No. E 45 RESTRICTED 66891 Th is report is restricted to use within the Bank INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT • REPORT ON THE ECONOMY OF THE LEBANON f)ecember 20. 1948 Revised June 8, 1949 • Economic Department Prepared by F. G. Bochenski TABLE OF COHTEUTS :Basic Statistics, I. Summary , . .. . . .. i II.. General. • " . 1 Geography . • . . • • .... ...... 1 Populat ion • • • . . • •. 2 Standards 'of Living ~ . • • • • .. ,. . :3 Recent History and Current Developments 5 III. Agticulture and the Food SupplY • • . .. • .. 11 Cultivable Land and ITrigation . . . . ~ l::l Agricul tuX-a! Hethods • • . • • • • 13 C~ps .. . . .. . 10 • • • . , . 14 Livestock .. . • ;~19 Forests • • • • ! • '!' • • • • 20 IV. Industq. Po,'rer ,ang.. Transpo~t . .. . • .. . 21 Industries' • PO':Ter . . .'. .... .. • .. • • . · . .- . ...-. ,... 21 26 Transport at ion . • .. • •• 0: • 27 v. Currenci(,:Sanl~ Credit and Prices Currency • . • '. '. . • ·. .. . ".. . 31 31 . ..... Credit .. .. . • • .- ,. f' 35 . • I .' •• • ,. Prices and ,'rages . • tt • • 37 VI. Government Finance • 41 BUdget... . ~ • i. .. . .. . . . . • . ., . '41 T~ation' . . . . . . . • • • II •• • 43 PUblic Debt 45 VII. Foreign Trade, • • . . • . . • • • • • • • • • • • . • 46 Total ~rade and Ealance of Trade . . . , . . 46 Trade by Principal Commodities , ,. . 49 Principal Suppliers and Harkets . .. . 50 Transit, Entrepot and ~~ld ~rade . '. . . ~ 53 VIII. Balance of Payments . . ,. . • • .. · . .. ,. 56 Invisible Items '. . , . . . . . ., , .. 56 Balance of P~e'nt s Est imate . .. ~ . ·. . • • ~ I> 58 IX. Present Foreign Exehcmge Position and Outlook • • •• 6l ; I RegUlatio'ns • . • • .' '. '.. • • .. • , • • ,. 61 Availabilities . .. • .. • • • ... 6) Outlook , .. . . • , . . . . . . . . . . . . . . • • 67 statistical Avp~ndix THE LFJ3ANON Basic Statistics 10,170 sq. kilometers 3.926 sq. miles ~ POE~lation 1,200,000 National .Income (tentative estimate) t,L 600 million ~L .500 per capita (equals $1.56 at market value) Agricultural Production Cereals 9Q,OOO metric tons • Fruits 140~OOO ft tI Vegetables 200,000 " " Currency Unit Lebanese Pound (~L =100 pi~sters) Exchange Rates Official: ~L 2.20 = U.S. $1 Harket (Nay 1949): ~L 3.20 e u.s. $1 Prices -~ T;1holesale prices 1939 :: 100 i948 =792 Cost of Living 1939 =100 1948 =502 Government Budget 1946 1947 (In IIillion;L) Reven~es 79 .59 3:.:.:penditure .52 59 Surplus 27 Foreign Trade (SYr~a_ and Lebanon) Imports 266 362 1!]xports 85 83 Deficit 181 279 BalD.nce of ?e;yments -- Estimated Defi~it 100 170 - i - 1. The principal eeonomic pursuit of the Lebanese people is agriculture: of a total population of 1.2 million, over 66 per cent are tilling the soil" Trade represents the s~eond most important source of income. Although the coun- try's natural resources are limited and ·population density is high -- 102 persons per sq. km. as compared with 25 in Turkey and 17 in Syria -- the per capita national income of the Lebanon is slightly higher ~han that of any other Middle Eastern country except Palestine. This is due in large part to the industry and ~ resourcefulness of a comparatively better educated, and more thrifty and business- minded population which has, for centuries, provided trade and middle-men's ser- vices for a large Middle Eastern area. 2. The greatest assets of Lebanese ag+iculture are a wide range of cul- tivation, made possible by varying degrees of altitude, and the existing, con- siderable, though still partly unutilized, water resources, While production of cereals covers only 40 per cent of domestic consumption, that of fruits and vege- tables yields exportable surpluses. 3. I~rigation represents the most effective means of increasing Lebanese agricultural production. It is estimated that the area now un~er irrigation could be trebled, which would not only provide additional employment, but, . , depending upon the choi,ce of ~rops, would also e1 ther reduce the country's import requirements or increase its exportable surplus. or five new irrigation projects, one is almost finished, while work on two is fairly well advanced. 4. Among the longer-term policies for agricultural advancement, tvo deserve special attention: a certain measure of land reform to increase the si~e of existing dwarf holdings, and an afforestation program, which, by using some of the country's marginal mountain areas, would p~ovide a source of timber, - ii - enhance the Lebanon 1 s climati.c and touristic assets, ~nd prevent further soil erosion. 5. Lebanese manufacturing industries, mainly of the light and secondary type, were greatly expanded during the war; they are at present working at only about half of their full cap~city. Textiles, cement, tanning, and food process- irig are the most important branches. All suffer from inefficient methods and equ~pment, and consist largely of small family enterprises, scattered allover the couptry~ Production costs are generally high, and prices unc9mpetitive. • P~oductioll high tariffs. 6, suffer$ from foreign competition, 'although :it i$ protected by fairly Iiydroeleotric developcnent has de.fini tely a future, although it is limiteq by the considerable disproportion between the winter and summer flp'~ of tn~ rivers, and by the necessit,y to preserve &n adequate ",ater supply for general purposes and fo~ irr~gation. At presen~, two-thirds of the installed p~ant capa- city are gener~ted by water power; in additionJ s~vera~ new hydroeleotric projects are being studied. 7. Transport is adequate: its international links enhanee the importance of Beirqt as a center of international trade. S. While agriculture is believed to supply about one-half of the national i~come, the most remunerative activity -- the countl~'s industries being small a.nd relatively unimportant - is trade. For this the country is particularly well-suited through its long coast line, a good port at Beirut, and excellent rail and road communications witb neighboring countries. Income from trade is known to be large, but it$ exact amount is difficult to estimate because of t'1e joint handling, under the customs union with neighbortng Syria, of a number of trade matters, and the fact that most foreign exchange transactions do, at present, evade official channels. - ili - 9. The extent of Lebanese foreign trade transactions, which aI'e el ther recorded together with those of Syria, or completely unrecorded, can only be estimated approximately. It is elear, however, that, while before the war Lebanese imports '~xce~ded exPorts by two or three times, at present imports are seven or eight times larger than exports. While depletion of stocks and lack of replacement of industrial and agricultural equ~pment during the war could justify the large temporary disproportion, it is regrettable that much of the ~ountryts foreign purchasing power accumulated during the war now flows into imports of • luxuries and unessentials • 10. The last war has, in fact, deeply affected the Lebanese economy_ While imports were limited by the loss of souroes of supply and lack of maritime transport, internal c~nsumption grew materially, mainly as a result of the pre- sence of large bod'ies, of Allied troops, The expend:Ltures of these supplied the country with considerable foreign exchange resouroes, whicq, however, were aocumulated by comparatively small local groups for their own benefit. The pre- war differences in the distribution of wealth and income thus became even more • aocentuated, a development which -- apart from its socially undesirable effects continues to aggravate the economic situation, excha~ge reserves being largely spent on unessentials and speculation instead of being made to serve the country's legitimate needs. 11. A high cost structure, another war inheritance, still characterizes all seQtions of the Lebanese economy and constitutes one of its foremost present problems. High prices of raw materials and power, costly processes of produc- tion, and the inordinate inflation of the profit rate, combine in retarding eco- nomic expansion. While, as compared with mid-1939, wholesale prices increased eight times, the cost of living index shows a five-fold increase; although it - iv - has been fairly sta.ble during the .last year, it is still about 50 per cent higher than in Turkey and Egypt, and '30 per cent higher than in. Cyprus or Palestine . 12. The Government budget, which had always shown surpluses, appears to have been evenlY'balanced in 1947 and in 1948. The proportion of the national inoome ,Consumed by the state is gradually increasing. Indireot taxes, inoluding tariff duties, provide up to 70 per cent of thetota: revenue; taxation of income is very limited. While higher income groups a~e thus treated with great lepiency, the present system weighs heavily on the consumer and contributes to the main- tenance of the present high price levaL. 13. The unfavorable trend of the country's foreign trade balance is aggravated by the fact that invisible exports, which in former years paid f~r the import surplus, are, in general, also on the decre~se. War with Israel and high prices have recently greatly reduced income from tourist trade. Although emi- grant remittances can only be estimated roughly, as most of them avoid official exchange control channels, there is no reason to believe thai;; this souroe of foreign exchange is yielding more now than before. Income from transit and gold trade must be considerable, but benefits the country only to a limited extent, being largely employed in further speculation or remaining abroad. 14. As a result, the country's balance of payments, so far as oan be ascertained, has shown steady deterioration for the last three years, its increas- ing qefioit being covered mainly by tQe liquidation of assets held abroad. A red~~tion of this deficit in 1948 is only due to rather exoeptional ~apital transfers from Palestine and Syria. A. continuation of this dangerous trend ;118Y well deprive the country of essential reserves requ~red in future to pay for much needed imports of food and raw materials. 15. The Government, which for some time seemed reluctant to adopt any derin!te eoonomic policy, has, howeve~, during the last year taken a few steps ... v - aiming at an improvement of the oountry' s eOOllomio position:' the virtual devalua- tion of the Leban~,s~ pound. through' 'the recognition of the free, foreign exchange market, development of the tree' trade .one of the p0x:-t of Beirut an,d restriction of the importation of locally pro~uced goods are among ..~helU. Some of the basic difticul ties ~r a oonsl.stent 8QQnorniC policy arise' from a c.er.tain ~onflict of interest between m~ddle-men and pro~ucers as well as from the difricult~ of enforcing controls on a basically individualistic populationb,y a rather ineffec- tive administration. • 16. Unless existing high production eO$~s 'benefit fully from the contemplated irriga.tion projects, even to be financed exclusively from domestic sources. are red~~,d, ~h~ Sipos the i~ eountry cannot the la:tter were exi~tiqg r~latively high price and cost structure is also the main impedimen~ to industrial expansion and the revival of tourist trade, it appears to be of the utmost impo:rt~nce for the Government to undertake a polioy which would tend to bring down prices and the cost Qf living and to increase the efficiency of production. 17. All the difficult~es mentioned above are reflected in the foreign • payments position of the country. exports grows, earning~ has no significant reserves o~ While the disproportion betw~en from invisiblss tend to, de9rease; at present the state forei.gn exchange, and the funds provided by the imports and monetary agreement with France will soon be exhausted.. In contrast to this s1 tua- tion, however, unrecorded ~ransactions show an abundance of dollar and sterling availabilities on the free market of.Beirut, to which botb government and traders have recourse. The large supply of free foreign,exchange und~u~tedly constit~tes an element of strength in the Lebanese pos~tion. It also would enable the govern~ m9nt to procure the c~rrency required for the servicing of a moderate-sized loan, if such currency should not be availab~~ at a cheaper r~te from Trans-Arabian ,. - vi - . . . Pipeline Company revenue. The r~sumPtibn of ~perations by this Company con- siderably Qrightens Leban~n's economio·proapects • • t1.: - GENEIMt GeographY. 18. The Lebanon 1a the smallest independent state of the Middle East. It has 220 km. of 1nd,en~ed ~oastline witt. several ports, and land borders with Syria (278 kIn.) end Palestine (72 kIn.)., By physical configura'tion, and climate, the cioun~17 is divid~d into four d.istinct region~, running more ,or less parallel fr.o~ NOJ'~h ~o So~th: ~,} ~he Coastal Pl~in, with a Mediterranean- type of 'climate and yelJetation; b) the Lebanon Mountail)s; witb heavy'rainfall, • and's wids rang~, of altitud.e and cultivation; c) ,the high Central Valley (Beqas)" wi.thr~J;'tile ~o;il,. -but less precipitation; , <1) the largely barren Anti-Lebanon, along the frontier with Syria. Apart from certain building , ' . ' materials, the Lebanon has prectically ~o mineral res~Urces, 'but a compara- ." ~ \ tively large portion of its so~l is fertile. 19. The physical configuration' of tne 'country in ,1tseif' gives it Ii speoial, in cer1iain ,respects, monopolis~!c position in the Middle East. The Lebanon rSl1ge condense s n.. ,·:-t of the moisture blown i~ from 'the sea by e' the preveilil',lg western w~.nds, Precipitation is particularly heavy near the coast,.. b~~, even if measured for the whole of the CO\.ltltry, water re- sources are grea,ter ~han ~ other Middle East countries. Fruit of the te~perate zone can be grown ?n the high mountain slqpes"the scenic beauty '. '. .' '. ~ . \. ~, , .. of' which rep~~~ent~ a climatic and. touristic' asset unique in· that part of' the 'World. 20, As none of the Lebanon's rivers:~re:Ilavigable~ their importance t lies in the ~ water supply and hydroelectric potential wr:ich they !"epresen~.• In most cases, tille flow varies tremendously bE)tween wint~rend summer, (e.g" discharge of the largest river, the titani, measureo near the source" in MansoUTa, rang~s ~~rom 3 cubic meters per second in August to 32 oubfe ,.I I \. • ,< R t. F ERU-lCE PAIL WAYS I , I I I I ".1AIN ROADS SCALE - I; 750,000 KILOMETRES 10 5 0 10 20 30 IllIfllllI! . I :t::::::::::=J r~~~----~~~~~----~~~~~----~--------------~~-q-.~,-,----------------------~H~,-H-)'-----------JJ~· 0."t"., l. f 4 GENERAL MAP OF LEBANON ~ ~ 2 - .. , ". / Snow melting in ,the 'moun:t,ains, (e.g., the Orontes), have a' fai:rlystesdy' flow" 6< • • : ~ .. ~. • ~ during the summe~. In ease of large-scale hydroelectric :developments, t~ese . f t '. cond.itions would point toward.s th~ advisability of inter~onnecting the'· vari~~~ po~e:r-producing are!;lS by a national grid. Popplat!on 21. The . L~bsnese .. population, . am.ounting to over 1.200,000" is Unevenly. ,. di:;ptrl1;>uted. ... Its density in the Mount Lebanon province is over four·time$ • . " . , , greeter than in the Beqaa pro:i~c~. 0' Th~ ~v~~aee density· for t.he whole· country (102 persons. per sq. km~) is the highest'!n the M;1ddle'East (Palestille 73, Turkey 24, Syria 17). " ~2. Over two-~hirds of the population are xoural;, there is, however,-. e considerable, mobility, at ~east among the inhabitants of the Western part of the country, w~leh leads to a swelling of the town population' during ~he w~nter months. Beirut, the capital, which 1~ also the countryFs • •• II< main, pori., hafl~ling abou~ 60 perc~nt , , Qr its meritllne trede, has about. 240,000 i~habit8nts in the summe~, and up to 350 ,000 ill the winter.. Other- . ' larger towns are Tripoli (85~OOO inhab!tants), the second major port, historic Saida (78,000), .~88bda (60,OOO), and Zable (17,000)_ 23;. The Le henan is the only country in the Middle Ee at lotith a Christiah majority. The 1946 . Government statistics indicate 51~5 percent . Qhrist1ans. and 46.3 percent Moslems. The history of the Lebanon, which baa always been a melting pot of r~ces, nations, and c~eeds, is best reflected by·thenumeroUB further religious subdivisions (Maronltes, : . '. - Catholics, orthodox, Sunl1+tes,' Shiites, and Dru~es), which a't p:resel'lt constitute stronger links for their followers than any politioal party sllegianc$ • A balance of' power "Oetve.e". these"' grou~$ is caJ'eftilly ·ma·$!1tained~ ·and relations among· them are tab.ly:- ha;r.monialiS. Arabic is the orria.t&~ lsJaguage;. French is spoken throughout· the. c;,o\UJtry~. 24, Consid.ering· the. densit.y or the population, i't$ standard or- living, the pa~clty of naturel. resources, and limited development possitfl!tles_ the ~ntry must be regarded as ovel!-JlOPUleted~ Yet, the populatIon conti;aues to increase repidlYi .the &xees$ of' births over deaths being et present ab~t· 20 per ~,OOO inhabitants; at· thlsrate~ the populatiott may be doubled • within some 20 years ... Large-scale em1grat.1on Q'Ol.