, and Israel, which poses a permanent threat to Lebanon.

Lebanon’s economy and infrastructure have been negatively impacted by the on-going conflict with Israel and terrorist groups. Lebanon’s financial and business systems are likewise witnessing a huge collapse. As a result, there has been an increase in government corruption, debt, and poverty. Lebanon is rife with nepotism, corruption, and sectarianism. The current financial crisis is a direct result of this type of terrible management. China has often shown an interest in investing in Lebanon and expanding ties, but the government has been unable to respond due to external concerns.

Even after gaining its independence from French administration in 1943, Lebanon remained divided along sectarian lines. A number of regional and distant countries have objectives in Lebanon. As a result, many Arab and international investors were forced to leave the country. Government efforts are being made to attract international investment and expats to invest in Lebanon. As part of a strategy to attract international investment, IDAL (Investment Development Authority of Lebanon) was founded in 1994. Investing in Lebanon is encouraged by the country’s capital flow independence and the efforts of competent government agencies. Concerns regarding the integrity of Lebanon’s justice system are raised by the country’s turbulent security environment and widespread corruption. Regulations governing foreign investment are essential, but their implementations need a well-organized system with constant monitoring.

Lebanon’s Shabby Political Economy

Between 2010 and 2017, revenue between China and Lebanon increased from $40 billion to $58 billion before dropping to $50 billion in 2019.

Due to the country’s distinct human and social characteristics, investors should choose Lebanon, but only if the government implements a modern anti-corruption and security plan. Because of its location in the middle of a open conflict, Lebanon’s political geography is unfavorable. To restore financial and economic stability and attract international investment, Lebanon may benefit from its isolation from regional conflicts. This might lead to a more peaceful country and a better quality of life for everyone. Lebanon only needs a well-thought-out strategy and a trustworthy administration to succeed. Syrian refugees have been displaced and trade has been disrupted as a result of the conflict in Syria. After the crisis, Lebanon is expected to reclaim some of its economic might.

The value of the lira in Lebanon is decreasing, and the public has lost faith in the country’s banks. As a result, foreign investors shy away from the Lebanese economy. The economic downturn in Lebanon is nothing new. Lebanon’s public debt is the result of misguided financial strategies, weak economic policies, and extensive corruption. Instead of empowering the national economy, the several central administrations took loans from other states and organizations after the end of the Civil War. As a result, the government’s debt soared because of the method utilized to raise money for reconstruction.

Consensus democracy has bred a culture of corruption and thievery by granting equal access to public office and resources to all groups and sects. The Lebanese economy is in ruins because of tremendous corruption in traditional Lebanese politics. There has been a rise in party and sectarian loyalty as a result of Lebanon’s political system.

Allowing corrupt transactions to be authorized by the government is a major factor in Lebanon’s economic woes. Partisan and sectarian groups, as well as merchants, rob the Lebanese wallet. Due to Lebanon’s reliance on aid from donors such as the World Bank and the IMF (International Monetary Fund), the country’s fiscal burden grows. The current Great Depression was created by insincere economic policies. Lebanon’s attractiveness to investors has diminished as a result of this.

While some Lebanese nongovernmental organizations (NGOs) have been successful in holding corrupt officials accountable and verifying their claims, progress is rare. The country of Lebanon is in desperate need of good foreign relations and sound economic policies. To effect change, we will need a strong national commitment and a common vision. Growth, peace, and prosperity cannot happen without economic stability. National political movement, the courts, and the state were all damaged by sectarian strife. However, Lebanon’s state is dominated by political parties and sects. As a result, politics and a disregard for professional standards are the main concerns.

The Taif Agreement ended the civil war and established a quota-based political system. But it did not eradicate economic corruption; instead it glorified it. Now, most political and economic institutions are controlled by leaders. Prior to the Taif Agreement, the presidency had sole authority over the state budget, but now all three presidents have a say in financial matters.

To satisfy the interests of the leaders and to continue the flow of cash aid to Lebanon, economic and political ties have been strengthened between Lebanon and the United States. Many Chinese offers to Lebanon were rejected after US pressure, with the aim of preventing any Lebanese rapprochement with China or others such as Russia or Iran, as the US wants to dominate the political decision in Lebanon.

In Lebanon, there is a combination of political and economic consensus democracy. There has been an increase in political corruption and difficulty in prosecuting corrupt officials due to the interplay between politics and economics. In retrospect, the Lebanese system is a blunder. A modern and innovative structure reflecting Lebanon’s diversity would be more effective.

