LEBANON: PRESSURE TO RAISE MINIMUM WAGE AND MAY 7 STRIKE;

UNCLAS SECTION 01 OF 02 BEIRUT 000609 SENSITIVE SIPDIS STATE FOR NEA/ELA STATE PASS USTR TREASURY FOR MNUGENT AND SBLEIWEISS USDOC FOR 4520/ITA/MAC/ONE NSC FOR ABRAMS/SINGH/YERGER/DEMOPOLOUS E.O. 12958: N/A TAGS: ECON EFIN PREL PGOV LE SUBJECT: LEBANON: PRESSURE TO RAISE MINIMUM WAGE AND MAY 7 STRIKE; FINANCE MINISTRY SUCCESSFULLY RE-FINANCES PART OF EUROBOND 2008 MATURITIES (ECONOMIC WEEK IN REVIEW, APRIL 28 - MAY 4, 2008) CONTENTS -------------- -- INCREASING PRESSURE TO RAISE MINIMUM WAGE -- FINANCE MINISTRY SUCCESSFULLY ISSUES $882 MILLION IN EUROBONDS -- GOL WILL SET UP EQUITY FUND TO HELP PRIVATE SECTOR -- BANKING SECTOR REMAINS PROFITABLE -- EXPORTS GROW 41 PERCENT IN FIRST Q 2008; U.S. MAJOR IMPORT PARTNER -- LEBANON RANKS 9TH OUT OF 168 DEVELOPING ECONOMIES IN REMITTANCES RECEIVED -- ANTI-MONEY LAUNDERING CONFERENCES OCTOBER IN THE U.S. INCREASING PRESSURE TO RAISE MINIMUM WAGE -------------- ¶1. (U) Sources in the Finance Ministry expect the Lebanese cabinet on 05/05 to approve an increase in the minimum monthly salary (currently $200/month) of $100-130, of which part will be transportation allowance, according to moderate anti-Syrian An-Nahar. An-Nahar indicated that the GOL will also announce other measures to alleviate the burden of rising prices. Pro-opposition General Labor Confederation (GLC) says it will hold a strike on May 7 regardless of the Cabinet decision, in order to maintain the pressure on the GOL. Various economic sectors (banking, trade, industries) do not support the strike and the educational sector is distancing itself from the GLC and has called for a separate strike on May 14. ¶2. (SBU) Marwan Khawli, head of the pro-GOL/March 14 National Salvation Committee, made up of 17 out of the 37 federations under the GLC, told us his group will not participate in the March 7 demonstration, even if the cabinet does not agree on the salary increase during the 05/05 session. Khawli believes that demonstrations will take place only in areas under Hezbollah/Amal dominance. He noted that opposition Free Patriotic Movement (FPM) supporters support the demonstration on paper, but he doesn't expect many FPM members/supporters will be on the ground on May 7. It is noteworthy that Egypt and Syria have recently approved salary increases for the public sector of 30 percent and 25 percent respectively to compensate for rising prices. FINANCE MINISTRY SUCCESSFULLY ISSUES $882 MILLION IN EUROBONDS -------------- �00A;¶3. (U) The Finance Ministry has announced that it has successfully completed a new six-year Eurobond issue, worth $882 million, of which $731.612 million is a voluntary debt exchange of May, June and August 2008 maturities and $150 million is additional borrowing. This issue aims to secure the Ministry's foreign currency financing needs for 2008 and reinforce financial market stability. GOL WILL SET UP EQUITY FUND TO HELP PRIVATE SECTOR -------------- ¶4. (U) Finance Minister Jihad Azour indicated that the GOL is keen to support the private sector and increase productivity. Azour mentioned that the GOL is working on setting up a Venture Capital Fund, valued at more than $200 million, to help businesses restructure, develop, and expand operations. Azour was speaking at the Arab Economic Forum on 05/02. BANKING SECTOR REMAINS PROFITABLE -------------- ¶5. (SBU) Lebanon's banking sector saw a 60 percent increase in branches and subsidiaries abroad in 2007, Chairman of the banking Control Commission (BCC) Walid Alameddine told us on April 29, and assets abroad reached $20 billion by the first quarter of 2008. This represents 20 percent of the overall profits of the TOP banks, and the objective is to increase this share to fifty percent by 2012, President of the Association of Banks Francois Bassil remarked. Net capital inflows reached $1.5 billion in the first quarter of 2008, while $600 million were converted into Lebanese Lira deposit despite the prevailing political and security situation, Alameddine remarked. BEIRUT 00000609 002 OF 002 EXPORTS GROW 41 PERCENT IN FIRST Q 2008; U.S. MAJOR IMPORT PARTNER -------------- ¶6. (U) Figures released by the Higher Council for Customs show that exports reached $875 million in the first quarter of 2008, reflecting a 40.9 percent increase compared to the corresponding period in 2007. This signals that demand for Lebanese products continue to grow, reflecting the appreciation of the Euro. However, the appreciation of the Euro has affected the value of imports, as around 30 percent of Lebanon's imports originate in Europe. Imports totaled $3.498 billion in the first quarter of 2008, a 29.5 percent increase compared to the first quarter of 2007. The trade deficit reached $2.623 billion, an increase of 26.1 percent compared to the first quarter of 2007. As the growth in exports surpassed the growth in imports, the export-to-import coverage ratio went up by two percent, from 23 percent in the first quarter of 2007 to 25 percent in the first quarter of 2008. ¶7. (U) Switzerland was the main destination of Lebanese exports in the first quarter of 2008, with $144 million (16.5 percent of total exports) followed by the UAE with $76 million (8.7 percent),Syria with $51 million (5.8 percent),and Iraq with $49 million (5.6 percent). As to sources of imports, the U.S ranked first with $489 million (14 percent),by far surpassing Italy --Lebanon's traditionally largest import partner -- which came second with $316 million (9 percent),France with $297 million (8.5 percent),and China with $275 million (7.9 percent). LEBANON RANKS 9TH OUT OF 168 DEVELOPING ECONOMIES IN REMITTANCES RECEIVED -------------- ¶8. (U) According to the United Nations Conference on Trade and Development (UNCTAD) report on Development and Globalization: Facts and Figures 2008, which ranks developing countries according to remittances received in 2006, Lebanon ranked 9th in terms of remittances received out of 168 developing economies and second in terms of remittances received as a percentage of GDP. Lebanon received $4.924 billion in remittances in 2006, ranking third among Middle East and North African (MENA) developing economies. Lebanon recorded $4.018 billion in remittances paid in 2006, ranking 13th among TOP 20 remittances paying countries. ANTI-MONEY LAUNDERING CONFERENCES OCTOBER IN THE U.S. -------------- ¶9. (SBU) Secretary of the Special Investigation Commission (SIC) fighting money laundering and terrorism Mohammad Baasiri told us that his April 28-30 meetings with USG officials in Washington, D.C. were successful. He discussed two upcoming events tentatively scheduled for October in Washington. The first is a seminar for CEOs of Arab and American banks to be organized by the Treasury on the margins of the Annual World Bank/IMF meetings. The other is the U.S.-MENA Private Sector Dialogue (PSD) Conference for banks' compliance officers, which will be organized around the time of the Arab Bankers Association Annual conference. These events aim to strengthen the relationship between Arab and American bankers in combating money laundering and terrorism finance. SISON