VZCZCXRO1989
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1053/01 2030824
ZNR UUUUU ZZH
R 210824Z JUL 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 2521
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 001053 
 
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: NEW MINISTERS TAKE OVER; TELECOM PRIVATIZATION ENDORSED 
(ECONOMIC WEEK IN REVIEW, JULY 14 - 20, 2008) 
 
CONTENTS 
-------- 
 
-- MINISTERS FOCUS ON REFORMS, PRIVATIZATION, AND SOCIAL ISSUES 
-- GOL TO ISSUE EUROBONDS TO MEET AUGUST 2008 MATURING BONDS 
-- EUROPEAN COMMISSION: 42 MILLION EURO IN ASSISTANCE TO LEBANON IN 
2008 
-- TWO AMERICAN COMPANIES TO SUPPLY SECURITY EQUIPMENT FOR BEIRUT 
INTERNATIONAL AIRPORT 
-- SHORTAGE IN JET FUEL WILL NOT AFFECT AIRPORT TRAFFIC 
-- BUSINESS MONITOR INTERNATIONAL REVISES LEBANON'S ECONOMIC RISK 
RATING, INFLATION EXPECTED AT SIX PERCENT FOR 2008 
-- USDOL-FUNDED PROJECT COMBATTING CHILD LABOR COMES TO AN END 
-- CAPITAL INTELLIGENCE FORECASTS FOUR PERCENT GROWTH IN 2008 
-- WORLD BANK: LEBANON RANKS 82 GLOBALLY IN TERMS OF NOMINAL GDP FOR 
2007 
 
MINISTERS FOCUS ON REFORMS, 
PRIVATIZATION, AND SOCIAL ISSUES 
-------------------- 
¶1. (U) During the handover ceremony at the Ministry of Finance on 
July 15, newly appointed Minister Mohammad Chatah expressed his 
belief that Lebanon could witness nine percent GDP growth if the 
political and security situation were stable.  Chatah pledged to 
continue reforms at the Ministry, and said he is committed not to 
use the Ministry's resources for political and electoral purposes. 
On the same day, newly appointed Hizballah Labor Minister Mohammad 
Fneish noted that the issue of minimum wages would have to be 
discussed by the Cabinet to secure the interests of both employees 
and employers.  (Note: On May 6, the previous Cabinet had approved 
raising the minimum wage from $200 to $333.  End Note.)  Fneish also 
pledged to carry on with social security reforms. 
 
¶2. (U) Meanwhile, on July 14, newly appointed Minister of 
Telecommunications Gebran Bassil expressed support for mobile 
privatization in complete transparency, ensuring the best service 
for citizens.  Bassil indicated that his first priority would be to 
reduce mobile phone rates -- among the highest in the world -- and 
increase the number of subscribers, thus maintaining the high rate 
of telecom revenues that the GOL so heavily depends on. 
 
GOL TO ISSUE EUROBONDS TO MEET 
AUGUST 2008 MATURING BONDS 
-------------------- 
 
¶3. (SBU) The Ministry of Finance (MOF) is preparing for a new 
Eurobond issue to meet the GOL's August 2008 maturities, amounting 
to $750 million in principal repayment, entirely held by the banking 
sector.  The MOF wants to take advantage of favorable market 
conditions and the drop in interest rates on sovereign Eurobonds in 
the secondary market between 0.5 percent and one percent.  The GOL 
has already met over 80 percent of its sovereign maturities for this 
year. 
 
EUROPEAN COMMISSION: 42 MILLION EURO IN 
ASSISTANCE TO LEBANON IN 2008 
-------------------- 
 
¶4. (U) The European Commission press release on July 17 indicated 
that the EU will provide a total of 42 million Euro in assistance in 
2008 to Lebanon under its European Neighborhood Policy (ENP).  The 
three priorities for EU assistance in 2008 are the reinforcement of 
the competitiveness of the Lebanese private sector (14 million 
Euro), support to local development in Northern Lebanon (18 million 
Euro), and the modernization of the Lebanese justice system (10 
million Euro). 
 