In Lebanon, warlords and sectarian leaders use politics to swindle the state and advance foreign interests. Lebanon’s economy was expected to improve following the civil war. It was exacerbated by political infighting and widespread corruption, however. The majority of Lebanon’s politicians are dishonest. It is only those with political clout who benefit from government-sponsored financial policies. In Lebanon, political parties and religious groups are free to operate as they see fit. As a result of this policy, foreign investment in Lebanon is restricted and the country is branded as corrupt. Putting party interests ahead of national ones is undemocratic.

As a result, Lebanon is doomed to fail in the face of corruption. Many reconstruction and infrastructure projects have been left unfinished due to a lack of funding. Ministers are appointed by political parties, and those parties formulate economic policies. Politics and economics are currently intertwined. Economic progress is aided by a stable political environment. Because of this, it is imperative that political and economic initiatives are kept separate. The political system and public policy must be revised because bad policies harm the economy.

The Sino-Lebanese Partnership on a Stunted and Difficult Path

An unstable Lebanon is an impediment to Chinese investment in Lebanon. Israel, to the south, and Syria, to the north and east, both countries at conflict, surround Lebanon. The geographic location of Lebanon as the “Gateway to the East” facilitates trade and cultural exchanges among Arab countries. Because of the general lack of stability in the area, doing business there is fraught with danger. Despite strong ties to the Syrian government and Israel, the Chinese may not be fully prepared to participate in Lebanon and build a strategic partnership because of the threat of terrorists. Security stability and foreign investment go hand in hand; as a result, attracting foreign direct investment to Lebanon requires a high level of security.

War with Israel, civil conflicts and anti-terrorist measures are only a few of the events that have taken place in Lebanon throughout the course of its history. The security situation in Lebanon remains bleak. China must thus take this matter seriously and respond cautiously. China is an excellent investor in Lebanon since it does not exercise any military action abroad. As a possible economic partner, the involvement of the Chinese businesses in Lebanon is being viewed as a positive development.

International investors are drawn to Lebanon’s location and business practices, but security remains a concern. Terrorists from Syria have endangered Lebanon’s politics and security because of the Syrian catastrophe. With a population that is splintered, Lebanon is a small country. In addition to the large influx of Arab migrants, the current system is broken. Conflicts have arisen as a result of nationalism, pluralism, and subordination.

Lebanon: A Politically, Security and Economically Exhausted Country

The civil war was finally put to an end by the victory of the warlords. A series of corporate politicians, led by Rafik Hariri, was in charge of Lebanon’s post-civil war reconstruction. It took far longer than expected to get electricity installed due to the lack of an effective administration. The country’s political and religious divisions are reflected in its composition. In order to maintain security and stability in Lebanon following the Taif Agreement, Syrian soldiers were to be stationed there. Until Syria’s military departed (2005), the situation in Lebanon was expected to be stable.

Pro- and anti-Syrian sentiments ran high among Lebanese citizens. In 2007, a conflict in Nahr al-Bared occurred between the Lebanese Army and terrorist groups. The Sunni-Alawite conflict in northern Lebanon raged between Jabal Mohsen and Bab al-Tabbaneh from 2011 to 2015.

Legislation and infrastructure were laid during the French mandate period, laying the groundwork for the current state. Lebanon has long been touched by the Palestinian-Israeli conflict. Large numbers of Palestinian refugees have fled to Lebanon as a result of this conflict. Regional wars (in general) have taken a toll on Lebanon’s economy and infrastructure.

Violence broke out in response to the presence of armed Palestinians, which incensed right-wing Christian groups. As a result of the Taif Accord, hostilities were put to a stop and both sides were left unarmed. Government debt has risen and public funds have been squandered as a result of reconstruction. The national debt increases as a result of a lack of a sustainable economic plan.

As a result of its location and population, Lebanon is the country that receives the most refugees. Many Arab countries, including GCC (the Gulf Cooperation Council), refused to accept Syrian refugees, while Europe imposed stringent restrictions and only accepted a small number of them. In 2014, the Lebanese Army wiped out ISIS and Al-Nusra Front. The lack of direct communication between Lebanon and Syria has resulted in a lack of security and economic instability. Internal disputes have exacerbated the situation in Lebanon, where democracy does not guarantee economic development. Lebanese expats are reluctant to invest in Lebanon because of the country’s unsteady security situation.