\nt-elt-balanced thi& inQree.se in pre~1o~s d.ecades, when 18T'ge ~mmuni~es of Lebanese in both Amerioas, elol'lg the West Afrlcan coast, and in E gypt~ came into be,ing~ , Si~ce the la~t wa~, the numb~r. of emigrant$ has been emalle~~ and. more then otteet. by the ~flo'W of 1mmlgrs:nts and refugees: i~to the country. Standards ~f Li~~ng ~5~ The LebanoD has the dIstinction o~ haTing attained the highest educational level in the Middle Ea at,,· About. 60 pel~cent of the populatioll. are literate, and the reputation o~ some oftne hign schools, the American University, and the Universite·St. ~oseph in.Beirut, is w&11 established ewn beyond the border-s or the ,country.. A large pl7oportion of" the- educational institutions are aided by foreign assistance, the country thua receiving mueh needed foreign exchange in the form of·subsidies and. expenses of ro~e1gn stude~s~ 26. No- estimates can be giv~n or., :the countr-yts: national income, a$. nearly all o~ the elemen~s ~n which its. calculation m~t be based a~e UMftOWll-. For this ~e8.&>n,. es:timates worked out. by SOIlI& Lebanese economi$ts,. end' indicating an ann~l per capita inco~ ranging around ~600 must be- taken with the utmost r~serve. J;n gel:ler~l these estimatea seem toO' optimistio .. - 4- Something like ~L 500 may be more likely as income per head in 1947, and even this figure seems high, when compared 't-lith data collected by the U.N. Secretariat. Nevertheless, it can be assumed" for several rea Bons, one of which being the level of imports,. that 'the national per capita income in the . Lebanon is slightly above that of other Mid.dle Eastern countries, except Palestine. 27. While wide disparities in living stand.ards between various groups of the population should cause no surprise in the Middle East, they • appear more strikil~ in the and the extensive co-existence of Lebanon~ because of the small size of the country, scarc~ty and waste. Lavishly constructed and. supplied, floodlit hotels, casinos, and private re.sidences, wastefully powerful cars, and shops completely stocked with imported. luxuries can be seen sid.e-by... side with mud villages comparatively clean. but without light or sanitation, with camel dung cakes as the only fuel. There may be a larger middle cla.ss in Lebanese towns than in the neighboring countries, but middle- sized farms are rare. Some 200 persons own about one-half of the cultivated area. The size of their estates averages 790 hectares, while the average size of f~rms, owned by the remaining 84,000 lando~lners, is 1.6 hectares. 28. Disproportions in income levels vere oonsiderably increased during the last war_ when compara.tively small groups enriched themselves rapidly, either by selling pre-war stocks of goods at higher prices, by proouring for themselves import licenses for scarce commodities, or by manu- facturing under hot... house conditions. This accumulation of large means, particularly with r egarcl to foreign exchange, in the hand s of a fe'!,! a ccol.lnts for the fact that lar~e sums are employed in specula.tion and the import of unessentials, instead of being devoted to the productive needs of the country. - s- Recent History, 8nd.Qgr~nt· D~~l~vments 29. World War I liberated the 'teb$non fr~m Turkish rule, whioh had lasted 400 years. Even duri~g that period., the historic nucleus of the country, co~rising most of the' present Mount Leba'no~ . province , enjoyed at times a"certain measure of freedoin,'vhich distingUished 'its fate from that or neighboring areas. and gave birth to a certain tradition of liberalism and tolerance, vhich makes itself' felt up to the pre~ent day. l~hi,le the Lebanon was frequently torn by internal strife or factions'and families, it 4It had only one short period of religious war, around '1860, and even then the fundamental oel.\ses were sQcial and, political ret her then religious. There is also t,he tradition of' 8-sylum; for centuries groups fleeing from persecution , .. have found refuge in the valleys of the Lebanon~ Armenians, auring the . , first World l~rar, and Po'ies, Jews, and Christian"s from Syria~ during the lest war, as well as scme 120,000 Palestinian Ara.b refugees in recent days, bear test1roonythatthis tradlti.on li~s on. Another ,inherited trait, shared with most of the n&tions \7hi-c:h formed part or the ottoman Empire, must be • " added to theae specifically Lebanese eharacte~lstlcs; 8 strong aversion to authority, which only" too often expresses itself in e negative attitude toward the country's own government and its decrees. 30. After World War I, the Middle East settlements repre-sented 8. compromise between Arab and Jewish aspirations, and the int~rests of the Great Powers. Under these circumstances, 8 French Macdate over the Lev~nt appeared to be 8 logical solution, as France had repeatedly intervened in this area before, diplomatically and militarily, and FTench cultural influence ,\-'8S strong. l,fuUe French rule in Syria clashed from the beginning with national aspirations, in the Lebanon the mandatory period was fairly peaceful, and marked, by the construction of roads and railways, as well as by .. 6- the dewlopmellt o~ the POft of Be1r~t. It shou+d be rem.emb~red that the present. trontiers ot ~be Lebanon were &ct~allY' carved Ol!.~ from the larger 8r~s by France, which add.ed to the fprmer Sanja~ ot. Lebar~on (autonomous under the ~ks) territories immediately to the No~th an~ South, as wel~ 8" the Beql,i8 Plain further inland. In 1926 a Lebal)~s..~ Constitu~ion was prom~g8ted and approved. At the outbre8~ ~~ WQ~~d W~r II~ the Lebano~ was being ~Qd~ally prepared to d.iscard the Ma!,ldat~~ and to substitute for it a tre.,ty or al1t~nce with France, under wbich, ~owever, FrenQh ~oops • were aliowed to .31. r~ma in in the country • During the last war, Syria and ~h~ Lebanon were for occupied by FrencQ forces loyal to Vichy, which led" in 1941, to an armed som~ time clash, ended by oco~pation or both countries by British and Free Fr~n~h troops. Thel~~ expedition was preceded by pledgfi!:; to, end the mandatory regime, and to proclaim Syria and the Lebanon as free and independent states. Elections were held in the Summer or 1943. On November 8, ~943, the Lebanese Chamber of Deputies repealed. virtually all t~e ~rti~l~s of the Constitution • which involv;ed 8 Fre~ch limitations on the short show of force, during which both President Prime Minister Ried Solh were arrested by the loc8l count~y.' s ful:! Bech~ra inQependence. El Khoury and French~authorit1es, After their government was reinstated, and the Lebanon began its full independence. 3~. Constitutionally, the Lebanon is a Republic; legislative power is vested in 8 Chamber of Deputies (55 members) and ~xecutive power in a President elected by the Chamber, who carrie-a on his funct.ions with the assistance of a Prime l\1inister and a Cabinet. Of' the three existing parties, the Constitutional Party, the National Party, and the Lipera\ion Bloc, the first is now in power, and has 8 majority in the Cham~~~.. Presid.ent Sheikh Bechara El Khoury, at present the strongest, single polit.icsl factor within the ccnmtr7,t was ree~rit17' r~l.~cted; for it nother six-year term,' a year before expiration ot the previous one.. For' administrative purposes, the coUntry is divid,d int::o five district!' (Monafazats)'i' Be~ut, Mount Lebanon, North Lebanon, So~th Lebenon,t and the Beqea. Personal freedom, freedom of the press, and property rights ate guaranteed b,y law, and, in general, enjoyed by the popul8'tion~ 33. ~irlg the first foUr 'yearS 'ot its existence, inde!)endent Lebanon has established a reputatioll through: 1t;s, active l'ole j,n international organ- • i.zations. It is otten regarded. 'e~ tlie most westerni'zed and. politically ad,V8n~d· State of the Niddle East. Internai conditjons have been fairly stable, thanks to the well....balanced rela.tions between the Christian end Moslem pert~ o~ the population. The same could probably not be said about the so~181 end economic belance for the influence of oertain groups of the population to 8 certain extend inhibit·the government, from adopttng a firm economic policy. The lack of an experienced and reliable administration, as well 8~ the highly individualistic attitude of the popu.1.stion, made it • often difficult to carry Olut decisJons arid to secure respect for the law • 34. While in other Arab countries which fought in· Palest;.ne recent developments were followed by various disturbances and crises, the Lebanese Government, stands out as the only one whioh survived without 8S much 8S a major reshuffle. It is mainly for reasons connected with internal conditions that dissatisfaction with the Government bas beeome lately more vociferous. The recellt slump in trade, added to the elready existing d.ifficulties erf agric- ulture and industry, incre~seB ~he .feeling or une8Bi~ss which finds an outlet in attacks on the Government, Which is fairly frequently accused of incompetence and even graft. Oppo$ition to the Government, .though spparently widespread, seems unorgenized, except far the Phelangist mOYement, grouping ..:. 8 ~. , • • , :' .. '.. f .!.... : . ...• .... ~ 't .. ' .{ i r.. • . ' '. some 30,000 yquths,. predom1nanti1'Chrl·~tians,· 'whose leader Pierre Gemay-el, ~ • I ( • • ••• ' \/." t ~"... ' • a drugstore owner in Beirut, is however Dot regarded as amen who would 8ttemp~ 8 forc1bl~ overthrow of the regime~' .... ,,' 35. With Syria, whieh gained tts 1nd~pende'nc~ sImultaneously,' the L~b8non has a custo~s ull!on_ and the currency of both countries is ,still in' f'a"t ~ though no longer legally ;,..' in't~reh8ngeabie.. Both countries have a • I.; .: largely complementary structure; with the Lebanon supplying transit and other . serlides; end. importing some , or Syria's ourpius ce'reals. The ;policies • 8 mote Westerrl and p~o-French orientati~n -- and for the latter is obvious; tor Syria . .. seeke to economically. protect its' the reason agricultural and growing industr1ai produotio~ by tarirfs and cont~olSi while the Lebanon, or e·t least Beirut; thrives on ~ee trade. After the iiquidatlon of the common railway administration and tob.c~o monopoly, negoilatiops started for a new basic agreement 011. customs, ~nd fOl"eigl'l exchange alld have been carried on since the beginning of 1948, but have thus far broUght JlO result. It is to be hoped that they w1~ end in 8 compromise, the more so as e separation of the common customs system of the two eountries would seem to create almost unsUrmountable dUfioufties. J6~ T'he recent coup d"etat in Syria of Colonel HUSD! Zaim; apart from some satlstectio'n with which it was greeted by Leb~ile!e opposition oircles; gave rise to serious m~sgiv1ngs with 'regard. to tutcire Syi-ian~Lebanese relation!'. It must be remembel'ed that the new Syrian 'regi1r1e was initially suspected ot r8~oring the s~-caJ:led "Gr9at~r syria" or "Fertile Crescent" schemes, <~he realization of which'might easily' endanger r'elatiotls' wiih the Lebanon ift .1ew of that country's desire to remain outside of 8~ such combination. Although these fears have, so r~r, ~ot b'e'en justified in any - 9-- way, ,~he manfter; in whleh:',C olonel Zaim has repeatedly treated relat'ions with the Lebal10n -h'8'~ 'DOt' contributed' to'dispelling all- fears. On'the other hand,~ howellJ!r, the quick"rat1fiaation of 'the monetary agreement with France Bnd of the Tapline agreement b.Y the new dictator of Syria, may indicate' that he will be mor,e ~uccess~ul then the preyious wesk parliamentary government' j~ solving other'overdue problems, of which an economic settlement with the LeballOlt.. is probebly,:the most important.. It fs characteristic that acoord7.ng to press reports, ,the Lebanese Government;.before,becoming the first state ,to • recognize ,:the new regime of '11,s larger neighbOr' country, sought and apoarently obtained reassure,ncea from representatives of the four great' Powers j that Le banon ' s . integrity and· independ.ance will continue to he re SIJected. " 37. Although, 8S w111 be shown in more detail in the f'ollG""ing pages, not all the economic effects of the Palestine ws!" were unfavorable to the Lebanon, the damages sUffered from it outweigh the advantages and render the country~s pos~tion even more difficult. The impact of' the Palestine developments makes itself felt in all parts'of the Lebanese econo~. Military • requirements,. and the influx of a number of refugees exceeding 10 percent of the countr.y'~: ,,')Opulation, have mcreaS,jd the shortage of motor fuel and cereals, and thus contributed t~ kee~ing prices high •. The great mass of the refugees 1s destitute, ,end the necessity to support them weighed heavily on the stage budget.lI Some of the refugees, however, belong to the wealthier jJ Although since February 1949 food end housing ~xpenees o~ the A.rab refugees from Palestine are covered through the U.N., Lebanese expendi- tures before that date amounted to ~ 9 million, while the continuing expenses on medical care and sanitation exceed ~ 3 million per year. - 10- claes, and hed capital abroad.. Their expenditure in the LebJnon ~'mpensates to 8 certain extent for the loss of tourist trade, due to war and travel :restrictions', The turnover ~r, the p.ort ..o·r Beirut hee inc:reaaed BeJ Ha1f$'s trade deolin"d., but total exports ot 'the"Qo~ntry wf;'re reduced by the lo~s of the Palestine market. Construotion ·of the ':['ra.nsarabian pipeline termin~ and refinery ne'a~ 'Seida, 'wliich repl"e8e·l.l~s· :th~·mo.st promising development from the point or vj,ew ot :sUpplying .the Lebanon, ~i.th d,ollars, was held. up until Mar- 1949 because ::0£' reluctafloe on the .. paT.t ,of $yria to 'rat.iry the agf'eement .' ,.,ith the pipeline oompUIlY.· . . -11- l II 'r' AOOICYLIURE Am? lim FOOD SUPPLt, 0 £ult~!!~le·Land,!od. Irttgltlop 38. Soil and ~te~ are tbe main nstur~l reSources ot the Lebanon, a country with no miner~ls of importance, and only small industries, iargely dependent·on tmported raw materiels and ruel. Although trade at present supplies a large part of the Lebanon's ineome, it employs only 8 small part of its pop~ation,. while agriculture provides a livelihood fot two .. thirds or the Lebanese people. It is ther~tore j~stiriable to put eXpansion • or agricultural production in the forefront of any sQhemes for the eoonomic development of the cQQntry. 39. Climatic eonditions permit the oultivation of a very wide variety or orops J from the tJ"opical banana and sugar cene, the 5ubtrop.ic8.1 olive J citrus and fig, to ·the grape, apple· and. pear, and wheat anti pelta.to ot the temperate ~one~ This diversity of agricultural .potentialities, excep- tional within such a small area, may well become the oountry's greatest asset; it tends to give it s economy greater stability than it could attain if it were to depend only on se~vices or monoculture, ttlhat is needed, however, is not only an inQrease in agricultural production, but also a lowering of its cost. 40. Because or the configuration of the country, areas which can be readily devoted to orops gro~n· on cultivated land are restrioted. Only about 25 percent of the total surface is et. present undei:' cultivation, and additional p~ocl.uetiob depends primarily on' irrigation. It is estimated that while the whole area of oultivated land, amounting to some 270,000 hectares, could probably be increased by about 50 percent, the irrigated part (44,000 hectare!!) could be trebled. if existing water resouroes were put to fuller use. It 1s assumed in this detertnitlation of the amount of water :H 3o'r-------------------------~----~~------------------~ HERMEL. ~. ~¥ Jf ~t ~ i?) ~/ [ • , ~~~L-------~~-----+------------~3+ ~~ 3 ~O'r---------------~~------~--~~--~~--------------~~~----------------------------~--------------~~O' REFERENCE EXISTING FLOW RECORDING STATIONS o PROPOSED FLOW RECORDING STATIONS t ~REAS OF IRRIGATION EXISTING OR UNDER COIIISTRUCTION ~i PROJECTED ():·f\.:~ SCALE·- I: 750,000 KILOMETRES 10 5 0 10 20 30 bllaII'O'II'laIIilC=====~I======~I====~1 ~w~____________~=- ______ ~~ ____ ____________--____ ~ --J_~~~________- -____________ ·J-------__----~33' 35" 30' 36° G~~~~..2jC:H 36° 30' IRRIGATION AND WATER SUPPLY IN LEBANON -12~ available tor irrigation, thet domeatie eon$umption would be given priority, while hydroelectric requirements, if conflicting with irrigation, would take third place. 39. l'he ~e~l'1on enj~ys a fair annual rainfall over most aress, but practically t~e whole precipitation eomes during a winte~ ot not more than seven months. In, 8d~itipn, there 1s considerable var1at,ion in rainfall from year toye.er, and. the vitally important autumn and spring, rains are at times quite inadequate. Rain-ted cultivation is therefore somewhat hazerdous; • it has moreover been proved that· the 'yield illcrea,s,es, on irrigated lands, and makes more then one crop per year possible. 