THE GIST:
How can a program designed to modernize a nation’s broken civil service become a tool for political patronage? This article breaks down the 27-year-long Policy Support and Advisory Unit (PSAU) program — a post-civil war experiment initiated by Lebanon’s government and the UNDP, initially funded by international donors, and built on promises of efficiency and technical excellence. But as the PSAU program expanded, questions about political interference, accountability, and the true cost of reform began to rise. The PSAU legacy — marked by staggering public spending, growing rifts between high-paid PSAU staff and regular civil servants, and critiques from leading economists — forces us to ask: Can well-meaning technocratic fixes ever overcome entrenched political power? Today, as Lebanon embarks on another critical phase of multi-billion-dollar post-war reconstruction, these unresolved issues set the stage for a wider debate on the role — and limits — of technocratic interventions in transforming state institutions.
The Sofa Cabinet
It was late 1992. In May, a collapse in the Lebanese lira had brought crowds onto the street and forced out the short-lived government of pro-Syria premier Omar Karami. By October, a business tycoon named Rafic Hariri had ascended to the Grand Serail. Hariri had plans to fix the country’s economic problems and kick-start postwar reconstruction. His top deputy was the newly appointed Minister of State for Finance Fouad Siniora, a veteran of the Banking Control Commission, who later became the right-hand man for Hariri’s empire of private businesses.
One day, shortly after Siniora was appointed minister, he summoned a handful of Lebanon’s best and brightest young professionals — including two of his own employees — to his office. The Finance Ministry headquarters was still speckled with bullet holes and blast damage; his temporary office was in the Gefinor Tower. In the early 1990s, before Solidere’s reconstruction of downtown, Gefinor was Beirut’s premier office building, and Siniora’s office was just downstairs from his previous one, where he had been working for Hariri’s private business.
Siniora sat them down on a sofa facing his desk, recalls one of the employees, Salim Balaa. Then he pointed to them one by one, assigning each one to a different Finance Ministry directorate. Each of them would soon be a full-fledged technical advisor to the Lebanese government, in a brand-new unit intended to rewrite the rules for how existing departments worked — or, in reality, struggled to work.
At least one of the brand-new recruits on Siniora’s sofa tentatively pointed out that they hadn’t even heard of the department they were now advising. But Siniora brushed this detail aside: he needed experts in good management and modern technology to clear the administrative rubble of war. (Siniora did not respond to a request to comment on the meeting.) The new team set up in the Gefinor, “and that,” said Balaa, “is how this thing started.”
The new recruits would join a new generation of para-state civil servants now being swept into public service by Hariri’s reconstruction. Many of them were young Lebanese professionals who had been working overseas at the tail end of the civil war.
Some seven months later, the Finance Ministry and the United Nations Development Programme (UNDP) hired the team from Siniora’s sofa to be among the first of a new generation of expert advisors to the Lebanese bureaucracy that would eventually be known as the Policy Support and Advisory Units, or PSAUs. (UNDP officials said the new hires would certainly have had to be approved through a formal process, but conceded it was possible in a post-war context that a minister’s hiring recommendations, if the candidates met all the necessary requirements, could have been accepted.)
Over the next 27 years, the PSAU program (internally, UNDP called it a “modality”) would spread across at least half the country’s ministries and a half dozen other state bodies. In both duration and scale, the PSAU program was the Second Republic’s largest experiment in improving the public administration. As Lebanon enters a new post-war era, the story of this previous reform attempt shows what happens when well-intentioned outsiders try to take on a stubborn system.
As Lebanon enters a new post-war era, the story of this previous reform attempt shows what happens when well-intentioned outsiders try to take on a stubborn system.
Today, in early 2025, Lebanon is facing the challenge of a multi-billion-dollar post-war reconstruction effort yet again, after 14 months of war with Israel. Traditional donor countries in the Gulf and the West are signaling a willingness to bankroll reconstruction on certain conditions: that Lebanon’s new government sideline Hezbollah politically, reform the country’s dysfunctional administrative state, and restructure its frozen financial sector.
A new government formed this month is promising fixes on all fronts. Some observers, like Saint Joseph University professor Carole Alsharabati, are optimistic about donor-supported reforms. “I think we may see success on this front more than we have ever had,” she said. “In the current momentum, it’s a different ballgame.” But others remain skeptical — and they have good reason.
Building the Peace
The PSAU program started with high hopes: it offered free money and a means to rebuild Lebanon’s bankrupt post-civil war state. It also reassured donor countries that Lebanon’s government was putting its affairs in order, by bringing in the best and brightest advisors, armed with the latest in public management best practice. From politicians’ perspectives it didn’t hurt, either, that PSAU advisory teams would report directly to the new generation of ministers, allowing the country’s new leaders to sidestep the war-era bureaucracy they had inherited.
As the brain trusts of the new ministers, the advisors also took on more overtly political work: the young experts helped usher Lebanon into an era of international agreements and donor conferences that would shape its social and economic policy for the next three decades. In countries like Lebanon, dependent on technical assistance and outside support, international donors play an important role in setting the agenda — whether or not they can actually achieve their visions — in the process often reducing domestic politics to a contest between those who endorse and those who oppose the terms of international agreements.
