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Viewing cable 06BEIRUT2526, TFLE01: LEBANESE INDUSTRY HEADS CALL FOR BUSINESS

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Reference ID Created Released Classification Origin
06BEIRUT2526 2006-08-03 14:05 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Beirut
VZCZCXRO9549
PP RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ
DE RUEHLB #2526/01 2151405
ZNR UUUUU ZZH
P 031405Z AUG 06
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 4880
INFO RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
UNCLAS SECTION 01 OF 03 BEIRUT 002526 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
NSC FOR ABRAMS/DORAN/SINGH/HARDING 
 
E.O. 12958: N/A 
TAGS: IS LE MOPS PGOV PREL SY EFIN ECON ETRD EINV
SUBJECT: TFLE01:  LEBANESE INDUSTRY HEADS CALL FOR BUSINESS 
CORRIDORS TO SAVE ECONOMY 
 
SUMMARY 
------- 
 
1. (SBU) Leading Lebanese business and industry associations 
have asked Embassy Beirut for the immediate establishment of 
safe commercial corridors for passage of imports and exports. 
 Lebanese business leaders stressed the need for industry 
leaders to have "a sense that this war will never happen 
again" in order to make the investment to rebuild damaged and 
destroyed industrial infrastructure.  Direct physical damage 
of industrial sites is estimated at USD 150 million, with 
indirect damage resulting from the broken supply-chain 
estimated at 30 million USD per day.  Non-industrial sectors 
have begun to be negatively affected, with agricultural 
concerns being unable to bring in needed supplies and to move 
out produce and other products.  Despite difficulties, 
confidence in the GOL amongst Beirut business leaders remains 
high.  End Summary. 
 
 
LAND CORRIDORS NEEDED TO AVOID 
ECONOMIC COLLAPSE 
------------------------------ 
 
2. (SBU) The Beirut Chamber of Commerce and the Association 
of Lebanese Industrialists have intensified their calls for 
an immediate cease-fire, or failing that, the right of 
passage for goods and materials coming in and out of Lebanon. 
 Chamber officials told the Embassy that there would be a 
concerted effort in the coming days to engage both the 
Lebanese government as well as the international community to 
find means of "keeping the economy going at a bare minimum." 
Albert Nasr, senior economist for the Chamber, characterized 
the current economic situation as "very bad," adding that the 
national and international distribution networks here have 
been largely suspended, with less than one percent of 
Lebanon's pre-conflict import and export capacity remaining 
through overland transport and out of Syria. 
 
3. (SBU) Chamber and Association members asked for any kind 
of secure business corridor to allow traffic in both 
directions, supporting the import of raw materials and export 
of products.  In addition, several members stressed the 
importance of moving personnel via the corridor who need to 
travel abroad to market products and look for more investment 
opportunities. 
 
4. (SBU) According to Embassy sources, food and consumer 
goods importers are becoming increasingly worried about 
dwindling stocks.  Import/export representatives estimate 
that Lebanon relies on imports to satisfy approximately 90 
percent of its consumer product demands.  Replenishment of 
supplies will be impossible without the establishment of 
commercial shipping corridors.  Several industry groups have 
set up working groups to study possibilities of setting up 
single-port corridors originating from and returning to a 
Mediterranean port, either in Turkey or Cyprus.  In addition, 
businesses are seeking USG support to secure safe passage of 
goods waiting to enter Lebanon from the Masnaa border 
crossing with Syria or the safe transfer of stocks warehoused 
in "dangerous areas."  Entry of these existing goods into the 
market would ease pressure on the local markets, according to 
several major Lebanese importers. 
 
 
SUPPORT BEYOND CORRIDORS: 
SOFT LOANS, USAID, AND OIL 
-------------------------- 
 
5. (SBU) There is a general sense of disappointment and 
disbelief in recent events amongst the members of the 
Chamber.  Noting their own personal and professional 
obligations to the Lebanese economy, Chamber Vice-president 
Wajih Bizri called on the U.S. and other "friendly nations" 
to give Lebanon the economic support it needs to rebuild. 
Bizri added that Lebanese business leader need two things in 
order to rebuild:  first, the belief that this would be the 
"final time" a regional security issue would disrupt their 
business in this magnitude (i.e., a final, lasting solution 
between Hizballah and Israel); and second, GOL support to 
those business damaged, through tax breaks, soft loans, and 
other incentives. 
 
