ECONOMIC RECOVERY AND RECONSTRUCTION IN POSTWAR BEIRUT

By DONA J. STEWART

Source: Geographical Review, Oct96, Vol. 86 Issue 4, p487, 18p

ABSTRACT. After sixteen years of brutal civil war Beirut is being rebuilt. In this article I note the causes of the city's destruction and examine the fundamental demographic shifts that lie behind Lebanon's internal power struggle. Current reconstruction plans, already being implemented, call for a new, peaceful Beirut. Despite their aspirations, the plans fail to address the underlying tensions in Lebanese society, which is divided along religious and socioeconomic lines. Finally, I assess the likelihood of Beirut's economic recovery, given the current regional political situation. Keywords: economic recovery, Lebanon, Middle East, reconstruction.

For many westerners the dominant image of Beirut, its buildings reduced to bombed-out shells riddled with bullet holes, freezes the city in time. Although the memory of Lebanon's civil-war landscape looms large in the collective consciousness, the nation has moved forward and seeks a revived economic role in the Middle East. And Beirut is being rebuilt. The society and government confront the dual tasks of reconstructing the physical infrastructure of the city while attempting to create interreligious societal harmony to ensure peace.

In light of the major demographic and political shifts that initiated and sustained intersocietal hostilities, it is imperative to place reconstruction plans for Beirut within Lebanon's social and political context. Although armed conflict has ended, many of the issues that aggravated relationships among the country's various confessional groups remain unresolved.[1] The physical and economic reconstruction of Beirut thus holds enormous implications for the future of Lebanon. The greatest challenge is to use the reconstruction process to weld the divergent sectors of the multireligious society and to create, along with economic prosperity, a stronger sense of national unity. Yet reconstruction also has the potential to aggravate old tensions between groups and to renew internal strife.

Although the case of Beirut has unique aspects, the problem of joining divergent sectors of society while repairing the built environment is not limited to Lebanon. The apportionment of representative space for ethnic or religious groups will surely be raised during the reconstruction of Sarajevo and throughout the republics of the former Yugoslavia as well. Issues of economic and cultural integration face East European cities as they try to attract investment and create a regional economic presence. A unified Berlin, specifically, faces the challenge of integrating "Ossies" and "Wessies" economically and culturally. Admittedly, though, the stakes may be higher in Lebanon, where reconstruction is assumed to be the foundation for future stability and where the propensity for violence is certainly great.

HISTORICAL DEVELOPMENT

Though not as monumental an Arab city as Cairo or Damascus, Beirut has held an important and occasionally central role in the Levant for 2,000 years. Much of its historical prominence derived from a favorable maritime location that allowed creation of a trade-based economy. Its important role as a broker for trade between Europe and the Middle East expanded in the fifteenth century with the return of Europeans (they had twice seized the city during the Crusades but were lastingly repelled in 1291) (Boulanger 1965).

Beirut's central role in the economy of Greater Lebanon was solidified during the last stage of Ottoman rule (1840-1920).[2] In a period marked by rapid growth, the city's population increased from 6,000 in 1820 to 120,000 by the dose of the nineteenth century (Reed and Ajami 1988, 16). Newly created infrastructure, including a major addition to the port of Beirut, facilitated economic growth and drew additional immigrants. The city expanded beyond its old walls as immigrants and refugees arrived, fleeing a civil war between the country's Maronite Christians and Druze sectarians. Members of each religion tended to live among their own, creating Beiruti suburbs that were distinctly homogeneous (Reed and Ajami 1988).

Following the defeat of Ottoman troops in 1918 by British and Arab troops, control of Lebanon and Syria was given to France under the newly established League of Nations mandate system. During French control, which lasted from 1920 to 1943, economic and cultural links were forged between Lebanon and Europe that would persist long after French rule ended. Economic and educational opportunities further facilitated the growth of Beirut, the center of French administration, and its population.

In the twentieth century Beirut absorbed waves of immigrants, ranging from Armenians to Kurds, who increased both the size and the diversity of its population (Khalaf and Khoury 1993). Among the largest groups of immigrants were Palestinian Arabs who fled the new state of Israel in 1948 and whose arrival hastened the deterioration of Lebanon's delicate religious balance. On the eve of the civil wars Beirut was estimated to have a population of 1.2 million--nearly 45 percent of the country's total population--and approximately 350,000 of the country's inhabitants were of Palestinian origin (Held 1994, 222).