But the PSAU program was also a series of enclaves, and enclaves don’t resist the larger dynamics of Lebanese politics for long. The Council for Development and Reconstruction (CDR) is another cautionary tale: when it was founded, in 1977, the CDR was designed to be made up of planning experts par excellence, shielded from the dysfunction that plagued other parts of the bureaucracy — an “island of efficiency” inside the state, in the words of former Prime Minister Salim al-Hoss. But by the 1990s, leading politicians like Hariri and, later, Nabih Berri had taken command of its board of directors, and made the state’s largest contracting agency a byword for sweetheart deals.
As time went on, critics and observers, and even some insiders, accused the UNDP reform program of turning into a parallel administration, beset with the same partisanship, favoritism, and lack of accountability that plagued the regular bureaucracy. When the Lebanese government started funding the program out of the state budget, in the early 2000s, critics added charges of waste. And according to some observers, both inside and outside the program, nobody was able to turn off the tap.
“I think somebody had to say no at one point,” said Lamia Moubayed, who currently heads the Institut des Finances Basil Fuleihan, an in-house training center at the Finance Ministry. “And nobody had the courage to do it, including the good ministers. They had a duty to say ‘These projects are being paid from public money.’”
“I think somebody had to say no at one point. And nobody had the courage to do it, including the good ministers.” —Lamia Moubayed, head of the Institut des Finances Basil Fuleihan
Between 2001 and 2020, the PSAU program cost a minimum of $121.9 million, of which the Lebanese government paid at least $98.6 million, whether through taxpayer money or foreign donations channeled into the program, The Public Source has calculated based on an extensive review of budget documents. Of that sum, Lebanese government payments to UNDP for its administrative services totaled at least $5.5 million. (The Public Source was able to confirm the existence of other bilateral agreements — such as one from 2003, for a unit at the Prime Minister’s office — that, if publicly accessible, would almost certainly push these numbers even higher.)
Asked about their cost estimate, UNDP declined to give a total, but told The Public Source the program averaged $10 million per year — a number that, if averaged over the program’s entire duration, would be significantly higher than our estimate.
In exchange for all this money, UNDP said in project renewal documents and program appraisals that it achieved a series of technical improvements to make Lebanon’s state more efficient, responsive, and capable, while also facilitating international agreements that brought additional donor money into the state. UNDP Lebanon chief Blerta Aliko said the program “mobilized over $250 million” of donor funding.
But Lebanon’s PSAUs suffered from the same Achilles heel of technical assistance missions around the world: they lived, inescapably, in the shadow of an elite power-sharing arrangement that operates far above the heads of technicians — both the qualified and unqualified, both conscientious and less so. “The problem with all of these technical assistance programs, as important as they are in a normal context,” said AUB economist Mohamad Faour, “is that it gives a façade of normalcy to the current status quo — as if the issue is that all we need to do is improve the technical capabilities of the civil service. That is not the case.”
Paperwork piles up inside the Finance Ministry headquarters. Beirut, Lebanon. August 24, 2003.
To understand this history, The Public Source spoke to 19 program alumni, UN officials, civil servants, politicians, and experts in a series of interviews mostly conducted between late 2023 and mid-2024, before the Israeli escalation in September last year. Many of them declined to be interviewed on the record, citing fears of professional consequences — testifying to the sensitivity of maintaining good working relationships with international agencies in a donor-dependent country like Lebanon.
For economist Sami Zoughaib, the PSAU experiment was “one of the worst examples of donor interventions in Lebanon.”
In the end, technocratic fixes couldn’t solve the looming problems created by larger political dynamics — and in some ways, they may have postponed the eventual reckoning. Some UNDP staffers eventually went so far as to tell one researcher they had been “subsidizing the status quo” and “bankrolling the establishment.” For economist Sami Zoughaib, at The Policy Initiative, a Lebanese think tank, the PSAU experiment was “one of the worst examples of donor interventions in Lebanon.”
A Big Kick in the Butt
In 1990, after 15 years of war, the state was broken and bankrupt. Fighting, especially the Israeli invasion of 1982, had destroyed much of the country’s infrastructure. Government ministries and directorates were in disarray, with facilities damaged and equipment missing.
Human capital was missing too. In the mid-to-late 1980s, as massive currency depreciation spiraled out of control, large numbers of trained administrators emigrated or retired, without being replaced. A 1991 UN inter-agency assessment found that 50 to 70 percent of public sector posts were vacant, and salaries were “highly inadequate to meet the cost of living”— circumstances not that different from Lebanon’s current status quo.
International donors who came to assess the damage, at the government’s request, found two main problems: the first was that Lebanon did not have the money to finance reconstruction domestically. The second was that Lebanon lacked the technical ability and expertise to plan, organize, and carry out the mammoth project of postwar reconstruction. In March 1992, then-Prime Minister Omar Karami’s “committee of experts” agreed, declaring that “administrative performance in Lebanon has become… a major obstacle in confronting the economic and social crisis.”
Lebanese and foreign observers saw the regular bureaucrats, rightly or wrongly, as largely corrupt, incompetent, close to retirement, or all of the above.
