About
Administrative
Decentralization
in Lebanon
Introduction
As part of LCPS’s mission to disseminate policy
research findings to decision makers, experts,
and the wider public, this booklet presents
facts and figures about the oil and gas sector in
Lebanon, which we hope will contribute to a better
understanding and perspective on the significance
of the sector locally and internationally, as well as
what the sector’s governance and sound
development entails.
The booklet is divided into three main sections.
The first section introduces the Lebanese energy
sector and highlights the importance of petroleum to
the Lebanese economy. The second section, ‘Where
We Stand’, offers a description of Lebanon’s potential
reserves and the progress of the sector compared to
regional and international players, as well as the
sector's institutional and fiscal framework. The final
section, ‘The Way Forward, presents the challenges
that will eventually need to be addressed in the
sector. This booklet combines information from
LCPS research as well as external sources, which has
been simplified and visually represented for those
interested in learning about the oil and gas sector.
LCPS would like to thank the British Embassy in
Lebanon for making the production of this
booklet possible.
1
Government tiers
Central
Government
8 governates
Deconcentration
Decentralization
26 qadas
51 municipal unions
1,108 municipalities
10 municipalities
Source
Municipal law in Lebanon, decree-law 118/1977 and its amendments, articles 1, 47, 50
10 municipal unions
2
Municipalities
3
Municipalities
Number of municipalities
The number of municipalities in Lebanon is high
relative to its surface area and number of residents
Lebanon
Croatia
Finland
Cyprus
1,108
428
336
40
10,452 km2
56,594 km2
338,424 km2
9,250 km2
2014 data, except Cyprus 2013
10 municipalities
4
Municipalities
Definition and role
of the municipality
Municipalities are local bodies with administrative and fiscal
autonomy. They are endowed with tasks that have a public
character or utility within their area and they are entrusted
to establish, manage, and help in the implementation of
projects like:
Source
5
Infrastructure
Kindergartens
Public
schools
Vocational
training centers
Playing
fields
Dispensaries
Public
hospitals
Public
housing
Municipal law in Lebanon, decree-law 118/1977 and its amendments, articles 1, 47, 50
Municipalities
Local services
Municipalities provide services in different sectors
including infrastructure
New
services
Maintenance
services
35%
49%
Potable
water
network
38%
55%
Road
lighting
network
62%
88%
Road
paving
72%
88%
82%
65%
Sidewalks
Retaining
walls
Only 8% of municipalities offered all of the above services in 2012
Source
Percentages refer to the number of municipalities that provide these services
Atallah, “Municipal Performance”, Sudgest Aid, 2012
6
Municipalities
Local spending
The share of local to central government spending is 6% in
Lebanon, which is low compared to other countries
6%
11%
Lebanon
Luxemborg
22%
Hungary
42%
Norway
24%
France
56%
Finland
Local spending is the spending by municipalities and municipal unions.
Central government spending is the spending by the central government
2012 data, except Switzerland 2011 and Lebanon 2008
Source
7
IMF-Data and Statistics-Government Finance Statistics
http://elibrary-data.imf.org/DataReport.aspx?c=24944917&d=33061&e=170809
13%
Ireland
42%
Switzerland
85%
Denmark
Municipalities
Structural constraints
Municipalities are endowed with many prerogatives
and responsibilities, but suffer from administrative
constraints
70%
Municipalities
with a registered
population lower
than 4,000
43%
Municipalities
with an
administrative
structure
Municipalities
with one
employee only
87%
68%
Municipalities
with fewer than
six employees
75%
M
i i li i
Municipalities
lacking the
financial means to
hire new employees
Source
400
57%
M
i i liti
Municipalities
that prefer to
hire temporary
employees
Municipalities
that need new
employees
30%
M
h are
Mayors who
above the age of
64
2011 data
Atallah, “Municipal Performance”, Sudgest Aid, 2012
8
Municipalities
Sources of revenue
Municipalities are funded by seven sources of
revenue, the most substantial ones being direct fees
and the Independent Municipal Fund (IMF)
Other sources
Aid and loans
Revenues from municipal
properties, including commons
Fines
Grants and bequests
Fees transferred from
autonomous
us agencies and
public institutions
tittutions
26%
30
43%
%
Direct
fees
31%
IMFF
transfers
nssfers
Source
9
2010 data
