LEBANON: FINANCIAL SECTOR JOINS TOGETHER TO PROMOTE

UNCLAS SECTION 01 OF 02 BEIRUT 000813

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

E.O. 12958: N/A
TAGS: ECON EFIN EIND KFLU PGOV LE
SUBJECT: LEBANON: FINANCIAL SECTOR JOINS TOGETHER TO PROMOTE
CORPORATE GOVERNANCE (ECONOMIC WEEK IN REVIEW, JULY 13 - 19, 2009)

CONTENTS
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-- BANKING SECTOR SETS UP COMMITTEE TO PROMOTE CORPORATE GOVERNANCE
-- GOL AIMS TO LENGTHEN DOMESTIC DEBT MATURITY
-- TOURISM MINISTRY EXPECTS TWO MILLION VISITORS IN 2009;
PRIVATE SECTOR SAYS MINISTRY HAS NO STRATEGY
-- BEIRUT RANKS SIX OUT OF 14 MOST EXPENSIVE MENA CITIES
-- SWINE FLU CASES REACH 70

BANKING SECTOR SETS UP COMMITTEE
TO PROMOTE CORPORATE GOVERNANCE
--------------


1. (SBU) The Central Bank of Lebanon (CBL) and the Association of
Banks in Lebanon (ABL) jointly established a new committee to
enhance corporate governance in the Lebanese banking sector. Amin
Awad, a member of the Banking Control Commission (BCC),told us this
committee was created in response to a CBL Circular on basic
principles of corporate governance. The committee will issue
implementation procedures, as well as a checklist that will help BCC
examiners determine bank compliance with best practices dealing with
governance, based on Basel II requirements. Awad expects the
committee to start publishing compliance procedures in fall 2009.

GOL AIMS TO LENGTHEN
DOMESTIC DEBT MATURITY
--------------


2. (SBU) In his first meeting with the newly elected board of the
Association of Banks in Lebanon (ABL) on July 9, Central Bank of
Lebanon (CBL) Governor Riad Salameh announced that the CBL will stop
issuing five-year Certificates of Deposit (CDs) in Lebanese Lira
(LL). In addition, on July 14, Dr. Youssef el-Khalil, CBL Director
of Financial Operations, told us the GOL intends to start issuing
5-year Treasury Bills (TBs) on a bi-monthly basis, since the market
for Lebanese paper is bullish as yields are decreasing. These two
actions will shift the liability for banks' excess LL liquidity from
the CBL to the Lebanese government, while extending the GOL's public
debt maturity. In the past, the GOL had issued 5-year TBs only
once, in the spring of 2005 after the assassination of Prime
Minister Rafic Hariri, to maintain currency stability. Currently,
the GOL issues TBs of up to three-year maturity on a weekly basis.

TOURISM MINISTRY EXPECTS TWO MILLION VISITORS IN 2009;
PRIVATE SECTOR SAYS MINISTRY HAS NO STRATEGY
--------------


3. (SBU) On July 14, Director General of the Ministry of Tourism
(MOT) Nada Sardouk told us that given the large number of visitors
to Lebanon -- over 760,000 from January to June 2009 -- the MOT
forecast of two million tourists in 2009 appears realistic. Sardouk
said that the current tourism boom began in May 2008 with the Doha
Conference and flourished due to the political stability and, most
importantly, security that ensued. Lebanon's reputation as a
tourist destination has also been enhanced through invaluable
coverage in the international press, particularly in Europe and the
United States. She highlighted in particular the New York Times'
ranking of Beirut as its top destination for 2009.


4. (SBU) Meanwhile, head of the syndicate of hotel owners, Pierre
Achkar, and head of the syndicate of restaurant owners, Paul Ariss,
respectively, told us separately that although the summer season is
promising, the MOT does not have a vision or strategy for the
tourism sector in Lebanon. Achkar assessed that for tourism to
prosper, security was much more important than political concerns,
while Ariss said he does not believe Lebanon has the infrastructure
to accommodate the projeted two million visitors.

BEIRUT RANKS SIX OUT OF 14 MOST
EXPENSIVE MENA CITIES
--------------


5. (U) According to Mercer Human Resource Consulting, Beirut ranked
41 out of 143 cities worldwide in terms of cost of living in 2009,
up from 80 in 2008; and six out of 14 MENA cities, unchanged
compared to 2008. The survey noted that Beirut's surge in the
ranking was more a reflection of changes in foreign exchange rates
and the value of the dollar, rather than a rise in prices. The

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study measures the comparative cost of over 200 items, including
housing, food, clothing and household goods, as well as
transportation and entertainment.

SWINE FLU CASES
REACH 70
--------------


6. (U) According to the Ministry of Public Health (MOPH),the number
of swine flu cases reached 70, up from 47 during the first week of
July. No deaths have been attributed to the flu in Lebanon. The
MOPH said it will begin issuing weekly bulletins to keep the public
updated on the virus's spread. It noted that it expects the number
of swine flu cases to rise as more tourists and expatriates enter
the country for the summer holidays. Meanwhile, Minister of Public
Health Khalifeh announced that he will be attending the Arab Health
Ministers' emergency conference in Cairo July 22 to discuss
contingency plans ahead of the Muslim pilgrimage season.

SISON