Editors In Chief
Jasper Schutt
Rebecca Eneyni
Design Editors
Vishal Jammulapati
Cate Knothe
Manon Fuchs
Editorial Board
Majed AlMunefi
Willow Taylor Chiang Yang
Matthew Salfity
Eleyan Sawafta
Colin Lee
Isa Lucas
Featured Artist
Helen Zughaib
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Student Organization Finance Committee (SOFC) Duke University Middle East Studies Center
We are proud to present you with Jasūr 5.1. In this issue, our trio of brilliant student authors shed new light on various under-discussed aspects of MENA political economy. Accompanying their pieces is the artwork of the acclaimed Lebanese-American painter Helen Zughaib, who shared her work, time, and creative spirit with the Jasūr team as we put this edition together.
My heartfelt thanks to Ethan, Joanna, and Mayar, who graciously accommodated our drawn-out publication process. The issue’s strength is theirs. Its flaws—especially its delayed release—are my own. Note that these pieces were written in 2021 and early 2022, prior to the Turkey-Syria earthquake and the deepening of Lebanon’s political and financial crisis. Nonetheless, our authors’ work remains prescient. We invite readers to consider how the dynamics raised herein help deepen our understanding of these present crises and their roots.
Readers who attended Ethan Dinçer’s lecture in the fall will be familiar with “Textile Troubles,” his exploration of the rapidly changing Turkish garment industry. Departing from previous literature that treats issues with labor standards in Turkish cotton production as primarily enforcement-related, Dinçer argues that unregulated, informal, and ethnicized labor is central to the industry’s operation. For him, the emergence of Turkish fast fashion giant Trendyol, which primarily produces for the domestic market, has intensified these trends. Freed from European brands’ loosely enforced standards, new players like Trendyol and Hepsiburada are providing cheap products to increasingly squeezed consumers by doubling down on exploitative practices that disproportionately impact Kurds and Syrians.
Mayar Ibrahim’s “Inhabiting Suspension” is an abridged version of her master’s thesis, based on extensive fieldwork at Ismailia’s Radio Canal—the last and historically most significant public radio station in Egypt’s Suez Canal Region. Relying on dozens of interviews with employees of Radio Canal, Ibrahim paints a vivid picture of Egyptian public servants’ attempts to remain true to their original mandate in the face of state disinvestment. Ultimately, she argues that Radio Canal allows us to better understand contemporary Egyptian statecraft, which blends neoliberal economic policies with what she terms “military paternalism.”
Finally, in “A Catastrophic Domino Effect,” Joanna Wrobel examines the underlying causes of Lebanon’s current financial crisis. She traces the crisis to the influx of Syrian refugees and the woefully inadequate support provided by the international community in response. The subsequent surplus of workers and increased government expenditures over time destabilized Lebanon's financial institutions. In an effort to rebuild investor confidence, the Banque du Liban began deceptive financial engineering policies, which met short-term goals while concentrating credit risk. She concludes that these practices obscured rising inflation, deceived investors, and ultimately contributed to the March 2020 financial crisis.
On behalf of the Jasūr team, I offer heartfelt gratitude to all those at Duke, UNC, and beyond who have supported us this year. We hope you enjoy Jasūr 5.1!
With love, Jasper
SchuttTEXTILE TROUBLES: An Economic-Legal Review Of Türkiye’s Garment Industry
INHABITING SUSPENSION: Neoliberalism and the Public Servants of Ismailia’s Radio Canal
A CATASTROPHIC DOMINO EFFECT: The Lebanese Financial Crisis
ETHAN E. DINÇER WILLIAMS COLLEGE
YALE
By Ethan E. Dinçer
From towels to luxury dresses, there is a good chance the product label will include an iteration of ‘Made in Türkiye.’1 Known for its superb organic cotton, Turkish textiles are a staple of many fashion scenes—from couture to linens. In 2020, even amidst the COVID-19 pandemic, Türkiye was the 7th largest exporter of garments in the world and 3rd largest exporter to Europe, outnumbered only by China and Bangladesh, respectively.2 Türkiye’s prominent position in global fashion manufacturing is due to its geographical proximity to European fashion houses and an increasing availability of both formal and informal labor. Yet, this normative perspective on Turkish fashion manufacturing does not capture the complexities evident in the industry, particularly in the last decade.
To this end, this article serves as a review of the Turkish fashion industry, reconsidering the conditions under which garment workers and the textile industry operate. These include Turkish labor laws, the ethnicization of informal labor over the past decade of the Syrian refugee crisis, and the economic turmoil facing Türkiye brought about by President Recep Tayyip Erdoğan’s rogue economic policies. I end with a brief case study of Trendyol, a rapidly growing, Türkiye-based online e-commerce and fast fashion retailer. I conclude on the increasing complexity for the future of Türkiye’s fashion industry—a future rife with inequality while also saturated with local innovation—calling for an end to the reliance on European fashion firms, and instead increasing support for domestic brands. Unbundling these complex industrial organizations, laws, and economic policies is integral not only in advocating for justice for those exploited by the industry, but also in imagining fashion spaces beyond exploitation.
Türkiye is the third largest organic cotton producer in the world, exporting US $8 billion worth of raw materials and $17 billion of ready-made garments in 2017.3 Given the sheer scale of the Turkish cotton industry’s production and exportation primarily to Europe, the state has, over time, implemented various legal systems to protect garment workers and promote sustainable practices. Most of these regulations parallel EU laws, particularly those concerning environmental protection,
1 For the purposes of this article, I have decided to use Türkiye throughout instead of Turkey, to remain aligned with the 3 June 2022 UN statement declaring the official change. While the name change has been interpreted by some as a bandaid for worsening domestic politics (See https://omerjournal.com/2022/03/16/turkey-or-turkiye-the-politics-of-a-name-change/ for more), the use of Türkiye in this article is not a statement or declaration of affiliation with any political motive for the name change.
2 Bennett, Safak Tartanoglu. “Syrian Garment Workers in Turkey: Modern Slavery?” Futures of Work, Feb. 2020. https://futuresofwork.co.uk/2020/02/03/syrian-garment-workers-in-turkeymodern-slavery/
3 Oral, Elif. “Sustainability Challenges of Fast Fashion: Environmental and Social Impacts of Cotton Growing and the Ready-Made Garment Industry in Turkey.” Yuridika 34 (3), 2019: 444.
consumer and health protection, food safety, and agriculture.4 These directives have been adopted in tandem with Türkiye’s seemingly perpetual journey to become an EU member-state: Türkiye became an EU candidate country in 1999 and official ascension talks began in 2005, although talks have stalled and ultimately failed since the rise of President Recep Tayyip Erdoğan to the presidency in 2014.
The issues with the Turkish fashion industry do not arise from the content of these laws, rather the loose enforcement of them, Elif Oral argues. She highlights that Türkiye has been a party to the International Labor Organization (ILO) since 1932 and continues to follow the rules and regulations established by the organization.5 She uses the 2008 Communique on the Integrated Pollution Prevention and Control in Textiles Industry, a suggestion for managing environmental outputs of major polluting industries, as an example to show the unequal enforcement of certain EU laws surrounding the fashion industry. The Communique is limited to facilities with a capacity of more than ten tons per day, and many textile manufacturers in Türkiye are smaller workshops, meaning they do not have to conform to the EUdictated regulation. Further, larger workshops in Türkiye may reluctantly adhere to regulations due to the high costs of advanced pollution-controlling technology, which are priced based on foreign currencies, a repeated issue with Türkiye’s fluctuating lira value.6 However, these regulations only apply to the manufacturing of products for European-based brands, creating further loopholes for locally produced garments or brands outside of Europe. Oral describes Turkish garment industry labor with inherently flawed enforcement, a landscape that allows suppliers and large cotton producers to evade EU regulations. Her account only covers half of the complex industry, and loopholes in the very construction of Turkish labor laws suggest issues do not only stem from enforcement.
However, the root of these flawed regulations arise from international players themselves. Large brands—most of which are European fashion houses—continue to exploit the Turkish textile economy, which in turn impacts how labor forces are employed. The Business and Human Rights Resource Centre conducted a series of interviews with textile suppliers that formed a 2019 report documenting the supply chain weaknesses that have marginalized labor—particularly Syrian labor— within the Turkish garment industry. The report documents how, as international brands continue to push for larger profits and quicker turnarounds, Turkish suppliers are forced to resort to subcontracting, both within cotton cultivation and garment manufacturing, to either make a profit, as clothes can be made cheaper in noncompliant factories, or to achieve unrealistic turnaround times.7 In addition,
4 Oral, “Sustainability Challenges of Fast Fashion,” 446.
5 Ibid., 449.
6 Ibid., 454.
7 Business & Human Rights Resource Centre. The Price You Pay: How Purchasing Practices Harm Turkey’s Garment Workers. July 2019. https://media.business-humanrights.org/media/ documents/files/Turkey_Purchasing_Practices_Briefing.pdf
the report notes how all interviewed Turkish suppliers reflected that international buyers did not change their metrics to reflect the 2019 26% minimum wage rise in Türkiye.8 While the minimum wage grew domestically, since international brands still hold textile suppliers to a foreign currency, the buying margins remained the same. This stance by international brands concretizes suppliers’ reliance on subcontracted labor instead of formal counterparts—an informal sector that is rife with exploitation against Syrian and minority labor. I cover Syrian labor and Türkiye’s economic crises extensively in the next sections.
As illuminated, the most critically vulnerable area of textile manufacturing surrounds the informal sector, especially seasonal, or otherwise temporary, work. A geographic split in Türkiye’s garment industry has caused a gap between labor, mechanization, and industrial development. The majority of Turkish cotton is cultivated and processed in southern provinces, mainly the Aegean coast, Çukurova, and the Southeastern Anatolian regions of Diyarbakir and Gaziantep, part of the Güneydoğu Anadolu Projesi (GAP - Southeastern Anatolia Project) region.9 The GAP project, ongoing for over 40 years, focuses on the lower Euphrates and Tigris basins, with 13 infrastructure projects covering agriculture, hydropower, education, and other industries.10 However, while the GAP project is ongoing, cotton cultivation and processing has not yet reached the industrialized standard of garment production and distribution, which occurs in the major textile cities of Bursa and Istanbul.11 Oral calls this industrialization disparity a “structural impediment [in the industry] that causes cotton cultivation to be dependent on manual labor of seasonal agricultural workers who are mostly employed as unregistered workers”.12 Combined with immense demand from international brands, it is within this structure of the Turkish garment industry that regulations falter: since textiles are distributed by suppliers in Northern Türkiye, international labor regulations from global brands are focused most directly on the middlemen of the supply chain, not the actual producers.13
Under this regime of unregulated work the Turkish fashion industry sees its greatest exploitation as challenging demands, relaxed regulations, and legal loopholes
8 Business & Human Rights Resource Centre.
9 Ministry of Industry and Technology. The Southeastern Anatolian Project (GAP). http://www. gap.gov.tr/en/what-is-gap-page-1.html.
10 Balat, Mustafa. “Southeastern Anatolia Project (GAP) of Turkey and Regional Development Applications.” Energy Exploration & Exploitation, 21 (5-6), 2003: 391.
11 The GAP project has been subject to much controversy surrounding its tangible material benefits. Around 90% of the population living in the GAP region is Kurdish, and testimony has increasingly critiqued the purpose of GAP, with some viewing it as an opportunity to suppress Kurdish economic development under the guise of infrastructure advancement. See https:// www.newsecuritybeat.org/2013/08/great-anatolian-project-water-management-panaceacrisis-multiplier-turkeys-kurds/ for more.
12 Oral, “Sustainability Challenges of Fast Fashion,” 455.
13 See the Business & Human Rights Resource Centre report for a detailed explanation of industry structuring.
create a dangerous environment for those who need the most protection by the law. This exploitation is compounded by the influx of Syrian refugees over the past decade, which has made the labor market in Southeast Türkiye more competitive as refugees cannot acquire work permits and are forced to pursue informal channels.
Legal loopholes allow unregistered, informal garment workers to be exploited under Turkish labor law by unregulated factories in order to meet international demand. Turkish legislation protects laborers in regards to wages, benefits, and working hours, except under two conditions: if the duration of the employment duration is more than 30 days and if an agricultural business has 50 or fewer workers.14 In an intensive report on child labor laws, the Istanbul-based legal firm Çetinkaya describes:
…labor inspections can only be conducted in workplaces that fall under the scope of the Labor Code, which excludes, inter alia, (i) marine and air transportation works, (ii) agriculture and forestry works that employ less than 50 workers, (iii) handcrafts, (iv) home services, (v) athletes, and (vi) apprentices. As the Turkish Obligations Code (Law no. 6098) [Obligations Code no. 6098 is dated 11 January, 2011]15 governs these types of work activities, children who are employed under these conditions would not be protected by labor inspections. Given that many child workers are employed in seasonal agriculture, which falls under the “agriculture and forestry works” heading above, the lack of inspections creates a significant regulatory gap and fuels the problem of child labor in Turkey.16
While Çetinkaya describes the conditions specifically for child labor, this loophole accounts for any form of labor, allowing small-scale cotton and garment factories to fall out of the jurisdiction of Turkish labor code. Oral notes that 98.2% of textile factories and ready-made garment producers in Türkiye are micro-enterprises or small to medium sized, meaning that the majority of garment workers can be employed informally with relatively sparse jurisdiction in order to meet strict production guidelines while generating profit.17 Not only are garment workers impacted by these loopholes—the saturation of the Turkish fashion industry with micro-enterprises means they can often sneak past international garment labor oversight and certification since they exist as subcontractors for larger suppliers.18
14 Oral, “Sustainability Challenges of Fast Fashion,” 455-6.
15 6098 sayılı Borçlar Kanunu / Turkish Code of Obligations, Law No. 6098 of January 11, 2011.
https://wipolex.wipo.int/en/legislation/details/11084
16 Ozgun, Kemal Altug and Gungordu, Atakan. Child Labor in Turkey and the Need for Human Rights Due Diligence for Corporations. Çetinkaya Law, January 2021. https://www.cetinkaya.com/ insights/child-labor-turkey-need-human-rights-due-diligence-corporations
17 Oral, “Sustainability Challenges of Fast Fashion,” 458-9.
18 Ibid., 459.
Work within Turkish labor regulations is being done by ACT, a Europe-based cooperation between the IndustriALL Global Union and 19 large fashion brands— including well-known giants H&M and Inditex (the conglomerate that owns Zara). While ACT has made specific attempts, including signing a Türkiye-specific memorandum of understanding (MoU) between its partnering brands, the actual legal framing of labor issues in Türkiye illustrate the flawed understanding of on the ground realities. ACT and its signatories pledge to support freedom of association for all garment workers in Turkish factories, specifically advocating for three principles:
1. Workers must be free and able to exercise their right to be unionized and bargain collectively in accordance with ILO Conventions.