6. (SBU) Several Chamber members requested that USAID support 
for Lebanese industry become as active as in Jordan and 
Egypt.  Bizri offered that the current situation presents the 
U.S. a unique opportunity to help Lebanese industry and 
 
BEIRUT 00002526  002 OF 003 
 
 
advance the U.S. vision for Lebanon.  Chamber board member 
Salah Ossiran suggested that the USG use its influence with 
oil-producing countries to arrange for a 50 percent reduction 
in oil prices for Lebanon, implying the USG had previously 
made such arrangements for Jordan during the first Gulf War. 
The cutting of energy costs at this critical juncture, opined 
Ossiran, would have a tremendous positive psychological 
effect.  Ossiran added, "don't worry about rebuilding the 
bridges.  Iran will take care of that." 
 
7. (SBU) Damage sustained by Lebanon's 20 largest industries 
has led to over 10,000 Lebanese workers losing their jobs 
since the beginning of hostilities, according to the 
Association of Lebanese Industrialists.  30 to 40 percent of 
active industry has been damaged, according to the 
Association, with direct physical damage estimated at USD 150 
million.  Indirect damage caused by production stoppages has 
led to estimated losses of approximately USD 30 million per 
day. The Association estimates that "hundreds" of small 
companies in the south of Lebanon and Beirut's southern 
suburbs have closed.  Large multinational companies - such as 
Microsoft, Cisco Systems, Oracle, GE and Procter & Gamble - 
have either relocated their regional offices outside of 
Lebanon or have minimized operations.  The President of the 
Association of Lebanese Industrialists offered, "we will need 
a kind of Marshall Plan in order to rebuild Lebanon's 
industry." 
 
 
AGRICULTURE IN BIQA' VALLEY 
UNABLE TO PICK, DELIVER PRODUCE 
------------------------------- 
 
8. (SBU) The Biqa' Chamber of Commerce describes the economic 
situation in the Biqa' Valley as "paralyzed."  The Biqa' is 
Lebanon's major agricultural production region.  With the 
agriculture sector in its peak season, lack of safe transport 
for supplies and product has adversely affected farmers' 
capacity to harvest and deliver their produce.  According to 
Ibrahim Tarchichi, the president of the Union of Farmers in 
the Biqa', there is a current labor shortage as many third 
country national (TCN) farm hands have fled.  Tarchichi 
characterizes the current situation as "a total crisis for 
Lebanese agriculture."  Vegetables and fruits are either in 
the fields or in warehouses, according to Tony Thome, the 
vice-president of the Vegetable and Fruit Traders 
Association.  Agriculture traders may neither export nor 
transport goods to other locations in Lebanon, due to 
security risks and the disruption of the transportation 
network. 
 
9. (SBU) The Lebanese poultry industry has begun to feel the 
effects of the lack of secure transport from the Beirut port 
to agricultural areas inland.  Biqa' Valley MP Ily Skaff 
contacted the Embassy on behalf of the Syndicate of Poultry 
Farmers, saying that there is a shortage of poultry feed in 
the Biqa'.  He added that there are large quantities at the 
Beirut port, but truck owners are scared to drive all the way 
from Beirut to the Biqa'.  Skaff requested Embassy support to 
secure an inland corridor to prevent immediate catastrophic 
losses in the poultry sector. 
 
CONFIDENCE IN SINIORA REMAINS HIGH 
---------------------------------- 
 
10. (SBU) When asked about business' relations with the 
Siniora government during the crisis, the board members of 
the Chamber all agreed that they have the utmost confidence 
in the Prime Miniser.  As one Chamber officer put it, "we 
feel we are part of this government."  Bizri explained that 
they were not seeking any sort of financial support from the 
GOL, adding "Siniora wouldn't even give money to his son 
right now."  Rather, GOL assurances of other incentives, such 
as soft loans and tax incentives during the rebuilding 
process, would be seen as sufficient government support for 
industry.  Chamber Board member Fadi Saab shared that the 
PM's office had asked businesses to sustain their payroll 
until the end of August.  For the large part, business owners 
have agreed to the PM's request.  However there is growing 
concern that if no means of increasing cash flow arise soon, 
most companies would not be able to sustain their payrolls 
for a second month. 
 
11.  (U) Comment:  The Lebanese business leaders in contact 
with Embassy Beirut share many of the same complaints and 
concerns, namely the re-establishment of the supply-chain. 
While frustration with perceived USG "complicity" in Israel's 
 
BEIRUT 00002526  003 OF 003 
 
 
military action is high, Chamber and Association members 
continue to be clearly motivated by maximizing return on 
their investments.  With many business owners unwilling to 
take financial losses to keep their businesses and employees 
afloat, finding a solution to the endemic supply-chain and 
cash-flow problems in Lebanon is all the more critical to 
staving off a wider economic crisis.  End comment. 
FELTMAN