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Abu Dhabi, UAEMonday 10 December 2018

Fallout of Intra Bank skulduggery haunts Lebanon still

Lebanon celebrated 70 years of independence last week but not everyone enjoyed the party.

Lebanon celebrated its 70th birthday on Friday but, like a bad office party, no one was really in the mood.

Who can blame them? The country is a failed state. A constitution that demands consensus from 16 officially recognised sects was always on a hiding to nothing, but arguably our biggest crime is that we could never harness and exploit our fabled entrepreneurial instincts.

Such is the fame of our incompetence, Mongolian shepherds know that our national grid is incapable of pumping out 24 hours of electricity, even in central Beirut, and needs US$1 billion in state funding each year to deliver power for an average of 12 hours a day across the country.

Water, which in theory we have enough to sell, is wasted and there is a shortage. Our environmental readings make Pittsburgh look like Tuscany, while our roads harvest death and the speed of our internet is an obstacle to direct foreign investment.

I could mention the fallout – both military and humanitarian – from the Syrian civil war, but I think I have made my point. As for the fact that we have not had a government for six months, well, why kick a man when he is down?

We could have been a banking and trading powerhouse like Hong Kong, Singapore or Luxembourg, where finance drives politics. “Forget Paris, we really could have been the London of the Middle East if Intra Bank and Yousef Beidas had consolidated Lebanon’s financial expertise on a global scale,” said a banker friend.

Intra Bank and its chairman, Beidas, were a golden couple. In the early 1960s, Intra Bank was the biggest financial institution in the Middle East with offices in the United States, Europe, Brazil, the Bahamas and West Africa. Its assets included real estate in New York and Paris. It also owned a major French shipyard and Middle East Airlines (MEA).

Its spectacular collapse in October 1966 was the moment politics and finance collided. The Lebanese establishment lost patience with what it saw as an upstart Palestinian who had much of the country in his pocket.

The presidential palace, the office of the prime minister, as well as rival Lebanese financial institutions, leaked rumours that Intra Bank was in difficulty. Investors panicked and the central bank should have stepped in but did nothing. Intra Bank died, as did Beidas, by then a broken man, in Lucerne, Switzerland, two years later.

Najib Alamuddin, MEA’s former chairman and government minister, called the Intra Bank affair “the beginning of the disintegration of Lebanon … [by] a system so corrupt in style and morals that had plagued Lebanon since independence and finally plunged the nation into civil war.”

Forty years later, I asked the London-based publisher Naim Attallah, one of Beidas’s closest confidants, whether the Lebanese hated Beidas, who was among the most powerful people in the land, simply because he was Palestinian. “They saw the bank as a threat, and yet when they destroyed it, they also killed Lebanon’s financial credibility – one that to this day it has not recovered,” he lamented.

My banker friend agrees. “If the government hadn’t toppled Intra, our banking sector would have been international by now. As it is, we aren’t even a regional player. Local is how best to describe us. Intra Bank was a genuine investment bank with a seriously talented management team. Now the banks would rather bail out the government than lend aggressively to stimulate the economy.”

Harsh? Maybe. Fair? Definitely.

With all this in mind, the by now infamous spelling mistake on the new, and fabulously garish new 50,000 Lebanese pound (Dh121) banknote is peculiarly ironic. The note, which was released two weeks ago to celebrate the 70 years since France cut us loose, spells “independence” with an English “e” rather than the French “a”.

The central bank governor Riad Salameh blamed the British firm De La Rue for the error. “It’s [a] French word and [De La Rue] is a British company,” he told the local media.

That is another thing we do well by the way. Blame everyone else for our problems.

Michael Karam is a freelance writer based in Beirut