Lebanese economic collapse and mounting national debt are a result of economic mismanagement and bad policy. Due to a lack of accountability, government administrations are plagued with corruption. Increasing levels of corruption in government have necessitated the use of privatization as a means of improving public sector productivity. This new structure, on the other hand, is heavily influenced by party and sectarian leaders, resulting in huge corruption and economic devastation. Political and religious factions shared a number of ministries and high-ranking positions. As a result, the court has become increasingly reliant on political parties and religious groups, resulting in an increase in prejudice.

As a result of the Lebanese government’s inability to borrow more from donors and foreign financial institutions, the country’s currency depreciated and its public debt grew. Several state development councils and organizations, such as the Southern Council of Development and Reconstruction, have employed official looting techniques. Certain auditors estimate that just 2.4 percent of the $ 6 billion invested on real projects actually went toward such projects. According to a UN (United Nations) assessment from 2001, anti-corruption efforts waste over $1.5 billion annually, or about 10% of GDP (Gross Domestic Product). Lebanese statehood is not a priority for public officials, who are loyal to party and religious leaders instead. It has been reported by the United Nations that more than 43 percent of international firms operating in Lebanon pay bribes, indicating a widespread practice in the country.

Aid to Lebanon appears to be having the opposite effect. Lebanon’s politicians benefit from this rather than the country as a whole. In fact, inn Lebanon, excessive pricing and subpar service are the result of corruption. In more developed nations, politicians are actively involved in the battle against corruption and the attainment of economic success. Corruption thrives in Lebanon because of the existence of unchecked power. Developed countries have anti-corruption legislation, but Lebanon does not. Some leaders go against the law in order to further their own agendas. Having modern laws and an unbiased judiciary is the greatest way to keep criminals away from society. Corruption will increase if laws and courts are broken. In Lebanon, if you want government assistance or a job, you have to have a leader. Corruption and bribery will rise as a result of low public sector pay and a falling currency.

Public service quality is lowered when there is corruption, bias, and a lack of law enforcement. As a result, economic growth is dependent on strong administration. Poor management and internal corruption are reflected in Lebanon’s high costs and poor service quality. Corruption has a negative impact on the economy, society, and security. In addition, a government’s debt is connected to bribery. As a result of corruption, people become distrustful of their government. As long as there remains corruption in Lebanon, the country will be off limits to foreign investment. An economy plagued by corruption has an impact on Lebanon’s interior, international partners’ confidence in the government, as well as on its citizens.

An Uncertain Sino-Lebanese Partnership

A tiny and weak economy makes Lebanon an attractive target for foreign intervention. Lebanese sectarian and political subordination have become stronger as the country has received international financial, military, and political assistance under these conditions. As a result, every Lebanese party feels threatened and wants regional or global influence instead of national allegiance. There is no indication that China was involved in the Lebanese war. In China, there is a great deal of respect for other countries’ sovereignty.

When it comes to Lebanon-China ties, external factors might have a negative impact. In addition to the internationally backed civil war, Lebanon has seen clashes between Palestinians and Israelis, Syrians and Israelis, Saudis and Iranians, etc. Nations from France to Iran to Syria to the United States and Turkey have a stake in Lebanon. A slogan for Lebanese independence exists. Everyone in Lebanon, regardless of their religious, political, economic, and ethnic affiliations, has a connection to the rest of the globe. The Sykes-Picot Agreement’s French mission did not diminish the French’s influence in Lebanon. France is a major political ally of Lebanon, and it has played an important role in the success of the Doha Agreement by sponsoring conferences to collect money for the Lebanese government.

Chinese investment will suffer as a result of this. The relationship between China and the Lebanese government is unusual and complex. Uncertainty surrounds Chinese investment in Lebanon. Chinese investors have concerns about security, the economy and geopolitics. China’s investment policies in the region should be altered, but the connection between Lebanon and China should not be dissolved. China has solid ties with Israel and Syria, but Chinese investors will be helpless in the face of terrorism and global sanctions. The Middle East is a dangerous and highly politicized place. Since Lebanon’s governance relies on worldwide implications, China cannot rely on the collaboration with Lebanon’s government.

In order to lessen sectarian strife and carnage in Lebanon, it is imperative that a climate of trust be established. Interfaith dialogue will need the building of bridges and the strengthening of cultural trust. No matter how divergent their opinions are at first, their combined efforts are critical. They serve as a “defensive network” for personal connections, minimizing the length and severity of violent outburst.

Due to internal constraints, Lebanon may not be able to accept a powerful economic partner and huge Chinese investments. Because of the deteriorating security, external involvement, and an economic crisis, the relation with China is not reaching its peak yet.

 

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