Despite these barriers, the ambitious new Hariri government envisioned a radically far-reaching and expensive reconstruction project. Physically, Hariri’s economic model would be centered on downtown Beirut; ideologically, it revolved around currency stability, attracting private investors, and an economy built on luxury tourism and services. Hariri’s plan called for widespread displacement in the city center and massive sovereign debt. But once it generated high annual GDP growth rates, all would be forgiven, and the debt would eventually be retired — or so the government thought at the time.
But the new government needed outside help. And so, in 1992, the UNDP and the International Monetary Fund (IMF) began to design what would eventually become technical and policy advisory units embedded in at least half the state’s ministries.
International advisors envisioned the units as the brain trusts of the new state. Lebanese and foreign observers saw the regular bureaucrats, rightly or wrongly, as largely corrupt, incompetent, close to retirement, or all of the above; the new class of experts would come in, sort out the mess, and then train regular civil servants to carry on their work. The new program’s first and most crucial unit was located at the ministry that collects and allocates money to all the others: Finance.
From the start, the PSAU at the Finance Ministry brought in new blood. Unlike most regular civil servants, the initial cohorts of PSAU staffers typically consisted of younger Lebanese with foreign experience and credentials. In June 1993, Hariri’s economic advisor, Nadim Munla, tapped a 29-year-old economist named Basil Fleihan, who was then working with the IMF in Washington, D.C., to be the advisory unit’s first director.
The new recruits earned at UN salary scales much higher than those of their counterparts in the Lebanese civil service. “In order to attract high-caliber individuals, we would have to pay salaries that are higher than those provided by the public sector,” said Raya Haffar el-Hassan, who joined as a “reform implementation specialist” in the unit’s first generation. “Otherwise you will not be able to attract individuals with technical backgrounds.”
In 1994, the government and UNDP launched a second PSAU: this one at the Office of the Minister of State for Administrative Reform (OMSAR), a small new ministry launched with UNDP assistance. The idea behind the OMSAR team was to help change the way civil servants handled money, personnel, and work. To that end, OMSAR’s unit got to work producing ambitious, detailed organizational studies intended to restructure every ministry in the country.
It didn’t occur to many of them, at the time, how that might land. “As an administrator, if somebody comes to my door and tells me ‘Hey look, this is your new organizational structure, I thought it all over for you,’ you know what I would do with him?” said Moubayed, who was part of the OMSAR team in the mid-90s. “I would give him a big kick in the butt.” Of the 18 new organizational structures OMSAR proposed to ministries, after 15 years, just two had been implemented.
But donors loved it. Countries like Lebanon “can improve their personnel at an acceptable fiscal cost,” wrote a senior World Bank technocrat in the September 1996 edition of the IMF’s in-house journal, by bringing in experts “decided at high levels” and “cleared personally by the top executive.”
Prophetically, the World Bank official also warned against trying to “fence off” projects from larger, inefficient structures: “Creating enclaves,” he wrote, “does not work.”
“We Know You’re a Siniora Guy”
Throughout the ‘90s and early 2000s, the young Finance technocrats accumulated some significant victories. They updated and streamlined tax procedures, overhauled and computerized the process of filing customs declarations, modernized the government’s debt management systems, and updated the Finance Ministry’s unwieldy land cadaster. They even began publishing monthly fiscal data, allowing the public to see how much money the government was spending on a monthly basis. A coalition of French advisors, Lebanese civil servants, and Finance Ministry PSAU director Fleihan even created a training institute to transfer new management approaches to the regular civil service: the Institute des Finances Basil Fuleihan.
But from the beginning, outsiders saw the PSAU program as hostage to Lebanese politics. Its flagship unit, at the Finance Ministry, was working on the economic portfolio while Hariri held it. Throughout the 1990s, Hariri and his allies sometimes explicitly hired people from their camp. That doesn’t necessarily mean those people didn’t do their jobs; but it would inevitably affect how others perceived them, and it guaranteed pushback.
“We were brought in by Siniora/Hariri Group, and we’re proud of that,” said Balaa, who worked as the PSAU project head for the customs administration. “But the key factor is the success of this project, which is beyond Siniora. You have to demonstrate that. Otherwise, if you don’t, they will think you are here to facilitate Siniora/Hariri’s work.”
For over a decade, the power-sharing agreement in Lebanon rested on a two-part division: Hariri controlled the economic portfolio, and Syria and its allies controlled security and foreign policy. The Syrian Assad government extracted lucrative economic rents from its dominant status in Lebanon. And Hariri’s domestic rivals claimed many of the service-providing ministries — like Education, Health, and the Ministry of the Displaced — running them as patronage machines in exchange for political loyalty.
Salim Balaa was sitting at home, wondering if he still had a job, when two customs officers showed up at his door.
The advisors considered themselves non-political technocrats: their role was not high politics, but rather improving the daily functioning of the Finance Ministry and the Prime Minister’s office, where they helped administer the economic portfolio. Many of them were trained in the dominant schools of thought that were popular at the time, in university economics departments as well as at the IMF and World Bank — a neoliberal wave which lined up with Hariri’s vision anyway. And Hariri’s jurisdiction in the economic sphere meant that economic policy advisors often aligned themselves with him, even if they had not initially come from his entourage.
