After the delay, the government submitted two draft laws to the legislature: one issued by virtue of Decree No. 10415 dated June 13, 2013, pertaining to the introduction of new taxes or the adjustment of existing ones in order to cover the cost of the new pay scale and the other issued by virtue of Decree No. 10416 dated June 13, 2013 and addressing the minimum wage increase and the cost of living increment. It is noteworthy that the most recent pay scale amendment occurred in 1998 with retroactive effects from 1996. Later in 2008, a lump sum cost- of-living increment of LBP 200,000 was granted to public sector employees. In other words, there have been no earnest attempts to settle the pay scale saga since 1998, given that even the proposition laid out at the time was not a radical solution.

Action of the Subcommittee

After putting the two new decrees into the hands of Parliament and their referral to the joint Parliamentary Committees, a Subcommittee chaired by MP Ibrahim Kanaan, Head of the Finance and Budget Parliamentary Committee, was formed to look into the proposals. The Subcommittee held 24 sessions between July 3 and December 2, 2013 its members being joined by the Prime Minister and a number of ministers and directors generals. They concluded with several amendments and corrections to the Cabinet’s draft law and proposed figures. Thus, the pay scale assumed a new aspect in both form and content.

Pay scale cost between the Cabinet and the Subcommittee

According to the draft law proposed in the Cabinet, the pay scale cost was estimated at LBP 1669.4 billion, an amount that the Subcommittee branded as an underestimate, since it had overlooked the following:

• The family indemnity cost, which would rise in parallel with the minimum wage increase, at an estimated rate of LBP 125 billion annually.
• The cost of the prospective increases to be transferred from the public budget to public institutions. The increase in these contributions would cost around LBP 160 billion and some would estimate it to be twice as high.
• Subscriptions to the National Social Security Fund of roughly 5600 employees on contract or full-time basis. The hike in cost is estimated at LBP 29 billion.
• The cost of state contributions to free private schools, which would rise in parallel with the minimum wage increase at an estimated rate of LBP 27 billion annually. It is noteworthy that the Subcommittee has also miscalculated the prospective increase after it adopted the Decree in its initial, not its amended form, putting the final cost at around LBP 58 billion, whereas the best estimates put the actual cost at no less than LBP 70 billion.

Accordingly, the pay scale cost becomes LBP 2,010 billion instead of 1,669, i.e. an increase of LBP 341 billion that the government had left out of consideration for unknown reasons.

Subcommittee’s Amendments

Pay increase for the military

In addition to the above-mentioned disregarded costs, the Subcommittee spotted a blatant injustice in the pay of the military sector as compared to others. While the pay hike granted to around 28,486 teachers stood at LBP 292 billion, i.e. an average of LBP 10.2 million per teacher, military personnel estimated at 93,576 were given an increase totaling LBP 130 billion, meaning only 1.4 million per member on average. Conversely, raising the salaries of the administrative sector consisting of roughly 17,226 employees cost the treasury LBP 94 billion, i.e. an approximate average of LBP 5.4 million per employee.

Consequently, the Subcommittee adjusted the pay of the military personnel in a commensurate manner with the rises bestowed on public teachers and administrative employees. This adjustment is expected to push up the cost of the military by LBP 277 billion, thus bringing the total cost of military salaries up to LBP 407 billion.

The military pay increase would be granted by adjusting the benefits delivered to military personnel as follows:

• Increasing the military equipment allowance assigned for general officers (Generals, Major-Generals and Brigadier-Generals) from 45% to 50% of the basic salary of a Grade 1 Lieutenant, taking it from LBP 585,000 to LBP 650,000.
• Increasing the military equipment allowance assigned for senior officers (Colonels, Lieutenant-Colonels and Majors) from 30% to 35% of the basic salary of a Grade 1 Lieutenant, taking it from LBP 390,000 to LBP 455,000.
• Increasing the military equipment allowance assigned for junior officers (Captains, First Lieutenants and Lieutenants) from 20% to 25% of the basic salary of a Grade 1 Lieutenant, taking it from LBP 260,000 to LBP 325,000.
• Increasing the field service allowance assigned for enlisted men from 20% to 25% of the salary of a Grade 1 soldier, taking it from LBP 180,000 to LBP 225,000.

Pay increase for the administrative sector and the retirees

Given the inequity and the growing salary gap marring the public administrative sector, the Subcommittee tasked with revising the salary scale decided to grant additional increments to administrative employees after unifying the basic salary of each grade. The total cost of this correction is estimated at around LBP 30 billion.

