Annex IV. CDCS-Lebanon-December-2026.pdf

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TABLE OF CONTENTS

ACRONYMS 2

I. EXECUTIVE SUMMARY 4

II. COUNTRY CONTEXT 7

III. USAID’S STRATEGIC APPROACH 13

IV. RESULTS FRAMEWORK 16

DO1: INCLUSIVE ECONOMIC OPPORTUNITIES ENHANCED THROUGH PRIVATE SECTOR ENGAGEMENT 17

DO2: EFFECTIVENESS OF EDUCATIONAL INSTITUTIONS IMPROVED 21

DO3: EFFECTIVENESS OF PUBLIC SERVICE DELIVERY TO LEBANESE COMMUNITIES ENHANCED 27

SO4: BASIC HUMANITARIAN NEEDS OF VULNERABLE POPULATIONS MET 30

V. MONITORING, EVALUATION, AND LEARNING 35

VI. ANNEX 38

ANNEX A: CLIMATE RISK ASSESSMENT 38

ANNEX B: FY 2021 LEBANON COUNTRY ROADMAP 39

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ACRONYMS

ALLC American Lebanese Language Center

AUB American University of Beirut

BEE Business Enabling Environment

CBHE Capacity Building for Higher Education

CDCS Country Development Cooperation Strategy

CDP Community Development Project

CERD Center for Educational Research and Development

CLA Collaborating, Learning, and Adapting

CSO Civil Society Organization

CSP Community Support Program

DO Development Objective

DOPS Direction d'Orientation Pédagogique et Scolaire

EG Economic Growth

EGRA Early Grade Reading Assessment

EU European Union

FCO UK’s Foreign and Commonwealth Office

FFP Food for Peace

FSN Foreign Service National

FSO Foreign Service Officer

FTE Full-Time Equivalent

GDP Gross Domestic Product

GIZ Gesellschaft für Internationale Zusammenarbeit

GOL Government of Lebanon

HA Humanitarian Assistance

HECD Higher Education Capacity Development

HEI Higher Education Institution

HEP Higher Education Project

HES Higher Education Scholarship

HLA Holistic Learning Approach

IFC International Finance Corporation

IMF International Monetary Fund

IP Implementing Partner

IR Intermediate Result

IRC International Refugee Council

ISIS Islamic State of Iraq and Syria

LAU Lebanese American University

LBP Lebanese Pounds

LCRP Lebanon Crisis Relief Plan

LDO Local Development Office

LED Lebanon Enterprise Development

LIFE Livelihoods and Inclusive Finance Expansion

LII Lebanon Investment Initiative

LINQ Lebanon Investment in Quality

LIVCD Lebanon Industry Value Chain Development

LRA Litani River Authority

LRI Lebanon Reforestation Initiative

LWP Lebanon Water Project

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MEHE Ministry of Education and Higher Education

MEL Monitoring, Evaluation, and Learning

MENA II Middle East and North Africa Investment Initiative

MoU Memorandum of Understanding

MSI Management Systems International

MSME Micro, Small, and Medium Enterprise

NGO Non-Governmental Organization

NPI New Partnership Initiative

NRW Non-Revenue Water

NSSG National Security Strategic Guidance

OECD Organization for Economic Co-operation and Development

OFDA Office of U.S. Foreign Disaster Assistance

PAD Project Appraisal Document

PEA Political Economy Assessment

PISA Program for International Student Assessment

PMP Performance Management Plan

PMSPL II Performance Management and Support Program for Lebanon

PODA Project Outside Demonstration Area

PPP Public-Private Partnership

PRM Population, Refugees, and Migration

PSC Personal Services Contractor

PSD Private Sector Development

QITABI Quality Instruction Towards Access and Basic Education Improvement

RACE Reaching All Children with Education

RF Results Framework

RWE Regional Water Establishment

SMO Senior Management Office

SMT Senior Management Team

SO Special Objective

TIMSS Trends in International Mathematics and Science Study

TO Task Order

TVET Technical and Vocational Education Training

UN United Nations

UNDP United Nations Development Programme

UNHCR United Nations High Commissioner for Refugees

UNICEF United Nations Children's Fund

UK United Kingdom

USAID United States Agency for International Development

USAID/Lebanon USAID’s Mission to Lebanon

USP University Scholarship Program

USG United States Government

USP University Scholarship Program

VASyR Vulnerability Assessment for Syrian Refugees in Lebanon

WASH Water, Sanitation, and Hygiene

WDM Water Demand Management

WFP World Food Programme

3RF Lebanon Reform, Reconstruction and Recovery Framework

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I. EXECUTIVE SUMMARY

The goal of USAID/Lebanon’s 2021-2026 Country Development Cooperation Strategy (CDCS) is a stable, resilient Lebanon at peace with its neighbors, building on economic, institutional, and community-based opportunities. Considering Lebanon’s country context, the USAID strategy is designed to increase economic resilience including competitiveness, livelihoods and service delivery, vis-a-vis private sector and municipal engagement. The goal takes into account the presence of a large refugee population, a fluid country context; complements the priorities of the Government of Lebanon

(GOL), as well as other donors’ efforts in economic growth, education, water, and humanitarian assistance. The goal also aligns with Lebanon’s 2021 Integrated Country Strategy (ICS). Throughout the implementation of the CDCS, the Development Objectives (DOs) and the learning plan will address relevant cross-cutting themes of gender, youth, anti-corruption, and transparency. At the conclusion of the Strategy, the Mission expects to achieve a series of meaningful results, including a greater number of private sector organizations that have retained or boosted their revenues and improved their resiliency to economic downturns; effective education delivery; a majority of USAID scholarship recipients that have obtained meaningful employment; and an increase in municipal governments that have the capacity to deliver services effectively, in coordination with civil society.