2. A joint approach is needed where all participants in global supply chains assume their respective responsibilities in continuing to ensure the respect of the right to freedom of association.
3. ACT members will provide capacity building, including training of managers and workers on freedom of association and collective bargaining.19
Most surprising about the work of ACT is that it only focuses on the right to unions as described by the ILO, which, as Oral notes, Türkiye has been a member of for 90 years. Nowhere in ACT’s MoU do the critical issues of Turkish economic crash, Syrian labor, or informalization of the sector appear. Neither do issues of international demand and the purchasing power of large fashion brands. European labor law activism—which, in the case of ACT, has been co-signed by the largest exploiting brands in the fashion industry—focuses on the wrong issues in the Turkish garment industry: the right to unionize needs to come after principle labor laws are amended and international demand is properly reformed to account for all voices in the sector. This legal landscape shapes the way Turkish manufacturers operate today, molding the industry around a series of exclusions that enable the on-time production of large quantities of garments at the expense of garment workers. Informal labor might be a product of the development gap between cotton processing and textile manufacturing, but ultimately the continued presence of labor exploitation falls upon international fashion demand and the construction of labor laws with specific loopholes to increase international exports and profits. As briefly illustrated, the landscape has become more complicated since the Syrian refugee crisis, producing a Turkish textile industry that has become divided largely along informal/ formal and ethnic lines, producing the conditions for the exploitation of already marginalized communities.
19 Act on Living Wages, Türkiye Freedom of Association Annex. https://actonlivingwages.com/ app/uploads/2022/08/ACT-Tu%CC%88rkiye-FOA-Annex_EN.pdf
The Syrian refugee crisis has seen over three million seek protection in Türkiye, making it the largest refugee destination country in the world. Before a controversial migration deal made between the EU and Türkiye in 2017, Syrian refugees had few avenues of pursuing formal employment and often resorted to informal sectors, such as the garment industry. One study finds that up to 650,000 Syrian refugees are employed in the Turkish garment industry.21
The Temiz Giysi Kampanyası (Clean Clothes Campaign Türkiye) has identified major abuses against Syrian refugees at the hands of Turkish garment factories. Syrian refugees are frequently underpaid: Syrian women earn the least in a hierarchy of wages that sees Turkish men at the top, followed by Turkish women, Syrian men, and finally Syrian women and children. Syrian women are paid well under the minimum wage, sometimes even below the hunger limit, as defined by the Confederation of Turkish Trade Unions.22, 23 Further exploitative conditions include the challenges of attaining work permits for Syrians, which in turn makes employer accountability challenging: The Campaign found that the lack of work permits and written contracts means holding factory owners responsible in cases of arbitrary dismissals, delayed payments, or other forms of exploitation is nearly impossible.24 Oral notes an additional layer of legality to this grey space of discrimination; as of 1 January 2018, mediation between an employer and workers became compulsory before a workplace complaint could be taken before the courts.25 For already underpaid Syrians, the absence of formal contracts and mandating solving workplace issues and potential abuses with employers creates a hostile environment that effectively makes Syrians in the Turkish garment industry voiceless.
The increasingly fragmented position of Syrian refugees in Türkiye’s garment
20 For the purposes of aligning the temporal development of fast fashion and e-commerce, this article only focuses on the ethnicization of garment labor for the Syrian refugee population. For years, other ethnic minorities and migrants, including Kurdish, Afghan, Iraqi, and Central Asian communities have been subject to similar labor abuses in a number of industries, including the garment sector. I choose to focus solely on the Syrian case, however, as the combination of legal loopholes, ethnic subjugation, and rapid saturation in the garment industry is crucial to analyze within contexts of global fashion manufacturing and demand.
21 Houerbi, Salma. “Turkey’s fast fashion is rising on the backs of Syrian refugees.” Open Global Rights, Oct. 2019. https://www.openglobalrights.org/turkeys-fast-fashion-is-rising-on-thebacks-of-syrian-refugees
22 Syrian Workers in Turkey’s Garment Industry: Looking Back, Moving Forward. Temiz Giysi Kampanyası, Nov. 2019: 2. http://www.temizgiysi.org/wp-content/uploads/2019/11/syrianrefugees-in-textile.pdf
23 Oral, “Sustainability Challenges of Fast Fashion,” 460.
24 Temiz Giysi Kampanyası, Syrian Workers in Turkey’s Garment Industry, 2.
25 Oral, “Sustainability Challenges of Fast Fashion,” 462.
industry constitutes what Emre Eren Korkmaz calls the ethnicization of the industry. He argues that there is a de facto relationship between the formal and informal Turkish fashion industries that allow Türkiye to be the fashion hub it is. Before the Syrian refugee crisis, Korkmaz argues that formal and informal fashion sectors would shift: when suppliers received large orders from international customers, they could mobilize their contacts in informal workplaces, which temporarily shifted to formal conditions of employment to meet deadlines and regulations. Informal workers became briefly registered until the order was complete, after which they reverted to producing in informal conditions for a largely domestic market.26 However, over the past decade as Syrian labor has fundamentally changed the hierarchy of garment production, Korkmaz notes a more distinct division along ethnic lines between formal and informal sectors. He argues that informal units dismissed Turkish workers, who only accepted such jobs on a temporary basis and were critical of their treatment, and instead shifted to employing primarily Syrian refugees who remained desperate for income without access to work permits.27
Combined with the legal loopholes that allow for exploitation of Syrian workers, the Turkish garment industry became practically cleaved along ethnic lines between formal and informal production.
How can these cycles of exploitation and discrimination be stopped?
Subcontracting makes regulation by the Turkish state or international brands exceedingly difficult as factories employing refugees informally find methods via legal loopholes to continue their practice. On the other hand, the conditions that create exploitation are set by increasing pressure by international brands requiring collections quicker and with smaller margins for error. Salma Houerbi names brands’ “abusive purchasing practices” as the drivers of exploitation in supply chains, an argument that resonates deeply with critiques of the fashion industry writ large, particularly fast fashion. The Turkish garment sector would not see such frantic shifts between formal and informal work identities and the labor fragmentation based on ethnicity had large fashion corporations not pressured suppliers into creating an economy of unregulated subcontracting.
While this perspective offers a pointed critique of international consumerism— what about domestic consumers within Türkiye? The next two sections investigate this question from seemingly diametrically opposed angles: Erdoğan’s rogue economic policies and the rising fast fashion scene within Türkiye.
26 Korkmaz, Emre Eren. “Syrian refugees and the ethnicization of Turkey’s informal garment sector.” Ethical Trading Initiative, 2016. https://www.ethicaltrade.org/blog/syrian-refugeesand-ethnicization-turkeys-informal-garment-sector
27 Korkmaz, “Syrian refugees and the ethnicization of Turkey’s informal garment sector”.
Türkiye’s economy has been in persistent turmoil for the past few years, rapidly declining since the end of 2021. November and December saw the Turkish lira plummet to a rate of US $1/TRY 16₤, landing at US $1/ TRY 18₤ in August 2022. President Erdoğan’s unorthodox monetary policies can be cited for most of these economic woes. Namely, he has pushed the Turkish Central Bank to cut interest rates in hopes of boosting exports and reducing inflation. Instead, the opposite has happened, and in October 2021, before the winter crisis, inflation was running at 20%, with some estimates listing it at much higher.28 Almost a year later, after continuing with largely similar policies, in July 2022 official inflation hit 79.6%, a 24-year high.29
The economic situation has serious, tangible impacts on nearly everyone’s daily life. The Business of Fashion reports that in 2017, even before the significant worsening of the economy, 12% of Türkiye’s High Net-Worth Individuals departed the country.30 On the fashion side, a 2021 survey by Türkiye’s United Brands Association—which represents 384 brands and over 70,000 domestic stores—showed that more than 50% of those surveyed reported decreased sales by more than a half compared with 2020.31 This comparison is apt given that fashion retailers were already hard-hit by the first round of pandemic lockdowns in 2020. Economic woes have hardly affected brands and retailers as much as normal citizens. A particularly poignant series of interviews in an Üsküdar second-hand market points to the rising unaffordability of second-hand goods. The interviews, published in Turkish in the newspaper Cumhuriyet, illustrates how people are turning to selling their clothes in order to afford food. An example of an elderly man selling his TV to pay off a grandchild’s credit card debt, and people buying appliances and furniture in installments then selling them in cash to be able to survive, highlights the dire situation of Türkiye’s vulnerable. 32
Türkiye’s economic troubles and the Turkish garment industry intersect at this critical point. Brands and retailers, especially those based internationally, are hiking prices to reflect rising inflation, meanwhile many in Türkiye are struggling
28 Hall, Casey. “Turkey’s Economic Crisis Batters Retailers, Boosts Apparel Exports.” Business of Fashion, Dec. 2021. https://www.businessoffashion.com/news/global-markets/turkeyseconomic-crisis-batters-retailers-boosts-apparel-exports/
29 “Turkey’s inflation jumped to 24-year high of 79.6 percent in July.” Al Jazeera, Aug. 2022. https://www.aljazeera.com/economy/2022/8/3/turkeys-inflation-jumped-to-24-year-high-of79-6-percent-in-july
30 Berezhna, Victoria. “Turkey: Troubled, Resilient and Full of Opportunity.” Business of Fashion, Jun. 2018. https://www.businessoffashion.com/articles/global-markets/turkeyfashion-retail-troubled-but-full-of-opportunity/
31 Hall, “Turkey’s Economic Crisis Batters Retailers, Boosts Apparel Exports”.
32 Polat, Ali Can. “Zamlar ve kur yurttaşın belini büktü: Ekmek için ceketini satıyor.” Cumhuriyet, Dec. 2021. https://www.cumhuriyet.com.tr/ekonomi/zamlar-ve-kur-yurttasinbelini-buktu-ekmek-icin-ceketini-satiyor-1890951
to get by, selling clothes to afford food. Many cannot afford international brands and are instead turning toward local design houses. Yet, local brands purchase raw materials and machinery in international currencies, thereby raising prices, making finding affordable and locally-produced clothing nearly impossible. This picture becomes increasingly complex when considering Türkiye’s large role in the garment manufacturing industry, and the impacts of the economic crisis on marginalized figures within Turkish fashion sectors.
Despite all of this, there has been a notable rise in Turkish e-commerce. No longer relying solely on international distribution giants such as Amazon, Turkish consumers are increasingly buying goods from domestic alternatives. Business of Fashion reports that Türkiye’s predominantly young population—60% of the country’s 80 million are under 35—opens a prime market for e-commerce and online fast fashion retailing.33 Given this rising opportunity for domestic retailing, I investigate Türkiye’s leading e-commerce and fast fashion platform, Trendyol.
Founded in 2010 by entrepreneur Demet Mutlu, Trendyol has taken the Turkish market by storm. A Turkish equivalent to the likes of Amazon and Alibaba, the platform carries everything from clothes to electronics to household supplies, and has revolutionized the way Türkiye shops. As of August 2021, Trendyol was valued at US $16.5 billion, with significant financial backing by Alibaba, General Atlantic, and the Qatar Investment Authority, among others.34 Within Türkiye, Trendyol has over 12,000 employees, with an indirect employment of 730,000 through various business partners. According to one of its board members, the Trendyol ‘ecosystem’ partners with various smaller Turkish enterprises and companies to create economic benefits for Türkiye, including contributing to the economic development of Anatolian provinces and increasing women’s participation in the national economy.35 Most recently, Trendyol announced an expansion into the European market, featuring a new website and covering 27 countries, including France, Germany, and the U.K.36 In this capacity, Trendyol hopes to bring primarily Turkish-manufactured products to European consumers under terms established by a Turkish company, unlike European companies that utilize Türkiye as an outsourcing site.
Trendyol adds a complicating factor to the Turkish garment industry, which has
33 Berezhna, “Turkey: Troubled, Resilient and Full of Opportunity”.
34 “Turkey’s Trendyol Raises $1.5 Billion, Valuing It at $16.5 Billion.” Business of Fashion, Aug. 2021. https://www.businessoffashion.com/news/global-markets/turkeys-trendyol-raises-15billion-valuing-it-at-165-billion/
35 “Turkish e-commerce firm Trendyol adds 1,000 jobs in 3 months.” Daily Sabah, Oct. 2020. https://www.dailysabah.com/business/economy/turkish-e-commerce-firm-trendyol-adds1000-jobs-in-3-months
36“Turkish e-commerce firm adds 1,000 jobs in 3 months,” Daily Sabah.
been producing en masse for international distributors and brands for generations, and highlights the domestic consumer of fast fashion. Türkiye is a locus of labor for the international fashion and garment industry, compounded recently with the growing preference for organic Turkish cotton and its geographic proximity to Europe. Previous sections have outlined the economic and legal practices that shape Turkish supply chains’ completion of international orders, but Trendyol’s massive growth as a domestic alternative complicates this landscape. As Korkmaz states, many once-formal garment sectors return to informal practices for a domestic market once production for international brands ceases. So, now that a domestically born and driven market for fast fashion has emerged in Trendyol, what are the legal, economic, and political practices that regulate these domestic supply chains? How might garment workers be treated when the pressures of fast fashion come from within Türkiye rather than from abroad?
Currently, little has been revealed about the state of the Turkish fast fashion scene in terms of rapid production times compared to its European counterparts, but it can be assumed that if Trendyol wants to expand into the European market, they would need to maintain a competitive production speed to be successful. Yet, the conversation of Trendyol’s expansion becomes more murky when juxtaposed with their investors.
