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 BEIRUT 00002690 002 OF 002 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