VZCZCXRO9443
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #1725/01 3401236
ZNR UUUUU ZZH
R 051236Z DEC 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 3733
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 001725 
 
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 PGOV LE
SUBJECT: LEBANON AND FINANCIAL CRISIS: IMF SAYS GOOD OVERSIGHT  HAS 
SHIELDED BANKING SYSTEM (ECONOMIC WEEK IN REVIEW, DECEMBER 1 - 7, 
2008) 
 
CONTENTS 
-------- 
 
-- IMF ISSUES FIRST REPORT ON LEBANON SINCE ONSET OF FINANCIAL 
CRISIS 
-- MP HARIRI HOSTS ROUNTABLES TO DEAL WITH GLOBAL ECONOMIC CRISIS 
-- GOL TAKES CHARGE OF ALFA MOBILE NETWORK 
-- BASSIL THANKS USAID FOR ASSISTANCE, SAYS NOTHING ABOUT 
PRIVATIZAITON 
-- MERRILL LYNCH MAINTAINS ITS RECOMMENDATION ON LEBANON DEBT 
-- BEIRUT STOCK EXCHANGE RANKED THIRD BEST IN THE REGION 
-- SYRIA CANCELS FUEL TAX ON TRUCKS 
-- CABINET TO SUBSIDIZE DIESEL DURING THE WINTER SEASON 
-- LEBANON JOINS UN CONVENTION ON SALE OF GOODS 
-- BEIRUT RANKS 43 IN WORLDWIDE RETAIL LOCATION 
 
IMF ISSUES FIRST REPORT ON LEBANON 
SINCE ONSET OF FINANCIAL CRISIS 
--------------------------- 
 
¶1. (U) In its first report on Lebanon since the onset of the global 
financial crisis, the IMF indicated that oversight by local 
supervisory authorities has so far shielded the banking system from 
direct impact of the crisis.  It warned that the crisis could impact 
Lebanon through weakening conditions in the Gulf, as deposit 
inflows, remittances, and direct investment from the region may slow 
down and erode bnks' profitability.  The IMF said banking 
supervsory authorities should be ready to step up supervsion to 
minimize risks and continue to monitor the quality of loan 
portfolios closely.  It also noted that Lebanon's top priority is to 
reduce the public debt-to-GDP ratio.  According to the IMF, the 
GOL's fiscal adjustment program is serious, since it should decrease 
the debt-to-GDP ratio even if telecom privatization does not take 
place in 2009. 
 
MP HARIRI HOSTS ROUNTABLES TO 
DEAL WITH GLOBAL ECONOMIC CRISIS 
-------------------- 
 
¶2. (U) On December 1, Parliamentary Majority Leader Saad Hariri 
hosted a second economic roundtable in less than two weeks to 
discuss the global financial crisis and its economic and social 
repercussions in Lebanon.  A committee will be in charge of issuing 
a working document giving suggestions on the appropriate course of 
action for the GOL to tackle the effects of the crisis.  The 
roundtable gathered a wide variety of economic and business leaders 
from the private and public sectors, including Finance Minister 
Chatah, Central Bank Governor Riad Salameh, former ministers of 
economy and finance, MPs, representatives of leading local banks, 
the chairman of the Beirut Stock Exchange, members of the IMF 
resident team, and the president of the Association of Lebanese 
Industrialists.  Hariri was quoted as saying that he will organize 
more roundtables to discuss issues affecting citizens' livelihoods. 
 
 
¶3. (SBU) The General Manager of Beirut-based Arab Finance House, 
Fouad Matraji, told us on December 3 that these roundtables are 
serious and hope to provide useful suggestions to help the GOL 
minimize the impact of the global crisis on Lebanon.  Hariri, 
heading the largest parliamentary bloc, believes that he will be the 
future prime minister of Lebanon, Matraji said, and as such, is 
trying to deal with any crisis before he officially "takes charge." 
 
 
GOL TAKES CHARGE OF 
ALFA MOBILE NETWORK 
------------------- 
 
¶4. (U) On December 1, the Lebanese Ministry of Telecommunications 
took charge of the Alfa mobile network for the next two months, 
until the GOL issues a tender for the management of the two mobile 
companies.  Minister Gebran Bassil noted that the "biggest challenge 
during the next two months will be to prove that the Lebanese are 
capable of running a mobile phone company without any foreign 
assistance."  (Note: Bassil previously indicated his preference for 
placing foreign ownership limits on the two companies when they are 
privatized later this year.  His nationalistic rhetoric reflects 
that.  End note.) 
 
