VZCZCXRO1844
PP RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1570/01 3081554
ZNR UUUUU ZZH
P 031554Z NOV 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 3430
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNDT/USMISSION USUN NEW YORK 3117
RUEHNO/USMISSION USNATO 3326
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 03 BEIRUT 001570 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/FO, NEA/ELA, EEB 
ALSO FOR IO A/S HOOK AND PDAS WARLICK 
USUN FOR KHALILZAD/WOLFF/SCHEDLBAUER 
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: PGOV EINV EFIN ETRD LE
SUBJECT: LEBANON: ECONOMIC DEVELOPMENT IN TRIPOLI FACES 
POLITICAL HURDLES 
 
SUMMARY 
-------- 
 
¶1. (SBU) Northern Lebanon, which is in dire need of economic 
development, has existing infrastructure that, if improved 
and utilized, could in time promote investment and create 
jobs.  However, political roadblocks are delaying progress on 
current projects, particularly the expansion of Tripoli port, 
the recently-approved "economic zone," and the Rashid Karami 
trade fair facility.  Increased political will and outsider 
investment interest, the glimmerings of which may exist, 
could inject much needed capital into the region.  However, 
the run-up to 2009 parliamentary elections probably will 
shift political attention away from long-term development 
goals and could increase sectarian and political tensions in 
northern Lebanon, delaying projects further.  End Summary. 
¶2. (SBU) Tripoli, from Lebanese independence in 1943 until 
the outbreak of civil war in 1975, was the economic hub of 
northern Lebanon.  The city housed the country's steel and 
wood industries and the active port transferred goods to 
Syria and Iraq.  The nearby Beddawi refinery processed all of 
the crude oil drilled by the Iraq Petroleum Company. 
However, as tensions between Syria, Lebanon's vital transit 
link, and Iraq grew and the civil war in Lebanon began, the 
quantity of supplies shipped through the port of Tripoli 
dropped and factories began to close.  Inhabitants of the 
predominately Christian mountain villages surrounding Tripoli 
stopped spending winters in the city and patronizing its 
service sector as sectarian tensions increased.  Tripoli 
contacts blame the central government for "turning its back" 
on the city after the civil war and continuing the dramatic 
economic digression.  The International Poverty Centre 2008 
country report found that while northern Lebanon accounts for 
20.7 percent of the Lebanon's entire population, it is home 
to 38 percent of the poor and 46 percent of the extremely 
poor population in Lebanon. 
 
INVESTOR INTEREST IN ECONOMIC ZONE 
---------------------------------- 
 
¶3. (SBU) As part of Prime Minister Siniora's six-point 
development plan to increase security and improve living 
conditions in northern Lebanon, Parliament approved in 
September 2008 the formation of a one million square meter 
"economic zone" in Tripoli.  According to March 14 allied-MP 
Mosbah Allouch, Siniora hopes that government incentives, 
such as tax cuts, will encourage the private sector to invest 
in the area by building facilities and teaching local 
laborers necessary skills.  Former Chairman of the Board of 
Tripoli Port Antoine Habib focused on the zone's potential to 
bring artisans out of the poor conditions of Tripoli to make 
and sell their wares.   Tripoli business owner, and supporter 
of former Prime Minister Najib Mikati, Walid Kamaraddine 
expected the area would be used to build distribution 
warehouses for all sectors, with goods ranging from food 
stuffs to machinery.  He knew of Chinese and Latin American 
companies considering participation in the zone and also told 
econoffs he planned to invest.  Allouch indicated that 
several EU companies had expressed interest. 
DELAYED IMPACT 
-------------- 
 
¶4. (SBU) However, political prerequisites for the 
establishment of Tripoli's economic zone will delay any 
economic impact.  The law passed by Parliament in September 
called for the creation of a General Authority for the 
Special Economic Zone, requiring an implementation decree in 
the Cabinet.  The implementation decree must set up the 
Authority's bylaws, financing standards, duties and 
indemnities, board of directors, and other functional 
requirements -- a time-intensive process, particularly with 
pressing issues, such as the 2009 budget, still on the 
Cabinet agenda.  Additionally, the sectarian makeup of the 
zone's board of directors must balance that of the board of 
the port and the trade fair, and will need poltical approval 
by key Tripoli leaders, including former Prime Ministers Omar 
Karami and Najib Mikati and Minister of Economy and Trade 
Mohammad Safadi, as well as by Future Movement leader Saad 
Hariri. 
PORT EXPANSION KEY DEVELOPMENT OPPORTUNITY 
 