Country Roadmap (2021):

Capacity - Relatively high scores on capacity belie deep-seated, chronic issues including poverty, youth unemployment, brain drain, low literacy and low women’s participation in the labor force.

Commitment - Lebanon has relatively low scores on commitment, which underscores the chronically weak performance of the public sector that is currently constraining the country’s economic growth and limiting the pace of recovery and long-term progress.

The challenges illustrated by the low commitment scores and reluctance on the part of the national government to reform suggest that in order to achieve meaningful progress towards sustainability, recovery, and sustainable development, it will be necessary to collaborate closely with the private sector and subnational governmental bodies. The Mission articulates this throughout the Strategy, specifically (1) increasing private sector competitiveness and livelihoods (2) improving service delivery.

Strategic Approach: USAID’s strategic choices for the 2021-2026 CDCS are enhanced economic opportunities (DO1), effective educational institutions (DO2), effective public service delivery (DO3), and a Special Objective (SO) of meeting humanitarian needs of vulnerable populations (SO4). These approaches are inclusive, multi-faceted, and mindful of interdependencies among the core needs for recovery in the short-term and sustainable development in the long-term. As demonstrated throughout the CDCS, these objectives align with and bolster the goals stated in the 2021 ICS for Lebanon. Most importantly, these DOs/SO also provide USAID/Lebanon with the flexibility to adapt to the country’s changing political and socioeconomic contexts, which is characterized by increased fragility due to the multifaceted crises brought about by economic collapse, COVID-19, and the after-effects of the Port of

Beirut explosion.

Major shifts in USAID’s investments include: Expanding Lebanon’s trade from reliance on the East (Gulf and Arab countries) to include more diverse markets, including the West and South; increasing support for agribusinesses with export potential; moving beyond school retention and basic literacy and numeracy to focus on work-oriented soft skills; exploring avenues for increased private sector engagement in basic education and essential service delivery; building on institutional support for regional water institutions to improve wastewater management, sanitation, and water resource conservation; engaging the private sector and local communities in water resource management; and

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providing basic support to vulnerable Lebanese and refugee populations. Although not a main focus of this strategy, USAID will also provide targeted support to help private hospitals to more effectively respond to the COVID-19 pandemic and future public health emergencies.

USAID’s engagement with the central government will likely continue to be limited. The presence of

Hizballah-affiliated or -appointed ministers and senior officials in some GOL entities complicates certain engagement at the national level. This experience is reinforced by the recent political economy assessment (PEA), which recommends limiting USAID’s engagement with the GOL’s ministries to only instances where clear opportunities for collaboration arise. At this point, the Mission is planning to work only with the education and water sector entities of the GOL where significant improvements have been made due to USAID’s long-term investments in the sectors. Additionally, the inability to collaborate directly with the GOL in key sectors due to the presence of unfavorable actors within government institutions heightens the importance of private sector engagement to drive economic sustainability, reforms and growth in Lebanon.

As Lebanon's economic crisis deepens, the government may look to strengthen its relationship with the

People's Republic of China (PRC) as an alternative source of support. The PRC is already Lebanon's top trading partner, with Chinese goods accounting for 40 percent of Lebanon's imports, amounting to an estimated $2 billion annually. The PRC is also seeking to make inroads in Lebanon through cultural and educational exchange programs and health and defense donations. The Mission will continuously assess the situation and, if needed, develop programming that more directly addresses concerns.1

The new strategy will support foreign policy goals and align with the Interim National Security Strategic

Guidance (NSSG). More specifically, this CDCS describes USAID’s current and future activities that will in part seek to counter efforts by certain regional players to undermine Lebanon’s sovereignty and territorial integrity. The NSSG identifies these entities as key threats to security and stability in the

Middle East region and globally.

Activities envisioned in DO1 - including facilitating the flow of goods, services, and investment funds -will support Lebanon as it moves its economy towards a more integrated regional and international presence. DO1 will support the U.S. Mission Lebanon’s ICS as the country transitions to a stable and prosperous trading partner for U.S. businesses interested in developing relationships with counterpart

Lebanese businesses. DO1 is linked to ICS sub-objectives 3.1.1 Increase Private Sector

Competitiveness, Opportunities for U.S. firms, and Support Inclusive Growth-Enhancing Reforms

(DO1). The successes under DO 1 will be critically important to combating unfavorable internal and external influences and will give the GOL and the private sector opportunities to expand to new markets, thereby reducing their reliance on Gulf States for exports and the PRC for imports.

Moreover, stronger economic solvency will decrease the likelihood that Lebanon succumbs to debt traps or unfavorable international loans.

