**2. Literature review**

#### **2.1 The Lebanese government**

Because Lebanon was under French Mandate from 1920 to 1943, its legal system is influenced by French civil law [2, 3]. Due to religious and socio-historical influences, however, Canon law, Islamic law, and Ottoman law remain fundamental parts of the legal system (Mattar Law Firm nd; [4]). According to Salloukh [5], more than 30 years ago, the Taef agreement (the basis for the end of the civil war and the return to political normalcy in Lebanon) "established a more balanced consociational powersharing system. However, Salloukh argues that this also led to the creation of a" larger, more clientelist, more corrupt public sector. "Therefore, Salloukh contends that the Taef accord (which laid the groundwork for the conclusion of the civil war and the restoration to normalcy) was flawed in its outcome. More than 30 years ago, political normalcy in Lebanon" established a more balanced consociational power-sharing. However, this resulted in a "bigger, more clientelist, more corrupt public sector." One of the most important things to have a healthy democratic government is the complete separation of the three powers (Legislature, Executive, and Judiciary). According to (ibid), in Lebanon, the Supreme Judicial Council is a ten-member council in charge of appointing and managing judges. However, it is significantly influenced by the Ministry of Justice (part of the Council of Ministers), which appoints eight of the ten members, together with the president and the rest of the cabinet. The Ministry of Justice is responsible for approving and transferring judges selected by the Supreme Judicial Council, as well as their budget. Judicial independence is threatened as a result of the executive branch's influence over the judiciary [4]. As a result of the "Taif's" division, several groups have clamored for more political power, leading to elevated levels of corruption and a very clientelist system [6, 7].

While it is difficult to give a complete review of corruption in Lebanon due to a combination of government obscurity and a scarcity of scholarly study, the available evidence indicates that corruption is deeply embedded in Lebanese society [8, 9]. In Lebanon, corruption is strongly tied to political elite. The government of Lebanon is very centralized [10]. While some localities have some decision-making authority, most policies are set by the federal government (ibid). Due to this centralization, power is concentrated in the hands of a select few individuals in parliament. According to Boege, Brown, & Clements ([11], 17), the Lebanese political order can be characterized as a hybrid, where power is distributed through a combination of "authority structures, sets of rules, logics of order, and claims to power" that blend both Western and local institutions. According to the authors, this leads to instability and informality. The sectarian system in Lebanon exacerbates the power imbalance in the hybrid system.

Political elites frequently differ on policies because they want to profit from a particular circumstance and get advantages for their faction [12]. Political elites would throw out employment to their own followers to earn votes and stay in power [12, 13]. Diwan and Haidar describe the political system as a "coalition of sectarian oligarchs" (p.2) who preserve their power by participating in mutually beneficial behind-thescenes arrangements with individuals or groups (e.g., political subsidies in exchange for political backing by enterprises). As a result, citizens are barred from participating in democracy, and societal necessities are pushed aside in favor of the interests of their political party and affiliated sects [8]. Political parties in Lebanon have little to do with genuine politics and are merely a tool for sectarian elites to manipulate the system by controlling resources to benefit their own in-group [8, 9].

#### **2.2 Economy and business in Lebanon**

Politics and commerce are heavily intertwined in Lebanon, with far-reaching implications for the country's economy [14]. Since October 17, 2019, thousands of Lebanese have taken to the streets across Lebanon, expressing their anger over the economy's collapse and demanding "all government parties out" [15]. The October 17 Revolution did not occur out of nowhere; Lebanon has been experiencing severe economic difficulties since 2009, when GDP growth peaked at 10.1 percent in that year and has since fallen to 0.2 percent in 2019 [16]. According to the Central Intelligence Agency, Lebanon had the third highest Debt to GDP ratio in 2017, with 152.8 percent. The Debt to GDP ratio compares a country's public debt to its Gross Domestic Product (GDP). Other social and economic issues confronted Lebanon, including the Israeli-Palestinian conflict and regional crises. Despite the fact that Lebanon's government revenue was just \$19 billion in 2019, the gross public debt was \$86.2 billion in 2019. Taxes account for 58 percent of these earnings, while debt interest payments account for 32 percent [17]. The majority of Lebanese debt is held domestically, with 60.6 percent held in local currency by commercial banks and the Banque Du Liban (BDL) and the rest in foreign currency [18]. Aside from unemployment, corruption, and debt, Lebanon is now facing a dollar liquidity constraint. Although no official capital controls have been enforced, banks have imposed restrictions on dollar withdrawals. As a result of the crisis, 34 percent of enterprises have reduced employee salaries since October 17, and 49 percent of employers have had to slash staff salaries by roughly 39.7%.

