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French Version

Faith in Lebanon remains despite crisis

International investors have renewed confidence in country

Lebanon's economy has been hard hit by two months of political crisis, but optimism remains high and international investors have renewed confidence in the country.

Leading global confidence, U.S. President George W. Bush vowed "plenty of help" to put the Lebanese economy "back on its feet" after a Syrian military pullout due to be completed by the end of the month.

Bush said the U.S. and European finance ministers hoped to work with international organizations like the World Bank and the International Monetary Fund to help Lebanon.

Lebanon was plunged into a political crisis after the February 14 assassination of former Prime Minister Rafik Hariri, leading to huge protests, bringing down the pro-Syrian government and forcing Damascus to pull out.

New Prime Minister Najib Mikati is a wealthy businessman who, like Hariri, will seek to inspire confidence in Lebanon's free-market economy. Also like Hariri, Mikati has come to power at a relatively young age, 49.

At a meeting on Monday with the head of Lebanon's Industrialists Association, Fadi Abboud, France's Ambassador to Lebanon Bernard Emie said his country "wants to be more involved in Lebanon's economy."

Abboud said economic activity had slowed down considerably since Hariri's killing, in a country which already had unemployment rate of 20 percent and a national debt of $34 billion, or 184 percent of GDP.

"Industrial sector activity, concerning consumer goods, has decreased by between 20 and 30 percent in the last two months, Abboud told Future television on Wednesday.

"Our turnover has decreased by 10 to 15 percent because of the crisis," Charles Ghostine, managing director of the Ksara vineyards in the eastern Bekaa Valley, told AFP.

Activity in the construction sector has also decreased after thousands of Syrian workers fled in the wake of Hariri's killing, which many Lebanese blamed on the pro-Syrian Lebanese regime and their political masters in Damascus.

Syrian workers provided the main bulk of cheap labor in Lebanon, particularly for the construction and agriculture sectors.

The tourism sector has also suffered since the massive blast that killed Hariri also wrecked a section of Beirut's seafront, including prestigious hotels favored by Western and Arab visitors.

"But we are now more optimistic," said Liliane Nakkhal, owner of a leading travel agency, saying that activity has picked up since Mikati's nomination.

Economist Marwan Iskandar saw as positive the fact that foreign visitors to Lebanon were only 16 percent down from last year in March.

Iskandar told the An-Nahar newspaper that investor confidence remained untouched, with new Saudi and Emirati projects recently launched in Lebanon.

The country's financial situation was also under control, with no flights of Lebanese and foreign capitals.

"Bank deposits decreased by only 1.8 percent between February 10 and April 7," said Makram Sader, head of the Lebanese Banks Association.

Total bank deposits are estimated at more than 55 billion dollars, or three times the country's GDP.

On Tuesday, Lebanon's Central Bank announced that it had raised $1.67 billion through an issue of 10-year certificates of deposit (CDs) despite the country's political crisis.

"The objective of the issue is to consolidate the Central Bank's foreign currency reserves in order to boost confidence, strengthen capital markets and attract funds to Lebanon," said a Central Bank statement.

Banking sources said foreign-currency reserves have fallen from $11 billion to $9.5 billion since Hariri's assassination.

Sader said "the new government is responsible for opening up the political horizon with less costly actions" to tame the economic and monetary problem.

Managing the crisis "only occurred at a very high cost, given the recent interest-rate hike which threatens to prevent economic revival," warned Sader.

"The new government is responsible for opening up the political horizon with less-costly measures" to tame the economic and monetary problem, he said.

Beirut,04 25 2005
The Daily Star
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