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Cablegate: Lebanon: France Loosens Conditionality On Second Tranche

VZCZCXRO0198
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #1686/01 3311153
ZNR UUUUU ZZH
R 261153Z NOV 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 3669
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 02 BEIRUT 001686

SENSITIVE

SIPDIS

STATE FOR NEA/ELA
STATE PASS USTR FRANCESCKI
STATE PASS USAID BEVER/LAUDATO/SCOTT
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: FRANCE LOOSENS CONDITIONALITY ON SECOND TRANCHE
OF BUDGET SUPPORT (ECONOMIC WEEK IN REVIEW, NOVEMBER 17 - 23, 2008)

CONTENTS
--------

-- FRANCE LOOSENS CONDITIONALITY ON SECOND TRANCHE OF BUDGETARY
SUPPORT LOAN
-- EPCA II: IMF APPROVES $37.6 MILLION LOAN FOR LEBANON
-- FINANCE MINISTER SAYS TELECOM PRIVATIZATION NOT DELAYED; TRA
WORRIED ABOUT FATE OF PRIVATIZATION
-- STATE PROSECUTOR: NOT ENOUGH IPR CASES TO JUSTIFY SPECIALIZED
COURTS
-- NEW DECREE IMPROVES PHARMACEUTICAL REGISTRATION
-- CONSUMER PROTECTION DIRECTORATE HIRES 100 NEW CONTROLLERS
-- TEACHERS HOLD SIT-IN DEMANDING HIGHER PAY
-- LEBANON FALLS IN EASE OF PAYING TAXES INDEX


FRANCE LOOSENS CONDITIONALITY ON
SECOND TRANCHE OF BUDGETARY SUPPORT LOAN
-------------

1. (SBU) On November 20, during French PM Frangois Fillon's visit to
Beirut, France and Lebanon signed an amendment to the Paris III
conditions for disbursement of French budgetary support. Lebanon
has already received a 150 million euro loan for budgetary support
under Paris III. The amendment stipulates that France will now
disburse a second tranche of 125 million euros, previously
conditioned on the complete privatization of mobile telecom
companies, upon the issuance of tender documents for the
privatization.

EPCA II: IMF APPROVES
$37.6 MILLION LOAN FOR LEBANON
----------

2. (U) On November 19, the IMF Board approved a $37.6 million loan
to the GOL under a new Emergency Post Conflict Assistance (EPCA II)
program to encourage the implementation of Lebanon's reform program.
Lebanon received a $76.7 million loan under its first EPCA in 2007.


FINANCE MINISTER SAYS TELECOM PRIVATIZATION
NOT DELAYED; TRA WORRIED ABOUT FATE OF PRIVATIZATION
--------------------

3. (U) Local press reported November 18 on Finance Minister Mohammad
Chatah's repudiation of reports that Prime Minister Siniora had told
cabinet ministers that telecom privatization would not occur for two
years. Although the cabinet decided the GOL should sign a one-year
management contract, renewable for a second year, for Lebanon's
cellular companies, Chatah said the contract will be revocable if
privatization goes through. He stressed that the timing of
privatization will depend primarily on the global economy and market
conditions.

4. (SBU) However, Telecom Regulatory Authority (TRA) Commissioner
Dr. Imad Hoballah told us November 17 the cabinet's decision to
award the one-year renewable management contract was a "big blow to
mobile privatization," akin to putting privatization "on the shelf."
TRA will ask Telecom Minister Gebran Bassil for clarification of
the terms of the management contract. Hoballah also hopes PM
Siniora himself will explain the press reports about cabinet
statements regarding privatization.

STATE PROSECUTOR: NOT ENOUGH IPR CASES
CASES TO JUSTIFY SPECIALIZED COURTS
--------------------

5. (SBU) On November 17, Econoffs met with the State Prosecutor of
the Cassation Court, Said Mirza, to discuss ways to better enforce
intellectual property in Lebanon. Mirza thanked the USG for sending
a large number of judges and prosecutors to U.S. Patent and
Trademark Office IPR trainings. He said that the small number of
IPR cases in Lebanon does not justify having judges dedicated solely
to IPR cases, nor having specialized IPR courts, although he said
some judges should be specialized in IPR. Mirza also said that in
order to increase IPR awareness among judges, instruction on IPR at
the Justice Institute could be widened and made mandatory throughout
the three-year training each judge and prosecutor must complete.


BEIRUT 00001686 002 OF 002


NEW DECREE TO IMPROVE
PHARMACEUTICAL REGISTRATION PROCESS
----------

6. (SBU) On November 17, Econoffs met the Director General of the
Ministry of Public Health (MOPH), Dr. Walid Ammar, for an overview
of existing medical services provided by the MOPH, as well as to
discuss allegations of registration of copycat drugs by the
ministry. Ammar admitted Minister Mohammad Khalifeh (an ally of
Parliament Speaker Berri) sometimes moved certain registration
applications to the front of the line based on political connections
or the political affiliation of the importer. Nonetheless, Ammar
said the process of drug registration will be improved with newly
signed Decree No. 571, which contains requirements on the treatment
of undisclosed information in a registration application. Though
the decree leaves some room for interpretation of what is or is not
undisclosed data, it theoretically would stop drugs with incomplete
data, i.e., copycat drugs relying on publicly available data to file
their applications.

7. (SBU) Ammar complained that pharmaceutical companies force
Lebanon to purchase drugs from more expensive manufacturers in the
EU rather than from the U.S. or other less expensive producing
countries, based on a system of zoning. This has forced the MOPH to
allow parallel imports to lower costs, Ammar said.

CONSUMER PROTECTION DIRECTORATE
HIRES 100 NEW CONTROLLERS
--------------------

8. (U) On November 14, Byblos Bank Weekly Review reported the
cabinet's approval of the expansion of the Consumer Protection
Directorate (CPD) at the Ministry of Economy and Trade (MOET) by
hiring 100 new controllers, joining the 40 already in the unit. CPD
controllers are also sometimes used by the IPR Unit at the MOET to
investigate IPR violations.

TEACHERS HOLD SIT-IN
DEMANDING HIGHER PAY
--------------------

9. (U) Teachers at private and public schools and the Lebanese
University held a one-day strike on November 18 demanding increased
wages, transportation allowances, a revision of the salary scale,
and better reimbursement for medical services. Approximately
100,000 teachers attended the sit-in in front of Parliament, while
representatives of the teachers syndicate met with Minister of
Education Bahia Hariri to present their demands.

LEBANON FALLS IN EASE
OF PAYING TAXES INDEX
--------------------

10. (U) According to the PricewaterhouseCoopers/World Bank 2009
Index of Paying Taxes, Lebanon ranked 45 out of 181 countries
worldwide and ten out of 19 MENA countries in terms of ease of
paying taxes. This constitutes a considerable drop from the 2008
survey, where Lebanon ranked 33 worldwide, and seven among MENA
countries. The 2009 index showed that the corporate tax rate for a
standard Lebanese business represents 12 percent of its commercial
profits, while labor tax rate represents 24.1 percent of a
business's profits.

SISON

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