“You have to attach yourself to who has the political power to actually enable you to kind of realize the plans that you want to do,” University of Liverpool political scientist Hannes Baumann told The Public Source. “You’re not going to go to Nabih Berri or Hezbollah because they’re not really interested—they follow a different political and economic logic. But the Hariri network was something that could enable their political economic project for Lebanon.”
Hariri initially tried to get rid of some regular bureaucrats by firing more than 2,300 civil servants he inherited from the civil war-era state, and pressuring an additional 3,400 to “voluntarily” resign. But the State Council, Lebanon’s highest administrative court, overturned hundreds of terminations. According to Baumann, rival politicians perceived it as an attack on their personal power bases in the public sector.
Instead, Hariri ended up relying on young Lebanese technocrats, including in the UNDP advisory program, to staff the institutions he needed in order to develop and implement his economic vision. For the Hariri-led cabinet, it was a win-win: UNDP footed the bill, and also set up an alternative to the existing structures that Hariri had inherited. UNDP said they work with all parties but that they ought to have been more proactive in communicating their nonpartisan credentials to stakeholders and the public.
This perception — that all of the young technocrats were, if not part of the Hariri camp, at least not in opposition to it — later became a liability. From 1998 to 2000, the Hoss government resisted moving forward on some of the donor-funded projects approved by Hariri’s government, despite the fact that Hoss’s policies were largely in line with Harirism economically. The first Finance PSAU chief, Basil Fleihan, left his position shortly after Georges Corm arrived as Finance Minister.
Around this time, Balaa began to doubt that his job was secure. “It was a weekend,” he recalled. “I was sitting at home saying, ‘Monday should I go to work?’”
He got his answer when two customs officers showed up at his door. They handed him an envelope full of papers from the office for them to work on. They also delivered a message from his non-PSAU counterpart: “He also wants you to know,” they said, “that if you don’t come to work on Monday, he will send a patrol to bring you to work in cuffs.”
A technocrat, it seemed, was a technocrat, no matter who hired them. A former colleague, close to Corm, confirmed to The Public Source that Balaa’s other colleagues inside the Ministry never perceived his work as political. “We know you’re a Siniora guy,” one of Balaa’s coworkers told him later. “But you’re a technician… who cares if Siniora chose you?”
The Battle of the VAT
The young technocrats helped usher the Lebanese government into a brave new era: over the next two decades, they facilitated international agreements with an alphabet soup of international partners, from the World Bank and the World Trade Organization (WTO) to the European Union (EU). These agreements brought badly needed money into the state — one of the PSAUs’ metrics of success — and ultimately raised far more than the cost of the PSAUs themselves. But they also committed Lebanon to a framework of economic policies, in line with the dominant global consensus at the time, that would later collapse.
Advisors who had trained in western universities, who had worked in international financial institutions, and who spoke the language of international finance — all this helped Hariri’s government woo donors. Fleihan called his PSAU unit in the Ministry of Finance the “local counterpart” to these international donors. And the World Bank agreed, noting that Fleihan’s access to the minister could help rally “political support” for “necessary legislative changes.” In 1994, the World Bank issued its first loan to Lebanon since the late 1970s; in the next five years the Bank issued 11 more, worth $472 million. [note:2]
The deals piled up: at the government’s behest, in April 1999, the advisors helped Lebanon establish a Working Party for accession into the World Trade Organization (just months before protestors derailed the WTO conference at the famous Battle of Seattle). In 2002, Lebanon signed a free trade agreement with the European Union. And between 2001 and 2007, the famous trio of “Paris” donor conferences brought in $12.3 billion in loans and grants to the state.
In exchange for cash injections, donors demanded a new economic model. The agreements required Lebanon to overhaul its fiscal and economic policies, in order to rein in the rapidly growing debt, by reducing spending on fuel and public sector salaries; raise revenues by privatizing state-owned assets like telecoms; and reduce trade protection for local industry and agriculture.
A linchpin of the new fiscal model was the value-added tax, or VAT. And the PSAU technocrats joined Siniora in his battle to sell it to the public.
The EU Association Agreement, which entered into force in April 2006, was a case in point. It allowed Lebanon to buy EU products, and export to the EU with reduced tariffs. In exchange, Lebanon agreed to remove customs duties on a variety of products, and agreed not to increase tariffs in the future. The government also introduced WTO-compatible trade laws; liberalized oil markets; and moved to liberalize pharmaceutical imports. And it tried to eliminate exclusive import agencies, the legal monopolies that grant one Lebanese company the right to import a specific foreign brand, (although many remain in place as of 2025, and are reportedly a factor in Lebanon’s accession into the WTO, which remains stalled, a quarter century after the negotiations began).
A linchpin of the new fiscal model — especially after the government gave up some of the customs revenues that it had historically relied on — was a new, easy-to-administer tax that would, in theory, make up some of that shortfall: the value-added tax, or VAT. And the PSAU technocrats joined Siniora in his battle to sell it to the public.
