VZCZCXRO5720
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1529/01 2990236
ZNR UUUUU ZZH
R 250236Z OCT 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 3370
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 001529 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA 
STATE PASS USTR FRANCESCKI 
STATE PASS USAID BEVER/LAUDATO/SCOTT 
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 PGO LE
SUBJECT: LEBANON: FINMIN: ALL PARTS OF GOVENMENT SUPPORT ECONOMIC 
 
REFORM (ECONOMIC WEEK IN REVIEW, OCTOBER 20 - 26, 2008) 
 
REF: BEIRUT 1523 
 
CONTENTS 
-------- 
-- FINANCE MINISTER SAYS GOVERNMENT UNITED ON ECONOMIC REFORM 
-- CHATAH GIVES PRESS UPDATE ON SUPPORT PLEDGES, BUDGET ISSUES 
-- LOCAL BANKS WILL ROLLOVER SOVEREIGN DEBT MATURING IN 2009 
-- BANKS' LOSSES FROM GLOBAL CRISIS ARE SMALL 
-- GOL NEEDS FUNDING FOR STATISTICAL MASTER PLAN 
-- FIRST POWER PLANT RUN BY WINDMILL ESTABLISHED IN THE NORTH 
-- BEIRUT PORT TO EXPAND DUE TO INCREASED TRAFFIC 
-- IMF RAISES LEBANON'S 2008 GROWTH FORECAST TO SIX PERCENT 
-- LEBANON RANKS 79 GLOBALLY IN PROSPERITY INDEX 
 
 
FINANCE MINISTER SAYS GOVERNMENT 
UNITED ON ECONOMIC REFORM 
-------------------- 
 
¶1. (SBU) During a Paris III donor briefing on October 23, Finance 
Minister Mohammad Chatah stressed the government's commitment to 
improving the standard of living of the Lebanese people by fostering 
an economic climate that encourages investment, creates jobs, and 
supports its people through strong social services.  He insisted 
that the government does not view itself as a transition government, 
and that it is cooperating across party lines to accomplish 
significant reforms during its short mandate.  To start, he said, 
the cabinet would take up the 2009 budget law and a new IMF 
Emergency Post Conflict Assistance (EPCA) program in its next 
meeting October 30.  Chatah's presentation provided a coherent 
vision of how the Lebanese state should work on behalf of its 
people, and could serve as a model for March 14's campaign platform 
for the 2009 parliamentary elections (reftel). 
 
CHATAH GIVES PRESS UPDATE ON 
SUPPORT PLEDGES, BUDGET ISSUES 
-------------------- 
 
¶2. (U) In an interview with LBC television on October 18, Chatah 
said that $600-700 million of budgetary support from Paris III 
pledges has not yet been dispersed by donor countries, and added at 
the Paris III briefing that he expects Lebanon should get $500-600 
million of that soon "if everything goes as planned."  Arab 
nationalist newspaper As-Safir said the GOL may review the 2009 
budget figures due to a projected lower deficit for national power 
utility Electricity du Liban (EDL) following the international drop 
in oil prices. 
 
LOCAL BANKS WILL ROLLOVER 
SOVEREIGN DEBT MATURING IN 2009 
-------------------- 
 
¶3. (U) In an October press conference, Chatah said the Finance 
Ministry was coordinating with the Central Bank regarding Eurobonds 
and T-bills maturing in 2009, which are estimated to total 
(including yields) around $14 billion.  The Ministry might 
reschedule or exchange these maturities, Chatah said.  Local banks 
hold the bulk of these maturities, and according to Dr. Makram 
Sader, SYG of the Association of Lebanese Banks, they are expected 
to continue to subscribe to sovereign debt securities given the 
Lebanese banking sector's strong liquidity position in the face of 
the international financial crisis. 
 
BANKS' LOSSES FROM GLOBAL 
CRISIS ARE SMALL 
-------------------- 
 
¶4. (SBU) Dr. Fadi Khalaf, President of the Beirut Stock Exchange, 
told us that a senior Audi Bank official said that although the bank 
lost $20 million in investments with Lehman Brothers, the bank still 
recorded $70 million in profits in the last quarter.  Amine Awad of 
Lebanon's Banking Control Commission said Lebanon's banking sector 
losses including unrealized profits are less than $50 million, while 
profits reached $850 million at the end of September 2008. 
 