40. Irrigation he,s been practiced, for oent1.Wi~s in many perts of the Lebanon, and trsQes of ancient irr1gation,~s~81s can be found in many places, Becauee of the mountainous character of the land', most irrigation is by gravity. or the five current. ~rigfltion projects, i.e. Es~1mated 4 Area 1. Qasm1ye 5;000 hectares It 2. South Beqaa l~,OOO 3, YammoUDe • :J.3,OOO 13,$00 . " 4. Akkar " 5. Kaa 6.,000 " the first has been almost completed, the third, is complete to 50 percent, the fourth to some 20 percent, while the 'seoond anc;:1. fifth ha't"~ ,'ust be.,n started. Consulting egrieultursl experts' believe that-tn, some cases more complete data on water supply should. b& collected' fo~ a number of yeal'~ before construotion is started.:or eQntinued,. ,As projeots 4 andS involve wete~ ~pplies CODm1Qn -with ,Syria I interna:tional egre~m~nt sho~ld precede construe,... tion. The coat of the projects per heotare .ot ,i~rigated land is estimated to be, in project 1 -~ 'L 1,900; in project 2 ~ ~ 413; in project ) .~ ~L§OO. The higher cost of the Qasmiy~ projeot may be justified. by the fect - 13 - that coast lend is involved, with more profitable fruit cUltivation. Con- struction work carried out thus far is of excellent quality. Agricultural Methods 43~ Methods thet are,. or should be, employed to raise productl,Ttty ere largely dependent on the size of holdings. In mountainous regions, small owner~ predominate, whereas in the plains there are lerge estate and tenant farms.· The Q7stem of land. tenure, an inheritance of the Ottoman Law, is complicated, in spite of it~ partial simplification in 1930; it ~equires a • great number of t1m~ or eo11ectivism". No land reform and' energy~oonsuming quote one ct the authorities, "lacks the advantages QI' settlements., and,. in short, to or either· individualism change of the 100a1 system seems to be contemplated at ptaesent. Cadastral surveys, however, have mad.e some progress, which has encouraged the development of mortgage credit. 44. One of the most serious obstsQles to p~ogress for the small fern1er is the leak or facilities for obtaining short-term capital at a low r8te~ Bank credit tor agriculture is limited, and not easily obtainable; frequently up to nine percent interest is charged. Credit cooperatives are in their beginning stages.. In prsQt1ce, the small holder borrows mainly from the merchant end the money lencler, to whom he frequently rerW:Jins permanently in debt. 45.. One or the ca\lse;~ of high cost in Lebanese egriculture is the excessive amount or· labor requir~d for cult1v8tio~. The number of tractors operating in t~e whole co~utry is given by one source at 65·. The Lebanese Governmell1i . believ~s that much of th~ :mountainous terra in: is suita ble for small: g8so1~ne tractors, ,ana that the total mechanized power installed in Lebanese egr~eulture should be. increased trom t,~ present 3,.000 HP to 15 1,000 HP. A)though the type ot plow use~ in the Lebanon, .anP in m~ch of the Middle - 14' .. East, 1~ l':l-obabl,. better' sulted,'t'o local 'conditions th8~ the lIo1eboerd type, there is,' nevert-heless,room for:morE(eXte'nsive us~ or nieohanical means' of cultlvat,ion. The poverty of the 'Slns11 holde~,and his leek ot technical experi~nce, however, are em:ong the'main obstacles to the extensive use of mooern farm mach1nery~. 46., Exoept on one or two: of the larger farms, no chemical fertilizer~ are used tor cereals. In non-irrigated "iand's~ fertility is maintained. by the system of fallowing;, whioh a Iso serve s:' the "nurpo se of supplying winter pa stura ge for sheep and. goats. In the more fertile lanos, leguminous' crops are grown in • rotation with cereals. Chemical- fertilizers Bte used for vegetable and fruit cultivation. In view of the limited ~rea available,. and the relatively poor Yields, fertilizers ehc)uld be used on a larger scalee There is not enough know- ledge concerning the use of fertilizers among farmers generally,' and proper fertilizer requirements for the different types of soil have lnot been sufficiently studied. 47. The prevailing me'thods of marketing agricultural products are very prtmitive. The average producer sells good quality produce mixed with pr~duce .'\ of poor quality. This applies in particular to the marketing of truits and vegetables, 'Nhere grading, packing, transport aEd processing'should be improved. The greater part of th~ agricultural output reaches consumers through a multitude of commission agents, with the effect that prices are raised accordingly. Crops 48. Cereals. Domestic production of cereals oovers only about 40 percent of con sUlnpt ion • In ~n average"year, the ·total prod-q.ction of wheat, barley and corn (maize) amounts to ~bout 92,000 tons, against estimate~ total requirements of 210,000 tons. 1-/ith the present'world shortage of cereals, the desire of the Lebsnese to increase their product'ion of wheat and rarley, at the cost of other crops, 1s ~derstandabie though it may prove to be uneconomic. The memory of mass starvation in the Lebanon during World Wer I still lingers, and there - 15 .... is alsQ 8. strong feeling that a perm(1nent defieit in staple food makes the country too dependent on imports, which, if not obtdined at rather high prices from Syria, have to be paid for in hard currency. 'While increased. cultivation of staple food is fully justified in periods of emergency, it seems, however, that in normal times the countrY, owing to its climate, terrain, and environment, could more profitably concentrate on fruits, vegetables, and other products of intensive f~rming. Full self~sufficiencr.1 in cereals seems hardly attainable at all, and would, in any case, be pro- hibitively expensive a.nd justified. only under conditions of a war""time economy • • 47. Wheat is mainly grown in the plains of Beqaa and average yield per aere for the oountry as a whole is 15 bushels. varieties might produce better results. Maize, which 1s little used and Akkar~ New The partly exported, is growing under irrigation, in some regions successfully interplanted with groundnuts. In 1947, production of the three main cereals amounted to: Production Domes.tic C2!1§UIngtion " Wheat* 50,400 metric tons 17!f-,000 metrio tons .' Barley Maize 26,600 12,626 " n " " 37,000 4,000 In aodition, small quantities of sorghum are grown in the dry farming sections, If" " tt n and. some rice in the plain of Akkar. 48. Fruits. The growing of fruit is one of the most pro11islng develop- ments in Lebanese agriculture. Together \.Jith pulses and vegetables, it provides between one-tttrd. and one-half of the country's exports., The following data sho't.J present production and e,stimated potentialities: Produc~.iQn Area of Orchard.s -~~--- --- Output --- Exports Present 18~500 ha. 140,000 tons 50,000 tons Planned 50,500 he. 350,000 11 , 260 000 " ~out 7~ .percent of the present area under orchard.s. is irr~gatedJ. and *The 1948 wheat crop was ,iery 'good and is estimated at 70,000 metric tons. - 16 - the same proportion t-lpplles to the area where d.eve1opment is planned. 51. The Lebanese litteral is well suited to the cultivation ot oitrus trees, Bnd it~ southern regions also to the oultivation of bananas. Production of both orops has expanded during recent years. The general practice at present is to plant bananas between newly planted. citrus trees, and to remove them when the latter reach the fruit-bearing stage, after six or seven years. One of the inspeoted banana plantations, on newly irrigated sandy terrain along the coast, (Qasmiye) showed excellent fruit after 18 months; with stems of over 60 Ibs. each; fertilizers were, however, riohly • applied. lrlhile at present both oitrus fruit and banan~s enoounter export difficulties in view of tneir high prioe~, some experts believe that future marketing possibilities are better for. bananas, particularly in Syria and Irak, while citrus fruit will ~lways encounter competition from Palestine and other Med.iterranean countries. .c'roduction in 1947 was: Citrus fruit, 65,CO~ metric tons. of which exportable - 32,500 tons; Bananas 11,506 metric tons, of vrhich exportable - 1,500 tons. 52. Grapes oOCUPY 9 percent of the arable lend. The average annual ~\ production is said to be about 80,000 tons, of which from 60 to 70 percent is eaten fresh, 15 to 20 percent is pressed for wines and spirits, and the balance dried or converted into molasses. Wj~:.\es and spirits are largely consumed locally. 'rhe fig tree is well adapted to many regions of the Lebanon, because its requirements of soil, water, and. care in cultivation are small, and it gives s. good yield "lith a 10'" cost of proauction. Annual average proQ-'lt'tion amounts to some 12,000 tons, most of "lhich are consumed locally. 53. The olive is the principal source of edible oil in the Lebanon. On about 16,000 hectares, some 32,000 tons 9f olives are produced in an average - ~7- year. The crop is largely pressed. for oil" and the cake 1s used as fuel. If exports were to increase, it would be necessary to substitute imported fats for domestic consumption, which at present uses mOlJt of the 8,000 tons of oil produced annually. it is planned to double the area and production of olive trees. The United States Lebanon Agricultural Mission suggested that it \Vould be ad.visable to grade the oil and to keep the different grades separate when sold. If standard. grades for olive oil \Vere established, and producers trained in their use" both prices and demand for Lebanese oils would. be likely to increase • • 54. As fruit typical of the temperate zone can be grown neither in neighboring Syria and Palestine, nor in Irak, Transjordan and E~~t, there is a good natural market for ~ebanese apples, pears, neaches, and. cherries, increasing quantities of which are grown in the Lebanese mountains. The annual export surplus of fruits of this kind amounts at pl"esent to some 10,000 tons, \tThich is s.bout one-third. of the yearly production. It is est~ated that production could be increased about three-fold. 55. Vegetable .. and Leguminous Crops Vegetable growing is particularly ; -.. ",ell adapted to the Lebanese economy a9 it requires little land, is not dependent on anyone tyPe of soil, and brings quick returns. The intensive cultivation of vegetables is of recent origin, Bnd must be accompanied by im- pro ved method s if it is to expand and find both internal and external markets. 4 At present, production totals some 200,000 tons, of which one-third is available for export. The more imoortant crops are: Average Annual Production Exoortable Surplus Potatoes 35,000 metric tons - 9,000 metric tons Onions 32,000 H If 18,000 n t1 Tomatoes 26,000 It !! 5,.000 " " Watermelons 22,000 ff II n 12,000 5,000 " n " u Cabbages 15,000 " - 18 - Unfortunately, the war in Palestine has temporarily deprived these exports of their best market. 56. Lentils, vetch, chickpeas, broad beans, and haricot beans are grown for the most part in rotation with cereals. They are mainly grown for domestic consumption. 57. Jndustrial Crops. Tobacco is grown in sufficient quantities to meet local needs, and to permit the export of up to 700 tons of tobacco leaves. The whole production is handled by the tobacco monopoly, which manufactures cigarettes, • and, until 1948, was jointly administrated by Syria and the Lebanon. 58. The cultivation of silk worms for the spinning indtist~ was at one time the most important single culture in the province of Mount Lebanon. Severe competition from synthetic and other fibres has nearly stopped the silk industry, and the mulberry tree is being displaced by the fruit tree. 59~ Sugar cane is grown to a limited extent on the littoral, so far with little success, as the varieties grown did not yield a good tonnage of cane, and the sucrose content was said to be low. It is intended to experiment with sugar beet in Northern Lebanon, partly to serve the needs of a new sugar mill built across the frontier in Syria near Horns. The temptation to embark on larger sugar production is great, as both Syria and the Lebanon import 90 per cent of their sugar requirements. 60. Groundnuts are grown on a small scale in the North of the country. Negotiations with British buyers for starting large-scale production proved fruitless, because prices calculated by the Lebanese exceeded those quoted in West Africa by about 100 per cent. On an area, estimated by some observers at 5,000 ha., hemp is grown for hashish, which is exported illegally, though profitably, to Egypt. - 19 - ~ivesto~ 61. Because of the limited area available for pasturage or the growing of forage crops, the Lebanon cannot expect to increase livestock fiUmbere to any great extent. The number of goats may even have to be reduced, because of the damage they inflict in forest areas. 62. Goats arE~ raised in all parts of the country; they number up to 450,000 head, and are by far the most important domestic animal. Their milk, flesh, skins and hair are all used; they yield, therefore, an important part of ~ the income of rural communities. 63. Sheep are of the fat~tailed variety, which produces a coarse wool, the greater part of which is exported to America for carpet weaving. They are, however, largely bred fo.r their meat. Owing to lack of pasturage, the Lebanon has relatively few sheep, and it seems hardly feasible to increase their number further. 64. Cattle are used mainly for ploughing, and~ to a lesser extent, for the production of meat and hides. No cattae are raised for meat only. They are fed on natural forage and chopped straw; few are given green fodder. As a result, yields are low and products of indifferent quality_ However, the gov- ernment has a project to improve the race by crossbreeding with imported animals. 65. The numbers of horses, mules, donkeys, and camels are comparatively small. Pigs are bred in a small way, as th~ market for their meat in a half- Moslem country is limited. Poultry is widely raised. 66. The slaughtering industry works largely on an~mals imported, mainly on the hoof, from Syria, Transjordan, and Irak. It is comparatively large and handles about 34,000 cattle, 230,000 sheep, 30,000 goats, and 4,000 pigs - 20 - annual~y. Veterinary serv~e~ 1s rai~ly adequate, ~nd ~ner. have been no live- !~ . . stock epidemics recently. 61. In 19.47 J the total value or _nimal products was approximately I,L 10 million, distributed as tol10ws: Casings ••••••••••••••• I,L 100,000 Wool .~ •••••• ~., •••• ~ ••• " 400,000 Hides •••••••••• ! •••••• ~ It 5,000,000 Eggs, Milk, e~e •••••• ,. " 4,500,000 Most of the sheep ~a8tngs and of the ~ool were shipped to the United states. Forests -- ... - - • cia+ly 68. some 74.000 hectares of pre~~qus The Lebanon~ at one time renown~d i~dirferent timbe~ left~ cedar can today only be found on the national for her. T~e rorest~, has no more than traqitional and commer- ~mQlem, and in a ~ew mountai~ reserva~ions~ Neglect by' o~to~n author~ties, war d~struction, charcoal burning, and destruc~io~ or see~ings by goats have contributed to ~bi~ condition. 69. Forests are es~e~~ial to the Lebanon, not only as a source of timbe~, which at present has to be impo~t~d, a~d as a climatic and touristic asset, but tit, also to prevent further soi~ erosion caused by the stormy winter rains, and alre.dy apparent on the mountain slopes which occupy a considera~le p8~t of the CQuntry's ~rrace. It is est~ated that, instead of the present 7 per cent, a 'total of from 25 to 30 pet' cent of the land should be fo~ested; this 'Would also repre$ent the only possible util+zation of some of the slopes of the L~banon and of Mount Hermon in the Anti-Lebanon range. Although understanding of this fact is increasing, and some experim~nts in afforestation were made -- largely at the in~istence of foreign advisors -- ~ntil now no develop~ent program has bee~ seriously considered, and the b~dgetary endowment of the forestry service is ridiculously low. - 21 - IV. IIIDUSTRY, PO~VER AND TRANSPORT Industries 70.. General. The manufacturing industries of the Lebanon, ~..,hich are largely of the light and secondary ty'Oe, are still suffering from the con- sequences of adjustment to peace-time conditions. Before vlorld \'Tar II, Lebanese industrial production was insignificant; it had developed largely from traditional handicrafts, a fact which, even now, accounts for the prevailing kind of small-size, family-type enterprise~ scattered allover the countrj'. Lack of imports during the war, coupled with the large expenditure and con- sum~1tion needs of Allied Armies stationed in the country, contributed to a rapid expansion of existing ~roductive facilities, and to the erection of new plants. The only nil refinery in the country, food-processing plants, and manufactures of glass, paper, hardware, etc •• were created at that time. Even production under technically primitive conditions proved profitable during the war, and most of the older estab~.ishments succeeded in amortizing quickly thei~ costs of installation, without, however, being able to renew their equipment. 