Ministry of Interior and Municipalities, ICMA, “Municipal Finance Studies Program: Final Strategic Framework”, April 2011
W 0
Municipalities
Collected fee
Collected fees make up only 30% of the total budgeted fees
30%
Collected
fees
Budgeted
fees
Source
2008 data
Atallah, “Municipal Performance”, Sudgest Aid, 2012
10
Municipalities
Direct fees
Municipalities collect 36 direct fees, but only 3 fees
constitute 83% of their direct revenues
Slaughterhouses
Contract
registration
Street
vendors
Rental
value fee
83%
Construction
permits
Pavement
& sewerage
maintenance
Billboards
Tourist
attractions
Municipalities are not allowed to impose any new tax or determine the tax base
Source
11
Atallah, “Establishing Regional Administrations for Integrated Development”, Policy Brief Nº2, September 2012
W
Municipalities
Rental value fee
Even though rental value fees form a large part of
municipal direct fees, their ratio to GDP is lower than the
average in other countries
0.016%
Lebanon
Source
0.6%
Developing and
transitional economies
Ministry of Interior and Municipalities, ICMA,“Municipal Finance Studies Program: Final Strategic Framework”, April 2011
12
Municipalities
Municipal development
level and collection rate
Municipalities in richer areas do not necessarily
collect more taxes
46% of
municipalities
in richer areas1
collect less
than 30% of
their total
budgeted
revenues
46%
Municipalities in
wealthier regions
13
Budgeted
revenues
2010 data
Higher than 60% according to the index developed by Consultation and
Research Institute (CRI) in 2006 and composed of 12 indicators
Municipalities’ financial statements, 2010
Ministry of Interior and Municipalities, UN Habitat and Sudgest Aid, “Performance of municipalities questionnaire”, Lebanon 2011
1
Source
30%
W7
Municipalities
Municipal performance and
development level
A high development level does not necessarily translate
into better municipal performance
+
High
18%
Municipalities in poorer
regions1 have a high
performance level2
Performance
26%
Municipalities in wealthier
regions3 have a low
performance level4
Low
-
-
Low
Level of development
+
High
1 Development index lower than 40%
2 Performance index higher than 3
3 Development index higher than 60%
4 Performance index lower than 3
The development index was developed by Consultation and Research Institute (CRI) in 2006, and is composed of 12 indicators.
The performance index is calculated based on 4 components: existence of development plan, existence of urban planning
strategy, number of new infrastructure services provided and number of infrastructure maintained
2012 data
Source
Ministry of Interior and Municipalities, UN Habitat and Sudgest Aid, “Performance of municipalities questionnaire”, Lebanon 2011
14
Municipal
Unions
15
Municipal Unions
Municipal union membership
There are 51 municipal unions in Lebanon with
more than 700 municipalities
1/3 of municipal
unions were founded
before 1999
2/3 of municipal
unions were founded
after 2000
700
out of 1,108
Municipalities
2013 data
51
Unions
10 municipalities
10 municipal unions
16
Municipal Unions
Municipal unions’
prerogatives
Municipal unions have many prerogatives, which include
executing public projects with common benefits for all or
some member municipalities, such
as: El Dreib El Wasat
Sahel Akkar
El Shaft
Mintaqat El Joumeh
Wassat Ou Sahel El Qaytaa
El Minieh
El Fayhaa
El Hermel
Jord El Qaytaa
El Dinniye
Qada Zgharta
El Kura
7%
Mentaqat El Batrun
El Dinniye
Deir El Ahmar
Mentaqat El Batrun
El Shallal
Qada Jbeil
Gharbi
El Metn El Shamali El Sahili Wa El awsat
Baalbek
Sahel El Metn El Janoubi
Metn El Aala
QadaElZahle
El Bekaa El Awsat
Iqlim El Kharroub El Shamali
El Bouhayra
Iqlim
El Kharroub El Janoubi
Qada
Jezzine
Saida el Zahrani
Source
17
Sahel El Zahrani
Jabal AamelQada Sour
El Qalaa
Civil defense
Qada Sour
Gharbi Baalbek
Baalbek
Slaughterhouses
Sharqi Baalbek
Sharq Zahle
Qada Zahle
El Bekaa El Awsat
El Suwayjani
El Gharb El Aala wa El Shahhar
El Sahel
El Shouf El Aala
El Suwayjani
El Sahel
El Shouf El Aala
El Bouhayra
Qada Jezzine
Sahel El Zahrani
Shamal Baalbek
El Dahiya El janoubiya
Iqlim El Touffah
Jabal El Rihane
El Shqif
Baalbek
Deir El Ahmar
Sharqi Baalbek
Waste
collection
Sharq Zahle
Keserwan - El Ftouh
El Metn El Shamali El Sahili Wa El awsat
Saida el Zahrani
Qada Bcharreh
El Shallal
Sahel El Metn El Janoubi Sewerage
Roads
El Metn El Aala
El Dahiya El janoubiya
systems
Iqlim El Kharroub El Janoubi
El Hermel
Jord El Qaytaa
Qada Zgharta
El Kura
Keserwan - El Ftouh
Iqlim El Kharroub El Shamali
El Shaft
Mintaqat El Joumeh
Shamal Baalbek
Qada Jbeil