ECONOMIC AND CULTURAL TIES

By the 1960s Beirut had become known as the "Paris of the Middle East" for its cultural and economic vigor. In the ten years prior to 1975 Lebanon's economy, characterized by low inflation, high levels of economic growth, and a large balance-of-payments surplus, made it one of the region's strongest nations (Sena and others 1995). Before the war Lebanon was classified as a middle-income country with a per capita income equivalent to that of Portugal. Its income level was twice that of neighboring Jordan (Economist 1996a, 12).

While the largest port facilities on the eastern Mediterranean ensured Lebanon's continued role in interregional trade, "Swiss-style" banking regulations encouraged the development of a large financial sector. Beirut became the publishing center of the Middle East and home to head or regional offices for many Western multinational firms. Lebanon's pivotal function was as an "intermediary between the developed economies of Europe and the developing economies of the Middle East" (Sena and others 1995, 1).[3] But economic prosperity concealed simmering religious and political tensions. In the summer of 1975 they erupted into the civil wars that destroyed much of the urban core of Beirut and changed the balance of power in Lebanon.

THE POLITICAL--RELIGIOUS BALANCE

The armed conflict that enveloped Lebanon between 1975 and 1990 was not a single war but a series of disputes with new participants added and shifting alliances (Fisk 1991; Hourani 1991). The root cause was the weakening, and the final collapse, of the country's religious and political balance.

The role of religion in Lebanese society and politics cannot be underestimated. Most of the nation's populace belongs to one of the many Christian or Muslim groups. Christian groups predate the Crusades and are a reminder of the pre-Islamic period when the Levant, like much of the Mediterranean realm, was Christian. From the seventh century A.D. Islam spread across the Middle East, attracting many converts. Christian communities continued to exist, particularly because Islam gave Christians a recognized status as "people of the book." The Ottomans institutionalized this status under the millet system of government, which allowed religious communities to have their own administrative structures and legal systems to carry out local governance. Thus Christian groups in the Islamic Empire not only survived but were often granted preference. But historically there has been a high degree of tension, if not open warfare, among religious groups in Lebanon. Major Muslim groups include the Sunni, the Shi'a, and the Druze, an offshoot of Islam; specific Christian groups include Maronites, the Greek Orthodox, and Armenian Christians. All of them engaged in a constant contest for political and economic power, eloquently described by Salibi (1988, 55):

The plain fact remained that the religious communities in Lebanon were essentially tribes, or in any case behaved as tribes, and the game that came to be played between them was a tribal game. At an overt level, the game was a contest between different concepts of nationality for the country. At the covert level, tribal rivalries and jealousies were mainly involved.

Of the dozen or more Christian sects involved in the "game" of Lebanese politics, it was the Maronites who, with French backing, assumed political power at the end of Ottoman control. The creation of Greater Lebanon by the French was motivated partially to ensure the existence of a Christian state in the Middle East. The Maronite population had increased between 1820 and 1900, especially in Beirut. With the coming of Maronite refugees, including those from Syria, in the late nineteenth century the numerical balance in Beirut tipped to slightly favor the Christians, whereas until the 1840s Christians and Muslims had been roughly equivalent in number. Maronites were Christians, but they were distinctly different from the Greek Orthodox Christians resident for generations in Beirut. Though not Catholic and possessing their own patriarch, they are in communion with the pope in Rome; the Greek Orthodox are bound to the patriarch of Constantinople. Most important, the Greek Orthodox and Sunni populations long ago established mutual acceptance (Reed and Ajami 1988). Maronites had a distinctly different vision for Lebanon: "[T]he Maronite leadership assumed that the cultural and political superiority of their community would maintain a Christian dominance in the country. The presence of the French and their role as a world power reinforced that attitude" (Phares 1995, 70). Under French control, Christian groups, particularly the Maronites, were favored politically and economically. By official estimates, the Christian population was numerically superior during this period. The last general census of Lebanon, conducted in 1932, found that Christians outnumbered Muslims by a six-to-five ratio (Hudson 1968, 23; Phares 1995, 89). Furthermore, the Maronites were estimated to be the largest single religious community, with 29 percent of the total population (Hudson 1968, 25). This census created what Robert Fisk (1991, 67) termed the "myth of Maronite majority," which became the basis for power sharing in Lebanon and would continue well after the Maronites' numerical superiority came into serious doubt.