Furthermore, it experienced a 10% increase in inflation in January 2020 compared to the same month the previous year. The Lebanese have lost faith in their government, leaders, and banks, and it is estimated that \$4 billion has been taken out of the bank and saved at home [15]. According to Stel & Naudé ([12], 264), "the political class is 38 heavily embedded in the private sector" with the majority of businesspeople being former politicians or present politicians who are also businessmen. Chaaban [19] investigated Lebanon's banking industry and its relationship to politics. He found that out of 20 banks studied, 15 had a board chair tied to a politician, and six board members held public office. This, however, was proven to be detrimental to banks because businesses with stronger political ties had higher loan default rates. Banks were giving out loans in exchange for political favors without following proper procedures or ensuring that everything was financially sound before granting the loan. Corruption in the public sector has an impact on the private sector, since most businesses in Lebanon indicate that they have been asked to pay a bribe by a public official at least once, and that failing to comply with these demands has hampered their growth [20]. In fact, about 43% of foreign corporations in Lebanon often or very frequently pay bribes, while another 40% sometimes do.

Furthermore, business corruption is most visible during times of crisis, such as in the case of Beirut Port construction following the devastating explosion, where construction companies are accepting short-term concessions to avoid long-term reform, in the hopes of reactivating stagnant patronage networks in the future ([21], para 4). A study by Diwan and Haidar, examines Politically Connected Firms (PCFs) to highlight the effects of combining politics and business. PCFs have a wide impact on the industries in which they operate. PCF's overall market share can range from 50 to 75 percent, with an average of 70 percent across all sectors, implying that they have a monopoly in the industries in which they operate. The same study shows that non-PCFs see an 11.3 percent drop in hiring. These enterprises are able to hire more

#### *Corruption and New Insights in Lebanon DOI: http://dx.doi.org/10.5772/intechopen.111903*

people as a result of the benefits of having a link to a politician/political party, notably as a type of clientelism to repay the politician. More broadly, for every added political connection, 7.2% less jobs are created. While having a political link benefits business, the processes through which PCFs must repay these politicians decrease their overall output. Remarkably, the political environment can have a negative impact on the business sector even if no politician is directly involved [14]. Stel and Naudé [12] showed, according to their survey of Lebanese businesses, political instability and corruption are two of the main hurdles to conducting business in Lebanon.

In 2009, 97% of businesses said they would have to pay a bribe to get a government contract, with the bribe amounting to around 8% of the deal's worth (double than the rest of the Middle Eastern countries) (ibid). Corruption at the political level, as well as their considerable influence in the commercial sector, produces several economic problems [8]. The economy of Lebanon is described as "free-market service-oriented with limited natural resources." ([10], p. 507). According to a study by the Lebanese Center for Policy Study in 2011, a small number of corporations controlled at least 50% of 300 separate marketplaces. As a result, there is a significant economic divide across the country [10]. The government's enormous public debt further exacerbates the economic gap, so that while the economy has the capacity to expand (Lebanon's GDP was \$US 47.5 billion in 2016, up from \$US 45.7 billion in 2004), finance remains scarce. Particularly since only 2% of businesses account for 50% of all loans [8, 13]. The economy remains stagnant because these enterprises are not allowed to expand or must maintain the appearance of being unprofitable in order to avoid being targeted by corrupt persons [22].

