VZCZCXRO9058
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0448/01 0911342
ZNR UUUUU ZZH
R 311342Z MAR 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 1394
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000448 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA 
STATE PASS USTR 
TREASURY FOR MNUGENT AND SBLEIWEISS 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR ABRAMS/SINGH/YERGER 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: MOBILE PRIVATIZATION DELAYED (ECONOMIC WEEK IN 
REVIEW, MARCH 24 - 30, 2008) 
 
 
CONTENTS 
-------- 
 
-- DELAYS EXPECTED IN MOBILE PRIVATIZATION, 
MANAGEMENT CONTRACT TO BE RENEGOTIATED 
-- GENERAL LABOR CONFEDERATION WARNS OF STRIKE IF MINIMUM WAGE IS 
NOT RAISED 
-- LEBANON'S BANKING SECTOR NOT AFFECTED BY U.S. FINANCIAL CRISIS 
-- MOODY'S RAISES LEBANON'S CREDIT RATING OUTLOOK... 
-- ...AS WELL AS THE OUTLOOK FOR FOUR TOP BANKS 
-- YOUTH SHADOW GOVERNMENT TO BE TRAINED ON CONSUMER RIGHTS 
-- NATIONAL SOCIAL SECURITY FUND INAUGURATES FIRST COMPUTERIZED 
BRANCH 
-- S&P REPORT EVALUATES LEBANON'S BANKING SECTOR 
-- TRAVEL AND TOURISM ECONOMIC ACTIVITY EXPECTED TO FALL BY 7.4 
PERCENT IN 2008 
 
DELAYS EXPECTED IN MOBILE PRIVATIZATION, 
MANAGEMENT CONTRACT TO BE RENEGOTIATED 
-------------------------------------- 
 
¶1. (SBU) Senior contacts at the Ministry of Telecommunications (MOT) 
and the Higher Council for Privatization (HCP) told us on March 28 
that mobile privatization will be delayed.  The deadlines for 
submitting bids and for conducting the auction for the sale of 
Lebanon's two mobile companies expire on May 1 and 21, respectively. 
 The MOT source believes it would be best if the GOL does not set 
new bid/auction deadlines, but instead indicates that "a new date 
will be announced in due time."  Telecom Minister Hamadeh has 
repeatedly said publicly that the privatization of the two mobile 
companies will not take place under the current government. 
 
¶2. (SBU) The MOT source pointed out that the management contract for 
the two mobile companies, which was extended from May 2008 until 
November 2008 by the Council of Ministers on February 28, 2007, 
needs to be re-negotiated, adding that negotiations could start in 
the coming weeks.  By virtue of the contract, the MOT has to inform 
the two management companies of any extension six months before the 
expiration of the contract.  He also said that neither company is 
willing to extend under the same terms. 
 
GENERAL LABOR CONFEDERATION WARNS OF 
STRIKE IF MINIMUM WAGE IS NOT RAISED 
-------------------- 
¶3. (U) The General Labor Confederation (GLC) warned on March 26 that 
it would prepare for a general strike if the minimum wage is not 
raised to $640/month, from the current $200/month (unchanged since 
1996).  In addition to that, it is asking for a 63.3 percent wage 
raise above the minimum wage hike.  Employers have only accepted a 
single $50 increase to the minimum wage.  According to 
pro-opposition Al-Akhbar newspaper, the strike would take place 
sometime after April 22, the next scheduled date for presidential 
elections.  The GLC also expressed support for the protest that 
Lebanese University teachers and teachers' unions and syndicates 
will stage on April 3 to call for salary increases. 
 
LEBANON'S BANKING SECTOR NOT 
AFFECTED BY U.S. FINANCIAL CRISIS 
-------------------- 
 
¶4. (SBU) A senior member of the Banking Control Commission (BCC) 
told us on March 25 that Lebanon's banking sector has not been 
affected by the financial crisis in the U.S.  The source explained 
that the Central Bank of Lebanon (CBL) prohibits banks from 
subscribing in foreign funds and papers except in sovereign papers 
of OECD countries.  The BCC found only one bank that had lost money 
(less than half a million dollars) because of products related to 
the U.S. credit crisis; this is a very small amount given that this 
bank has total assets of several billion dollars, the source 
remarked. 
 
