Syrian refugees burden and benefit for Lebanese economy

By Oliver Holmes

BEIRUT (Reuters) - What happens to a country when one in 10 of its residents is a refugee?

For the government of Lebanon - a tiny Mediterranean state of 4 million people that has seen almost half a million Syrians enter its territory over the past two years - the answer is clear. But economists say it may be overlooking the opportunities an influx of refugees can bring.

"Disastrous," Energy Minister Gebran Bassil told Reuters in an interview. "Imagine for example in England, all of a sudden you have 15 to 20 million people coming into the country."

Demand for electricity in Lebanon, which already suffers daily power cuts, has jumped 27 percent in one and a half years, Bassil said, straining government reserves.

On the streets, it is common to hear food prices have risen sharply as Syrians buy up bread, and that rents have increased as thousands of families seek shelter after fleeing a civil war that has killed more than 70,000 people and displaced millions.

Lebanon's interior minister Marwan Charbel says the refugees threaten security, and popular resentment is building against what many believe is a growing financial burden on the country.

The refugee wave has swelled just as Lebanon's economic slowdown hits government finances. After stellar growth of 8 percent a year from 2007-2010, expansion has slowed to around 2 percent, and Lebanon last year recorded its first primary budget deficit since 2006, when its infrastructure was ravaged in a month-long war with Israel.

But Jad Chaaban, a professor of economics at the American University of Beirut, says the Lebanese media's focus - and that of some right-wing groups - on the negative impacts of Syrian refugees is exaggerated and misplaced.

While there have been strains on hospitals, electricity and transport, he says Lebanon has also seen significantly higher spending in deprived rural areas where refugees are settling. Chaaban points to demand for goods and a booming aid sector as humanitarian groups rush to help the refugees.

"For the first time you have people spending money in these areas. You have a local economy that has been created," he said.

Chaaban has investigated the economic impact on Lebanon of hundreds of thousands of Palestinian refugees who fled there after the creation of Israel in 1948.

"We found out that the presence of Palestinians was benefiting Lebanon by $400 million per year, usually spent in rural areas," he said.


The issue of refugees is particularly sensitive for Lebanon, which suffered its own 15-year civil war during in which the presence of Palestinian exiles was a divisive factor, and the country has seen recent clashes between supporters and opponents of Syria's embattled president, Bashar al-Assad.

Most of the refugees are Sunni Muslims, and Lebanon's Shi'ite, Druze and Christian sects fear a demographic shift that could tip the country's delicate ethnic and religious balance.

Many blame the refugees for a reported spike in crime.

In the leafy Christian town of Botchai in southern Beirut, a large sign has been erected placing a curfew on all "foreigners from 8:30pm to 5:30am".

Near the sign, a group of Syrian manual labourers carry cement and masonry. A man from Iraq, who arrived in Lebanon as a refugee several years ago and has since become foreman, said that by "foreigner" the sign referred to Syrians.

"Of course it's only Syrians they don't want walking around at night. I'm Iraqi and I can walk where I want," he said.

The mayor of Botchai, Michel Khoury, told Reuters he had imposed the curfew on Syrians after a spike in petty crime.

"Before the revolution in Syria we had Syrian workers here and it was fine. I even have 10 Syrians working for the municipality," he said at his offices at the centre of the hill-side town of 4,000 people.

"But now people have seen Syrians hanging around at night or cruising on their motorcycles. None have any papers."

Khoury says there is not enough electricity, water, bread, petrol or school places for the new arrivals, many of them families of Syrian labourers who have worked in Lebanon for years and who have had to flee the violence.

Saade Kurdi, a volunteer for Lebanon's grassroots Anti-Racism Movement (ARM), says discontentment with the Syrians reflects xenophobia rather economic facts, adding that the Lebanese blame refugees for their own failings.

He says that in the Bekaa valley, where many Syrian refugees live and where he works to distribute aid, there has been no reported rise in crime, while rising prices and falling wages have more to do with the Lebanese businesses than the Syrians.

"It is not the fault of refugees. The landlords take advantage of the situation and raise prices. And Lebanese businesses are hiring Syrian workers for less money and longer hours. So Lebanese are losing their jobs," Kurdi said.


Lebanon's economy has suffered from years of domestic political turmoil, Syria-related clashes between militia, a wave of kidnappings and plummeting tourism revenues.

Inflation hovers at around 10 percent and its budget deficit after debt repayments jumped 67 percent in 2012. Last year, the International Monetary Fund said weak policymaking by the government was a greater concern even than the fallout from Syria's civil war.

Lebanon sold $1.1 billion of long-dated bonds last week, however, suggesting investors remain committed to the country.

Jennifer Alix-Garcia, an assistant professor at the University of Wisconsin who has researched the impact of refugees on host communities in sub-Saharan Africa, says it is hard to gauge the effects of large numbers of refugees, but that there are worldwide trends.

She said a trade-based economy like Lebanon's can quickly adjust to a refugee influx and even benefit from their presence.

"The displaced constitute both a source of cheap labour and a new source of demand for all sorts of things, though the things they need first are food and housing," she said.

Alix-Garcia says that in Lebanon, refugees will have a potentially damaging impact by competing for local jobs. Labourers, shop workers and prostitutes are all cited by Lebanese as examples of jobs that now have lower wages.

But at the same time they will provide an important source of demand for products such as a food and housing, which could be beneficial for Lebanon by stimulating growth.

And even if demand for food does drive up prices, Alix-Garcia says that could be offset by free food aid supplied to the refugees. Most of the Syrian refugees in Lebanon live with host communities rather than in camps like those in Jordan and Turkey.

There are also hundreds of thousands of self-supporting and wealthy families renting apartments in Beirut, although economists say they are spending only cautiously on other things as they know the crisis will continue. Others are manual labourers, not included in refugee figures.

Syrians may also be transferring savings to Lebanese banks.

"At the beginning of the crisis in March 2011 and April, the market in Syria saw an outflow of deposits. Has some of it come here? It's likely," said Nassib Ghobril, chief economist of the Byblos Bank Group.

"It's normal for Syrians to transfer funds. But we have seen an unusual spike in deposits," he said, while cautioning that the Syrian conflict has impacted negatively on the Lebanese economy overall, blocking export routes and resulting in a sharp decline of consumer confidence and investor sentiment.

More than two years after peaceful pro-democracy protests against four decades of Assad family rule were violently suppressed, there is no sign the civil war in Syria is abating and the outpouring of its citizens is accelerating.

The United Nations said this month it will halt food aid to 400,000 Syrian refugees in Lebanon in May unless it receives urgent new funding, a dismal outlook for Syrians in the poorest parts of Lebanon who already lack food, medicine and shelter.

Javier Baez, an economist at the World Bank, has researched the effect of similar numbers of refugees flooding into northern Tanzania in 1994 during the genocides in Rwanda and Burundi.

What he found in some of the poorest communities was that there was a competition for resources and a growth of infectious diseases, not unlike what some aid workers have reported in some poorer host communities in northern Lebanon.

One result was that children in the host communities were shorter, by nearly 2 centimetres, than those in other areas of the country. The Lebanese are yet to blame any perceived lack of height on Syrian refugees.

(Additional reporting by Dominic Evans; Editing by Catherine Evans)