The effort to pass the VAT wasn’t simply a Hariri project: it actually began under Hoss, during Georges Corm’s tenure as Finance Minister, in 1999. When Siniora returned to the Finance Ministry in 2000, under Hariri, he launched a p.r. campaign to push it over the finish line. Siniora and his PSAU advisors held discussion sessions with merchants and technical presentations explaining the draft law; one of the Finance Ministry’s PSAU staffers would go on to become a VAT expert, advising other countries on how to design their own VATs.
An outside consultant hired by UNDP found that the policies the young technocrats were recommending were essentially neoliberal conventional wisdom.
But many sectors of the public didn’t want the VAT to pass, or at least wanted it postponed. For once, segments of both the business community and organized labor agreed. Some merchant associations and politicians questioned the economic fundamentals of the VAT: according to them, Lebanon was only agreeing to it in order to join the WTO, gain an EU Association Agreement, and signal credibility to potential donors at the upcoming Paris II conference. The IMF, EU, and US Ambassador’s enthusiastic endorsements of the law did little to dispel that impression.
Domestically, most politicians at the time hesitated to identify themselves too closely with the unpopular new tax. But a majority, including the parliamentary blocs of Berri, Hariri, Walid Jumblatt, and Suleiman Frangieh passed the VAT in December 2001. For UNDP, the VAT was a successful reform: once passed, UNDP officials point out, it became a mainstay for successive governments.
The VAT couldn’t have been implemented without local champions like Corm and Siniora. But policies have many parents, and the UNDP advisors helped midwife this and other major policies: “The formulation, negotiation and getting them through,” said Aliko, “that was the brain[power] that was put, through those units, at the disposal of the development priority, be it the Paris Agreements, or VAT.”
These moves helped cement a nonproductive economic model in Lebanon — one that would eventually come crashing down.
In 2005, an outside consultant hired by UNDP found that the policies the young technocrats were recommending were essentially neoliberal conventional wisdom, reflecting the usual requirements for entry to global trade associations, and “the standard lines of thinking of major international institutions such as the IMF and the World Bank.” Lebanon’s policy options were “constrained,” or even “predetermined,” said the consultant, by the requirements of entry to these international bodies.
In other words, whether Lebanon played the game well or poorly, the rules were set elsewhere: only certain policies allow you to join the global economy of the 21st century, and the top levels of the Lebanese political class had few objections to them anyway.
These moves dramatically reshaped the postwar economy. They helped cement a nonproductive economic model in Lebanon — one that would eventually come crashing down. But at the time, donors saw Lebanon as moving in the right direction. The UNDP hailed the launch of the WTO accession process as a major accomplishment of the PSAU program.
In 2006, the U.S. Ambassador to Lebanon, Jeffrey Feltman, rated the PSAU program a success, saying in a diplomatic cable later published by Wikileaks that it “seems to be responsible for most reform progress to date, as well as drafting the current economic program.” And in 2007, the UN even granted a Public Service Award to the Finance Ministry for “Taxpayer Service.”
“I Need My Quota”
The PSAU units proved popular with ministers, even after the initial phase of postwar reconstruction ended. In the early 2000s, the government and the UNDP created new PSAU units at the Prime Minister’s Office, the Ministry of Economy and Trade, and the Investment Development Authority of Lebanon. They also renewed the existing units at the Finance Ministry and OMSAR. Even those who opposed the PSAU units, said Raya Haffar el-Hassan, the PSAU alumna-turned-two-time minister, “when they became ministers, they found out they can’t do without them, especially for policy advice.”
Ministers can always find work that can only be done by consultants. In 2003, the UNDP declared that the Finance Ministry’s capacities had been “successfully restored,” its services “modernized,” and its “capacities to design and implement policies created.” Yet despite that, then-Finance Minister Fouad Siniora signed a new agreement with the UNDP to renew the ministry’s PSAU unit anyway. The renewal agreement between UNDP and the Finance Ministry said “new challenges have emerged that require the evolution of the project” in order to “shepherd MOF through the medium-term requirements of the government’s new economic programs.”
“You pay UNDP, you have a say on the recruitment: ‘I’m signing the project documents, that can be a million dollars or something, so, yeah — I need my quota.’”
But the new agreement reflected a major change since the early 90s: UNDP was no longer footing the bill. The agreement committed $4.05 million from Lebanon’s public money to financing the unit — including $202,565 paid directly to UNDP for administrative services, like identifying and recruiting consultants and experts.
The fact that Lebanon was paying UNDP was a turning point in the program’s history, and not for the better. It gave ministers the negotiating power to abuse the program in order to hire allies. “You pay UNDP, you have a say on the recruitment,” Moubayed pointed out. “‘I’m signing the project documents,’” she said, speaking as a hypothetical minister, “that can be a million dollars or something, so, yeah — I need my quota.’”
“They Claim Plenty of Things”
In 2007, a veteran UN official named Marta Ruedas came to take the reins of UNDP’s operations in Lebanon. She found the size and scope of the PSAU program “fairly astonishing.” It didn’t make sense to her that the Lebanese government would be financing what she called a “parallel administration” through the UNDP.
Her initial impulse was to end the program, and absorb the units into the civil service. But she soon realized that the Lebanese state would not be able to integrate the PSAU program into the regular structure: the ministers resisted hiring staff through the regular civil service system, which constrained their ability to hire or fire people at will. They wanted to hire consultants through the UNDP hiring mechanism, which offered greater flexibility on salary, hiring, and firing. So she kept the program in place. “And you can argue that it’s a good thing or a bad thing,” she told The Public Source.