71. \vi th the revival of imports, many of the war-gro\"ln enterprises col- lapsed~ As neither industrial nor labor statistics exist, it can only be estimated that in 1947 and 1948 most industries were \~rorking a.t half of their capacity~ The number of \lnemployed industrial workers was said a~ mid-year 1948 to be about 20,000 but must be greater no'll! as difficulties of Lebanese industries have increased and one of the larger weaving plants actually closed down in May 1949. 72. Apart from the advantages resulting from a reduction in over-grown imports~ the importance of Lebanese industry lies in the fact that it can pro- vide gainful occupation for a quickly increasing population. Industrial de- velopment is handicapped, however, by the preference of local capital for in- - 22 - 'Yestment '.n trac~e, 'by the small size of plants, by lack of experience, extending to both management and ~abor, by the high ~ri~e of power, by the limited quantities of local raw materials and by the small ~1ze of the internal market, even if Syria.is included; only the two last-named factors can, however, be reg~rded as being, to a certain extent. of a permanent character~ Gover~ent policy, which. until some time ago, had been little con- ~ , eerned \.,1 th industrial d'l$"~''Jlopment t seems of late to have changed some\Olhat~ .~ number of industrial ~aw materials and semi-manufactured goods have been • completely ~xe~~ted from custom d~ties. While staple food and constl~ction materials ar~ dutiable at about 11 pe~ cent ad Talorem~ tariffs for articles produced locally reach~ ~n some cases, 50 per cent~ In view of the high production costs of local industries, and of,the propensity of the higher income groups to consume imported luxuries, however .. even this protection proves frequpntly lnsufficient r As the demands of industry for cheaper petroleum fuel and import restrictions clash with both fiscal and commercial interests, one could amost say that Le~anese industrialists are pinning most of their hopes for the future on the pressure exerted on Government policy by Syria during the present tr~\de negotiations "lith that countrY4t A prolonga.tion of the customs u~~~n, while preserTing a larger market and more extensiv~ sources of raw materials for the industries of both countries, will presumably lead to an even higher degree of protection against imports from abroad. 74. lviining. Al thou~h lea.d and a fe\1 other metals \orere found in the Lebanon's limestone hill$, no commercial ~uantities have been uncovered. The only mine~als produced are bi~unen, ochre. and lime. of which the following quantities were produced: Bitumen - 50 tong (1946) Ochre 10 n (1946) Lime 6,000 n (1947) - 2)- The country has an amlftdance of building stone -- limestone, dolomite, basalt -- as well as tif sand and gravel and Or~taceous marl suitable for the manufacture of cement. Salt is obtained in small quantities fro~ evaporation of seat-later; p~oduction is not encouraged by the Government, which fa~~~ ~ lc~s of income fr~ its salt monopoly. 75. Petroleum. Oil has not yet been discovered~ Four concessions to prospect rAVe been granted during the past few years; so far. only one well has been sunk at Terbol. near Tri~oli, and further drilling seems to ha?e been • ~tly. discontinued.. The Tripoli. refinery, belonging to the Irak Petroleum 00., Ltd. (I.p.e.) receives crude oil from Kirknk (Irak). by a pipeline which has a capacity of 2 million tons per year. It is planned to construct a parallel pipeline which would treble the present supply of crude oil; the refinery is to expand simultaneous~y.. 194-7 production of the Tripoli refinery was as follows: Metric Tons Gasoline 49.714 Kerosene 27,.53 0 Gas oil 32,406 Fuel oil l30~302 Loss 1.799 Total processed 241.751 Recently the Compagnie Francaise des Petroles. one of the shareholders of the I.P.C .•• concluded an agreement \Ali th the L@banese Government, providing for the erection of further refineries. 76. All of the 1947 refinery production was consumed in Syria and Lebanon, except for 37,583 tons of fuel oil, \Alhieh ",ere exported~ While Tripoli covered only about one-half of the two countries' needs of petroleum products, the rest was imported from the Haifa refinery which has recently been closed. The mark~ ting of petroleum products in the Lebanon is also largely in the hands of fore~ companies, of which Shell appears to be the largest • • - 24- 77-. The Palestine dispute interrupted constru~tion of the Transarabian pipeline, ~lth a capacity of 15 million tons per year, which was supposed to lead to a terminal ~n -the Lebanese coast, near Saida, where the construction of a refinery was contemplated. During the last year, ev~n the preliminary ex~enses for this :project sUPJlied the Lebanese Government \'Tith badly needed dollars; similarly; the 1.P-.C. is >the main source of the Government's sterling receipts. 78. Textiles. Textiles are probably the Lebanon'~ largest industry, > and consi$t of cotten spinning (36,000 spindles), and the weaving of cotton, • wool, rayon, and natural silk (694 mechanical and 300 hand looms). Although the production of c~tton yarn doubled in 1948, there is still a disparity in production capacity ~etween spinning and weaving, the cotton industry having to depend for about one-third of its capacity on imported yarn. There is only one factory equipped to weave high-class woolen cloth~ The spinning of silk, at one time the Lebanon's staple home industry, is on the decline. 79, Raw cotton is imported from Syria and Egypt, cotton yarn from Europe and the U.S., rayon yarn from England, Italy and Belgium, woolen yarn from England and France. Locally~produced textiles cover a sizeable part of domes- tic requirements. and are ~lso exported. The tariff of 40 percemt' on rayon g08ds. 30 perce:.t-: 'en cotton piece goods, and 25 percent on woolens is not sufficient to protect the industry against foreign competition. 80~ Cement. One of the,key 1ndustries in the Lebanon 1s the eountr,yt. only cement factory a\ Chekka, near Tripoll~ Production increased in 19~8 fr~m ~'" annual average of some 160,000 to"" per y$ar. valued at about I.L 10 million. to 200,000 tons, The completion Of a third furnace will raise the capacity to JOO,OOO t~n._annually. which should ~ suf~icient to cover all requirements of the irrigation,program. While moet of the production 1s eon. aumed in the Lebanon or in Syria.> so~e cement 1e aleo exported to other Middle Eaetern qountries~ eu~h a8 Tul'key and Irs:1te - 25 - 81_ Leather. The tanning of hides and skins is an old-established indus- try, owing its initial development to locally produced raw materials. There are 80 tanneries producing sole leather, upper leather, and tanned goat and sheep skins, valued at some ~L 3 million per annum. Small quantities of sho~s are exported to neighboring countries. Ra'll' hides come from domestic sources, as well as from Jyria, Iraq, and Africa. Tanners are not satisfied \11i th a customs tariff of 15 percent on sole leather, and 25 percent I)n upper leather and sheep and goat skins, but claim that nothing le~c tllan 40 percent can be considered protective. From 35 to 40 percent of total production is consumed locally; surplus sole and upper leather is sold in Syria, France, and the United Kingdom. 82. Soap~ The old-established Lebanese soap industry o",ed its "ride luarket in the Middle East to the po~ularity of its products made exclusively from olive oil. The addition of cheaper oils may have tempora~ily undermined the market, but in 1948 exports showed again a favorable trend o Annual production is a'Aout 3,000 tons, valued at ~L 7 million" Laundry soap is 6xported, toilet soap imported. ~~nufacturers have asked for an increase in the tariff from 11 to 25 percent. 83. Food Processing. There are a number of plants concerned "Ii th the manufacture of such foodstuffs as biscuits, macaroni, and chocolate. One new chocolate factory succeeded in obtaining markets abroad~ thanks to the quality of its products, Canning and preserving industries are small and handicapped by high costs of imported tinplate and sugar. The only exist.ing oli'v'e oil ref~nery does not work to capaci ty because the:r.e is no home market for refined oil, and foreign buyers prefer to buy the "OJ.11 s:fined prociucte About· 2.000 tons of vege';able oils are produced yearly from 'tal ious~ mainly imported, oil seeds, which represents only a small part of the capacity of existing plants; the latter depend larg'3ly on export, and expect more domestic ra.", material from - 26- newly irrigated areas. There are tw~ fully equipped breweries capable of supplying many times the present demand for their products. Lebanese brewers consider the 50 percent customs duty on beer inadequate. Over 300 tons of beer :per annum are now being imported, up to 90 l'ercent from the United states. Powe~. 84. Although the Lebanon has numerous rivers following steep courses, the development of hydroelectr1c power is limited by +~~o factors: the necessity to give prior consideration to an adequate water ~pply for domestic purposes as well as for irrigation; and the considerable 4ispro:portion between the winter and summel' flow of most of the rivers. Only mQre detail geological investigations could determine to what extent the latter handicap could be overcome by large-scale ,~ter storage. Another solution would consist of linking the future installations of the Litani Rive~t the production potential of which falls ~n summer to 10 percen~, with future plants on the Yammouneh and the Orontes, which run higher in summer tha~ in winte~. Total power output WOuld still be greater in \1inter than in summe~, but this excess might be con- surned in such seasonal operations as heating. In considering tIle development possibilities of the country in all fields, some experts believe that even the maximum develo~ment of hydroelectric power could never, by itself, meet total power requirements, and would have to be supplemented by thermal in~tallations.* 8.5. Ninety percent of all electrIc power iso, at present, :9roduced by two foreign concessionary companies, "Electricite de Beyrouth n and "La Kadisha ll in ~ripolie Total installed plant capacity in the country as a whole is 27,500 kw•• of which two-thirds are represented by water powere Service is highly unsatisfactory, voltage is uneven, and complete breakdovms are freq~ent. This is .s.metimes erplained by the unwillingness of the companies to invest in ney * On the ~ther hand, there is some speculation about the possibility of exporting power to Haifa, if the proposed hydroelectric station on the Litan! River should materialize. - 27 - equipment at a time when their concessions are coming to an end, and their pro- longation is uncertain. In p,either of the existing plants can there be a great increase in production without the installation of new 1M;ch1nery. No statistics showing the division of consumption between light and power are available, but there is no doubt that consumption for power in- creases rapid~y in urban areas. 86. The following estimates offer a comparison of consumption levels of electricity per head of the population in the Lebanon and neighbofing countries Palestine 70 kwh yearly Lebanon 46 kwh II Turkey 20 kwh tt Syria . 15 kwh n Charges for electricity are very high for a number of reasons. such as high fuel costs, long transmission lines in relation to a small consumption, and high overhead costs, particula~ly in ~he num~rous small distributing com- panies. It must be remembered, however, that in the Lebanon power supply is in its early stages. While it is generally considered that a minimum demand of 100 watts per head of population is necessary for a successful electrical supply industry, that figure represents nearly three times the present demand in Beirut. Transporta tion. , 87. Transportation in the Lebanon is, in general, adequate. All of the more important centers are easily accessible by road, railway,.or both; the road and rail net is linked with that of neighboring countries, and the exist- ing and planned sea and air routes enhance the traditional position of Beirut as one of the important gatetolays between East and vlest. 88. Railways. The Lebanon has railway com1ections ~ri th Horns and Damascus in Syria, and 'I,ITi th ~alestine, along the seacoast. All lines are operated by a French company. tlDamas - Hama et Prolongements" (DEP), \1!hich also owns 434 km. of standard gauge and 147 of narrow gauge (to Damascus)~ - 28- ~he Government O\,lns ~80 km. of ,;rtandard gauge along the coast t 'built by the British A~my in 1942, and· purchased by the Lebanon~ The southern section of this line is not operated at present, the northern one very irregularly,. 89. The D.H.P., until recently under the control of the Syrian-Lebanese Common'Interest Adinini stration, has an agreement with the two countrie,s where~ by the latter are responsible' for deficits, Largely as a result of unrestricted competition from road traffic, losses have 'been severe in recent years, and activities \lJere curtailed in'19L~7 to reduce operating costs, notably of :passen- ger service to Damascus. While it takes 8 hours to go from Beirut to Damascus tit by train, it only takes 2 hours by car. 90,~ Road Traffic. Partly as a result of the road-building program' of Allied Arm~es" roads in the country are numerous, and the main ones are hard surfaced~ Where mountains are cressed, grades are, in parts, rather too steep for slow-moving traffic, and some of the pa~rpin bends could stand i~provement~ 91.~ No traffic s'tatistics or reliable data on the number and types of vehicles are available. It is estimated, however, that in 1947 the Lebanon had about 100 vehicles per 10,000 population,\lJhich compares favorably with other IvIiddle Eastern countries, and is not quite hopt,)lessly behind pre,,.,ar s.tandards for \'J'estern Europe (France, 540; ,U,K~, 610). Among passenger vehi- cles, preference is given to American cars, in ~pite of their larger consumption of fuel, '",hien is rationed and expensive. 'Standards of maintenance and driving seem ra ther lOW,. 92,_ Ports'.' Of'the Lebanon's two ports, Beirut and T7tipoli, the former is much larger .. ' and has adequ~te \,la~ehml.se~, a f~ee zone, ~Lnd facili ties for seventeen deep-~ater ~hips~ Free ~one and cold storage warehouses at Beirut were extended in 1947, ,.and' a free zone at ~ri'Poli is contemplated. Smaller per,ts are Chekka, Saida, and Sour. Apart from a fe\,T small sailing and motor vessels, the Lebanon has "no mercharit marine, which is rather astonishing, eon- - 29 '"'!" sidering the country's traditional interest in foreign trade, and the volume of its transit services. 93 r The port of Beirut is run efficiently by a French concessionary company~ Favor~ble developments curing 1948 in9lude a further enlargement of the free port zone of Beirut and the creation in this zone of a Persian rug market of new ~reezi~g and grain storage facilities,as well as the beginn~ng of construction work pn connecting the port with the standard gauge railway system~ The unfavorable, more recent development is the decision of London • underwri tart? to inc:r~ase mari t~me ins'll~ance rates for the Lebanon about tW'ice above the ~evel of rate~ for Israel and three times above those for Turkey, Egypt, etc. This decision was taken in May 1949 as a result of repeated cases of pi1f~rage tn Beirut. 9~~ The follo~Ting ft~res prove that, 1/1111i1e P9 rt traffic in 1947 \'las roughly on the prewa~ level, 1948 shows a marked increase: ~?39 1?47 1248 Number of steamshi~s entering Beirut 1,164 1,.2 8 3 1,513 , 1'onnage of cargo handled (In thousan~s of metric tons) Imports 471 44~1* 763 Exports 91 .57* 96 * Not ~ncluding livestoc~ The pronounced upward trend :i,.n 1948 is undoubtedly due to decreased competition of Haifa • . Fears are expressed that the revival of maritime trade through Palestine, fostered by a dynamic development of the Jewish state, may limit the role of Beirut~ There are also some misgivings with regard to Syrian plans f~r improving the port of Latakia. Such a development might deprive Beirut of some qf its present tThin~~;r1and" in the North" and presumably ~!ould affect exports ;"ather than imports. In view of all these uncerta.inties - 30 - it might be wiser to limit expansion work in the port of Beirut to smaller projects (extension of 'breakwaters) and postpone, for the time be~ng, such large scale investments contemplated by the concessionary company. as the construction of a third basin. 