Trendyol’s investment points towards an orientation away from the massive funders of the West. In mid-2018, the Alibaba group began investing in Trendyol, causing the 5 top investors of the company to then drop out. These included Tiger Global, Kleiner Perkins Caufield & Byers, Maide Kurttepeli, Emre Kurttepeli, and the European Bank for Reconstruction and Development (EBRD).37 Of these investors, before Alibaba, Tiger Global and Kleiner Perkins Caufield & Byers together owned 4.8% of Trendyol, with the EBRD owning 14%. In 2018, estimates put Alibaba’s stake in the company at 75%.38 In early 2021, Alibaba invested another $350 million, putting its shares at 86.50%.39 According to a Crunchbase breakdown of Trendyol’s investors, the Qatari Investment Authority, General Atlantic, and the Abu Dhabi Developmental Holding Company (ADQ) also hold shares in the company, although the information has not been confirmed since the last round of Trendyol’s fundraising.40
The exiting of five previously key players upon the arrival of Alibaba speaks to the tension between Western-based groups such as the EBRD and the Chinese-owned giant, yet the expansion into European markets is rather interesting seeing that
37 Ferah, Ahmet Bugra. “Which Trendyol investors exited due to the investment of Alibaba?” Webrazzi, 29 June 2018. https://webrazzi.com/en/2018/06/29/trendyol-investors/
38 Ferah, “Which Trendyol investors exited due to the investment of Alibaba?”, 2018.
39 Yalçın, Fatma. “Trendyol Becomes Turkey’s Most Valuable Company with New Investment from Alibaba”. Doing Business in Turkey, 6 May 2021. https://doingbusinessinturkey.com/ trendyol-becomes-turkeys-most-valuable-company-with-new-investment-from-alibaba/
40 Trendyol Group, Crunchbase. https://www.crunchbase.com/organization/trendyol/ company_financials
Trendyol’s main investors, if not all of them, are outside of Europe. Could Trendyol be the way for Alibaba to expand its reach into Europe? While an interesting proposition, it does not answer more pressing questions about Trendyol’s domestic impact on Turkish society.
Looking critically at the state of the Turkish economy and Trendyol, the growing fashion giant represents the intensification of pre-existing forms of exploitation within the Turkish garment industry. The plummeting Turkish lira has meant that international products priced based on foreign currencies are becoming practically unattainable. In a time when many are resorting to second-hand markets and selling their own clothes to survive, Trendyol products are increasingly attractive to Turkish consumers. This leaves Trendyol, which produces and prices domestically, at an advantage to saturate the thinning affordable sector with its own products. Yet, consumer ethics also come into question here—as more and more try to buy sustainably, is avoiding fast fashion even possible for the Turkish consumer economy?
While the concept of fast fashion has been historically predicated on European fashion schedules, emerging market players such as Trendyol intensify the labor exploitation that comes with high demand and turnarounds. In bringing an international and exploitative business to the local level, Trendyol can effectively rule out appeasing international labor standards as implemented by the EU, ILO, and individual brands’ corporate responsibility policies. While domestic brands in Türkiye might have similar labor regulations and goals, the economic situation prioritizes the survival and sustenance of brands. In addition, although international demand has converted garment manufacturers to operating on a part-time informal labor schedule to fit in increased demand, the rise of a domestic fast fashion giant such as Trendyol would effectively eliminate any formal labor practices for domestic garment producers.
The Turkish population is left with increasingly few options for clothes in the current economic crisis, the rise of Trendyol will only further normalize the informal, ethnicized labor practices seen in garment production centers across Türkiye. Trendyol localizes everything from textile sourcing to labor, meaning that they can deliver affordable prices to the struggling Turkish consumer by increasing the exploitative practices in factories based locally. Türkiye’s size is further favorable to Trendyol’s model: goods can be shipped from anywhere in the country overnight, significantly reducing the time it takes for product design, sourcing, manufacturing, and delivery. Yet, many seem to love Trendyol for more than its affordable products and quick shipping—many family members and friends of mine continually comment on the surprisingly good quality of products from Trendyol, a reality not mimicked by clothes from similar fast fashion giants such as Shein or Alibaba itself.
Trendyol has further cemented itself as a cornerstone of Turkish e-commerce by allowing local small businesses and brands to sell on their site. In a similar format to Amazon, small brands can take advantage of the logistics framework Trendyol offers
to sell their products in a quick, integrated manner anywhere in Türkiye. Similar sites such as Shopier—a Turkish equivalent to Shopify—exist, however, they do not offer the marketplace advertising benefit that Trendyol does. Furthermore, the Trendyol Group operates Dolap, a Turkish equivalent to the popular second-hand shopping platform Depop. The app-based service is the primary way clothes are recycled and repurposed outside of physical secondhand markets. These elements of Trendyol’s operations offer a lasting question with no concrete answer: while the emergence of the e-commerce giant has domesticized the international fast fashion industry, it also provides a platform for smaller, more sustainable creatives to market their work in an industry and economic situation that means every sale counts.
Where does this leave the future of Turkish fashion writ large? The ethnicization of an already polarized and exploitative garment industry shows little hopes of improving with demand on a seemingly perpetual rise, as exhibited by growing Turkish exports each year. Türkiye’s economy doesn’t seem to be stabilizing either, with the past year’s currency devaluation adding more frustration with Türkiye’s economic conditions. The rise of domestic e-commerce platforms such as Trendyol and Hepsiburada complicates the singular image of European brands relying on Turkish textile production. Previously predictable cycles of formal and informal labor have given way to increasingly exploitative forms of informal labor, throwing into question the rigid classification of formal and informal work as for either the international or domestic markets. These blurred boundaries remind of the shifting fashion industry globally: an increasingly digitized fashion world means that the outputs of traditional brands can be replicated anywhere, at any scale, by altering labor landscapes to match fast fashion production standards. Trendyol’s domination of the Turkish market and rising presence in Europe is a reminder of the exploitative structures and practices enacted behind the scenes in the global fashion industry, and the future of Türkiye’s garment production and consumption remains tethered to worsening economic and political realities for all involved.
Walk to the Water Fountain detail, gouache on board, 2004
ieces of paper and used tissue were scattered all over the studio’s floor.
“No one cleans the studio these days, shame on them! Shame!” said Ahmed Farouk while cleaning up. It was his morning shift, and the mixing console and old talkback button were not working properly. Even the microphone had a pin attached to it, keeping it upright. In each break between programs, Farouk wrote part of the daily program report, a handwritten document meant “to record all the movements in the studio.” But this is not the case anymore: broadcasters now only write the names of the programs and their timing. This is still done on carbon sheets, which Maspero1 sends every few months to Radio Canal. They are often not enough and so employees use their own money to buy more. As I was looking at the studio’s walls, taking pictures, and getting familiar with the setting, the handwritten news bulletin had just arrived. They used to be printed, but the printer had broken and the workers were collecting money to fix it. Farouk started the morning shift: “Ladies and gentlemen, Salem Alikom w Rahmet Allah w Barakato. We salute you on the beginning of our morning shift on Tuesday the 17th of Sha’aban of 1442 of the Islamic calendar, and on 30th of March of the year 2021 A.C…” Then his eyes locked on the paper calendar on the wall, and he realized it not the 30th of March. Trying to curb his temper, Farouk pressed the talk back button and asked Samy, the technician, for an explanation. “I don’t know,” said Samy, “maybe someone needed a piece of paper or something.” In total frustration, Farouk told me that Radio Canal’s general manager is completely negligent, and that he is the one who has been trying, day in and day out, to keep the station from falling apart.
This article examines Ismailia’s Radio Canal, the only radio station in Egypt’s Canal region, using it to understand how a segment of Egypt’s public servants are grappling with Egypt’s variant of neoliberalism. My main aim here is to situate Radio Canal not only between the developmentalism of previous eras and contemporary neoliberalism, but also as an institution in which eras were formulated and imaginations built. It is an attempt to understand Radio Canal beyond its current state of ruination, focusing on its objects and capturing the affect associated with them. Because of its anomalous resilient character, despite the government’s disinvestment from the public sector, Radio Canal is a strategic place from which to observe the current Egyptian state and its convoluted relationship with public infrastructure. That is to say, the Radio is a prism that allows us to look at the different phases of the state and how they interact with one another.
The reflections presented here on the station’s technologies and programs enable us to understand the struggles of Radio Canal’s public servants as well as their attempts to maintain relevancy. As I gave Radio Canal, its people, hallways, and studios the authority to guide me, I realized that its public servants—who are witnessing rapid, cruel changes and implicit yet recognizable structural violence
1 The headquarters of the abolished Egyptian Radio and Television Union (ERTU) in Cairo and the current National Media Authority
—are stranded between different eras of statecraft. Some of them are still adhering to the place’s original mandate as a service developmental radio and are actively trying to further postpone its inevitable death. They are aware of the obsolescence of the objects and tools they are working with but continue to regard themselves as media professionals who are also part and parcel of the incumbent regime, holding onto this station as their safe haven that protects them from the uncertainties of neoliberalism.
Known as the main administrative headquarters of the Suez Canal Authority (SCA), Ismailia has long attracted people from all over the country to work in the SCA or other governmental posts. But with neoliberalism slowly seeping into the city, the social imaginary of Ismailia has changed from Bald El-Mawzfeen—a public servant’s city—to a city that strives to be business oriented. Though most of the projects in Ismailia are related to the government and military, they still demonstrate the state’s determination to create an atmosphere conducive to entrepreneurship. There has become a noticeable blend between the city’s public servants and “the new investors’ society” as Farouk puts it, a mesh that is slowly changing the deeply embedded perception of Ismailia as a peaceful, silent city to one that is full of cafes and government related enterprises.
Headquartered in Ismailia, Radio Canal is the only radio station in Egypt’s canal region—even the one in Port Said serves as its branch. It was established in 1988, along with other radio and TV stations across the country, with the aim of developing and serving local communities. The late 1980s were a time of economic crisis, which urged the government to open up its economy and restructure its public sector. In discussions between the Egyptian government and the World Bank to avoid sovereign debt default in 1989, the government tried to speed up reforms, calling for “the autonomy of public enterprises” while closing or privatizing the unprofitable ones.2 Though Mubarak at first declared his full support for the public sector, his government acquiesced to structural adjustment in 1991.3 The IMF privatization schemes became part and parcel of the overall government agenda, though they were later met with fierce opposition from the public. Consequently, the government was reluctant to restructure the public sector or completely sell it off.4
Yet, it was not counterintuitive to build radio and TV stations in Ismailia or other regions in the midst of the economic crisis. The state at the time endorsed a media
2 Aoude, Ibrahim. "The Egyptian Uprising and the Global Capitalist System." International Studies (New Delhi) 49, no. 3-4 (2012): 315-330.
3 Adly, Amr. 2012. “Press Releases & News | Egyptian Initiative for Personal Rights.” Eipr.org. October 8, 2012. https://eipr.org/en/press/2012/10/amr-adly-egypt%E2%80%99s-witheringpaternalism-and-future-its-political-economy.
4 Paczynska, Agnieszka. State, Labor, and the Transition to a Market Economy: Egypt, Poland, Mexico, and the Czech Republic. University Park, Pa: Pennsylvania State University Press, 2013
policy that aimed to establish regional broadcasting venues, believing that the best path to owning a universal influential media outlet is through establishing local ones.5 On one hand, these regional stations were built to provide fast and immediate local service capable of linking citizens with state officials.6 In other words, regional stations were meant to act as an interface between officials and the people in order for the latter to voice their demands and get their problems solved. On the other hand, President Mubarak wanted to guarantee Egypt’s position in the Arab region as a leading platform in both audio and visual broadcasting.7 Thus, beginning in 1981, the government started creating a network of local radio stations equipped with the latest tools and technologies, marking this epoch in Egyptian history as the era of networks.8 These regional networks were not just a key part in the state’s development policies, they were also meant to provide the government with information related to people’s perceptions of and sentiments towards existing policies.9
And of course, their informative role also compels them to deliver news from ‘around the corner’ important to locals.10 Many listeners in the Canal Region whom I interviewed pointed out the importance of Radio Canal, especially its news bulletins. Consider what Mohamed El-Sayed Abdelaty, a 53-year-old driver for the Suez Canal Authority and daily listener of Radio Canal, told me:
My siblings and I inherited our father’s house and have been trying to deal with the building violations and other legal issues, and so I started to tune in to [Radio Canal] at 8:00 am in order to understand the news related to the new residential policies.
This is just one example of how Radio Canal allows its listeners to know what is happening around them and make decisions accordingly. Clearly, the radio still has an impact on the people of Ismailia as regular listeners and a significant number of officials are still responsive to it. It is an institution that remains to this day focused on representing the Canal region’s culture while also trying to solve its inhabitants’ problems. Through its various
5 Darwīsh, Ahmad Muhammad. al-Idhāah Al-Misrīyah: Misr tatahaddathu 'an Nafsihā. V ol. 41. al-Qāhrah: Wizārat al-Thaqāfah, al-Hay'ah al-'Āmmah li-Qusūr al-Thaqāfah, 2016.
6 Khodair, Amany Ahmed, Mostafa E. AboElsoud, and Mahmoud Khalifa. "The Role of Regional Media in Shaping Political Awareness of Youth: Evidence from Egypt." Politics & Policy (Statesboro, Ga.) 47, no. 6 (2019): 1095-1124.
7 Badr, Hanan. "Egypt’s Media System: Historic Legacies and Blocked Potentials for Independent Media." Publizistik 65, no. 1 (2019;2020;): 63-79.
8 Darwīsh, Ahmad Muhammad
9 Khodair, Amany Ahmed, Mostafa E. AboElsoud, and Mahmoud Khalifa.
10 Chantler, Paul and Sim Harris. Local Radio Journalism. 2nd ed. Oxford; Boston; Focal Press, 1997.
programs, Radio Canal sheds light on the historical events and cultural traits that are constitutive of what canal people perceive as their distinctive identity.