Furthermore, a rise of approximately LBP 50 billion was earmarked for the remuneration of retirees.

Final pay scale costs

The addition of the costs overlooked by the initial Cabinet proposal and the calculation of the adjustments made to the military pay scale and the salaries of the administrative staff and the retired public employees have upped the cost of the pay scale from LBP 1,669 billion to LBP 2,447 billion, i.e. by 46% or approximately LBP 778 billion.

Despite the corrections made by the Subcommittee, some still point to many indemnities that remain left out of consideration, including above all the cost of the pay scale in public institutions, underestimated by both the Cabinet and the Subcommittee and expected to be as high as LBP 3000 billion.

Revenues

Not only did the Subcommittee examine and rectify the pay scale, it also investigated the suggested sources of funding and tried to seek newer ones.

The deliberations arrived at the provision of LBP 3,944.2 billion in revenues to be pronounced as follows:

• Permanent revenues amounting to LBP 2,994.2 billion of which LBP 1594.2 billion were mentioned in the initial Cabinet proposal, LBP 400 billion to come from the proposed Green Construction law and LBP 300 billion from higher tobacco taxes.
• Temporary revenues amounting to LBP 1,200 billion of which LBP 1,000 billion are to come from licenses granted to buildings under construction according to the provisions of the Green Construction proposal and LBP 200 billion from the settling of construction violations over 5 years, at an average of LBP 40 billion per annum.
• Other temporary revenues totaling LBP 80 billion during the next two years.

Table 1 illustrates the sources of pay scale funding and reveals a clear exaggeration in the estimation of certain revenues, particularly the projected customs revenues should there be an increase in the duties imposed on certain goods and products. Here, it seems imperative to raise the pressing question of why Lebanese Customs has communicated the possibility of generating higher income through higher taxation with the MPs rather than with the Ministry of Finance, let alone that raising taxes would translate in reduced imports thus leading to a decline in revenues.

The suggested funding sources also feature an overestimation of the returns from construction fees, particularly those expected from the Green Building proposal against an underestimation of the income brought in from coastal properties (LBP 65 billion), although the forecasts made by previous studies conducted under the premiership of Salim El-Hoss in 1999 put the returns from the occupation fees of coastal properties at far higher levels, apart from the price increase that has occurred since then.

Source: Report issued by the parliamentary subcommittee

Reforms between the Cabinet and the Subcommittee

The Subcommittee emphasized the fundamental principle of administrative reform, treating the financial rights of employees and the need to address the rampant corruption and the chaos crippling public administrations as two separate issues. In this context, the Subcommittee branded the reforms suggested by the government at the level of public administration- raising weekly working hours from 32 to 35, freezing employment, adjusting benefits and indemnities, reducing the judicial vacation, increasing the minimum retirement age by 5 years, etc- as partial and irrelevant to the core of the problem plaguing the public administration, particularly the rife politicization, corruption and bribery.

The reformative clauses laid out by the Cabinet were thoroughly examined and criticized by the Subcommittee and proved to be short of realizing their intended purpose. For instance, the Subcommittee pointed out that the blunders of the judiciary are not rooted in the length of the judicial vacation but rather in the delay in settling court cases, the absence of precise timeframes for the settlement of such cases and the absence of accountability for such delays.

On a separate note, extending retirement age by 5 years seems disadvantageous in that it limits employment opportunities and prevents admitting young talent and new skills into the administration.

Despite the Subcommittee’s diagnosis of the plight afflicting Lebanon’s public administration and its bashing of the reforms proposed by the government, the reform recommendations it offered did not differ drastically and amounted to nothing more than a reformulation of the government’s suggestions, while the success of such reforms must remain a function of executive. The Subcommittee’s recommendations postulated the withdrawal of scholarship benefits from public pre-university teachers and requested the Ministry of Education and Higher Education to provide a statement that elaborates the pros and cons of separating the salaries of teachers in the public sector from those in the private one. It is noteworthy that the reports issued by Lebanon’s supervision bodies- Civil Service Council, Central Inspection and Audit Court- made a recurrent mention of the same recommendations, yet lack of will or helplessness have often rendered their implementation impossible, emphasizing once again the futility of the Lebanese administration and its dire need of measures that transcend reform.

The concluding statement touched upon in the report was perhaps the best part of all: “The Subcommittee, although aware that the lesson remains in the executive power’s extent of commitment to its suggested recommendations, announces that it cannot examine a proposal that entails spending over LBP 2000 billion, without coupling it with what would contribute, in its opinion, to abolishing, or at least reducing or underlining, the reasons triggering the struggle and complaints of the citizens.”

