world economic crisis pdf

world economic crisis pdf

Living amidst the 21st Century Candle Light

Living amidst the 21st Century Candle Light

Outline:

Thesis Statement: Lebanon’s Electricity blackouts are a historically unsettled dilemma in which corruption hinders and the economy stumbles.

I. History of the electric Sector

A. Emergence of EDL

B. During the civil war

C. After the civil war

II. Corruption plaguing the sector:

A. The emergence of corruption

B. What lead to the current situation

C. Corruption at its present form

III. The Burden of the sector on the Lebanese economy:

A. The costs

B. Those that benefit

IV. Ending the current electricity crises is a future concern:

A. Solutions

B. The for coming future

Living amidst the 21st Century Candle Light

The year 1964 marked the establishment of Electricity Du Liban or EDL. It is Lebanon’s infamous public power company. Since its establishment, the company was granted the monopoly of generation transmission and distribution of electric energy throughout Lebanon (Chafic). At that time the company used to be an efficient well run public institution. It used to provide power on regular basis producing a hefty 1,826 billion KWh per year and providing juice to 540,000 houses equivalent to 1,550 billion KWh per year. Thus the company featured power surplus enabling it to sell a 100 million KWh to Syria in the year 1974 and a 3 million KWh in 1975 (Power Capacity is Available).So can you believe it Lebanon has once been exporting electricity! Yet this situation didn’t last long, on April 13, 1975 the civil war exploded in Lebanon. The once power exporting country became power hungry as it fell into darkness (Power Capacity is Available). Today, Lebanon’s Electricity blackouts have become a historically unsettled dilemma in which corruption hinders and the economy stumbles.

The negative impact of corruption on the economy is not much of a debate. Corruption’s effect is well known in hindering economic development, reducing social services and simply inducing inefficiency. Today, Lebanon’s power company is stricken by corruption along with numerous other problems all too which make the emergence of the company back into the profit zone simply impossible. In 2004 When Beirut MP Adnan Arakji was questioned by reporters about the electricity crises he considered the crisis “a scandal” asking how ”reviving the Iraqi electrical sector needs less than $7 billion,” while Lebanon has already spent “$9 billion on its electricity sector and yet is still suffering from darkness” (Hatoum). Well truly powering a country as small as Lebanon is incomparable with powering a country as huge as Iraq. Hence the question imposing itself is what makes reviving Lebanon’s electric sector much more expensive than that of Iraq? Today in 2009, the electric crisis is still the same so haven’t the $9 billion been enough to even slightly improve Lebanon’s power crises! Thus the huge funds exhausted by the electric sector along with the ever worsening power situation clearly lead us to induce that corruption and inefficiency are major players in the crises. In 2002, the billed energy amounted to only 54.4% of the total energy produced. In other words, EDL is only receiving revenues for around half of its production the other half is divided among transmission, piracy, and technical loses. The non technical losses are estimated to be 28.6% meaning that 28.6% of the energy produced is lost solely due to piracy or illicit tapping of power lines (Chafic).54.4% of EDL’s energy production is estimated to be billed but that does not include those who don’t pay the bills. It is estimated that 10% of the billed energy isn’t collected or paid (Electricity Cost in the Arab World). More than a third of the power EDL generates gets lost in distribution or is not paid for. Yes this is the 2,000 employee company of an average age of 58! It the company which it’s last issued audited accounts date back to 2004 (Lebanon losing battle to keep the lights on).

Availability of Electricity is a main driver of growth, employment, and competitiveness around the world. When electricity tends to be unstable or interrupted the economy and the GDP naturally tend to slow down. The Lebanese electric sector is indeed in deep crises. The sector and EDL in particular is unable to establish itself as a reliable energy supplier of the electricity needed by homes, offices and industries. On the other hand despite the unsteady power supply along with the heavy rationalization taking place the costs of EDL remain remarkably high. The expenditure on EDL is estimated to be around 4% of the GDP amounting to over a $ 1billion a year (Republic of Lebanon Electricity Sector Public Expenditure Review).The costs of the Lebanese electric sector are truly high. Those high costs are due to structural problems. Ziad Hayek, Secretary-General of the Higher Council on Privatization, stated out in an interview “The billion dollars that’s usually referred to as a loss is nothing more than a subsidy. This is the cost of subsidy that the government is absorbing in order to sell power to consumers at the rate it does. Our tariff is set on the basis of oil costing $25 a barrel, but oil [really] costs $100 a barrel.”Hayek continues to point out that every electric bill issued represents nothing but 30% of the original value of the bill (The truth behind Lebanon’s electricity crisis ). In Lebanon Prices per kilowatt hour are one of the highest in the region (Electricity Cost in the Arab World).This high cost is due to the production of electricity with fuel oil and gas oil. On the other hand the old power plants present make power production inefficient and increase the technical losses of EDL causing the prices per KWh in Lebanon notably higher than that in neighboring countries. After all Lebanon doesn’t have any major energy source. Lebanon is dependent upon petroleum and imported energy sources regardless of their price fluctuations. After all, is it possible to renovate a utility, whose tariffs were fixed in 1996 when oil cost $25 a barrel?