95. Air. The countryf s main airport at Beiru.t is fairly well equipped to handle international traffiC', but r1,lnways are short and the largest ai;rcraft which can use them is a D8.kota. The construction of a new airport at Khald(~, 8 km. south of ~eirutt is planned, and some construction work has been ~tarted , but progress is slow. This airport should be capable of accommodating four- engine aircraft of the largest type in operation, and thus attract a number of international airlines, a development which would be of great benefit fo;r the Lebanon, especially as a source of added foreign currency receipts. It::seems likely that a large airport in Beirut could to a certain extent rival the present position of Cairo, as it would provide a shorter transit route from the West to some of the countries of the ~addle and Far East. T""o small Lebanese airlines at present operate successfully between Beirut and some Middle Eastern countries. - 31 - v. CURRENCY ~ BANK CREDIT liND PRICES Currency 96. The monetary unit of the Lebanon is the Le'banese pound (I:,L). Up to the oonclusion of the Franco-Lebanese monetary agreement (January 1948), banknotes for circulation in Syria and the Lebanon were issued by a joint central bank, were exchangeable at par, and circulated freely in both countries. In February 1948, Syrian currency circulating in the Lebanon was officially withdrawn and can now be used only for payments of customs duties up to 50 per cent of the amounts • charged. In ~raetice, both currencies are still accepted by the population, the Syrian pound at a discount of from 5 to 7 per cent. The parity of the Lebanese pound was fixed when the Lebanon joined the I.M.F. in July 1947. The official rate of exchange is $1 =bL2.20; the free market rate, which was ~~2.91 in mid-1947 and hL3.55 in mid-1948, bas recently dropped to hL3.20. 97. The Lebanese Bank of Issue (Banque de Syrie et du Liban) is a private French concern which in 1919 took over from the Ottoman Bank all its agencies and ~ privileges in the Lebanon and Syria, and functioned as a note issuing bank under the Fren~h Mandate. Its present status in the Lebanon is based on an agreement with the Lebanese Government dated May 29, 1937, expiring in ~pri1 1964. The Bank has its headquarters in Paris and seven branches in the Lebanon. The manage- ment 1s composed of fourteen directors (of whom three are Lebanese and three Syrian), a president, and a managing director (both French). At the end of 1947 the Bank's capital was Fr. Fr. 57,375,000 (bL 1,055,657). The Bank has a Banking Department and an independent Issue Department with separate accounts. In the management of its commercial operations, the Bank is free from all Government interference; Government control over the Issue Department is exercised through a Censorship Co~~ttee. - 32 - 98. Not all of the traditional functions of a central bank are performed by the Banque de Syria et du Liban. Besides issuing notes it acts as fiscal agent for and principal lender to the Government, and as sole agency for the floating of public loans and the managing of the exchange office. The Bank does not, however, effect contraction or expansion of credit in the public interest, nor does it habitually act as a redisoount center for, and lender to, other banks. 99. Gold coverage of the Lebanese note issue amountl3 at pre$ent to less til than 4 per cent, the remaining backing being provided by French Franc balances. Present arrangements for the backing of Lebanese ourrency can be best explained by its history. Lebanese currency was originally established in 1920 as a common Lebanese-Syrian monetary unit based on the French Franc. During the Mandatory period this unit follo\-1ed the changes in the value of the franc. In 1937, through a new agreement between the Lebanese Government and the Banque de Syrie et du Liban, the currencies of the two countries were separated, and a minimum gold cover of 10 per cent was stipulated for the Lebanese note issue. The latter provision was waived in June 1940, when the French High Commissioner introduced controls which centralized all foreign exchange operations in the "Office des Changes". Since payment for foreign exchange purchased by that office was made in Lebanese currency, the Mandatory power had to deposit: for the account of the Banque de Syrie et du Liban, francs and French Government bonds. It was in that year that the country's circulating media rose from around bL 55 . million to ~L 92 ~illion, thus starting the inflationary trend which was to oon- tinue until 1945. 100. In June 1941, at the start of the occupat;1.on of Lebanon and Syria by the Allies, some hopes were raised that both countries would join the Sterling - 33 - Bloc. After liberation, the rate of the pound sterling was fixed at its prewar equivalent of hL 8.83. Considerable amounts of sterling and gold were brought into the eountry by the British Army and the Lebanese Office des Changes started sales of sterling and gold to the public, in order to offset, at least in part, the increasing inflation. This free conversion of Lebanese currency into ster- ling, maintained for about three years, gave rise to an accumulation of Lebanese sterling balances, which, atter the war, were used to replenish the country's depleted stocks through imports. tit In January 1944, on the initiative of British and French authorities, the Lebanese Government agreed to join the Franc Bloc, on condition that the rate of sterling in Lebanese currency, based on the parity of FF 176.6 to the ~ St., would not be changed without prior consultation with the Lebanon, and that the French Committee of National Liberation undertake to maintain constantly in b st. the counter-value of the Banque de Syrie et du Liban holdings in FF., including those kept as cover for the note issue. Accordingly, the parity of the Lebanese pound with the French franc -- established in 1944 at FF 26.65 -- was raised to FF 54.35 during the December 1945 devaluation of the franc. In January 1946, however, France notified the Lebanon that it would not be respon- sible for losses resulting from any further devaluations of the franc. After protracted negotiations, both countries came to a new monetary agreement, signed on January 24, 1948, i.e., one day before the new devaluation of the franc~ Following this devaluation, the prevailing rates between the Lebanese pound and the ~ sterling were maintained, while the rate with the franc was altered to FF 97.83 to the pound. 101. The agreement of January 1948 also provided that franc assets of the Lebanese Branch of the Banque de Syrie et du Liban, ou~standing at the date of - 34 - the agreement, were to be divided into an "Old No. 1 Account" and an "Old No. 2 Account". The No. 1 Account, representing the cover for the note issue, was • ~ 1:, I credited with approximately 9 bil116ft f'rahds, and carries a ten-year starling ex~hange guarantee. It was supposed to be drawn upon for the following purposes: a) to repay France for the value of French Government property sold to the tebanon estimated at ~ 20 million, in five equal annual installments, starting in June 1949; b) to provide current foreign exchange with the proviso that annual releases not to exceed one-tenth of the original a~ount were to be made beginning in 1953. The No. 2 Account of approximately FF 5 billion was to be debited with the value of goods purchased from France and of purchases of certain European currencies, other than French francs, converted at official exchange rates. l02. Since the signature of the Frenoh-Lebanese Agreement, the No. 2 Account has been entirely used up and -- beoause of the adverse Lebanese balance of payments with France -- inroads are also being made into the No. 1 Account, representing the cover for the country's currency, which was supposed to have been blocked until 1953, and then released by annual installments. Up to the end of Marcn 1949 this account has decreased by 13.4 per cent and there was a roughly corresponding decrease in the circulation of Lebanese pounds during the same period. 103. This deflationary trend is a new faotor in the Lebanese economy and follows a period of comparative stabilization, which came after a sharp wartime inflation. Between 1939 and the end of 1945, currency circulation rose from ~L 29 million to 1L 172 million, and demand deposits from ~L 26 million to bL 226 million; since that year, however, the country1s total ciroulating medium has, on the Whole, remained fairly stable. At mid-1948, currency in circulation amounted to hL 189 million and demand deposits to hL 182 ~illion. Both figures represent a small decrease, as compared with the first quarter of 1948, but are - 35 - somewhat higher than the sum of cirClllation and demand deposits at mid-l947. This, however, is explained by the fact that, when in February 194$, the Lebanese Government ordered all Syrian currency within the country to be exchanged for Lebanese currency, about 45 mlllion Syrian pounds were presented, Lebanese cur- rency being increased accordingly. No data which would make it possible to draw conclusions as to the ~elocity of circulation of Lebanese currency are available. 104. Deflation was forced upon the Note Bank by the continuous dwindling of the note cover. Drawings on the "Old Account No.1" amounted during the first quarter of 1949 to two billion Fr. Francs and, if continued at a similar rate during the rest of the year, would result in a contraction of the money in cir- culation by over 45 per cent in one year. Already in Spring 1949, this somewhat involuntary deflationary policy led to a certain scarcity of money and the tightening of credit, thus aggravating effects of the marked business recession in Beirut. 105. It is therefore hardly surprising that a new currency bill was sub- mitted by the Government and approved by the Lebanese Parliament without delay in May 1949. According to the available information the notes at present in circu- lation will be progressively replaced by new notes as well as by gold and silver coins. The note ~over is to consist up to 50 per cent of gold coin and bullion and for the rest of foreign exchange and Treasury bills. Thus a certain measure of freedom in regulating the money supply has been restored. It is to be hoped that moderate and prudent use will be made of this leeway and that it will not be unduly enlarged by futUre legislation. g~ 106. Since the First World War, Lebanese commercial banking has developed rapidly. The number of local banks has increased, and foreign banks, previously - 36 - limited to the financing or foreign trade, have increasingly undertaken to finance internal trade also. Commercial bank credit can, at present, be said to meet most of the needs of the country. 107 • l~ortgage banking, completely undeveloped in the Lebanon before ~Jor1d War I, is largely represented by the local branches of two French mortgage cor- porations, the "Credit Fancier d'A1gerie et de Tunisien, and the "Compagnie Algerienne" • This branch of banking has been facilitated recently by the progress of cadastral surveying, and some settlement and registrations of rights on real estate. I 108. Agricultural credit, on the other hand, is still predominantly in the hands of provincial money lenders, who take heavy toll of the small farmer. Misuses are facilitated by the absence of any special Lebanese law to regulate banking and credit operations. Credit cooperatives among the peasant population are still in their beginnings, and operations in the field of agriculture of the "Societe de Credit Agricole et Industriel du Liban", (S.C.A.I.L.) established by the Banque de Syrie et du Liban, appear to be still very limited. 109. The Government has recently agreed to g~arantee loans to agricultur- I ists, made by the Compagnie Algerienne and by S.C.A.l.L. Similar guarantees are also extended to certain b~k loans to industrialists, to hotel owners, and to municipalities: the latter loans being usually made by the Banque de Syrie et du Liban. 110. There are no separate investment or savings banks, and there is no modern security market. The Lebanese people mostly prefer hoarding of savings in gold to deposits in banks, and investing in real estate tc. investing in indus- try or securities. Capital is inclined to flow into speculative channels, where high profits are expected. Versatile Lebanese merchants are ~1own to shift easily from commodity to commodity, and to withhold stocks for long periods in - 37 - anticipation of price increases, rather than to ai~ at large, quick turnover with moderate profits. Although the domestic discount rate i q high, (between 5.5 and 7.5 per cent) considerable funds are known to be held abroad in the interest of safety. No figures for total savings and investments are available. - Prices and \-1ages ; 111. While wholesale price'S show a rise to about eight ,times the prew.ar figure, the cost of living increased from 100 in 1939 '"to 502 at the end of the first quarter of 1948 and sinee then dropped only imperceptibly; both had reached I their peak in 1945, when the index of wholesalA prices stood at 1038, and the cdst or living index at 6cY1. As has been indicated, the total circulating medium increased about seven times between 1939 and 1945, but -- contrary to prices -- has not been appreciably reduced since the latter date. 112 ~ The v'ery considerable reduction of impo~ts during the war and immediate postwar years, together with a marked increase of internpl consumption brought about by the presence of large bodies of Allied troops, were the basic causes of the tremendous pri,ee inerea.s~. But, wQi19 the same factors gave rise to similar trends in some other M,iddle ;Eastern cOWltrie~, in the Lebanon the I situation was aggravatf;td by the g~eater dep~nd~nee of the OOl.Ultry on imports from overseas and by the monetary developments already desc,~i'bed, the effects of which were only par~lY' offset by free sales of sterling and golq. 113. Statistics prepared by OBe of the largest of the foreign companies operating in the Middle East show that in 1939 food p+iees in Syria and the Lebanon were sligh.tly below the Egyp.tian, and about 20 per cent below the Pales- tinian level, but that in 1947 they were twice as high as food prices in Egypt, and about one-third higher than those in Palestine. The s~me source gives the cost of living index for Syria-Lebanon in January 1948 as 590, (which is sliglltly - 3S - higher than the government figure, quoted before, although in both cases the summer of 1939 was taken as a base) and co~pares it with the following indexes for other rliddle Eastern countries: Turkey, 341; Cyprus, 330; Egypt, 231. Com- parison of the cost of living indices for the U.S. and the Lebanon is unfavorable to the latter ~ountry, even when the difference is reduced by application of the free market exchange rate. It would appear, then, that the ~L, valued officially at 45 cents, and unofficially at 31 cents, has a purchasing po~er which is even smaller •. 114. Labor being obviously the Clnderella of the limited statistical ser- I vices of the country, no data are available on the level of wages or on the num- bers of the wage-earning population. Spot inquiries have shown that the wage of a male worker employed at digging of irrigation canals ranges around ~L 4, that of a woman worker around IL 2.5. Some Lebanese experts indicate ~L 5 as the average daily wage~ running from bL 3 as the average for an unskilled worker to ~L 10 for a highly skilled mechanic. It is often said in the Lebanon that, by prewar standards, the average wage should correspond to the price of 10 kgs. of bread. If measured by this yardstick, wages must be at present considerably lower, because, in July 1948, the controlled price of bread amounted to 1L 0.59 per kg., the uncontrolled price, to ~L 1.10 per kg. In view of these considera- tions, the opinion of another expert who believes that salaries and wages have risen only about half as much as the cost of living seems to be not ill-founded~ 115. Even if no specific estimates are accepted, it is undoubtedly true that during the past several years "wages have c~:.