VZCZCXRO9943
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0896/01 1680500
ZNR UUUUU ZZH
R 160500Z JUN 08 ZDK CTG NUMEROUS SVC MSG
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 2268
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000896 
 
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: SEVERE POWER CUTS AND INCREASED GAS AND 
TRANSPORTATION PRICES HIT CITIZENS (ECONOMIC WEEK IN REVIEW, JUNE 9 
- 15, 2008) 
 
CONTENTS 
-------- 
 
-- CONTROVERSY BETWEEN FINANCE MINISTRY AND POWER COMPANY LEAD TO 
SEVERE POWER CUTS 
-- GAS PRICES REACH RECORD HIGH, PUBLIC TRANSPORT FARES ALSO RISE 
-- FINANCIAL INSTITUTE DISCUSSES PLANS FOR IPR TRAINING PROGRAM, 
SEEKS U.S. ASSISTANCE 
-- ARAB INVESTORS AWAIT 2009 ELECTIONS TO MOVE ON MEGA PROJECTS 
-- GOL AND THE FOOD AND AGRICULTURAL ORGANIZATION LAUNCH THREE 
PROJECTS VALUED AT OVER $6 MILLION 
-- HOUSING PROJECT IN TYRE AIMS AT REDUCING FISHERMEN 
IMMIGRATION 
-- FITCH'S INFLATION VULNERABILTY INDEX RATES LEBANON AS SECOND MOST 
VULNERABLE IN MENA REGION 
-- LEBANON FALLS IN COUNTRY CONNECTIVITY SURVEY 
 
CONTROVERSY BETWEEN FINANCE MINISTRY AND 
POWER COMPANY LEAD TO SEVERE POWER CUTS 
-------------------- 
 
¶1. (U) It is expected that power outages will be reduced in 
frequency after Finance Minister Azour approved opening $140 million 
Letters of Credit for fuel imports for national power utility 
Electricite du Liban (EDL).  Azour indicated that EDL is using power 
cuts to put pressure on the GOL and Treasury to settle its fuel 
bills as EDL suffers from chronic deficits.  Azour believes poor 
management and maintenance are causing power cuts. 
 
¶2. (SBU) Meanwhile, EDL Chairman Kamal Hayek told us June 12 that 
EDL had to impose severe power cuts that reached four hours in 
Beirut and 9-12 hours in other regions daily as of last week because 
of shortage in fuel and gasoil reserves.  He said he warned Azour in 
writing about the shortage in oil reserves two weeks ago and urged 
the opening of L/Cs for oil imports.  He rejected Azour's public 
statements that increased power rationing was not due to shortage in 
fuel/gasoil, but to problems in production and in programming oil 
imports.  Power cuts are expected to drop starting early next week 
as fuel/gasoil tankers unload in storage tanks. 
 
GAS PRICES REACH RECORD HIGH, 
PUBLIC TRANSPORT FARES ALSO RISE 
-------------------- 
 
¶3. (U) The Ministry of Energy and Water raised the prices of 20 
liters of gasoline by slightly over one dollar on June 11, so that 
the price of 95-octane is $21.2 per liter and the price of 98-octane 
is $21.8 per liter.  Private sector economic and business officials, 
as well as member of the labor and agricultural sectors have 
expressed their concerns on the effects of this rise on production 
and how it will affect the most recent increase in the minimum wage. 
 
 
¶4. (U) Even before the most recent hike in gas prices, the Ministry 
of Transportation raised the fares of public transportation (buses 
and shared cabs) by around 33 percent, effective from the first week 
of June. 
 
FINANCIAL INSTITUTE DISCUSSES PLANS 
FOR IPR TRAINING PROGRAM, SEEKS U.S. ASSISTANCE 
-------------------- 
 
¶5. (SBU) On June 12, Econ staff met with the head of the Financial 
Institute, Lamia Moubayed, to discuss ways Post can assist in 
implementing a one to two year training program at the Institute for 
Customs officers on IPR enforcement.  Working in collaboration with 
the Brand Protection Group (BPG) -- an association of leading local, 
regional, and international manufacturers and distributors aimed at 
combating counterfeiting -- the Financial Institute hopes to use the 
skills and experience of those that post has already sent on IPR 
training, as well as bringing U.S. IPR experts to train local 
officers and improve IPR enforcement.  In addition, Moubayed made a 
strong pitch for a U.S. expert to assist in engineering the program. 
 
 
ARAB INVESTORS AWAIT 2009 ELECTIONS 
TO MOVE ON MEGA PROJECTS 
-------------------- 
 
 
BEIRUT 00000896  002 OF 002 
 
 
¶6. (SBU) Arab investors are increasingly interested in real estate 
projects in Lebanon because real estate is still under-valued, 
General Manager of Lebanon's largest Islamic bank Arab Finance House 
(AFH) Fouad Matraji told us June 10, noting that AFH has been 
approached by several Arab investors for real estate development 
projects in Greater Beirut.  Matraji however noted that Arab 
investors are holding back on mega projects, mostly in tourism 
sector, until after the 2009 parliamentary elections, to see how 
"Lebanon will re-shape" given recent developments in the region. 
 
GOL AND THE FOOD AND AGRICULTURAL ORGANIZATION 
LAUNCH THREE PROJECTS VALUED AT OVER $6 MILLION 
-------------------- 
 
¶7. (U) According to the local press, the Food and Agricultural 
Organization (FAO) announced on June 10 the launching of three 
agricultural projects, valued at over $6 million, financed by the 
GOL with funds from the August 2006 Stockholm Conference, organized 
in the immediate aftermath of the 2006 July war.  The projects will 
be undertaken in collaboration with the Lebanese Ministries of 
Agriculture and Environment and focus on flora and fauna, forestry 
sector, and combating wildfires. 
 
HOUSING PROJECT IN TYRE AIMS AT 
REDUCING FISHERMEN IMMIGRATION 
-------------------- 
 
¶8. (U) A housing project for 80 Christian fishermen from the 
southern coastal city of Tyre was inaugurated on June 9.  This 
project was co-funded by the Spanish Government Development Agency, 
local Christian/Shia NGO Association for the Development of Rural 
Capacities (ADR), the Greek Catholic Archdiocese of Tyre, and the 
fishermen.  The total cost of the project is estimated at around 
$2.8 million, and aims at encouraging young Christian fishermen to 
stay in Tyre, thus reducing immigration from the area. 
 
FITCH'S INFLATION VULNERABILTY INDEX RATES LEBANON 
AS SECOND MOST VULNERABLE IN MENA REGION 
-------------------- 
 
¶9. (U) Fitch Ratings' Inflation Vulnerability Index (IVI) ranked 
Lebanon as the 29 most vulnerable economy to inflation shocks out of 
73 emerging economies in Europe, the Middle East, Africa, Asia and 
Latin America, and the second most vulnerable in the MENA region. 
The index measures the extent to which a country's vulnerability to 
inflation shocks could result in broader macroeconomic instability, 
potentially damaging a country's creditworthiness. 
 
LEBANON FALLS IN COUNTRY 
CONNECTIVITY SURVEY 
-------------------- 
 
¶10. (U) According to the 2008 Arab Advisor's Group Total Country 
Connectivity Measure (TCCM), Lebanon ranked 10 among 19 countries, 
down one place compared to the 2007 survey.  The TCCM is the 
aggregate of household mainlines penetration, cellular penetration, 
and Internet users penetration in each country. 
 
SISON