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Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).

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LEBANON

	FY 1997	FY 1998	FY 1999
	Actual	Estimate	Request
Development Assistance..............	300,000	-0-	-0-
Economic Support Funds.............	$12,000,000	$12,000,000	$12,000,000

Introduction

Since the signing of the 1989 Ta'if Agreement that ended the civil war that engulfed Lebanon from 1975 until 1991, the country has been rebuilding itself, and living conditions have improved. It is important to the United States that Lebanon progress as a stable, responsible, and prosperous partner that shares our goals of peace, democratic society and market economies. Moreover, Lebanon is a critical link to achieving a comprehensive settlement in the Middle East peace process. USAID assistance is designed to assure that we contribute to these goals. The current strategy covers the period through 2002. The evolution of the peace process as well as progress in development factors will influence decisions regarding graduation.

Development Challenge

The end of the war provided an opportunity for many Lebanese to return to their homes and villages and to start rebuilding their lives. However, this return has been difficult, and many displaced have not been able to resettle. Thousands of homes, villages and businesses were destroyed or severely damaged during the war. Electricity, water and telecommunications networks were destroyed, directly affecting 1.5 million people and cutting off potable and irrigation water. Government health care and education also suffered. Lebanon is now in the process of extensive reconstruction, hindered by fiscal imbalance, income distribution issues, social problems, and fragile political stability. Both Syria and Israel continue to occupy large parts of the country.

During the war, U.S. economic assistance was concentrated mainly on providing humanitarian assistance to victims of the civil conflict. After the Ta'if Accord, economic assistance gradually shifted more towards development, with USAID providing, through non-government organizations (NGOs), support in rural communities to rebuild homes, restore basic infrastructure, and regenerate economic activity. These activities affected over 200 villages and some 36,000 families. By the end of 1996, microenterprise credit programs provided capital to poor women in over 500 lending groups, accounting for 90% of all microenterprise lending in Lebanon. In 1997, as a result of the success of the programs and a decision to concentrate on rural areas neglected by other donors and the government, USAID awarded grants to five NGOs to provide assistance to thirty "clusters" of approximately 220 rural communities over a five year period. This assistance concentrates on returning the affected communities to economic and social viability through support for basic infrastructure, civic participation, income generation, and environmental protection.

The depletion and degradation of land, water, air, coastal and natural resources was unabated during the war, and is now recognized as a major impediment to the restoration of Lebanon. By 1996, USAID had assisted the American University of Beirut (AUB) to establish a new graduate program to train environmental experts, and had helped AUB to develop a program to monitor pollution and engage in environmental research and to generate public dialogue on the environmental problems facing Lebanon. The investment in AUB and a recent environmental policy assessment will assure environmental considerations are taken into account in USAID's investments in rural communities, as well as the national efforts of the government and other donors.

The country's government also suffered during the war, as entire buildings and records were destroyed, staffs left, procedures fell into disuse, elections were postponed, and government legitimacy was questioned. USAID provided assistance through an NGO to the parliament and the central control agencies responsible for the civil service and integrity of accounts and procedures. In the parliament, bills can now be tracked through the Internet by the public, voting can be managed electronically, key committees and the budget process have been strengthened, and staff capacity has been upgraded. The control agencies now have modern information systems, improved case management procedures, and have gained the autonomy and legitimacy these agencies need to do their work for more accountability, transparency, and effectiveness in the entire government.

While Lebanon has adopted macroeconomic stabilization measures, there remains a critical need for broad economic reform and structural adjustment. Country debt and budget deficits have been growing with the burden of reconstruction, and the Government of Lebanon (GOL) has been taking measures to bring these under control. USAID is helping the GOL to establish a modern regulated capital market, and is engaged with the government and other donors on the development of a comprehensive economic reform program. Through the Lebanese American University (LAU), USAID is supporting conferences to bring government, business, and academics together to focus on a series of development problems and investment opportunities. LAU has also competed a study of women in the labor market, leading to new education programs to increase women's participation in economic growth.

In 1997, USAID revised and updated the strategy and objectives to best utilize increased funding and eliminate the humanitarian aid image of the program. USAID placed a resident Representative in Beirut. A slight increase in the local staff is anticipated in FY 1999 to implement and monitor the activities under three restructured objectives (economic growth, democracy and governance, and environment).

Other Donors

While US assistance in 1996 was approximately 5% of all bilateral donor disbursements, and only 2% of all donor disbursements, the renewed USG commitment announced at the Friends of Lebanon conference in December of 1996 has enabled USAID to assume an active role in donor coordination. Additionally, the decision to focus in areas like rural development which are not being covered by other donors has given USAID access to key decision makers and a role in filling gaps in the overall donor effort. The largest amounts of assistance come from multilateral sources for reconstruction of urban infrastructure. Bilateral assistance is more varied, but also tilts toward infrastructure. In 1996, Kuwait was the largest bilateral donor, followed by Saudi Arabia, the European Union, and France.

