LEBANON: FINALLY, POLITICAL CONSENSUS ON CENTRAL BANK

UNCLAS BEIRUT 000369

SENSITIVE

SIPDIS

STATE FOR NEA/ELA AND EEB/IFD/ODF
STATE PASS USTR FRANCESCKI
STATE PASS USAID LAUDATO/SCOTT
TREASURY FOR PARODI/BLEIWEISS/CORREA
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR MCDERMOTT

E.O. 12958: N/A
TAGS: ECON EFIN PGOV LE
SUBJECT: LEBANON: FINALLY, POLITICAL CONSENSUS ON CENTRAL BANK
APPOINTMENTS (ECONOMIC WEEK IN REVIEW, MARCH 23 - 29, 2009)

CONTENTS
--------------

-- CABINET APPOINTS CENTRAL BANK VICE GOVERNORS
-- NEW STUDY TO CREATE LEBANON ANTI-CORRUPTION STRATEGY
-- TOURISM AND TRAVEL EXPECTED TO CONTRIBUTE OVER $7 BILLION TO
ECONOMY
-- LEBANON IMPROVES IN COUNTRY RISK SURVEY


CABINET APPOINTS CENTRAL
BANK VICE GOVERNORS
--------------


1. (U) On March 26, cabinet appointed four Central Bank of Lebanon
(CBL) vice governors after the positions had remained vacant for
more than six months because of lack of political consensus on
filling them. These positions are traditionally filled by people
close to major political leaders on a confessional basis (Sunni,
Shia, Druze, and Armenian Orthodox). Since the vice governors
represent the majority of the CBL's Central Council, these
appointments will revive the important role the CBL plays in setting
monetary and credit policy. Other key positions in the public
sector remain vacant, such as directors general of various
ministries.

NEW STUDY TO CREATE LEBANON
ANTI-CORRUPTION STRATEGY
--------------


2. (U) On March 25, the UNDP and Lebanese Transparency Association
(LTA) presented a study on fighting corruption intended to assist
the GOL in formulating its national anti-corruption strategy. The
study is part of the UNDP/LTA project launched in 2005 with Danish
Trust Fund and UNDP funding, "Towards a National Dialogue on
Corruption in Lebanon." While UNDP resident representative Marta
Ruedas noted some improvements in Lebanon's legal and institutional
framework, she spoke out strongly on the need to combat the rampant
corruption in Lebanon's public and private sectors.


3. (U) Calling corruption "the most transparent thing in Lebanon,"
because of its pervasiveness, Interior Minister Ziad Baroud said
that since 1990 there has been no political will to fight
corruption, because its existence maintains the power base of the
political elite. He highlighted the need for parliament to support
the draft law on access to information, as a step in toward public
sector transparency and combating corruption. Lebanon ratified the
UN Convention against Corruption in 2008.

TOURISM AND TRAVEL EXPECTED TO
CONTRIBUTE OVER $7 BILLION TO ECONOMY
--------------


5. (U) The World Travel and Tourism Council (WTTC) estimated that
the travel and tourism industry in Lebanon would make a direct
contribution of $2.59 billion to the economy (9.3% of GDP) in 2009.
Total contribution to the economy (direct and indirect) is estimated
at $7.78 billion (a whopping 28.1% of GDP) and 28% of total
employment. According to the Ministry of Tourism, the number of
tourists visiting Lebanon in 2008 reached a record 1.33 million, a
31% increase compared to 2007, and is expected to reach two million
in 2009, assuming continued political stability.

LEBANON IMPROVES IN
COUNTRY RISK SURVEY
--------------


6. (U) In Euromoney magazine's semi-annual country risk survey,
Lebanon ranked 102 out of 186 countries worldwide, compared to 134
in the previous September 2008 survey. While out of 20 MENA
countries, Lebanon ranked 12 compared to 15 in the previous survey.
Lebanon's rank improvement was the eighth highest rise worldwide, as
a stabile political environment and a strong economic performance in
the face of the global financial crisis improved relative
performance. This improvement will ease Lebanon's ability to borrow
at lower rates in international capital markets.

SISON