El Gharb El Aala wa El Shahhar
El Dreib El Wasat
Sahel Akkar
Wassat Ou Sahel El Qaytaa
El Minieh
Qada ElBcharreh
Fayhaa
Iqlim El Touffah
Jabal El Rihane
El Shqif
El Aarqoub
Jabal Aamel
El Qalaa
Organization
Bint Jbeil
of transportation
Bint Jbeil
El Aarqoub
Akkar
CooperativesAkkarBaalbeck
SouksEl Hermel
Baalbeck
Hermel
and El
markets
Beirut
BeirutBekaa
BekaaMount Lebanon
Nabatiyyeh
MountNorth
Lebanon
Nabatiyyeh
South
North
Municipal
law in Lebanon, decree-law 118/1977 and its amendments, articles 1, 47, 50
UN
HABITAT (2012)
South
Municipal Unions
Municipal unions’
prerogatives
Municipal unions have many prerogatives, which include
executing public projects with common benefits for all or
some member municipalities, such as:
7%
Source
Roads
Sewerage
systems
Waste
collection
Slaughterhouses
Civil defense
Organization
of transportation
Cooperatives
Souks
and markets
Municipal law in Lebanon, decree-law 118/1977 and its amendments, articles 1, 47, 50
18
Municipal Unions
Municipal union size
Municipal unions have between 3 and 53 member
municipalities with an average of 14 municipalities,
spread accordingly:
7%
Unions with
more than 30
municipalities
16%
Unions with
between
20 and 29
50%
municipalities
Unions with
less than 10
municipalities
27%
Unions with
between
10 and 19
municipalities
2013 data
19
10 municipalities
Municipal Unions
Municipal union facts
70%
IMF share from total
municipal unions’
revenues in 2011
58%
Municipal
unions that do
not have any
full-time
employees*
Source
42%
Municipal unions
that do not collect
any membership fees*
50%
Municipal unions
whose president is
present daily in the
union’s headquarters*
21%
Municipal
unions that
have one or
two full-time
employees*
*2013 data
Municipal unions’ financial statement, 2010
LCPS, “Performance of municipal unions questionnaire”, 2013
20
Municipal Unions
Expenditures of
municipal unions
More than half of municipal unions’ funds
are spent on the construction of public roads
Other expenditures
Provision of public lighting networks
Construction of public water networks
Project studies
Buildings
Other facilities
13.5%
Construction of
pools and
playing fields
Sewerage
systems
7.7%
8.0%
9.3%
Construction
of parks
Source
21
Municipal unions’ financial statement, 2010
61.5%
Construction
of public roads
Municipal Unions
Sources of municipal
union financing
The most important source of municipal unions’ revenues is
the Independent Municipal Fund
Additional
percentage
Aid,
from the budget of the
municipalities which
benefit from a common
project in an amount
to be determined
by the union
Revenue
of member
municipalities
Unions’
share
of IMF
revenues
loans, and revenues
from commons
belonging to union
council’s jurisdiction
State
contribution
to union budgets
Grants
and bequests
Municipal unions cannot impose or collect fees and taxes
Source
Municipal law in Lebanon, decree-law 118/1977 and its amendments, article 133
22
Independent
Municipal
Fund
23
Independent Municipal Fund
Distribution of IMF funds
70% of municipal unions’ revenues and 31%
of municipalities’ revenues come from the IMF
IMF share
30
%
%
30
70%
31%
31%
of total municipalities'
revenues come from the IMF
Source
70%
of total municipal
unions' revenues
come from the IMF
2010 data
Municipalities' financial statement, 2010
Municipal unions' financial statement, 2010
24
Independent Municipal Fund
Intergovernmental
grant transfers
Transfers for municipalities and municipal unions
constitute 0.4% of GDP, a very low share compared
to other countries
0.4%
Lebanon
2008
8.1%
Source
25
0.3%
Tunisia
1999
8.8%
4.2%
Hungary
1999
12%
Switzerland
Ireland
Czech Repulic
2001
1997
2001
Ministry of Interior and Municipalities, ICMA,“Municipal Finance Studies Program: Final Strategic Framework”, April 2011
Independent Municipal Fund
IMF revenues
IMF revenues comprise 11 taxes and fees, only
7 of which are collected
Collected
1%
Property tax
2%
Transfers of estate fees
6%
Real estate registration fees
11%
Vehicle registration fees
12%
Not collected
Insurance fees
30%
Customs fees
38%
Income tax
Source
Ministry of Interior and Municipalities, ICMA,“Municipal Finance Studies Program: Final Strategic Framework”, April 2011
26
Independent Municipal Fund
Revenue collection
Only $1.9 billion of the $2.7 billion that should have
been collected for the IMF between 1999 and 2009 was
actually collected
$2.7bn
ought to be collected
$200M
were not
collected
VAT on
mobile
phones,
totaling
Total
collected
between 2002
and 2009,
was not
transferred to
the IMF
$1.9bn
Source
27
$600M
