VZCZCXRO1613
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHDH RUEHIK RUEHKUK RUEHLZ RUEHROV
RUEHSL RUEHSR
DE RUEHLB #0906/01 2250751
ZNR UUUUU ZZH
R 130751Z AUG 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 5518
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 000906 
 
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 ELTN EINV ENRG ETRD KIPR KFLU PGOV LE
SUBJECT: LEBANON: HEALTH MINISTRY CONSIDERS SWINE FLU ITS PRIORITY, 
NOT IPR (ECONOMIC WEEK IN REVIEW, AUGUST 3 - 9, 2009) 
 
CONTENTS 
-------- 
 
-- HEALTH MINISTRY CONSIDERS SWINE FLU ITS PRIORITY, NOT IPR 
-- LEBANON SUFFERS FROM INCREASED POWER CUTS 
-- CARETAKER FINANCE MINISTER STILL WORKING 
-- POLITICAL ANTICS HIT PRICE OF SOLIDERE SHARES 
-- TOTAL FDI UP BY 12%, BUT ARAB INVESTMENTS FALL 
-- SAUDI ARABIA ALLOCATES MORE FUNDS FOR ARAB HIGHWAY 
 
 
HEALTH MINISTRY CONSIDERS SWINE 
FLU ITS PRIORITY, NOT IPR 
-------------------- 
 
¶1. (SBU) On August 4, Director General of the Ministry of Public 
Health (MOPH) Walid Ammar told us he does not consider IPR a major 
priority for the MOPH.  Instead of focusing on stricter rules on IPR 
for WTO accession to protect the interests of multinational 
pharmaceutical companies, Ammar asked why Lebanon is forced to 
purchase its drugs from subsidiaries of pharmaceutical companies in 
countries where drugs are more expensive than in other markets.  He 
asserted that such practices went against the rules of free trade as 
called for by the WTO.  Amendments to the Patent Law regarding 
undisclosed information or trade secrets are still pending, mainly 
because of roadblocks set by the MOPH.  Pharmaceutical companies 
argue that the lack of stricter standards on what is considered a 
trade secret has facilitated the registration of copycat drugs. 
 
¶2. (SBU) Meanwhile, Ammar explained that the MOPH is currently 
focusing on ways to prevent the spread of swine flu, in preparation 
for the upcoming Muslim pilgrimage season.  He noted that swine flu 
vaccines will be in short supply worldwide, and if Lebanon were to 
order now, the earliest delivery date would be in early 2010.  By 
that time, a second pandemic wave of the virus may have started, he 
said.  Lebanon has confirmed over 100 swine flu cases, and one death 
has been attributed to the virus to date. 
 
LEBANON SUFFERS FROM 
INCREASED POWER CUTS 
-------------------- 
 
¶3. (U) Power cuts have increased in August all over Lebanon as a 
result of increased demand resulting from hot temperatures and 
record tourism.  Recent press reports have described citizens 
throughout Lebanon taking to the streets to protest the power 
shortages.  Power production remains insufficient, as Lebanon faces 
a massive capacity deficit.  While current production reaches about 
1600 megawatts (MGW), in addition to small quantities purchased from 
Egypt and Syria, demand at peak times reaches 2400 MGW or more. 
 
¶4. (SBU) The chairman of national power utility Electricity du 
Liban, Kamal Hayek, told EconOff the priority for the new cabinet 
should be construction of new power plants to increase production, 
while simultaneously attracting private sector investment in an 
Independent Power Producer (IPP).  The International Finance 
Corporation (IFC) provided assistance to the GOL in its preparations 
for an IPP, but the process stalled in the current government, as 
caretaker Minister of Energy and Water Alain Tabourian is vehemently 
against private sector participation in the power sector. 
 