FY 1999 Program

USAID's program will continue to support Agency goals for economic growth, building democracy, and protecting the environment. In the rural development clusters, funding will support U.S. NGOs involved in reconstruction and expanded economic opportunities, civic participation, and improved environmental practices. On the national level, democracy and governance activities will no longer involve the central control agencies, but will continue to strengthen the efficiency and effectiveness of the parliament, and provide support for the newly-installed local governments and the ministry that supports them. There will be a democracy and governance assessment in early 1998, which may influence future programming in this sector. Under the improved environmental practices objective, USAID will fund specific activities such as solid waste management, soil conservation, and restoring lost vegetation in the rural development clusters. In addition, USAID will expand its programs with AUB, and based on an assessment completed in 1997, implement an activity that would lessen the impact of a major environmental problem. While USAID will work closely with the government, all assistance will continue to be channelled through grants or contracts to NGOs or U.S. firms.

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ACTIVITY DATA SHEET

PROGRAM: Lebanon
TITLE AND NUMBER: Sustained Rural Reconstruction and Expanded Economic Opportunities 268-SO01 STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: $7,000,000 ESF
INITIAL OBLIGATION: FY 1994 ESTIMATED COMPLETION DATE: FY 2002

Purpose: USAID supports a range of community-level reconstruction and rehabilitation activities designed to revitalize rural communities in areas that were either heavily affected by the civil war or show a high incidence of poverty and government neglect. The intent is to make these communities viable for the return of displaced families, or to retain the population that might otherwise join the migration to overcrowded urban areas. In seeking to expand economic opportunities, USAID's grantees extend credit to women in poverty, and contractors provide technical assistance to modernize capital markets and support structural adjustment at the macro level.

USAID Role and Achievements: From 1993 to 1996, USAID took the lead in working in over 200 of these communities (involving 36,000 families), by providing grants to US non-governmental organizations (NGOs) to carry out a number of activities that rehabilitate health care facilities, reconstruct homes, roads, irrigation and potable water systems, and enhance Lebanese NGO capacity to plan and manage reconstruction and community revitalization efforts. The activity requires a high degree of community participation and contribution to plan, implement, operate and maintain the local projects. Close coordination with other donors and with Government of Lebanon (GOL) agencies is a key element. The United Nations Development Program (UNDP) and the World Bank have planned programs to complement or emulate and extend the USAID approach to additional rural areas.

USAID supported the first large-scale microenterprise lending activity in Lebanon, which now serves over 500 groups in all regions. In supporting the restoration and modernization of Lebanon's capital market. USAID's experts are creating a regulatory framework of international standard to assure investor confidence so that new capital is attracted to support Lebanon's economic growth. This effort is currently being supported by a comprehensive economic/commercial policy assessment that should lead to fundamental economic and structural reforms.

Description: Community surveys are conducted in target areas, including assessments of basic services, physical infrastructure, economic conditions and potential, community willingness to actively participate in solving problems, and environmental conditions. Local organizations are strengthened through training in project development and execution, or created if they are not in place. In 1997 the program took a new direction, focusing on clusters of villages that share services, or are geographically linked. Multiple actions in these larger clusters of communities (encompassing over 700,000 people in 220 additional villages) are to provide more visible and integrated impact, and to serve as a demonstration for the GOL and other donors that work in rural development. Areas of focus are basic infrastructure, income generation, environmental action, and civic participation. USAID grant funds are matched by contributions of cash, materials, and/or labor by local people, with NGOs providing expertise as needed in engineering, agriculture, public health, civic participation, crafts and light industries.

Microfinance work requires forming groups of women to guarantee each other's repayment of credits, helping them establish bank accounts for the savings component, and training them to manage their own village banking operations.

Technical inputs for upgrading the capital markets include reviewing the new legislation, setting up the structures, bylaws, regulations and procedures for the regulatory body (National Council for the Securities Market in Lebanon), providing training for public and private participants in the new context, and educating the investing community about the new organization and framework.

Host Country and Other Donors: During the first two or three years of this activity, the GOL had minimal ability to serve reconstruction needs in the rural areas, and the NGOs were engaged in reestablishing electrical service, patching main roads, and providing core housing for returning families. As the GOL's capacity was restored, public institutions took the lead role in electrical and housing programs. The NGOs turned their focus to community facilities (e.g. schools and clinics), irrigation and potable water systems, and needs related to restoring or improving economic conditions through new crops, processing local production, establishing nurseries, apiaries, improved herds, or responding to other community needs. During this period, the World Bank, UNDP, and bilateral donors have borrowed ideas from this model to design their own community development, rural revitalization and resettlement programs. They have also encouraged the GOL to devote more attention and resources to needy rural areas.

