VZCZCXRO7965
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1176/01 2241608
ZNR UUUUU ZZH
R 111608Z AUG 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 2711
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 03 BEIRUT 001176 
 
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/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: ECONOMISTS LET DOWN BY MINISTERIAL POLICY 
STATEMENT (ECONOMIC WEEK IN REVIEW, AUGUST 4 - 10, 2008) 
 
CONTENTS 
-------- 
 
-- ECONOMISTS LET DOWN BY MINISTERIAL POLICY STATEMENT; CABINET WILL 
MOSTLY FOCUS ON 2009 PARLIAMENTARY ELECTIONS 
-- EGYPT WILL SUPPLY LEBANON WITH 200 MEGAWATTS OF ELECTRICITY 
-- S&P RAISES LEBANON'S LONG-TERM SOVERIGN CREDIT RATING 
-- WTO MULTILATERAL NEGOTIATIONS MOVING FORWARD; PROBLEMS REMAIN 
BILATERALLY 
-- MINISTRY OF HEALTH LAUNCHES CAMPAIGN TO COMBAT COUNTERFEIT DRUGS 
-- IPR TRAINEES REQUEST ASSISTANCE IN PREPARING TO JOIN MADRID 
PROTOCOL 
-- LEBANON AND IRAN SIGN GRANT AGREEMENT TO REHABILITATE SOUTHERN 
ROAD 
-- CENTRAL BANK GOVERNOR PROJECTS FIVE PERCENT GROWTH IN 2008 
-- WORLD BANK: COST OF ENVIRONMENT DEGRADATION FOLLOWING THE JULY 
2006 WAR AROUND $729 MILLION 
 
ECONOMISTS LET DOWN BY MINISTERIAL POLICY STATEMENT; 
CABINET WILL MOSTLY FOCUS ON 2009 PARLIAMENTARY ELECTIONS 
-------------------- 
 
¶1. (SBU) Prominent financial economist Dr. Charbel Nahas told us on 
August 6 that the ministerial statement came "far below what it 
should have been."  He said that "this cabinet has a unique 
opportunity as all the political parties are represented in the 
cabinet; thus actions can be quickly endorsed in parliament. 
Unfortunately, the statement did not list specific actions to be 
implemented to build on the momentum politically and 
institutionally," he remarked.  The statement addressed social 
issues, such as health coverage and pension scheme very vaguely, 
although all political parties had unanimously agreed on these two 
major economic issues at the EU-hosted meeting in Beirut on April 
21-22, 2008, he said.  He also pointed out that the Statement should 
reflect the need to update the Paris III document to indicate what 
the GOL plans to do.  The previous government took actions opposite 
to what it had pledged in the Paris III document, such as 
reinstating the wheat subsidy and subsidizing gas and gasoil prices, 
he noted. 
 
¶2. (SBU) Economic consultant Dr. Louis Hobeika told us on August 6 
that this cabinet is "mostly a cabinet to prepare for parliamentary 
elections."  He believes that on the economic front, the cabinet 
will not be able to do more than pass the budget law, rationalize 
public spending, improve the supply of electricity, and take 
preliminary steps to liberalize economic sectors, such as abolish 
exclusive agencies.  He said that social issues mentioned in the 
Ministerial Statement are mere repetitions of what appeared in 
previous ministerial statements. 
 
¶3. (SBU) Along the same lines, economic expert Dr. Elie Yachoui told 
us on August 8 that the economic part of the Ministerial Statement 
was similar to previous statements that focused on international 
conferences and privatization.  He pointed out that the document did 
not mention reviewing all the macroeconomic policies.  "This should 
precede any privatization so that the GOL would benefit from 
privatization to reduce the public debt over the long run," he 
stressed.  He criticized the privatization of the cellular network, 
which is currently providing the Treasury with annual revenues of 
about $800 million.  He also rejected raising electricity tariffs, 
which are already high.  Yachoui stressed that Lebanon "needs to 
reform  its economic, financial, monetary, production, investment, 
and customs policies in order to double the size of the economy, 
reduce imports, and adopt incentives to encourage investment and 
increase production, projecting the trade deficit to reach $11 
billion this year." 
 
