VZCZCXRO8979
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1445/01 2800701
ZNR UUUUU ZZH
R 060701Z OCT 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 3219
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 001445 
 
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: IMF TO ANNOUNCE NEW EPCA FOR LEBANON (ECONOMIC 
WEEK IN REVIEW, SEPTEMBER 29 - OCTOBER 5, 2008) 
 
CONTENTS 
-------- 
 
-- IMF TO ANNOUNCE NEW EPCA FOR LEBANON NEXT WEEK 
-- PUBLIC SECTOR SALARY INCREASES DISBURSED BEFORE LEGISLATION 
PASSED 
-- POLITICAL WILL IS PRESENT FOR TELECOM PRIVATIZATION 
-- REFORM IN THE TELECOM SECTOR SLOWLY MOVING FORWARD 
-- POLICE GRADUALY DEALING WITH ILLEGAL CABLE PROVIDERS 
-- UNICERMIC SHUTS DOWN OPERATIONS IN LEBANON 
-- UNCTAD: DI UP BY 3.9 PERCENT IN 2007 
 
 
IMF TO ANNOUNCE NEW EPCA 
FOR LEBANON NEXT WEEK 
-------------------- 
 
¶1. (SBU) The IMF Emergency Post-Conflict Assistance (EPCA) team told 
us September 30 that the IMF will formally announce a new EPCA 
program for Lebanon during the Core Group Donors' meeting on the 
sidelines of the World Bank/IMF Annual meetings October 10-13 in 
Washington, D.C.  The new EPCA program is expected to be approved by 
the IMF Board in November, according to the team leader, Division 
Chief for Middle East and Central Asia Domenico Fanizza.  Under the 
new EPCA, Lebanon will receive a $39 million dollar loan from the 
IMF -- over and above the $76.8 million dollar loan granted under 
the previous EPCA. 
 
¶2. (SBU) Among the measurable benchmarks being considered under the 
new EPCA program, Fanizza listed a new electricity tariff structure, 
the issuance of the Request for Application (RFA) for the sale of 
the two cellular licenses, the strengthening of internal operations 
at the Central Bank of Lebanon, improving the institutional set up 
of the fiscal system, and cabinet endorsement and transmission to 
parliament of an income tax law. 
 
PUBLIC SECTOR SALARY INCREASES 
DISBURSED BEFORE LEGISLATION PASSED 
--------------------- 
 
¶3. (SBU) A senior source at the Finance Ministry told us that the 
GOL has started paying civil servants advances on salary increases 
before legislation that authorized the increases is out.  On 
September 9, the cabinet increased the minimum wage and endorsed 
salary increases in the private and public sectors.  Salary 
increases in the public sector need parliamentary approval, but 
Finance Minister Chatah authorized their payment prior to Eid 
al-Fitr. 
 
¶4. (SBU) Meanwhile, the decree on salary increases in the private 
sector has still not been published in the official registry.  A 
senior source at the Finance Ministry told us October 3 that the 
procedure takes time.  The cabinet transmitted the decree to the 
Shura Council (State Consultative Council, whose decisions are 
binding) for review.  If approved by the Shura Council, the decree 
will then be signed by the Finance and Labor Ministers, PM Siniora, 
and President Sleiman, and then be published in the Official 
Gazette. 
 
¶5. (SBU) Vice President of the Association of Lebanese 
Industrialists (ALI) Charles Arbid told us October 3 that some 
private sector companies have started paying salary increases, while 
others are waiting for the decree to come out officially.  All 
companies probably will apply it when the decree is out, he said. 
Arbid said that if the Shura Council approves the measure, ALI would 
consider an official challenge to the cabinet's decision on salary 
increases (but not the minimum wage) before the Council, because ALI 
considers it government interference in the private sector. 
Nonetheless, Arbid said, "this will not be an easy fight to win." 
 
POLITICAL WILL IS PRESENT 
FOR TELECOM PRIVATIZATION 
-------------------- 
 
¶6. (SBU) Telecommunications Regulatory Authority (TRA) Chairman 
Kamal Shehadi told us on September 24 that the political will exists 
to move forward on the sale of the two cellular licenses, and he is 
coordinating with Telecommunications Minister Gebran Bassil and the 
Higher Council for Privatization (HCP) SYG on drafting Request for 
Application (RFA). 
 
