VZCZCXRO9008
RR RUEHBC RUEHDH RUEHKUK RUEHROV
DE RUEHLB #0133/01 0391423
ZNR UUUUU ZZH
R 081423Z FEB 10
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 6513
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000133 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV LE
SUBJECT: IMF TEAM TAKES THE PULSE OF THE NEW LEBANESE GOVERNMENT 
(ECONOMIC WEEK IN REVIEW, JANUARY 25 - FEBRUARY 7, 2010) 
 
CONTENTS 
-------- 
 
-- IMF TEAM TAKES THE PULSE OF THE NEW GOVERNMENT 
-- GOL RENEWS MOBILE OPERATORS MANAGEMENT CONTRACT 
-- LEBANON BREAKS RECORD IN 2009 FOR NUMBER OF TOURISTS 
-- GOL TO APPOINT NEW BANKING CONTROL COMMISSION BOARD 
-- OPIC/CITI EXTEND ADDITIONAL LOAN FACILITY TO BANKMED 
-- MERRILL LYNCH: LEBANON'S EXTERNAL DEBT REVISED TO "UNDERWEIGHT" 
-- LEBANON'S QUALITY OF LIFE REMAINS ONE OF THE HIGHEST IN THE MENA 
REGION 
 
 
IMF TEAM TAKES THE PULSE 
OF THE NEW GOVERNMENT 
------------------------ 
 
¶1. (SBU) An IMF mission visited Beirut February 1-4 to engage the 
new government on its reform strategy and discuss post Emergency 
Post-Conflict Assistance (EPCA) cooperation.  The mission met with 
the finance, economy, energy, and telecommunications ministers, as 
well as with Central Bank of Lebanon officials and two major 
commercial banks (Audi and Byblos Bank) to discuss Lebanon's vision 
and progress on reform.  Outgoing mission chief Domenico Fanizza 
said the government wants to maintain strong cooperation with the 
IMF but wants more time to determine the nature of such cooperation. 
 The ministers also need to translate their vision into an action 
plan to be endorsed by the cabinet in order to start implementation, 
IMF Economist Najla Nakhle added.  IMF Resident Representative Eric 
Mottu told econoff the GOL had expressed no interest in a standby 
agreement or other formal IMF program. 
 
GOL RENEWS MOBILE OPERATORS 
MANAGEMENT CONTRACT 
--------------------------- 
 
¶2. (SBU) Gilbert Najjar, the telecom ministry official responsible 
for the two GOL-owned mobile companies, said the cabinet extended 
the management contract for the two operators for six months 
starting February 1, 2010.  According to Najjar, this period will be 
used to gather data on the mobile sector and enable Telecom Minister 
Charbel Nahas to outline options for the privatization of the two 
mobile companies and submit them to the cabinet.  "No one said we 
will delay privatization or that privatization will not take place," 
Najjar insisted.  Nahas told us separately that he would have an 
idea of how privatization would be structured before the end of May 
2010, and he indicated he was inclined to bring in a strategic 
investor to take management control while selling the remaining GOL 
stake on the Beirut stock exchange. 
 
LEBANON BREAKS RECORD IN 
2009 FOR NUMBER OF TOURISTS 
--------------------------- 
 
¶3. (U) The number of tourists visiting Lebanon in 2009 reached a new 
record of over 1.85 million, up by 38.9% compared to 2008, according 
to the ministry of tourism (MOT).  The previous record dated to 
1974, when 1.4 million tourists visited the country.  Tourists 
(including Lebanese expatriates) from the Arab world accounted for 
42.5% of total tourists in 2009, followed by Europe (24.5%), Asia 
(14.3%), the Americas (12.3%), Oceania (3.5%), and Africa (2.3%). 
Hotel occupancy rates throughout Lebanon reached 39.1% in 2009, and 
tourist spending rose by 13% compared to 2008.  Beirut's 
international airport also witnessed record numbers, as the number 
of passengers reached 4.98 million, up 22% from 2008.  The MOT 
estimated the country's annual income from tourism at around $7 
billion, or around 20% of GDP.  At the beginning of last year, the 
MOT had estimated the number of tourists would reach around two 
million in 2009. 
 
GOL TO APPOINT NEW BANKING 
CONTROL COMMISSION BOARD 
-------------------------- 
 
¶4. (SBU) The cabinet must appoint a new board for the Banking 
Control Commission (BCC), an independent entity that supervises the 
banking sector, as its term of office ended January 31, 2010. 
Unlike the Council for Development and Reconstruction board -- whose 
term ending December 31, 2009 was extended by the cabinet until a 
new board is appointed -- the current BCC board must leave office by 
law immediately upon the expiration of its mandate.  Dr. Youssef 
El-Khalil, director of financial operations at the Central Bank of 
Lebanon (CBL) told us the cabinet placed the appointment of a new 
BCC board on its weekly agenda, but it has not taken action yet. 
Further delays will affect BCC's ability to set policy for banking 
supervision, he said. 
 
 
BEIRUT 00000133  002 OF 002 
 
 
¶5. (U) Administrative appointments in Lebanon are highly politicized 
and require political consensus, so the GOL currently suffers from 
numerous vacancies in senior positions.  Hizballah Minister of 
Administrative Reform Mohammed Fneish is reportedly working on a 
streamlined mechanism, which will need cabinet approval, for making 
such appointments. 
 
OPIC/CITI EXTEND ADDITIONAL 
LOAN FACILITY TO BANKMED 
--------------------------- 
 
¶6. (SBU) Citi Country Officer for Lebanon Walter Siouffi told us the 
Overseas Private Investment Corporation (OPIC) and 
Citi signed a $40 million 13-year term loan facility for BankMed 
(one of Lebanon's top five commercial banks) at the end of December 
¶2009.  This amount will be used for lending to small and 
medium-sized enterprises (SMEs), for mortgages, and for consumer 
finance.  This is the second time that BankMed has benefitted from 
Citi/OPIC loan facilities, as it received $50 million in January 
¶2007.  With this new agreement, Citi and OPIC have extended $300 
million in term loan facilities (for up to 15 years) to selected 
commercial banks in Lebanon since January 2007. 
 
MERRILL LYNCH: LEBANON'S EXTERNAL 
DEBT REVISED TO "UNDERWEIGHT" 
--------------------------------- 
 
¶7. (U) Merrill Lynch revised its recommendation on Lebanon's 
external debt downward to "underweight" from "market weight" in its 
model portfolio of emerging markets debt and reduced Lebanon's 
market weight to 2.1% in January 2010, down significantly from its 
recent high of 7.4% in April 2009.  Merrill Lynch had upgraded 
Lebanon to "market weight" following the Doha Accord that restored 
political stability in May 2008. 
 
LEBANON'S QUALITY OF LIFE ONE 
OF THE HIGHEST IN THE MENA REGION 
--------------------------------- 
 
¶8. (U) Lebanon ranked 112 out of 194 countries worldwide and 4 out 
of 18 MENA countries in International Living Magazine's annual 
Quality of Life Index.  In comparison, Lebanon ranked 105 out of 195 
countries worldwide and 4 out of 20 MENA countries in 2009.  Lebanon 
improved in the culture and leisure, economy, environment, and 
health categories, while it remained unchanged in the freedom, 
safety, and risk categories.  Lebanon dropped in the cost of living 
-- indicating a rise in the cost of living and overall prices -- and 
infrastructure categories.  The survey is conducted at the beginning 
of each year, and therefore represents expectations for quality of 
life in the coming year. 
 
DAUGHTON