EGYPT WILL SUPPLY LEBANON WITH 
200 MEGAWATTS OF ELECTRICITY 
-------------------- 
 
¶4. (U) Minister of Energy and Water (MEW) Alain Tabourian indicated 
on August 4 after a meeting with his Egyptian counterpart Hassan 
Yunus that Egypt will supply Lebanon with 200 megawatts (MGW) of 
electricity; a meeting will be held at the end of the month to 
finalize details.  However, Lebanon will continue to suffer from a 
500 MGW shortage in power, Tabourian said.  He also hoped that 
Lebanon will be able to import natural gas from Egypt in two months. 
 
 
 
BEIRUT 00001176  002 OF 003 
 
 
S&P RAISES LEBANON'S LONG-TERM 
SOVERIGN CREDIT RATING 
-------------------- 
 
¶5. (U) On August 5, Standard & Poor's (S&P) raised Lebanon's 
long-term sovereign credit rating from 'CCC+' to 'B-', following the 
Doha Conference in May 2008 and subsequent easing of political 
tensions.  S&P stated that this reduces the risk that depositors 
will withdraw funds from the Lebanese banking sector, which in turn 
lessens the GOL's near-term financing risks as banks are the GOL's 
largest creditors.  Meanwhile, Lebanon's short-term rating was 
affirmed at 'C', and the transfer and convertibility assessment was 
affirmed at 'B+.' 
 
WTO MULTILATERAL NEGOTIATIONS MOVING FORWARD; 
PROBLEMS REMAIN BILATERALLY 
-------------------- 
 
¶6. (SBU) Advisor to Minister of Economy and Trade (MOET) Lama 
Oueijan told us August 5 that the MOET held a video conference with 
USTR in June regarding multilateral negotiations, which helped 
clarify several issues, and is expected to finalize the Q&A round 
regarding Lebanon's multilateral trade regime. 
 
¶7. (SBU) On the bilateral side, the goods and services offers were 
handled through an exchange of letters; the last letter sent by 
Lebanon to USTR was prior to Lebanon's Fifth Working Party meeting 
in May 2007, Oueijan said.  On the services offers, Lebanon met 70 
percent of the U.S. request, she said, but noted that Lebanon has 
received from USTR additional requests and is currently working to 
address them.  She expects Lebanon's response on services offers to 
be sent to USTR by October 2008. 
 
¶8. (SBU) As to the goods offers, 60 percent of the U.S. request was 
met, however, "the remaining 40 percent put a lot of pressure on 
industrialists and the agriculture sector, as well as strain the 
Treasury at a time when Lebanon is facing major debt restructuring 
problems," she said.  Lebanon cannot drop its customs duties beyond 
the currently applied tariff rates on the 40 percent remaining 
goods, she remarked, while USTR is requesting zero tariffs. 
 
MINISTRY OF HEALTH LAUNCHES CAMPAIGN 
TO COMBAT COUNTERFEIT DRUGS 
-------------------- 
 
¶9. (SBU) On August 6, Minister of Public Health Mohammad Khalifeh 
launched the first national campaign to combat counterfeit drugs in 
collaboration with the World Health Organization (WHO), Lebanese 
Order of Pharmacists, World Federation of Order of Pharmacists of 
Francophone countries, and the Forum of Middle Eastern Pharmacists. 
The campaign includes radio and TV ads, as well as billboards and 
educational flyers.  A research-based pharmaceutical company contact 
told us that they welcome the campaign, which mainly targets the 
general public, hospitals, and pharmacists.  The contact told us 
that the organizers of this campaign have been in touch with 
pharmaceutical companies requesting funding for a long-term campaign 
on drug counterfeits since the current campaign is seen as the 
initial phase of a long-term campaign. 
 