If she’d pulled the plug on UNDP’s management of the PSAUs, Ruedas said, the parallel administration wouldn’t have disappeared; it would simply have migrated to the World Bank, or another UN agency. “If this parallel administration was still going to go on,” she told The Public Source, “then I preferred to have more or less an overview of it, than to have it go somewhere else.”
But while top ministers loved the PSAU units, civil servants were starting to grumble. “What they were doing was to ask the administration to do their job, and then pretend that they did it,” said Yousef*, a high-ranking official who worked at the Finance Ministry in the early 2000s, and spoke to The Public Source on condition of anonymity in order to discuss politically sensitive matters. “But the reality is that, at least at the Ministry of Finance, we, the administration, were doing most of the work.”
In some cases, the salary for PSAU technocrats was as much as five times higher than their counterparts in the regular civil service.
“They claim plenty of things,” said Yousef. “They did absolutely nothing for VAT. We practically did the whole work.”
Sara*, a former mid-level Finance Ministry civil servant, agreed that the PSAUs took credit for their lesser-paid colleagues’ work. The advisors relied on civil servants to provide them with fiscal information — but wouldn’t share any of their own data. “This is the perception at the Ministry of Finance,” said Sara who requested anonymity because they are not authorized to speak to the press. “They used to constitute a separate department, working outside other departments at the ministry, and not sharing info.”
The two-tier pay scale didn’t help. “They [were] being paid by the government for doing the same work the administration is doing, and getting like $3,000, while at the same time the staff working in the administration used to get $1,000,” said Sara. In some cases, said Yousef, the salary scale for PSAU technocrats was as much as five times higher than their counterparts in the regular civil service.
The numbers bear this out. Based on publicly available documents, the average salary for PSAU staffers in the Finance Ministry was $4,495 per month in 2014. Meanwhile, Grade Three civil servants, such as Finance Ministry economists, got between $867 and $1,589, depending on how long they’d been in their job. Even General Directors, at the top of the state bureaucratic pyramid, had a salary between $2,000 and $3,470, depending on how long they’d been in their position — still far below the average for PSAU staffers. The gap decreased in 2017, however, when the government passed a pay raise for civil servants.
Foreign visitors would hold parallel sets of meetings about the same topics — fiscal projections, budgeting, economic indicators, and so on — with the PSAU staffers and the administration staffers. Yousef, the high-ranking Finance official, even had to meet foreign visitors after hours at their hotels in order not to antagonize a pro-PSAU minister, who he said wanted to control the flow of information.
Some of the regular civil servants saw the technocrats as outsiders, wrote an outside consultant, hired by UNDP in 2011 to evaluate the program. Their status and power as direct advisors to ministers, and their affiliation with the UN, wrote the consultant, led some PSAU staffers to “stress by small and large means their difference and distance from the regular civil service with which they were intended to collaborate” — all of which bred resentment.
More seriously, regular civil servants alleged that ministers were using the UNDP program for patronage. Both Sara and Yousef said that ministers would recruit junior staff, with political connections but no experience, who would “pretend that they knew everything,” as Yousef put it — and then rely on their less-connected and lesser-paid colleagues to teach them on the job. “A lot of those who were hired by the UNDP project were [politically] affiliated, or the son of someone, or the niece of whoever,” Sara told The Public Source. “That’s how they were hired to those projects after graduating from university right away, without any experience.”
Some politicians put their secretaries and drivers on the UN salary scale, which was originally intended for technical advisors or high-level consultants.
One PSAU alum and one civil servant, who both declined to speak on the record, responded that the advisors were competent, even if the hiring process was “sometimes” politicized.
But three people with knowledge of the program and the Finance Ministry independently confirmed that ministers and members of parliament abused the program to hire allies and relatives. Some even put their regular secretaries and drivers on the UN salary scale, which was originally intended for technical advisors or high-level consultants.
“A lot of those who were hired by the UNDP project were [politically] affiliated, or the son of someone, or the niece of whoever.” —Former mid-level Finance Ministry civil servant
“Absolutely there was pressure brought to bear,” agreed Ruedas. Ministers had their shortlists of candidates, she said, some of whom couldn’t make it through the interview because they weren’t qualified. The UNDP could guarantee a certain margin of protection, she said, and most of the time “you could come to a reasonable compromise solution” on a candidate that met the criteria and was also acceptable to the minister.
But negotiation wasn’t always enough. “I remember distinctly one particular time when I needed to fire somebody for going against the UN rules and very, very strong pressure came down on me not to fire this person,” she recalled. “Political pressure, very explicitly put on me, and I had to resort to headquarters to push back.”
Aliko said the UNDP looked into these claims and found hires were made using the proper procedures. She added that “there is no record” of a “deliberate effort” by the UNDP office to subvert those procedures, although she “would not be shocked” to hear that politicians might have applied pressure on the agency in some cases.
