LEBANON: HEALTH MINISTRY CONSIDERS SWINE FLU ITS PRIORITY,

UNCLAS SECTION 01 OF 02 BEIRUT 000906

SIPDIS

SENSITIVE

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 ELTN EINV ENRG ETRD KIPR KFLU PGOV LE
SUBJECT: LEBANON: HEALTH MINISTRY CONSIDERS SWINE FLU ITS PRIORITY,
NOT IPR (ECONOMIC WEEK IN REVIEW, AUGUST 3 - 9, 2009)

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

-- HEALTH MINISTRY CONSIDERS SWINE FLU ITS PRIORITY, NOT IPR
-- LEBANON SUFFERS FROM INCREASED POWER CUTS
-- CARETAKER FINANCE MINISTER STILL WORKING
-- POLITICAL ANTICS HIT PRICE OF SOLIDERE SHARES
-- TOTAL FDI UP BY 12%, BUT ARAB INVESTMENTS FALL
-- SAUDI ARABIA ALLOCATES MORE FUNDS FOR ARAB HIGHWAY


HEALTH MINISTRY CONSIDERS SWINE
FLU ITS PRIORITY, NOT IPR
--------------


1. (SBU) On August 4, Director General of the Ministry of Public
Health (MOPH) Walid Ammar told us he does not consider IPR a major
priority for the MOPH. Instead of focusing on stricter rules on IPR
for WTO accession to protect the interests of multinational
pharmaceutical companies, Ammar asked why Lebanon is forced to
purchase its drugs from subsidiaries of pharmaceutical companies in
countries where drugs are more expensive than in other markets. He
asserted that such practices went against the rules of free trade as
called for by the WTO. Amendments to the Patent Law regarding
undisclosed information or trade secrets are still pending, mainly
because of roadblocks set by the MOPH. Pharmaceutical companies
argue that the lack of stricter standards on what is considered a
trade secret has facilitated the registration of copycat drugs.


2. (SBU) Meanwhile, Ammar explained that the MOPH is currently
focusing on ways to prevent the spread of swine flu, in preparation
for the upcoming Muslim pilgrimage season. He noted that swine flu
vaccines will be in short supply worldwide, and if Lebanon were to
order now, the earliest delivery date would be in early 2010. By
that time, a second pandemic wave of the virus may have started, he
said. Lebanon has confirmed over 100 swine flu cases, and one death
has been attributed to the virus to date.

LEBANON SUFFERS FROM
INCREASED POWER CUTS
--------------


3. (U) Power cuts have increased in August all over Lebanon as a
result of increased demand resulting from hot temperatures and
record tourism. Recent press reports have described citizens
throughout Lebanon taking to the streets to protest the power
shortages. Power production remains insufficient, as Lebanon faces
a massive capacity deficit. While current production reaches about
1600 megawatts (MGW),in addition to small quantities purchased from
Egypt and Syria, demand at peak times reaches 2400 MGW or more.


4. (SBU) The chairman of national power utility Electricity du
Liban, Kamal Hayek, told EconOff the priority for the new cabinet
should be construction of new power plants to increase production,
while simultaneously attracting private sector investment in an
Independent Power Producer (IPP). The International Finance
Corporation (IFC) provided assistance to the GOL in its preparations
for an IPP, but the process stalled in the current government, as
caretaker Minister of Energy and Water Alain Tabourian is vehemently
against private sector participation in the power sector.

CARETAKER FINANCE MINISTER
STILL WORKING
--------------


5. (SBU) Though the Lebanese government formation process has
reached a standstill, caretaker Finance Minister Mohammad Chatah
told the Ambassador August 6 that he and his ministry are still
working. He noted that he was in the process of putting together
the 2010 budget, which his successor will be required to present to
the cabinet shortly after taking office. He said the ministry was
moving forward with a new IT system to streamline processes and
increase transparency. Meanwhile, he assured the Ambassador that
Lebanon's foreign currency financing needs will be met easily, as
Lebanese banks are so flush with liquidity that interest rates are
beginning to fall. He stressed that the GOL was carefully
monitoring the effect of falling interest on capital inflows, in
order to ensure that they continue to grow at the 10-12% annual rate
necessary to fund government and private sector borrowing.

BEIRUT 00000906 002 OF 002




6. (SBU) Chatah said the next Finance Minister will need to draft
legislation to overhaul Lebanon's retirement system, which he
claimed was poorly conceived and implemented. He also recommended
his successor look into providing more resources to local and
municipal governments, though he worried that such decentralization
could be disastrous if not coupled with capacity building at the
municipal level. The Ambassador noted that USAID has a capacity
building program working in over 700 municipalities in Lebanon.

POLITICAL ANTICS HIT
PRICE OF SOLIDERE SHARES
--------------


7. (SBU) On August 5, President of the Beirut Stock Exchange (BSE)
Dr. Fadi Khalaf told us that MP Walid Jumbatt's statement on August
2 that his alliance with March 14 "cannot continue" and the
subsequent travel of PM-elect Saad Hariri to France hurt share
prices on the exchange, particularly those of Solidere, which
represent the bulk of daily trading activity. Solidere, the Beirut
downtown real estate development company -- in which Hariri is a
major shareholder -- dropped from nearly $26 on July 31 to $23 on
August 4. This was attributed to market fears that Hariri would
fail to form a new cabinet, Khalaf said, adding that Solidere shares
went up again to $25 on August 6 following positive expectations
regarding the cabinet formation. Jumblatt's statement on August 6
reaffirming his support for Hariri improved market sentiment.

TOTAL FDI UP BY 12%, BUT
ARAB INVESTMENT FALLS
--------------


8. (U) According to the Inter-Arab Investment Guarantee Corporation
(IAIGC),foreign direct investment (FDI) in Lebanon totaled $3.2
billion in 2008, a 12.4% increase compared to 2007. IAIGC ranked
Lebanon seven out of 17 countries in the MENA region in terms of
total FDI.


9. (U) Meanwhile, IAIGC estimated that Arab investment in Lebanon
was approximately $2.6 billion in 2008, falling by 20.4% compared to

2007. 82.5% of Arab investment was in the real estate sector. The
UAE was the primary Arab investor in Lebanon with 42% of total
investment, followed by Kuwait, Saudi Arabia, Qatar, and Bahrain.
Lebanese FDI in the Arab world reached $2.3 billion in 2008, up from
$465 million in 2007, with Sudan as the largest recipient of
Lebanese FDI or 81% of the total, followed by Saudi Arabia, Yemen,
Egypt, and Syria.

SAUDI ARABIA ALLOCATES
MORE FUNDS FOR ARAB HIGHWAY
--------------


10. (U) Saudi Arabia announced that it will help finance the
construction of the Arab highway linking Beirut to Damascus with a
$50 million soft loan. The loan carries a 2% interest rate and is
payable over 20 years. Last May, the GOL announced the start of the
first phase of construction on the highway, which will cost
approximately $153 million, financed by soft loans from the Saudi
Fund for Development, the OPEC Fund, and Saudi Arabia.


SISON