With independence from French rule the political supremacy of the Maronites was guaranteed in the National Pact. The pact was an agreement made in 1943 between the Maronites and the Sunnis that essentially identified Lebanon as being Arab in nature but sovereign, independent, and neutral. Lebanon would seek neither alignment with Western nations nor assimilation into the Arab community of states. The agreement also provided for the division of the highest governmental offices in Lebanon along religious lines. In this document and subsequent agreements, an arrangement was made whereby the president of Lebanon was required to be a Maronite Christian, the prime minister was to be a Sunni Muslim, and a member of the Shi'a sect would serve as Speaker of the Parliament. Furthermore, Parliament seats were apportioned on the basis of six Christian seats for every five Muslim-held seats. The arrangement was designed to ensure stability in the sharing of political power (Goldschmidt 1991; Phares 1995).

AN UPSET BALANCE OF POWER

Rapid demographic change after independence radically changed the foundation originally laid for Lebanese power sharing. Through the mid-1950s Maronites maintained numerical superiority, but high birthrates among Muslims, especially among the more traditional Shi'a, combined with considerable out-migration in the Maronite community, cost the Maronites their numerical advantage. Another factor in the numerical rise of Muslims was the wave of Palestinian immigrants, largely Sunni, around the time of the creation of Israel (1947-1949) and of the 1967 Arab-Israeli War. Although data immediately before the 1975 civil wars are unreliable, Ajami (1992) estimated that Maronites ranked third in number behind Shi'as, who had become the largest group, followed by Sunnis. Likewise, Hourani (1991) noted a numerical superiority of Muslims over Christians. Current population estimates for Lebanon as a whole (Figure 1) indicate that Shi'as and Sunnis together account for 55.3 percent of the population and that Christian groups combined make up 37.6 percent (Economist 19961, 4). Although Shi'as represented the largest single sect in the country as early as 1975, the Maronites retained official political control, as laid down in the National Pact.

Economic disparity between Maronites and Muslims further contributed to sectarian tensions (Hourani 1991). For all its cosmopolitan veneer, Beirut was home to a religiously and economically fragmented society. As each wave of immigrants and refugees had arrived over the preceding 120 years--first Maronites, then Armenians, and, finally, Palestinians--they had tended to settle among their own religious group. This tendency toward self-imposed religious segregation is common in Middle Eastern cities. Nevertheless, parts of Beirut remained mixed, with Muslims and Christians living in the same neighborhoods. This inclination reflected conditions in the rural areas, where 44 percent of the towns had members of more than one sect in the prewar period (Nasr 1993, 67). The extent of religious mixing in Beirut has often been overstated, however, especially by Beirutis themselves. In reality, true mixing of neighborhoods by sect was more common in upper-class areas, and the wealthy Hamra and Ras Beirut neighborhoods around the campus of the American University in Beirut are notable examples of heterogeneity. Areas with lower socioeconomic status tended to remain inhabited exclusively by one faith.

As a result, Beirut, even in the prewar period, became extensively segregated along sectarian lines. "Beirut and its suburbs became, in effect, two cities with two distinct political cultures" (Khalaf and Khoury 1993, 27). The Christian community largely resided in the more affluent East Beirut. West Beirut, notable for its large zone of squatter settlements, housed hundreds of extremely poor Shi'a families. West Beirut also included Sabra and Chatila, enormous Palestinian refugee camps. Some parts of West Beirut remained isolated from the prewar economic progress of central and East Beirut. Conditions in these slums encouraged the rise of militant Islamic groups such as Amal and, later, Hezbollah, which provided social services such as health care and schooling.

As the sectarian balance continued to erode in Lebanon, sects and some individuals formed their own militias to protect the interests of their group. Clashes between these militias in April 1975 is the general reference point used to mark the onset of the Lebanese civil wars (Ibrahim 1993). The period of hostility lasted from 1975 through 1990. In addition to Lebanese militias the conflict included the Israeli army, Iranian guerrillas, military troops from the United States, the United Kingdom, and France, and U.N. peacekeeping forces.

With the coming of civil war, Beirut was explicitly divided into east and west. The city became split along what came to be known as the "green line," which cut through Martyrs' Square at the center of the city (Figure 2). The sectarian division of the population increased as residents in formerly mixed neighborhoods moved to be on the appropriate side of the green line. Muslims, who had made up 40 percent of the 1975 population of "Christian" East Beirut, were just 5 percent of the 1989 population. A similar redistribution occurred in West Beirut, where the Christian population dropped from 35 percent of the total in 1975 to 5 percent in 1989 (Nasr 1993, 69). As Lebanon, which had described itself as the "Switzerland of the Middle East" because of the diversity of its populace, exploded, the belief that various religions could cohabit in the volatile Middle East also faded.

