VZCZCXRO1001
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0356/01 0700525
ZNR UUUUU ZZH
R 100525Z MAR 08 ZDK DUE TO NUMEROUS REQUESTS
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE ASHDC 1248
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
UCNMEM/EU MEMBER STATES
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 02 BEIRUT 000356
SIPDIS
SENSITIVE
SIPDIS
STATE FOR NEA/ELA
STATE PASS USTR
TREASURY FOR MNUGENT AND SBLEIWEISS
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR ABRAMS/SINGH/GAVITO
E.O. 12958: N/A
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: SWAP OF MATURING EUROBONDS AND FRENCH SOFT LOAN
EASE PRESSURE ON STATE FINANCES (ECONOMIC WEEK IN REVIEW, MARCH 3 -
9, 2008)
BEIRUT 00000356 001.2 OF 002
CONTENTS
--------
-- CREDIT SUISSE AND AUDI BANK TO MANAGE EUROBOND ISSUE
-- LEBANON RECEIVES $220 MILLION SOFT LOAN FROM FRANCE
-- PIRACY RELATED LOSSES ESTIMATED AT OVER $26 MILLION IN 2007
-- CONSUMER PRICES CONTINUE TO RISE IN 2008
-- INDUSTRIALISTS TO SUE THE GOL FOR LACK OF PROTECTION
-- AGRICULTURAL AND INDUSTRIAL EXPORTS RISE BY 23 PERCENT IN 2007
-- FORMER MINISTER ESTIMATES ECONOMY'S GROWTH POTENTIAL AT OVER
SEVEN PERCENT
-- REAL ESTATE TRANSACTIONS REACH OVER $4 BILIION IN 2007
-- MASTERINDEX INDICATES SHARP DECLINE IN LEBANESE CONSUMER
CONFIDENCE
CREDIT SUISSE AND AUDI BANK TO
MANAGE UPCOMING EUROBOND ISSUE
--------------------
1. (SBU) The Ministry of Finance (MOF) on March 6 contracted with
international financial institution Credit Suisse and local Audi
Bank as lead managers in a new five-year Eurobond to refinance March
12 maturities amounting to $869 million, a senior MOF source told
us. The coupon is estimated to range between 9.125 percent and 9.5
percent, relatively high compared to international rates but close
to the rates for Lebanese papers in the secondary market.
LEBANON RECEIVES $220 MILLION
SOFT LOAN FROM FRANCE
--------------------
2. (SBU) Lebanon received last week a $220 million soft loan from
the Agence Francaise de Developpement (AFD - French USAID
counterpart), a senior source at the Finance Ministry told us on
March 4. This amount was disbursed after Lebanon's Finance Minister
Azour signed a Euro 375 million loan agreement for debt reduction on
February 21, 2008, in Paris. This agreement is part of France's
pledge at the Paris III Donors' conference.
PIRACY RELATED LOSSES ESTIMATED
AT OVER $26 MILLION IN 2007
--------------------
3. (U) The International Intellectual Property Alliance (IIPA)
estimated preliminary 2007 piracy-related losses in Lebanon at $26.8
million, up from $25.6 million in 2006, and accounting for 3.6
percent of all such losses in the MENA region. The IIPA recognized
that some progress had been made in combating piracy, given the
political and security situation in the country, mainly by the
special police Cyber Crime and Intellectual Property Bureau,
Customs, and the Ministry of Economy and Trade (MOET) inspectors.
The IIPA believes more work needs to be done in terms of enforcing
existing anti-piracy laws and improving the efficiency of the
judiciary, and by imposing sentences for offenders which are more of
a deterrent.
CONSUMER PRICES CONTINUE
TO RISE IN 2008
--------------------
4. (U) According to reputed private consultancy firm Consultation
and Research Institute (CRI), the Consumer Price Index (CPI) rose by
3.5 percent in January 2008 compared to December 2007. This
increase was mostly due to a 7.7 percent increase in prices of
personal care and other products and 7.46 percent increase in prices
of food and beverages. The food sub-index showed an increase of
45.74 percent and 19.8 percent in prices of vegetables and
fish/seafood respectively. Housing prices went up by 4.22 percent.
