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French Version

Lebanon expects loans to exceed $4.4 billion

Economy minister favors full privatization of telecom sector.

Economy Minister Sami Haddad said he expects the donor states meeting in Beirut in December 2005 to pledge more soft loans for Lebanon than at the Paris II conference. He also said that he favors the full privatization of the telecom sector and other stateowned assets. "I hope and even expect a pledge that exceeds the $4.4 billion committed to Lebanon at the Paris II conference," Haddad told The Daily Star.

Former Prime Minister Rafik Hariri, who was assassinated in February, managed to persuade France, Saudi Arabia, the U.A.E. and other countries to pledge $4.4 billion in soft loans in November 2002 to help reduce debt servicing. The government receiv-ed $2.5 billion from the actual pledge. "What Hariri did in Paris was amazing. The donor states gave have us $2.5 billion without questions or conditions," Haddad said.

The minister said it was regrettable that Lebanon was not able to seize the opportunity after Paris II. "We failed for political reasons to implement the needed reforms at that time."

Haddad added that the interest rates on soft loans will be at the same levels as those of Paris II if not less.
"We will probably get some of the pledged money from the donor states upfront and the rest in stages. These soft loans will allow the government to reduce debt servicing, which represents two thirds of the government's revenues, along with the measures that will be taken by the state such as privatization and reforms," he added.

He said that by the time the conference convenes in Beirut, the government hopes to have started the process of privatization of at least one sector.

Hariri's government projected revenue of $5 billion from the privatization of all state-owned assets prior to the Paris II conference.
But Haddad declined to set a figure for privatization although he believed that the telecom sector alone may be worth $3 billion at least.
"What are privatizable now are the fixed lines of state-owned Ogero Company and the cellular lines that are managed by two firms."

He said that the government cannot sell everything at the same time because materially it is not feasible. "But we should put something on the block before the donor conference starts in December of this year." Haddad said all the measures needed to pave the way for privatization will be done soon, such as the creation of the regulatory body.

"I am in favor of privatizing 100 percent of the telecom sector and we need to do it soon because the market conditions are very suitable."
Haddad said "the condition of the sector in Lebanon is very poor in comparison not only to the West and the Arab Gulf Cooperation Council but to Jordan, Egypt and Morocco."

Responding to some of the critics of privatization, the minister said selling some of the state assets to the private sector will increase investment opportunities, improve the capital market and create new jobs.
"Privatization will not shed any jobs but on the contrary it will help create more jobs, especially in telecom and IT fields."

He added that the prices of services and phones, which are one of the highest in the world, will surely drop if privatization was implemented.

"Privatization is a win, win, win situation."
Haddad does not expect strong opposition to privatization because the measure was mentioned in the ministerial statement which was passed by Parliament.
"But of course we will sit with all parties in the country to underline the importance of privatization. If any one has a different suggestion to overcome the public debt issue then let him step forward."

Haddad said most people working in the telecom sector, will keep their jobs after privatization.
Concerning the troubled electricity sector, Haddad said that the government will first privatize the management of Electricte du Liban and then consider the privatization of the distribution network.
He also said that the privatization of the Middle East Airlines (MEA) is feasible and easy as the company is profitable.

"Any company that wants to buy MEA from the Central Bank will probably hire more staff and expand the current fleet."
The minister stressed the issue of public debt should be seriously addressed because the problem is no longer sustainable.

Beirut 18-10-2005
Osama Habib
The Daily Star

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