Warfare ceased only in 1990, after a large Syrian military presence moved into Christian-controlled East Beirut and Mount Lebanon, overpowering the Christian militias and ending the violence. Political power was essentially shifted from Maronite Christians to Sunni Muslims under the Taif Agreement, signed in 1989. The agreement substantially increased the powers of the prime minister, who was required to be a Sunni Muslim under the National Pact, and substantially reduced the authority of the Maronite-held presidency. Lebanon came under Syrian control and, except for the southern security zone claimed by Israel, became a de facto Syrian protectorate with the establishment of a Syrian-sponsored, Muslim-controlled government. Since 1990 Lebanon has been in a period of normalcy, with political power largely in the hands of the Muslims and their Syrian backers.

THE DESTRUCTION OF BEIRUT

The cost of the fifteen years of war was very high and severely weakened Beirut. The damage to the city is estimated to be at least $25 billion (Robison 1993a). The international airport, sewer systems, electrical grid, and telephone lines were destroyed. More important, at least 170,000 people lost their lives in the hostilities, 300,000 were injured, and scores remain listed as missing (Economist 1996a, 1).

Much of the Lebanese conflict was an urban war, fought in the streets and boulevards of Beirut. Approximately 180,000 of its housing units were ruined, and 180,000 were badly damaged. The destruction left an estimated 300,000-500,000 people homeless or displaced, forced to live either with relatives or amid shattered buildings (Meadows 1994, 20). With the city destroyed, many of Lebanon's highly skilled professionals left to work in other countries. Estimates of the number of expatriate Lebanese range from 500,000 to 800,000 persons, but there is no accurate count (Economist 1996a, 12). When they left Lebanon these expatriates took with them an estimated $10 billion in capital (Abu Fadil 1992, 35).

Beirut was literally a battleground during much of the civil war. At the onset of hostilities in 1975, nearly half of the country's population of 3 million lived in the city. By 1992 its population had dropped to an estimated 300,000 (Held 1994, 221), as residents fled to other cities in Lebanon or overseas. The old city center, anchored by Martyrs' Square and divided by the green line, was most severely damaged by the war. Nabil Beyhum (1992, 44) noted that as the center, one of the most devotionally mixed areas of the city, was demolished, "a shift in the center of gravity to the outskirts" took place, with residents moving into the religiously homogeneous suburbs. The result of the shift into what Beyhum termed "single community ghettos" further fragmented the population along sectarian lines. A particularly significant aspect of the destruction was the loss of common spaces, areas that had been shared by members of all sects. Located in the old section of the city, these areas had brought together groups to transact business and for social opportunities. Moreover, the old souks (markets) were destroyed, as was the more upscale Hamra commercial district.

The protracted warfare severely injured Lebanon's economy. Beirut lost its preeminence as interpreter between Europe and the Middle East. Many expatriate firms relocated their headquarters or regional offices to Cyprus, only twenty minutes away by air. Arab-owned businesses also fled, often to the Arab Gulf states. Bahrain, for example, became the new home of many banks and insurance firms that had formerly been located in Lebanon. Firms that did not leave Lebanon were unable to reach suppliers or customers and often lacked electricity or telephone lines. Lebanon's once-thriving tourism industry was crippled. In total, the International Monetary Fund estimates that real gross domestic product in Lebanon dropped from Leb L 8.1 million in 1974 to Leb L 4.1 million in 1993 (Sena and others 1995, 4).

RECONSTRUCTION GOALS

For many Lebanese the first tangible--and highly symbolic--proof of the country's emergence from civil war and return to normalcy was the return of Fairuz, often considered the Arab world's greatest living singer, to the Beirut stage on 17 September 1994. A highly emotional concert, the Greek Orthodox singer's first in Lebanon since the onset of civil war 1975, took place in the ruins of Martyrs' Square (Muir 1994). The mixed audience of Muslims and Christians embodied hope for Beirut's future based on multiethnic cooperation.

Significantly, the concert was underwritten by Solidere, the private holding company created to reconstruct the Beirut Central District (BCD). The reconstruction is part of Horizon 2000, a plan created by the Council for Development and Reconstruction to provide for the comprehensive development of Lebanon as a whole. Designed to restore Lebanon's battered economy and rebuild the country, Horizon 2000 was originally scheduled for completion by the turn of the century, a tentative completion date that has slipped to 2007 at the earliest (Economist 1996a,13). The restoration of Beirut alone will take much longer than that, with the final stage of the three-stage project scheduled for completion in 2018 (Solidere 1994, 23). When completed, the new downtown area will house 40,000 citizens and work sites for 100,000 daytime employees. Moreover, reconstruction of the central district is to be a catalyst for economic growth throughout the country. So important is the success of this effort that Philip Khoury (1995b, 9) declares that "investment in Solidere more closely represents a wager on a country than an investment in a company."

