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Cablegate: Lebanon: Central Bank Governor Says Lebanon Still Needs

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RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHDH RUEHIK RUEHKUK RUEHLZ RUEHROV
RUEHSL RUEHSR
DE RUEHLB #0957/01 2380624
ZNR UUUUU ZZH
R 260624Z AUG 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 5607
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 000957

SIPDIS

SENSITIVE

STATE FOR NEA/ELA AND EEB/IFD/ODF
STATE PASS USTR FRANCESCKI
STATE PASS USAID LAUDATO/NANDY/SCOTT
TREASURY FOR PARODI/BLEIWEISS/AHERN
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR SHAPIRO/MCDERMOTT

E.O. 12958: N/A
TAGS: ECON EFIN EINT KFLU PGOV SOCI LE
SUBJECT: LEBANON: CENTRAL BANK GOVERNOR SAYS LEBANON STILL NEEDS

REFORM (ECONOMIC WEEK IN REVIEW, AUGUST 17 - 23, 2009)

REF: BEIRUT 920

CONTENTS
--------

-- CENTRAL BANK GOVERNOR: DESPITE BOOMING ECONOMY, LEBANON STILL
NEEDS REFORM
-- PRIVATE SECTOR INITIATIVE TO SUPPORT YOUNG ENTREPRENEURS
-- SWINE FLU CASES REACH 500
-- INTERNET AND MOBILE PENETRATION RISE IN 2008
-- LEBANON'S PER CAPITA INCOME AT $6,350 IN 2008


CENTRAL BANK GOVERNOR: DESPITE BOOMING
ECONOMY, LEBANON STILL NEEDS REFORM
--------------------------------------

1. (SBU) The Lebanese economy is booming, with tourists pouring in,
hotel occupancy rates high, bank deposits rising, and growth set to
beat all forecasts. Nonetheless, Central Bank of Lebanon (CBL)
Governor Riad Salameh told the Ambassador August 14 that Prime
Minister-designate Saad Hariri needs to form a government that can
take on the fundamental economic problems facing the country,
including electricity provision, water management, telecom
privatization, and environmental protection (reftel). Salameh
described the efforts the CBL had undertaken to promote growth and
development, but said the new government should take advantage of
record capital inflows to finance infrastructure development that
would increase job creation and promote growth. He believed turning
over state assets to Lebanon's resilient private sector would
benefit Lebanon, but said political buy-in is crucial, though
difficult, because of the political class's dependence on the
patronage state-owned institutions provide it. He asked that the
United States be patient with Lebanon in its demands for increased
budget transparency.

PRIVATE SECTOR INITIATIVE
TO SUPPORT YOUNG ENTREPRENEURS
------------------------------

3. (SBU) On August 19, Antoine Abou Samra, Managing Director of
local NGO Bader, told EconOff and Econstaff that Bader will soon
present workshops in under-privileged Lebanese areas (such as in
Tripoli, the south, and the Bekaa) to educate young entrepreneurs on
writing business proposals, using $44,560 from the Embassy small
grants program. Bader will work with local partners such as social
institutions and NGOs to recruit participants.

4. (SBU) Bader (Arabic for "take the initiative") was formed in 2006
by a group of successful Lebanese businessmen to provide technical
and financial support to young entrepreneurs for start-ups and SMEs
that have potential for regional or international reach. Abou Samra
said Bader is now in the implementation phase of several
initiatives, including developing a "faith loan" program to lend at
zero-percent interest, starting a Lebanese Business Angels program
to encourage equity participation from investors in start-ups and
small enterprises, increasing scholarships for higher education,
embarking on a sustainable mentorship program, and strengthening
ties between Bader members and the Lebanese diaspora.

SWINE FLU CASES
REACH 500
--------------

5. (U) According to the Ministry of Public Health (MOPH), the number
of swine flu cases reached 500, up from 105 in mid-July. Most
patients were youth and children, the statement said. On July 31,
the MOPH confirmed Lebanon's first death attributed to swine flu, a
cancer patient in a Beirut hospital. Minister of Health Mohammad
Khalifeh noted that the MOPH will purchase vaccines for swine flu,
which will be available in 2-3 weeks in government hospitals across
the country at subsidized prices.

INTERNET AND MOBILE
PENETRATION RISE IN 2008
------------------------

6. (U) According to the International Telecommunications Union
(ITU), Lebanon ranked 63 out of 207 countries worldwide and third

BEIRUT 00000957 002 OF 002


out of 20 MENA countries in 2008, up from 75 worldwide and seventh
regionally in 2007, in terms of internet penetration. Lebanon's
internet penetration was at 37.7%, up by 10.9% from 2007, and higher
than the MENA average of 23.9%. The aggregate number of internet
users rose by 65.3% to over 1.5 million in 2008. The ITU also noted
a 16% surge in mobile phone penetration, which came at the expense
of fixed lines, mainly attributed to the reduction in mobile fees
implemented at the beginning of the year by Minister of Telecom
Gebran Bassil. Despite increased internet penetration and reduced
mobile fees, the quality of both services remains behind
international standards.

LEBANON'S PER CAPITA
INCOME AT $6,350 IN 2008
------------------------

7. (U) The World Bank's (WB) annual survey on gross national income
(GNI) per capita ranked Lebanon 94 out of 210 countries worldwide,
and sixth out of 13 MENA countries, in terms of GNI per capita at
purchasing power parity (PPP) in 2008. Lebanon's GNI per capita at
PPP was estimated at $10,880, below the MENA average of $14,389.
Meanwhile, Lebanon ranked 89 worldwide and seventh within MENA
countries in terms of GNI per capita (non-PPP) in 2008. Lebanon's
GNI per capita was estimated at $6,350, roughly half the MENA
average of $12,643.

SISON

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