Wayzata World Factbook 1996/The World Factbook - 1996 Edition - Wayzata Technology (3079) (1996).iso/mac/TEXT/backgrd/lebanon.bkh

Text File | 1995-12-29 | 13KB | 240 lines

BACKGROUND NOTES:  LEBANON (CONTINUED)
PUBLISHED BY THE BUREAU OF PUBLIC AFFAIRS
U.S. DEPARTMENT OF STATE

JANUARY 1994
Official Name:  Republic of Lebanon

ECONOMY
Lebanon's economy is liberal and open, and traditionally heavily oriented
toward services.  Lebanon served historically as a haven for Arab capital and
as a Middle East transit point and enjoyed a vibrant and largely unregulated
private sector.  Lebanon's banking and tourism sectors flourished between the
Gulf oil boom of 1973 and the beginning of Lebanon's civil war in 1975 by
serving regional needs.  Real GDP growth was 6% per year from 1965 to 1975.

Despite the civil war and mounting government budget deficits resulting from
an inability to collect taxes, Lebanon kept its currency stable and inflation
rate manageable until the early 1980s.  Expatriate workers' remittances, the
flow of capital from abroad to support various militias, the PLO's economic
activities, and the narcotics trade all contributed to a positive balance of
payments.

Events in the early 1980s, including the Israeli invasion of 1982, conspired
against the Lebanese economy, resulting in accumulated infrastructure damage,
massive dislocations of the population, growing migration of people and
capital, and the uprooting of the PLO bureaucracy.

Recession in the Gulf led to a sharp reduction in remittances.  Beirut's
prominence as a center for finance, commerce, and tourism faded away.  A
calmer security environment in 1986- 87, combined with a sharp depreciation of
the Lebanese pound and a decline in labor costs resulting from inflation of
600%, produced a modest economic rebound.  Growth was cut short by the general
chaos of 1988-90.

Hostilities in 1989-90 in industrial and prosperous areas of Lebanon had a
dramatic and negative impact on production and exports, triggered massive
outflows of capital and people, and created circumstances resulting in the
"dollarization" of the economy.

The end of hostilities in 1990, the beginning of the process of national
reconciliation, and the removal of internal barriers to the movements of goods
and people produced a short- term economic boom in 1991.  This high level of
activity proved unsustainable, largely because of enormous state deficits,
poor economic management by the government, public sector corruption, the
unavailability of commercial credit, and the collapse of public confidence in
the nation's leadership.

A large, retroactive public sector salary increase in late 1991, financed
through the sale of Treasury bills, precipitated a crisis:  From January 1,
1992, to early October, inflation galloped to about 130%, and currency lost
180% of its value.  The high cost of living became, and has remained, an issue
of acute concern to the Lebanese public.

A surge of optimism swept across Lebanon with the advent of the Hariri
Government in October 1992, amidst expectations that the billionaire
businessman and his team of advisors would reform state finances and
administration, embark on needed emergency infrastructure reconstruction, and
attract foreign aid.  Demand for Lebanese pounds jumped immediately, despite
substantial intervention by the central bank to stabilize the exchange market
(the pound was valued at the end of May 1993 at 1,740 to a dollar, after an
early October 1992 low of 2,400 to a dollar).  There was also evidence of
deflation.

The Ministry of Finance has achieved remarkable advances toward closing the
budget deficit, despite rigidities in debt servicing, the public sector
payroll, and large subsidies to the electricity and telephone companies.  The
deficit in the first quarter of 1993 amounted to $104 million, compared to
$550 million in the first quarter of 1992.

The absence of functioning services is a serious obstacle to growth.  The
Hariri Government has made infrastructure rehabilitation a centerpiece of its
efforts, using the December 1991 emergency rehabilitation plan (ERP) as a
blueprint.  It calls for spending $2.3 billion in the next 2.5 years,
primarily on rejuvenating the electricity, telecommunications, water supply,
waste water, and solid waste management sectors.

The government has already begun pre-qualifying international firms for
projects in those fields.  The government has in hand commitments for over
$900 million in allocated and non- allocated foreign assistance, almost
entirely in the form of loans.

In February 1993, the World Bank signed an agreement to loan $175 million in
support of ERP.  Future aid, necessary for partial financing of an ambitious
$13-billion, 10-year development plan revealed by the government in March
1993, will depend largely on the Hariri team's ability to point to a record of
economic stabilization and well-managed use of current assistance flows for
reconstruction.

Hariri's economic policy is firmly rooted in the principle that infrastructure
spending and budget austerity will stimulate private-sector growth.  The prime
minister's advisers hope to develop more sophisticated capital markets to
attract a portion of Lebanese capital held abroad, which amounts to tens of
billions of dollars, institutionalize exchange rate stability, and help manage
a debt burden which is bound to grow as ambitious rehabilitation plans
proceed.

The formation of a private real estate company to rebuild the downtown
commercial center of Beirut is a centerpiece of the Hariri team's strategy for
hooking economic recovery to the engine of private sector investment.  The
company will expropriate property in the area and compensate owners with
shares in the company.  The company is to obtain capitalization equal to half
of the estimated property value in the development zone, estimated at $4
billion.  Gulf Arab businessmen have already committed about $500 million to
the controversial project.

Lebanon may have experienced a modest balance of trade deficit in the first
quarter of 1993, estimated by a private bank at $1.8 million.  A large trade
deficit was virtually eliminated by capital inflows.  Gold reserves amounted
to $3 billion, and foreign exchange reserves at $1.2 billion.  Foreign debt
may approach $700 million today, and domestic public debt exceeds $2.5
billion.