The initial goals of reconstruction are mainly repair of the built environment, including commercial and residential buildings, and the provision of such key services as telephones and sewerage. A longer-range economic aim is revival of the Lebanese economy, enticing back Lebanese investors and their capital while also attracting investment from other regions. The most difficult task lies in creating a climate of religious harmony, or at least tolerance, without which uncertainty dominates the prospect for long-term economic and social development.

DETAILS OF THE PLAN

The central core of Beirut encompasses 395 acres of built space. Although the BCD is not large (Figure 3), challenges to its reconstruction are great. Solidere (1993, 16) identified the following major hurdles:

[T]he virtually complete destruction of its infrastructure; the Normandy garbage dump, formed in the course of the war, in the absence of an alternative dumping site. Today, this site poses severe local and regional health and environmental problems and disfigures the coastal facade of the city; the extreme fragmentation and entanglement of property rights involving owners, tenants and lease holders; the large percentage of very small real estate properties, 48% of the lots are smaller than 250 square meters; squatters in certain zones of the central district.

The first stage in the planned redevelopment covers the repair of Beirut's basic infrastructure and services, which will be completed by 1997 (Economist 1996a). This first step is crucial, for as late as 1995 the city had no streetlights, and electricity was available only for twelve hours a day (Jansen 1995b). Other concerns relate to the development of Beirut as a new international center of business designed to rival Hong Kong and Singapore (Economist 19961). A barrier to the realization of this aspiration, however, is the large Normandy landfill, an informal dump that developed during the civil wars, which hardly makes for an attractive business site. Situated only one-quarter of a mile from the famous St. George Yacht Club on the seashore, the dump will be transformed into a beachfront park and commercial complex. Existing refuse at the landfill will be augmented by the thousands of tons of rubble still to be cleared from downtown Beirut, and the enlarged landfill will be converted into a fifty-four-acre island, linked to the mainland by a short causeway (Meadows 1994). Solidere sustains great hopes for this reclaimed area, which will house a financial center where, it hopes, national and multinational firms will find a "prestigious location for their headquarters or local branch offices" (Solidere 1994, 19).

Other features of Beirut's commercial revival include restoring the old souks, preserving the historic core area as a pedestrian district, and opening Martyrs' Square to the sea (Solidere 1994). Through these efforts Solidere hopes that commercial establishments, which once occupied the BCD, will return and take advantage of its central location, infrastructure, and "new attractive urban landscape" (Solidere 1994, 20).

AGENTS OF RECONSTRUCTION

On paper, two major organs are responsible for the reconstruction of Lebanon. The Council for Reconstruction and Development, a government entity set up originally in 1977 and recently revived, is responsible for reconstruction outside the BCD. Solidere, as previously mentioned, is the private holding company that is reconstructing the BCD. The truest catalyst behind the reconstruction of Lebanon, particularly central Beirut, is Lebanese Prime Minister Rafic Hariri. Not only has the Hariri government advanced reconstruction in Beirut through legislation, much of the reconstruction has been financed out of Hariri's own personal fortune.

Hariri, a Lebanese national who made his fortune in Saudi Arabia, has assets estimated at $3 to $4 billion (Walden 1994). One of the world's hundred wealthiest people, he owns several banks in the Middle East and Europe and is one of Saudi Arabia's largest publishers of the Koran. He owns real estate on four continents, including the Texas Commerce Tower in Houston (Walden 1994), and he has long played a philanthropic role in Lebanese society, building hospitals and providing scholarships for students to study overseas. A Sunni Muslim, he became prime minister after the 1992 elections, which were boycotted by the main Christian parties. After Hariri took office he unveiled an aggressive plan for the economic recovery of Lebanon, and he used his own money to pay for the $5 million redevelopment feasibility study (Partner 1995). He is also the largest single shareholder in Solidere (Walden 1994).