In contrast, the television stations Channel Four and Canal TV, which were established for the same purpose of Radio Canal, shifted their focus to entertainment only fifteen years after their launch. Sentences like “we have no connection to Canal TV” and “I have to be pinned down in front of it, so I do not really like it,” were common among the Radio listeners I interviewed. One of them is Foaad Hoba, a 72-year-old man who works in the import-export industry and is a devoted Radio Canal listener. He told me that “those who work in radio broadcasting work for the people, but those who work in television work for fame.” Indeed, the residents of Ismailia perceive the radio as an entity that remains loyal to its purpose as a service platform, which connects people with each other and with state officials. It stuck to its original mandate, to serve and inform the people of the region, even though its capacity to help people no longer depends on the radio as an institution. Though there exists no legal obligation for officials to answer to the radio or even be attentive to it, most officials still feel obligated to answer to it mainly because of its influence back in the 1990s. Now, the radio's impact is fading, and it is all based on the capacity of the broadcaster to build a network within the governorate’s apparatuses to be able to help the people. Or as one listener puts it “they are making sherbet (sweetened juice) out of rotten fish.”
At the beginning of 2021, the former Minister of Information Safwat El-Sherif passed away. Among most of my interlocutors, he is well-remembered, as he is seen as responsible for Radio Canal’s high-quality work environment and technologies. My interlocuters frequently referred to how technologically advanced the station once was. Khaled Rashid, senior technician at Radio Canal, told me that Safwat ElSherif highlighted to Mubarak at Radio Canal’s inauguration that the equipment in the station was the latest in the whole Middle East. In fact, it was Mubarak’s visit to Radio Canal’s inauguration that stopped the national broadcasting authorities from replacing the new equipment with older ones from Maspero. But now, expectedly, the situation is quite different. Zeinab, the only broadcaster in the English department hired since 2011, told me that although “this is Maspero [the headquarters] and this is Maspero [Radio Canal], they are way more developed than us.” She explained to me that extent to which Radio Canal has fallen behind technologically in the last decade. In 2017, she worked in El-Bernameg El-Orobi—the European Program—and was shocked to see that there was a computer inside the studio equipped to use flash drives. In general, the use of flash memories has been prohibited since 2011, but apparently, there existed some flexibility at the headquarters. For example, the
morning shift at the European program was “lively, full of new songs and nice hits,” but if Zeinab wanted to air new hits or songs in Radio Canal, she had to take the following steps:
I wrote the list of songs, their titles, artists, and lyrics, burnt them onto a CD and came to the studio when the sound engineer is here. Then, I would fight with the sound engineer about the content that he himself does not understand, get permission from the general manager to air these songs, and then come back to the engineer! Then he would ask me, ‘how do I know what’s on the CD won’t get us into trouble?’ It is a vicious cycle!
Though the situation is slightly better now, it is still a tedious process. Zeinab, among others, uses some of her montage time in order to record a song or two. She connects the computer with her cell phone, and the computer records the whole song while she is listening to it: “compared to what I had to do before, this is a huge improvement! Kda khier w barka.” Despite the fact that Zeinab thinks that recording songs is an achievement in and of itself, this procedure does not make up for the fact that the USB cable that attaches the computer to the smartphone sometimes distorts the song altogether, and one can discover this problem only when the recording is done.
Obsolescence is made legible to the workers of Radio Canal whenever they interact with its tools. Their relationship to these tools allows us to understand the significance of this place to my interlocutors and gives us the chance to encapsulate their convoluted relationship with the present. By providing a detailed description of the affective technological landscape of Radio Canal, I aim to situate its suspension between the developmental epoch that brought it into existence and this contemporary neoliberal moment that is slowly eroding its use and jeopardizing its survival. This is not to suggest that the current neoliberal reality is not tainted with a developmental agenda. But the government’s conception of development in the late 1980s, when neoliberal tendencies were still nascent, had different terms from the present iteration of neoliberalism. The memories and encounters recounted here will allow us to analyze the state’s implementation of this unique logic. It is in these instances where we can examine how the state’s total abandonment of these places is not formally enacted but socially felt. Through the various forms of negligence practiced upon this place, the state’s political agenda reveals itself. In other words, the absence of a clear-cut decision to close regional radio and TV stations altogether does not negate the state’s disposition to disinvest from public service infrastructure. As shown below, the state is trying to maintain a paternal socialist legacy to avoid any kind of disruption while providing the workers of these places with the bare minimum.
It was almost 4:00pm, and Rabab Fekry, a technician at Radio Canal, was still working vigorously to finish montaging some programs. Sitting beside her was Amr Meligy, a Senior Radio Correspondent. In front of Rabab was a Dell computer and an eleven-year-old mixing console. Though working with an operating system year out of date, she was grateful that the station had reached this level of technology and was proud of her ability to “edit on the spot.” Rabab explained that now, broadcasters do not have to be physically in the studio to do their jobs. Whereas previously, the studio was always full of broadcasters waiting for Rabab to edit their work, now they can simply send the content of their programs via WhatsApp and she can get right to montaging. Even the Radio’s general manager, Gamal Masoud, sends his work electronically to Rabab. She then downloads and montages it without his physical presence.
Before the introduction of more advanced technologies, technicians used to work on reel-to-reel tape recorders. These intricate machines are scattered everywhere in the station. Using these recorders requires significant expertise, and so when I wanted to listen to Radio Canal’s inauguration ceremony, I needed the help of Khaled Rashid, who gladly sat with me and shared his memoires of that day. But as the tape played, the voice would frequently dim a bit. And as it went on, the
quality deteriorated even more, until it was almost completely distorted. To solve this problem, Rashid would stop the tape, put some alcohol onto its carbon fibers, and start it once again. As he wiped the fibers, he lamented that “the Swiss company Studer, the one that made these machines, made them and closed! And since then there are no spare parts available, we have about 15 or 20 reel-to-reel tape recorders, in the drama studio that just do not work…”.
Yet, contrary to his recollection, Studer did not close. As of 2007, the company was maintaining a steady growth with a noticeable increase in orders and total turnover from 180 million CHF in 2005 to 200 million CHF in 2006. In 2010, the Egyptian Radio and Television Union (ERTU) was among the public broadcasting services that received shipments of new Studer equipment. And, unexpectedly, some of them landed in Radio Canal. Rashid’s assumption that Studer closed was an affirmation of the abandonment and nonchalance that Radio Canal and its people are suffering from. The National Media Authority, which was created under Law No. 92 of 2016 to replace the Ministry of Information without any sort of debt relief, is currently suffering from a severe budget deficit, and authorities are neither committed to renovating Radio Canal’s old equipment nor are they willing to replace it. Rather than thinking that Radio Canal’s broken equipment is the result of disinvestment, Rashid assumed that Studer made these machines with no spare parts and then vanished into thin air. Despite general neglect by national authorities, when in May 2021, the Studer mixing console in the on-air studio broke, Safaa El-Mahdy, another senior technician, told me that two technicians came from Maspero to fix it.
This attempt to fix the console, this injection of some measure of care is among many efforts to keep this place afloat. To understand the contradictions presented in these last two paragraphs—between Maspero’s systematic negligence of Radio Canal and its occasional assistance—we have to understand that the state still presents itself to the public as a patriarch who would not suddenly abandon its public servants. Had the Egyptian state abided by the classical conception of neoliberalism, Radio Canal as service governmental organization would have ceased to exist years ago. But the state is choosing to preserve it for the lack of a more efficient reasonable route.
“This is one of the forms of the management of the state” says Lamiaa Ebrahim, a senior broadcaster in the English department, while expressing her certainty that the station would never close down unexpectedly. She added that [The state] takes steady steps but it does not implement them on whole groups all of a sudden, so as not to incite any kind of rebellion. So the strategy is to divide things and take them down individually, that is one of the main reasons why they keep Maspero alive. But to shut a whole sector down then they would have a lot of troubles and it would not go peacefully.
With some exceptions, like the Ministry of Justice, the state’s administrative
apparatus has had no new recruitments since 2011. Since then, it has sold its lossincurring public companies to investors. For example, the National Cement Co. (NCC) was liquidated in 2018 and the Egyptian Company for Iron and Steel, which has played a huge role in Egyptian industry since its establishment in the Nasserite era, was privatized in 2021. About 7,000 workers have been informed not to go to work until a compensation agreement has been finalized, and a sit-in demanding proper compensations was held as a result. “After this mess is finalized, investors intervene” said Farouk in describing these events for me “they buy these factories ba rokhs al torab—with very cheapest prices.” These actions go hand in hand with the neoliberal urge to constitute a “society grounded in the enterprise”11 altering its own services into sites that have the capacity to accumulate profit even if it will implode the structure of some segments of the society altogether.
Radio Canal belongs to an economic authority that is heavily indebted and unable to generate any kind of profit. The National Media Authority, which replaced the Ministry of Information in 2016, has not been allowed to recruit new employees since 2011. As of 2017, Maspero had 36,700 employees.12 Thus, any abrupt closure would certainly stir instability. This is one of the main reasons why Maspero employees believe that their total dismissal is unthinkable, even though the classical Egyptian developmental agenda that entailed the construction and sustenance of places like Radio Canal does not exist anymore. It has been replaced by a veneer of developmental neoliberalism embraced by Sisi’s government and its primary constituencies, the military and the business class.
The people of Radio Canal know that their station is crumbling, that it might be privatized, that their transmission times might be rented out, and that their voices might not be heard five years from now. Yet, there is a sense of security, of reassurance invoked by public statements and fragmented moments of acknowledgment that gives them the semblance of security. It is this feeling that gives them the capacity to work as if nothing has changed, even as the talks of privatization are omnipresent.
Through the words of my interlocutors, Radio Canal’s affective dimension comes to life and the state’s agenda incoherent neoliberal agenda becomes more evident.
"Back in the day, we worked with reel-to-reel tape recorders. I used to stand all the time, and we did not have enough time to sit because as soon as the broadcaster said the word, I had to be ready with the music… and so I had to prepare beforehand. I had a huge stack of
11 Lazzarato, Maurizio. "Neoliberalism, the Financial Crisis and the End of the Liberal State." Theory, Culture & Society 32, no. 7-8 (2015), 7.
12 Sharawy, Fatma. 2017. “ ” Al-Ahram Online. 2017.
reel tapes in front of me… It was a huge mental and physical effort, because you had to be present… the broadcaster might surprise you with something irrelevant to the what you had prepared, and so you needed a quick wit. For instance, what will happen if he starts talking about agriculture and then I air something related to education? And that was the real challenge. But when the job was done, you were proud. You were happy to be part of something successful and have your name on it. You felt that your effort and exhaustion did not go to waste.” -
Rabab Fekry, Technician in Radio Canal“The whole process used to give one energy. It was as if you were at the gym, moving all around. But the computers we have now have really eased things for us. Now, you can merge things with one click, and move from track to track from the comfort of your chair. You can do the work of professionals, because the technology is more advanced than reels and tapes. Of course, as you know, everything that is new and modern is better.” -Khaled Rashid, senior technician at Radio Canal.
“You felt that you accomplished something when you worked with 5 or 6-reel tapes. You felt like you did your job and worked for real…It was a hard process, and so you felt like an expert, but now, the whole thing is just very easy.”
-Shimaa Hakeem, Technician in Radio CanalThe emotional resonance these machines hold for Rabab, Khaled, and Hakeem speaks to a corporeal memory, a memory of energy and diligence, as opposed to new broadcasting technologies that require minimum effort. Khaled’s gym analogy conveys the vigor and energy that he felt using Radio Canal’s old technologies. On the other hand, his reference to “the work of professionals” relates to his expectations of the existing technologies. These new technologies have the power to affect him, even as they fail to live up to his expectations.13 They seem to enable Khaled to pursue the practices and styles of professionalism, an aspiration that only seems possible with the introduction of ‘new’ technologies.
Both Rabab and Khaled’s statements are in direct contact with the intense affective impact that using these old technologies has had on them. It is as if their movements, the physical toil they exerted, and the bodily sensations they recalled have stayed with them throughout all the transitions that Radio Canal went through, “accumulating in memory, in habit, in reflex, in desire, in tendency."14 In recounting their experiences of working with complex outdated technologies, the corporeal
13 Ahmed, Sara. The Promise of Happiness. Durham: Duke University Press, 2010, doi:10.1515/9780822392781., 29.
14 Massumi, Brian. 2015. The Politics of Affect. Malden, Ma: Polity Press., 4.
aspect of the memory is both manifested and emphasized, as if their past encounters with the old technologies are deeply ingrained within their bodies. Although at the moment their work is easier with the presence of relatively new production technologies, the state’s care for them and for the station comes in irregular rhythms. Hence, neglect has become the constant background noise, pulling the state’s paternal cloak bit by bit. Even if its neoliberal endorsement was never officially announced, it is felt. And it is one of many aspects that makes the people of Radio Canal relate to the old machinery with such nostalgic overflow.
Though they are grateful for new technologies, the obsolete technologies stand for a culture of hard work and effort. The symbolic value that the reel-to-reel tape recorder holds lays in its connection to expertise. It acts as a reminder of the technicians’ dexterity in dealing with such complex machinery and their capacity to “work for real.” Even with the existence of computers and servers, the rhythms of the reel-to-reel tape recorders seem to overrule. Moreover, the qualities that are associated with the obsolete technologies and manual labor, like effort, energy, and alertness are very different from the qualities that are linked to the more modern technologies, like speed, change, and professionalism. There is no doubt that the computers and mixing consoles made a technological leap within the place and have, in turn, eased the jobs for the technicians, but still the excitement and vigor in the technicians’ voices whenever they recalled working reels was noticeable. This old machinery acts as a common terrain that the technicians stand on, reminding them of a different work ethic that is lacking in the present. As a matter of fact, the transition from the machines which seem to reside within the folds of history to the machines that have the relative capacity to speak to the contemporary did not fulfill any expectations of improvement.