MOODY'S RAISES LEBANON'S 
CREDIT RATING OUTLOOK... 
-------------------- 
 
¶5. (U) On March 25, Moody's Investors Services raised Lebanon's 
credit rating outlook from negative to stable.  Moody's attributed 
this improvement to the "impressive resilience of Lebanon's public 
finances" in the face of ongoing political instability.  Lebanon's 
rating outlook fell to negative in November 2006, with the fears 
 
BEIRUT 00000448  002 OF 002 
 
 
related to the government's repayment capacity given the large 
public debt.  According to Moody's, since then public finances have 
improved modestly, and the GOL's short-term funding needs are 
manageable.  This change of outlook applies to the GOL's B3 local 
and foreign currency bond ratings, the B3 country ceiling for 
foreign currency bank deposits, and the B2 country ceiling for 
foreign currency bonds. 
 
...AS WELL AS THE OUTLOOK 
FOR FOUR TOP BANKS 
-------------------- 
 
¶6. (U) Moody's also raised its outlook from negative to stable on 
March 27 for Bank Audi, BLOM, Byblos Bank, and Bank of Beirut. 
According to Moody's, this was a result of the outlook upgrade for 
Lebanon's credit rating, since these banks hold significant amounts 
of bonds.  The banks' ratings however, remain unchanged. 
 
NATIONAL SOCIAL SECURITY FUND 
INAUGURATES FIRST COMPUTERIZED BRANCH 
-------------------- 
 
¶7. (U) On March 26, the first fully computerized branch of the 
National Social Security Fund (NSSF) was inaugurated in Beirut, 
while the computerization of all branches is expected by June 2008, 
at an estimated cost of $3.7 million.  This is part of a wider NSSF 
reform program aimed at streamlining procedures, increasing 
productivity, coverage, and services provided, as well as balancing 
NSSF finances.  The World Bank is also involved with the reform 
program at the NSSF; it provided technical assistance and a $750,000 
grant last September for this purpose. 
 
YOUTH SHADOW GOVERNMENT TO BE 
TRAINED ON CONSUMER RIGHTS 
-------------------- 
 
¶8. (U) On March 17, the Minister of Economy and Trade Sami Haddad 
launched a cooperation project between the MEPI-funded youth shadow 
government and the Consumer Protection Unit at the Ministry of 
Economy and Trade.  The project aims to train selected university 
students on consumer rights over a two-month period to reinforce 
their role in the development of public administration.  Haddad 
noted the Ministry is also looking at ways in which those trained 
would use their spare time to participate directly in the Consumer 
Protection Unit's activities. 
 
S&P REPORT EVALUATES 
LEBANON'S BANKING SECTOR 
-------------------- 
 
¶9. (U) A Standard and Poor's (S&P) report entitled "Lebanese banks 
plant cedars abroad while resisting the political impasse," 
published on March 17, noted that banks are expanding abroad to 
avoid high direct exposure to the intrinsic risks of operating in 
Lebanon.  Meanwhile, the GOL's high indebtedness, fiscal deficit, 
and political instability, along with the country's low ratings, 
pose a serious threat to any bank in the system.  S&P identified 
four main characteristics of the Lebanese banking sector, including 
the value of banks' assets (over three times the country's GDP), 
high dollarization of deposits, the elevated number of banks, and 
the improved quality of assets. 
 
TRAVEL AND TOURISM ECONOMIC ACTIVITY 
EXPECTED TO FALL BY 7.4 PERCENT IN 2008 
-------------------- 
 
¶10. (U) The 2008 World Travel and Tourism Council (WTTC) report on 
Lebanon noted that the political stalemate will continue in the 
coming year and affect the travel and tourism sector accordingly. 
Travel and tourism industry economic activity is on track to 
register a negative 7.4 percent drop in activity.  There was a 25.4 
percent regression in industry activity in 2007.  Total demand for 
travel and tourism is expected to grow by 0.4 percent compared to 
2007, while Lebanon's share out of total demand in the Middle East 
is projected at 3.6 percent in 2008.  The travel and tourism 
industry contribution to GDP is estimated at 5.7 percent in 2008, 
while the sector will account for 18.4 percent of total employment, 
compared to 9.3 percent in 2007. 
 
SISON