Cablegate: Increased Bank Deposits: Blessing or Curse? (Economic Week
DE RUEHLB #1107/01 2810755
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R 080755Z OCT 09
FM AMEMBASSY BEIRUT
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INFO RUEHEE/ARAB LEAGUE COLLECIVE
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UNCLAS SECTION 01 OF 02 BEIRUT 001107
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TAGS: ECON ECPS EFIN EIND PGOV LE
SUBJECT: INCREASED BANK DEPOSITS: BLESSING OR CURSE? (ECONOMIC WEEK
IN REVIEW, SEPTEMBER 28 - OCTOBER 4, 2009)
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-- INCREASED BANK DEPOSITS: BLESSSING OR CURSE?
-- FIRST RIGHT TO KNOW DAY IN LEBANON
-- AGRO EXPORTS EXCEED 200,000 TONS IN FIRST HALF OF 2009
-- LEBANON IMPROVES IN INDUSTRIAL COMPETITIVENESS INDEX,
INDUSTRIALISTS COMPLAIN ABOUT SUBSIDIZED COMPETITION
INCREASED BANK DEPOSITS:
BLESSING OR CURSE?
1. (U) As Lebanon reports a $14 billion increase in bank deposits in
the first eight months of 2009, prominent local economists have
publicly characterized increased deposits as a double-edged sword
for local banks. Head of Research at Byblos Bank Nassib Ghobril
noted that since depositors continue to convert dollar deposits to
Lebanese pounds to benefit from higher pound interest rates, bank
profits will likely take a hit in 2009. As banks are already highly
exposed to sovereign risk through their government debt holdings,
finding new investment tools (mainly in the Gulf) to cover deposit
costs may be more difficult in the light of the effects of the
global crisis in that region, Ghobril said.
2. (SBU) Meanwhile, general manager of Al Mawarid Bank Marwan
Kheireddine told us September 29 that the Lebanese banking sector is
very conservative in its lending policies. The bulk of loans are
extended to major businesses and corporations, as opposed to SMEs,
startups, and the industrial and agricultural sectors. Kheireddine
noted that the slow judicial process in settling client default
cases discourages banks from expanding their lending base.
FIRST RIGHT TO KNOW DAY
3. (U) On September 29, International Right to Know Day was
celebrated for the first time in Lebanon, under the auspices of the
National Network for the Right of Access to Information. The
network, established in April 2008, includes Lebanese
Parliamentarians against Corruption (LebPAC), the Lebanese
Transparency Association (LTA), ministries, and NGOs, in
collaboration with the American Bar Association's Rule of Law
Initiative in Lebanon. The network helped draft the access to
information draft law introduced to parliament in April 2009 and is
currently working on a draft law for whistleblower protection.
4. (U) During the press conference, Minister of State for
Administrative Reform Ibrahim Shamseddine expressed disappointment
at the small number of MPs in attendance. Minister of Interior Ziad
Baroud noted the lack of a cabinet since the June parliamentary
elections is not an excuse to stop working on increasing
transparency through greater citizen access to information as a
means of fighting corruption. According to Transparency
International's 2008 Corruption Perception Index, Lebanon ranked 102
out of 180 countries, down from 99 in 2007, and 11 out of 20 MENA
countries, in terms of perception of corruption.
AGRO EXPORTS EXCEED 200,000 TONS
IN FIRST HALF OF 2009
5. (U) The Investment Development Authority of Lebanon (IDAL)
announced it would pay 30% of dues and obligations to farmers
exporting their agricultural products under the Export Plus program
for 2008. IDAL has paid farmers a total of 60% of dues to date.
IDAL noted agricultural exports for the first half of 2009 reached
203,000 tons, 41% of which were oranges, followed by bananas (15%)
and apples (14%). 31% of the exports under the Export Plus program
went to Syria, while Saudi Arabia received 17% and the UAE 8%.
Launched in 2001, Export Plus seeks to increase exports by
subsidizing the transport of certain agricultural goods and
overseeing quality and compliance with international standards.
Subsidies have been decreased gradually since 2006 and are expected
to be completely phased out by 2011.
LEBANON IMPROVES IN INDUSTRIAL
6. (U) Lebanon ranked 61 out of 122 countries worldwide in the
latest UN Industrial Development Organization's (UNIDO) Competitive
Industrial Performance Index, up from 71 in the 2004 index. Within
the MENA region, Lebanon ranked 6 out of 14, up from 7 in the
previous survey. The index measures the ability of countries to
BEIRUT 00001107 002.2 OF 002
produce and export manufactured goods competitively.
7. (U) Meanwhile, the vice president of the Association of Lebanese
Industrialists (ALI) publicly noted the GOL was not doing enough to
support Lebanese industries, which are struggling with competition
from neighboring countries that subsidize the main factors of
production, such as energy and land. Lebanon's largest ceramic
tilemaker, Uniceramic, unable to compete with imported products
whose manufacturing costs were 73% less, declared bankruptcy last
week following years of gradually scaling down production and
reducing staff, according to press reports.