Activities carried out under DO2 and DO3 will contribute to the achievement of critical foreign policy goals identified under Post’s ICS. These include ICS sub-objectives 3.2.1 Expand Access to Education for All Students in Lebanon and 3.2.2 Improved Quality of Services Across Lebanon, Especially Water-related Services (DO2), as well as 2.1.1 Bolster Governments at the National and Sub-national level in

Achieving Reforms that Lead to Better Governance and 2.2.1 Build the Capacity of Lebanese Civil

Society Organizations (CSOs) and Empower Civil Society to Be Engaged in Policy Making and Hold the

Government Accountable (DO3). Successes under these DOs will be important to indirectly address

1According to U.S. Commerce Department: The United States is Lebanon’s largest supplier of imported goods, followed by China, Greece, Russia and Italy. https://www.trade.gov/lebanon https://www.arabnews.com/node/1683276/middle-east https://oec.world/en/profile/country/lbn https://www.trade.gov/lebanon https://www.arabnews.com/node/1683276/middle-east https://oec.world/en/profile/country/lbn

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the rise of internal and external unfavorable influences, especially by expanding access to education that is secular and providing scholarships to build a cadre of leaders that will confront these influences and actors head-on as the country emerges from its current set of crises.

Crisis Modifications and Contingencies: Lebanon, at the time of this writing, is facing a number of concurrent crises. USAID remains committed to achieving the objectives laid out throughout the

CDCS. However, due to extreme uncertainties in the country, USAID will likely need to adapt to potential shifts in the socioeconomic and political environments as they arise.

To demonstrate this flexibility, the 2021-2026 CDCS includes examples of possible strategic and tactical programmatic pivots, and USAID/Lebanon stands ready to develop and implement these and other adaptations if necessary. The document also clearly articulates how USAID’s DOs align with ICS objectives, thereby ensuring the Agency continues to contribute to USG-wide goals for Lebanon during this difficult period.

RESULTS FRAMEWORK OVERVIEW

USAID/Lebanon will address climate change under DO3, by prioritizing water management and will provide targeted support to help private hospitals more effectively respond to the COVID-19 pandemic. To advance diversity, equity, inclusion and accessibility, the strategy will prioritize an inclusive development approach with particular emphasis on youth and women, and the Special

Objective will advance USAID’s commitment to support displaced religious and ethnic minorities. As noted above, throughout implementation, the Mission will address critical cross-cutting themes of gender, youth, anti-corruption, and transparency.

Furthermore, due to legal restrictions, the Mission is limited in its engagement with national institutions, and partner vetting requirements affect the Mission’s ability to engage with a broad range

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of local entities. However, in keeping with the Administrator’s Localization Vision, USAID/Lebanon’s strategy will emphasize input from local actors, such as the private sector, non-governmental organizations, and sub-national and local government entities which will play a pivotal role in providing basic services for the Lebanese people. The Mission is also committed to expanding opportunities to work with new, underutilized, and non-traditional actors, by lowering barriers to entry through streamlined procurement and co-creation techniques, while adhering to legal vetting requirements.

USAID/Lebanon will also continue to monitor emerging priorities and assess potential impact on our programming and, if needed, the Mission will re-evaluate the strategic approach.

II. COUNTRY CONTEXT

Despite a strong entrepreneurial spirit and a robust private sector before the crisis, Lebanon faces multiple challenges, including having the world’s third highest debt-to-Gross Domestic Product (GDP) ratio and the largest refugee presence per capita, with more than 855,000 registered Syrian refugees out of an estimated 1.5 million refugees in total and over 200,000 Palestinian refugees. Lebanon is also witnessing a massive devaluation of its currency, experiencing high youth2 unemployment, witnessing growing brain drain, and suffering from dwindling investment opportunities. In addition, the country’s credit rating has been downgraded several times since 2019. Longstanding frustration with the central government due to entrenched corruption and lack of capacity has led to widespread social unrest throughout the country, adding to the already challenging political landscape. Furthermore, the country is grappling with the presence of a U.S. designated terrorist organization embedded within its government - Hizballah - which functions as a proxy for Iran. These two entities remain influential political actors in Lebanon. USAID’s local development activities in Shia-majority areas work to strengthen civil society partners and local governments to provide transparent, quality essential services, which are critical to provide an alternative to Hizballah. However, the reach of these activities is limited given Hizabllah’s dominance in some municipalities and U.S. laws against providing them material support.

Until 2014, USAID/Lebanon worked extensively with the GOL to implement key economic and judicial reforms. However, over the course of this partnership, the Mission recognized that the GOL’s lack of political will to implement meaningful reforms rendered such programming ineffective. Furthermore, the presence of Hizballah ministers and senior officials in many GOL entities complicated certain engagement at the national level. As a result, when designing the current CDCS, USAID/Lebanon focused its assistance on the private sector, non-governmental organizations, and sub-national and local government entities to build legitimate institutions able to provide basic services and jobs for the

Lebanese people.