Along this electric crisis Lebanese citizens have found themselves among three choices each of which is inconvenient in its own way. Citizens are able to buy and run their own private generator, subscribe to one or simply live in darkness (Electricity in Lebanon). It is estimated that Lebanese citizens pay an additional 25% in spending on electricity per month and around 10% of the total electric energy produced in Lebanon is not produced by EDL but by private generators (Republic of Lebanon Electricity Sector Public Expenditure Review).

Lebanon’s power plants don’t have the actual capacity to meet the demand of electricity. The demand for electricity in is around 1800MW.While the theoretical installed capacity is a much greater 2260 MW .Yet in reality some of the plants are very old (Chafic, A.Said-E.Baroudi). Thus Lebanon’s power plants altogether are unable to exceed the production of 1100 to 1300 MW which leaves Lebanon in a shortage of 500MW (The truth behind Lebanon’s electricity crisis ).This shortage is the major cause of rationing taking place throughout Lebanon.

In conclusion, unless the Lebanese government takes the initiative to build new power plants power black outs will continue to be a way of life in Lebanon. Actually new power plants take a minimum average of five years to be built and with the lack of planning and the immense debt Lebanon is through one can be sure that the Lebanese power crises will not end in the foreseen future. Many observers call for privatization to solve the ongoing crises, but who is willing to invest in a sector where squandering cannot be stopped and bills can’t be collected?

References:

Chafic, A.Said – Roudi, E. Baroudi (2002) “A Case Study on Lebanese Electric Power Sector: Proposed Restructuring and Privatization Program – The Potential Benefits for the Lebanon”
“Electricity Cost in the Arab World” (2008) In The Monthly (issue 76 November 2008 pp 48-49)
“Power Capacity is Available” (2007) In The Monthly (issue 64 November 2007 pp 24-25)
“Electricity in Lebanon” (2009) In The Monthly (issue 78 January 2009 pp 20-21)
Chafic, A. Said (2005) “Electric Energy and Energy Policy in Lebanon”
Ghassan, S. (2008) “In Lebanon, even electricity is political “Retrieved 20/2/09 from http://www.menassat.com/?q=en/news-articles/4551-lebanon-even-electricity-political
“Azour repeats call for badly needed reforms at EDL” (2007) Retrieved 20/2/09 from http://www.lebanonundersiege.gov.lb/english/F/eNews/NewsArticle.asp?CNewsID=1148
“Lebanon losing battle to keep the lights on” (2008) Retrieved 20/2/09 from http://www.iht.com/articles/reuters/2008/12/08/africa/OUKWD-UK-LEBANON-POWER.php
“Republic of Lebanon Electricity Sector Public Expenditure Review” (2008). Retrieved from http://siteresources.worldbank.org/INTMNAREGTOPENERGY/Resources/LebanonElectricityPER.pdf

About the Author

Rayan Abu Saleh

Why is a leaked UN Memo on Global Climate Change says its policies are going to cost billions?

http://www.foxnews.com/projects/pdf/032709_informationnote.pdf

A United Nations document on “climate change” that will be distributed to a major environmental conclave next week envisions a huge reordering of the world economy, likely involving trillions of dollars in wealth transfer, millions of job losses and gains, new taxes, industrial relocations, new tariffs and subsidies, and complicated payments for greenhouse gas abatement schemes and carbon taxes — all under the supervision of the world body.

The memo is at the above link. Read it. So will global warming be another economic crisis that we will have to deal with?

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