It would be commonsensical to think that with the introduction of new technologies like mixers and the computers, there would be some progress towards delivering the Radio’s developmental message. But what followed was different since the introduction of new equipment and computers was paired with the state’s disinvestment and negligence. The above episodes reveal how the people of Radio Canal understand the station’s past and understand their present in relation to Radio Canal’s golden era. To them, though the past was filled obsolete technologies, it was free from the scratches of the present, projecting itself as a period of hard work and dedication as opposed to this lacklustre confusing temporal moment
Despite the feelings of despair shared by most of my interlocutors, there is also a blatant refusal to succumb to the station’s loss of weight and potential, especially in the face of rising private media outlets. This constant resistance is nowhere clearer than in the presence and functionality of Radio Canal’s English department, which has always struggled to work and establish its presence with limited resources. Unlike the Arabic-language departments, which have their own news editors, English
broadcasters get the news for themselves, either from other official radio networks, El-Ahram Online, or the Egyptian Gazette—a newspaper that Lamiaa buys for the whole department. Even the objects and technologies used in that department belong to the broadcasters. During the heyday of Radio Canal, the broadcasters used to record the news on their personal Walkman devices that they have bought themselves. Afterwards, they would transcribe and translate the news bulletin and then air it. Now, the mechanism is still the same, but rather than using their Walkman or CD players, they use their phones to record the news from any official source. The English department has always been maneuvering its way just to exist and below is Lamiaa’s experience as she was constantly trying to get the job done: The deterioration escalated to the extent that those in charge would tell you that if you want to go and record in that particular place, you have to pay for your own gas. I used a huge cassette player and got a tumor in my shoulder because of how heavy it was... They only gave us the flash drives that they gave to Amal [the head of the department] six years ago, in order to record voices with clarity and that is the only thing that Amal has with the name of the English section on it.
Most of my interlocutors have been working in Radio Canal since their early 20s. They became so attached with the station that they could no longer let go of it, as “the continuity of its form provides something of the continuity of the subject’s sense means to keep on living on and to look forward to being in the world.”15 But in the case of Lamiaa, there is a bundle of unrealized promises and desires that are part and parcel of what is keeping them magnetized to this crippled institution. She wants to stay in Radio Canal because she believes that what is doing is important, even though no one listens to the English service anymore. “Even if I ever left, I want to come back,” says Lamiaa, “I want to make this place better and put whatever I have learnt into good use.”
"Do not think that my dancing amongst you all is out of thrill or glee, For the slaughtered bird dances out of sheer pain."
This is the caption that Ahmed Farouk used in his first TikTok video from Radio Canal’s on-air studio, filmed as he was reading the news bulletin. I saw him on the same day he posted it and we went to the Radio station. The moment we entered, everyone started giving him compliments on his new video, encouraging him to do
15 Berlant, Lauren; "Cruel Optimism". differences 1 December 2006; 17 (3): 20–36. doi: https://doi. org/10.1215/10407391-2006-009., 21.
more. He told me about how that idea came to him:
I was sitting with my friend; he is in his mid-40s, and he asked whether I would consider creating TikTok videos for people to see. I replied, wondering whether TikTok is mashboh—has a bad reputation? But he told me that it is all about the content that you put out there…And I downloaded it—it is fairly easy, but needs consistency, and you know me, I am lazy.
He then showed me a comment that someone posted on his video, praising his voice and performance. Farouk remarked: “even this does not make me happy anymore.” I looked away, talking to Nermine (a broadcaster in the English department), but I could see that he was still checking the comments with a brief smirk drawn on his face. Interrupting this moment of pride, Nermine suggested that Farouk should upload excerpts from his show El-Leil Maw’dena—In the Night We Shall Meet—on TikTok, as it she thought it would receive a lot of views. Farouk liked her idea, and later that night re-shared the video once again on Facebook and sent me a link on WhatsApp on how to make money out of TikTok.
El-Leil Maw’adena is a social show about love, feelings, and moral standards, infused with an Islamic aura. It aims to solve some of the social and emotional problems that people suffer from. Each week, at 11:00 pm on Sunday, I get a notification on my Facebook account that Ahmed Farouk wrote in the El-Leil Maw’adena group, announcing that he is going live shortly. People start interacting immediately. The group has about 3,000 members, “it used to have about 17,000 members,” Farouk told me, “but it was hacked or stolen and so this one is private. You only become a member through an invitation.” Along with her live streams from the studio, Nermine also has a Facebook page that has about 1,463 followers. She uses it to post her upcoming episodes and the guests in them. Members of Nermine’s audience can contact her through her page to be on her show if they have any special talents. Other broadcasters and technicians use their profiles directly to let people know their programs and their timings like Mohammad Saad and Khaled Rashid. Sahar Salem and Ali Abdallah went the extra mile and made a teaser on YouTube for their program Makan fe Zakerat al Zaman—A Place in Time’s Memory, announcing that the program will have daily competitions during Ramadan.
Henri Bergson, as seen through Maurizio Lazzarato's eyes, argues that the relationship between the flows of durations, different rhythms, and images—that produce natural perception—have always been based on their “capacity to act.” This capacity corresponds to having a margin of power that can be increased through “retaining and conserving time."16 To do so, what Lazzarato called “the technologies of time” become crucial. In retrospect, the broadcasters’ access to the internet gave them the perception that they can retain time, through machines that crystallized
it. An electronic machine like the camera in their smartphones, for instance, allowed them to create an operation of “contraction-syntheses of time” an action that consists of material synthesis that contracts “successive, independent, and actual instants or elements” and a spiritual synthesis that “contracts levels of the past that are all coexisting, virtual."17 In other words, using the camera to create videos and images that capture both the surroundings of Radio Canal, its objects, its technologies (material synthesis), and the different layers of the past that are represented by these surroundings, objects, and technologies (spiritual synthesis), equips the people of Radio Canal with the capacity to act, to relate to the present. The action of capturing moments and airing them on social media platforms is in itself a stand against irrelevance and obsolescence. It is both an invitation to wander between the more eventful planes of the past and an incomprehensible rugged present. In other words, this process magnifies the present, the one that has within its segments the equipment and the studios of the past. This friction between the past and the present tilts the people of Radio Canal towards believing that there might be other possibilities that exist in those retained moments. With the production of images that are made to stay on their social media profiles, there is a force endowed to them that has the capacity to drag the future onto the present, penetrating the interior of duration.18 And it is precisely that integration of the past, the present, and the future in one minute videos or hours of Facebook live streaming, that allows the people of Radio Canal “to retain what is no longer and to anticipate what is not yet."19
My interlocutors conscious efforts to use the station’s tools, objects, and programs, to ensure their relevance, is nowhere clearer than in Nermine and Farouk’s desire to transform Radio Canal into a visual radio:
Nermine: we have tools and we have a studio.
Ahmed Farouk: we have three studios not just one!
Nermine: I always try to make people understand that Radio Canal is not something small—I went live on Facebook during the Eid break, illustrating to people that this is our work and this is the way we talk… of course, the equipment and tools that we are using, are outdated and there is a lack of capabilities for sure…but we are trying.
Ahmed Farouk: no it is about that! The problem is not in the place and its capabilities. It is about the weakness of the system, and the management… why don’t you make a program about shaabi
17 Lazzarato, Maurizio. "Neoliberalism, the Financial Crisis and the End of the Liberal State", 94, 95.
18 Ibid., 114.
19 Ibid., 96.
popular—commercial music? We can make something valuable out of it w hatkasr el-donia—it will be a hit.
In the middle plane that is Radio Canal, there are constant movements between logics, objects, and different temporal junctures, as its employees resist obsolescence and cope with change. Not only do the videos that the people of Radio Canal post conserve time, they also produce an affective energy that reminds them of their long forgotten significance as media professionals. Think about Farouk, a man in his late 50s, using TikTok, became familiar with it and vows to use it consistently just to remain relevant. It is that same urge that makes Rashid post a video or go live on Facebook almost every single day. The same motive pushes Nermine to create a Facebook page and announce the timings of her programs on it, etc. These are all actions that give them the feeling that they have surpassed the now lethargic category of the public servant, by fusing “the dead into the living."20 It is a way, among many, that enables them to rebound time, cope with change, and assert their presence as the structures they have known all their lives are gradually disintegrating.
The hybridity of Egypt’s current economic policies is also manifested in the content of Radio Canal’s programs. They project a fusion between a developmental mandate and an urge to keep up with a peculiar reality, alien to its main purpose. The station’s programs balance its content to communicate with the government’s hybrid language. Among popular educational, cultural, religious, and entertainment programs, the most important programs remain those that go hand in hand with the Radio’s developmental message: the service programs. These are not only meant to educate and inform people, but also aim to connect listeners with government officials.
This is the case with the daily morning program Hadith El-Qana (“The Talk of the Canal”). Every day around 7:30 am, Radio Canal’s landline phone is constantly ringing. The requests are more or less the same every morning. People call and ask for more or fewer speed bumps in particular areas, the removal of garbage containers from the middle of the streets, the construction of a sewage system or other infrastructural facilities in villages, finding a solution for the stray dogs in Suez, etc. It is a developmental program par excellence, connecting the people of the region with each other, the people with the officials, and the presenters with both.
These open durations more or less serve the same purpose. In them, the broadcasters host the undersecretaries of different ministries and other government officials, who are able to reply to people’s concerns and inform them of any updates related to the state’s policies. Yet, in recent years, these programs have become infused with a certain neoliberal rhetoric.
20 Lazzarato, Maurizio. "Neoliberalism, the Financial Crisis and the End of the Liberal State", 95.
For instance, when Farouk hosted the undersecretary of the Ministry of Education the latter talked about a seminar that he did for Ismailia high school students about how to tailor oneself to fit the current job market:
The computer, with all its departments and names, is the new job market, simply said! During the seminar we asked ‘who has taken a course to learn Chinese?’ What is the percentage of Chinese products here? Humongous! So when a paper comes from China that needs to be translated, how much does that cost? Isn’t that part of the job market? How many languages are you fluent in? How are you with programming? When you travel outside of this country, they will tell you to put your educational certificate in the trash! They will tell you ‘come here habibi, how many languages do you speak? Do you speak Chinese? Prepare a contract for him,’ because [the Chinese] are two billion and they make a lot of products…
The irony here is clear. How often do you hear a government official, let alone the undersecretary of the Ministry of Education, saying that the moment graduates step outside their country they will throw their certificates in the trash? The neoliberal tendencies are so forceful here that he is almost chastising high school students for not taking Chinese courses that are not provided in the Egyptian school system. Though neoliberalism is not a monolithic category, one of its general tenets is to constantly work on oneself and be responsive to the needs of capital. What the undersecretary aimed to introduce here to high school students were ways to meet neoliberal demands by thinking of themselves as plastic subjects, “capable of absorbing any content,"21 and flexible beings, ready to monetize their existence whenever/ wherever possible.
Another major type of programs is the call-in. Each Friday, Mohammad Saad, a senior Arabic broadcaster, presents a show called Gaded Hayatak—Renew Your Life. During one of my visits to him on air, the topic of the day was whether callers should wait for the government to open up jobs in the public sector or search for employment in the private sector. The first caller was Wael, a quarry worker in Suez, who complimented the choice of topic but emphasized that the benefit of working in the public sector is the fixed salary even in times of injuries. Saad replied that now “there is insurance in most of the private companies and factories,” but Wael continued reflecting on the precarity he experiences as a private employee. While waiting for the next call, Saad elaborated on the topic of the episode:
The topic of private sector employment needs our focus because every home has a young man or woman who recently graduated and is waiting for work…today, there are no governmental appointments.
21 Mbembe, Achille and Laurent Dubois. Critique of Black Reason. Durham: Duke University Press, 2017, 4.
Just get to work! If you are successful, they won’t kick you out. And most probably, everyone has insurance now, so why are we still insisting on having a government job? Why do we still have the concept of ‘ieen fatak al meri, etmramagh fe torab—try to work in the government no matter what? For your son who still gets an allowance, tell him to find any job even if it is temporary.
Then just wait for something better to come along. I want to hear your experiences. If you worked in the private sector and succeeded, tell us your story. If you worked in the private sector and did not succeed, tell us why you failed. And, if you are still waiting for a government appointment, call us and tell us why you are still waiting!
In trying to reset the listeners' expectations and adjust common understandings of stable government jobs, Saad emphasized the benefits available to private sector employees and provided clear invocations of individual agency and responsibility. Also speaking to this hybrid neoliberal developmental reality was another program aired during Ramadan called Genayan Masr—Egypt’s Gardens. The program recited Sisi’s national projects and accomplishments in the form of poetry with oud playing in the background. As the name of the program suggests, the new projects were likened to flowers that have bloomed in the gardens of Egypt. Here is an excerpt: The factories when they produce, the machines when they run, the buildings when they are erected, and when the roots heave projects, each one of them becomes a beautiful flower in the gardens of Egypt. A beautiful song that produces the smell of a perfume like no other. And Bahiya22 is on the other side of the shore, calling the names of the sailors who are fighting death, and their boats are defeating dangers. The boats of development know their way and know where to anchor on the shore of hope, hugging the lights.
This overview of the programs emphasizes the spread of the symptoms of military neoliberalism, like being attentive and flexible to the demands of capital, abandoning public sector employment, and celebrating national developmental projects and initiatives, into the studios of Radio Canal. It is in these programs that we see how the broadcasters are trying to snatch relevancy in the midst of its lack by combining an older developmentalist discourse with a contemporary flexible neoliberal reality. In other words, the designs of these programs and the topics they discuss act as a reflection of how an outdated governmental institution is struggling to remain relevant while striving to speak the baffling language of the government.
The doors of Radio Canal, the echoes in its break room and hallways, its reelto-reel tape machines and technicians’ cabinets, the on-air and recording studios, the worn out cafeteria, along with the words of my interlocutors, all reflect bits and pieces of neoliberal creeps on a past developmental welfare state. The institution is situated within a unique hybrid of neoliberal state that, on one hand, has the political will to retreat from public infrastructure and implement IMF reforms, while on the
22 A term that is used to refer to Egypt a long time ago, meaning gorgeous.
other hand seeks to maintain its paternal allure. Radio Canal technicians’ relationship with their old machinery contains a longing for a previous era: a time when they were the executors of the state developmental project and it actively provided them with care and security. They yearn for the welfare benefits as well as a well-defined social contract with the state at a moment in which the individual is expected to be responsible for oneself.