Ministry of Interior and Municipalities, ICMA, “Municipal Finance Studies Program: Final Strategic Framework”, April 2011
Independent Municipal Fund
Deductions and withdrawals
The IMF suffers from withdrawals and deductions to
cover costs that do not benefit all municipalities
Collected sum
$1.9
billion
Deductions
$270
million
Salaries, wages,
public works, waste
management
Withdrawals
$246
million
Civil defense, villages
without municipalities,
school fee exemptions
Municipalities and
municipal unions
1999--2009 data
Source Ministry of Interior and Municipalities, ICMA,“Municipal Finance Studies Program: Final Strategic Framework”, April 2011
28
Independent
Municipal
Fund
Independent
IndependentMunicipal
MunicipalFund
Fund
Distribution of
of revenues
revenues
Distribution
Law
Law
Law
Revenuedistribution
distributionbyby
Revenue
Revenue distribution by
25%
25%
25%
Municipal
Municipal
75%
75%
75%
Development
Development
projects
Development
projects
projects
union
Municipal
union
budgets
union
budgets
budgets
Reality
Reality
Reality
Revenuedistribution
distributioninin
Revenue
Revenue distribution in
40%
40%
40%
Based
Based
onon
60%
60%
60%
Based
Based
onon
number
Based of
onof
number
municipalities
number of
municipalities
municipalities
population
Based on
population
size
population
size
size
Municipal
unions
Municipal
Municipal unions
unions
Municipal
unions
Municipal
Municipal unions
unions
25%
25%
25%
most
AtAt
most
At most
12%
12%
12%
75%
75%
75%
least
AtAt
least
At least
88%
88%
88%
Municipalities
Municipalities
Municipalities
Municipalities
Municipalities
Municipalities
most
AtAt
most
At most
least
AtAt
least
At least
5%
5%
5%
95%
95%
95%
Municipality
Municipality
10%
10%
10%
90%
90%
90%
Municipality
Municipality
22%
22%
22%
78%
78%
78%
Population
Population
Civil
Civil
defense
Civil
defense
defense
30%
30%
30%
Development
Development
projects
Development
projects
projects
40%
40%
40%
Previous
Previous
direct
Previous
direct
revenues
direct
revenues
basis
revenues
basis
basis
Accordingtotodecree
decree1917/1979
1917/1979
According
According to decree 1917/1979
Source
Source
Source
29
70%
70%
70%
Municipality
Municipality
budgets
Municipality
budgets
budgets
60%
60%
60%
Population
Population
basis
Population
basis
basis
Development
Development
projects
Development
projects
projects
Previous
Previous
direct
Previous
direct
revenues
direct
revenues
basis
revenues
basis
basis
budgets
Municipality
budgets
budgets
budgets
Municipality
budgets
budgets
basis
Population
basis
basis
Accordingtotodecree
decree10234/2013
10234/2013
According
According to decree 10234/2013
MinistryofofInterior
Interiorand
andMunicipalities,
Municipalities,ICMA“Municipal
ICMA“MunicipalFinance
FinanceStudies
StudiesProgram:
Program:Final
FinalStrategic
StrategicFramework”,
Framework”,April
April2011
2011
Ministry
Ministry of Interior and Municipalities, ICMA“Municipal Finance Studies Program: Final Strategic Framework”, April 2011
W 4
Independent Municipal Fund
Revenue distribution criteria
Unfairness in IMF’s revenue distribution
revenues are one of the criteria for
1 Direct
distributing IMF revenues to municipalities.
More than 80% of these revenues
originate from fees related to the
real estate sector, which is often
more developed in urban rather
than in rural areas.
80%
This results in an unfair distribution of revenues
between urban and rural municipalities.
of the IMF revenues go to small
2 Part
municipalities (having a registered population
lower than 4,000), based on the presumption
that these municipalities are more in need of
financial support and development projects.
But in reality, 60% of small
municipalities have high levels
of development.
60%
Thus,
h such
h assumptions contribute to increasing
the gap between rich and poor municipalities.
3
The registered, not the resident, population is a
primary criterion for the distribution of IMF
revenues, resulting in an unfair distribution.
25%
Residents
Registered
For example, there are 42
municipalities which have a
registered population of 231,000,
versus a resident population
of 961,000.
10,000 people
Source
Ministry of Interior and Municipalities, ICMA, “Municipal Finance Studies Program: Final Strategic Framework”, April 2011
30
Lebanese Center for Policy Studies
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POB 55-215 - Leon Street
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T +961 1 799 301
F +961 1 799 302
[email protected]
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Data prepared by LCPS for the Decentralization Law.
Infographic and Graphic design by Polypod.