LEBANON: TWO MINISTERS ON LEBANESE RECONSTRUCTION

C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 002690

SIPDIS

SIPDIS

NCS FOR ABRAMS/DORAN/SINGH/HARDING

E.O. 12958: DECL: 08/16/2016
TAGS: IS LE MOPS PREL PTER SY
SUBJECT: LEBANON: TWO MINISTERS ON LEBANESE RECONSTRUCTION


1. (C/NF) SUMMARY: On August 17 the Ambassador and emboff
had separate meetings with Minister of Economy and Trade Sami
Haddad and Minister of Public Works and Transportation
Mohammad Safadi. They blamed the GOL's lack of a centralized
authority to set priorities and determine the distribution of
funds for relief and reconstruction on PM Siniora's
micromanagement. However, both ministers cited works being
done in arguing that progress is being made. Haddad (who
started the meeting by raising alarm bells about declining
wheat stocks) reported taking on the role of heading up
housing issues, dubbing himself "Vice Minister for Social
Affairs in Housing" (second to Minister Nayla Mouawad).
Funding for housing will come from the "reconstruction fund,"
although an expected $800 million from Saudi Arabia and
Kuwait have not yet materialized. Haddad requested the help
of USAID and wants to revive a housing loan guarantee program
that expired years ago. Safadi's ministry completed an
assessment of 50 percent of the country in terms of damage to
public infrastructure. The bill so far, he said, was only
$95 million to repair roads and bridges, excluding the
privately funded bridge repairs. A compete assessment will
be finished in 48 hours (and may include far higher figures,
since the parts of the country still to be surveyed are the
most damaged). Safadi has met with Fadel Chalaq, Director of
the Council for Development and Reconstruction (CDR),and
agreed that CDR -- before the war an arch rival of Safadi's
ministry -- should take the lead in building roads and
bridges because of its expertise. END SUMMARY


2. (C/NF) Minister Haddad began the conversation by
observing that Lebanon's wheat stocks are down to 15 days'
consumption. With just 13,000 tons in the silos, immediate
action is needed to get wheat to Lebanon. Haddad welcomed
the Ambassador's offer to explore prospects for bringing
American wheat to Lebanon that could be sold for local
currency.


3. (C/NF) The Ambassador expressed concern that the GOL is
not seen as taking the lead in reconstruction efforts.
Hizballah adopted a clever strategy, which is highly
publicized, to provide 15,000 Shia families with rent and
furniture money for the next year as their homes are being
rebuilt. Years from now, those families would remember that
Nasrallah put a roof over their heads. The GOL must compete
to strengthen the role of the state and demonstrate that it
is responding to the needs of the people. The Ambassador
noted that Nasrallah has taken an easy route -- cash payments
with no public accountability, letting people themselves do
the work of rebuilding -- but that the GOL must not abdicate
the entire reconstruction field to Hizballah.

Housing
--------------


4. (C/NF) Haddad agreed and explained that progress is being
made as the GOL is tackling reconstruction efforts in two
phases. The relief phase is quickly coming to an end and the
reconstruction phase is moving forward as the priority. The
main concern for Haddad is housing. With the blessings of
Prime Minister Siniora, Haddad sought out where,
bureaucratically, the issue of housing (heretofore completely
a private sector issue) is lodged in the GOL. When he
discovered a small housing authority within Nayla Mouawad's
Ministry of Social Affairs, he offered to take charge of the
issue, to Mouawad's delight, and dubbed himself Vice Minister
for Social Affairs in Housing.


5. (C/NF) Haddad wants to incorporate the money that
Hizballah is giving people into a greater state-sponsored
scheme. If Hizballah is giving people $10,000 to rebuild
their homes, the benefactors can offer this money to the
state's larger housing plans. This would be better for them
and for the state, he claimed.


6. (C/NF) Funding for housing will come from the
"reconstruction fund." The main contributions thus far are
$500 million from Saudi Arabia and $300 from Kuwait, though
neither set of funds has yet materialized. He expects the
fund to be outside government control, with a board composed
of private sector and donor representatives. PM Siniora is
keen on using grants to speed up the process. The objective
is to provide grants for housing, infrastructure, and private
industries. Those responsible for actually setting up and
organizing the fund are the Prime Minister, Minister of
Finance Azour and Haddad, the "usual cast of characters."
The Ambassador noted that Siniora, Azour, Haddad, and the
"usual cast" (meaning Siniora advisors Mohamed Chatah and

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Rola Noureddine) are already busy; it is time for Siniora to
empower someone else. Haddad agreed.

USAID Needed
--------------


7. (C/NF) Haddad requested the help of USAID and wants to
revive the housing guarantee program. Acknowledging that it
could be politically charged for the U.S. if it were only to
build homes, he recommended that USAID, IFC, the local
banking sector, and the EU create a fund specifically for
housing.

Micromanagement
A Problem
--------------


8. (C/NF) Haddad had lamented that there is no centralized
authority to set priorities and determine the distribution of
funds for reconstruction. In a separate meeting, Minister of
Transport and Public Works Mohamed Safadi blamed this on PM
Siniora's micromanaging of the process. Safadi acknowledged
that Siniora has been vital during the conflict and performed
remarkably well in trying circumstances. But Safadi also
complained that now the PM must delegate responsibilities and
let ministries "do their job." Otherwise, reconstruction
efforts led by the state will never get going.

Infrastructure
--------------


9. (C/NF) In spite of the micromanagment issue, Minister of
Transport and Public Works Mohamed Safadi reported that there
has been progress. Because of the pressing need to work
together on reconstruction, there is good cooperation between
the Ministry of Public Works and Council for Development and
Reconstruction (CDR),which have had an historically strained
relationship. Safadi has met with Fadel Chalaq, Director of
CDR, and agreed that CDR should take the lead on building
roads and bridges because of its expertise. He recognizes
that the success of CDR will reflect well on the reputation
of his own ministry. As Safadi explained it, the Ministry
will work with donors and the GOL in selecting priorities,
and CDR will implement any projects the GOL builds itself.


10. (C/NF) Safadi advised that thus far 50 percent of
Lebanon's public infrastructure has already been assessed for
war damages. Of that 50 percent, the war damage to raods and
bridges and will cost an estimated USD 95 million to repair.
This is excluding the damaged bridges that will be repaired
privately by Lebanese political figures and businesses. He
added that within 48 hours all damage would be assessed. In
a subsequent phone call to the Ambassador, Safadi noted that
the USD 95 million figure will likely rise substantially when
the other half of Lebanon is assessed. This is because the
worst affected parts of the country -- the Biqa'a and the
south -- are only now being examined.


11. (C/NF) When the Ambassador asked Safadi whom the Embassy
should approach concerning U.S. funded reconstruction
projects, he fervently responded, "come to me and bypass the
Prime Minister." He affirmed that in the meantime, a central
reconstruction authority is needed.

COMMENT
--------------


12. (C/NF) There was good news and bad news in these
meetings. The good news is that there is more thinking, more
assessing, and more work being done at the ministerial level
than we had imagined. The fact that Safadi and Chalaq are
speaking, let alone cooperating, is a good sign. But the bad
news is that the GOL still lacks a central clearinghouse for
priorities and donor coordination. This is another issue on
which we need a decision from PM Siniora -- and one by which
he delegates donor coordination to someone else other than
"the usual suspects."
FELTMAN