VZCZCXRO3883
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0772/01 1481247
ZNR UUUUU ZZH
R 271247Z MAY 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 2047
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 03 BEIRUT 000772 
 
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/DEMOPOLOUS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: STOCKS SOAR/INVESTMENTS PICK UP FOLLOWING 
POLITICAL AGREEMENT (ECONOMIC WEEK IN REVIEW, MAY 19 - 25, 2008) 
 
CONTENTS 
-------- 
 
-- STOCKS SOAR AFTER ANNOUNCEMENT OF POLITICAL AGREEMENT 
-- POLITICAL STABILITY BOOSTS INVESTMENTS AND TOURISM 
-- BEIRUT PORT LOSSES ESTIMATED AT TWO MILLION DURING WEEK-LONG 
CRISIS 
-- WTO ACCESSION BY SPRING 2009; USAID FUNDING REMAINS A NECESSITY 
-- LEBANON IMPROVES IN GLOBAL PIRACY RANKING, VALUE OF LOSSES 
INCREASE 
-- IMPLEMENTING DECREE FOR PHARMACEUTICAL REGISTRATION LAW PASSED, 
COPYCAT REGISTRATION REMAINS AN ISSUE 
-- FINANCE MINISTER FORECASTS THREE PERCENT GDP GROWTH FOR 2008 
-- ...WHILE THE IMF FORECASTS THREE PERCENT GROWTH AND HIGHER 
INFALTION IN 2008 
-- MERRILL LYNCH UPGRADES EXTERNAL DEBT RECOMMENDATION TO "MARKET 
WEIGHT" 
 
STOCKS SOAR AFTER ANNOUNCEMENT 
OF POLITICAL AGREEMENT 
-------------------- 
 
¶1. (SBU) Prices of Lebanese stocks soared on the Beirut Stock 
Exchange (BSE) on May 21 and 22 after Lebanese political leaders 
reached an agreement in Doha.  Real estate consortium Solidere and 
some bank shares reached the BSE cap on daily price fluctuations. 
The market saw some profit-taking on May 22, and prices of shares 
stabilized on May 23.  Total value of transactions remained 
substantial compared to the average daily value of trading, and the 
BSE recorded a new record in number of transactions on May 22.  BSE 
president said international foreign funds, mostly western, are also 
investing in Lebanese instruments, and he expects "the momentum to 
remain positive, with some profit taking at certain levels." 
 
POLITICAL STABILITY BOOSTS 
INVESTMENTS AND TOURISM 
-------------------- 
 
¶2. (U) With the lifting of the sit-in, Beirut downtown district 
(Solidere) came back to life.  Restaurants were full; expectations 
about a prosperous summer were high, and investors are again moving 
forward with their projects.  Kuwaiti CEO of Levant Holding returned 
to Beirut to re-start a $1.3-2 billion "Phoenician Village" project, 
consisting of attraction centers, restaurants, and shops in 
Solidere.  Owner of high-end apparel store Aishti, Tony Salameh, 
will inaugurate a Fendi designer store in Solidere next week, with 
future plans including a new 32,000 square meter department store in 
Beirut downtown. 
 
¶3. (U) Tourism Minister Sarkis said on May 22 that tourism this 
summer will exceed the Ministry's earlier expectations, developed 
prior to the recent events.  He said that several aviation companies 
informed the Ministry that they are considering operating additional 
flights to meet increased demand by tourists and expatriates coming 
to Lebanon this summer.  He also said the schedule for the annual 
Beiteddine Festival (in the Druze-dominated Chouf region) will be 
publicly announced next week. 
 
BEIRUT PORT LOSSES ESTIMATED AT 
TWO MILLION DURING WEEK-LONG CRISIS 
-------------------- 
 
¶4. (SBU) On May 20, Chairman of the Beirut Container Terminal 
Consortium (BCTC) managing the Port of Beirut Ammar Kanaan told us 
that losses in projected revenues for the port during the week-long 
crisis were estimated at $2 million.  Earlier press reports in 
French language daily L'Orient le Jour had quoted an undisclosed 
source as saying that Beirut Port losses were as high as $7 million 
each day. 
 
