Culminating the Governance & Financing Dialogue in Lebanon - the way ahead

The 3rd Consultation Workshop on enhancing the potential for Private Sector Participation in Water Infrastructure in Lebanon, with emphasis on the role of Banks was organised in Beirut on the 8th November 2017, as part of the National Policy Dialogue on Water Governance and Financing. The Workshop involved more than 25 targeted representatives of relevant public institutions, private banks, regional organisations and NGOs.
The main objective was to confirm the process towards the preparation of technical and social criteria for water projects to be promoted under the BDL green funding mechanism “Lebanese Environmental Action (LEA)” and to design the implementation phase.  The criteria are developed as part of the Dialogue’s activities to support BDL and other partners with the screening and selection of bankable water/wastewater projects under the spectrum of Non-Conventional Water Resources Management (NCWRM).

The Workshop was opened by the Dialogue’s institutional partners, Dr. Fadi Comair, Director General of Hydraulic and Electric Resources, representing H.E. Eng. Cesar Abi Khalil, Minister of Energy and Water (MEW), Mr. Mario El-Khoury, Head of Section, Financing Unit, Central Bank of Lebanon (BDL) and Prof. Michael Scoullos, Chairman, Global Water Partnership – Mediterranean (GWP-Med) & Team Leader, SWIM-Horizon2020 Support Mechanism.

On this occasion, Prof. Scoullos provided an overview of the on-going work in Lebanon, already since 2005, in support of the water sector and highlighted the importance of showcasing Lebanese success stories in relation to PSP and the energy sector thanks to the leadership of BDL, MEW and the Lebanese Center for Energy Conservation (LCEC) so that these can be shared as a prototype in the final conference of the Governance and Financing project that will take place in Barcelona on 12-14 December 2017, with the participation of both institutional and non-governmental stakeholders from the South and East Mediterranean countries.   

From his side, Mr. Mario El-Khoury shared the good news about the new BDL circular 475 issued on 19/10/2017 that describes the facilities advanced by the Central Bank to commercial banks at 1% interest rate, instead of commercial banks using their required reserves. He also stressed the need and value of more active reach-out to beneficiaries of the financing mechanism.

The opening session concluded with Dr. Fadi Comair reiterating the interest of the Ministry to promote under the LEA scheme smaller-size NCWR projects, including small wastewater treatment units for tourism compounds or buildings; the re-use of treated water for landscaping; the desalination of brackish water from wells for tourism or for agricultural purposes; water treatment for drinking purposes to benefit schools; installation of drip irrigation systems; rainwater harvesting and greywater treatment and reuse for irrigation. Dr. Comair stressed the need to clarify the type of projects to be tackled and which would be of interest to both the banks and the Ministry and the value of putting together a related toolbox to present to the decision makers.

The following session started with Ms. Barbara Tomassini, GWP-Med, informing the participants about the updates of the National Report that assesses the key challenges for PSP and proposes a set of actions to tackle them and represents a key output of the work carried out in Lebanon, alongside the elaboration of criteria for the selection of bankable projects under the LEA mechanism.

On the criteria document, Prof. Michael Scoullos clarified that environmental considerations do not form stand-alone criteria but instead have been mainstreamed in the other categories (i.e. technical, economic and social), while he also specified that two formats will be employed: a set of more elaborate criteria for larger projects (to be used also in procurement processes) and a simplified checklist for smaller projects.

The discussion on social criteria was led by Ms. Anja Nordlund, Gender Expert & Managing Director, NCG Sweden and Mr. Niclas Ihren, CSR Expert, Matters Group and highlighted that it might also be more effective to differentiate the approach and address projects of different sizes through different criteria formats. The social criteria should refer both to the impact of the proposed project and to the overall applicant’s performance with respect to key social issues, while environmental considerations would be included across all criteria. A weighing for the different criteria in the evaluation of water projects was also suggested to be as follows: economic criteria (50%), technical criteria (20%), social criteria (30%).

The discussion also focused on a revised and shortened list of the International Finance Corporation (IFC) Performance Standards requirements on sustainable investments for banks prepared by the GWP-Med team to understand if the IFC approach would be of interest and feasible to the banks, since some of the commercial Lebanese banks are already part of the IFC sustainable banking network and BDL is also going to introduce the IFC standard shortly.

Importantly, some of the Lebanese commercial banks – Fransabank represented by Ms. Carine Azkoul, Project Manager - International Banking Division / Strategic Projects Department and IBL Bank represented by Ms. Pascale Kheirallah Nassif, Senior Relationship Manager - Corporate Division - presented their experience in financing environmental projects under LEA and similar green financing mechanisms provided by BDL as well as on the use of the IFC criteria mentioned above.

To this respect they also stressed on the importance of showing if NCWR projects prove to have high return on investment (ROI) and to raise awareness and conduct smart calculation of benefits to convince potential clients, since experience shows that, thus far, there has been more interest for energy-related projects than for water projects, because those have a better ROI and also because water pricing is not market based. 

 LEB 3rd Workshop

The 3rd Consultation Workshop was the last to be implemented in the framework of the Governance & Financing for the Mediterranean Water Sector. Its outputs are expected to contribute to the final Regional Conference of the project (Barcelona on 12-14 December 2017) during which the Lebanese experience particularly in relation to the BDL green funding mechanisms is expected to be showcased.

Closing the workshop, the GWP-Med and SWIM-H2020 SM team stressed that the Dialogue on Water Governance & Financing is a dynamic process and expressed their strong commitment in this endeavour, building on the long-standing work in Lebanon, since 2005, concerning targeted support to the country’s water sector, under the guidance of DGHER-MEW and with the active involvement of public, private and civil society stakeholders.

Intended actions from the Dialogue’s institutional partners, for example the update of MEW’s National Water Sector Strategy or the enrichment of BDL’s circular with social criteria, present valuable input to the Dialogue’s next steps and can assist with the identification of targeted pilot small-scale projects for immediate implementation in order to assist the learning-by-doing approach for enhanced engagement of the banking sector in water infrastructure.