Hariri's administration has improved the economic situation in Lebanon. Most notable is a lowering of inflation, from 131 percent in 1992 to 15-20 percent in 1995 (Jansen 1995b). The currency has also been stabilized, and consumer prices have steadied. Although the country's economy is far from healthy and a $1.5 billion budget deficit exists, these conditions are considered surmountable if recovery occurs (Economist 1996a, 13). The reconstruction of Lebanon will cost the private sector $18 billion. Hariri's government has successfully attracted outside funding for reconstruction, with the World Bank, the European Union, and various Arab governments pledging about $1.3 billion in aid (Robison 1993c). Despite his successes, not all factions in Lebanese society view Hariri favorably. Though born in Lebanon, he spent much of his adult life in Saudi Arabia, so many Lebanese consider him an outsider. They are troubled by the fact that reconstruction of their country has fallen largely to the Saudi billionaire:

It serves to remind the Lebanese of their own impotence, and of the growing political dominance of one immensely powerful Lebanese-born Saudi billionaire, Rafiq Hariri, whose personal vision of the new Beirut--glass walled, boulevarded, complete with marinas, conference centers and its own skyscraper world trade center--is likely to be made manifest in Lebanon, with much distress among those who once lived in the ruined city. (Fisk 1992, 3)

As always in Lebanon, sectarian politics influence how the Lebanese view Hariri. Many Christians believe that he uses his power to divert resources to his own religious group, the Sunni Muslims, and to create a political power base (Walden 1994). Although he has built a reputation for nonpartisan politics and maintains close ties with representatives of the Christian community (Lebanon Report 1995a), remnant suspicion of him reflects Christian bitterness regarding the realignment of political power in postwar Lebanon. Included in the Taif Agreement were measures that weakened the powers of the presidency--always held by a Christian--while strengthening the role of the prime minister--a Sunni Muslim. The presidential office now performs a ceremonial and consultative role, with real power lying in the hands of Prime Minister Hariri.

Friction between Hariri and Lebanese society is not limited to matters of religious affiliation. With his wealth and extensive control over reconstruction, Hariri is feared to have endangered the entrenched status of wealthy Lebanese of all sects, who resent the intrusion of an outsider whose family originated from the impoverished south of Lebanon. These old-money forces, who refer to Hariri's subordinates and the arriviste elite that emerged during reconstruction as his "financial militia," had hoped "to return someday to rebuild the country. Now, with the Mr. Hariri in control--backed by his friends in the Persian Gulf--those hopes have largely been dashed" (Walden 1994).

Finally, Hariri's large financial gains from the reconstruction, though not illegal under Lebanese law, have stirred controversy, even within his own government. In 1994 Hariri resigned after some of his cabinet ministers questioned one of his real-estate deals on the grounds of conflict of interest (New York Times 1994). Also behind the resignation was his anger over Parliament's refusal to incorporate the spending bill for Horizon 2000 into the 1995 budget, instead reviewing the Horizon budget as a separate item (Khoury 1995a). Hariri withdrew his resignation after mediation efforts by Syrian President Hafez al-Assad brought reconciliation between Hariri and the Speaker of the Parliament, Nabi Berry, a Shi'a (Jansen 1995a).

ECONOMIC AND SOCIAL CHALLENGES TO RECONSTRUCTION

In addition to internal political concerns, the reconstruction of Beirut and all of Lebanon faces serious economic and social challenges. Economic recovery depends on Lebanon's ability to attract back expatriate Lebanese and business owners who set up operations elsewhere during the civil wars. There is skepticism as to whether this goal can be achieved. If open warfare has largely ended, Lebanon still has a high level of turmoil, and investors must weigh significant levels of political risk, much of which is outside the control of the Lebanese government. Magda Abu Fadil (1992, 35) summed up the uncertainty: "[W]ith Israel occupying part of the country's south, launching raids on guerrilla strongholds there and marching its troops across the border with impunity, and Syria calling the shots almost everywhere else in Lebanon, potential investors are reluctant to pour in money where events remain unpredictable."

The Council for Development and Reconstruction reported hesitancy among investors, including Lebanese natives, to return while regional political problems remain unsettled. Hundreds of thousands of Lebanese left during the war, but only 55,000 had returned by 1991, an estimated 6 percent of the total (Abu Fadil 1992, 35). Although accurate figures are impossible to determine, an estimate by the minister of the economy calculated possible expatriate assets at up to $40 billion (Hassan 1991).

The major concern, according to the Economist (1996a, 15) "is that the outside world will lose its enthusiasm for Lebanon. The country balances its books only by attracting capital inflows--and these could move elsewhere at the merest hint of political or social trouble." Given the state of government finances, concerns remain over the feasibility of the Horizon 2000 reconstruction plan (Khoury 1995b). Lebanon's violent image remains in the minds of many Western governments. The United States forbids its citizens to travel to Lebanon, making it difficult for U.S. companies to bid on redevelopment contracts and virtually impossible for regional offices to be located there.[4]

Disputes over conflicting property rights have proved to be a major obstacle to development. In the BCD alone there are an estimated 100,000 claimants on a mere 1,630 parcels of land. Many claims predate the civil wars, and claimants range from individual householders to large Western companies that once had offices there (Robison 1993C). Under Lebanese law, both individuals holding leases to a property and actual owners of the property have property rights. Furthermore, many property owners have died since the onset of the civil wars, and their property is now dispersed among many descendants, residing both inside and outside Lebanon. Squatters, who have no property rights, occupy many buildings.