BEIRUT 00001445  002 OF 002 
 
 
 
¶7. (SBU) The GOL will decide if it wants to ask for proposals based 
on government revenue sharing (fixed percentage or declining) or 
not, but Shehadi expects to have an idea about the option to be 
selected in two to three weeks.  So far, nine bidders have expressed 
interest and Shehadi believes there will be more bidders when the 
GOL announces a bid deadline.  Finally, Shehadi agrees with Bassil 
that the sale of two mobile licenses should remain a benchmark for 
disbursement of USG Paris III support. 
 
REFORM IN THE TELECOM SECTOR 
SLOWLY MOVING FORWARD 
--------------------- 
 
¶8. (U) Ministry of Telecommunications auctioned 30 "platinum" (i.e., 
vanity) cellular numbers on October 3, raising USD 2.5 million. 
This reflects MOT attempts to use transparency in the sale of its 
services, and prevent rumors about handing these sought after 
numbers to political protegees.  Meanwhile, Telecom Minister Gebran 
Bassil recently announced that the ministry will reduce the cost of 
a land line from about USD 133 to USD 33 to sell the excess supply 
of land lines held by the ministry.  This will bring in revenues to 
the ministry and will reduce subscribers' bills, as calls from land 
line to land line are up to 70 percent cheaper than using a mobile 
phone to call a landline. 
 
POLICE GRADUALLY DEALING 
WITH ILLEGAL CABLE PROVIDERS 
-------------------- 
 
¶9. (SBU) On September 29, Head of the Cyber Crime and Intellectual 
Property Unit at the Internal Security Forces (ISF- Police) Major 
Elie Bitar told us that considerable work is being done to make 
illegal cable providers pay necessary fees to make their operations 
legal and respect copyrights.  Since they cannot shut them down 
completely, and following a series of lawsuits from major cable TV 
operators (including ART, Orbit, Showtime, MBC, and FTV), illegal 
cable providers are now paying a fee to the respective right 
holders.  According to Bitar, 90 percent of local cable providers 
are now paying for rights to broadcast from major cable TV 
operators.  The ISF Unit enforces the law by making sure local cable 
providers are paying their fees and have the necessary equipment for 
legal distribution.  Regarding counterfeit CDs and DVDs, Bitar said 
that around 100,000 CDs and DVDs are being confiscated and destroyed 
every six months. 
 
UNICERAMIC SHUTS DOWN 
OPERATIONS IN LEBANON 
-------------------- 
 
¶10. (U) Uniceramic, Lebanon's largest ceramic tile-maker, announced 
that it will shut down operations in the country and lay off its 
remaining 200 employees.  During the past two years, the increase in 
energy prices, lifting of tariffs by the GOL, and low-cost Egyptian 
imports caused Uniceramic to accumulate losses of around USD 11 
million.  President of the Association of Lebanese Industrialists 
(ALI) Fadi Abboud has been quoted as saying that because ceramics 
production is an energy-intensive industry, unfair competition 
originates mainly from Egypt and Qatar -- both of which heavily 
subsidize the cost of energy -- while defying World Trade 
Organization (WTO) obligations.  Uniceramic will continue operating 
from an already-established office in Algeria and plans to expand in 
Qatar. 
 
UNCTAD:  FDI UP BY 
3.9 PERCENT IN 2007 
------------------- 
 
¶11. (U) According to the UN Conference on Trade and Development 
(UNCTAD) 2008 World Investment Report, foreign direct investment 
(FDI) in Lebanon totaled USD 2.85 billion in 2007, or a 3.9 percent 
increase from 2006.  In nominal terms, Lebanon ranked five out of 20 
MENA economies surveyed in FDI receipts.  FDI flows to Lebanon were 
equivalent to 11.6 percent of GDP in 2007, the highest within all 
Arab countries surveyed.  UNCTAD placed Lebanon in the category of 
countries with low FDI potential but high FDI performance, and thus 
among countries with "above potential" results in terms of 
attracting FDI. 
 
SISON