Beneficiaries: Under this SO, beneficiaries will include the poorest families in rural areas under the rural development clusters grants, as well as the investing community through the modernized capital market. The microfinance effort benefits women in both rural and urban poor communities.

Principal Contractors, Grantees or Agencies: Rural Development grantees include Mercy Corps, YMCA, Catholic Near East Welfare/Pontifical Mission for Palestine, Cooperative Housing Foundation, and Creative Associates. Microfinance grantees are Save the Children and Catholic Relief Services. Technical assistance on capital markets has been provided by Coopers and Lybrand/MetaMetrics. The economic/commercial assessment is being performed by SRI.

Cooperation with the GOL in the rural development activities includes the Ministries for the Displaced, Social Affairs, Agriculture, Environment, Water and Hydraulic Resources, and Municipal and Rural Affairs. In the capital markets work, the principal counterpart is the Banque du Liban (Central Bank). In economic policy, USAID works with the Ministry of Finance as well as the central bank and the Ministry of Economy and Trade.

Major Results and Indicators 
							Baseline			Target
		  (7991)		 (1002	

Number of Target Communities Revitalized:		    022			    024
(measured by families resettled, additional cultivated
 land, and potable water systems improved)

Number of Informal Sector Loans:		   2,005		81,007

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ACTIVITY DATA SHEET

PROGRAM: Lebanon
TITLE AND NUMBER: Increased Effectiveness of Selected Institutions which Support
Democracy, 268-SpO02
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: $3,000,000 ESF
INITIAL OBLIGATION: FY 1994 ESTIMATED COMPLETION DATE: FY 2002

Purpose: This objective contributes to the rehabilitation and reform of the central control agencies, the civil service, parliament and local government to better manage a restructured central government and to carry out the country's redevelopment objectives. As part of this assistance, USAID introduces and reinforces concepts of transparency, accountability, integrity and effectiveness of government.

USAID Role and Achievements: While other donors have supported restoration of Lebanon's devastated postwar government (see below), many in the GOL consider the USAID-supported activity to have been the one that has set a standard of quick response, sensible problem-solving, educational value for key decision-makers, and systems that can be put to work in key governmental functions.

Description: The point of entry for this activity has been the installation of basic modern information systems (word processing, electronic mail, data bases) to simply put key agencies of the GOL back in business. In the process of meeting these needs, a number of other benefits have occurred. Outdated and cumbersome procedures have been streamlined; and staff have been trained in use and maintenance of information systems. Senior civil servants have travelled to the US for policy dialogues to learn about government reengineering, customer service, quality management, transparency of decision-making, and other contemporary public sector management values and concepts. USAID has been asked by the Minister for Administrative Reform to work on information technology policy, civil service reforms, and financial planning and management. In the Parliament, information systems have opened the door to rationalizing the work of key committees and opening their work to public hearings; installing an electronic voting system; and setting up for the first time a data base of existing laws that improves the quality (and minimizes conflicts and duplication) of law-making. The progress of bills through the committees and debates can now be tracked electronically.

In the next phase, the focus will shift away from assisting the "control agencies" listed below, which have now gained new autonomy, effectiveness and legitimacy. Work with the parliament will continue as it moves into a new building and takes on an expanded role in responding to constituents and oversight of budgets and programs. Municipal elections -- the first in over 30 years -- are scheduled in 1998, and new legislation was just passed that gives added authority to local government. USAID assistance will be extended to strengthen local government. This will include cooperation with the Ministry of Municipalities and Rural Affairs and with selected local governments, particularly in areas where the rural development clusters program under SO 1 is operating. The cooperation will include creating essential information systems, training elected and appointed officials, and putting decentralization into practice.

Host Country and Other Donors: The counterparts in this program have been the Ministry for Administrative Reform, the Speaker's Office in the Parliament, the so-called "control agencies" which are the General Accounting Office (GAO), the Civil Service Board (CSB), the Central Disciplinary Board CDB), and the Central Inspections Board (CIB). The World Bank and the United Nations Development Program have been supporting
the National Administrative Rehabilitation Program, but their managers and technicians often turn to the USAID program for technical advice in areas such as civil service performance evaluation, standardizing the government-wide budgeting system, and models of quick problem-solving.

Beneficiaries: The beneficiaries have been the control agencies and the parliament, as well as the

citizens and public servants they serve or represent.

Principal Contractors, Grantees or Agencies: All work so far has been performed under a cooperative agreement with the Center for Legislative Development at the State University of New York/Albany. In the next phase, CLD/SUNY will continue to play a key role, building on the excellent track record and relationships that have been set in place, though other organizations may be involved in technical aspects of local government. There will also be close coordination with the NGOs involved in the rural development clusters under SO 1. Finally, a democracy and governance assessment will be completed in early 1998 to develop options for further activities and policy dialogue.

