LEBANON: POLITICAL CONSENSUS IS CORNERSTONE FOR REFORMS

UNCLAS SECTION 01 OF 03 BEIRUT 000886

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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
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E.O. 12958: N/A
TAGS: BEXP ECON EFIN EIND ETRD KIPR KFLU PGOV SENV LE
SUBJECT: LEBANON: POLITICAL CONSENSUS IS CORNERSTONE FOR REFORMS
(ECONOMIC WEEK IN REVIEW, JULY 27 - AUGUST 2, 2009)

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

-- POLITICAL CONSENSUS CORNERSTONE OF REFORM
-- LEBANON CONFIRMS FIRST DEATH FROM SWINE FLU
-- MARKET SHOWS STRONG APPETITE FOR FIVE-YEAR TREASURY BILLS
-- AMCHAM LEBANON TO CHAIR THE AMCHAM MENA COUNCIL
-- BEIRUT TO HOST WIPO ARAB REGIONAL MEETING IN OCTOBER
-- CENTRAL BANK OF LEBANON PREPARES TO BECOME REGIONAL TRAINING HUB
-- CABINET ADOPTS NATIONAL STRATEGY TO FIGHT FOREST FIRES
-- LEBANESE NGO FOCUSES ON ENDANGERED SPECIES AND CLIMATE CHANGE
-- MIDDLE EAST AIRLINES AMONG 25 LEADING AIRLINES WORLDWIDE


POLITICAL CONSENSUS
CORNERSTONE OF REFORM
--------------


1. (SBU) During a series of meetings with EconOff July 21-22,
government officials and prominent economic consultants stressed
that politics had stalled reform and privatization. They believed
political leaders wanted to preserve their vested interests in any
future privatization. PM-elect Saad Hariri should show strong
commitment to reform, therefore, and engage all political partners
from the outset, they said. All contacts concurred that the new
cabinet should focus on moving forward on the following: increased
power production, electricity and telecom privatization, social
reforms, streamlining business procedures, support to SMEs, and job
creation.


2. (SBU) Telecommunications Regulatory Authority (TRA) Chairman
Kamal Shehadi assessed that PM-elect Saad Hariri was committed to
moving ahead with telecom privatization. Hariri asked Shehadi to
prepare a statement on telecom reform to include in cabinet's
ministerial statement, he said.

LEBANON CONFIRMS FIRST
DEATH FROM SWINE FLU
--------------


3. (U) On July 31, Minister of Public Health Mohammad Khalifeh
confirmed Lebanon's first death as a result of swine flu. Khalifeh
said a 30-year-old man had been receiving treatment for leukemia
when he caught the virus and died as a result. Fifteen to 20 swine
flu cases a day is manageable, Khalifeh said, but he warned that the
rate would increase at the beginning of the school year in the fall.
Last week, the Ministry of Public Health stated the total number of
swine flu cases had reached 105.

MARKET SHOWS STRONG APPETITE
FOR FIVE-YEAR TREASURY BILLS
--------------


4. (SBU) On July 23, the GOL issued approximately $92 million worth
of five-year Treasury Bills (TBs) in Lebanese Lira (LL) with a
coupon of 9%, a senior source at the Central Bank of Lebanon (CBL)
told us July 30. The issue was oversubscribed, with demand --
mainly from commercial banks -- reaching $186 million, the source
said. The increased demand was driven by an anticipated drop in
interest rates, which would boost the TBs' yield. The GOL will
begin issuing five-year TBs on a bi-monthly basis to absorb some of
the banks' excess LL liquidity, while extending the public debt
maturity. Banking sources expect strong demand for the new
instrument at the next auction on August 6.


5. (U) The strong demand for five-year TBs had a slight impact on
the money market, with the overnight rate rising from 3.5% (the
official rate set by the CBL) to 4% mid-last week due to a temporary
shortage in LL liquidity. The overnight rate closed at 3.5% on
Friday, July 24.