Changes in the economic, political, and livelihood contexts since October 2019

Throughout the drafting of USAID/Lebanon's CDCS, Lebanon experienced severe economic and financial challenges. In October 2019, hundreds of thousands of Lebanese protested against the government and demanded political change. When the citizens took to the streets, the Lebanese economy was already beset with significant internal challenges largely stemming from ineffective management and corruption. The public sector debt had reached 170 percent of GDP, according to an estimate by the Economist Intelligence Unit.3 The banking sector was functionally bankrupt and illiquid

22 According to Lebanon’s 2012 youth policy, youth is defined as aged 15-29 years old. Retrieved from https://youthpolicy.org/factsheets/country/lebanon.

3 Economist Intelligence Unit. (2021, April). Country Report Lebanon April 2021, 10.

https://youthpolicy.org/factsheets/country/lebanon http://www.eiu.com/FileHandler.ashx?issue_id=1960940979&mode=pdf

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after having lent 70 percent of combined deposits to the government.4 The economy had been stagnant for a decade with near marginal year-to-year growth. And the political class was effectively impotent and unable to implement any reforms to garner international economic support.

Since the October 2019 protests, the economic situation in Lebanon seriously deteriorated due to the compounded economic and financial crisis - Real GDP growth contracted by 6.7 percent in 2019 and

20.3 percent in 2020, and the World Bank estimated that the economy would contract a further 9.5 percent in 2021.5 The Lebanese Central Administration of Statistics reported an inflation rate of 88 percent in 2020, and an annual inflation rate of 121 percent as of April 2021. According to Lirarate.org, which reports on parallel market Lebanese pound to U.S. dollar exchange rates, the Lebanese pound depreciated against the dollar from 1,800 on October 31, 2019 to over 20,000 as of November 2021.

And the poverty rate continues to rise sharply - the World Bank projected an increase in poverty to 45 percent of the total population and extreme poverty to 22 percent in 2020 alone.6

The private sector and citizenry are suffering the painful consequences of the ongoing economic deterioration. Credit facilities are effectively unavailable, and banks have instituted capital controls to limit cash withdrawals. It is widely understood that Lebanon is experiencing (1) a growing 'brain drain' with skilled and educated citizens emigrating, and (2) deteriorating productive capacity from country-wide business closures. Furthermore, food security is a growing concern among Lebanese due to the collapse of real wages and purchasing power as noted by Aljazeera, which reported that food items cost ten times more in August 2021 than in April 2019.7

Lebanon’s future prospects have dimmed considerably as a result of rising political and economic instability. The aforementioned pervasive corruption and the reluctance of Lebanese politicians to undertake key, crucial reforms have left the country’s economy weakened and on the brink of collapse.

In October 2019, building public discontent directed at the Lebanese political establishment reached a climax. Public disgust and dissatisfaction with perennial economic mismanagement, the diminishing value of the Lebanese pound, continuously rising taxes; a lack of basic public services, and the central government’s failed handling of widespread forest fires erupted into nationwide demonstrations that brought the country to a grinding halt with obstructed roads, angry protests and rioting, and closures of banks and commercial centers due to fears of looting and violence. The devastating blast at the Port of Beirut in August 2020 not only compounded the country’s development challenges, but the GOL’s feeble response to the blast also highlighted its fecklessness and low accountability towards the people of Lebanon.

Since November 2019, the country witnessed the resignation of two governments - the first in response to the protests that erupted in the fall of 2019, and then again in August of 2020, in response to the explosion at the Port of Beirut. A new national government was formed in August 2021;

however, parliamentary elections are expected to take place in March 2022. The demonstrations that started in the fall of 2019 appeared to have largely abated due to the devastation inflicted on the population by the financial crisis and COVID pandemic. However, as the situation continues to deteriorate, protests may return with greater intensity. Meanwhile, civil society and activists began

4 The Editorial Board. (2021, March 15). Lebanon held hostage as it hurtles towards collapse. Financial Times.

5 World Bank Group. (2021, June 1). Lebanon Sinking into One of the Most Severe Global Crises Episodes, amidst Deliberate

Inaction.

6 World Bank Group. (2021, January 12). US$246 Million to Support Poor and Vulnerable Lebanese Households and Build-Up the Social Safety Net Delivery System.

7 Al Jazeera News. (2021, August 4). How much do basic necessities cost? Retrieved November 7, 2021.

https://data.worldbank.org/country/lebanon http://www.cas.gov.lb/index.php/key-indicators-en https://lirarate.org/ https://lirarate.org/ https://www.worldbank.org/en/news/press-release/2021/01/12/us246-million-to-support-poor-and-vulnerable-lebanese-households-and-build-up-the-social-safety-net-delivery-system https://www.aljazeera.com/news/2021/4/12/infographic-how-much-do-everyday-items-costs-in-lebanon https://www.ft.com/content/b76c2f65-47eb-42cb-a0a0-21a0b0ce8037 https://www.worldbank.org/en/news/press-release/2021/05/01/lebanon-sinking-into-one-of-the-most-severe-global-crises-episodes https://www.worldbank.org/en/news/press-release/2021/05/01/lebanon-sinking-into-one-of-the-most-severe-global-crises-episodes https://www.worldbank.org/en/news/press-release/2021/01/12/us246-million-to-support-poor-and-vulnerable-lebanese-households-and-build-up-the-social-safety-net-delivery-system https://www.worldbank.org/en/news/press-release/2021/01/12/us246-million-to-support-poor-and-vulnerable-lebanese-households-and-build-up-the-social-safety-net-delivery-system https://www.aljazeera.com/news/2021/4/12/infographic-how-much-do-everyday-items-costs-in-lebanon

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playing a major role in publicly educating protestors on the Lebanese constitution and other critical topics, including fighting corruption and developing an economic and financial vision for the country.

