Lebanon's million-dollar airport terminal deal in the hot seat: why the controversy?

The decision to award a $122 million deal without a competitive tender has triggered public outrage

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An agreement between Lebanon and private companies to build and operate a new terminal worth $122 million at Beirut's Rafik Hariri International Airport has stirred controversy after critics said it lacks regulatory oversight.

The deal to revamp the critical piece of infrastructure lacks transparency, critics added.

It comes as Lebanon sinks into a steep economic crisis after decades of profligate spending of public funds by the state, commonly involving lucrative infrastructure contracts awarded to companies with political connections.

Lebanon announced last Monday the construction of a new terminal at Beirut’s Rafik Hariri International Airport, which is set to welcome annually around 3.5 million passengers by 2027.

Lebanon's bankrupt state has turned to the private sector to fund a new airport terminal, through a partnership with the Lebanese Air Transport and Irish airport company daa International, the caretaker minister of Public Works and Transport, Ali Hamie, said.

The investors will receive all the profits generated from fees and taxes for 25 years in exchange for their investment before Lebanon returns control.

The new terminal will focus on low-cost flights and is expected to create 2,500 jobs while boosting the country's dollar inflows, Mr Hamie said.

Further details about the project have not been made public.

The existing terminal at Beirut airport was built in 1998 and has not undergone expansion work in over two decades, resulting in chronic overcrowding and delays.

However, the lack of a tender process for a contract worth over 100 million dollars stirred up a storm of backlash from civil society and some MPs with critics arguing that the mutual agreement bypasses current laws.

In 2021, Lebanon's parliament passed a new Public Procurement law aiming to increase transparency in public sector purchases while standardising tendering processes.

A statement signed by 10 civil society associations expressed deep concern “at the serious violations” against the law, “which opens the door to corruption and nepotism and allows illegal use of public funds”.

“The principles of transparency and open competition were foregone. Fiscal risks are not clear,” Lamia Moubayed, president of the Institut des Finances Basil Fuleihan, an autonomous body at the Ministry of Finance, told The National.

She said the deal presents three types of risks: political, technical and fiscal.

“First, it signals that Lebanon is not serious about implementing the public procurement reform, the only structural financial governance reform it has put in place,” Ms Moubayed said.

“Second, the fiscal and technical risks inherent to such projects including budgetary risks, size and nature of guarantees given, financial sustainability, thresholds for quality of services delivery, etc. have not been disclosed".

“Risks are inevitable in cases of unsolicited proposals or closed negotiations with private players. We cannot assess them properly because access to information is obstructed. Bidding documents, which should be made public as per the law are not accessible,” Ms Moubayed said.

The international community has made the implementation of the approved procurement law a condition for unlocking much-needed financial aid to cash-strapped Lebanon.

The International Monetary Fund stated last week that the law was “in line with the best international standards” and stressed the urgency of its implementation.

Competitive tender

Critics said that according to the new law on public procurement, “any public contract is competitive and must therefore automatically be put out to tender,” said international lawyer Karim Daher.

Ziad Hayek, the former Secretary General of the High Council for Privatisation and Public-Private Partnerships (PPP), said the contract seems to qualify as a PPP.

“According to the PPP law, a feasibility study must be conducted with cabinet approval before launching a tender. The tender must have at least three bidders to be considered valid.”

“There is no third way that would allow the contract to be awarded without undergoing the tender process. Any attempt to do so is a violation of the procurement law or the PPP one,” Mr Daher said.

Mr Hamie said he turned to a 1947 law regarding the occupation of open lands by air carriers, which would give his ministry a special regime, enabling him to award the contract through a mutual agreement.

Mr Hamie did not respond to our request for comments.

“This law is now obsolete since the adoption of the 2021 procurement law, which includes Article 114 that nullifies any incompatible prior text,” Mr Daher said.

Ongoing controversy

The debate around the deal continues to stir, leaving its fate uncertain.

The director of the Public Procurement Authority (PPA), the regulatory authority monitoring public contracting, Jean Ellieh, requested the file to the caretaker minister on Wednesday. He told The National that he has not received it yet.

“This is a public procurement contract and must be examined as such. We will assess if there are any exceptional circumstances that could justify awarding it without competitive bidding.

“But I need to review the file before expressing an opinion.”

In addition to the PPA, the Court of Audit, which oversees the management of public funds, has also requested the file for review

The head of the Parliamentary Committee on Public Works called for a session on Thursday with the caretaker minister, representatives of the Court of Audit, and the PPA's director to discuss the contentious issue.

“We will confront the minister with his choice not to launch a competitive process,” said Mark Daou, one of the 13 opposition MPs in parliament.

“We hope that this meeting will increase pressure on the authorities to stop the current process and initiate a more transparent one.”

Updated: March 29, 2023, 10:05 AM