Cablegate: Lebanon: President's Trip to Iran Yields No New Economic

VZCZCXRO2747
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #1706/01 3360843
ZNR UUUUU ZZH
R 010843Z DEC 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 3707
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 001706

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: PRESIDENT'S TRIP TO IRAN YIELDS NO NEW ECONOMIC
AGREEMENTS (ECONOMIC WEEK IN REVIEW, NOVEMBER 24 - 30, 2008)

CONTENTS
--------

-- NO NEW ECONOMIC AGREEMENTS SIGNED WITH IRAN
-- CABINET APPROVES MEGAPORTS MOU; MEASURES TO IMPROVE MOBILE
NETWORK
-- CENTRAL BANK GOVERNOR: EIGHT PERCENT INFLATION IN 2008
-- GOL FOCUSES ON DAMS
-- MINISTRY OF ECONOMY AND WIPO HOLD IPR SEMINAR
-- U.S. REMAINS LEBANON'S MAIN SOURCE OF IMPORTS
-- LEBANON RANKS FIRST IN ARAB ECONOMIC FREEDOM SURVEY
-- EIU: GDP GROWTH TO REACH 3.1 PERCENT IN 2009

NO NEW ECONOMIC AGREEMENTS
SIGNED WITH IRAN
-------------

1. (SBU) Arab nationalist As-Safir reported November 26 that during
the visit to Iran of President Sleiman November 24-25, Iranian
President Mahmoud Ahmadinejad said a joint Lebanese-Iranian
ministerial commission will soon be set up to reinforce bilateral
relations, revive previous agreements signed, and follow-up on new
agreements. Antoine Constantine, an advisor to Minister of Economy
and Trade Mohammad Safadi who accompanied Lebanese President Sleiman
to Iran, told us the visit resulted in no new economic agreements,
and noted that despite a previous agreement on facilitating
bilateral trade, trade flows between the two countries remain small.

CABINET APPROVES MEGAPORTS MOU;
MEASURES TO IMPROVE MOBILE NETWORK
--------------------

2. (U) In its November 27 session, the Lebanese cabinet approved the
signing of the memorandum of understanding between the U.S. and
Lebanon on the Megaports project. The project covers cooperation to
prevent illicit trafficking in nuclear and other radioactive
material through provision of equipment and training to Lebanese
customs.

3. (U) In addition, the cabinet approved a number of measures to
improve mobile telecom services, including expanding the mobile
network (the first phase of which is expected to be completed by
end-April 2009), reducing the price of calls and of other service
fees, as well as extending the expiry date of pre-prepaid minutes
from one to three months. The cabinet also gave the go ahead for
the Telecom Ministry to issue tenders, starting in February 2009,
for management of the two mobile networks, mandating that there be
no fewer than four bidders per contract.

CENTRAL BANK GOVERNOR: EIGHT
PERCENT INFLATION IN 2008
--------------------

4. (U) On November 20, Central Bank Governor Riad Salameh publicly
said that inflation is expected to be approximately eight percent in
2008, and less than six percent in 2009. GDP is expected to reach
$29 billion in 2008, while real growth is estimated at six percent.
Salameh asserted that Lebanese interest rates and the exchange rate
would remain stable in 2009.

GOL FOCUSES ON WATER MANAGEMENT
-------------------

5. (U) On November 24, Finance Minister Mohammad Chatah and Minister
of Energy and Water Alain Tabourian decided to move forward on the
construction of ten dam projects, at an estimated cost of up to $600
million, according to Blominvest Bank's weekly report. Chatah said
that better water management through dams and reservoirs is a
priority for Lebanon, and the GOL hopes to move ahead quickly with
the projects. Chatah also stressed the importance of tackling
national power utility Electricite du Liban's (EDL) staggering
deficit, which runs at approximately $1.5 billion annually.

MINISTRY OF ECONOMY AND
WIPO HOLD IPR SEMINAR
-------------------

BEIRUT 00001706 002 OF 002

6. (U) The World Intellectual Property Organization (WIPO), in
cooperation with the Ministry of Economy and Trade (MOET), organized
a seminar on Industrial Property and the Madrid System on November
25-26. The seminar featured discussions by WIPO specialists on
topics such as the Madrid Protocol and its benefits, the Singapore
Treaty, and the protection of non-traditional marks. Judge Marlene
El Jurr and MOET IPR specialist Wissam Al Amil (both of whom have
attended USPTO training programs) gave presentations on trademark
enforcement in Lebanon and the role of the IPR Unit at the MOET.

U.S. REMAINS LEBANON'S MAIN
SOURCE OF IMPORTS
--------------------

7. (U) According to USDOC statistics, U.S. exports to Lebanon
increased by 81 percent during the first three quarters of 2008,
reaching $1.08 billion compared to $599 million during the same
period in 2007. According to Lebanese Customs, U.S. exports to
Lebanon ranked first followed by China, France, Italy, and Germany.
Major U.S. exports to Lebanon include mineral fuel (49 percent of
all U.S. exports to Lebanon), automotive products (16 percent), and
machinery (9 percent). Meanwhile, Lebanese exports to the U.S.
increased by 1.63 percent during the first three quarters of 2008,
reaching $79 million, compared to $78 million during the same period
in 2007. Lebanese Customs noted that major Lebanese exports
included prepared foodstuffs (15 percent) and jewelry (5 percent).
(Note: The GOL's purchase of fuel oil from the United States for
electricity production, and the subsequent subsidizing of the
electricity for consumers, is the biggest drag on the Lebanese
national budget. See paragraph 5. End note.)

LEBANON RANKS FIRST IN ARAB
ECONOMIC FREEDOM SURVEY
--------------------

8. (U) In the Canadian Fraser Institute's 2008 Economic Freedom in
the Arab World report, Lebanon and Kuwait tied for the top spot in
terms of economic freedom among 13 ranked Arab countries. The
report evaluates economies based on size of government (at the level
of expenditure, taxes, and enterprises), commercial and economic law
and security of property rights, access to sound money, freedom to
trade internationally, and regulation of credit, labor and
businesses.

EIU: GDP GROWTH TO REACH
3.1 PERCENT IN 2009
--------------------

9. (U) In its most recent report on Lebanon, the Economist
Intelligence Unit (EIU) forecasted GDP growth at 3.1 percent in
2009, down from 4.2 percent estimated for 2008, mostly attributed to
uncertainty associated with the upcoming parliamentary elections and
spillovers from the global economic crisis. Average consumer price
inflation, which the EIU estimates at 12 percent in 2008, is
expected to decline to six percent in 2009.

SISON

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