According to a report published by the information provider InfoPro, approximately 550,000 people lost their jobs between October 2019 and June 2020, and the number of business closures increased by

20 percent during the same period. By April 2020, most shops and businesses had closed indefinitely as people across the country feared contracting COVID-19 despite strict social distancing measures put in place. The pandemic further aggravated the country’s already dismal economic and financial predicament. The market value of the Lebanese pound (LBP), which is officially pegged at LBP 1,507.5 to $1.00, plunged, reaching the value of LBP 9,500 to $1.00 in June 2020 and hovering at or above

15,000/1.00 in June 2021.

As many businesses closed and consumers were quarantined at home, the country’s economic collapse accelerated. According to the World Food Programme (WFP), 22 percent of Lebanese, 50 percent of refugees, and 33 percent of refugees of other nationalities are food insecure. Food prices have increased by more than 400 percent since early 2020, pushing more households to resort to negative coping mechanisms, including purchasing food on credit, selling domestic assets and reducing spending in other key areas such as health or education. Nearly half of all employed respondents continue to perceive that their wages were lower, consistent with the erosion in the purchasing power of their earnings.

Furthermore, skyrocketing unemployment and hyperinflation have led to other crises - a diesel fuel shortage has decreased the reliability of state-provided electricity, and private generators are no longer able to fully meet demand, resulting in blackouts. The country has experienced an uptick in security incidents, including robberies and car thefts, as well as rising tension among local communities, to which USAID/Lebanon’s implementing partners and other international donors have repeatedly expressed growing concern.

The August 2020 explosion at the Port of Beirut, the largest port operation in Lebanon serving import, export, transit (mainly destined for Syria, Iraq and other Gulf countries) and transshipment cargo to other ports on the Mediterranean Sea, caused approximately 230 deaths, 6,000 injuries, $10-15 billion in property damage, damaged 183 educational institutions (affecting 77,000 students) and left an estimated 172,000 people homeless. Though largely controlled by a temporary committee as the Port

Authority for the Port of Beirut8 under the Ministry of Public Works, the Port is a source of known corrupt questionable practices with misuse of revenues for personal patronage. Nonetheless, the explosion further exacerbated the adverse effects of the economic crisis, civil unrest, and the COVID-

19 pandemic.

Additionally, many businesses suffered extensive damage in densely populated neighborhoods near the

Port, contributing to the World Bank's losses in estimated economic activity of between $2.9 and $3.5 billion. The cost of repair of the Port itself is estimated at $140 million. As of November 2020, of a sample of 379 firms surveyed between October 2019-October 2020, one in five is confirmed or assumed to be permanently closed; this is expected to rise to one in four firms by December 2021.9 In addition, 61 percent of firms - mainly medium and large firms - decreased their permanent workforce

8 The Temporary Committee/Compagnie de Gestion et d’Exploitation du Port de Beyrouth (GEPB) was established as the

Port Authority (PA) for the Port of Beirut since the 1990s under the sole supervision of the Ministry of Public Works and

Transport (MOPWT). The Port of Beirut was the most important transit port in the Middle East and North Africa before the

1975 civil war.

9 Elzir, A. (2021, October 29). What the mega-crises have done to Lebanese firms and workers. World Bank Blog. Two additional waves of interviews have been conducted with results anticipated in December 2021.

http://www.businessnews.com.lb/cms/Story/StoryDetails/8681/550,000-unemployed-InfoPro-survey-shows https://blogs.worldbank.org/arabvoices/what-mega-crises-have-done-lebanese-firms-and-workers

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by nearly half (43 percent); one in five workers have lost their jobs since October 2019; the economic impact is expected to worsen for informal and micro-sized firms.10 Previous gains in women’s economic empowerment have receded, as net job losses for women are on average 5 percentage points higher for women than men.11 Skilled labor - particularly doctors and nurses - has begun to depart en masse.12

It is important to note that the potential for the economic crisis to further deteriorate due to the aforementioned difficulties has significantly increased. It will be integral to closely monitor the state of the investment climate and private sector in the coming years to ensure USAID’s programs are responsive and able to adapt to the ever-changing needs of the country.

Ostensibly, the priority of the new GOL should be the implementation of a series of urgent reforms and emergency measures to rescue the country from the ongoing economic crisis and should include significant reforms that target financial, judicial, and regulatory restructuring to reduce deep-seated corruption; preserve and increase productivity and exports; and strengthen the country’s social safety nets. Successful implementation of such reforms might potentially unlock foreign support to help

Lebanon more effectively alleviate the current crisis. Although multilateral partners and donors, through the Conference Economique pour le Development, par les Réformes et avec les Entreprises

(CEDRE) process and the European Union (EU) and World Bank-sponsored $2.5 billion Reform, Recovery, and Reconstruction Framework for Lebanon (3RF) for people-centered recovery13 and reforms and reconstruction, expressed willingness in supporting Lebanon with significant financial support, these efforts have been stymied due to the GOL’s inactivity on actual reform implementation, such as those required by the IMF.