The Subcommittee might have accomplished a great and fundamental work and laid major foundations for the correction of the scale of ranks and salaries and the reform of public administration. Yet, it seems that it has predicated its calculation on imprecise numbers and documentation. In its appraisal of the state contribution towards free private education in Lebanon for example, the Subcommittee relied on a decree text that was amended multiple times, thus sliding into faulty estimations.

Moreover, the Subcommittee stated on the fortieth page of its report that “Lebanon’s private schools provide basic education to roughly 700,000 students annually.” However, the statistics of the Educational Center for Research and Development put the number at 497,530 in the academic year 2009/10, 504,024 in 2010/11 and 509,979 in 2011/12, down by 200,000 from the figure adopted by the committee.

It is noteworthy that the precision of the projected pay scale cost is also dubious, particularly when it comes to the public institutions, which suffer in the main from a steep deficit and depend heavily on State funding. Similarly, skepticism surrounded the size of the projected revenues as well as the argument suggesting that the added taxation intended to bring in the necessary funds does not target low-income sectors.

Staff in Public administration

The staff of Lebanon’s public administration- excluding public institutions and municipalities- consists of 165,498 employees accounted for as follows:

• Full-timers: 10,632
• Contract employees: 4,667
• Wage earners: 1,927
• Lebanese University professors: 1,557
• Pre-university teachers: 28,468
• Contract teachers: 4,653
• Military personnel: 93,576

Vacancy rates in public administrations

A study conducted by the office of the Minister of State for Administrative Reform in January 2011 on the strategy of developing Lebanon’s public administration revealed that:

• 15,344 out of a total of 22,029 posts distributed over all grades in Lebanon’s public administration, or an equivalent of 70%, are vacant.
• 61 out of 150 Grade 1 posts, or an equivalent of 41%, are vacant. The vacancy rate dropped following appointments approved by the government for this grade.
• 332 out of 568 Grade 2 posts, or an equivalent of 58%, are vacant.
• 2,240 out of 4,165 Grade 3 posts, or an equivalent of 53%, are vacant.
• 10,366 out of 14,243 Grade 4 posts, or an equivalent of 73%, are vacant.
• 2,345 out of 2,903 Grade 5 posts, or an equivalent of 81%, are vacant.
• The number of contract employees stands at 3,043 and that of wage earners at 1,973

The 93,576 members of Lebanon’s military personnel

According to a report issued by the Finance Minister Mohammad Safadi on the scale of ranks and salaries under the number 2717/S on July 17, 2013, there are 93,576 military personnel in Lebanon distributed between the Lebanese Army, the Internal Security Forces, General Security, the State Security and Parliamentary Police. By rank, the military personnel consist of 7,297 officers, 63,152 non-commissioned officers and 50,127 enlisted men.

Lebanon’s military personnel by rank

Source: Report issued by the Finance Minister

High-priced vehicles for the handicapped?

During its examination of the Cabinet’s draft law regarding the possible sources of funding, the Subcommittee stopped to consider Law No. 220 dated May 29, 2000, which exempts individual and collective handicap-designated vehicles from customs and importation duties as well as vehicle registration taxes, provided that the said vehicles are assigned for the use of a handicapped person or for any non-governmental organization providing service to the handicapped with the condition that no other vehicle is imported before five years have elapsed as per the statement issued by the Ministry of Social Affairs.

The Subcommittee found however, that some people are finding a way around the law by importing luxury cars, normally highly taxed, in the name of handicapped individuals instead of their own names in order to benefit from tax exemption. Therefore, it suggested the amendment of Articles 85 and 86 of the law so that the exemption ceiling does not exceed LBP 8 million regardless of the nature of the disability. Abiding by this course of action would bring in around LBP 917 million in revenue at best, noting that many might refrain from importing high-priced vehicle altogether should this amendment be adopted.

The Subcommittee linked its proposition with documentary evidence indicating that 141 vehicles profited from the handicapped tax exemption in 2011 and 131 in 2012. The customs duties and VAT amounted to LBP 805.7 million for the former and LBP 751.1 million for the latter, meaning a total of LBP 1,559 million. Upon closer scrutiny of the imported handicap vehicles, it turned out that 60 of them could be branded as expensive (USD 30,000 and above) while the rest seemed affordable. In other words, the Subcommittee might have wasted its time in its quest for revenues at the expense of handicapped rights. Yet, it is undeniable that there might be attempts to bypass the law pertaining to people with disabilities.