#### **2.3 Electricity**

Lebanese citizens distrust the government's ability to provide fundamental services [8]. The clientelist nature of Lebanese politics, in which public officials provide unequal access to resources in exchange for political favors, accentuates this (ibid). Stel and Naudé [12] and Stel [13] demonstrated this through studies on electricity delivery in Lebanon. Electricité du Liban (EDL) is a state-owned company charged with providing electricity to the country. In 2018, Lebanon was ranked fourth worst in the world for power quality (World Economic Forum Report, 2017–2018) and 126th out of 141 nations for road quality (World Economic Forum Report, 2017–2018). EDL (Electricité du Liban) is a state-owned organization tasked with supplying power to Lebanon. However, electricity in Lebanon is not delivered equitably or efficiently, resulting in citizens having to pay twice: once for government service and again for generators from a private company due to frequent power outages (ibid). Corruption, dysfunction, and inefficiency have been particularly prevalent in Lebanon's electricity sector. EDL owns and operates eight HFO/DO production units and five small hydro power plants with a total installed capacity of 3000 megawatts (MW), including 2764 MW of thermal power plants that mostly use imported fuel oil. Corruption and inefficiency in the power sector have been a major source of popular outrage, culminating in the protests. Uprising in October 2019. The sector's shortcomings, which are frequently blamed on the government. EDL, an electricity provider in Lebanon, has had tremendous impact on the lives of Lebanese inhabitants through three distinct methods. First, frequent power outages deprive the majority of the Lebanese population of reliable energy, forcing many of them to rely on costly and polluting local diesel generator networks.

The unequal distribution of power outages, coupled with the inability of certain groups to afford a link to a generator network, as well as the emergence of powerful neighborhood-level structures, all have major consequences for energy access and justice. Secondly, the financial strain on the electricity sector, which has consistently accounted for 3.8 percent of Lebanon's GDP each year in the last decade, has significantly contributed to the country's rising public debt. Consequently, this has played a crucial role in country's current economic collapse and devaluation of the Lebanese Pound (LBP), resulting in high inflation, a large increase in unemployment rates, and poverty level. Third, data suggests that the proliferation of diesel generators in densely populated residential areas has had a significant negative impact on the environment and public health. The operation of diesel generator for only three hours per day in Beirut neighborhoods has been found to contribute to 38% of daily carcinogen exposure. This indicates a significant increase of 60% above background values without generators. In Lebanon, the EDL has been utilized to pay kickbacks to politicians as well as a means for political elites to deliver free electricity to their supporters [13]. According to Abdelnour [23], 55 percent of EDL bills are not paid, while 45 percent of electricity generated is not billed. The cost is then distributed to citizens and private firms who must pay large fees to the EDL owing to inflation. Furthermore, it has been reported that the Speaker of Parliament hires people of his own sect for EDL jobs [13]. As a result, services become "a political favor, not a public right," reinforcing citizens' negative emotions and furthering corruption ([12], p. 256).

#### **2.4 Pollution**

The 2015 garbage problem in Lebanon is a good example of corruption's pervasiveness (though it is still on-going). The main landfill reached capacity in 2015, and the government's rubbish collection contract expired. However, there was a political impasse because any proposal for the government contract took on a sectarian tone, with politicians discussing hidden plans to benefit from the deal. Citizens and the environment come second to politicians' ambition to benefit from this circumstance. Because of a shortsighted government that failed to plan or manage the expanding waste of a consumer society that imports far more products than it exports, the problem arose when stinking rubbish bags covered riverbanks and overflowed over roads. Beirut is one of the Middle East's most polluted cities. Lebanon was placed sixth on the Pollution Index for Country this year (up from twelfth in 2018). It is far ahead of China, which has a population of 1.4 billion people. In Lebanon, the cancer burden is significant. Lebanon holds the unfortunate distinction of having the highest cancer rate in the Arab world and one of the worst rates in the eastern Mediterranean region, according to the World Health Organization and the Global Cancer Observatory. There are 242.8 cancer sufferers for every 100,000 people in Lebanon. (By way of comparison, neighboring Israel, which possesses nuclear power and thus nuclear waste, has an estimated 233.6 cancer sufferers per 100,000 inhabitants.) The figures in Lebanon may also be an underestimation because they are based on an incomplete national registry that does not meticulously account for private hospital records [24].