Yet, the state has not fully adopted the neoliberal doctrines that would have it dismantle Radio Canal. At a moment of abandoning unprofitable public infrastructure, the mere existence of Radio Canal is almost confounding. It is an institution whose form has changed from a service radio established to help the government pursue its developmental policies during the 1980s and 1990s, to a liminal space, a no man’s land, that is trying to maintain its relevance and importance. Its continued existence reveals an administration that has been able to maintain its paternal façade while slowly letting sections of a whole sector disintegrate. As they deal with obsolete technologies and suffer from the state’s negligence, the employees of Radio Canal are still using the existing objects to produce content that combines developmental spirit with a neoliberal edge. What Lazzarato calls time technologies, such as the video recorders and cameras, help my interlocutors adjust to this temporal juncture. Put differently, these technologies give them ability to “snatch agency in the very midst of its lack."23 Radio Canal, in essence, is an institution determined to adapt itself to the Egyptian state’s new structure, while remaining essentially grounded in the past. As a consequence, it is a remnant of a different version of the Egyptian state. An example of a service institution that has a striking ability to function in a regime with a voracious appetite for “profit making and policy setting.”24
Radio Canal’s state of gradual, rather than abrupt, decay is the exception that the Egyptian state has used to thwart even the mere possibility of social unrest. Examining the status of Radio Canal’s public servants as they navigate between a purposeful past and an alien, unstable present in a city that has long been identified with public service reveals a liminality with no clear-cut end. Its beginning resides in the memory and the archives of Radio Canal, and its end is yet to be known.
23 Hage, Ghassan. waiting. Carlton, Victoria: Melbourne University Press, 2009., 101. 24 Sayigh, Yezid. 2019. Owners of the Republic: An Anatomy of Egypt’s Military Economy. Carnegie Middle East Center. https://carnegie-mec.org/2019/11/18/owners-of-republic-anatomy-ofegypt-s-military-economy-pub-80325., 237.
The Long Wait
detail, gouache on board, 2022
mnesty International referred to the Syrian conflict as the worst refugee crisis of our lifetime. The civil war has displaced roughly 13.5 million people, over half the country’s population. Syrians have settled in Lebanon at the highest rate; on a per capita basis, refugees in Lebanon comprise 25% the size of the domestic population—twice as high as any other country in the world. The Syrian civil war and migrant crisis have had a negative effect on the Lebanese economy and financial system. Geopolitical proximity to the Syrian conflict created sustained economic stress that depressed growth in Lebanon while the migrant population increased the cost of public services and disrupted the labor market. Lebanon’s positive economic trends from 2006-2011 sharply reversed and the Lebanese economy suffered from rising debt, declining revenue, and contracting GDP growth. In 2020, eight years of sustained economic pressure later, Lebanon defaulted on its sovereign debt. Hyperinflation, alleged insolvency for the entire banking sector, and humanitarian tragedy has ensued and continues as of November 2021. The World Bank predicts the Lebanese financial crisis to be one of the three worst financial crises in terms of its effect on well-being since the mid-nineteenth century. 1
Due to the contemporary and ongoing nature of both the Syrian and Lebanese crises, literature on the impact of the Syrian crisis on Lebanon and the subsequent Lebanese crisis is incredibly limited. The successive, tragic crises in Syria and Lebanon prompt several questions including: To what extent did the influx of Syrian refugees contribute to Lebanon’s subsequent financial meltdown? To explore this question, I evaluate the economic effects of the Syrian crisis inclusive of both the geopolitical conflict and the migration crisis—on the Lebanese economy and financial system. I outline the short-and medium-term effects of Syrian migrants and the civil war on Lebanon’s economy and financial system as well as the agency exercised by Lebanese institutions through policies such as Financial Engineering. My analysis relies on calculations using data posted by the World Bank, IMF, UNHCR, and Banque du Liban over the course of the decade. Economic assessments of Lebanon from the World Bank and International Monetary Fund (IMF) will also be referenced, especially in their detailed evaluations of the labor market and fiscal expenditures. This essay is based on data available as of its time of writing (November 2021).
In the early 2000s, Lebanon’s financial system faced institutional challenges, yet between 2006-2011, high growth created progress towards better financial conditions. Prior to 2006, the economy suffered from corruption, high inequality, and
1 “Lebanon Sinking into One of the Most Severe Global Crises Episodes, amidst Deliberate Inaction,” The World Bank, June 1, 2021, https://www.worldbank.org/en/news/pressrelease/2021/05/01/lebanon-sinking-into-one-of-the-most-severe-global-crises-episodes.
a trade deficit which resulted in growing public debt. However, from 2006 to 2011, high GDP growth and stagnant debt reduced Lebanon’s debt-to-GDP ratio, improving financial confidence. These changes had the effect that while the Lebanese economy continued to have fragilities, the system was improving and far from the brink of collapse in early 2011.
The Lebanese economy suffers from poor underlying institutions plagued with corruption and inequality. Institutions in Lebanon are highly influenced by Hezbollah—a non-state actor deemed a terrorist organization by many states and groups including the United States, United Kingdom, and the Arab League.2 For decades, Hezbollah has exercised powerful influence in Lebanon and beyond. In Lebanon, Hezbollah maintains control with a powerful military arsenal, network of bribes, and through affiliation with the majority of politicians in the current coalition of government.3 In part due to Hezbollah’s political control, the Lebanese financial system is rife with corruption, fraud, and illicit finance. International organizations rank Lebanon 134 out of 183 countries on Transparency International’s 2011 Corruption Perception Index.4 Institutional corruption allows the proliferation of nepotism and enables elites to evade auditing and shelter their wealth, maintaining Lebanon’s high wealth inequality.5 These institutional economic struggles have persisted for many years and hindered Lebanon’s economic growth.
Due in part to these institutional problems, the Lebanese labor market bleeds from the emigration of educated Lebanese, resulting in a financial system dependent on capital from remittances. Lebanon has one of the best education systems in the Middle East with over 40% of high school graduates continuing to universities or technical institutes. Despite the strength of this system, the World Bank estimates that roughly 40% of male and 30% of female graduates of Lebanese universities ultimately emigrate to other countries to seek employment.6 This sustained emigration has created a Lebanese diaspora many times larger than the country
2 James Rickard, “Crisis in Lebanon: Anatomy of a Financial Collapse,” Foundation for Defense of Democracies, August 5, 2020, https://www.fdd.org/analysis/2020/08/04/crisis-in-lebanon/.
3 Hezbollah maintains a missile arsenal greater than any European country in NATO, and runs the global network of drug smuggling, money laundering, and terrorism called “the System” through Lebanese banks. Source: Ibid.
4 Junko Oguri, “Part II of Crisis in Lebanon: Buildup of Interrelated ...” (Yale School of Management, September 21, 2021), https://som.yale.edu/blog/part-ii-of-crisis-in-lebanonbuildup-of-interrelated-challenges.
5 The top 10% of Lebanese owned 70% of all personal wealth in 2019, making inequality in Lebanon higher than in the United States. Source: “Escwa Warns: More than Half of Lebanon's Population Trapped in Poverty,” ESCWA (United Nations, September 3, 2021), https://www. unescwa.org/news/lebanon-population-trapped-poverty.
6 Julia Tierney, “The Diaspora, Debt, and Dollarization: Unraveling Lebanon's Resilience to a Sovereign Debt Crisis,” Jadaliyya (Jadaliyya, July 10, 2017), https://www.jadaliyya.com/ Details/32733.
itself; the Lebanese diaspora ranges from 8 to 20 million people compared to the 4.9 million living domestically within Lebanon.7 Roughly half of capital inflows to Lebanon come from remittances that are generally “resilient to shocks due to the diaspora’s familiarity with the country’s political and security volatilities”.8 From 2003 to 2012, remittances have consistently ranged from 15.5% to 26.5% of Lebanon’s GDP.9 Remittances have become central to the operation of the Lebanese financial system as the consistent flow of dollar and euro deposits sustain high levels of dollarized capital for the Lebanese Central Bank, the Banque du Liban (BdL), to maintain the pegging of the Lebanese Pound (LBP) to the USD. Indeed, the LBP has been pegged to the USD at a rate of 1507.5 since 1992.10 Flush with foreign currency, commercial banks in Lebanon deposit these euros and dollars at the BdL, resulting in a consistent inflow of dollars that help the Central Bank maintain the link between the pound and the dollar, make payments on sovereign debt, and access credit.
With these deposits, the Lebanese government has financed a perpetual trade deficit and current account deficit through public debt. Lebanon runs a negative trade balance averaging 23% of annual GDP.11 The country relies on imports for petroleum and over 80% of daily food needs.12 The country’s largest export is tourism, which constituted roughly 21% of Lebanon’s GDP in 2010.13 Tourism is an elastic export due to its dependence on positive geopolitical circumstances and prosperous international economic conditions, while food and fuel are inelastic, creating a gap between exports and imports. Largely as a result of its trade imbalance, Lebanon sustained a current account deficit averaging 16.1% of GDP from 2002-2011 (Figure 2). Combined with a weak taxation policy rife with loopholes and exemptions, the Lebanese government tends to spend more than it can afford.14 Lebanese debt-toGDP peaked at 180% in 2006 (Figure 3). However, since 2006, Lebanon has prioritized paying off debt, leading the GDP to contract to 134% in 2011—a substantial decrease. Underpinning this contraction was nominal debt leveling off between 2006-2011
7 Erika Solomon, “Lebanon's Central Bank Governor: 'We're Not a Normal Country',” Financial Times (Financial Times, November 21, 2017), https://www.ft.com/content/cf667768-c0bd-11e7b8a3-38a6e068f464.
8 Tierney, “The Diaspora, Debt, and Dollarization: Unraveling Lebanon's Resilience to a Sovereign Debt Crisis”.
9 Ibid.
10 Rickard, “Crisis in Lebanon: Anatomy of a Financial Collapse”.
11 Average trade balance over 2000-2011. Source: “Lebanon,” World Bank, accessed December 1, 2021, https://www.worldbank.org/en/country/lebanon.
12 Oguri, “Part II of Crisis in Lebanon: Buildup of Interrelated ...”.
13 Calculated from Lebanon tourism revenue (CEIC) and GDP (World Bank).
14 Lebanon had an exceptionally weak taxation policy. For example, foreign yachts, diesel used for electricity generation, and road vehicles are all exempt from the VAT. Source: Oguri, “Part II of Crisis in Lebanon: Buildup of Interrelated ...”.
and high GDP growth averaging 9.1% from 2007 to 2011 (Figure 4). Overall, Lebanon’s financial circumstances and stability were improving in 2011 compared to past performance.
As the protests in Syria evolved into a brutal civil war, approximately 65% of the population fled the violence and chaos, roughly half of whom (about 6 million people) are recognized as refugees by the United Nations High Commissioner on Refugees (UNHCR). Many of these refugees entered Lebanon, resulting in Lebanon having the highest refugee to population ratio of anywhere in the world (Figure 1). Lebanon maintained an open border policy with Syria until October 2014, meaning that refugees could enter the country with limited physical or legal restraint.15 Over the course of the crisis, Lebanon took between 1.5 to 1.8 million refugees. Popularly covered in the media, Turkey took the highest quantity of refugees at roughly 3.253.6 million refugees. What these statistics fail to highlight is that as a small country, Lebanon took in 0.30-0.37 refugees per native resident while Turkey absorbed around 0.04. By 2015, refugees represented over 25% of Lebanon’s population (Figure 5). As many unregistered migrants also entered Lebanon, the real influence of the migrant crisis on Lebanon is much higher; the World Bank estimated in 2015 that migrants represented 34% of Lebanon’s population.16 An IMF report on the scale of Syrian refugees entering Lebanon compares the Syrian refugee presence in Lebanon to “the United States experiencing a refugee influx the size of the Canadian population, or Germany absorbing the combined Austria and Swiss populations.”17 The quantity of refugees proportional to native population projects the amount of humanitarian support and increased fiscal spending a government must undertake relative to its size and capacities, meaning that the Syrian migration affected Lebanon at an unparalleled scale.
i. The Short-Term Effects of The Syrian Crisis on Lebanon (2012—2014)
With the start of the Syrian crisis, the Lebanese economy immediately began
15 In 2015, after absorbing over a million refugees, Lebanon began discouraging the further flow of refugees by forcing incoming Syrians to either register with the UNHCR for aid and sign a pledge “not to work” or find a “Kafeel”—a Lebanese employer willing to sponsor them. Source: Divine, Ali and Huelzer, Johanna-Maria. “Securitization of Border Policy in Lebanon and Its Impact on Refugees”. Feb 17, 2020.
16 World Bank.
17 “IMF Country Report No. 14/238 Lebanon” (International Monetary Fund, June 12, 2014), https://www.imf.org/external/pubs/ft/scr/2014/cr14238.pdf.
suffering as expenditures increased with the growing population while revenues declined due to geopolitical proximity to conflict. Refugees began entering Lebanon on a mass scale in early 2012. By August of 2013, Lebanon had absorbed an estimated 914,000 registered refugees.18 The refugees created an influx of workers that increased labor supply by 30-50%, highly concentrated in the low-skill sector, creating downward pressure on wages.19 Indeed, refugees received 25-50% lower wages than those typically paid to Lebanese workers in the same position, with a higher gap in the informal sector.20 In 2013, the World Bank concluded that the impact of the Syrian conflict would likely double the unemployment rate in Lebanon to above 20% and push 170,000 Lebanese into poverty as wages fell and job opportunities declined.21
At the same time, government expenditures increased as population expansion resulted in heightened demand for goods and services. Health, educational, and other social spending all increased as Syrians began to also rely on Lebanese institutions. Health-related spending swelled due to increased costs for medicines and greater hospital usage. The World Health Organization (WHO) reported in 2014 that the Lebanese health care provision system was beyond capacity. Educational spending also increased as 70,000 Syrian students enrolled in public school for the 2013-2014 school year (23% the size of the Lebanese student body).22 The World Bank projected that educational costs would rise further in future years as less than a quarter of Syrian children in Lebanon were enrolled in the formal school system.23 Overall, the World Bank and IMF respectively estimated that Lebanon would require 5.3-5.5% of GDP to restore these services to pre-crisis levels for this larger population.24
Beyond the impact of refugees, the Syrian civil war heightened geopolitical risk, which negatively affected Lebanese exports, resulting in depressed revenue collection. By 2013, Lebanese tourism revenue had declined by 40% compared to 2010 levels as security concerns surrounding Syria extended to include Lebanon.25 In this period, many Gulf Cooperation Council (GCC) countries issued travel warnings against visiting Lebanon and vacationers opted for other destinations less proximate to civil
18 UNHCR.
19 “IMF Country Report No. 14/238 Lebanon.”
20 60% of refugees entering the labor market were in the low-skill sector. Source: Ibid.