At a session in March 2020, Lebanon's Cabinet voted unanimously to default on a $1.2 billion Eurobond payment, its first ever default. The ramifications reverberated within Lebanon's financial sector and will have long-term effects on Lebanon's credit rating. Most analysts now believe substantial economic and political reforms are required to forestall complete economic collapse. The GOL started discussions with the International Monetary Fund (IMF) regarding a restructuring plan in 2020, but there was a lack of consensus among bankers, Central Bank, and politicians regarding the contours of the proposed plan, which inhibited the commencement of negotiations.14

As Lebanon's economic crisis deepens, the government may look to strengthen its relationship with the

PRC as an alternative source of support. The PRC is already Lebanon's top trading partner, with

Chinese goods accounting for 40 percent of Lebanon's imports, amounting to an estimated $2 billion annually. The PRC is also seeking to make inroads in Lebanon through cultural and educational exchange programs and health and defense donations.

10 Elzir, A. (2021, October 29).

11 Elzir, A. (2021, October 29).

12 WHO Director-General’s remarks at the press conference on Lebanon and Afghanistan. (2021, Sept 23);

Youmshajekian, L. (2021, Oct 8). Lebanon’s economic war sees mass exodus of skilled workers, devastating health sector.

ABC news. The WHO estimates 2,000 doctors and 1,500 registered nurses have departed, and 600 private pharmacies have closed.

13 The 3RF does not duplicate efforts of Lebanon Crisis Response Plan (LCRP), which targets refugees and Lebanese host communities across the country.

14 At the time of CDCS finalization, discussions have opened after 13 months of deadlock. DW news. (2021, Oct 18). Lebanon to resume talks with IMF, but the outcome uncertain.

https://www.who.int/director-general/speeches/detail/who-director-general-s-remarks-at-the-press-conference-on-lebanon-and-afghanistan https://www.abc.net.au/news/2021-10-09/ https://www.dw.com/en/lebanon-to-resume-talks-with-imf-but-outcome-uncertain/a-59495417 https://www.dw.com/en/lebanon-to-resume-talks-with-imf-but-outcome-uncertain/a-59495417

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Although the presence of Hizballah in the GOL precludes the signing of a bilateral agreement with

USAID and restricts where and with whom USAID can work, the CDCS complements the GOL’s development priorities and other donors’ efforts in the areas of economic growth, education, water management, and humanitarian assistance through the joint GOL-United Nations (UN) Lebanon Crisis

Response Plan, which focuses primarily on the needs of refugees in country, and the Emergency

Response Plan (ERP), released in August 2021 to focus on the needs of Lebanese and migrants.

Currently, USAID coordinates with multiple donors including the EU, France, the United Kingdom, Germany and the Netherlands on activities related to enterprise and agricultural support, ensuring complementarity of actions and sharing experiences. The Mission seeks to expand opportunities for collaboration with additional donors under this CDCS. Should more favorable political circumstances unfold vis-a-vis the GOL, USAID would consider pivoting support to key ministries, particularly the

Ministry of Health given the COVID-19 pandemic.

A key factor to consider when designing and implementing development programs is that Lebanon has a particularly weak state with an ineffective government and a collapsed financial sector. In addition, the inadequate capacity of the state is a result of the confessional system in Lebanon, which creates institutional paralysis and policymaking gridlock, and is sustained by robust patronage networks tying sectarian leaders to their respective constituencies. The ability of these leaders to distribute patronage, especially government jobs, is critical to maintaining political and social dominance. Unfortunately, this process adversely impacts the overall capacity and effectiveness of state institutions. The demonstrations in late 2019 strongly rejected sectarianism and demanded an end to corruption.

The country’s myriad challenges—particularly the systematic paralysis, economic and financial crises, poor service delivery, and considerable refugee burden—make now an appropriate time to increase private sector competitiveness and livelihoods; strengthen capacity of schools and higher educational institutions; and advance new service delivery initiatives to better address community resilience, economic growth, and youth development. Approximately 33 percent of Lebanon’s total resident population is 10-29 years old. As this percentage continues to grow, there is an urgent need to implement relevant and impactful development programming that will ensure young people are able to find decent, meaningful employment and effectively participate in civil society forums. Without these crucial investments, Lebanese youth may become disaffected, potentially leading to further unrest, violence, and outward migration due to a lack of employment and civic engagement opportunities.

USAID will build on Lebanon’s comparative advantage with respect to freedom of trade, which is relatively open by regional standards. Lebanon’s strategic position in the region, untapped domestic resources, and culture of entrepreneurship are assets and areas where USAID can exert the biggest influence and best support the achievement of foreign policy objectives.