Major Results and Indicators*

1. Improved effectiveness of major parliamentary committees    
- Increasing percentage of committee recommendations approved in GOL budget
- GOL-wide budget system operating

2. Improved operation of control agencies
    - Increasing percentage of CSB operations conducted electronically
    - Increasing percentage of CDB inspections become cases
    - Increasing percentage of GAO cases carried to decision

3. Ministry of Municipalities and Rural Affairs (MOMRA)
- MIS system functions to provide technical assistance and information to municipalities
- Increasing no. of requests from municipalities responded to

4. Six municipalities have developed budgets and plans
    - 6 pilot municipality plans and budgets in place and local authorities are able to interact with central agencies and provide citizen services

*Note: Targets and timeframes for indicators under measers 1 and 2 are still being negotiated and analyzed with the respective GOL institutions. Results and timeframes for measures 3 and 4 are not in place, as these are new activities still being designed.

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ACTIVITY DATA SHEET
PROGRAM: Lebanon
TITLE AND NUMBER: Improved Environmental Practices: 268-SpO03
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: $2,000,000 ESF
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2002

Purpose: Lebanon's environment problems will be better understood, and policy reforms as well as demonstration activities will point the way to solutions at national and local levels.

USAID Role and Achievements: Until 1997 USAID has supported the American University of Beirut (AUB) to equip and organize environmental laboratories, and to establish a multi-faculty research, teaching and outreach program involving the departments of public health, engineering and agriculture. Beginning in 1997, USAID included environmental activities under the rural development clusters activity. This will be expanded in FY 1998 and FY 1999. Also in 1997, USAID completed a participatory assessment of national environmental challenges, currently planned solutions and needed policy reforms to identify areas where USAID could work through contracts or grants to tackle broader problems. AUB now has the capacity to conduct water quality testing and air pollution monitoring, and provide policy and technical leadership on some of Lebanon's most pressing problems, especially in the heavily populated coastal zone. As USAID's planning is still evolving on this objective, details will be provided in future notifications as they are decided.

Description: AUB now has three laboratories that support environmental research, testing of air and water, and teaching for undergraduate and graduate students. Studies of the country's surface and subsurface water resources (quantity and quality) are under way, which will provide needed data and analysis to the country's decision makers. AUB is also involved with solving solid waste problems.

At the community level, environmental activities take several forms. These include building or restoring retaining walls, upgrading potable and irrigation water systems, improving road drainage to reduce erosion, tackling community solid and liquid waste disposal problems with low-cost technologies, and in some areas, planting crops that serve both income and environmental objectives.

Host Country and Other Donors: Lebanon's Ministry of the Environment is still unprepared for the challenges that face it. The World Bank and other donors have assessed environmental problems, and proposed programs for coastal resources management, solid waste management, wastewater treatment, and national reserves.

Beneficiaries: Thousands of families in urban and rural areas will benefit from more sustainable land use, clean water and reduced pollution

Principal Contractors, Grantees or Agencies: USAID's activities (supporting AUB, Mercy Corps, Catholic Near East Welfare, YMCA, Cooperative Housing Foundation, and Creative Associates) will have benefits both at the national and the community level by demonstrating low cost methodologies for waste treatment, as well as productive agriculture that is environmentally sustainable. Through technical assistance, policy dialogue, and possibly treating a major problem such as Beirut's air pollution, a national problem can be alleviated. Through sustained community action, and then disseminating the results and methods, local solutions can be replicated on a national scale. The Ministries of Environment, Water, and Agriculture will cooperate in these efforts.

Major Results and Indicators*

1. AUB provides environmental testing services to GOL and private sector
- Number of technical assistance activities conducted
    - Level of utilization of Core Environmental Lab

    - Number of spot check samples of water quality
- Number of samples monitoring hazardous substances

2. Land area in rural communities placed in environmentally managed use
    - Number of hectares in sustainable production
    - Number of hectares restored to environmental use
- Improved quality of water resources

3. A major national environmental threat is substantially reduced
    - Measured decrease in level of pollution

*Note: This Special Objective is still being designed and negotiated with the participating institutions, after which firm baselines, targets and timeframes will be established.

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Lebanon
FY 1999 PROGRAM SUMMARY
(in Thousands of dollars)

USAID Strategic and Special Objectives	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Development	Humanitarian Assistance	TOTALS
S.O.1. Reconstruction & Expanded Economic Opportunity -ESF	6,000	---	1,000	---	---	---	7,000
Sp.O2 Increased Effectiveness of Democratic Institutions -ESF	---	---	---	3,000	---	---	3,000
Sp.O3 Improved Environmental Practices -ESF	---	---	2,000	---	---	---	2,000
Totals ESF	6,000	---	3,000	3,000	---	---	12,000

USAID Representative, James Stephenson

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