VZCZCXRO6966
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #0328/01 0821043
ZNR UUUUU ZZH
R 231043Z MAR 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 4493
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 000328 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA AND EEB/IFD/ODF 
STATE PASS USTR FRANCESCKI 
STATE PASS USAID LAUDATO/SCOTT 
TREASURY FOR PARODI/BLEIWEISS/CORREA 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: FINMIN SAYS UNITY GOVERNMENT BAD FOR REFORM 
(ECONOMIC WEEK IN REVIEW, MARCH 16 - 22, 2009) 
 
REF: BEIRUT 325 
 
CONTENTS 
-------- 
 
-- FINANCE MINISTER FRUSTRATED WITH REFORM DELAYS 
-- GOL SWAPS $2.3 BILLION IN FOREIGN CURRENCY DEBT 
-- DEMONSTRATION AGAINST HIGH GAS PRICES HAS LOW TURNOUT 
-- FINANCE MINISTRY RECEIVES WORLD BANK GRANT FOR FISCAL REFORM 
-- E-NORTH PROJECT LAUNCHES FIRST WIMAX NETWORK IN LEBANON 
-- FIRST CREDIT BUREAU IN LEBANON EXPECTED TO OPEN IN 2010 
-- LEBANON RANKS IN UPPER ICT DEVELOPMENT CATEGORY 
 
FINANCE MINISTER FRUSTRATED 
WITH REFORM DELAYS 
-------------------- 
 
¶1. (U) At a Paris III donor meeting on March 18, Finance Minister 
Mohammad Chatah said the national unity government has proven to be 
an ineffective model, as even the smallest decisions are 
politicized.  The resulting government paralysis has held back the 
disbursement of nearly $500 million in Paris III pledges that could 
have been invested across the Lebanese economy, particularly in the 
electricity sector, he complained (reftel). 
 
GOL SWAPS $2.3 BILLION 
IN FOREIGN CURRENCY DEBT 
-------------------- 
 
¶2. (U) The GOL successfully completed a voluntary Eurobond exchange 
in the amount of $2.3 billion on March 19.  Chatah was clearly proud 
of the exchange, marveling that 83% of the holders of GOL-issued 
Eurobonds maturing in 2009 exchanged their bonds for longer-term 
maturities (2012 and 2017), while an additional $450 million-dollar 
issue was two times oversubscribed.  This demand for Lebanese 
sovereign bonds reflects investors' confidence in Lebanon's fiscal 
management, he said.  The yields of the new bonds range from 7.5-9%. 
 According to Moody's Investors Services, the GOL's next significant 
Eurobond maturity will be approximately $1.1 billion, due in March 
¶2010. 
 
DEMONSTRATION AGAINST HIGH 
GAS PRICES HAS LOW TURNOUT 
-------------------- 
 
¶3. (U) On March 19, bus drivers and others from the transportation 
sector demonstrated in front of parliament calling for a reduction 
in gas prices by removing the excise tax. (Note:  This tax is a USG 
and IMF benchmark for disbursement of Paris III pledged budgetary 
support.  End note.)  Although the General Labor Confederation 
(GLC), whose leadership is close to the opposition, had called for a 
nation-wide demonstration to bring the entire public transportation 
sector to a standstill, the number of demonstrators was fairly 
modest and caused minimal disruption.  Daily An-Nahar newspaper 
reported that compliance with the demonstration was highest in 
Beirut's southern suburbs (a Hizballah stronghold) and areas where 
support for the opposition is strong.  (Note:  GLC-sponsored labor 
demonstrations contributed to the outbreak of violence in Beirut in 
May 2008.  End note.) 
 
FINANCE MINISTRY RECEIVES WORLD 
BANK GRANT FOR FISCAL REFORM 
------------------- 
 
¶4. (U) On March 16, the World Bank (WB) signed a $4 million grant 
agreement with the Ministry of Finance (MOF) for a two-year project 
to reform the fiscal administration, budget preparation, liquidity 
and debt management, and donor coordination.  The reform measure is 
meant to create a more transparent framework for the management of 
state resources and will help decision makers in cabinet and 
parliament implement appropriate policies.  The grant is the last 
tranche of a $70 million WB grant gradually disbursed since the 2006 
July war. 
 
E-NORTH PROJECT LAUNCHES FIRST 
WIMAX NETWORK IN LEBANON 
-------------------- 
 
¶5. (SBU) On March 14, the Ministry of Telecommunications (MOT), in 
 
BEIRUT 00000328  002 OF 002 
 
 
collaboration with the Union of Arab ICT Associations and local 
broadband company GlobalCom Data Services (GDS), launched the 
e-North Project -- the first WiMAX service in Lebanon providing 
broadband access to northern Lebanon.  This service will give 
internet access to a region poorly served by information networks, 
where many citizens have limited access to internet.  This pilot 
project is a partnership between the public and private sector; 
three Internet Service Providers (ISPs) will provide free internet 
access to government offices, schools, and community centers, while 
charging affordable rates to citizens.  Union of Arab ICT 
Associations Chairman Nizar Zakka has applied for funding from the 
U.S. Trade and Development Agency for technical assistance to 
support this project. 
 
FIRST CREDIT BUREAU IN LEBANON 
EXPECTED TO OPEN IN 2010 
-------------------- 
 
¶6. (U) The Association of Banks in Lebanon (ABL) announced that it 
expects to establish Lebanon's the first credit bureau in mid-2010. 
The bureau will issue credit reports on individuals and SMEs that 
are not covered by the Central Bank of Lebanon's (CBL) risk 
assessment database, which does not cover corporate loans and loans 
smaller than $5300.  The bureau's reports are expected to increase 
access to finance for individuals and businesses, and allow banks 
and financial institutions to expand lending and make faster and 
better loan decisions.  The project is supported by the CBL, based 
on a feasibility study conducted for ABL by the International 
Finance Corporation (IFC). 
 
LEBANON RANKS IN UPPER 
ICT DEVELOPMENT CATEGORY 
-------------------- 
 
¶7. (U) The International Telecommunication Union's (ITU) Information 
and Communication Technology (ICT) Development Index ranked Lebanon 
64 out of 154 countries worldwide and seven out of 19 MENA countries 
in 2009.  Lebanon came in the category of countries with "upper" ICT 
development, while its overall score rose by 35.6% compared to the 
2008 survey.  The index quantifies and tracks the digital divide 
among economies, measuring the level of access, usage, and skills of 
ICT in each country.  Regional general manager of Cisco Fadi 
Moubarak publicly said on March 11 that ICT sector growth in Lebanon 
is still below potential, noting that with the availability of 
"true" broadband, Lebanon could play a more important role in the 
regional ICT sector. 
 
SISON