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Cablegate: Lebanon: Economic Development in Tripoli Faces

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DE RUEHLB #1570/01 3081554
ZNR UUUUU ZZH
P 031554Z NOV 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 3430
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNDT/USMISSION USUN NEW YORK 3117
RUEHNO/USMISSION USNATO 3326
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 03 BEIRUT 001570

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ALSO FOR IO A/S HOOK AND PDAS WARLICK
USUN FOR KHALILZAD/WOLFF/SCHEDLBAUER
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TAGS: PGOV EINV EFIN ETRD LE
SUBJECT: LEBANON: ECONOMIC DEVELOPMENT IN TRIPOLI FACES
POLITICAL HURDLES

SUMMARY
--------

1. (SBU) Northern Lebanon, which is in dire need of economic
development, has existing infrastructure that, if improved
and utilized, could in time promote investment and create
jobs. However, political roadblocks are delaying progress on
current projects, particularly the expansion of Tripoli port,
the recently-approved "economic zone," and the Rashid Karami
trade fair facility. Increased political will and outsider
investment interest, the glimmerings of which may exist,
could inject much needed capital into the region. However,
the run-up to 2009 parliamentary elections probably will
shift political attention away from long-term development
goals and could increase sectarian and political tensions in
northern Lebanon, delaying projects further. End Summary.
2. (SBU) Tripoli, from Lebanese independence in 1943 until
the outbreak of civil war in 1975, was the economic hub of
northern Lebanon. The city housed the country's steel and
wood industries and the active port transferred goods to
Syria and Iraq. The nearby Beddawi refinery processed all of
the crude oil drilled by the Iraq Petroleum Company.
However, as tensions between Syria, Lebanon's vital transit
link, and Iraq grew and the civil war in Lebanon began, the
quantity of supplies shipped through the port of Tripoli
dropped and factories began to close. Inhabitants of the
predominately Christian mountain villages surrounding Tripoli
stopped spending winters in the city and patronizing its
service sector as sectarian tensions increased. Tripoli
contacts blame the central government for "turning its back"
on the city after the civil war and continuing the dramatic
economic digression. The International Poverty Centre 2008
country report found that while northern Lebanon accounts for
20.7 percent of the Lebanon's entire population, it is home
to 38 percent of the poor and 46 percent of the extremely
poor population in Lebanon.

INVESTOR INTEREST IN ECONOMIC ZONE
----------------------------------

3. (SBU) As part of Prime Minister Siniora's six-point
development plan to increase security and improve living
conditions in northern Lebanon, Parliament approved in
September 2008 the formation of a one million square meter
"economic zone" in Tripoli. According to March 14 allied-MP
Mosbah Allouch, Siniora hopes that government incentives,
such as tax cuts, will encourage the private sector to invest
in the area by building facilities and teaching local
laborers necessary skills. Former Chairman of the Board of
Tripoli Port Antoine Habib focused on the zone's potential to
bring artisans out of the poor conditions of Tripoli to make
and sell their wares. Tripoli business owner, and supporter
of former Prime Minister Najib Mikati, Walid Kamaraddine
expected the area would be used to build distribution
warehouses for all sectors, with goods ranging from food
stuffs to machinery. He knew of Chinese and Latin American
companies considering participation in the zone and also told
econoffs he planned to invest. Allouch indicated that
several EU companies had expressed interest.
DELAYED IMPACT
--------------

4. (SBU) However, political prerequisites for the
establishment of Tripoli's economic zone will delay any
economic impact. The law passed by Parliament in September
called for the creation of a General Authority for the
Special Economic Zone, requiring an implementation decree in
the Cabinet. The implementation decree must set up the
Authority's bylaws, financing standards, duties and
indemnities, board of directors, and other functional
requirements -- a time-intensive process, particularly with
pressing issues, such as the 2009 budget, still on the
Cabinet agenda. Additionally, the sectarian makeup of the
zone's board of directors must balance that of the board of
the port and the trade fair, and will need poltical approval
by key Tripoli leaders, including former Prime Ministers Omar
Karami and Najib Mikati and Minister of Economy and Trade
Mohammad Safadi, as well as by Future Movement leader Saad
Hariri.
PORT EXPANSION KEY DEVELOPMENT OPPORTUNITY