21 “Lebanon: Economic and Social Impact Assessment of the Syrian Conflict,” The World Bank, September 2013, https://www.worldbank.org/content/dam/Worldbank/document/MNA/LBNESIA%20of%20Syrian%20Conflict-%20EX%20SUMMARY%20ENGLISH.pdf.
22 “Lebanon: Economic and Social Impact Assessment of the Syrian Conflict.” World Bank. 2013.
23 This low enrollment rate was due to Syrian children working to earn income or being enrolled in informal community-education systems created in their communities.
24 Calculated based on World Bank and IMF gross spending estimates from the 2013 and 2014 reports respectively and 2013 GDP.
25 “IMF Country Report No. 14/238 Lebanon.”
war.26 Other Lebanese exports—in the food, retail, and mining sectors—also suffered due to a sharp reduction in trade flows as Lebanon no longer exported through Syria.27 Prior to the conflict, Lebanese goods were exported through land-ports in Syria to Iraq and Jordan. During the war in Syria, most of these ports became inoperative or unsafe, resulting in a supply chain shock and logistical challenges for Lebanese exporters.28 Overall, shocks to Lebanese exports depressed revenue collection by slightly over 3% of GDP by 2014.29 Ultimately, the labor market shock, heightened fiscal expenditure, and reduction in export revenue dramatically slowed GDP growth. Lebanon’s GDP growth declined from an average 9.1% in 2007-2010 to 2.4% in 20112014 (Figure 4).
The impact of the Syrian conflict on the Lebanese economy was recognized by several international organizations. A 2014 IMF report summarized that “Lebanon does not have the fiscal space to take on all crisis-related needs” and called on the international community to increase support for the Syrian refugees and Lebanese individuals economically affected by the migration.30 In 2013, The Economic and Social Impact Assessment (ESIA) of Lebanon warned of a bleak outcome for the country and its refugees in the absence of adequate international support. The ESIA projected that the refugee population in Lebanon would continue to grow, pushing government expenditures higher as demand for public services surged. The higher fiscal spending would lead to further widening of the fiscal deficit. Additionally, poverty and unemployment would increase while public services declined. The ESIA warned of overcrowded public schools, insufficient personnel at clinics and hospitals, and electricity shortages. The report cited that the enlarged population would stress already depleted infrastructure, poor financial conditions, and inadequate public services potentially leading to negative humanitarian consequences.31
The publicity and brutality of the Syrian conflict motivated large but insufficient
26 The Gulf Cooperation Council is made up of 6 members—the UAE, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain. The travel advisory on GCC citizens against traveling to Lebanon went into place June 2012 primarily due to the ongoing fighting in Syria. As visitors from GCC countries represent 40% of tourists and 60% of tourism receipts in Lebanon, this was a primary contributing factor to the decline in Lebanese tourism revenue. Source: Ibid.
27 Ibid.
28 By 2012, the average exporter of goods to Syria before the war lost USD 90,000. Source: “The Impact of the Syrian Conflict on Lebanese Trade,” World Bank (World Bank Group, May 4, 2015), https://www.worldbank.org/en/country/lebanon/publication/the-impact-of-the-syrianconflict-on-lebanese-trade.
29 “Lebanon: Economic and Social Impact Assessment of the Syrian Conflict.”
30 Ibid.
31 “Lebanon: Economic and Social Impact Assessment of the Syrian Conflict.”
donations of government and international aid to support the Syrian migrants and their host countries. Memorialized as “the largest humanitarian emergency of our time”, waves of international outcry led to large pledges of aid from governments and international organizations to support Syrians in need.32 Due to the scale of the domestic destruction, intra-Syrian migration, and the exodus of refugees and migrants, many populations required humanitarian aid. Relief packages were spread thinly, meaning that everyone ultimately received inadequate assistance. Aid sent to Lebanon focused on increasing access to necessities for refugees but was overwhelmingly inadequate to offset the negative impacts on the Lebanese economy. Lebanese citizens whose welfare declined due to the crisis were frustrated at their lack of inclusion in these programs festering a growing sense of antagonism towards Syrians in Lebanon.33
The United Nations report on the Lebanese Crisis Response plan shows that over the decade, international donors provided only 45-51% of the necessary funding to Lebanon to offset the effects of the Syrian Civil War.34 Some international organizations were more pessimistic—calculating that the sum of all funding received was only enough to meet 20% of estimated needs.35 The sustained need for humanitarian aid created by the broader Syrian Crisis could not be met by international donors whose funds were limited, especially as the conflict fell on domestic political agendas. At a 2017 conference hosted by the European Union, Lebanon requested that its humanitarian aid be doubled in size, citing risks of civil unrest and economic collapse. Backed by international development agencies, Lebanese officials argued that the country required increased investment in public services to lower the government fiscal burden and compensate for other economic damages inflicted by the refugee population.36 The European Union and United States did not adjust their aid allocations or policy in a meaningful way following this request.
32 From 2011-2021, USAID donated over $11.3 billion in humanitarian aid to assisting Syrians negatively impacted by the Syrian Crisis. “Syria Complex Emergency,” U.S. Agency for International Development, April 18, 2017, https://www.usaid.gov/crisis/syria/fy17/fs03.
33 “Lebanon Bears the Brunt of the Economic and Social Spillovers of the Syrian Conflict.”
34 “2021 Update of the Lebanon Crisis Response Plan - (LCRP 2017-2021),” UNHCR Operational Data Portal (ODP), accessed December 2, 2021, https://data2.unhcr.org/en/documents/ details/85374.
35 “IMF Country Report No. 14/238 Lebanon.”
36 Jad Chaaban, “Should Lebanon Get More Funds for Hosting Refugees?,” Al Jazeera, April 5, 2017, https://www.aljazeera.com/features/2017/4/5/should-lebanon-get-more-funds-forhosting-refugees.
Syrian refugees did not return home in 2016 as the IMF’s economic model had predicted, continuing Lebanon’s heightened economic stress. From 2012 to 2020, Lebanon’s population remained elevated, with official estimates ranging from 1.5 to 1.8 million refugees living in Lebanon in 2018 (including over 250,000 Palestinian refugees who previously resided in Syria), reinforcing the country’s status as having the highest proportion of refugees to pre-crisis population in the world (Figures 5 and 6). The Lebanese government became less tolerant of the perceived negative effects of refugees’ presence in Lebanon and changed border policies in 2014 in an attempt to prevent refugees from entering the country.
As the sustained pressure of hosting refugees continued, the size of Lebanon’s government debt increased while foreign reserves declined. Lebanon’s government debt as a percent of GDP increased every year from 2013-2018 due to heightened fiscal expenditures and decreased revenues (Figure 3). Meanwhile, foreign currency reserves at the BdL decreased from 2014-2016 as it began intervening more heavily in foreign exchange markets to defend the peg (Figure 6). Simultaneously growing indebtedness and declining reserves amounted to a sharp decline in the BdL’s foreign currency reserves as a percent of external debt. This metric reflects the BdL’s future ability to service its debt from 62% at the end of 2011 to 43% in mid 2016 (Figure 7). Foreign reserves as a percentage of external debt are the most closely followed metric by investors when calculating sovereign default risk, making Lebanon’s declining reserves an immense problem for the BdL.
In response to its declining reserves and growing debt, the BdL began the policy of financial engineering, effectively creating a Ponzi scheme between the BdL, Ministry of Finance, and Lebanese commercial banks. Enacted in May 2016, the policy intended to alleviate foreign reserve scarcity, decrease the cost of serving debt, and increase foreign capital. The unorthodox program sought to restore investment through a financial scheme that posted misleadingly high data about foreign reserves to entice investors with higher returns.
Financial engineering operated by allowing the BdL to swap LBP-denominated Treasury bonds with Lebanese commercial banks for newly issued dollardenominated Eurobonds using the fixed 1,507 LBP per USD exchange rate. The BdL issued USD-denominated Certificates of Deposit (CDs) to commercial banks backed by Eurobonds at a high interest rate in return for dollars in cash. This swap scheme allowed banks to earn a spread without taking on exchange-rate risk while giving the BdL access to more dollars and euros. To incentivize banks to participate in this swap scheme, the BdL discounted at 0% interest equivalent to the quantity of CD’s a
commercial bank purchased.37 The BdL explained the system as a “win-win situation, whereby it didn’t burden the Central Bank [nor] the Lebanese Government with any costs. On the contrary, it enhanced both BdL’s balance sheet and Lebanon’s credit profile.” Indeed, the BdL explained this policy to investors as a genius maneuver to reduce risk, increase investment opportunity, and raise foreign reserves.
Financial engineering achieved its desired short-term effects—attracting investments and increasing foreign reserves. Lebanon’s Balance of Payments (BoP) reversed from negative to positive as the high interest rates attracted increased foreign remittances.38 Easing investor concerns, Net Foreign Assets surged by 85% of GDP over the first five months, boosting foreign reserves as a percentage of external debt by 7 percentage points from March to August of 2016 (Figure 7). Indeed, the highest gross foreign reserves for the BdL in history were posted in October 2017 (Figure 6). Financial engineering was even somewhat endorsed by the IMF who referred to it as “money-financed capital injection without any equity stake in return equivalent to 10 percent GDP, which helped strengthen banks’ capital buffers” in 2016. In summary, financial engineering succeeded in establishing positive shortterm effects, but did not (and was not realistically intended to) sustain an engine of economic growth and improved financial management.39
This IMF response was largely due to the opacity of the policy. The BdL changed accounting practices to use seigniorage—capitalizing future swap profits on the balance sheets. BdL’’ capitalization from financial engineering opportunities was recorded in the category of “Other Assets.” It is not uncommon for Central Banks to have an “Other Assets” category meaning that this change did not draw immediate suspicion. Economists now believe that the category of “Other Assets” was likely created to conceal the BdL’s losses and avoid a bank run if depositors realized that commercial banks likely would not return their deposits. Indeed, financial engineering did not come under scrutiny until the “Other Assets” category ballooned in 2017-2018, leading rating agencies and others to begin questioning its status.40
In the medium term, financial engineering posed massive risk and created no real value. First, the scheme heightened exposure to macroeconomic risk by reinforcing the dependence of commercial banks on the BdL. Commercial banks maintained high dollarized liabilities but transferred their dollarized assets to the BdL, furthering their dependence on the peg and the BdL as a lender. Roughly 70% of the assets of commercial banks (particularly those using dollars and euros) became claims of the public sector (~10%) or government debt (~60%), concentrating credit risk and
37 “IMF Country Report No. 14/238 Lebanon.”
38 Lebanon’s Balance of Payments increased from -$1.64 billion to $.37 billion between March 2016 to August 2016.
39 “IMF Country Report No. 14/238 Lebanon.”
40 Ibid.
reliance on the Lebanese government.41 Second, the scheme was unsustainable as it effectively borrowed money from abroad promising high interest rates. Instead of being invested in high-yield opportunities, however, the funds were channeled into the BdL to service debt, making the policy untenable beyond the short-term. By 2019, BoP had fallen below pre-financial engineering levels and capital flight had quietly begun. Finally, the increase in dollars and euros gave the Lebanese central bank a false sense of security in its supply of foreign currency, likely making the impending crisis worse. The policy unethically deceived investors and locals who believed economic performance had improved, leading them to make decisions based on incorrect and incomplete information. Financial engineering set Lebanon up for future financial developments that have destabilized the livelihoods of many people and the political future of the country.
i. The Crisis and its Causes
The visible catalyst for the Lebanese Crisis was the government default on a $1.2 billion Eurobond on March 9, 2020. The first default in Lebanese history, this event led investors to anticipate Lebanese default on all outstanding Eurobond obligations, many of which required payments by June.42 Immediately before default, the price of the Eurobond plummeted, and yield skyrocketed above 1000% as news of the impending default leaked.43 Sovereign default often precedes financial crises, signaling that the central bank no longer has adequate liquidity to pay back or roll over maturing debt.
While many journalists and analysts point toward the sovereign default as the beginning of the crisis, the system’s collapse was proceeded by domestic political recognition of the declining economic situation. On September 2, 2019, political leaders called a state of economic emergency when public debt reached 170% of GDP (Figure 3). Lebanese officials recognized that the BdL’s liquid foreign reserves were too low to sustain debt payments through the end of 2020.44 On October 17, proposed taxes on tobacco and gasoline led to civil demonstrations that evolved into nationwide protests about sectarian rule, weak economy, corruption, and refugees.45 The demonstrations led the Lebanese Prime Minister to resign and banks to close
41 “IMF Country Report No. 14/238 Lebanon.”.
42 $2.7 billion of payments were due in April and June 2020.
43 Oguri “Part II of Crisis in Lebanon: Buildup of Interrelated ...”.
44 In September 2019, the BdL held $29 billion in foreign reserves, not all of which had liquidity within the year. This level of reserves was too low to service debt payments, $20 billion of which would amortize in 2020 alone (Figure 6).
45 Rickard, “Crisis in Lebanon: Anatomy of a Financial Collapse”.
nationally for two weeks. When banks reopened, bankers cited widespread concern about depositors rushing to withdraw savings or transfer them abroad. Unwilling to officially declare capital controls and further discourage foreign investment, Governor of the BdL, Riad Salameh, ordered banks to only allow withdrawals for “critical and fundamental matters,” which banks would decide on a case-by-case basis.46 This policy fed into the culture of corruption and favoritism as bankers had overwhelming discretion enabling nepotism and bribery in determining those “critical and fundamental” withdrawals. The political instability and economic concern spooked international investors, shutting Lebanon out of the Eurobond market.47 Without access to new dollars, sovereign default became imminent.
The March default indicates the moment that the crisis visibly began but represented a decade of economic strain and financial mismanagement. Seemingly immediate causes of the crisis such as financial engineering, protests, and the Eurobond default are all symptoms of the true problem: an economy left fragile by a decade of heightened economic stress due to negative spillover effects from a terrible civil conflict afflicting a neighboring country. After a decade of stress and inadequate aid, Lebanon could no longer conceal its financial insolvency.