¶5. (SBU) Audi Bank Strategic Advisor Chief Finance Officer Freddie 
Baz told Reuters on October 18 that he expects deposits in Lebanese 
banks, which he argues are "considered shielded from the global 
financial crisis," to continue to rise.  The Lebanese domestic 
 
BEIRUT 00001529  002 OF 003 
 
 
banking sector saw an $8 billion sector-wide increase in deposits 
during the first eight months of the year.  Baz said good 
regulations and risk-aversion strategies by bank management have 
protected Lebanese banks from the international financial situation. 
 
 
¶6. (SBU) On October 22, Baz refuted press reports that the merger of 
Audi Bank with Egyptian investment institution EFG Hermes has been 
suspended for the time being as a result of the international 
crisis.  Baz told us that he cannot comment on this issue as he is 
subject to strict disclosure restrictions, but confirmed that "talks 
are continuing." 
 
GOL NEEDS FUNDING FOR 
STATISTICAL MASTER PLAN 
-------------------- 
 
¶7. (U) On October 22, PM Siniora announced to donor country 
representatives that Lebanon will start working on a Statistical 
Master Plan (SMP) to reinforce Lebanon's statistical system and 
assist the GOL in policy-making decisions.  This project falls under 
reform initiatives taken by the government, the PM said.  The 
preliminary study was funded though a World Bank grant, and the cost 
of implementing the project is about $11.1 million over a five-year 
period. 
 
FIRST WIND POWER PLANT 
ESTABLISHED IN THE NORTH 
-------------------- 
 
¶8. (SBU) On October 22, press reported on the establishment of the 
first power plant run by windmills in the northern region of Akkar. 
The plant was built based on studies undertaken by a specialized 
French company and financed by the Issam Fares Foundation (a former 
Deputy PM who is also from Akkar), which determined that Akkar was a 
suitable location for such power plants.  Fares Foundation Director 
General Sajih Attieh told us that this project is still in its trial 
phase, and that more power plants will be built throughout the area 
in the future. 
 
BEIRUT PORT TO EXPAND DUE 
TO INCREASED TRAFFIC 
-------------------- 
 
¶9. (U) The Beirut Port Authority (BPA) announced plans to expand its 
container terminal due to the rapid growth in the number of 
containers currently being handled and a lack of space and storage. 
Container traffic increased by 62 percent in 2007 compared to 2006. 
BPA retained German consultant Sellhorn to conduct studies related 
to the expansion, which also helped with the port's previous 
expansion in 2005. 
 
IMF RAISES LEBANON'S 2008 GROWTH 
FORECAST TO SIX PERCENT 
-------------------- 
 
¶10. (U) In its most recent World Economic Outlook (WEO), the IMF 
revised its forecast for Lebanon's 2008 real GDP growth upwards to 
six percent from an estimated three percent in the previous WEO 
March issue.  The IMF noted that Lebanon would likely prove 
resilient to the global financial crisis, mostly because of the 
higher-than-average liquidity of its banks and the Central Bank of 
Lebanon's (CBL) leadership.  The lack of direct links between 
Lebanon and the current crisis would also render the country more 
resilient than other emerging markets, according to the report. 
 
LEBANON RANKS 79 GLOBALLY 
IN PROSPERITY INDEX 
-------------------- 
 
¶11. (U) The Legatum Institute's 2008 Prosperity Index ranked Lebanon 
79 out of 104 countries worldwide and 11 out of 13 MENA countries in 
terms of drivers of prosperity.  The index is intended to reflect 
the conditions that foster prosperity in a given country.  It ranks 
countries based on the strength of 44 variable drivers -- grouped 
into the two main pillars of economic competitiveness and 
comparative livability -- rather than according to simple measures 
of income and life satisfaction. 
 
 
BEIRUT 00001529  003 OF 003 
 
 
SISON