IPR TRAINEES REQUEST ASSISTANCE 
IN PREPARING TO JOIN MADRID PROTOCOL 
-------------------- 
 
¶10. (SBU) On August 5, Econstaff met with seven members of the 
Ministry of Economy and Trade's (MOET) IPR Unit who participated in 
a variety of USPTO IPR training programs since February 2008.  They 
all expressed their appreciation to the USPTO and its interest in 
training them to improve their performance at the IPR Unit. 
Participants who attended programs focused on copyright, 
enforcement, and industrial design highly appreciated their 
respective programs, although most wished that more time was given 
to practical applications instead of the theoretical side of the 
issues. 
 
¶11. (SBU) Meanwhile, Loubna Kodeih who participated in the Trademark 
Administration Program (March 25-28, 2008) was highly satisfied with 
the program, given that a lot of the Unit's work deals with 
trademarks, adding that the balance between theory and practice 
during the training was adequate.  Kodeih made a pitch for USPTO 
assistance as Lebanon prepares to join the Patent Cooperation Treaty 
 
BEIRUT 00001176  003 OF 003 
 
 
(PCT) and more so the Madrid Protocol.  For properly implementing 
the Madrid Protocol, Lebanon is in great need of training, as well 
as assistance for e-filing and in scanning all its archives. 
 
LEBANON AND IRAN SIGN GRANT AGREEMENT 
TO REHABILITATE SOUTHERN ROAD 
-------------------- 
 
¶12. (U) On August 6, President of the Council for Development and 
Reconstruction (CDR) Nabil Jisr and head of the Iranian Committee 
for the reconstruction of Lebanon Hussam Khouchnoyess signed in the 
presence of Iranian Ambassador to Lebanon Mohamad Rida Shibani a 
grant agreement for the rehabilitation of the Naqura-Marjeyoun road. 
 Shibani said that "Iran's assistance is part of efforts to remove 
the impact of the July 2006 war against Lebanon," and noted that 
"Iran did not set a ceiling for such assistance and contribution," 
stressing that "Iran's position on this is strategic."  He also 
expressed Iran's readiness to "strengthen bilateral cooperation 
politically, economically, socially and culturally."  Shibani 
thanked the CDR and the previous Siniora Cabinet for their 
"cooperation facilitating Iranian reconstruction efforts, and 
expecting such cooperation to continue with the current government." 
 
 
CENTRAL BANK GOVERNOR PROJECTS 
FIVE PERCENT GROWTH IN 2008 
-------------------- 
 
¶13. (U) On August 4, Central Bank of Lebanon (CBL) Governor Riad 
Salameh projected a five percent real growth in 2008 as a result of 
confidence and optimism in the markets, with inflation to range 
between ten to 13 percent.  Dollarization of deposits fell from 79 
percent a year ago to 74 percent today, he said.  Also, Salameh 
reportedly said that the environment was favorable to move ahead 
with listing 25 percent of national passenger carrier MEA shares, of 
which 99 percent is held by the CBL, on the Beirut Stock Exchange. 
 
 
WORLD BANK: COST OF ENVIRONMENT DEGRADATION FOLLOWING THE 
JULY 2006 WAR AROUND $729 MILLION 
-------------------- 
 
¶14. (U)  According to the World Bank, the overall cost of 
environment degradation in Lebanon caused by the July 2006 war is 
estimated between $537 million and $831 million, for an average of 
$729 million or 3.6 percent of GDP.  The waste sector suffered the 
most damage, estimated between $207 million and $374 million due to 
the high costs of disposing demolition waste and to casualties and 
losses in agriculture production caused by unexploded ordnances. 
This was followed by losses due to damages from the oil spills 
(between $166 -$240 million), impact on water supply and repairing 
water infrastructure ($131 million), landscape damages caused by 
quarries and non-rehabilitation of quarries (between $15.4 - $176 
million), and damages to forests (between $7 - $11 million). 
 
GRANT