VZCZCXRO7767
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1321/01 2521600
ZNR UUUUU ZZH
R 081600Z SEP 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WSHDC 2975
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 001321 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA 
STATE PASS USTR 
TREASURY FOR MNUGENT AND SBLEIWEISS 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: MINIMUM WAGE CONTROVERSY AMONG ISSUES FORCING 
CABINET TO CANCEL ITS SESSION (ECONOMIC WEEK IN REVIEW, SEPTEMBER 1 
- 7, 2008) 
 
CONTENTS 
-------- 
 
-- MINIMUM WAGE CONTINUES TO STIR CONTROVERY, LABOR CONFEDERATION 
THREATS "EMPTY" 
-- FINANCE MINISTER ESTIMATES FIVE PERCENT GROWTH IN 2008; 
TIMETABLE FOR FINANCIAL REFORMS TO BE SET SOON 
-- CONTRIBUTION OF COPYRIGHT-BASED INDUSTRIES TO THE ECONOMY AROUND 
4.75 PERCENT 
-- PARLIAMENT ESTABLISHES PUBLIC DEBT MANAGEMENT OFFICE AT THE 
MINISTRY OF FINANCE 
-- LEBANON SIGNS MOU WITH THE UN INDUSTRIAL DEVELOPMENT 
ORGANIZATION 
-- GOLDMAN SACHS: LEBANON FALLS IN 2007 GROWTH ENVIRONMENT SCORES 
 
 
MINIMUM WAGE CONTINUES TO STIR CONTROVERY, 
LABOR CONFEDERATION THREATS "EMPTY" 
-------------------- 
 
¶1. (SBU) The cabinet cancelled is September 4 session due to lack of 
consensus on minimum wage increases.  The next cabinet session is 
scheduled for September 9, and though the minimum wage is not on the 
formal agenda, contacts tell us it may still be discussed.  So far, 
disagreement among cabinet members has centered on the amount of an 
increase, as well as on whether the GOL will insist on a private 
sector increase in addition to the public sector one.  Although the 
previous cabinet decided to raise the minimum wage from $200 to $333 
in May 2008, it did not issue the necessary decree (for private 
sector increases) and draft law (for public sector increases) to 
implement the increase. 
 
¶2. (SBU) Head of the General Labor Confederation (GLC) Ghassan Ghosn 
-- an opposition supporter -- has been threatening to take to the 
streets if the GOL does not increase the minimum wage to $640.  A 
long time GLC staffer told us on September 3, however, that his 
threats are empty.  When asked what would trigger the GLC to take to 
the streets, she said that it would not be anything related to labor 
demands, but "political conditions."  (Note: The GLC's May 
demonstration to increase the minimum wage was used as a pretext for 
pro-opposition forces to take to the streets, resulting in the May 
2008 clashes.  End note.) 
 
FINANCE MINISTER ESTIMATES FIVE PERCENT GROWTH IN 2008; 
TIMETABLE FOR FINANCIAL REFORMS TO BE SET SOON 
-------------------- 
 
¶3. (U) In an interview with French-language daily L'Orient le Jour 
on September 4, Minister of Finance Mohammad Chatah estimated 
economic growth would reach around five percent in 2008, noting that 
Lebanon had the potential for eight to nine percent growth per year. 
 Chatah said that the public deficit would increase in the coming 
months because of transfers to national power utility Electricity du 
Liban (EDL), an expected rise in world interest rates, and the 
upcoming rise in the minimum wage.  Although he recognized the 
importance of increasing the minimum wage, as decided by the 
previous cabinet in May 2008, Chatah estimated that a $133 increase 
in the minimum wage in the public sector would cost the GOL around 
$533 million per year. 
 
¶4. (U) The timetable for financial reforms in 2008 -- including 
raising the value-added tax and tax on interest on deposits as 
agreed during the Paris III conference -- has been delayed due to 
the political and security situation in recent years, Chatah said, 
but dates for implementation will be determined soon. 
 
COPYRIGHT-BASED INDUSTRIES CONTRIBUTE 
AROUND 4.75 PERCENT OF GDP IN 2005 
-------------------- 
 
¶5. (U) On September 5, the Ministry of Culture (MOC) presented a 
study on the economic contributions of copyright-based industries in 
Lebanon, done in collaboration with the World Intellectual Property 
Organization (WIPO) and Lebanese consultant Roger Melki.  According 
to the study's findings, the contribution of copyright-based 
industries to the Lebanese economy in 2005 (the most recent year for 
which data is available) reached 4.75 percent of GDP, while these 
industries accounted for 4.49 percent of total employment, or around 
50,000 workers.  The study identified a clear competitive edge in 
 
BEIRUT 00001321  002 OF 002 
 
 
the Lebanese the publishing industry, and WIPO expressed its 
willingness to follow-up with further studies on the sector, to 
establish capacity building activities and to improve data 
collection practices. 
 
¶6. (SBU) Meanwhile, DG of the MOC Dr. Omar Halablab told us that 
work on amending the law on the Protection of Literary and Artistic 
Property, in cooperation with the World Intellectual Property 
Organization (WIPO), is well underway.  Halablab expected the draft 
to be sent to Parliament at the end of September, following the 
expected passage of a new electoral law. 
 
PARLIAMENT ESTABLISHES PUBLIC DEBT MANAGEMENT OFFICE 
AT THE MINISTRY OF FINANCE 
-------------------- 
 
¶7. (U) On August 26, parliament ratified a law establishing a 
specialized directorate at the Ministry of Finance (MOF) to manage 
public debt, with an aim to centralizing debt management and 
consolidating all debt-related functions.  The office will be in 
charge of market activity, issuing, buying and swapping debt 
instruments, as well as reimbursing interest.  The law also mandates 
the creation of a supervisory board chaired by the Minister of 
Finance, joined by the MOF's director general, directors of budget 
and treasury, and a representative of the Central Bank of Lebanon. 
This new law is part of the GOL's pledge for financial sector reform 
as part of Paris III. 
 
LEBANON SIGNS MOU WITH THE UN 
INDUSTRIAL DEVELOPMENT ORGANIZATION 
-------------------- 
 
¶8. (U) During the visit of UN Industrial Development Organization 
(UNIDO) Director General Dr. Kandeh Yumkella to Beirut on August 23, 
the Ministry of Industry (MOI) signed an MOU with UNIDO defining the 
practical framework of the organization's activities in Lebanon. 
UNIDO will assist the MOI in implementing its strategy to enhance 
Lebanon's industrial sector, including encouraging private and 
public sector collaboration, supporting agro-industries in 
collaboration with the Ministry of Agriculture, support the Lebanese 
Cleaner Production Center (LCPC) to encourage 
environmentally-friendly industries, and continuing supporting small 
and medium size enterprises. 
 
GOLDMAN SACHS: LEBANON FALLS IN 2007 
GROWTH ENVIRONMENT SCORES 
-------------------- 
 
¶9. (U) Investment bank Goldman Sachs ranked Lebanon 118 out of 181 
countries worldwide on its Growth Environment Scores (GES) index for 
2007, down from 116 in the 2006 index.  Lebanon also ranked 15 out 
of 20 MENA countries, unchanged from the 2006 index.  Goldman Sachs 
noted that Lebanon was one of 14 developing countries that witnessed 
deterioration in growth conditions over the past ten years.  The GES 
is a composite measure of economic growth conditions, based on 13 
indicators grouped in five broad categories: macroeconomic 
stability, macroeconomic conditions, human capital, technological 
capabilities, and political conditions. 
 
SISON