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Last Updated: Monday, 14 February, 2005, 22:22 GMT
Lebanon's economic champion
By Mary Hennock
BBC News business reporter

Mr Hariri (right)
Hariri (R) saw the rebuilt Beirut as a strategic economic showcase
Former Lebanese Prime Minister Rafik Hariri used his business empire to rebuild Beirut after years of civil war.

To do it, he deployed his own construction industry fortune, and a huge network of rich and powerful friends.

No single individual has played a bigger role in rebuilding the credibility of Lebanon's economy around the world.

His killing ahead of May elections has raised fears for his economic legacy.

He was his country's richest man, reckoned to be worth roughly $4bn (2.1bn). But it is his corporate brain-child, Solidere, that best illustrates his central role in regenerating Lebanon's economy.

Solidere bought up large chunks of central Beirut and turned the business district from a bullet-marked, rubble-strewn mess into a glitzy banking and tourist centre. Mr Hariri was its most influential shareholder.

Flying the flag

"He was very much the driving force of the national reconstruction project," says Simon Williams, an economist at the Economist Intelligence Unit in London.

Mr Hariri mobilised wealthy friends to invest in Beirut, and revelled in playing the role of Mr Lebanon abroad.

LEBANON'S ECONOMY
Population: 3.7 million
Life expectancy: 72 years
GDP: $17.8bn (9.4bn) in 2003
GDP per head: $4,800 a year
28% of Lebanese below the poverty line
Source: CIA World Factbook

His apparent assassination in a huge bomb has triggered fears that tourists may stay away, and investors withdraw their money from of Beirut's new financial services sector.

Beirut has been pulling in record numbers of visitors. The tourism ministry says there were 1.2 million tourist arrivals in the first 11 months of 2004, a 30% rise on the same period of 2003.

Beirut is beyond the average backpacker budget. Most tourists are Arabs from Gulf states on "high-end, high-spend" holidays, says Mr Williams.

It became particularly popular as wealthy Arabs steered clear of the US after 11 September 2001.

Rags to riches

Mr Hariri was born in a poor family in Sidon in 1944. But aged 21, he left for Saudi Arabia and made a fortune in the construction boom created by the oil-rich Gulf state's rush for modernisation, returning to Lebanon at the end of its civil war.

As prime minister, Mr Hariri's public works and rebuilding programmes ran up debts that threatened to overwhelm the public finances.

The budget deficit climbed to 17% of gross domestic product (GDP) by 2002, and debt repayments were costing the government 80% of revenue.

But he pulled together the Paris 2 debt reconstruction conference in 2002 where creditors, led by France and Gulf states, provided $3bn that the Lebanese government used to swap expensive loans for cheaper ones.

"It's difficult to see how stability would have been sustained" without Paris 2, says Mr Williams.

Cronyism

"Hariri had a lot of friends, a lot of very powerful, wealthy friends in France, Saudi Arabia and the Gulf in particular," says Mr Williams.

Scene of blast
The huge blast killed several bystanders

In business, and in politics, he spent his time cultivating powerful allies. Inevitably, allegations of cronyism and corruption surrounded him.

Critics alleged over many years that he used his fortune to buy off political opponents and his political power to advance his business interests.

Proteges rose to positions of political prominence and allies were rewarded with valuable contracts.

And, for many Lebanese, the redevelopment of central Beirut meant dispossession of homes or property without adequate compensation, and the enrichment of Mr Hariri.

Policy-making stalled during his last two years as prime minister because of his rivalry with President Emile Lahoud, until Syria sided decisively with the president.

It remains uncertain what economic impact his assassination will have. Much depends on how wealthy Gulf Arab investors react.

Economic prospects

One fear is a run on the Lebanese pound, but the central bank has $15.5bn in foreign currency and gold to weather the storm.

"There's certainly enough foreign exchange there to mount a robust defence while people decide what they make of it," says Mr Williams.

The financial services industry is much stronger than a few years ago, part of Mr Hariri's vision of Lebanon as "the Singapore of the Middle East".

Today, service industries - banking, tourism, retailing - make up three quarters of the economy.

But Beirut's chances of wiping out the lost civil war years and catching up with Bahrain and Dubai have always been slight.

Public finances remain rocky, but are stronger than two years ago. Outside Beirut, the country remains poor with at least a quarter of its people below the poverty line.

Mr Hariri's vision for wealth creation of Lebanon was definitely of the trickle-down variety. In power, he cut social services, public sector wages and company taxes.

But his vision of Beirut as the flagship for a market-driven, service sector economy appears to be working, while he himself was widely viewed as an impressive ambassador for Lebanese interests.

Mr Hariri's personal empire does not seem at any risk of collapsing either. Several family members helped him run his companies, Solidere, Saudi Oger and Oger Liban, and he had a reputation for hiring the brightest and best outsiders.




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