~;mbed the staircase, while prices have gone up by elevator". As a result, the incomes of merchants, land- owners, and industrialists were increased, while the wage- and salary-earning part of the popUlation has been impoverished. The latter also applies to public - 39 - servants, and undoubtedly accounts for the reportedly lower efficiency among them. It folloW's, from these considerations, that a downward trend of produc- tion costs could hardly be initiated by lowering wages. On the contrary, it may be expected that, unless the cost of living falls, a certain pressure to increase wages will contribute to keeping costs high. 116. As a remedy against the existing high price structure, winch cripples the country's whole economy, an artificial lowering of the prices of such basic consumer goods a~ wheat and textiles is sometimes recommended. This step would I not be without precedent since, during the British occupation in the last war, under the so-called Spears plan, large quantities of wheat VJere at one time thrown on the market. The experiment proved abortive, as the imported cheap wheat was immediately bought up and hoarded by speculators, without any bene- ficial effect on the price level. Should this step be repeated, distribution obvtously would have to be better controlled, and an ample supply of cheap flour , (or, preferably, of bread) would have to be kept up for a longer period. measure, which, if successful, would result in a lowering of domestic wheat prices, might, however, necessitate subsidies for Lebanese farmers. This 117. Far from subsidizing the cost of living, which policy vias recom- mended repeatedly by responsible Lebanese economists, the Government tried during 1948 to cover some of its previous expenditure on cerea~s by raising prices of the remaining rationed goods (sugar and rice) up to the free market level and by selling imported wheat at a profit. The exceptionally high taxa- tion of petroleum products can be regarded as another, Government-sponsored J - 40 - price lever. In view of the dependence of the Lebanese consumer supply on road transport such products can hardly beolassified as luxury goods. I , - 41 - VI. GOVEHHi-IEET FIHAlJCE :Budget 118. Betueen 1938 and 1946 the government's budget has continuously sho1'ln a surplus ranging from 10 to 39 :per cent of annual revenues; in 19~,6, the last year for "Thich final figures are available, total revenue l,1a,s ±,L 79.1 million, total expenditure, 1::L 51.9 million, and the SU11)lus 1,11 27.2 mill ion. SUr'"1)luses "I.'Tere credited to a reserve fund used mainly for the financing of develol)roent projects, some of ~.1hich are grouped under tl1e name of a five year plan. The 1947 budget anticipated revenues and expenditures balanced at bL 58.9 million. I These figures I'rere sucsequently raised by deficienc;\, appropriations, and the remaining reserve fund ':Jas partly exhausted. 119. The 19 L!-8 budget amounted to 11 67.0 nillion of balancec1_ revenues and ex'penditures, and there "rere SOme fears t~iat the additional cost of ~.'Jar and sup- :nort to Palestine refu[ees may have caused a deficit. Tbe actual figures are not yet available. The 1949 budget foresees revenues and e:':l)enditures ba12nced at 75 million Lebanese '!ounds. Fourteen million are foreseen for J)ublic \'Torks, such , as roads, irrigation, end hydroelectric developments; credits for agricultural services amount to 1-1/2 million Lebanese pounds. slightly increased. -r.:xpenditure on the Army is Direct taxes are anticipated at 12 million Lebanese pounQs, indirect t8]~es at 52 million, "'Thich means that t:'le ::')roportion bet1;Jee~l these tl'JQ tY.l}ef! of taxation remains I~rD.ctically uTlcha.nged. ~~le only ne't' T tax is the ?eles- tine Fund tax, eXl)ected to yield about 4 nillion Lebanese liound.s. The budget has not yet been voted and is criticized becC'use of its dimensions. 120. During the l)ast eleven yee.rs, the size of JJebcnese budgets increased over 10 times (from .tL 6.3 million in 1938 to bL 75 mi.llion in 1949) nominally, and by over one-third in real terms. Tl-le exte~'lt of this increase is not sur- prising; it reflects, largely, the country's gradual clevelo~)ment frolil autonomy under mandc"te to full statehood. Internal administration ,'ras tal{en over, l)ublic - 42 - property purchased, a small standing army crea-ted,. and external representation established. The latter required additional funds in connection 1'lith the Lebanon's active participation in several international organizations. (The opposition press pointed out at one time that the Lebanon hacl l)articiIHlted in 1947, during six months, in seventeen international congresses, ancl asked l:Jhetller a small country could afford foreign missions on such a scale.) The 1)rice of inde~)endence. hO"rever, seems heavier if it is considered that this increase of government expenditure comes at a time "Then national income on the basis of the most favorable estimates appears statio,nary ~ HIlile in 1944 taxation may have I reca.uired bet"Teen .5 and 8 per cent of thn national income, t'lat share is probably nearer 12 per cent OT more at the ~resent time. 121. So far as brealcdouns are knoHp., the 1947 and 1948 lJud.get s inclicate, on the revenue side, the same preponderance of indirect over direct taxation. The 1948 budget contains increased appropriations for the army. for ecluc[1,tion, for agriculture, and for J!ubllc health. The follo':ring th]'''ee categories represent t,"o-thirds of tot al expenditure: salarie sand indemnities, ±,L 19 million; admin- istrative expenses, 11 5 million; army and police, tL 18 million. 122~ The Common Interests Administration of Syria and the Leb["'non Las u. Sel)arate budget, 'lith recei]")ts de1)endi~1g prim2.rily on customs duties. Its e::.pen- di tures, mainly on the administrEl.t ion of custom~, renge from 11 4 million, in 1944, to tL 6 rr,i11ion in 1947. The net profits of the j~dr.1inistration are al)por- tioned 56 per cent to Syria e.nd LJ.4 !)er cent to the Lebanon. The Lebanon's s1:1.8.1"e, ~"Thich is included in the budget lri th the income from inclirect taxes, 8l11ounted in 1947 and 191.~8 to 11 13 and 1L 16 million, respectively. - 43 - Taxation 123. Indirect ta"{es provide up to 70 per cent of total revenues; apart from the net profits of the customs administration, the most important sources of receipts in this group are the income of the tobacco mono:poly, about ~I, 12 million in 19~'7 &"10. 1948, and the fuel ta..."'{, about 1,1 7 million. There are also consiclerable registration and stamp fees, bet ';Teen tIt 3 and 4 million per yea.r. The salt monopoly yields a profit of over I,L 1 million; import license fees and the amusements ta."'{ yield about the same amount each. 124. The Lebe,nese tax system, \'lith its prepondeTance of te,;{es on consumers, e undoubtedly ueighs heairily on the lot1er income classes. A substa."ltial reduction of government income on sales of sugar, kerosene, rice, salt, etc., ~:Ioulcl be a first step tot-Tards a lo 1-rering of the cost of living. The same a~?l)l.ies l)artly to motor fuel, as most of the country cle)ends on road transport. Eat too much. h01:1- ever, should be expected from such a step, as a large :)roportion of indirect ta..."'<:es is imposed on luxury articles. It should also be kept in mind that the one-sided character of these large sources of ])ublic revenue may involve some dangers for the future. As one of Beirut I s ne1;Js:napers aptly l)uts it: "Lebanese inde~')endence , cannot for too long depend on the sale of gasoline ancl tobacco. II 125. A modern income ta.ov:: \'ras creEted in 19l }LI't to reT-'lace the antique,tecl semi-income tax, based on such indices of income as the amount of rent paid, or the number of employees and servants. Incomes subject to the neN income taiC are: (1) ~rofits of industrial, commercial and non-commercial professions; (2) salaries, ,.-rages and IJensions; (3) income from investnents other than real prOl)erty. On the first t"l:TO, the tax is progressive, on the third it is }!rol}Ortional. According to the data received from the Lebanese Government, the rate is highest on profits of commerce and industry, "I.-There it reaches 1.5 I)er cent for incomes above 11 50, 000 per year; on profits of non-commercial l')rofessions. it reaches 12 per cent for - 44 - the same income class; on salaries, '·le.ges, a~d pensions, the highest rate is 8 per cent for incomes above ~L 24,000,_ The rate for·incomes in group (3) is 7 per cent _ It "lould seem that rates applyil1g to all categories of income COUld. be raised considerably those on groups (1) 8,nd (2) at least in the higher brac- kets. 'rhe argument is often heard that it i:rill take some time to. accustom the public to this ne':T ta."{ation of income, but there is no doubt that a more efficient administration of t:'le tax ':rould substantially increase its yielcl. It is i.-JOrth mentioning that "1hile all the components of the cost of living index in Eeirut bet':1een 1939 and 1948 she':! from t"10 to. seven fold increases,. expenditure on direct taxes has actually dropped by 25 per cent during this period. 126. Income from land not included in the nei,! income ta"{, is still taxed :!?rimit,ively by an old agricul.tura~ land tax,. ':r11ich yields only about #1 0.6 mil- lion per year. It is intended to replace this tax by 9- ne\1T land tax ,·,hich should yield about *,L 5 million annually. An aj')propriate project ':las prepared a.nd sent to Parliament in 1945, but no legislative act ion baa been ta.ken -~ "Thich !!1ay to a certain extent reflect the influence of lando~'Tners on the affairs of the state. By ta."{ing uncu.ltivc.ted arable la1'lcl at a h~gher rate than the cul- I tivc: ted area, the propo.sed 1m'! "Joulcl have the ac:ditionp.1 l)eneficial effect of encouraging increased nroctuction. Existing taxF,t ion of inherited "real th is completely insignificant. 127 ~ Tax: evasion seems fairly general ane;' tBJ~es ve.rious forms. Some observers believe that only the fe.·r existing corporations I ':!ith rroper accounts and audits, '!lay the full amounts due. The ",ar excess profit tro:, imposed in 1944. ",as settled. in 2.;Teel'lent l:lith the Goverl11nent. by o. comparatiyely small voluntary payoent made by the ::eirut iIerchants ASDocietion. - 45 - Public Debt 128. Strictly speaking t the Lebanon has no public debt lrhich '.Jould involve payment of interest and amortization. The Government o\-,es some bL 34 million to the :Ba.nque de Syrie et du Liban as the equivalent of the loss incurred from the devaluation of the French Franc in the part of the monetary cover not guaranteed Q,j7' the French Government and :±,L 20 million to the French Gov·3rnmei.tt for some French property purchased b:r the Lebanon, the latter amount to be paid in five annual installments, beginning in 1949- I - 46 - Total Trade and Bal~nce of Tr~de i 129. The Lebanon and Syria form one CODmon customs cxea. On their fron- tiers no data are collected ".lhich '.Joule. indicate for :'lhic11 of t~le ti,.tO . . . .tries cOlli imports are destined or in trhich exported goods originate. Persons and goods cross the frontier between the Lebanon and Syria freely, and no data are avail- able on this traffic. The only knoNn trade data for the Lebanon are. t!lerefore. the common trede statistics of both countries, puolished by their Council of I Common Interests. The follouing figures sho1.·[ the total value of imports and exports of Syria and the Lebanon before and after the '\'Jar: Igmorts 3:roorts 37.ports us Per Cent (In ;:illion 11) of Imports 1939 75·5 36.5 48 1945 130.6 43·8 33 1946 266.7 85·6 32 1947 362.8 8J.6 23 Of l·rhich first 3 quarters (264·3) (56.6) (21) First 3 quarters of 1948 (329.9) (43·6) (13) I 130. In order to a.chieve a closer approach to reality. tFo corrections are necessary '.Jith reg2rd to qjrrian-Lr:oD.nese trade fi..:;ures: izn:;ort figures must he some'lhat increased, say by ebout 25 per cent, to alloH for smuggling '.Ihich takes place particularly via Tr~nsjordan; export figures nust be incrc2~ed to incluC:e clandestine e:q:'orts of gold, .rhich are sometimes estima.ted at a"'.;out bL 25 million per year. 131. Opinions vEry rridely r!.S to the nr01-'ortion of imports T.rhich ~,re des- tined for. and ultimately renain in, the Leoanon. Considering t:~e hi;her stan ... dard of consurr"tion in the Leb~non than in !7;rria, and the hibher v~lues of goods i.rn]!orted into that country (more Itl:-':'..lries), it can l-'e assumed, uith a certain - 47 - measure of probability. thut, in Sl)i te of the smaller }1onulation, at least one- half of the i~orts go to the Leb~non. ~:ith re~ ~i.rd to e.:-:}1orts, estio£'.tes collected from Syrian and from LebDnese sources "'erlJ similar and t>eir conclusion t'lut not more than one-fifth of the common cXT'orts originate in the Lebanon ':ras confirmed by a recent enquiry cerried out ~.y the Lebcmese '.i-overnment. This pro~'ort ion cloes not apply tho' rever. to gold exPorts, 'Ihere the Lebanon probably !1redomin~.tes. Internal trade beb'Teen the Lebanon anu 3yria is (1 isregarded for the ::loment t in order not to cOIIll1licate the :"':icture unduly. For the SEme reason, no corrections are made for a possible under I val~n.tion of imports resulting from the practice of authorities to record values at official ezchange rates. lJ2. If all the above factors are considered, trade data for the Lebanon ["=.,lo'.1e, in 1947, "!oulcl be as fol1o~.rs: Imports Exports ::J:~'port s as Per Gent (In ~rillion bL) of Imports 363 t 90 (smuggling) = 226 84 f 18 (gold) 35 1.5 2 5 , It cannot be emphasized strongly enough that the above culculations are no ~0re than estimftes based on eGti~[tes. c1e;:.r: Yet, the general trend is unmistckaoly in 1'?47 LebClnese im"!.10rts e:::ceeded. e:~orts by ,-'bout si:: or seven times and in 1948 the difference must he-ve increased further. r"hile {] deficit in e.:;:ternal connnerce is in lcee!,ing "ith the general nature of tile country's economy, '1hich e:;}phasizes trade and. services rutiler than production, e11d has been in evidence b( fore t!le ·..rar, it h~.d never before a~~lieved SUC~l climensions. In fact, l1rel:rar imports never e:~ceeded 8:;:nortc by !llOre than t"fO to three times. 133. Because of the substantial "artime 'Price increasec, the gro'rth in the value of imports ,~.,as not accornrnnied by a similar increase in volume. If imports of crude oil thro:lgh existing pil")elines are added to imports of the t~.!O - 48 - countries sh01:Tn in the statistics of the "Co::rrnon Interest ll , it ~:ri1l be se~l1 the.t the total tonnage imported in 1947 r?~:)resents only 125 r er cent of the tonnage imported in 1939. This, as tras saia above, is lC:~:'~'ely due to the hi[;ller ~:)rices of imported merchandise, to the increc ~ed proportion of llL--:tl.r? article!}. mid. to the heavy lJurchases of gold coin and bullion cince the . 'ax. 134. As both countries '.·r~re cut off from their !10r::lal su.~!,l~"'ine :.:' r:.:ets during t'le t'/ar, a certe.in increase of inports -.!a.c required in the posturr 'Je!'iocl to replenish depletet stocks. Appr.ref1tly, ho' 'ever , since t}"le 'l,'/;Jr o:lly a CO~1[.ra- tivelj~ s~all nroportion of im~orts ',rae such as to increase t~;.e procluctive ca:"'iacity I of the t,·,o countries. . .uch of the accumu1:tec1 1')urc:1!l.sing pm:er -'as co~"ur.'Gd in the aCCluisition of llrmries "'hich are of no lonG-term benefit to the t~ro coun- tries. "'~1is is the more regrett[l- 1e since. as vill be e~la.ined in tlv? ~cct ion \'Thich folloNs, at t''lir :9res~l1t r[;te iITi!1orts cmmot be paicl for out of current receil"lts froJl e:=!lorts, services, Cln( in~Jisr.le!:. hile 0.11 t::i~ 3.1'"'})lier to both countries linl:ec1 by t 11e cur.tons union, it [':~i}eDXS t9 r~)~ly to [ill even larger e:-:-- tent to the Leb['nol: t~.1.an to yria. 135· ~~':e Leb~nese ·-;'overnment l1C.S aI' 'a:-s :~'rrntetl i:nrort licenses fc,irly I I ibera11y. ]1" rt icu1ar 1:: so. as for s Orne t irne nO\1 such 1 i cense s have no t invo1'Ted simultc:neous foreign e:-:change alloc~,tions. Since the recognition of the free mar "et in foreign exchange, in ."ovember 194~J, the procurer.lent of foreign exc':.::nge has been left completel~~ to the i111}1orters, a T'ractice l:rhich hDd been observecl for some time even before that <.l.:te. ~here is a n'-'.turc::l reluctance to introduce im- port restrictions in a country lrhicl: c::.epends so hi['hljr on income from :oreign trade and ','here it rna:,' be not too eas:" to carr~" out a strict cepn.ration of im- ]lorts for local consUDption and imports 'Thich G;',re eventually ree:q:orte(~, though sonetimes after a considerable ti:ne lag and not aluays through normal channels. -49- lJ6. It 1.• ras tIlerefore onl~r in ny 1949, Dt a. moment '·:hen some Lebanese industric.l establishnents 'l~re 'teing clo:",.ed l.Jhile imrorters :ouncl it increasi:lgly difficult to sell their large stoc~'s of imported COtll1ottities, t':at imr;orts of ~o~c foods "rere made denendent on Government permission, a stC':"'l '[hich pro'bably nt's also me:ant to satisfy some of S;~rrial s ~rotectionist (emancls. :::e list of limited imports includ.es cement, read:'" mOode ant:. seconcl hantl clothing, c.~lcohol, mDtches, biscuits, s'Jeets, beer, etc., all articles :nroC:uced in the country, but sur"risingly also some locally unfwailC'.ble cotton yarn and. o.!ea.ying macilinery. IJ7. -::::ports for both countries in 1947 represent less than one-half and , in 1948 only somethinG li::e one-quartE'r of the 701ume of 1939 e;<:ports and only about t,:rice their nominal vQ.lue. The reaSO;lS for t:le J.ecrease of e:':I~orts from the Lebunoll 1"'1;)."'1e alrec:.cl.y beea o..ealt "!ith in the s"ctions of this '~aJ?er describing preEent high costs of r>roc:.uction in t:1'.'.t countr~". ~raG.e by ?rincinal Conmocli ties 138. 1'1:e chief exports of the Lebenon and S~rria are the rrot:ucts of the soil. In t'''6 Lebflnon, fruit an~. veg-ete-Jles, sOme olive oil illlU foodstuffs ~.'hich ~"lave undergone simple ':)rocescing nncl. tob[ ceo, form t1"'!e :Jul1: of tl-:ese 'J.le::tiles I VTe t~le largest e:~orts of mnnufactil.red goods, 'rith chemicC'~ products, mainl:,' soar> enG.. Ilir-t c::es, f0110'·/in::=. !'ides anc":. tanned leather continue to be fairly important e~ort articles, ,.,hereas e:c:r.orts of shoes have C:~ecreD.se(1. ~Prac'>;.e stat- istics for both countries sho'.[ thClt, in seneral, pro ..:ucts of the soil re}!resent over one-half of total eX!)orts anCl te-:tiles o.00Ut one-!:!.uerter. 