Climate Change

According to USAID/Lebanon’s Climate Risk Assessment, climate changes such as increasing temperatures, rising sea levels, declining rainfall, and an accumulation of extreme weather events will lead to the erosion and degradation of beaches, desertification, and an increasing risk of fire, drought, and loss of ecological habitats will adversely affect the tourism sector. Moreover, the impacts of climate changes are expected to reduce the exploitable water supplies by about 1% by 2020, 8% by 2040, and

29% by 2080 and accelerate the depletion of groundwater supplies that are already under pressure from extraction for agriculture. It is also estimated that the Lebanese economy will lose about $800 million per year in agricultural and food costs that can be traced to direct or indirect climate change-related causes. This happens as higher temperatures, precipitation changes, and extreme weather events (e.g., storms) reduce agricultural productivity, cause flooding, and damage infrastructures. These climate related events are expected to cost Lebanon around $23,200 million in 2080. To help mitigate

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the impacts of climate changes, especially in the water sector, USAID/Lebanon will prioritize assistance

(DO3, IR3.1 and IR 3.2) to help improve the operational efficiency of regional water establishments, upgrade infrastructure and provide technical assistance to improve sanitation and water conservation and engage the private sector and local communities in water resource management.

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III. USAID’S STRATEGIC APPROACH

Country Roadmap

Lebanon lies on the southeast quadrant of its Country Roadmap, scoring relatively high on capacity and relatively low on commitment. Despite the country’s high scores in some capacity metrics, including

GDP Per Capita and Poverty Rate, the United Nations High Commissioner for Refugees (UNHCR) estimates that 30 percent of the population lives on less than four dollars a day, and 90 percent of the estimated 1.5 million population of Syrian refugees live below the national poverty line. Only 1 percent of students in Lebanon perform well in basic literacy (compared with an Organization for Economic

Co-operation and Development (OECD) average of 9 percent). Lebanese experts estimate that unemployment is at 37 percent for people under 35 years of age and given the current financial crisis the poverty rate among the population has jumped to 55 percent.15 Without economic opportunities, many of Lebanon’s educated youth have and will continue to migrate abroad. Approximately 77 percent of emigrants from Lebanon are below the age of 35, resulting in a major drain on the skilled labor force. Women’s participation in the labor force is only 23 percent, well below the OECD average of 63 percent. Women’s labor force participation is an important driver (and outcome) of growth and development, though the goal should not only be for a higher quantity of jobs but also for higher quality as well. More significantly, the low scores reflected in the commitment metrics, such as Open

Government, Liberal Democracy, Economic Gender Gap, and Business Environment, underscore the chronic, dismal performance of the public sector, especially at the national level. This is an area of crucial importance that is severely hindering Lebanon’s ability to become self-reliant.

USAID’s Strategic Approach

Key strategic shifts in the 2021-2026 strategy include the following:

▪ Balancing existing development needs and objectives with emerging conditions that may drive increased fragility. Notably, the ongoing economic collapse and political deadlock may necessitate expanded humanitarian assistance and modified development approaches during the

2021-2026 strategic period.

▪ Expanding Lebanon’s trade from reliance on the East (Gulf and Arab countries) to include more diverse markets including the West and South and expanding business solutions to incorporate non-bank financial services and technology. Noting the importance of trade and the private sector’s growing preference for trade, emphasis will be placed on supporting exports and import substitution where possible. This will augment high-growth potential businesses with tremendous export potential.

▪ Transitioning USAID’s focus on the forestry sector toward new areas of natural resource management to better support livelihoods and help alleviate the country’s deepening poverty.

▪ Moving from a focus on school retention to expanding literacy efforts, extending into numeracy, exploring avenues for private sector engagement in basic education, further developing the organizational capacity of higher education institutions, engaging with Lebanese and refugee communities in need of life-saving support, and providing education support to refugees through higher education activities and Lebanon’s public primary schools.

▪ Transitioning from only upgrading regional water establishments’ (RWEs’) institutional platforms and systems to improving their operational efficiency, upgrading infrastructure and

15 United Nations Economic and Social Commission for Western Asia. (2020). Poverty in Lebanon Policy Brief.

https://archive.unescwa.org/sites/www.unescwa.org/files/20-00268_pb15_beirut-explosion-rising-poverty-en.pdf https://archive.unescwa.org/sites/www.unescwa.org/files/20-00268_pb15_beirut-explosion-rising-poverty-en.pdf

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providing technical assistance to improve sanitation and water conservation, and engaging the private sector and local communities in water resource management.

▪ Expanding assistance to unions of municipalities and clusters of municipalities not controlled by

Hizballah or other malign actors to address community needs and ensure economies of scale to boost livelihoods, manage solid waste, and promote renewable energy sources to improve timely delivery of services, a key driver of fragility.

▪ Empowering civil society to advocate for and advance transparency and accountability, good governance, community services, civil rights, and citizenship.

In the short term, USAID’s strategic approach endeavors to maintain stability in an increasingly volatile and difficult operating context driven by sectarian tensions, violence stemming from tensions between refugees and host communities, increased food insecurity among Lebanese, and an economy in free fall.

These challenging circumstances could create the perfect conditions for social unrest and violence.

USAID strives to prevent the rise of violent extremism due to the presence of Hizballah by strengthening social safety nets, improving delivery and quality of essential social services, and ensuring that impoverished areas are able to maintain critical lifelines to vital employment opportunities with decent wages.

With respect to economic growth, USAID, through IR 1.1 and 1.2, will adapt and tailor its activities to address key challenges and constraints that enterprises face due to the volatile and extremely challenging context. USAID will help enterprises adapt and sustain productive activities, but also take advantage of growth opportunities, particularly in exports and import substitution. In anticipation of an economic recovery, USAID will engage the private sector and other relevant actors to formulate and advocate for reforms to the business enabling environment.

