IMF TEAM TAKES THE PULSE OF THE NEW LEBANESE GOVERNMENT

1. (SBU) An IMF mission visited Beirut February 1-4 to engage the
new government on its reform strategy and discuss post Emergency
Post-Conflict Assistance (EPCA) cooperation. The mission met with
the finance, economy, energy, and telecommunications ministers, as
well as with Central Bank of Lebanon officials and two major
commercial banks (Audi and Byblos Bank) to discuss Lebanon's vision
and progress on reform. Outgoing mission chief Domenico Fanizza
said the government wants to maintain strong cooperation with the
IMF but wants more time to determine the nature of such cooperation.
The ministers also need to translate their vision into an action
plan to be endorsed by the cabinet in order to start implementation,
IMF Economist Najla Nakhle added. IMF Resident Representative Eric
Mottu told econoff the GOL had expressed no interest in a standby
agreement or other formal IMF program.

GOL RENEWS MOBILE OPERATORS
MANAGEMENT CONTRACT


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2. (SBU) Gilbert Najjar, the telecom ministry official responsible
for the two GOL-owned mobile companies, said the cabinet extended
the management contract for the two operators for six months
starting February 1, 2010. According to Najjar, this period will be
used to gather data on the mobile sector and enable Telecom Minister
Charbel Nahas to outline options for the privatization of the two
mobile companies and submit them to the cabinet. "No one said we
will delay privatization or that privatization will not take place,"
Najjar insisted. Nahas told us separately that he would have an
idea of how privatization would be structured before the end of May
2010, and he indicated he was inclined to bring in a strategic
investor to take management control while selling the remaining GOL
stake on the Beirut stock exchange.

LEBANON BREAKS RECORD IN
2009 FOR NUMBER OF TOURISTS


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3. (U) The number of tourists visiting Lebanon in 2009 reached a new
record of over 1.85 million, up by 38.9% compared to 2008, according
to the ministry of tourism (MOT). The previous record dated to
1974, when 1.4 million tourists visited the country. Tourists
(including Lebanese expatriates) from the Arab world accounted for
42.5% of total tourists in 2009, followed by Europe (24.5%), Asia
(14.3%), the Americas (12.3%), Oceania (3.5%), and Africa (2.3%).
Hotel occupancy rates throughout Lebanon reached 39.1% in 2009, and
tourist spending rose by 13% compared to 2008. Beirut's
international airport also witnessed record numbers, as the number
of passengers reached 4.98 million, up 22% from 2008. The MOT
estimated the country's annual income from tourism at around $7
billion, or around 20% of GDP. At the beginning of last year, the
MOT had estimated the number of tourists would reach around two
million in 2009.

GOL TO APPOINT NEW BANKING
CONTROL COMMISSION BOARD


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4. (SBU) The cabinet must appoint a new board for the Banking
Control Commission (BCC), an independent entity that supervises the
banking sector, as its term of office ended January 31, 2010.
Unlike the Council for Development and Reconstruction board -- whose
term ending December 31, 2009 was extended by the cabinet until a
new board is appointed -- the current BCC board must leave office by
law immediately upon the expiration of its mandate. Dr. Youssef
El-Khalil, director of financial operations at the Central Bank of
Lebanon (CBL) told us the cabinet placed the appointment of a new
BCC board on its weekly agenda, but it has not taken action yet.
Further delays will affect BCC's ability to set policy for banking
supervision, he said.


BEIRUT 00000133 002 OF 002




5. (U) Administrative appointments in Lebanon are highly politicized
and require political consensus, so the GOL currently suffers from
numerous vacancies in senior positions. Hizballah Minister of
Administrative Reform Mohammed Fneish is reportedly working on a
streamlined mechanism, which will need cabinet approval, for making
such appointments.

OPIC/CITI EXTEND ADDITIONAL
LOAN FACILITY TO BANKMED


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6. (SBU) Citi Country Officer for Lebanon Walter Siouffi told us the
Overseas Private Investment Corporation (OPIC) and
Citi signed a $40 million 13-year term loan facility for BankMed
(one of Lebanon's top five commercial banks) at the end of December


2009. This amount will be used for lending to small and
medium-sized enterprises (SMEs), for mortgages, and for consumer
finance. This is the second time that BankMed has benefitted from
Citi/OPIC loan facilities, as it received $50 million in January


2007. With this new agreement, Citi and OPIC have extended $300
million in term loan facilities (for up to 15 years) to selected
commercial banks in Lebanon since January 2007.

MERRILL LYNCH: LEBANON'S EXTERNAL
DEBT REVISED TO "UNDERWEIGHT"


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7. (U) Merrill Lynch revised its recommendation on Lebanon's
external debt downward to "underweight" from "market weight" in its
model portfolio of emerging markets debt and reduced Lebanon's
market weight to 2.1% in January 2010, down significantly from its
recent high of 7.4% in April 2009. Merrill Lynch had upgraded
Lebanon to "market weight" following the Doha Accord that restored
political stability in May 2008.

LEBANON'S QUALITY OF LIFE ONE
OF THE HIGHEST IN THE MENA REGION


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8. (U) Lebanon ranked 112 out of 194 countries worldwide and 4 out
of 18 MENA countries in International Living Magazine's annual
Quality of Life Index. In comparison, Lebanon ranked 105 out of 195
countries worldwide and 4 out of 20 MENA countries in 2009. Lebanon
improved in the culture and leisure, economy, environment, and
health categories, while it remained unchanged in the freedom,
safety, and risk categories. Lebanon dropped in the cost of living
-- indicating a rise in the cost of living and overall prices -- and
infrastructure categories. The survey is conducted at the beginning
of each year, and therefore represents expectations for quality of
life in the coming year.

DAUGHTON