“Now, [are] there ways of making it through the process?” she said. “I wouldn’t say that there are no ways of making it through the process, because I would be lying to you, if, because, at the end of the day, the processes are humans behind” — in other words, they rely on humans. “You might have had a slippage of one advisor that is connected.”
The Paper Economy
By 2010, Lebanon’s postwar euphoria was long gone. Lebanon’s astronomical debt burden was crippling the government’s ability to pay for basic services. And the sluggish labor market was not creating nearly enough jobs. Between 2004 and 2007, around 23,000 people entered the labor force every year. But Lebanon’s economy was only creating 3,400 new jobs a year — which meant almost seven people competing for every new job.
The economy on paper and the economy people lived in were coming apart. Between 1997 and 2009, Lebanon’s inflation-adjusted GDP expanded by an average of 4.4 percent per year — but employment only grew by 1.1 percent. The Finance Ministry was still valiantly publishing fiscal statistics. But what those reports reflected was a government that was getting no more disciplined or targeted in spending — with huge outlays to a clearly broken electricity sector, and scant spending on healthcare, education, transportation, and environmental protection. Meanwhile, a 2010 study found Lebanon’s VAT system to be “clearly regressive,” hitting the poor harder than the rich — while including exemptions for items like jewelry, yachts, precious metals, air transportation, and gambling.
The Lebanese government’s new policies weren’t supporting the productive economy. For example: when Lebanon reduced or removed customs duties on a variety of imported products, critics said that these measures exposed local industrialists to international competition overnight. And there’s some evidence for that: local manufacturing as a percentage of GDP fell from 11 percent in 2003 to 7–8 percent during 2004–2019. And the country’s negative trade balance, the gap between imports and exports, continued to deepen.
Public anger targeted the entire government apparatus, including the PSAUs. The advisory teams were “propping up the state,” said researcher and editor Sami Halabi in Executive Magazine, and letting political leaders off the hook for fixing a dysfunctional and weak civil service.
Lebanon’s economy was only creating 3,400 new jobs a year — which meant almost seven people competing for every new job.
Free Patriotic Movement MP Ibrahim Kanaan, chair of the parliament’s Finance and Budget Committee, called for the government to reduce the number of outside advisers and expand regular staffing, making the unverifiable claim that there were “more advisors who control public administrations than general directors and department heads.”
In October 2011, the government formed a ministerial committee to evaluate the PSAU programs. After two years, the committee released its results. It found that since 2008, the government had committed $14 million of taxpayer funds for the programs. But the majority, an additional $26 million in external financing, flowed from the UN, European Union, and donor countries through the government and into the PSAUs.
The committee also found that some units had contracted with consultants who weren’t qualified, sometimes ignoring people in-house with the needed qualifications, and used UNDP as an “easy alternative” to recruiting through the Civil Service Board. Three people with knowledge of the program corroborated this claim.
In response to the controversy, the UNDP hired yet another consultant — this time, an outsider — to evaluate the program. He concluded that Lebanon’s civil service had improved since the early ‘90s, when the country was still suffering brain drain from the civil war years. Lebanon no longer lacked qualified, educated personnel; but the advisory units remained. It was time, he said, for an “evolution” in the UNDP’s strategy and a pathway to absorbing the PSAUs into the regular civil service.
A 2010 study found Lebanon’s VAT system to be “clearly regressive,” hitting the poor harder than the rich — while including exemptions for items like jewelry, yachts, precious metals, air transportation, and gambling.
In the meantime, the PSAU program marched on. The Finance Ministry’s advisors continued to issue the government’s Eurobonds on international capital markets, negotiating interest rates and legal language with international investors. They also led financing negotiations for the Sonatrach contract, a series of fuel purchases that would later become mired in a wide-ranging scandal when Electricité Du Liban told the Lebanese judiciary that the fuel was tainted. UNDP strongly rejected any responsibility for the Sonatrach contract, saying that advisors merely assisted in implementing the policies of ministers, who are ultimately responsible. “We would never hire somebody to negotiate on behalf of the government,” said Lebanon deputy head Thair Shraideh. [note:3]
But despite the grumbling in 2010, the Finance unit had become part of Lebanon’s state: it survived the ministry’s 2011 transfer from the March 14 political bloc to March 8, and even its transfer to Berri’s Amal movement in 2014. The MoF signed additional agreements in 2011, 2014, and 2016 that committed the government to spending an additional $23.73 million for PSAU units at the ministry, with the UNDP getting $1.42 million of it for administrative costs.
The Crisis
In August 2017, a Finance Ministry PSAU alumnus, Toufic Gaspard, made national headlines when he warned of a potential “full-fledged” financial crisis. Gaspard predicted the crisis would be “essentially” caused by the high interest rates that Banque du Liban (BDL) paid to commercial banks on their dollar deposits, leading to mounting losses to the central bank — in other words, BDL’s once-praised but now-infamous financial engineering. In a scathing statement, BDL assailed Gaspard’s study, and asserted that “the economic indicators for Lebanon are stable by any norm.” (The Public Source reached out to Gaspard, who declined to be interviewed for this article.)