USAID/Lebanon focuses mainly on engagement with the private sector and for the most part does not work directly with central government institutions. Due to political and vetting considerations, the

Mission is largely unable to engage with national institutions that directly address economic development and business promotion. As indicated previously, should the Lebanese government begin implementing serious reforms and should the Mission expand its engagement with the Lebanese government, USAID might consider partnering with GOL institutions to improve the business enabling environment in order to boost economic growth. In lieu of working directly with the GOL, USAID will engage the private sector and other relevant actors including, but not limited to business associations, unions, CSOs, think tanks, universities, and media, to identify, develop, and advocate business enabling environment reforms.

USAID education programming outlined in IR 2.2 will seek to improve early grade reading and numeracy skills for students in grades 1-6. USAID observed improvements in the reading abilities of students participating in its prior basic education activity and now seeks to expand programming to include numeracy and social and emotional learning. In addition, USAID is uniquely positioned to contribute to the organizational development of the Ministry of Education and Higher Education

(MEHE) and its affiliated organizations in order to improve education delivery and produce better learning outcomes. This will be particularly important in a context in which thousands of families have moved their children from private to public schools due to the devaluation of the Lebanese pound, straining an already overburdened and underfunded16 public education system. USAID programming, implemented through IR 2.1, will also aim to develop second-tier universities across Lebanon to stimulate competition among educational institutions and improve student learning experiences. Finally, 16 The GOL’s spending on education is low at less than 2 percent of Gross Domestic Product (GDP) in 2020, well below the

OECD average of 4.4 percent (2016), and among the lowest in the MENA region (EdStats).

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USAID will continue to provide scholarships to academically qualified financially disadvantaged Lebanese and refugee students to obtain jobs and develop their leadership and civic engagement skills.

In this five-year plan, USAID, as detailed in IR 3.2, will move away from supporting institutional platforms and systems of the water sector—an area that USAID has made substantial investments—to water conservation and sanitation, as well as enhancing the efficiency of the water sector. In light of the current financial crisis, USAID will assist regional water establishments in their efforts to reduce costs and remain self-sufficient. However, the main thrust of USAID’s programming will be to successfully address the issue of untreated wastewater in Lebanon.

Since 2013, USAID partnered closely with local municipalities to improve service delivery to the

Lebanese people and will continue this partnership through interventions stated in IR 3.1. Working with local municipalities better enables USAID to mitigate the risk of Hizballah deriving any benefit from USG assistance by being able to, more specifically, identify its beneficiaries. The Mission found that engaging with local governmental entities has led to the implementation of tangible reforms, including reduced community tensions over resources and meaningful improvements in service delivery.

It also merits mention that USAID does not typically undertake health programming due to an absence of designated health funding as well as because, until August 2021, the Minister of Public Health was nominated by Hizballah. USAID will continue to undertake targeted programming to build capacity and increase training in privately-run Lebanese hospitals and consider aiding public health institutions to more effectively respond to the COVID-19 pandemic. USAID is considering more comprehensive support to address immediate humanitarian health needs to ensure the continuity of health services while closely monitoring related protection needs. While an important contribution, it is important to reiterate that this limited support is not a core part of this CDCS.

Although USAID’s past humanitarian support to WFP helped meet the basic food needs of refugees, other donors in Lebanon have typically taken a more direct role in specifically providing support to refugees while USAID/Lebanon has implemented a more traditional development portfolio.

However, successive crises including the October 2019 protests, the COVID-19 pandemic, the Port of

Beirut explosion, and continuing economic deterioration have dramatically increased the Bureau for

Humanitarian Assistance’s (BHA’s) activities in Lebanon. Since March 2020, BHA has provided over $34 million in humanitarian assistance in Lebanon—above and beyond previous contributions to WFP to address the Syrian refugee crisis, which was more than $755 million since 2012—in response to the

COVID-19 pandemic, the Port of Beirut explosion, and increasing poverty rates due to the collapsing economy. In FY2021, BHA provided $111m in food and non-food assistance for both refugees and

Lebanese. Many humanitarian needs in the aftermath of the August 4, 2020 explosion and the country’s economic decline remain unmet. The Mission’s expanded focus on humanitarian assistance and response efforts will likely be sustained during the period of this CDCS. A key goal of this special objective (SO) is to ensure that shorter-term humanitarian assistance better aligns with the Mission’s development programming.

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IV. RESULTS FRAMEWORK

Goal Statement and Narrative:

A STABLE AND RESILIENT LEBANON AT PEACE WITH ITS NEIGHBORS, BUILDING ON INCLUSIVE

ECONOMIC, INSTITUTIONAL, AND COMMUNITY-BASED OPPORTUNITIES

USAID/Lebanon’s goal to increase Lebanon’s stability and resilience will be advanced through two strategic themes: 1) increase competitiveness and livelihoods and more effective educational institutions; and 2) equitable delivery of services by supporting subnational institutions and civil society actors and improving community capacity and the management of key resources. The Mission will address these themes through an inclusive development approach that engages the private sector and strives to ensure that all people, especially youth and women, are able to participate in and benefit from USAID’s development efforts.