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Cablegate: Lebanon: Minimum Wage Controversy Among Issues Forcing

VZCZCXRO7767
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1321/01 2521600
ZNR UUUUU ZZH
R 081600Z SEP 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WSHDC 2975
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 001321

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: MINIMUM WAGE CONTROVERSY AMONG ISSUES FORCING
CABINET TO CANCEL ITS SESSION (ECONOMIC WEEK IN REVIEW, SEPTEMBER 1
- 7, 2008)

CONTENTS
--------

-- MINIMUM WAGE CONTINUES TO STIR CONTROVERY, LABOR CONFEDERATION
THREATS "EMPTY"
-- FINANCE MINISTER ESTIMATES FIVE PERCENT GROWTH IN 2008;
TIMETABLE FOR FINANCIAL REFORMS TO BE SET SOON
-- CONTRIBUTION OF COPYRIGHT-BASED INDUSTRIES TO THE ECONOMY AROUND
4.75 PERCENT
-- PARLIAMENT ESTABLISHES PUBLIC DEBT MANAGEMENT OFFICE AT THE
MINISTRY OF FINANCE
-- LEBANON SIGNS MOU WITH THE UN INDUSTRIAL DEVELOPMENT
ORGANIZATION
-- GOLDMAN SACHS: LEBANON FALLS IN 2007 GROWTH ENVIRONMENT SCORES


MINIMUM WAGE CONTINUES TO STIR CONTROVERY,
LABOR CONFEDERATION THREATS "EMPTY"
--------------------

1. (SBU) The cabinet cancelled is September 4 session due to lack of
consensus on minimum wage increases. The next cabinet session is
scheduled for September 9, and though the minimum wage is not on the
formal agenda, contacts tell us it may still be discussed. So far,
disagreement among cabinet members has centered on the amount of an
increase, as well as on whether the GOL will insist on a private
sector increase in addition to the public sector one. Although the
previous cabinet decided to raise the minimum wage from $200 to $333
in May 2008, it did not issue the necessary decree (for private
sector increases) and draft law (for public sector increases) to
implement the increase.

2. (SBU) Head of the General Labor Confederation (GLC) Ghassan Ghosn
-- an opposition supporter -- has been threatening to take to the
streets if the GOL does not increase the minimum wage to $640. A
long time GLC staffer told us on September 3, however, that his
threats are empty. When asked what would trigger the GLC to take to
the streets, she said that it would not be anything related to labor
demands, but "political conditions." (Note: The GLC's May
demonstration to increase the minimum wage was used as a pretext for
pro-opposition forces to take to the streets, resulting in the May
2008 clashes. End note.)

FINANCE MINISTER ESTIMATES FIVE PERCENT GROWTH IN 2008;
TIMETABLE FOR FINANCIAL REFORMS TO BE SET SOON
--------------------

3. (U) In an interview with French-language daily L'Orient le Jour
on September 4, Minister of Finance Mohammad Chatah estimated
economic growth would reach around five percent in 2008, noting that
Lebanon had the potential for eight to nine percent growth per year.
Chatah said that the public deficit would increase in the coming
months because of transfers to national power utility Electricity du
Liban (EDL), an expected rise in world interest rates, and the
upcoming rise in the minimum wage. Although he recognized the
importance of increasing the minimum wage, as decided by the
previous cabinet in May 2008, Chatah estimated that a $133 increase
in the minimum wage in the public sector would cost the GOL around
$533 million per year.

4. (U) The timetable for financial reforms in 2008 -- including
raising the value-added tax and tax on interest on deposits as
agreed during the Paris III conference -- has been delayed due to
the political and security situation in recent years, Chatah said,
but dates for implementation will be determined soon.

COPYRIGHT-BASED INDUSTRIES CONTRIBUTE
AROUND 4.75 PERCENT OF GDP IN 2005
--------------------

5. (U) On September 5, the Ministry of Culture (MOC) presented a
study on the economic contributions of copyright-based industries in
Lebanon, done in collaboration with the World Intellectual Property
Organization (WIPO) and Lebanese consultant Roger Melki. According
to the study's findings, the contribution of copyright-based
industries to the Lebanese economy in 2005 (the most recent year for
which data is available) reached 4.75 percent of GDP, while these
industries accounted for 4.49 percent of total employment, or around
50,000 workers. The study identified a clear competitive edge in

BEIRUT 00001321 002 OF 002


the Lebanese the publishing industry, and WIPO expressed its
willingness to follow-up with further studies on the sector, to
establish capacity building activities and to improve data
collection practices.

6. (SBU) Meanwhile, DG of the MOC Dr. Omar Halablab told us that
work on amending the law on the Protection of Literary and Artistic
Property, in cooperation with the World Intellectual Property
Organization (WIPO), is well underway. Halablab expected the draft
to be sent to Parliament at the end of September, following the
expected passage of a new electoral law.

PARLIAMENT ESTABLISHES PUBLIC DEBT MANAGEMENT OFFICE
AT THE MINISTRY OF FINANCE
--------------------

7. (U) On August 26, parliament ratified a law establishing a
specialized directorate at the Ministry of Finance (MOF) to manage
public debt, with an aim to centralizing debt management and
consolidating all debt-related functions. The office will be in
charge of market activity, issuing, buying and swapping debt
instruments, as well as reimbursing interest. The law also mandates
the creation of a supervisory board chaired by the Minister of
Finance, joined by the MOF's director general, directors of budget
and treasury, and a representative of the Central Bank of Lebanon.
This new law is part of the GOL's pledge for financial sector reform
as part of Paris III.

LEBANON SIGNS MOU WITH THE UN
INDUSTRIAL DEVELOPMENT ORGANIZATION
--------------------

8. (U) During the visit of UN Industrial Development Organization
(UNIDO) Director General Dr. Kandeh Yumkella to Beirut on August 23,
the Ministry of Industry (MOI) signed an MOU with UNIDO defining the
practical framework of the organization's activities in Lebanon.
UNIDO will assist the MOI in implementing its strategy to enhance
Lebanon's industrial sector, including encouraging private and
public sector collaboration, supporting agro-industries in
collaboration with the Ministry of Agriculture, support the Lebanese
Cleaner Production Center (LCPC) to encourage
environmentally-friendly industries, and continuing supporting small
and medium size enterprises.

GOLDMAN SACHS: LEBANON FALLS IN 2007
GROWTH ENVIRONMENT SCORES
--------------------

9. (U) Investment bank Goldman Sachs ranked Lebanon 118 out of 181
countries worldwide on its Growth Environment Scores (GES) index for
2007, down from 116 in the 2006 index. Lebanon also ranked 15 out
of 20 MENA countries, unchanged from the 2006 index. Goldman Sachs
noted that Lebanon was one of 14 developing countries that witnessed
deterioration in growth conditions over the past ten years. The GES
is a composite measure of economic growth conditions, based on 13
indicators grouped in five broad categories: macroeconomic
stability, macroeconomic conditions, human capital, technological
capabilities, and political conditions.

SISON

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