BEIRUT 00001570 002 OF 003


------------------------------------------

5. (SBU) All interlocutors cited the port of Tripoli as an
invaluable, and underutilized, resource for the north.
Currently, poor administration, discontinuity of port
management, and lack of regulation offer little incentive for
companies to favor Tripoli port over the port of Beirut.
Additionally, sectarian requirements that the chairman of the
board of the port be a Muslim and the port general manager be
a Christian have enabled political and sectarian
disagreements to hinder port operations. However, Tripoli
port's position as a point of access to Iraq, historical role
as transit center to Syria and Iraq, and existing
infrastructure suggest that the port, with significant
structural and administrative improvements and immense
political will, could bolster economic activity in northern
Lebanon.
6. (SBU) An existing port development framework exists,
although little has been accomplished recently. Former
Chairman of Tripoli Port Habib, who developed the plans for
the port rehabilitation project, said the initial step of
redoing the decks of the port was completed. However, the
second phase that would deepen the port from seven to 14
meters, contracted to a Chinese company, has been stalled for
two years. According to contacts, financial and technical
disagreements between the Lebanese government and the Chinese
contractor, including the price of the contract and the best
means to execute the project, caused the delay. Habib's plan
also included an economic free zone at the port to encourage
tourism and business.
7. (SBU) Contacts also often cite the railroad that ran from
Tripoli to Homs in Syria as an important part of any port
revitalization. The tracks, sold for steel during Lebanon's
civil war, must be replaced, but the path for the railroad
already exists. According to Allouch, a Syrian survey
estimated that rebuilding the railroad from Tripoli to the
border with Syria would cost between $30 and $35 million.
REINVIGORATED POLITICAL WILL ON PORT?
-------------------------------------

8. (SBU) Prime Minister Siniora's September visit to Tripoli
and issuance of the Tripoli "six point plan" may have renewed
attention on the problem of development in northern Lebanon,
but progress on port rehabilitation is unlikely to be smooth.
In a potential sign of progress, the Lebanese Cabinet on
October 21 approved the payment of $4 million to a Chinese
company for steel purchased before disagreements with the
government arose. However, when Minister of Transportation
and Public Works Ghazi Aridi October 27 formally asked the
port board to pay the contractor, the head of board of
directors refused and offered his official letter of
resignation October 31. According to Habib, Minister Aridi
wants to appoint an entirely new board for the port --
potentially a positive if new board members are invested in
improving port operations, but undoubtedly in Lebanon, a slow
process.
TRADE FAIR HAS OFFERED LITTLE
------------------------------

9. (SBU) The Rashid Karami trade fair has offered little
economic development for the region. Designed by Brazilian
architect Oscar Nemeyer, best known for his work designing
Brasilia, the complex houses an indoor and outdoor exhibition
area, two stage areas, and a hotel. However, the fair rarely
holds events of any kind, let alone those that would draw
broader Lebanese, regional, or international crowds. A
symposium of international sculpture was held in 2001, and in
2002 and 2003 Tripoli festival used the space for a concert
and other events. Since then, the fair has seen little use.
The Lebanese Cabinet has not appointed a new board of
directors for the exhibition center to replace the last board
that resigned two years ago.
COMMENT
-------

10. (SBU) Tripoli's existing infrastructure offers a wealth
of development opportunity. However, as attention in Lebanon
turns toward the parliamentary elections scheduled for spring
2009, political will to undertake long-term economic
revitalization projects, whose impact will not be seen in

BEIRUT 00001570 003 OF 003


time to curry votes, will likely diminish. Additionally,
powerhouse players in Tripoli, including Hariri and Tripoli
natives Safadi, Mikati, and Karami, may have little desire to
drastically rehabilitate an area whose poverty has enabled
them to maintain financial, and thereby political, influence.
Nevertheless, will to improve existing infrastructure in
northern Lebanon does exist to a small degree in some
political circles, and small steps toward development would
play an important role in decreasing poverty, and thereby
reducing violence, in this tremendously needy and vital area
of Lebanon. End Comment.
SISON

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