AMCHAM LEBANON TO
CHAIR MENA COUNCIL
--------------


6. (SBU) During the annual American Chamber of Commerce (Amcham)
MENA Council meeting on July 27-28 in Jordan, the chairmanship of
the council was transferred from Amcham Jordan to Amcham Lebanon for
a two-year term. The Lebanese delegation at the meeting included

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Amcham Lebanon president Salim Zeeni, vice presidents Arslan Sinno,
Maher Beydoun, Richard Haykal, and board members, as well as Senior
Commercial Specialist. Discussions focused on regional events for
the coming two years, including holding an environment day in Egypt
on October 27 (featuring former VP Al Gore),a U.S.-MENA ICT Forum
in Beirut in November 2009, and the Made in America Beirut trade
fair in April 2010. Participants also suggested leading more
regional delegations to U.S. trade fairs.

BEIRUT TO HOST WIPO
REGIONAL MEETING
--------------


7. (SBU) Wissam El Amil, Intellectual Property Rights (IPR)
Specialist at the Ministry of Economy and Trade (MOET),told us that
Beirut will be hosting the World Intellectual Property Organization
(WIPO) Arab Regional Meeting on October 12-15 with high-level
government representatives from the region as well as IP experts.
El Amil noted that the MOET, in collaboration with the Ministry of
Education, will resume its IPR awareness campaign for schools,
interrupted due to the 2006 July war, in 2010. Meanwhile, a new IPR
masters degree program at the publicly-owned Lebanese University is
set to begin in the upcoming school year. Lebanon is working on
improving the IPR environment, but increased awareness and training
for judges would improve IPR enforcement, he said.

CBL TO BECOME
REGIONAL TRAINING HUB
--------------


8. (SBU) On July 29, Central Bank of Lebanon (CBL) Vice Governor Dr.
Saad Andari told us the CBL is currently working to expand its
training institute to serve as a training hub for central bankers in
the region. As a result, the CBL is re-negotiating a 1997 agreement
with the Federal Reserve to set up a hub in Lebanon, he said, adding
that the director of the CBL training institute, Mohammad Jabri,
will attend a "Train the Trainers" program at the Fed in August in
preparation for the project. Andari expected that the CBL would
start regional training programs in Beirut in October 2009.

CABINET ADOPTS NATIONAL STRATEGY
TO FIGHT FOREST FIRES
--------------


9. (SBU) On July 28, Director General of the Association for
Forests, Development, and Conservation (AFDC) Sawsan Bou Fakhreddine
told PolEcon officer and Econ staff that the Cabinet adopted a
National Strategy for Forest Fire Management in May 2009. The
strategy aims to reduce the risk of intense and frequent forest
fires, while allowing for fires that are "socially, economically,
and ecologically sustainable." Work towards implementing the
strategy will be based at the disaster management office, part of
the Prime Minister's office, Bou Fakhreddine said.

LEBANESE NGO FOCUSES ON ENDANGERED
SPECIES AND CLIMATE CHANGE
--------------


10. (SBU) On July 28, PolEcon officer and Econ staff met with the
Executive Director of local environment NGO Indyact, Wael Hmaidan,
and Deputy Director Soumar Dakdouk. Indyact's currently focuses
primarily on pushing Lebanon to ratify the Convention on
International Trade in Endangered Species (CITES). Dakdouk noted
that Indyact will start working on the scoping report and
justification needed for Lebanon to join CITES as soon as funding is
secured from the Dutch government and Lebanese Byblos Bank. Indyact
hopes that Lebanon will join before the CITES Conference in Bahrain
in 2010. Hmaidan noted the importance of ratifying CITES, as
Lebanon is considered a hub for the illegal animal trade worldwide.



11. (SBU) Additionally, Indyact will hold a workshop in August on
climate change negotiations for Arab media and a climate change
conference on October 24 in Beirut. According to Hmaidan, Indyact
is the only NGO in the Arab region working on climate change. The
group is also fighting against bluefin tuna extinction, he said.


MEA AMONG 25 BEST

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AIRLINES WORLDWIDE
--------------


12. (U) Air Transport World Magazine, a leading magazine covering
the airline industry, ranked Lebanese national carrier Middle East
Airlines (MEA) among 25 leading airlines worldwide. In 2008 MEA
ranked 18 and 23 worldwide in terms of net profit and operational
income respectively. MEA flies to 29 destinations in the Middle
East, Europe, and Africa with a current fleet of 13 Airbus planes.
The company, owned by Lebanon's Central Bank, is expected to receive
three additional Airbus planes by 2010.

SISON