To untangle this complex web of rights and give Solidere control over the area for redevelopment, in 1991 the Lebanese Parliament ratified Law 117, which granted Solidere the power to expropriate the property of existing owners. In return, property owners received shares in Solidere (Martin 1993). Landholders received 65 percent of the total number of Solidere shares, with an estimated value of $1.2 billion. Solidere's remaining shares, valued at $650 million, were recently sold to the Lebanese public to raise cash for infrastructure. Hariri holds 19 percent of Solidere's shares (Walden 1994).

Deep resentment has led landowners, who regard the land deal as unconstitutional, to organize and protest the scheme (Fisk 1992). Yet it is not only the Christian and Muslim elite landowners who oppose government expropriation of property rights. In an odd alliance, the Iranian-backed fundamentalist group, Hezbollah, has spoken against Solidere, stating that Islamic law protects people from giving property against their will (Walden 1994). The Shi'a group has many followers among the 15,000 or so squatters downtown and among the country's large Shi'a population.

Beyond the issue of property rights lies Lebanese sentiment that the reconstruction of Beirut has proceeded largely without consultation with the community. The residents' anger has been voiced through protests, strong criticism of the plan, and threats of long-term litigation. Many Lebanese, according to Fisk (1992), question the need to hastily implement a plan that has had little input from the general population. Unlike previous plans for the city's redevelopment, which emerged sporadically during lulls in the fighting, the current plan has proceeded largely without citizen participation, especially from the middle class. According to Beyhum (1992), residents have found their role in a reconstructed Beirut to be shrinking. This lack of involvement is especially discouraging because a reconstruction plan for Beirut, in which religious groups work together, could help form the basis for a stronger, more unified, postwar Lebanon.

Perhaps the greatest weakness in the reconstruction plan, with its external focus on the international business community, is its failure to address needs of the poor. If Solidere is successful in re-creating the former Beirut, especially its economic role, underlying economic disparity will not be addressed. Instead, according to Marko Milivojevic (1995,14), "It has often been pointed out that Solidere's vision of a new Beirut will turn it into what it once was, namely the main business center and plugged into the rich of the nearby Arab world, an objective that seemingly has little to offer the city's poor." A lack of affordable housing, a problem that will become more acute as squatters are removed for reconstruction, may not be alleviated in recreated Beirut. Although Horizon 2000, which acknowledges the overall shortage of housing in the city, calls for the creation of residential areas for all income levels, it offers few details or numbers. Indeed, much of the current housing is far out of the reach of the poor. An estimated 30,000 premium apartments, with prices above $300,000, were empty at the end of 1994. With available real estate skewed toward expensive properties, many of Lebanon's residents, especially those in southern Lebanon, where unemployment is high and the average income is below $150 month, are never likely to become property owners (Whittington 1994).

Although redevelopment of Beirut's southern suburbs, especially Elissar, began in the 1990s and included the construction of 7,250 housing units, schools, and hospitals, much of the poor population remains unserved (Lebanon Report 1995b). The disenfranchisement of a large swath of Lebanon's population in the reconstruction has created potential political instability. Hezbollah secured a following among the poor, particularly in Beirut's southern suburbs, by providing some low-cost housing as well as schools and hospitals (Economist 1996a).

PROSPECTS

There is little doubt that the physical form of Beirut will be rebuilt. With the backing of Hariri and Solidere it is also likely that the final form of a new Beirut will reflect the prime minister's preferences. What is less clear is whether Beirut will ever regain its position as the middle agent and broker between the West and the Middle East. In many respects the Middle East no longer needs Beirut to fill the role that gave it predominance in the 1960s. At that time Lebanon was an extremely important intermediary because its businesspeople could speak the languages of both regions and explain each other's cultures. Today, however, nearly all of the Middle Eastern countries have created an elite, typically Western educated, that can represent national political and financial interests in the West. The shift of economic fortunes in the Middle East as a result of oil production has also focused the attention of Western firms away from the Levant, with its smaller, poorer markets, to the Arab Gulf region. Here, large Western expatriate communities are present, and institutions have already been developed to facilitate East--West exchange. Moreover, as the global economy continues to reorient itself toward the emerging economies in Asia and the Pacific Rim, it is likely that the Arab Gulf states, especially the United Arab Emirates, with its massive free-trade zone in Dubai, will assume the role of broker between East and West.