BEIRUT 00001570  002 OF 003 
 
 
------------------------------------------ 
 
¶5. (SBU) All interlocutors cited the port of Tripoli as an 
invaluable, and underutilized, resource for the north. 
Currently, poor administration, discontinuity of port 
management, and lack of regulation offer little incentive for 
companies to favor Tripoli port over the port of Beirut. 
Additionally, sectarian requirements that the chairman of the 
board of the port be a Muslim and the port general manager be 
a Christian have enabled political and sectarian 
disagreements to hinder port operations.  However, Tripoli 
port's position as a point of access to Iraq, historical role 
as transit center to Syria and Iraq, and existing 
infrastructure suggest that the port, with significant 
structural and administrative improvements and immense 
political will, could bolster economic activity in northern 
Lebanon. 
¶6. (SBU) An existing port development framework exists, 
although little has been accomplished recently.  Former 
Chairman of Tripoli Port Habib, who developed the plans for 
the port rehabilitation project, said the initial step of 
redoing the decks of the port was completed.  However, the 
second phase that would deepen the port from seven to 14 
meters, contracted to a Chinese company, has been stalled for 
two years.  According to contacts, financial and technical 
disagreements between the Lebanese government and the Chinese 
contractor, including the price of the contract and the best 
means to execute the project, caused the delay.  Habib's plan 
also included an economic free zone at the port to encourage 
tourism and business. 
¶7. (SBU) Contacts also often cite the railroad that ran from 
Tripoli to Homs in Syria as an important part of any port 
revitalization.  The tracks, sold for steel during Lebanon's 
civil war, must be replaced, but the path for the railroad 
already exists.  According to Allouch, a Syrian survey 
estimated that rebuilding the railroad from Tripoli to the 
border with Syria would cost between $30 and $35 million. 
REINVIGORATED POLITICAL WILL ON PORT? 
------------------------------------- 
 
¶8. (SBU) Prime Minister Siniora's September visit to Tripoli 
and issuance of the Tripoli "six point plan" may have renewed 
attention on the problem of development in northern Lebanon, 
but progress on port rehabilitation is unlikely to be smooth. 
 In a potential sign of progress, the Lebanese Cabinet on 
October 21 approved the payment of $4 million to a Chinese 
company for steel purchased before disagreements with the 
government arose.  However, when Minister of Transportation 
and Public Works Ghazi Aridi October 27 formally asked the 
port board to pay the contractor, the head of board of 
directors refused and offered his official letter of 
resignation October 31.  According to Habib, Minister Aridi 
wants to appoint an entirely new board for the port -- 
potentially a positive if new board members are invested in 
improving port operations, but undoubtedly in Lebanon, a slow 
process. 
TRADE FAIR HAS OFFERED LITTLE 
------------------------------ 
 
¶9. (SBU) The Rashid Karami trade fair has offered little 
economic development for the region.  Designed by Brazilian 
architect Oscar Nemeyer, best known for his work designing 
Brasilia, the complex houses an indoor and outdoor exhibition 
area, two stage areas, and a hotel.  However, the fair rarely 
holds events of any kind, let alone those that would draw 
broader Lebanese, regional, or international crowds.  A 
symposium of international sculpture was held in 2001, and in 
2002 and 2003 Tripoli festival used the space for a concert 
and other events.  Since then, the fair has seen little use. 
The Lebanese Cabinet has not appointed a new board of 
directors for the exhibition center to replace the last board 
that resigned two years ago. 
COMMENT 
------- 
 
¶10. (SBU) Tripoli's existing infrastructure offers a wealth 
of development opportunity.  However, as attention in Lebanon 
turns toward the parliamentary elections scheduled for spring 
2009, political will to undertake long-term economic 
revitalization projects, whose impact will not be seen in 
 
BEIRUT 00001570  003 OF 003 
 
 
time to curry votes, will likely diminish.  Additionally, 
powerhouse players in Tripoli, including Hariri and Tripoli 
natives Safadi, Mikati, and Karami, may have little desire to 
drastically rehabilitate an area whose poverty has enabled 
them to maintain financial, and thereby political, influence. 
 Nevertheless, will to improve existing infrastructure in 
northern Lebanon does exist to a small degree in some 
political circles, and small steps toward development would 
play an important role in decreasing poverty, and thereby 
reducing violence, in this tremendously needy and vital area 
of Lebanon.    End Comment. 
SISON