The link between pollution of the air and water and cancer is now widely known. Lung cancer is caused by outdoor air pollution, according to the International Agency for Research on Cancer, which confirmed this in 2013. Since the 1990s, while Lebanon was in the midst of reconstruction following the civil war, there has been a significant increase in cancer cases reported (1975–1990). From June 1st to August 31st, 2018, Jounieh, a coastal city located a few kilometers south of Beirut, was included among the global hotspots for nitrogen dioxide (a gaseous air pollutant created by the burning of fossil fuels) [24]. The main source of this pollutant in Jounieh was attributed

*Corruption and New Insights in Lebanon DOI: http://dx.doi.org/10.5772/intechopen.111903*

to the transportation and electricity production plants of the rusted Zouk power factories, as well as the numerous diesel generators scattered across the country (which have replaced the Electricité du Liban's (main electricity producer) nonexistent and failing power plants). It is crucial for people not to overlook the toxic legacy left behind by the civil war, even as the 17 October revolution is recognized as the beginning of the end of a sectarian regime that was consolidated by the so-called national pact of 1943 and crystallized with the 1989 Taef agreement, which officially ended the civil war [24]. During the violent and chaotic civil war in Lebanon, these toxic—and some believe nuclear—wastes were dumped in numerous regions, allowing various groups to profit from trafficking such waste [24].

#### **2.5 Culture and corruption**

A very important determinant of corruption is culture. The article "Culture and Corruption: An Experimental Comparison of Cultural Patterns on the Corruption Propensity in Poland and Russia" compares the effects of cultural patterns on the propensity for corruption in Poland and Russia. The study conducted experiments on university students from both countries to determine the relationship between cultural values, trust, and corrupt behavior. The results suggest that cultural differences, such as individualism vs. collectivism, power distance, and uncertainty avoidance, play a significant role in shaping attitudes toward corruption. The study also found that trust in others is negatively correlated with corrupt behavior, and that trust levels are higher in Poland than in Russia. The authors conclude that cultural factors should be taken into consideration when designing anti-corruption policies and programs [25].

The article "Wealth, Culture, and Corruption" by Bryan W. Husted explores the relationship between wealth, culture, and corruption in various countries. The study analyzes data from 63 countries and finds that wealth is negatively correlated with corruption. Cultural factors such as individualism, power distance, and uncertainty avoidance also play a significant role in shaping attitudes toward corruption. Specifically, the study finds that countries with higher levels of individualism and lower levels of power distance and uncertainty avoidance have lower levels of corruption. Additionally, the study suggests that certain cultural factors, such as the importance of family and social connections, may mitigate the negative impact of corruption on economic growth. The author concludes that understanding the complex relationship between wealth, culture, and corruption is essential for policymakers seeking to combat corruption and promote economic development [26].

The article "Cultural Dimension of Corruption: A Cross-Country Survey" by Monica Violeta Achim examines the cultural dimensions of corruption in various countries. The study surveyed participants from Romania, Italy, Spain, and Hungary to determine the relationship between cultural values, social norms, and corrupt behavior. The results show that cultural values, such as individualism, power distance, and uncertainty avoidance, are significantly correlated with corrupt behavior. The study found that people from countries with high levels of individualism are more likely to engage in corrupt behavior, while those from countries with low power distance are less likely to engage in corrupt behavior. The study also found that social norms play a significant role in shaping attitudes toward corruption, with participants reporting higher levels of corruption in countries with weaker social norms. The authors suggest that cultural factors should be considered when designing anticorruption policies and programs [27].