Lebanon continues to be unstable from a political and security viewpoint. The southern portion of the country remains under Israeli military occupation, with daily administration and policing duties carried out by a client militia, the South Lebanon Army. Hezbollah wages a guerrilla campaign against Israel's continued presence in the zone. Although leaders of the rest of the countries in the region met in Egypt in March 1996 to discuss means to combat terrorism, Lebanon and Syria were notably absent (Erlanger 1996). Such a signal is likely to be noticed by potential investors. In late April 1996 Solidere's worst fears were realized when Israel, in response to Hezbollah missile attacks, launched a large-scale military operation at Lebanon that included areas outside the security zone. The most devastating aspect of this engagement was the bombing of a U.N. refugee camp at Qana. Beirut was directly affected, for its port was blocked, the newly installed electricity-generating stations were hit, and a flood of refugees headed north toward the capital city (Economist 1996b).

Internal problems have persisted. In February 1996 the Lebanese government deployed troops to impose a nationwide curfew in response to anticipated antigovernment demonstrations. The demonstrations were organized by unions that sought wage increases (Trendle 1996).

In the current reconstruction plan social concerns have been overlooked in favor of economic goals. Although the city was destroyed by sectarian and intersect violence, the plan fails to adequately address this most significant of Lebanese problems. With the shift in formal power to the Muslim community, tensions between Christian and Muslims groups have not abated. The Shi'as are numerically superior, but under the current system the highest governmental position they can occupy is that of Speaker of the Parliament.

The failure to thoroughly address the needs of the poor is perhaps the most risky aspect of Beirut's reconstruction. Outside Beirut, especially in the southern suburbs, there has been little reconstruction of infrastructure or improvement of the living standard. Violence rooted in the poor urban areas, in which groups such as Hezbollah and Amal operate, could squash economic recovery before it even takes root.

*

a I would like to thank the editor and anonymous referees for their helpful comments on earlier drafts of this article.

NOTES

1. In the literature on Lebanon, confessional groups is the standard usage. Religions is not acceptable because the word does not indicate that even within a religion (Christianity or Islam, for example) a great number of groups exist.

2. Greater Lebanon refers to the creation of a state of Lebanon that included not only the area around Mount Lebanon but also the Bekaa Valley, South Lebanon, the Akkar district in the north, and the coastal cities of Beirut, Tripoli, and Tyre. Greater Lebanon corresponds to the modern state of Lebanon.

3. A 1965 map of Beirut carried this description of Lebanon, provided by the Ministry of Information: "Lebanon, which invented the alphabet and the art of writing and spread them throughout the world to provide its peoples with a basis for their cultural and intellectual expansion. Lebanon, so rich in its historical, natural and cultural heritage, intends to maintain its presence through the Universe and preserve that unique factor in its prosperity, its capacity to be open to the whole world" (Boulous 1982).

4. U.S. citizens have not been allowed to visit Lebanon, for either personal or business purposes, since the Reagan administration, in reaction to the kidnapping of foreigners, including Americans, imposed a travel ban in 1987. Although the last American hostage was released in 1991, the ban was routinely renewed at six-month intervals, despite repeated efforts by U.S. business representatives and Lebanese American groups to have it lifted (Robison 1993b). Finally, in August 1997 the U.S. Department of State, under Secretary Madeleine Albright, chose not to renew the travel ban, thereby enabling travel by holders of U.S. passports to Lebanon. However, Secretary Albright noted that Lebanon remained a dangerous place for Americans (Trendle 1997,16).

Armenian Christian 4%
Other  1%
Shi'a 33%
Sunni 20%
Druze 8%
Maronite 20%
Greek Orthodox  8%
Greek Catholic 6%

MAP: FIG. 1--The geographical distribution of religious groups in Lebanon and religious groups as percentages of the total population, mid-1990s. Sources: Phares 1995; Economist 1996a. (Cartography by the Cartography Research Laboratory, Department of Anthropology and Geography, Georgia State University)

MAP: FIG. 2--Divided Beirut, 1975-1990. (Cartography by the Cartography Research Laboratory, Department of Anthropology and Geography, Georgia State University)

MAP: FIG. 3--Reconstruction plans for the Beirut Central District. Source: Solidere 1993. (Cartography by the Cartography Research Laboratory, Department of Anthropology and Geography, Georgia State University)

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