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Cablegate: Lebanon: First Made in America Show Since 2005 (Economic

VZCZCXRO5322
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1475/01 2881503
ZNR UUUUU ZZH
R 141503Z OCT 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 3275
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 03 BEIRUT 001475

SENSITIVE

SIPDIS

STATE FOR NEA/ELA
STATE PASS USTR
TREASURY FOR MNUGENT AND SBLEIWEISS
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT

E.O. 12958: N/A
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: FIRST MADE IN AMERICA SHOW SINCE 2005 (ECONOMIC
WEEK IN REVIEW, OCTOBER 6 - 13, 2008)

CONTENTS
--------

-- U.S. OFFICIALS PROMOTE BUSINESS TIES WITH LEBANON AT MADE IN
AMERICA
-- 2009 BUDGET LAW READY TO GO TO CABINET
-- NO NEWS ON SAUDI PLEDGE FOR ADDITIONAL ONE BILLION DOLLAR
DEPOSIT
-- EDL CHAIRMAN NEGOTIATES LOWER ELECTRICITY PRICE IN EGYPT
-- PARLIAMENT APPROVES NEW MEASURE TO COMBAT MONEY LAUDENRING,
AND LEBANON'S ADHERENCE TO CORRUPTION CONVENTION
-- U.S. TREASURY HOSTS CONFERENCE TO STRENGTHEN U.S.-ARAB BANKERS'
COOPERATION
-- ISLAMIC BANK INTERESTED IN OPENING A BRANCH IN THE U.S.
-- LEBANON PERCEIVED AS A PLATFORM FOR ARAB BANKING EXPANSION IN
LEVANT
-- CHINESE MILK IMPORTS STOPPED FOLLOWING SCANDAL

U.S. OFFICIALS PROMOTE BUSINESS TIES WITH LEBANON AT MADE IN
AMERICA
-------------

1. (U) For the first time since 2005, the Embassy and FCS sponsored
the Made in America exposition of American products October 9-11.
Assistant Secretary of Commerce and Director General of the Foreign
Commercial Service Israel Hernandez and U.S. Ambassador Michele
Sison, along with Lebanese Minister of Economy and Trade Mohammad
Safadi, launched the fourth Made in American fair at the BIEL
Center. The fair showcased more than 270 U.S. companies doing
business in Lebanon, bringing the latest in technology and services
to Lebanon's fast-growing market. Participation has tripled since
the event was first held in 2003, highlighting the strength of
U.S-Lebanon commercial ties. The event also included conferences on
deepening commercial relationships between the U.S. and MENA region
and Lebanon's WTO accession.

2009 BUDGET LAW READY
TO GO TO CABINET
--------------------

2. (SBU) Rola Azour, head of the Ministry of Finance (MOF) Economic
Unit, told us on October 6 that the MOF has completed the 2009
budget law proposal, which Finance Minister Chatah will submit to
the cabinet for approval when he returns from the World Bank/IMF
Annual Meetings in Washington. The proposal includes two
revenue-generating measures: raising the tax on interest on deposits
from five to seven percent, and collecting rent on seashore
properties. These measures cover part of the $500 million
additional cost resulting from recent minimum wage and public sector
salary increases, she noted. Azour stressed that there will be no
increase in VAT in 2009 as it would not be politically feasible.

3. (SBU) The MOF has secured a large part of its foreign currency
financing needs for 2008, Azour said, and cannot borrow further in
foreign currencies in the absence of legislation. The MOF is
waiting for parliament to approve the 2006, 2007, and 2008 budget
laws, which were never passed during the political stagnation of the
past two years. Azour believes parliament will pass the three
budget laws by the end of the year; once passed, this would give the
GOL the possibility to borrow up to approximately six billion
dollars to meet its foreign currency needs, she remarked.

NO NEWS ON SAUDI PLEDGE FOR
ADDITIONAL ONE BILLION DOLLAR DEPOSIT
--------------------

4. (SBU) Azour also told us that the Saudis had taken no action on
their pledge last February to deposit an additional one billion
dollars at the Central Bank of Lebanon (CBL) to strengthen its
foreign currency assets. During the July 2006 war, Saudi Arabia
deposited one billion dollars at the CBL to strengthen foreign
currency assets and maintain stability in the foreign exchange
market.