TWO AMERICAN COMPANIES TO SUPPLY 
SECURITY EQUIPMENT FOR BEIRUT INTERNATIONAL AIRPORT 
-------------------- 
 
¶5. (U) U.S. firms Raspican and American Science and Engineering 
Incorporation were awarded a $15 million contract at the beginning 
of July to supply security equipment, including X-ray machines and 
metal detectors, to the Civil Aviation Authority at Beirut 
International Airport (BIA).  The contract is funded by the 
International Civil Aviation Organization (ICAO). 
 
SHORTAGE IN JET FUEL WILL NOT 
AFFECT AIRPORT TRAFFIC 
 
BEIRUT 00001053  002 OF 002 
 
 
-------------------- 
 
¶6. (SBU) The shortage in jet fuel quantities at Beirut International 
Airport (BIA) did not affect airport traffic as small quantities of 
jet fuel from Syria were imported via land, President of the 
Association of Petroleum Importing companies Bahij Abu Hamzeh told 
us on July 17.  He explained that these quantities would be 
sufficient until Friday when a jet fuel tanker arrived and started 
unloading.  Abu Hamzeh attributed the shortage to the delay in the 
tanker's arrival and increased demand at BIA due to increased 
airport traffic. 
 
BUSINESS MONITOR INTERNATIONAL REVISES LEBANON'S ECONOMIC RISK 
RATING, INFLATION EXPECTED AT SIX PERCENT FOR 2008 
-------------------- 
 
¶7. (U) In the Business Monitor International's (BMI) latest business 
forecast report for the third quarter of 2008, Lebanon's short and 
long-term economic risk ratings were revised upwards, as Lebanon 
outperformed BMI's two percent growth forecast for 2008.  In the 
BMI's business environment rating, Lebanon ranked 61 out of 130 
global markets and 9 out of 14 regional markets.  BMI cited the 
current unified political will in Lebanon to implement economic 
reforms and the potential for further external debt relief as the 
country's main economic opportunities for the remainder of the year. 
 
 
¶8. (U) Meanwhile, Lebanon's main challenges included high inflation, 
brain drain, and reviving the tourism sector -- one of the main 
pillars of the economy.  BMI estimated a 10.3 percent year-on-year 
inflation at end-March 2008, while a yearly inflation rate of six 
percent is expected at the end of 2008. 
 
USDOL-FUNDED PROJECT COMBATTING 
CHILD LABOR COMES TO AN END 
-------------------- 
 
¶9. (U) On July 9, a press conference was held to announce the end of 
the Alternatives to Combat Child Labor through Education and 
Sustainable Services in the Middle East and North Africa (ACCESS 
MENA) project, financed by USDOL and implemented in Lebanon in 
cooperation with Cooperative Housing Foundation (CHF) International, 
the Rene Mouawad Foundation (RMF), and AMIDEAST.  The ACCESS MENA 
project began in 2004 and intended to target 4,500 children, with 
education interventions for children withdrawn and children at risk 
of engaging in exploitative labor, with specific focus on the need 
to expand access to girls' education.  By the end of the project, 
over 8000 children had been targeted, far surpassing the initial 
target. 
 
CAPITAL INTELLIGENCE FORECASTS 
FOUR PERCENT GROWTH IN 2008 
-------------------- 
 
¶10. (U) According to Capital Intelligence (CI) rating agency, 
Lebanon's economic growth is forecast at four percent for 2008, 
unchanged from 2007, while the fiscal deficit is expected to reach 
10.5 percent of GDP in 2008, compared to 10.8 percent of GDP in 
¶2007.  CI also projected the current account deficit at 10.4 percent 
of GDP in 2008, compared to 10.7 percent of GDP in 2007, while 
public debt is expected at 167.8 percent of GDP at the end of 2008, 
down from 171 percent at the end of 2007.  CI's revised outlook came 
in the positive aftermath of the Doha conference, although it warned 
that in the proposed national unity cabinet, opposition members may 
veto key policy issues.  (Note: CI's report was issued before the 
formation of the Cabinet, as announced on July 11.  End note.). 
 
 
WORLD BANK: LEBNON RANKS 82 GLOBALLY 
IN TERMS OF NOMINAL GDP FOR 2007 
-------------------- 
 
¶11. (U) The World Bank ranked Lebanon 82 out of 185 countries 
worldwide, and 15 out of 18 MENA countries in terms of nominal GDP 
for 2007.  Lebanon's nominal GDP was estimated at $24 billion in 
2007, accounting for 1.4 percent of total GDP in the MENA region. 
 
 
GRANT