October 1999

Lebanon Update Memo

The following report outlines new developments in the past three months and the state of on-going developments.

1. General background

The overall situation in Lebanon on the security level was not satisfactory at the beginning of the period under review i.e. July-September 99. Consequently, the performance of the Central Public Administration was not up to the expectations of the government. For the same reasons, the economic activity as a whole took a slow pace. Only the banking and financial sector retained some of its traditional dynamism.

2. General telecom policy

In spite of the difficulties that prevailed, the main objectives of the government were maintained. Concerning the telecommunication policy, efforts were made to continue to extend the network of fixed telephone system to remote regions in north Lebanon and in the north district of the Bekaa valley. The extension of the telephone system in these regions is expected to attract about ten thousands new subscribers.

3. Institutional structures in charge of the regulatory issues

The official position of the government announced earlier at the end of May has been reiterated by the minister of posts and telecommunications (MPT). He stressed the will of the government to extend the telecom services to cover the entire Lebanese territory. Should the fixed network be difficult to extend immediately the private mobile network could be allowed to enhance its equipment and increase the number of subscribers. A technical commission has been appointed to study the issue and examine the possibility of granting a third license to operate a mobile system. According to an administrative reform now underway, the ministry has experienced drastic changes in its administrative and technical staff. It is believed that once these internal changes have terminated, a new regulatory commission would be set up. It is worth noting that the minister of posts and telecommunications has already announced last may that a totally new regulatory framework will be set up by the end of 1999.

4. International relationships and agreements

Based on a previously signed treaty between the government of Lebanon and Syria, the MPT in both countries agreed to extend the telecom services exchanged between them. The enhancement of the microwave link between Lebanon and Syria will thus improve the ability of the Lebanese subscribers to reach the Arab countries of the Middle East as it will improve the ability of the Syrian subscribers to reach the western countries. It is worth noting that the area code (02) enables subscribers from one country to reach any subscriber in the other country as if everybody were on the same network. It is also worth noting that many Syrian individuals and companies are connected to the Internet through Lebanese ISPs.

5. Ongoing developments

Following a strategic workshop held at the Lebanese MPT in may to which participated international consultants as well as representatives from the World Bank, some basic announcements were made as mentioned in our previous report. Following up on these announcements, especially the instating of a National Operator and a complete reform of the regulatory framework, ad hoc commissions were formed to promote the implementation. It is believed that some legal texts concerning these issues will be decided by the Council of Ministers and sent, during the fourth quarter, to Parliament for discussion and approval.

The major regulatory action during this period was due to the Central Bank of Lebanon (Banque du Liban) as it pushed through the implementation of the last stages of the Y2K program it previously proposed to the banking and financial community.

The action plan implemented by the Central Bank consisted of:

• Founding a Y2K task force to emphasize on the responsibilities and participation of higher management in the financial community throughout the year 1999.

• Devising a three phase plan to make the community comply fully with the standards set by international expert bodies especially the Bank of International Settlements. The first two phases are reported to be satisfactorily completed. The third phase to be completed in July - September 99 consisted of implementing comprehensive and thorough testing "including unit level testing, integration testing and product testing". Moreover, the financial and banking companies operating in Lebanon have been instructed not to issue their financial statements for the year 1999 before submitting a copy to the Banking Control Commission in addition to the evaluation reports prepared by their external auditors.

As a result of the voting in June of the law on intellectual property protection, a number of international companies have expressed their intentions to establish offices in Beirut. Some large companies, of which Microsoft, have promised grants in hardware and software to be installed in various public administrative units. The grants so received by the government are put at the disposal of the Office of the Minister of Administration Reform (OMSAR).