139. :?eing 1"'rimcrilj.r L"lgriculturnl countries l':ith limited industrial resources, the Lebtn0n enG. 0;'fria i!.1po:!:'t the brea.ter ::~rt of their require:nents in mcnufacture(;. t ..rt icles. r:ncertain climb.t ic conc.ii tiol1s, cor.ibineC: tfi th bacb..rard foodprocessilgmethods, also result in irrrr'orts of a consitlera:~ 1e qu~nti ty of - 50 - foodstuffs and other agricultural prouucts. Fuels must also be imported. The main imports for both countries are, invariably. te:-:tiles I re~1resenting ulj to 30 per cent of the total. Ee£ore the \'/ar, the second largest items Fere metals, iron and steel':/Ork. In 1946 and 1947, hOl!ever, and rresumably £:.lso in 19 L 8, im::orts of gole;' coins and bullion held second plr.ce, representing, in 19L~6, tHent:y', ~nd in 1947, fifteen per cent of total imports. Imports of machinery unc tec~~ic~l equipment of all l:ino.s J on the other hand, fell from 10 per cent in 1~139 to 7 ner cent in 1947, '1hile imrorts of chemical ~roducts. including fertilizers, remnined at t:'eir r.re1:TaT level of 5 per cent. Princiual SU1)u1iers and ~·;arl:ets 140. :£Ihe ctirection of Leb.:nese foreign trade has unc.lergone SOI:Ie definite changes after tIle \'far. in particular 1'1i th regf'rd to imports. ::Sefore tl'!e U8.r I the ,origin of imports both to the Lebanon, 211(l to Syria, "as ("!.eternined lcrgely by t1'lO factors: the connections of the t-.TO countries uith France anc~ the need for P.1anu- fuctured articles and in pprticulcr for te:::tilcs. At t;1C'.t ti:·r-~ . ..:rance uas the chief sUI'1flyinf: mc:r~:et. '.lith Great .. rit[.in and Jc:pan as close second and third, I the lat ter sup~lying the largest sUI'plier, I.·rith chieflj- cotton piece !SOOt:c. :'~ree.t ~)ri tain _lit er the qar I the L. S. oecf me ho1( in:- it S second place, cncl FrC:.nce dropping to third. 141. :::~-tport m.arl:ets proved more sta:~1e. Falestine held first pIece, almoc;t '.'Ii thout interru::~tion; Irnnce canle seconc J t:le ~. S., Ite.1;y-, ~n~ Ira.:: follo'l:J8C as the ne7.:t most important buyers of ;';;.rrinn and Lebcl1ese gooCis. Trade oetl'reen t!lose t- 10 countries end t!1e rest of the ::ic1<1.le :Jast f1 :mrished during the UDI, '.,/hen overseas tre!lsport 'fas reduced, but has droplJed again e. .fter the par. 1his trend, freq:aently deplored. by Arab sources for rlO1i ticel reasons, is nevcrt!1eless nEttural, as most countries of that area ~l~·ve Dgricu}.ture.l surn111ses Dnd fe',r, if any, induf.tri8l goods t~ offer. - 51 - 142. The ,!,rel1onderance of the United f:tates as a source of imports is undisputed, but recentl;y 'estern ~:uror)ean countries, including Ital~r, hC'.ve been !wrtly re1)lacine;; the l'. S t:'.s su~}!")liers of ceni t c,l goods. ::'otC),l 1947 im}lort s from the :":-.S. for t 11e entire area of the customs union "Jere 66,000 tons Yc:'..lued -- .at the rate of bL 2.20 to the $ -- at 1L 97 million; an e,lmost 100 ]""Ier cent increase over 1946 iIJ:iorts from the J.S. ..::"utomobiles and s:9~re :nr.rts \·;ere hea.di!1~;: the list in both years, (over bL 17 million in 1947) '.!ith cotton goOt:s, :'1achinery, clothing articles, and gold follo'.ring. .L closer anclysis sho~·rs that only ;;')out 20 l)er cent of these imports re-"Iresented industr 1.al (15:) or agricul- I tural (5~) equi:rJment. Among 8-:-.1orts, the Inrgest iteos are tobacco -- of the II Abou Itil1~." or Lt'takia "oleno., l)opular nmO:1g .American ~;iT"'e-smo!:r.:!rs -- coarse '''001 and liCluorice. Contrary to Ll!1ports, e:::'1orts to the 7_T.S. have declined b~r almost t'lo-thirds bet!1cen 19L~6 and 1947 anG. represenied in the lutter year, only neven per cent of imports. 14.3. Trade pith France h[lG mode a gooel recover;' since the '.'Tar. J:otal imnorts for S:~ria and the Leb8non uere I:L 18 million in 194,6, bL 40 million in 1947, end have }1rc£umably increD.sect CI):j.f it~erably in 1948. :!he ma.in items in 19/.}7 lle!~e te~-tiles (amounting to over or..e-tl'irc"'. of total imports), m':!t~.ls, I :-.o.c1linory [tnc: [1utor;}f)hiles. In 194d the lergent i!'li'Ort items seer:! to heve been '31ectric:,,1 eCluinment [,11e1 r.1etal t.:0068. j"::ports of ;L 17 milJ.ion in 1946 '.Jere f,'1irly 'Tell brl~ need Hi th imT)orts, but droT):l)e('L to about bL 5 million in 1947. The (~ecrease wae ")~rticularly rr~9t in fruit, fruit ~'')reserves, olive oil, Bnd ve,getoJJles I all {Irticles nrimDrily ~)roduced. in the Leb['I!on rather than in :;yria. !-ic:es anci. liquorice exr,orts incrAace,-~ sl i.c:;1:ltl::T in 1947 en(!" (lried vegetables in 1948. .:hile t!1e prorortion of e;:7)ortr. to i~-;ortE in t:lf\ tl"ade 1rith :'rance during 1948 P"?llcars to hC'Ne rern.ained roughl~" at the 1947 ro,t io of 1: 8, the Db solute value of trade 'lith :irt~nce has further incre·!lsed. '~:~1is must be, c't leart partly, - 52 - a.ttributed to the ~ayment facilities in ~'rench Fr~~~cs re:.)resented by the avail- ability of I1(Jle: i:.ccount .. (. In [l"nd, ,?of,sibl~;, also to the not Ul1i'['.vor&.1Jle ~.)uying rate of t!1e :Yrench :Franc, underl~,-in .. these trnnnactions. 1L~LL Trac':.e '·rit 11 the TInited ::inr.d.om is ['lr.1o~t completely lii:liteCi. t:) i:.!- !:>ort s, ','hich e::ceeded exrort s 22 fo1(1 i~l 19L~6, and .54 fold in 19 L1 7. -:he ::.12"in iIIl])ort s in the let tel' yef'r . .·Tere fJachinery, co1cl., iron, met::.l ,'.:OOL:r., [~(~ tc::t iles . A.:;~:L·'1, conctlJ"!1er gOO{E f'.nd golc1. y.>reclor.lincte, representing over three-fo:~,rths of the total. -;:.:,:!,orts, in 194'7, included. small quant itios of tobacco t hides, c-nc1 olive oil, .?:ld (ecreasecl for cll t~1.ese it0IDS, as cO!Il]'."'rcc1 t.rith 1946. I lLl.5. PalestinG reDresented for several Y"!2.rs the l[l,:!:'ge~t mcr!-;:et for Leba'!1ese e-"ort £ of fruit s anr.1 ycgctobles (ir.clut~in:: notc::.toes, . rhich C.r0 h::-rily gro"Tn in Palestine, and eJre a treditional food among Je 1 '!s of hUrO~)erul origin) and axtificial silk pro(~uctr, as uell as for S:;:rian cereals anci. fresh eggs. In 1947 exports totalled bL JO million, a considerable increase over 19 L:6 (bL 17 million), and remar'-able, in ~rie\'J of t~e increasing i:.rah-L~ionist tension Clnd economic boycott. Imports from .rnlc-stine rer.1ainecl on the S0me level of a~out :f,L 8 :million in both ~rt;c.rs, flnr.'1. con~isted largely of oil r·ro0.ucts fro~ t:~e ;':e1fa I refinery and of oranges. 146. Ira]: is an important source of (tf'tes and im!)orte(l cattle e.nG. buys, in turn, te::tiles and soap -- the latter largely from the Lebnnon. Tracie betneen Irak and the customs union '.las roughly balDnced in 19l.J.6, -:i th Syrini"!-Lebanese imports at ~L 16 million, ena exnorts at :bL 12 million; in 19l~7. e:-:ports 'rere :f,L 18 million, cn(l e:-ceeded imports, valued at bL 8 million. ::rade r~ith Iran 'Tas very one-sideel, f'ntl consistect lr'rgely of imr"'rts of ruGS (over ~L 2 million). 14'7. :-0 (le.ta ~Ie availcble on trade nit"1in t~'le customs union area, i.e .• bett!een S:rria and the Lebonon. It is 1:Jl0,·rn, ho"cver, t';.C't t!1is trade has Dl'~a~rs been some·'.1hD.t one-sided, Dnd conDisted lcrge>ly of sales t)f ~~Tio.n c.gricultural - 53 - products in the Lebanon; exchange of industrial goods betNeen the h'lO ,countries '.las roughly balanced. A cOID:pt:.rison of estim£'.tes for the years 1939 and 1946 S:lO'.!S that tbe Lebanon \·ras consuming more cereals from Syria than before. uhich cal'1 be partly explained by the increas~d !Jopulation. Lebanese purchases of other Syrian foodstuffs, such as butter. cheese, etc., as uell as of c[l.ttle, increased Dlso an(. are balGlJlced onl~.T to D. small e::tent b~r :~;:r;.Dn buying of Le'b'nese fruits an(~ veGetables. Trans it, :3ntrepot and Gold ~rE.de 148. BecQuse of the 10~1t;-}?roven skill of LeD e nese merchants, their ':lorld- 11ide co:cnections, EmL. t:le considerable freedom of action existinG in a country ':There restrictions to business enter~~rise Dre neither numerous nor respected, :-eirut has for years been an importnnt center of transit trade for the vhole .:1.rabian 7eninsula ane for a fD.irly '·riele E'rea beyonli. Althoufh the gro'l;rth of nationalistic tendencies Dnd commercial eZ11erience in adjacent countries create rivals for £eirutian midcller.1en, the latter continue to .... lay a considerable role, pc-rticularly ~Ji th reg['.rd to t:!."ansactions in sold -- i!llportet~ openly, exported secretl~r -- cnd ft)reign e~ch2n~e, not to sl1eal~ of such ot 11er items as hashish, I '.lhich is exported illegall:t» mainly to -~.;;y:1t. InG.ivic.~ual profits from trensuc- tions of thi£ t~;'1)e are certain to ~:e cOl1siderroceeds of their exports Pond dis,osed of them in the free m~rket. Such proceeds f,-/ere eas:r to sell since i:nport licenses '-lere issued freely to i::npo~·ters ' ';:0 did not requcnt :'In oi'ficinl allocation of foreit:n exch.t:ni:e. Under sl:.ch circu:::stc~nces tl.C ~Z'ou..Ylt of forei~ln ex- ch£l.nge . '~~ich becar1e avn ilable to the :;):cLc1n~.;e Office · 'as limited indee'l • • 164. Ite .)orts of the :xch~n,'e Cf;ice, in {act, sho', th.! t of dollars f't the din")ocal 0';: th:: t of.·:'ice hat- 'een mid-19L!6 ['::~ CI~d. of A)ril 1948 nt no time re:'c:~ed the ~ million r.1r'rz>::; :-at the 1t'ltter il'''tc it :"!10 :"~ount "/2.5 only :-to'l.lt ~67tO(}O. During the same perio ~ t!1E' :;terlint ~C,;O"JDt reached its ,.lea::: on July 31, 194 7, ';li th ; 1,413,839, < ile the correG~on;l­ inr fi;llrl3 foj," April 30, 194B was b 340,621. !·~old.in;:n of P:"lestinian, F~yptian, Ir:'lkipn. ,'1nd other foreign c'l.lrr'encies \';erc ncgli,o;ihlp tllrou[~hout. T~1C only relif.:1.bll? Gource of dollqrs '.'0 S the Tl1P line ':~~~C!: ·~tJril1." thr:' last t\'/O ye~rs sT)ent Gom~th'ln~: like $2 ~illion in tho ~~::J;)'i:on. ':·i t~. rccnrd to sterlin;:, of "hich the Go . . . ernr.1ent e::~/ected. to .:cce1-;e over ±, 3 million in 1948, the most reliable sources "ere I.P.C. trr;::inery Dn~l ;:Ji.:~\linp teninA.l in Tripoli), and Uni ted I~int;dom Lege.tion ex;;endi turr:s. - 62- 165. As the existint ; system comp:!.etely failed to \lork, it is harclly surprising that the Lebanese Government introduced in l:ovember 1948 ne\·, foreign exchant;;e regul':tions. Accordinf:; to the ne\'! rules. only 10 21er cent of the foreign exch2nge enterinr the country must be sold to the :Sxc:l:-;.ni;e Of:ice; the res t C8,n be disposed of freel:."'. Proceeds fror:; Gj:ports ;;IUS t 1~e returned to the country, ei ther in the ::or:n of foreign excha.nge or in the form of ir.r.)orts ::l ~ro7ed "(I:; thA Govern~ent. Cor...'!lerciC'l companies \·.'orkin· under contract t'!iti! the state must sell 80 per cent of their for- ei~ exch.:1nge receipts to the Excnt'nge Office, an ol)l:G;ltion ~'Jhich may be • revised nfter tree mO!lths t:lrouf;~1 the conclu~ion O:-;era tions 1,}i th regard to ltren')h ;},CC01L'1ts cr-nti!lue t'J of vious exchnn;-e rer:ul:· tions, bl.:t the l'lu;,ri!1D ana. sel:'in{; of foreiGn currency s~)ecific be"o"!er~ed t:'creements. b;{ pre- of all kinds (banlmotes and coins) I includin~ ~'rench francs t is absolutely free wnd su""ject to no control. 166. ':Lila net'! rer;u,l,"ltion3 constitute an officinl recognition of 'the already predomin::nt free mgr!:et p:n't must be rer;'lrded ac ~ formal introduc- t ion of multiple exc>fJ.n?:e ~ractices. The ne"! Let;[l:tefv:: s~ts teo is very • similar to the only diffeTI3:'ce, re&ll~tions cO:l1si~ting introduced by Syria of the prorortion of foreign p surrendered (10 instead of 20 'r}er cent) t disa:.)peared almost immediLtely as few months e~rlier. excl:~n!;e to be The Syria adjusted its requirements after the Lebanese motlel; \tri th no custOf.lS frontier l)etltfean them the t,·!O co~mtries simply c~"'lnot pretend to l~[:islate independently from each other. As f'I result of the ne~·, lat-' ::lost free rn~~.rket foreic~n exchan,c;e ouerr! tions ':err: tr·'"!nsferrerl from tl.:p ::~ 11': s of unlawful m03t relia,ele nourCes of fornie:r.. e::chrn::e.. I t may, in f:lC t, be A.s~:ed, \1hether tIle m,pintenancc of the f~.!ll S~:~t;ls quo \'/i th rcg!'!rd to these - .63- companies \'Iould not have b-:;en more prudent t ;11 thour;h it t·!ould probably have met \·ri th protests and mif,ht hB.ve contributed to discouraf;e some po- tential investors. Availabili ties 167. The economic effects of the ne\1 foreign exchange sys te'jr., i'lS far as can be j-l1dged after six months of its dur? t ion, \'Jere fD.vornts I '9ros .,eri ty nnl"i the purchasing 11m- Ter of the popul~til)n is therefore offiflll. - 6'4- 169. Freed from the encTh--:brG'.nces and risks of illega.l operation, the foreiGn mBrket of 5eirut so far he s sho~ln no signs of nervousness. '::hich is proved particulc,r:i.y b: r the steadily improving position of the Lebanese pound.; (tL3.70 to the dollar in Octo1Jer, 1948; ll3.20 in ~.'!ay, 1949). ~l:is development can be regardeQ as spontaneous in so far ~s there was no icter- vention on the part of the Government or ~ote Baa~, but it ~ust h~ve been considerably facilitated, if not caused ,rimarily. by the general scarcity of money resultill(, from the decrease in circu10tion • • effect in 170. '2here is no increasin~ the officiel rn te. ir..;i.i~~tion the f(J!"c:i{c:n :ven ti.:e s~all that the ne1:: eAch~:1~'e prewium on reg1).l~tions h~.ve aVE'.il:2.n::'e to the Government at t~le ten !1erce:~t had any of foreign exchange recei?ts SGems to ee p suf:icient inJ~c~ment ;or evasion. The eif;hty ,ercent surrendered b;,:- forei~"n co:,:,!)C'nie:: cOl1ti:lues to be the only It.r£er, reliable source of forei ~n C:J.ri." t?nc;y" earnint of the Government. 171. T!:e Gu]yr:;ly 0: (iollr'rs, llo':.;ever, '.rhiC:l u:ltil no'.. hiLS been :par- ticularl:,r smn.ll, . 'ill i;-WreaGE dae to t!:e reo."'C'l1J.n. thB T;',.p line activ- • 0 ... the Cl{;rep::Je.: t 't:,T Syr:':: l • .:;'~cor~: in,,: to infol'tlf:1 tio!l received :ro::1 t!la t Company t:l~ir total direct n-rJ..l intlirect ;}e~"ments in the Le~i.n.nor: '!ill amo1LYlt to about ;;4 million durinC the cr.>n3tructior: ~erio: ul' ~~o the end of 1950, ~·!h}.le annual )r"yments ~.ur ir..': the follo"in/;,: o:~GrGtin.;: ~er!.or1~re e~5t,J.!?1r ted at in turn st~oul ~ be reflec tFd in (cl. rlro, of the l:read ",rico. In race!: t ~~oars ap)ro.ximately fifty ,ercent of the "'he~t imports h~d to 0e paid in hard - 65 - currency, "Jhich represented an annual e:qJendi ture of roughly $~·.5 millicn. 172. The sterling position has al\'Jays been some,..!11:~.t easier ani the Government is l::no\tffi to have sold. sterlin~ in the free marl~et at one t.ime, in order to obtain dollars. It is estimated tllat the Government receiv~s annually about ~ J million at the of;icial exch,n~e rate. This a~ount should increase "'hen the second I .P.C. pipeline to Tri~)oli \'iill come u."Ylder o~eration. As in the case of dollors, the official sterlinF, recei~ts are not sufficient to cover imports from the sterling area, but the gap be- t"Jeen the funds which are availa.ble and those ,·{hich are needed is smaller in the case of sterling. 173. Contrary to the previously discussed currencies, French fro.ncs seem to be available to the government in larger ~uantities. This is ex- plained by the present drowincs from "Old Account :"0. I" but the volume of financial transactions '-i th ~11":).nce anfl the num~er of :i!'rench concessic.n- ary com,8nies in the Lebanon, if not;ling else, \·,ill probably prevent French • francs from becoming scarce in this country. For the time being ~~rench francs are easily obt;:;tinable in the free market '·Ii thout ,reTIlium pnd even 1'lithout bank commission. 174. To su..tn up tilis short revie''] of offici~~l sources of lorci,:-:l:. ex- chan~:e, it can be said th:'t in the most favorable cirC1.U!1stances the f~:OV­ ernment could use its cheaply obtained currencies in order to finRnce some of the most essential im,orts, Ilreferably t::o~e e.ffectin~·; most directly the cost of livinG_ There are no prospects of rene"ed forei~~n exchange allocations for imports on a lc:.rger scale. It is also dif'ficul t to see ho\" the e;overnment could service Any s':.lbstanti::}l lOClns from its officiDl foreien exch8nge revenue. There is no doubt, hmlever, th?t the Government - 66- could purchase considerF..ble Dmounts of forei,:n exch:--nr:8, particu.l['.rly dollars and sterling in the ~'eirut me.rket for Lebanese YJoUIl(ls. 175. Accordin r : to the testi!"!1ony o:t the ?resident 01 the :',al1\~ue de Syrie et de Liban, fully confir~ed by informption from other sources, t~e volume of daily transactions on the 3eirut forcibn e:=:chanf~e mar~:ot is lar{;e. From mid-~;ovember, 1948 to mi(l-~';'pril, 1949, for ins te.nce, ~21. 8 million and 13.9 million ':Tere sold on tl1e free marl:et. ~'!hile it miGht, therefore, not even be necessary to stae:,·:er purchf'~ses over c lon~~er 'Ieriod • of time in order to avoicl affec tin:; the exclv·nge rate, some pl.?'nnin be necessary es aVcilabilities - even if lL1rge in certain Jc:riods - JJay underGo frequent ':n( rn-:;ic1 vcri .... tions in kec")in t.!itl:. the senJitive ttud ould s)ecul~tive character of thin market • • - 67 - Outlook 176. ~here are t1.'ro scho::>ls of thoue;ht ~!ith r8;~crd to the country's future econo!I1ic policy. One recommends fuller, bolder, ~nd more cOT'!.sistent liberalism; the other leans tetrard tlle reinforcement of S01:18 of the existing cantrols and the introduction of ne1.'T ones. 