Another issue bringing increasing attention to Lebanon is its role as a major
drug producing and trafficking country.  In addition to traditional hashish
production, opium is cultivated and processed into heroin in Lebanon, and
Lebanese traffickers have become increasingly involved in the cocaine trade.

The dramatic expansion of drug activities in Lebanon can be traced primarily
to the breakdown of central government authority.  Because of the potential
for huge profits from the drug trade, many militias in Lebanon, including
known terrorist elements, are thought to be engaged in one or more aspects of
the drug trade to finance their operations.

Since 1976, Syrian troops have occupied Lebanon's prime drug-producing area,
the Biqa' Valley.  They constitute the only formal security authority in this
area.


FOREIGN RELATIONS
Lebanon's foreign policy reflects its geographic location, the composition of
its population, and its reliance on commerce and trade.  Lebanon hopes to
reestablish good ties with Western countries and in the Middle East.  Lebanon
remains friendly with Western countries and follows a generally cautious
course in its relations with countries of the former Soviet bloc.

Lebanon's foreign policy is also heavily influenced by Syria, which maintains
forces throughout parts of Lebanon.  Lebanon did not participate in the 1967
or 1973 Arab-Israeli war or in the 1991 Gulf War.  Lebanon and Israel are now
conducting bilateral negotiations in the Arab-Israeli peace process.


U.S.-LEBANESE RELATIONS
The United States seeks to maintain its traditionally close ties with Lebanon,
to help preserve its independence, sovereignty, national unity, and
territorial integrity.  The United States also supports the withdrawal of all
non-Lebanese forces from Lebanon and the disarming and disbanding of all armed
militias.  The United States believes that a peaceful, prosperous, and stable
Lebanon can make an important contribution to stability and peace in the
Middle East.

The United States supports the programs of the central government to restore
security and unity to Lebanon and to rebuild that country's national
institutions.  One measure of U.S.  concern and involvement has been a program
of relief and rehabilitation assistance which, since 1975, has totaled more
than $250 million.

This support reflects not only humanitarian concerns and historical ties but
the importance the United States attaches to the restoration of a sovereign,
independent, unified Lebanon.  Current funding is used to support the
activities of U.S.  and Lebanese private voluntary organizations engaged in
humanitarian relief programs.

Over the years, the United States also has helped finance construction of the
American University Hospital in Beirut and has assisted the American
University of Beirut (AUB) by financing part of its operating budget and by
providing scholarships to many of its students.  When the AUB administration
building was bombed in November 1991, the U.S.  allocated an additional $3
million to help defray the costs of rebuilding this symbolic center of the
university.

In September 1989, all American officials at the U.S.  embassy in Beirut were
withdrawn, when safety and operation of the mission could not be guaranteed.
A new U.S.  ambassador returned to Beirut in November 1990, and the embassy
has been continuously open since March 1991.  However, due to the size of the
staff and security concerns, normal consular and commercial services and other
embassy functions are not available in Beirut.

Principal U.S. Embassy Officials
Ambassador--Mark G. Hambley
Deputy Chief of Mission--Vincent Battle
Political Officer--David Hale
Consular/Commercial Officer--Patrick Syring
Consul--Vacant
Administrative Officer--Louis Lemieux

The U.S. embassy operates in Awkar, Lebanon (tel. 402-200, 403-300).


Travel Advisory
On January 26, 1987, pursuant to the authority of 22 U.S.C.  211A and
Executive Order 11295 (31 FR 10603), and in accordance with 22 CFR 51.73 (A)
(3), all U.S.  passports were declared invalid for travel to, in, or through
Lebanon, unless specifically validated for such travel.  This action was
required because the situation in Lebanon was so chaotic that American
citizens could not be considered safe from terrorist acts.

Although there has been some improvement in the security situation, review of
the situation has led to the determination by the Secretary of State that
Lebanon continues to be an area "...where there is imminent danger to the
public health or the physical safety of United States travelers" within the
meaning of 22 U.S.C.  211(A) and 22 C.F .R.  51.73 (A) (3).  Accordingly, all
United States passports shall remain invalid for travel to, in, or through
Lebanon, unless specifically validated for such travel under the authority of
the Secretary of State.

Exceptions to this restriction may be granted to professional journalists and
to others for compelling humanitarian considerations or if travel is
determined to be in the national interest.  Exceptions will be scrutinized
carefully on a case-by-case basis in light of the level of threat to the
prospective traveler's safety.  Requests for exceptions should be forwarded in
writing to the following address:

Deputy Assistant Secretary for Passport Services
U.S. Department of State
Washington, DC  20520
Attn.:  Office of Citizenship Appeals and Legal
Assistance, Room 300.

The request for an exception must be accompanied by substantiating
documentation according to the category under which an exception is sought.
Additional information may be obtained by calling the Office of Citizenship
Appeals and Legal Assistance (tel.  [phone] ).


Published by the United States Department of State -- Bureau of Public Affairs
-- Office of Public Communication -- Washington, DC January 1994 -- Managing
Editor:  Peter A.  Knecht

Department of State Publication 7956 -- Background Notes Series.  Contents of
this publication are not copyrighted unless indicated.  If not copyrighted,
the material may be reproduced without consent; citation of the publication as
the source is appreciated.  Permission to reproduce any copyrighted material
(including photos and graphics) must be obtained from the original source.

For sale by the Superintendent of Documents, U.S.  Government Printing Office,
Washington, DC 20420.