On a yearly basis, the CPI increased by 5.7 percent between January
2007 and January 2008.
5. (SBU) The Central Administration of Statistics (CAS) will start
issuing a monthly CPI under IMF technical assistance in two weeks, a
CAS source told us, refusing to disclose their January CPI at this
moment. CAS used to issue a quarterly CPI. CAS estimated inflation
at 9.3 percent in 2007.
INDUSTRIALISTS TO SUE THE
GOL FOR LACK OF PROTECTION
--------------------
BEIRUT 00000356 002.2 OF 002
6. (U) On March 3, the Association of Lebanese Industrialists (ALI)
announced that it would sue the GOL for failing to protect local
industries against unfair competition. ALI argues that local
industries, especially those that are energy-intensive, cannot
compete with imports from Arab states that subsidize the cost of
energy for their local production, and with which Lebanon has signed
free trade agreements. In a letter addressed to all Arab
governments, ALI suggested countries either cut subsidies, allow
Lebanon to impose duties on Arab imports, create a special fund to
subsidize energy costs for non-oil producing countries, or give
compensation to industries enabling them to open elsewhere.
AGRICUTLURAL AND INDUSTRIAL EXPORTS
RISE BY 23 PERCENT IN 2007
--------------------
7. (U) According to the Investment and Development Authority of
Lebanon (IDAL)'s annual report, 2007 economic growth reached between
1.7 - 2 percent. Export of agricultural and industrial products
rose by around 23 percent in 2007. Activity in Beirut's
international airport as well as in the Port of Beirut rose by 20
percent and 59 percent respectively compared to 2006. The report
also noted a significant rise in real estate transactions, valued at
around $4 billion, and the continued expansion of Lebanese banks
abroad.
FORMER MINISTER ESTIMATES ECONOMY'S
GROWTH POTENTIAL AT OVER SEVEN PERCENT
--------------------
8. (U) Former Economy and Trade Minister Adnan Kassar said on March
6, that had it not been for the deteriorating political situation,
economic growth in Lebanon could have been over seven percent per
year since 2005, compared to actual growth rates of zero percent in
2006 and around 2.5 percent in 2007. Kassar estimated losses in GDP
of around $3 billion, $5 billion in Foreign Direct Income, and $2.2
billion in the tourism sector in the past three years.
REAL ESTATE TRANSACTIONS REACH
OVER $4 BILIION IN 2007
--------------------
9. (U) In a March 7 interview with the Daily Star newspaper, general
manager of real-estate firm Coldwell Banker, Elie Harb said that
property sales reached $4.2 billion in 2007, compared to a little
over $3 billion in 2006. According to Harb, 2007 was the best year
for property sales and transactions since 2001. Meanwhile, leading
Lebanese bank, Audi Bank's research department attributed the rise
in real estate transactions to an increase in population, higher
demand by expatriate Lebanese, relatively low taxes, improvement in
property transfer operations, and ease of foreign ownership.
MASTERINDEX INDICATES SHARP DECLINE
IN LEBANESE CONSUMER CONFIDENCE
--------------------
10. (U) MasterCard's biannual MasterIndex consumer confidence index
survey for the second half of 2007 recorded a 38.6 out of 100 score
for Lebanon, a sharp decline from 67.6 in the first half of the
year. This indicates overall pessimism on all five indices used by
the survey: measuring consumer expectations on the stock market --
with the highest drop compared to the second half of 2006 - followed
by quality of life, employment, economy, and regular income (the
only index whose score was in the optimistic zone). Forecasts for
the first half of 2008 indicate a continuation of the overall
pessimism, with some expected improvement in the quality of life,
stock market, and employment indices.
SISON