Lebanon’s business community is sending a clear and crucial warning which must be heard and heeded: the ongoing Cabinet paralysis is threatening to do serious damage to the country’s economy, with devastating fallout for all the nation’s citizens.

Caretaker Minister of State Adnan Kassar led a band of high-wattage business leaders to visit Speaker Nabih Berri Monday with the message, but all the country’s politicians need to know the facts. The business community has been making noise about the government vacuum for some time, but no one is evidently listening.
The threat is amplified by the summer tourist season rushing upon us; an outsize portion of Lebanon’s economic activity depends on tourism and the associated boost to the nation’s economic health from these summer months. Alas, the 2011 summer season is shaping up to be a catastrophe. Bookings are disastrously low for hotels, rental cars and furnished rental apartments.

To be sure, the dismal prospects are also an effect of the turbulence buffeting the Gulf and giving pause to the many there who have traditionally frequented Lebanon in the summer months; in addition, the tumult roiling neighboring Syria is also leading many potential visitors to think twice about a trip to Lebanon.
As has often been the case, circumstances beyond Lebanon’s control can result in deleterious consequences for Lebanon; however, the existence of a Cabinet is something that the Lebanese should be able and must be able to control. With the situation in the region so precarious, the last thing Lebanon needs is to undermine its own historically wobbly stability by failing to form a government.

Not that it was a secret, but this country and its business climate have grave structural problems – spelled out by a recent report from the World Bank, Mercer and the World Economic Forum – that the new Cabinet should already be addressing. The shortcomings are not a mystery: electricity and water, technological backwardness, infrastructure, the environment and the deep-seated corruption behind an inert bureaucracy. Luckily, the solutions are known as well, but their implementation requires a functioning executive.
The country is at a precipice. If the political instability continues, it will have a domino effect that will harm everyone in the country. Growth is estimated to drop by half; investment is down; the real-estate market, long a driver of growth, is slowing.

Literally every single day without a new Cabinet makes the situation worse. In this tiny country, the political and economic conditions are tightly correlated – crisis in one area will sabotage the other. Lebanon’s economy has long been the more resilient of the pair, but finally even this bastion is being brought to the edge of collapse. This sobering reality must serve as an incentive to the bickering politicians to settle on a Cabinet, because if the economy falls, everyone in Lebanon – politicians, businesspeople and all its citizens – will suffer.