VZCZCXRO3556
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHDH RUEHIK RUEHKUK RUEHLZ RUEHROV
RUEHSR
DE RUEHLB #0578/01 1470801
ZNR UUUUU ZZH
R 270801Z MAY 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 4959
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 000578 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ELA AND EEB/IFD/ODF 
STATE PASS USTR FRANCESCKI 
STATE PASS USAID LAUDATO/NANDY/SCOTT 
TREASURY FOR PARODI/BLEIWEISS/AHERN 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR SHAPIRO/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAIR EIND PGOV KFLU LE
SUBJECT: LEBANON: ON ELECTION DAY, WILL MOBILE NETWORK BE 
OVERLOADED? (ECONOMIC WEEK IN REVIEW, MAY 18 - 24, 2009) 
 
CONTENTS 
-------- 
 
-- TELECOM PENETRATION RATE UP AFTER EXPANSION AND DROP IN COSTS 
-- CONCERNS OF MOBILE NETWORK FAILURE ON ELECTION DAY 
-- SHARP INCREASE IN FISCAL DEFICIT 
-- CENTRAL BANK SEEKS TO STIMULATE SPENDING 
-- INVESTMENT PROMOTION AGENCY RANKS "AVERAGE" 
-- PIRACY RATE SLIGHTLY UP IN 2008 
-- AMCHAM PROMOTES CORPORATE SOCIAL RESPONSIBILITY 
-- SAUDIS BOOST TOURISM 
-- PORK BAN STAYS FOR NOW 
 
 
 
TELECOM PENETRATION 
RATE UP AFTER COST 
REDUCTION 
------------------- 
 
¶1. (SBU) Following the reduction in mobile fees and charges by 
Ministry of Telecommunications (MOT), Lebanese consumers have rushed 
to acquire new mobile lines, now more affordable to low income 
users.  Advisor to MOT Minister Antoine Boustani told us the two 
private companies managing the GOL-owned mobile network, MTC Touch 
and Alfa, registered a total of about 400,000 new mobile users as of 
January 2009.  As a result, mobile penetration rose to 52% (compared 
to 30% in December 2008.) 
 
¶2. (SBU) Boustani told us MTC Touch and Alfa are expanding their 
networks to reach gradually 400 base stations each by the end of 
June in order to increase coverage to serve 1.2 million subscibers. 
 To avoid congestion on the network, bothcompanies are increasing 
their subscriber base in line with the completion of new sites. 
 
CONCERNS ABOUT MOBILE 
NETWORK ON ELECTION DAY 
----------------------- 
 
¶3. (SBU) Meanwhile, a private sector telecom expert privately 
expressed concerns to us about a possible disruption in service or 
failure in the mobile telecommunications network on the June 7 
election day, and its impact on elections outcome.  Massive voter 
turnout is expected for 2009 parliamentary elections, which for the 
first time will take place on a single day, potentially overloading 
the capability of mobile networks exceeding.  Mobile network 
problems on election day could impede the flow of information, 
encourage rumors, and could cause chaos, the contact worried. 
 
¶4. (SBU) With USG-designated Hizballah operating a parallel telecom 
network, a breakdown in mobile networks could provide an advantage 
to the opposition.  Chairman of Telecom Regulatory Authority (TRA) 
Kamal Shehadi told us he advised Telecommunications Minister Gebran 
Bassil to stop expansion of the mobile base and instead start to 
optimize the current network, equip polling stations with land lines 
and pay phones, and provide the Lebanese Armed Force (LAF) and 
police with radio equipment. 
 
SHARP INCREASE 
IN FISCAL DEFICIT 
----------------- 
 
¶6. (U) Figures released by the Finance Ministry show that the fiscal 
deficit reached $1.14 billion in the first quarter of 2009, up 92.5% 
from the corresponding period in 2008. (Note: This is the highest 
fiscal deficit recorded in the first quarter of any year since 2000. 
End note.)  The rise in the fiscal deficit is attributed to a 35% 
increase in total budget and Treasury expenditures, mostly due to a 
substantial rise in transfers to the national power utility EDL. 
 
¶7. (U) Overall government expenditures reached $3 billion, while 
total revenues reached $1.88 billion.  The deficit to expenditures 
ratio was 37.8% compared to 26.5% in the first quarter of 2008. 
(Note: This is the highest deficit to expenditures ratio in the 
first quarter of any year since 2003.  End note.)  Without 
structural reforms, fiscal vulnerability will remain the main 
weakness in the Lebanese economy. 
 