WTO ACCESSION BY SPRING 2009; 
USAID FUNDING REMAINS A NECESSITY 
---------- 
 
¶5. (SBU) Advisor to Minister of Economy and Trade (MOET), Lama 
Oueijan, believes that Lebanon's accession to the WTO is possible by 
spring 2009.  Oueijan told us May 20 that the next Working Party 
meeting will be held in July 2008, and expects negotiations to 
conclude by year end.  Oueijan expressed concerns about availability 
of USG funds for the WTO accession project.  Oueijan made a strong 
 
BEIRUT 00000772  002 OF 003 
 
 
pitch for additional USAID technical assistance funding.  "There is 
enough progress to justify continuing USG support for this project," 
she said, adding that USTR believes renewal of the USAID contract is 
a good step.  Oueijan argued that Lebanon is now in the accession 
phase, and the next phase entails training of government staff 
(ministries of Agriculture and Industry, customs, others) on 
post-accession requirements.  Embassy view has been that the GOL has 
not made sufficient progress to justify additional USAID funding, 
although in part that has been the result of the closure of 
Parliament, preventing legislative action on some key provisions. 
 
LEBANON IMPROVES IN GLOBAL PIRACY RANKING, 
VALUE OF LOSSES INCREASE 
-------------------- 
 
¶6. (U) In the Business Software Alliance (BSA)'s annual report on 
piracy, Lebanon ranked 37 out of 108 countries with the highest 
piracy rate worldwide in 2007, an improvement from 2006 when Lebanon 
was ranked 30.  Within the MENA region, Lebanon ranked six in 2007; 
Lebanon has been in third place since 2003.  Lebanon's piracy rate 
remained constant at 73 percent since 2005.  Meanwhile, 
piracy-related losses totaled $44 million in 2007, up 12.8 percent 
from $39 million in 2006.  The BSA has been waging an anti-piracy 
campaign in Lebanon since Parliament passed the intellectual 
property rights law in 1999. 
 
IMPLEMENTING DECREE FOR PHARMACEUTICAL REGISTRATION LAW PASSED, 
COPYCAT REGISTRATION REMAINS AN ISSUE 
-------------------- 
 
¶7. (SBU) During its last session on May 5, the Cabinet approved the 
implementation decree for the 2003 Law 530 on the Import, 
Registration, Marketing, and Categorization of Pharmaceutical 
Products.  This constitutes an important step forward in terms of 
improving registration and import conditions, and at the same time, 
MOET sources have told us that the decree is WTO-compliant.  On the 
other hand, some private sector research-based pharmaceutical 
companies have noted their reservations in that the decree did not 
incorporate their recommendation of requiring that drugs be 
registered in "reference countries" before they are considered to be 
registered in Lebanon.  One source at Janssen-Cilag argued that this 
will allow copycats and drugs of doubtful standards to remain in the 
Lebanese market. 
 
FINANCE MINISTR FORECASTS GDP OVER 
$28 BILLION FOR 2008, THREE PERCENT GROWTH 
-------------------- 
 
¶8. (U) Finance Minister Jihad Azour stated on May 21 that he expects 
real GDP growth to reach three percent in 2008 and 4.5 percent in 
2009, while inflation was estimated at 2.2 percent for the next 
three years.  Azour projected Lebanon's GDP at $28.4 billion in 
2008, $30.4 billion in 2009, and $32.5 billion in 2010.  Meanwhile, 
government expenditures should represent 30.7 percent of GDP in 2009 
and 27.5 percent of GDP in 2010.  Debt servicing should also 
decrease from 12.1 percent of GDP in 2009 to 10.8 percent of GDP in 
2010, Azour noted. 
 
...WHILE THE IMF FORECASTS THREE 
PERCENT GROWTH AND HIGHER INFLATION IN 2008 
-------------------- 
 
¶9. (U) In its semi-annual economic outlook for the Middle East and 
Central Asia region, the IMF estimated Lebanon's real GDP growth at 
three percent in 2008, down from four percent in 2007.  Other 2008 
IMF estimates for Lebanon included nominal GDP at $26.8 billion, 5.5 
percent inflation, government revenues at 22.8 percent of GDP, and 
public expenditures at 34.1 percent of GDP.  The IMF projected the 
current account deficit at 9.8 percent of GDP for 2008, down from 
10.7 percent in 2007, whereas public debt is expected to decrease to 
166.5 percent of GDP by end of 2008, compared to 170.6 percent of 
GDP at end of 2007. 
 
MERRILL LYNCH UPGRADED LEBANON'S 
EXTERNAL DEBT RECOMMENDATION TO "MARKET WEIGHT" 
-------------------- 
 
¶10. (U) Merrill Lynch (ML) updated its recommendation on Lebanon's 
external debt to "market weight" in its new model portfolio of 
emerging markets debt for May, due to the positive political 
 
BEIRUT 00000772  003 OF 003 
 
 
developments resulting from the Doha agreement.  ML had retained its 
recommendation of Lebanese external debt at "underweight" since 
April 2007.  Now Lebanon is in the same category as Argentina, 
Columbia, Mexico, and Russia. 
 
SISON