Lebanon’s collapse and economic stagnation stemmed from “conscious political decisions that were made, and not technical incompetence.” —AUB economist Mohamad Faour
Two years later, Gaspard was proved right. In October 2019, amid a massive uprising against the political class, the currency collapsed. Banks shut their doors. The Saad Hariri cabinet quickly resigned, and in December, the March 8 coalition chose Hassan Diab — a little-known former education minister — to lead a crisis cabinet staring down Lebanon’s first ever debt default.
Lebanon’s banking sector, state finances, and economy were not sound, and hadn’t been for years. Technical skills and top university degrees had not been enough to outweigh the political class’s fundamentally flawed rentier economics and style of governing.
For Faour, the AUB economist, the real issues at the root of Lebanon’s crisis are the incestuous relationship between the political class and the financial class, and fixing them is well beyond the power of any technical assistance provider. Lebanon’s collapse and economic stagnation stemmed from “conscious political decisions that were made, and not technical incompetence,” he told The Public Source. “There were, and perhaps still are, quite a few perfectly capable civil servants.”
Because nobody wanted to touch the power-sharing agreements put in place after the civil war, advisors couldn’t make substantial changes even if they wanted to, said Ruedas. “Each and every one of them were all band-aids, because there was no way to get at genuine reform,” she said. “Any attempt at pushing through important or major or vital reforms was a nonstarter from the get-go.”
The End
Starting in early 2019, an Institute des Finances researcher painstakingly crawled through Lebanon’s annual budgets to figure out how much Lebanon was spending on the PSAUs. But on August 4, 2020, the spreadsheet and other important documents were all lost when the Beirut Blast tore through the office and destroyed the server.
In a bizarre twist of fate, the PSAU program had ended its 27-year run that very morning. In a letter sent just hours before the port explosion, the government notified UNDP that it was unable to continue paying for it — then about 150 people in total costing $9–10 million annually.
The government gave the staffers a choice: leave, or join the regular civil service. Hassan, the former minister, said there were takers for both options. She blamed the program’s abrupt demise on what she called the “war” waged within the Diab cabinet against the PSAUs over high salary costs. UNDP said while the timing was earlier than expected, they had begun setting in motion a gradual phase-out in 2019; in April 2022, the UNDP evaluated the Finance Ministry’s PSAU unit as “highly satisfactory,” despite the fact that it was “closed earlier than planned.”
Many of the advisors were crucial to the day-to-day work of running the various ministries. But the lack of skills transfer, mentoring, and coaching of regular civil servants — despite the teams being there for years, or even decades — meant that when the teams shut down, they left a vacuum in many of the ministries. This left some of the ministries unable to carry out basic tasks — “ghost institutions,” in the phrasing of one researcher.
“Today we find ourselves with no [PSAUs] and no staff. I know because I talk to the current minister of finance and he has nobody to help him,” Hassan said in early 2024.
When the PSAU advisory unit at the Finance Ministry closed, “all the capabilities of the MoF went with them,” said Zoughaib, the economist, in summer 2024. “Now we have a completely dysfunctional MoF, because we did not invest in the institution itself.”
The Aftermath
The Public Source asked Ruedas last year whether donor countries and international institutions should have left Lebanese elites to fail on their own, in the hopes that doing so could pressure them to clean up their act, instead of trying to mitigate the damage.
She thought for a moment. “It is the question that is raised, not infrequently, across the world,” she said. “My feeling is that there’s enough money floating around in Lebanon, among the elites, that it wouldn’t necessarily regulate itself.” In that case, she said, “then you learn to mitigate.”
The public sector has been rapidly emptying over the past five years — just as in the late civil war period, with its hyperinflation and brain drain. As salaries plunged to double digits, in real dollar equivalents, technical and managerial staff have fled public employment.
“My feeling is that there’s enough money floating around in Lebanon, among the elites, that it wouldn’t necessarily regulate itself.” —Former head of UNDP in Lebanon, Marta Ruedas
Since the start of the economic crisis, Lebanon’s government has once again turned to donor countries and the UN for assistance in carrying out basic state functions like education, healthcare, water and electricity, and tax collection. In 2023, the Finance Ministry delegated part of its multi-year backlog in paper property tax filings to youth volunteers in exchange for transportation allowances and resumé lines.
Zoughaib said in summer 2024 he was “afraid” the PSAUs might be replicated in the near future, based on some of the ideas then floating around the donor community.
But eight months later, after the war, Aliko said UNDP would take a new approach. The PSAU program, she said, “should not have lasted for the time and the duration it lasted.”
Future projects, she said, will be time-bound and paired with an exit strategy. “I want the government to trust me again, and I want the donors, and I want the public opinion to trust UNDP, because we know how to do it. We have learned. We are doing it in so many countries, and let’s be open about a model that really can fit Lebanon today, with all these lessons integrated, because I think [there] can be a great opportunity for a public administration reform as we speak today.”
Moubayed wants to see international partners improve the mainline administration itself. “The only idea, the only thing they should experiment with,” she said, “is to actually strengthen the state.”
Zoughaib agreed. For him, the right approach for administrative reform is to fill the widespread vacancies in the regular civil service with good candidates, improve their salaries, and start reforming ministries one after another.
And the best way to reform ministries, he said, is by fixing their organizational structures — not by adding new units on top of them. “I cannot stress enough,” he said, “how terrible of an idea that was.”