Following sovereign default, the LBP entered a state of hyperinflation, the effects of which were worsened by the lack of change in the official exchange rate. At the beginning of the crisis, domestic elites transferred over 2.3 billion USD out of the system.48 This capital flight led the LBP to depreciate against the USD as the supply of dollars in Lebanon quickly decreased. However, to avoid the nominal value of its foreign currency-denominated debt increasing, the Lebanese government refused to devalue the LBP. This decision immediately created a black-market, as the practical exchange rate deviated from the official rate. By summer of 2021, the black-market rate skyrocketed, with the LBP losing 90% of its value (Figure 8). The black-market rate decreased economic efficiency as its volatility forced businesses to constantly adjust their price levels. Additionally, the situation created money changers who worked to the detriment of average consumers by arbitraging the exchange and
46 Samia Nakhoul and Lisa Barrington, “Banks Will Seek to Stop Money Leaving Lebanon When Doors Reopen: Sources” (Thomson Reuters, October 31, 2019), https://www.reuters.com/article/ us-lebanon-protests-banks/banks-will-seek-to-stop-money-leaving-lebanon-when-doorsreopen-sources-idUSKBN1XA2QH.
47 Ibid.
48 France 24, “Lebanon Prosecutor Grills Bankers over Capital Flight,” France 24, March 2, 2020, https://www.france24.com/en/20200302-lebanon-prosecutor-grills-bankers-overcapital-flight.
profiting off the chaos.49
At this time, the Lebanese government unofficially implemented capital controls. In April 2020, the BdL ordered commercial banks to limit the amount of dollars that each account holder could withdraw at 5,000 USD.50 Up to this amount, dollars could be withdrawn as pounds converted at the seemingly arbitrary rate of 3,900 LBP per USD, which was higher than the official government rate, but lower than the black-market rate. The government created this policy to prevent citizens from transferring their savings abroad. In action, the policy both limited the quantity of money that could leave accounts and forced dollars to be converted to pounds at a loss to depositors. The policy placed Lebanese depositors in a terrible situation: dollar deposits were trapped in the collapsing system and could only be withdrawn at 2030% of their value while LBP deposits lost purchasing power by the day. Meanwhile, the price level inflated, especially that of food, which rose 500% by the end of 2020 (Figure 9). The rising prices forced depositors to withdraw their life savings at a fraction of their value to pay for necessities. While illegally transferring money abroad largely saved the fortunes of elites, the average Lebanese depositor got poorer in real terms.
Beyond the catastrophic hyperinflation, the Lebanese economic system entered a sharp recession with contracted output and heightened unemployment. In 2020, GDP contracted over 20% and the World Bank projects it to contract by another 45% in 2021 (Figure 4). As of October 2021, real GDP per capita has declined by 37%, quantifying the massive negative effect of the crisis on regular people in Lebanon.51 In the labor market, the lack of growth reduced job opportunities leading employers to lay off workers. Unemployment increased from 28% in February 2020 to 40% in November 2020 and is likely even higher in 2021.52 Ultimately, the total losses of the Lebanese crisis to date have been quantified as greater than the Lebanese GDP in 2019.53
In this terrible financial and economic situation, the BdL has become insolvent. Lebanon’s remittances have declined to near zero and the country has been shut out of credit markets, making the BdL unable to secure more dollars. Experts agree that
49 Anchal Vohra, “Nobody Knows What Lebanon's Currency Is Worth Anymore,” Foreign Policy, April 5, 2021, https://foreignpolicy.com/2021/04/05/lebanon-currency-inflationexchange-rates/.
50 “Banque Du Liban Basic Circular 151 Addressed to Banks,” Banque Du Liban, April 21, 2020, https://www.bdl.gov.lb/files/circulars/151_en.pdf.
51 “Lebanon's Economic Update - October 2021,” World Bank (World Bank Group, October 7, 2021), https://www.worldbank.org/en/country/lebanon/publication/economic-updateoctober-2021.
52 “Lebanon. Economic Crisis,” Warsaw Institute, September 6, 2021, https://warsawinstitute. org/lebanon-economic-crisis/.
53 Oguri, “Part II of Crisis in Lebanon: Buildup of Interrelated ...”
the BdL’s foreign currency reserves are substantially less than the capital account, meaning that the central bank is in a negative capital position.54 Said differently, the BdL owes more money than its reserves, making it insolvent. In the commercial banking sector, analysis of fourteen of the most prominent Lebanese banks concluded that each was deeply insolvent.55 Since the beginning of the financial crisis, the BdL has been using its foreign reserves to import necessities, ignoring deposits and servicing debt. The strategy of using reserves to exclusively pay imports and abandoning debt payments indicates that the BdL likely calculates the only way forward as a bailout option from creditors or an international group. It seems likely that the BdL will continue importing until reserves run dry. At that point, the country will no longer be able to pay to import necessities such as food and fuel.
Two other shocks to the economy—the COVID crisis and the explosion in the port of Beirut—also occurred in 2020, the effects of which further harmed the Lebanese economy. First, in March 2020, a pandemic shocked the international economy, creating a financial crisis World Bank Vice President Pazarbasioglu describes as “likely to leave long-lasting scars and pose major global challenges”.56 In addition to all the highly documented negative financial and economic effects of the COVID crisis generally, in Lebanon, the pandemic further decreased tourism revenues and foreign appetite for lending. Beginning only a month after the Lebanese financial crisis, it is impossible to separate the effects of each crisis.
A few months into the financial crisis, a catastrophic explosion in the port of Beirut caused further death, destruction, and mayhem. On August 4, 2020, over 2,000 tons of ammonium nitrate exploded in the port of Beirut. The explosion had catastrophic consequences, killing approximately 180 people and injuring thousands more while also damaging the majority of the Port of Beirut and surrounding areas.57 Economically, the explosion cost Lebanon an estimated 12-15% of GDP as it destroyed infrastructure and logistically challenged exports. This event exacerbated fiscal stress and worsened the financial crisis on the lives of those living in Lebanon.
54 The BdL claims to have gross reserves of $38 billion mostly held in dollars. The BdL, however, must pay $60 billion of dollar-denominated deposits from commercial banks held at the BdL making the BdL insolvent as the net capital position is -$22 billion. Source: Rickard.
55 Ibid.
56 “Covid-19 to Plunge Global Economy into Worst Recession since World War II,” World Bank (World Bank Group, September 30, 2020), https://www.worldbank.org/en/news/pressrelease/2020/06/08/covid-19-to-plunge-global-economy-into-worst-recession-since-worldwar-ii.
57 The chemicals had been sitting and decaying in a warehouse since 2013, making government negligence a cause of the explosion. Some have alleged Hezbollah’s implication in the situation as well.
The financial crisis has greatly deteriorated the well-being of those living in Lebanon, where poverty and inequality have greatly increased while government incompetence generates fear of social unrest. The percentage of Lebanese citizens in poverty has doubled to 55% and those in extreme poverty has nearly tripled to 23% (Figure 10). Poverty among Syrian and Palestinian refugees is even worse—affecting 88% and 92% of the respective populations.58 Fuel shortages have greatly increased traffic in Beirut and Tripoli due to fuel lines. Additionally, the entire country has been facing routine blackouts sometimes spanning days as the bankrupt BdL cannot pay for utilities. In the aggregate, the UN summarizes that over three-quarters of the population is “trapped in poverty and struggling for basic necessities.”59 Meanwhile, political leaders fail to form a new government, creating serious concern for society slipping into social disorder. World Bank analysts consider the social and humanitarian costs of the Lebanese Crisis to be among the worst ever caused by a financial crisis.
As the scale and cost of the Lebanese financial crisis is massive, the Lebanese government is seeking a bailout larger than any previous intervention in IMF history. Lebanon entered bailout discussions with the IMF in September 2019. Since then, economic organizations and the IMF alike estimate that Lebanon likely requires 93 billion USD or more to stabilize the financial system. This estimate includes $67 billion to stabilize the banking sector, $22 billion for losses incurred by the BdL, and $4.2 billion to pay the defaulted Eurobond.60 This value as a percentage of Lebanon’s 2019 GDP greatly exceeds typical IMF bailout packages, even those of notoriously deep financial crises such as Greece in 2010 and Argentina in 2018; bailing out the financial system would cost 179% of Lebanon’s GDP compared to 44% and 9% for Greece and Argentina respectively (Figure 11).
There are measures that could be used to reduce the international cost for a bailout, but each has ethical or legal complications. The most impactful way to ensure solvency would be to haircut depositors, which the BdL currently stands against.61 Haircutting deposits would entail the BdL offering to pay a value less than one for each pound or dollar deposited in commercial banks. This option effectively makes those with outstanding deposits—disproportionately the lower and middle classes—pay for the crisis. The second means through which to reduce the bailout
58 “2021 Update of the Lebanon Crisis Response Plan - (LCRP 2017-2021).”
59 “ESCWA Warns: More than Half of Lebanon's Population Trapped in Poverty.”
60 Ibid.
61 Ibid.
cost would be to cash in Lebanon’s gold reserves, which could pay for a sizable 18% of the bailout.62 Unfortunately, the usage of gold assets on behalf of the BdL has been outlawed since 1986.63
Lebanon has also been in conversations with the IMF for a bailout of significantly less than $93 billion—if the country implements austerity measures. The IMF estimates aggregate gross losses of the financial system as ranging from $60 billion to $160 billion.64 The IMF bailout package promises Lebanon funds of $10 billion over five years if Lebanon makes severe financial, fiscal, and political reforms.65
IV. Conclusion:
Beginning in 2012, over one and a half million refugees fleeing the civil war in Syria settled in the small neighboring country of Lebanon. Syrian migrants fled to Lebanon on an unprecedented scale as anti-refugee rhetoric made them largely unwelcome in other destinations. This migration resulted in Lebanon housing more than double the refugees per capita to any other country in the world, which had the effect of reversing previously positive economic trends. Lebanese debt increased, growth contracted, and unemployment exploded because of geopolitical proximity of Lebanon to Syria and supporting the enlarged population.
Although Lebanon’s government and central bank attempted to disguise the strain on their economy, they were unable to maintain the façade indefinitely. By late 2019, widespread protests and temporary bank closures signaled the imminence of crisis. In March 2020, Lebanon defaulted on its debt and a sovereign debt crisis and currency crisis have since ensued. The humanitarian and social losses in Lebanon due to the collapse of the financial system have been tragic with over half the population now impoverished, unemployment nearing 50%, and widespread shortage for fuel,
62 Value calculated based on the estimate that Lebanon held an astonishing 286.8 metric tons of gold in its reserve position as of May 2020. The market price of gold as of June 2020 for an ounce of gold was $1,800, making this gold worth approximately $16.5 billion. Source: Banque du Liban.
63 In 1986, the Lebanese Parliament passed Law #42, which bans “the disposal of gold assets with or on behalf of the Banque du Liban and under any circumstances.” Source: Lebanese Constitutional Archive.
64 “The Lebanese Government’s Financial Recovery Plan ...,” Lebanon Opportunities, April 30, 2020, http://www.leadersclub.com.lb/Download/GovernmentPlanApril302020.pdf.
65 The IMF requires financial changes including closing, merging, and auditing banks, restructuring of the BdL, devaluating the pound to 4,297 LBP to USD by 2024, and improving the environment for foreign investment. As the black-market values the LBP at over 20,000 LBP to USD as of November 2021, a devaluation target of 4,297 will potentially be impractical to stabilize the economy. The IMF also demands sizable fiscal austerity measures such as tax increases, ending electricity subsidies, and reduction of public expenditures. Finally, concerns of fraud and Hezbollah’s involvement complicate and may prevent international aid provisions to Lebanon.
electricity, and medicine. The situation has become precariously close to civil unrest, raising the imminent question of what will happen when foreign reserves run dry, and Lebanon can no longer import food and fuel. All those living in Lebanon require immediate humanitarian aid and the IMF should work with Lebanon to find a solution to the financial crisis. As the largest ally of the Syrian refugees during the crisis, Lebanon now pays the largest economic share of their support—costs which should be dispersed among the entire international community.
Figures
Fig (1): ReFugee PoPulAtion As % oF TotAl PoPulAtion in 10 Highest Countries in 2020 (And United StAtes, shown For comPArison)
Source: World BAnk As oF 11/23/2021.
Source: IMF As oF November 2021.
Fig (2): Current Account BAlAnce For LebAnon (% oF GDP)
Fig (3): LebAnese Government Debt (% oF GDP)
Source: World BAnk As oF 11/23/2021. Projection bAsed on World BAnk’s LebAnon Economic Update as of october 2021.
Source: World BAnk As oF 11/23/2021.
Fig (4): GDP Growth oF LebAnon (% oF GDP)
Fig (5): ReFugee PoPulAtion in LebAnon (As % oF totAl PoPulAtion)
Fig
Foreign Currency Reserves oF the BdL
Financial engineering policy implemented
Source: BAnque du LibAn As oF November 2021.
Fig (7): Foreign Currency Reserves oF the BdL (As % oF ExternAl Debt)
Financial engineering policy implemented
Source: CAlculAted bAsed on BAnque du LibAn, World BAnk, And LirArAte.org As oF November 2021.
(6):soUrce: Lirarate org as of noveMber 2021.
Source: International Monetary Fund as of November 2021.
fig (8): Lbp to Usd bLack Market exchange rate
Fig (9): Consumer Price Index oF LebAnon
Fig (10): Percent oF PoPulAtion by Socioeconomic ClAss/Income HeAdcount oF Income by Socioeconomic ClAss
Source: ESCWA estimAte bAsed on PovcAlNet using most recent rePorted nAtionAl Poverty lines oF 2012 in USD Per dAy.
Fig (11): The Required Size oF the LebAnese BAilout ComPAred to PAst BAilouts Elsewhere (BAilout As % oF GDP)
Source: World BAnk As oF November 2021.
Women Against the Night Series detail, gouache on board, 2009
Helen Zughaib is a critically acclaimed painter and multimedia artist currently based in Washington D.C. Originally from Beirut, Lebanon, her artwork explores migration, gender, and religion through several mediums, including gouache and collage. With exhibitions and artwork on display in the Arab American National Museum, the White House, World Bank, Library of Congress, and American Embassy in Baghdad. Through her work, Zughaib aims to create a shared space for empathy, introspection and dialogue. She currently holds the inaugural social practice residency at the John Kennedy Center in Washington D.C.
The pieces featured in Jasūr 5.1 are drawn from across Zughaib’s body of work.
Cover piece: Arab Spring gouache on board, 2011 collection of The Library of Congress
Map of Home/Self Portrait gouache on board, 2010
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