 
BEIRUT 00000578  002 OF 003 
 
 
CENTRAL BANK 
STIMULATES 
SPENDING 
------------- 
 
¶8. (U) The Central Bank has recently issued circulars providing new 
incentives for commercial banks to lend to the private sector as 
well as to increase education and housing loans.  The circulars 
cover interest rate subsidies on loans to productive sectors in 
Lebanese pounds and foreign currency as well as decrease the reserve 
requirements for commercial banks by sixty percent of the value of 
loans extended in Lebanese pounds. 
 
¶9. (U) Private companies in the fields of agriculture, industry, 
tourism, handicrafts and information technology are eligible to 
benefit from interest rate subsidies on loans to finance existing or 
start new projects in Lebanon.  According to prominent BLOM BANK 
investment group, BLOMINVEST, this incentive package is expected to 
increase loans to the private sector by one billion dollars and 
boost growth by one to 1.5%. 
 
"AVERAGE" INVESTMENT 
PROMOTION AGENCY 
------------------- 
 
¶10. (U) The World Bank Group's 2009 benchmark survey on the 
effectiveness of investment promotion agencies in 181 countries 
placed the performance of the Investment Development Authority of 
Lebanon (IDAL) in the "average" category.  The survey, jointly 
produced by the World Bank, the International Finance Corporation 
(IFC) and the Multilateral Investment Guarantee Agency (MIGA), 
examined the effectiveness of government agencies in promoting their 
countries to foreign investors. The assessments were conducted 
between March and September 2008.  IDAL, a public agency under the 
Prime Ministry, is currently working on setting up the Investor 
Support and Information Center (ISIC), a data bank that will provide 
comprehensive, reliable, and up-to-date investment related 
information to prospective investors. 
 
2008 PIRACY RATE 
SLIGHTLY UP 
---------------- 
 
¶11. (U) The U.S.-based Business Software Alliance (BSA), an industry 
group representing the world's leading computer software developers, 
ranked Lebanon 63 worldwide and fifth in the Middle East and North 
Africa region (MENA) in terms of piracy rate in 2008.  The BSA 
annual report indicated that Lebanon's piracy rate was 74%, slightly 
up from 73% in the last three years (2005-2007).  Lebanon also 
posted the 68th highest piracy- related dollar loss worldwide and 
eighth highest loss among the Arab countries.  Piracy-related losses 
totaled $49 million in 2008, up by 11.4% from $44 million in 2007. 
 
AMCHAM PROMOTES CORPORATE 
SOCIAL RESPONSIBILITY 
------------------------- 
 
¶12. (SBU) On May 19, the American Chamber of Commerce's Better 
Business Group held a conference highlighting the importance of 
Corporate Social Responsibility (CSR) and the correlation between 
good corporate citizenship and positive business performance.  CSR 
consultant Gina Chammas listed the Brand Protection Group (BPG) -- 
formed by a group of local companies conducting nationwide campaigns 
against counterfeit products since 2005 -- and the Lebanese 
Intellectual Property Alliance (LIPA) -- an initiative to fight 
software piracy that led to the destruction of 100,000 CDs valued at 
$5 million -- as examples of CSR success stories. 
 
SAUDIS BOOST 
TOURISM 
----------- 
 
¶13. (U) According to Global refund, the tax refund operator for 
international shoppers, tourists from Saudi Arabia spent the most in 
Lebanon in the first four months of 2009, about 19 percent of total 
tourist spending, followed by tourists from Kuwait and UAE (13% 
each), and Egypt (8%). Fashion and clothing accounted for 67% of 
total spending, followed by watches (11%), and perfume and cosmetics 
(5%). 
 
BEIRUT 00000578  003 OF 003 
 
 
 
NO PLANS TO 
RECONSIDER 
PORK BAN 
----------- 
 
¶14. (SBU) Dr. Obeida Moudawar, Chief of Animal Health Services at 
the Ministry of Agriculture (MOA) on May 22 told us the MOA has no 
intention for the time being to change its April 27 decision banning 
the importation of live pork and pork carcasses.  There is no ban on 
importing processed and manufactured pork products, he said. 
Moudawar stressed that because Lebanon does not import live pork and 
imports very little pork carcasses, the MOA faced little opposition 
in passing the ban, a measure that sought to reduce panic among the 
Lebanese population about swine flu.  When the MOA has a clearer 
picture of the extent of the pandemic, it may reconsider the 
decision, Moudawar said. 
 
SISON