VZCZCXRO5444
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0609/01 1261351
ZNR UUUUU ZZH
R 051351Z MAY 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 1720
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 02 BEIRUT 000609
SENSITIVE
SIPDIS
STATE FOR NEA/ELA
STATE PASS USTR
TREASURY FOR MNUGENT AND SBLEIWEISS
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR ABRAMS/SINGH/YERGER/DEMOPOLOUS
E.O. 12958: N/A
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: PRESSURE TO RAISE MINIMUM WAGE AND MAY 7 STRIKE;
FINANCE MINISTRY SUCCESSFULLY RE-FINANCES PART OF EUROBOND 2008
MATURITIES (ECONOMIC WEEK IN REVIEW, APRIL 28 - MAY 4, 2008)
CONTENTS
--------
-- INCREASING PRESSURE TO RAISE MINIMUM WAGE
-- FINANCE MINISTRY SUCCESSFULLY ISSUES $882 MILLION IN EUROBONDS
-- GOL WILL SET UP EQUITY FUND TO HELP PRIVATE SECTOR
-- BANKING SECTOR REMAINS PROFITABLE
-- EXPORTS GROW 41 PERCENT IN FIRST Q 2008; U.S. MAJOR IMPORT
PARTNER
-- LEBANON RANKS 9TH OUT OF 168 DEVELOPING ECONOMIES IN REMITTANCES
RECEIVED
-- ANTI-MONEY LAUNDERING CONFERENCES OCTOBER IN THE U.S.
INCREASING PRESSURE TO RAISE MINIMUM WAGE
-------------
1. (U) Sources in the Finance Ministry expect the Lebanese cabinet
on 05/05 to approve an increase in the minimum monthly salary
(currently $200/month) of $100-130, of which part will be
transportation allowance, according to moderate anti-Syrian
An-Nahar. An-Nahar indicated that the GOL will also announce other
measures to alleviate the burden of rising prices. Pro-opposition
General Labor Confederation (GLC) says it will hold a strike on May
7 regardless of the Cabinet decision, in order to maintain the
pressure on the GOL. Various economic sectors (banking, trade,
industries) do not support the strike and the educational sector is
distancing itself from the GLC and has called for a separate strike
on May 14.
2. (SBU) Marwan Khawli, head of the pro-GOL/March 14 National
Salvation Committee, made up of 17 out of the 37 federations under
the GLC, told us his group will not participate in the March 7
demonstration, even if the cabinet does not agree on the salary
increase during the 05/05 session. Khawli believes that
demonstrations will take place only in areas under Hezbollah/Amal
dominance. He noted that opposition Free Patriotic Movement (FPM)
supporters support the demonstration on paper, but he doesn't expect
many FPM members/supporters will be on the ground on May 7. It is
noteworthy that Egypt and Syria have recently approved salary
increases for the public sector of 30 percent and 25 percent
respectively to compensate for rising prices.
FINANCE MINISTRY SUCCESSFULLY
ISSUES $882 MILLION IN EUROBONDS
---------------
3. (U) The Finance Ministry has announced that it has successfully
completed a new six-year Eurobond issue, worth $882 million, of
which $731.612 million is a voluntary debt exchange of May, June and
August 2008 maturities and $150 million is additional borrowing.
This issue aims to secure the Ministry's foreign currency financing
needs for 2008 and reinforce financial market stability.
GOL WILL SET UP EQUITY FUND TO HELP PRIVATE SECTOR
-----------
4. (U) Finance Minister Jihad Azour indicated that the GOL is keen
to support the private sector and increase productivity. Azour
mentioned that the GOL is working on setting up a Venture Capital
Fund, valued at more than $200 million, to help businesses
restructure, develop, and expand operations. Azour was speaking at
the Arab Economic Forum on 05/02.
BANKING SECTOR
REMAINS PROFITABLE
------------------
5. (SBU) Lebanon's banking sector saw a 60 percent increase in
branches and subsidiaries abroad in 2007, Chairman of the banking
Control Commission (BCC) Walid Alameddine told us on April 29, and
assets abroad reached $20 billion by the first quarter of 2008.
This represents 20 percent of the overall profits of the top banks,
and the objective is to increase this share to fifty percent by
2012, President of the Association of Banks Francois Bassil
remarked. Net capital inflows reached $1.5 billion in the first
quarter of 2008, while $600 million were converted into Lebanese
Lira deposit despite the prevailing political and security
situation, Alameddine remarked.
BEIRUT 00000609 002 OF 002
EXPORTS GROW 41 PERCENT IN FIRST Q 2008;
U.S. MAJOR IMPORT PARTNER
---------
6. (U) Figures released by the Higher Council for Customs show that
exports reached $875 million in the first quarter of 2008,
reflecting a 40.9 percent increase compared to the corresponding
period in 2007. This signals that demand for Lebanese products
continue to grow, reflecting the appreciation of the Euro. However,
the appreciation of the Euro has affected the value of imports, as
around 30 percent of Lebanon's imports originate in Europe. Imports
totaled $3.498 billion in the first quarter of 2008, a 29.5 percent
increase compared to the first quarter of 2007. The trade deficit
reached $2.623 billion, an increase of 26.1 percent compared to the
first quarter of 2007. As the growth in exports surpassed the
growth in imports, the export-to-import coverage ratio went up by
two percent, from 23 percent in the first quarter of 2007 to 25
percent in the first quarter of 2008.
7. (U) Switzerland was the main destination of Lebanese exports in
the first quarter of 2008, with $144 million (16.5 percent of total
exports) followed by the UAE with $76 million (8.7 percent), Syria
with $51 million (5.8 percent), and Iraq with $49 million (5.6
percent). As to sources of imports, the U.S ranked first with $489
million (14 percent), by far surpassing Italy --Lebanon's
traditionally largest import partner -- which came second with $316
million (9 percent), France with $297 million (8.5 percent), and
China with $275 million (7.9 percent).
LEBANON RANKS 9TH OUT OF 168
DEVELOPING ECONOMIES IN REMITTANCES RECEIVED
----------------
8. (U) According to the United Nations Conference on Trade and
Development (UNCTAD) report on Development and Globalization: Facts
and Figures 2008, which ranks developing countries according to
remittances received in 2006, Lebanon ranked 9th in terms of
remittances received out of 168 developing economies and second in
terms of remittances received as a percentage of GDP. Lebanon
received $4.924 billion in remittances in 2006, ranking third among
Middle East and North African (MENA) developing economies. Lebanon
recorded $4.018 billion in remittances paid in 2006, ranking 13th
among top 20 remittances paying countries.
ANTI-MONEY LAUNDERING CONFERENCES
OCTOBER IN THE U.S.
--------------
9. (SBU) Secretary of the Special Investigation Commission (SIC)
fighting money laundering and terrorism Mohammad Baasiri told us
that his April 28-30 meetings with USG officials in Washington, D.C.
were successful. He discussed two upcoming events tentatively
scheduled for October in Washington. The first is a seminar for
CEOs of Arab and American banks to be organized by the Treasury on
the margins of the Annual World Bank/IMF meetings. The other is the
U.S.-MENA Private Sector Dialogue (PSD) Conference for banks'
compliance officers, which will be organized around the time of the
Arab Bankers Association Annual conference. These events aim to
strengthen the relationship between Arab and American bankers in
combating money laundering and terrorism finance.
SISON