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French Version

Regie securitization could net $600m - Revenues of state tobacco monopoly up for sale (Daily Star)

The government is expected to generate between $500 million to $600 million from the securitization of the proceeds of the government-owned tobacco monopoly ­ the Regie Libanaise des Tabacs et des Tombacs ­ before the end of October of this year, bankers and economists said Thursday.

International investment bank Morgan Stanley and another firm have been commissioned by the government to prepare for the securitization of the proceeds of the Regie.

The government will discuss the securitization of the Regie in the next Cabinet meeting, on Sept. 4. “The average life of the securitization agreement is 10 years and the yield will be 6.5 percent,” a leading banker told The Daily Star.

He added that 65 percent of the projected revenues of the Regie will be securitized by commercial banks.

The net revenues of the Regie are about $90 million a year. “I think the securitization of the revenues of the Regie will go smoothly because the government wants to send a positive signal to the international market,” economist Marwan Iskander said. He added that major international banks will take part in the securitization of the Regie’s proceeds, and that the money generated will go to a special account at the Central Bank.

If the government and President Emile Lahoud approve the securitization of the Regie’s proceeds, this move will be the first indication that the country has taken serious measures to lower the $32 billion public debt.

The Regie, a government monopoly on the trade of cigarettes and tobacco, is the only organization known to practice barter through deals which involve exchanging Lebanese tobacco leaves in payment for cigarettes from the US.

However, the Regie has an independent status within the government and its practices are not considered to be part of the general trading scene in Lebanon. Established in January 1935, the Regie was based on a decree issued by France, which organized a monopoly in the cultivation, production and trade of tobacco in the Lebanese territories. The Regie also distributes production licenses and purchases produce from the farmers at prices laid down by the Finance Ministry.

Some economists say that Prime Minister Rafik Hariri was hoping to privatize the Regie but the plan was apparently rejected by Lahoud and other prominent politicians.

They added that the government will be considering other options if the bidders for two cellular licenses do not come up with the desired amount.
The telecommunications sector is generating more than $700 million a year for the state. The Telecommunication Ministry took full control of the networks of Cellis and LibanCell last year.

Qordahi said the revenues from the networks have jumped to more than $47 million a month since the government took over the companies. “If the government did not get a fair price from privatization bids the next logical step is to securitize the telecom sector,” one telecommunications expert said.

He added that the government can easily generate $5 billion to $6 billion from the securitization of the cellular networks proceeds over the next 20 years.

However, a close ally of Hariri said the prime minister does not want to implement securitization until all the companies biding for the privatization of the cellular networks put their offers on the table.

Hariri’s government, under tremendous pressure from the international community to reduce the budget deficit, has projected revenues of $5 billion from privatization and securitization of some of the state-owned assets in 2003.

The International Monetary Fund criticized in a report released last month the government’s inability to speed up privatization and economic reforms. The IMF predicted that the budget deficit would reach 35 percent at the end of this year, contradicting the government’s early hopes of a 25 percent deficit.

The IMF warned that even if the government was able to generate $4.5 billion from privatization over the next few years, the public debt in terms of gross domestic product would only fall to 130 percent.

But Makram Sader, the secretary-general of the Association of Banks in Lebanon, said that a 35 percent deficit is still acceptable. “I don’t think a 25 percent deficit was realistic. But any drop in the budget deficit will be well received by the market,” Sader said.

Beirut 25-08-2003
Osama Habib
The Daily Star

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