5. (SBU) Meanwhile, the Director of Economic Affairs at the
Presidency, Dr. Elie Assaf, told us October 8 that President Sleiman
will raise this issue during his visit to Saudi Arabia on October
12. Although Sleiman's trip is of a more political nature, the
President will also raise bilateral economic issues, Assaf told us.


BEIRUT 00001475 002 OF 003

EDL CHAIRMAN IN EGYPT TO NEGOTIATE
LOWER ELECTRICITY PRICE
--------------------

6. (SBU) Chairman of national power utility Electricite du Liban
(EDL) Kamal Hayek was in Egypt October 8-9 for additional
negotiations on possible Egyptian electricity supply to Lebanon.
Egypt has offered to sell Lebanon 150 megawatts of surplus
electricity, but at a price indexed to the cost of heavy fuel, which
both Hayek and Energy Minister Alain Tabourian have told the Embassy
they will not accept. If an agreement is reached, the
infrastructure is in place for electricity to reach Lebanon via
Syria, and EDL will be able to supply an additional two to three
hours per day of electricity all over Lebanon, Tabourian told us.

PARLIAMENT APPROVES NEW MEASURE TO COMBAT MONEY LAUNDERING,
AND LEBANON'S ADHERENCE TO CORRUPTION CONVENTION
--------------------

7. (U) On October 8, parliament approved a law expanding powers of
investigators into cases of money laundering to include funds
originating from corruption. The parliament agreed that Lebanon
will adhere to the UN Convention Against Corruption.

8. (U) In addition, Parliament adopted a law dropping fines by 90
percent on overdue car-inspection fees and municipality fees for
2006, 2007, and 2008, provided settlement is reached before the end
of 2008. This measure aims to encourage citizens to pay pending
dues and replenish the state coffers.

U.S. TREASURY HOSTS CONFERENCE TO
STRENGTHEN U.S.-ARAB BANKERS' COOPERATION
--------------------

9. (U) The Union of Arab Banks (UAB), based in Beirut, and the U.S.
Treasury Department jointly organized the fourth U.S.-MENA Private
Sector Dialogue (PSD) Conference on October 9 at the U.S. Treasury,
on the margins of the World Bank/IMF annual meetings in Washington,
D.C. This event aims to strengthen the relationship between Arab
and American bankers on international banking issues and combating
money laundering and terrorism finance.

ISLAMIC BANK INTERESTED IN
OPENING A BRANCH IN THE U.S.
--------------------

10. (SBU) Fouad Matraji, General Manager of Lebanon's largest
Islamic bank, Arab Finance House (AFH), told us October 8 that he
will meet with U.S. Treasury Assistant Secretary Eric Solomon to
explain Islamic banking and the necessary amendments in U.S.
legislation for such banks to exist in the U.S. Matraji explained
that this is timely given the international financial crisis, adding
that Islamic banking is the safest way to invest money since
investment is backed by real assets and there is no leveraging.
(Note: Islamic banking prohibits interest, and provides for sharing
in profit and loss. End note.) Matraji will be accompanied by
senior officials from AFH's major shareholder, Qatar Islamic Bank
(QIB), who also met last year with senior officials at the Federal
Reserve Board expressing QIB interest in opening a branch in the
U.S.

LEBANON PERCEIVED AS A PLATFORM FOR ARAB
BANKING EXPANSION IN LEVANT
--------------------

11. (U) On October 8, Bank of Sharjah officially announced its
acquisition of Banque Nationale de Paris Intercontinentale's (BNPI)
operations in Lebanon. The new joint-holding will be known as
Emirates Lebanon Bank (ELB). Bank of Sharjah will hold 81 percent of
ELB shares, while French BNPI will retain 19 percent. With this
acquisition, Bank of Sharjah continues its expansion into Lebanon's
banking sector. Last year, it acquired Banque de la Bekaa from
Fransabank, one of Lebanon's top ten banks. ELB Chairman/GM Varouj
Nerguizian indicated that Lebanon is a platform for the bank's
expansion into Syria and Iraq.

CHINESE MILK IMPORTS
STOPPED FOLLOWING SCANDAL
--------------------

BEIRUT 00001475 003 OF 003

12. (U) The Lebanese Ministry of Agriculture decided on October 6 to
stop the import of Chinese powder milk and related products, and to
remove all those already in the market, following the recent tainted
milk scandal in China. According to the Ministry, Lebanon imports
around 500 tons of powder milk from China each year.

SISON

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