'Ihe liberalists believe that, in the existing customs union ':ith "yria, the Lebanon is the loser. The protectionist pressure, \'!hich has beer, xerted b:r the ~:yrian partner until no~·!, E'::1d threatens to lead to even more seri0us • restrict ions under the ne,'! agrec:'1E'nt nm'! being negot i£"t ed bet':'een the t~·TO countries, is held resDo:'si"ble ::or the hish :Drice level and is said to have elim::'nated, or t~ t~1reDtei1 to elimin&..te, ~an~r iw;:orts ,.Thich c.re essential for the Lebanon's -position as a conr;~prcial and t01~lrist center. M:,'" restrictions on trade , it is se.id, u.,dermine :'he ~ooi :'ion of t1:e Leb£.r.on, ~!llich con only me.intain its higher stcnc1.crd of li>Ting cy incretlsing itG 1'ale as a s1111plier of services rc.ther t1'!an £:::oo~-:s, us C) fir..ancial m:fl. cowr'.e:"c:i.al center for a tion of ~~:rial1 end l.eb::nese forfJi s:"! t:":-'I::'e, ')r ~ua:nt::'t:,tive restr':'ctiol1G to • "Ii t:1. t:1P. aid of it s limi :;~::G. 177- ~:le currcnc~- :~€.so;:rces. Ct.sc ::'or iI!CreeGGc-;' controls or IlJ:!.rlgiz:ne ll could rrol.a.l;ly be sum.rnarized as follo',;s: In fact, even thO~A~gh not accordir:g to the letter 0:: the Im~T, tile Lebanon is £:.n islc..v:cl of free tr~ cl.e CJIlong l~rbelj~ !~rotcctio!!ist surroundinGs; nevertheless the econom::'c ni t-:J.2.tion of the CQUl1:;r;;- C::eteriorctcs. A li1:0I'al granting of imnort licenses ::as TI(':ther ::"o",:-rred ")rices nor has it substc:nt :'all~- incrcp-sed ,,:rot~uct ::'-';-8 c .. · L~ i.t;-, t::8 Gelect :"on of GOoc"'..s ::or import being cletermined l)~-the hi·. ·:.est r,r te I"lf I~ro:it for t!le ir.;:orter. Abolition of te.riffs would ruin Lec:nPG6 ind.ur3tr~... [nd c;~ricu!.t;.~re in :'heir ;"'resent conc:.ition .. - 68 - As many Syrian goods are exported through Lebanese ports, restrictions on move- nents of goods betT'Jeen the t'.'lO countries ~Tould require Cl.uantitr..:.tive controls on all goods exported from one countr;)T to the other in ol'der to determine "That can be left for local consum~ition, and \'.rhat can be ex::>orteG., a proceCiure vhicl1., from the [~dministrative point of vie"r, may not be much simp}_er than the estab- lisl'uJent of a customs frontier betueen the t'.;o countries, a steT- l:hich, every- body agrees, is impracticable. 179· It seems that, of tl1ese b.-TO vie".":s as to the best econo:;lic rolic:r for t:'le future, tl:e second 'I.'rill prevail under the ::;rensure of the deteriorating • foreign e:cch2.nGe :,:osition, anl~ t~:e I:101itical necessity ~f cooperating l.'Tith Syria. of ~eirut. ~rovision must be .r.l['(~e, fin·rever, to sD.feQ.lC'rcl t!1e cOr.l:.1":rci21 pOf.ition ':..'he Le':enese ;}o"rernmerrt r0nlized t:1c.t for several ~~ears a ?lcrt of the cour..try's :iopulc:.tion lived end t~:rivecl on evt:sion of existing rectrictions, \'Thich i!2S uncloubtedly one of t~le d.8e,e1' 1'8[,30n8 uel"!.ind 1,1:e ~overl1nt}nt' s Ul1- ·"illingness to enf0rce t::em Dn(~ n.:',:" ht).ve contric-at'2G. to the ne' r, ~ore liberal, e::ci1Dnge regulations. it l.TUji out miG~1t be offered b~" the furt:ler 6_e i Telop!:lent of D. free truG.inb zonE"' ['.!'aun( t:le port of 7· Birut cO.P.l0inect ·:.ri th a me[\sure of • SO;:1e'~:~~t c071flictir.r; ir..tE"rents (if :.ciru.t me:;:·c·-,::r..ts onc'. t1:'e 1'e;:;t of t:'8 countr~:-. STATISTICAL _:'..PP~i:DIX LIST OF TABLES Table Humber Title I Population of the Leoanon II Estimated Agricultural Production of the Leoanon III LClnc~ O\·mership in the Lebanon IV The Lebanon: Livestocl: ancl iu"'1iI!1al Products V Irrigation Projects in. the Lebanon VI The Lebanon's Chief Industries • VII VIII Hydroelectric Projects in the Lebanon Balance Sheet of the 3anque e.e S;YTie ct du Liban, Per December 31, 1947 IX ;ionetary Circulation, Dollar Itates, Cost of Living, and :Jholesale Prices in the Lebanon from 1937 to 2nd ()larter of 1948 x Ind.ices of the Cost \)f LivinG at 3ei.rut :~I Revenues, x:penl~i tures anc1 ,3urplus of tlle LeDcnese Goverp~ncnt I 1938 to 192;6 XII Forei;;n Trade of Syri2. Qnu t.he Lebrnol1, Im}10rts, ~~xnorts c:md • 7ransi t 'l,1rac1e AlII Foreign Trc-.cle of S~~ria [I,nd t~le Le'Oanon: EDin Imports ::IV Foreign Trade of Syria C::1.(~. t~le Lebanon: i:ai:a :~x1)crts xr ForeilZn Trade of Syria [lnd the Lebml0n: Principal f,u1')~')licrs X-vI Foreign S!rade of S~rria an.d the Lel)flnol~: Pri:"!ci:pal lIar~,,:ets }:VII '1.ihe Lebanese :.sa.le.nce of Pa;yments ~ :istir.1f'te for 1948 ::.vIII The 1949 Lebtmese -:uuget Table I Populat ion of the Leb~lnon (By religious groups) (End of 1946) Sunnites 244,307 Shiites 217,.520 Druzes 77,023 ilaroni tes 337,734 • Greek Cat:l01ics Greel: Orthodox Protestants 66,542 113,197 10,783 '1. Catholics ::':'Ou13.• ),241 Armenian Catholics 10,410 Armenian Ort:10CoX 61,660 Chaldaeans 1,394 S~rrinn C!atholics • S~rriD.n Ortho~- 0:-: 3,916 Israelites 5,830 Others 6,476 TOTAL 1,165,208 Source: Census :urc2u, Bei~~t. ::ote! ::he total PO])U1L:.tion tJ' ~1~e e!ld of 19118 (not including P&lestil1e rofugees) is given L...t aro"'J.ncL 1,200,000, uhich roughl~T corres}JonC.s to the rete of increase re;.;istered eluring the lc\st ::8r·rs. Table II ~stimat~d Agr1:.su1 tural Production of the Lebanon Production Related to Annual Average Average Annual Consumption Crop CuI ti vated Area Production Deficit Surplus (in~hectares) (in metr;i.c "tons) (in metric tons) • Cereals 104,000 92,000 120,000 Fruits 13,500 140,000 50,000 Vegetables Ie;:' r)OO ./,~ 200,000 65,000 Leguminous 17,000 30,000 26,000 Industrial 45,500 60,000 20,000 Source: Based on data from the L~inistry of Agriculture, Deirut. -- Table III land Ovmers:lip in the Leb&non Number of Area under Porc(:nt~J~e c r ('ot£ Lando1r,mers CultivLtion h.rea 'Ul 't")I' l'-:.:.1 Li ve.i Size of Fa.rms ---_._-------- ---ern hectares) (in L.ectares) From 0.5 to S 84,111 9h,500 35 • From Over 10 5 to 10 ---- 191 171 hr,500 13~,OOO ------- IS )0 TCTAL 8L,47J. 270,000 100 ~.2urce: Based on data .i\"om the i .i1:istry of Ag:r·icultl.ll~e, I~t~irllt. Table IV The Lebanon: Live·~tock and Animal Prod'lcts Livestock I!um1:er of He£lds Sheep 20,000 Goats 45o, coo Camels 2,500 • Oxen Horses and i "ules 120, COO 2,000 12,500 Asses 2), coo Zebus 250 Poultry 1,500,000 Aninlal Prod".lcts Lilk 25,000 hectoli:'ers tt Butter 250 liletric ton.s C11eese 4.' , •c·"'\o .;IV tI It ','fool 50 It " Silk Cocoons Sao II II :;':;~Gs 12,000,000 Source: Linis try of f..rrriculture, Beirut Table VI The Le~anont G Chief Inductries Estinated Output in 1846 .. - - - - ' - -71 -~--~ Loca.tion (Jn~ t ~~..-:: uy TextilfJ s Cotton ('ri!lninc Tripoli qnd ~eir~t Tor:s 1,760 Cotton '.!eavinE Tripoli and Beirut I~~eter s 3,7EO,OOO ~ tOO 1 :.; e a ving Beirut L,eters 100,000 Eayon and [utural Silk .. P,8vir:: B9irut I.:et8rc 760,000 Si l~c t pinning l.:ount Le banoI:'. Kilos 40,000 • ~\r:i ttinE Eeirut Dozen 65,000 Cenent Chekka Tons Tan!lins 1,500 6,800 ---- Soan Foo'l stuffs Chie fly Tri poli Tons {,OOO Janw and ,Pre serve s Beirut Tor.s 2,000 Bi scni ts Beirut TOI1.s lE2 Chocolates Beirut Tons 3CG h.. lc0bo 1 Beirut Tons 1,500 Eeirut Hecion 13o .. :es 24,63E,JOO Quote! f'r0I:1 Table VII Hydroeleotric ProJeots in the Lebanon Capacity of Estimated Estimated Construction Location Proposed Annual Coat of Cost per kw. Plant Production Construction Installed (kw.) (thou. lew.h.) (million ~l (:bL) • Grantee Yammouneh Litani 5,50n ·2,700 50,000 44,000 18,60 n 420,OOq 5.. 0 1.3 900 480 ~- 700 Totals 58,200 482,600 41.3 Source: Ministry of Public Works, Beirut. T:~hle VIII Balance Sheet of t:.e ~anque de SyTie at eu L:;'uan Per uece~ber 31, lu47. ----------,-,,_ .._--"---- -- ..... -~ --- ... A0S!l~TS :::n thousr.r:dc of Fr .F:·~~.l.'1CS bL ---------- _.. _--- Ghareholclers 10,000 ( Bui ldin51 ft:rni ture uno fixture s ~E,f37G ( ro('" \ Securitiee r:.\nd in~;estments 104,523 ( 1, ;"IG,:. j Cash in Banks 8,733,n38 "" J" O.JC (1 b ,.,..c) 5';2,561 n ' r'.: \ Tre,-~3ury bills c.nd bonds ( " ,. Ju I r 4.t1 ,.,.., 1 ) • Loans and acc t.ll:ts receivable 2,488,289 \ -.r,U.L •• Special debit ';.ccQunt 4,G38 ( 83) Loans EUura!:teed by the Ee:::ublic G of Syria 8.:ld 7!JG, J£l ( 14,5'12) Lebr.).;~o:n ot he l' a. sse -t s Q,274 ( 171) Escrow c.ccour~ts 158,:)413 ( 2,~:08; ~ote I~suin~ IL~titute (in '1 ~1otd.'':"'.nd I· r:..l1C s ) "Of' ~'. ~"ril3. .- - o'£,- -;;.;-~:.-L~-orl Gold '.r.: silv8r coin ::.nd bu11i:.n lZ{ J.j~)3 ,",ul,4S4 ) Central Fund o~ the Fra~ch ) Fublic Treasury 2Z~,270 29tJ,·~84.) Central :rlune' o~~ 1']-,lOrSG.'2s FL:-~'Je 2,177,702 1,930,:)31) * ~.Jecuri tio f' :rsueu or ~'u_\ranteed ) by tho? Fr')r:ch St",te on d8:'o~it ) wi til. tr~e ~junk 0 r Fr: nee 7 ,147 , ~~~5 6,135,466) :~~ on-ir~te TIl::.t be', rinr:; &.dv~l'!ce s ) to the I '3public ~ of: ~I:;·rifl. ) ,,,; L·.;18..non 88,G2 P ) s;r:?:-S;1'YS; .ds~ets o:~ J.... he r~'::~0rve J.n( retiromer.t f1.1i.'! of' [f!l' .onne 1 ; ;n:-ia £.L· I.:JtJanon ... _- ...78,;:';51 _---_ .... • ,-,,> ,..,,..,.,) ( \ L I 'o' J (::: J. Table VIII (continued) Balance sheet of the 3anqlle de 3yrie et du Liban Per necr:mber 31, 1947 LIAl3ILITIES Fr. Francs Capital 57,375 ( ~ ~. , ,. '~:. 1'\ • Legal . . {es~rve 5,737 ( '. r' ...t. 't",":; ) Reserve for ~ontingencies 14,:?oo ( 267') Sundry Res~rves 93)039 ( 1,712) RE::serVE; for the redemption of bank notes I 7.J 6 ,.: .... ( 119) • Deposit acccunts l currcr.t 2ccounts nnd various creditors Notes PC1yahlB Dividends Payacle Unearnec intel""st on bills Clnu notes in portfolio 12,227,932 _;)t·,L If.) : .J':. \ 37,107 ,- 725 (224,935) ( 2,3'78) ( ( 13) 1)83) Sundry liabilities S,S;60 ( \ 110) ?scr0w accounts 158,oL6 ( 2,?08) Banknotes in circu13:ti'Jn: SjT~an banknotes: :.5. 179,500,000 ) le,479,OOO (:4:),000) Lebanese boRnknotes: L.L~ 16,,),5of',Q()O ) Profit and loss, cal'rit~r1 for',r8r(~ frorl 19h6 2,772 ( 51) frofj ", of 1947 21,?21 ( 3~i8 ) Heserv p r~n{: retirp!11ent i'une; of personnel fyr~a ~nd Leb2non 78,0;:1 ( ; I. 'J/,) _'t~:"~ Total liavilities 31, 3L4J 762 (r;7(:'·, 721) S0urce: i1anque de ~~yrie (-)t du Libnn. Table IX Monetary Circulation, Dollar Rates, Cost of Living, and Wholesale Prices in , the lebanon from 1937 to 2nd '~uarter of 1948. Year or Currency Demand Dollar Rate(Avg.) Cost of 'lTholesale Quarter in Cir- Deposits (+) Total Free Official Living Pricep (End of Period) cu1ation Index , Index Ifillions of Lebanese Pounds 1937 1.25 - --~ 1938 1.74 1939 28.9 26.0 54.9 1.99 100 2/ 100 5/ 1940 52.7 38.9 91.6 2.19 110 1.1 156 - • 1941 1942 19LJ 1944 1945 1946 60.3 97.2 114;»2 146.2 171.9 145.5 29.0 8).2 165.7 178.5 225.8 208.7 89.3 180.4 280.n 324.8 397.7 354.3 3~3l 1/ 2.19 2.20 2.20 2.20 2.21 2.20 - 319 4/ 470 - 594 4/ 607 - 553 953 1,038 889 309 626 835 1947 163.5 205.3 363.8 3.07 - 2.20 499 797 1 9 4 7 1st Quarter 138.4 211.4 349.9 3.20 2.20 511 825 2nd Quarter 142.9 219.2 36202 2.91 2.20 493 782 3rd Quarter 154.0 216.6 370.6 2.88 2.20 494 782 4th Quarter 163.5 205.3 368.8 3.29 2.20 501 798 1 9 4 8 ~ 1st Quarter 201.0 192.9 393.9 3.49 2.20 502 792 2nd Quarter 189.5 131.9 371.4 3.55 2.20 (.J-) Principal banks including the Bank of Syria nnd the Lebanon. 11 October/December 3,./ June/August 2/ January. l:±/ June c:!n(: December. J../ June. Source: Ministry of Finance, Beirut. Table X Indices of the Cost of Living at Beirut (B~se: January - June 1939 =100) EduC'Rtion" Gen. r[~l It~... I(-'~. .I:eligion Direct of Co,- t ')1' Food Rent Clothing & Bisc. TAxes IJL',l 1., January 1940 114 102 110 116 100 100 JanuarJ 1942 334 133 260 • 178 187 233 December 1942 564 166 459 224 187 365 December 1943 650 208 861 316 233 300 December 1944 699 245 1,102 h24 l1ecember 194) J02 594 685 244 1,119 496 7h 601 December 1946 601 239 837 479 74 514 194 7 Jenuary 582 239 796 477 74 500 February 549 229 784 1173 74 E~arch 483 545 229 7Bh 465 74 480 April 540 229 785 465 74 Hay 479 556 229 742 471 74 477 June 5)4 229 726 471 July 74 466 524 229 728 471 74 h63 August 538 229 719 471 September 74 466 542 229 719 471 74 4.68 October 562 ~ 231 724 L~66 74 475 November 579 231 701 466 December 74 476 565 230 701 470 74 472 194 8 January 576 237 700 L~70 February 74 477 627 240 700 470 7L~ 495 March 629 247 700 470 74 L97 Source: Conseil Superieur des Interets Communs, EleMent.s st(~tistioues des Etats de Syrie et du Liban, Page 51. Premier Trimestr~.r. 1748. .t1.0venues, :'):pcl1oi-;':'ures end 3urplue of tl:'3 leounese Coverru:ent, 2.933 to 1946 Year deVe!1Ue Zxpeno.ltv.re S'.1l'pl 'J.S 1938 6.3 5.7 0.6 1939 7.4 6.3 1.1 1940 2.7 6.1 2.6 • 1941 1942 19L:-3 10.3 16.6 29.1 7.] 12.1 21.6 3.0 4.5 7.5 1944 37.8 27.6 IJ.2 1945 59.1 35.9 23.2 1'-;/46 79.1 51.9 27.2 1947 58.9~~ 58.9 1948 67 .O~~- 67.0 ~~ Budget proposals. Source: =~inistry of Finance, JeiI'ut, for figures from 193f-1943; Conseil Superieur des Interest,s Cor.:U:l1.ll1s. ~le~.lents Statistiql~~. Ho. 22, for remaining figures. Tahle ::11 Foreirn Trade of Sy.::'ia and t:l€ Lebano ..1, Imports, ?,:por~ and Tralisit rfrade (-4uantitieu i . . l Thousands --------- rear of .,Ietric 'lIons ifr..luo in .iJ l":'on,~ o~'\ T .... ~..., Imports :Xports ._----_.-_-- 'i'rallsit L~!l)O:~·t s .~ .:·o_,ts ' r:~_ . . .i. t. 1939 542 326 2,150 76 37 38 1943 428 53 655 110 32 l~" -,0 • 19~ 1945 1946 429 515 370 120 13'; 107 1,436 2,023 1,998 94 131 257 11-6 114 :36 158 1?':~ ,-w lC2 1947 414 148 2,104 363 84 183 1st half 1947 193 84 1,2l,6 177 42 101 1st half 1948 360 ')1' ...)0 1,079 2/1-0 :23 III note: From 1946 on:-rard, im~)orts of crude oil fron Il"ak to the l'ri!'I:"'li refinery were not incluci.ed in00 'Ghe total of importe. In 1945, 2:: 2 thousand tons of cruG.e oil valued at 4.5 r!;i11ion ;1 ::ere included. Source: E1el1:.ents Statistiques des ,Stats de Syrie et d:l Liban. 17o. 23 DetD:ielile ':t'rime stre, 1 SL~9 • Tc::ble ~C!::II Foreign Tro.c~e of S:yria and the Lebanon: :.lc.in Lnports (: lllions of f,L) First Eo.lf Category 1938 1946 of 19//1 Textiles 18,,5 69.6 49.2 Gold coin, bullion, &. silver 6.3 52.0 27.0 • iTachinery 3.9 12.0 13.4 i:etCils 6.LI- 16.6 12.8 ~rans::)Ort !:quipment 2.7 13.0 10.9 Foodst"nffs (lareely su~ar) 4.0 10.9 11.1 Chel:ucal :'rocl.ucts 3.6 17.6 9.0 Agricul ttlral ?:"'oc1ucts 5.5 29.6 9.1 ~Jourc9: Elements Sta:Gis'0iqll.os C.8S ~.";t.c.ts de SYI'ie et du Li.:::an Tabla ~:IV (l:iilliol1s of ±,L) First Half Cate~ory 1938 1946 of 1947 ,--- Fruits, veGetables 8.: pulses 10.1 25.5 16.2 'rextiles, unviashed rrcol, cloth, si2.k yarn, etc. 6.2 21.1 9.3 • PreserV8cl. and canned foods and tobacco le3.f 2.2 7.4 3.7 Livestocl: and dairy IJr a c.uc 0 3.0 6.0 3.0 Vegetable oils, r.lai!11;T olive oils 2.6 12.8 2.4 Chemical products, mcinly soap B...."1d matches 0.4 4.8 1.1!,. .i-lides CL'1U tanned leat~!er 1.4 3• rl I 1 (' -e0 30ul"'ce: blements Statist.iques des :8tGts de Syrie et du Liban 'lIable X" Forei:;n Trade of Syria and the Lebanon: Princil)al SUP1:·1io::"'E2. (Ei11ions of flL) 7irst IIalf Countr3r 1938 1946 of 1947 United states 4.9 48.6 42.0 United Kinedom 9.4 47.9 2[;.1 • France Italy Irak 9.6 3.2 2.3 17.7 9.9 16.2 19.9 12.3 5.5 Be1gilUn 3.3 3.1 4.6 Palestine 4.3 8.3 LI-.O India 1.9 9.1 2.6 Source: ~neLGS Statistj.ques des ~"t:J.ts ci8 c,.::Tie at du Lj.ban Table :CVI Foreign Trade of Syria an9- the .Lebanon: Principal ~larkets CB.11ions of f,L) First Half CO''..lntry 193G 1946 of 1947 Palestine 8.0 17.5 13.6 Irak 0.9 12.2 6.3 Italy 2.2 0.5 3.9 • United states France E~ypt 1.7 5.7 1.6 14.9 16.8 5./.,. 3.3 2.9 2.1 Transjordan 1.2 3 9 Q 1.LI- United Kingdom 1 • I, I 2.2 008 Source: Elements Statistiques des Etats de SyriG et, dll Liban 1 Table XV~I The Lebanese Balance of Payments: Estima.te for 19L~8 (In Billions of 1,L) Debits Credits Imports 250 Exports 30 Expenditu.res of Zmigrant remittances 45 Lebanese Abroad 10 Foreign tourists 10 Transfers of foreign companies 10 Capt tal transfers from • Palestine and Syria 40 Foreign investment and donations for schools and hospitals 20 Profits from transit and gold trade, foreign ex- change operations, etc. 60 Revenue from Leb2.nese assets held abroad 5 DEFICIT 60 270 270 • Source: 13ased on estirn2tes of vrriou$ Lebanese economists. Table ~~VIII Lebanese Eud~et ?roposals for 1949 (In Nillion ];L) Revenue Expened. ture Direct taxation 12.0 President of the Republic 0·5 Parliament 0.6 Indirect taxation 51.1 Prime Hinister 0.2 i:inistry of Finance ) .L~ Income from St8.te fI of Interior II.) Property 1.1 II of Foreign Affairs 4.0 • Sta,te enterprises Various revenues ).0 7.8 II fI fI II 11 " of Justice of Public Uorks* of Education of :Tation8Jl Economy ot Agriculture ** of Posts and Telegra~h 3.0 16.2 7.) 0 . .5 2.4 2.0 " of Defense 15·1 n of Public Health 4.4 Debt Service 2·7 Reserve for unforeseen expendi tures 1.4 Total 75·0 Total 75.0 ~ Notes: * Including bL 14 million for roads, hydroelectric projects, etc. ~:o:~ Including 1L 1.5 million for agricu.l tural proj ects. Source: Lebanese iIinistry of Finance.