BEIRUT 00001725  002 OF 003 
 
 
 
BASSIL THANKS USAID FOR ASSISTANCE, 
SAYS NOTHING ABOUT PRIVATIZAITON 
-------------------- 
 
¶5. (U) On December 3, AID Mission Director and EconOff attended the 
launch of the Telecommunications Regulatory Authority's (TRA) new 
web portal and information database, www.tra.gov.lb, funded by USAID 
under its Transparency and Accountability Grants (TAG) program, 
implemented by AMIDEAST.  In his remarks, Telecom Minister Gebran 
Bassil thanked USAID for its valuable assistance, and hoped it would 
continue to support the telecom sector in the future.  He stressed 
the need for the speedy establishment of Liban Telecom, the new 
company meant to take over fixed line operations from the 
government, and said he wanted the process of development of the 
sector to happen smoothly.  He mentioned nothing about privatization 
of the mobile telecom companies.  TRA Chairman Kamal Shehadi 
highlighted his and his agency's commitment to development of the 
sector, and said TRA was ready to move forward with privatization at 
any time, once the political decision-makers give him the go-ahead. 
 
 
MERRILL LYNCH MAINTAINS ITS 
RECOMMENDATION ON LEBANON DEBT 
-------------------- 
 
¶6. (U) Merrill Lynch (ML) maintained its recommendation on Lebanon's 
external debt to "Market Weight" in its model portfolio of emerging 
markets debt and increased Lebanon's market weight to 7.7 percent 
due to the performance of Lebanese Eurobonds so far this year, given 
the global financial crisis.  In comparison, the Europe, Middle 
East, and North Africa (EMEA) region and countries rated similar to 
Lebanon maintained an "Under Weight" recommendation.  Lebanon's 
external debt posted the highest return among 10 EMEA countries at 
3.42 percent from January-November 2008, as well as the best return 
among the 29 emerging economies included in ML's Sovereign Plus Debt 
Index. 
 
BEIRUT STOCK EXCHANGE RANKED 
THIRD BEST PERFORMER IN THE REGION 
-------------------- 
 
¶7. (SBU) President of Beirut Stock Exchange (BSE) Fadi Khalaf told 
us December 2 that the BSE ranked as third best stock exchange 
performer in the Arab region year to date, after Tunis and Morocco. 
Given the financial crisis and plummeting markets, the ranking is 
more a reflection of "less bad" performance than "good" performance. 
 Khalaf said the BLOM index (issued by BLOM Bank and used by the 
BSE) showed a drop of 17 percent for the first eleven months of 
¶2009. 
 
SYRIA CANCELS FUEL 
TAX ON TRUCKS 
------------------ 
 
¶8. (U) Daily As-Safir reported on November 4 that the Syrian 
authorities will cancel the so-called "diesel tax" that was imposed 
in April 2008 on trucks and buses running on diesel and crossing 
into Lebanon, Jordan, Iraq, and Turkey, in order to prevent 
smuggling of subsidized Syrian diesel across borders.  The 
cancellation was attributed to the worldwide decrease in energy 
prices, which brought prices closer to Syrian levels.  Agricultural 
syndicates were quoted as saying that they were grateful to the GOL 
for achieving this, as it will reduce their transportation costs on 
this vital export route to the Arab region. 
 
CABINET TO SUBSIDIZE DIESEL 
DURING THE WINTER SEASON 
-------------------- 
 
¶9. (SBU) According to the local press, PM Siniora stated that the 
cabinet will agree December 5 to subsidize diesel by two dollars per 
20 liters during the winter months.  In the last few years, the GOL 
has subsidized diesel sold to households in winter 
(December-February); this measure essentially targeted households in 
remote areas so they can afford to heat their houses during winter 
without cutting trees. 
 
 
BEIRUT 00001725  003 OF 003 
 
 
LEBANON JOINS UN CONVENTION 
ON SALE OF GOODS 
-------------------- 
 
¶10. (U) Lebanon joined the UN Convention on Contracts for the 
International Sale of Goods (CISG), Byblos Bank's economic report 
noted.  Lebanon became the 72nd country to join the convention 
worldwide and the fourth in the MENA region.  The CISG will be 
implemented in January 2009. 
 
BEIRUT RANKS 43 IN WORLDWIDE 
RETAIL LOCATION 
-------------------- 
 
¶11. (U) According to property consultants Cushman & Wakefield's 2008 
"Main Streets Across the World" report, Beirut ranked 43 worldwide 
in terms of most expensive retail location, out of 236 locations 
across 48 countries.  Within the top ten most expensive locations in 
the Middle East and Africa (MEA) region, four were in the Greater 
Beirut area (ABC Achrafieh, Verdun, Kaslik, and Beirut Center 
District).  The report noted that following the end of political 
instability witnessed in recent years, the retail market in Lebanon 
has started to recover, especially in Beirut, where there has been 
solid aggregate rental growth. 
 
SISON