CARETAKER FINANCE MINISTER 
STILL WORKING 
-------------------- 
 
¶5. (SBU) Though the Lebanese government formation process has 
reached a standstill, caretaker Finance Minister Mohammad Chatah 
told the Ambassador August 6 that he and his ministry are still 
working.  He noted that he was in the process of putting together 
the 2010 budget, which his successor will be required to present to 
the cabinet shortly after taking office.  He said the ministry was 
moving forward with a new IT system to streamline processes and 
increase transparency.  Meanwhile, he assured the Ambassador that 
Lebanon's foreign currency financing needs will be met easily, as 
Lebanese banks are so flush with liquidity that interest rates are 
beginning to fall.  He stressed that the GOL was carefully 
monitoring the effect of falling interest on capital inflows, in 
order to ensure that they continue to grow at the 10-12% annual rate 
necessary to fund government and private sector borrowing. 
 
BEIRUT 00000906  002 OF 002 
 
 
 
¶6. (SBU) Chatah said the next Finance Minister will need to draft 
legislation to overhaul Lebanon's retirement system, which he 
claimed was poorly conceived and implemented.  He also recommended 
his successor look into providing more resources to local and 
municipal governments, though he worried that such decentralization 
could be disastrous if not coupled with capacity building at the 
municipal level.  The Ambassador noted that USAID has a capacity 
building program working in over 700 municipalities in Lebanon. 
 
POLITICAL ANTICS HIT 
PRICE OF SOLIDERE SHARES 
------------------------ 
 
¶7. (SBU) On August 5, President of the Beirut Stock Exchange (BSE) 
Dr. Fadi Khalaf told us that MP Walid Jumbatt's statement on August 
2 that his alliance with March 14 "cannot continue" and the 
subsequent travel of PM-elect Saad Hariri to France hurt share 
prices on the exchange, particularly those of Solidere, which 
represent the bulk of daily trading activity.  Solidere, the Beirut 
downtown real estate development company -- in which Hariri is a 
major shareholder -- dropped from nearly $26 on July 31 to $23 on 
August 4.  This was attributed to market fears that Hariri would 
fail to form a new cabinet, Khalaf said, adding that Solidere shares 
went up again to $25 on August 6 following positive expectations 
regarding the cabinet formation.  Jumblatt's statement on August 6 
reaffirming his support for Hariri improved market sentiment. 
 
TOTAL FDI UP BY 12%, BUT 
ARAB INVESTMENT FALLS 
------------------------ 
 
¶8. (U) According to the Inter-Arab Investment Guarantee Corporation 
(IAIGC), foreign direct investment (FDI) in Lebanon totaled $3.2 
billion in 2008, a 12.4% increase compared to 2007.  IAIGC ranked 
Lebanon seven out of 17 countries in the MENA region in terms of 
total FDI. 
 
¶9. (U) Meanwhile, IAIGC estimated that Arab investment in Lebanon 
was approximately $2.6 billion in 2008, falling by 20.4% compared to 
¶2007.  82.5% of Arab investment was in the real estate sector.  The 
UAE was the primary Arab investor in Lebanon with 42% of total 
investment, followed by Kuwait, Saudi Arabia, Qatar, and Bahrain. 
Lebanese FDI in the Arab world reached $2.3 billion in 2008, up from 
$465 million in 2007, with Sudan as the largest recipient of 
Lebanese FDI or 81% of the total, followed by Saudi Arabia, Yemen, 
Egypt, and Syria. 
 
SAUDI ARABIA ALLOCATES 
MORE FUNDS FOR ARAB HIGHWAY 
-------------------- 
 
¶10. (U) Saudi Arabia announced that it will help finance the 
construction of the Arab highway linking Beirut to Damascus with a 
$50 million soft loan.  The loan carries a 2% interest rate and is 
payable over 20 years.  Last May, the GOL announced the start of the 
first phase of construction on the highway, which will cost 
approximately $153 million, financed by soft loans from the Saudi 
Fund for Development, the OPEC Fund, and Saudi Arabia. 
 
 
SISON