ESIS extension / Lebanon / Regulatory Developments / Update Memo 6

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

The telecommunications technology industry along with the high performance prevailing in the broadcasting and computing industries constitutes the basic components of the Information Society. As in many other countries, Lebanon is experiencing the effects of the telecommunications revolution and its impact on the socio-economic development. The move towards the Information Society is presently considered by the Government decision makers as an engine of growth and therefore of economic well being.

Revolutionary and pervasive technologies are profoundly influencing the organization of work, the economic behavior of firms and markets, the performance of the public administration, the quality and productivity of the education sector as well as the societal interrelations at large. Through a drastic reduction of the constraints of time and space, Information Society offers panoply of new tools with incomparable capacities enabling the developing economies to move towards progress by economizing on many intermediary stages.

Not all developing economies are showing similar attitudes towards the Information Society revolution. Specific characteristics at the institutional, social, cultural and technological levels are influencing the way the Information Society is emerging. The peculiarities of the Information Society in Lebanon are presented in this report.

The following background information is based on documents published by the following reliable sources:

This short historical perspective is meant to shed some light on the difficulties that any serious research would be facing as no official and unified body is collecting basic and vital economic information and making it available through timely published publications. Gathering bits and pieces of information is therefore a long process.

Situated on the eastern most part of the Mediterranean Sea, the Lebanese Republic stretches over a tiny territory of 10452 squared meters and a coastal line of nearly 190 km from north to south. A survey conducted by the CAS in June 1997 puts the number of permanent residents in Lebanon at 4005000, 92% of whom are Lebanese. 39% of the population is under 20 and only 10% above 60. The capital Beirut, along with its suburbs accounts for 32% of the population. Other main cities are Tripoli in the north, Sidon and Tyre in the south and Zahleh in the eastern Bekaa Valley.

Throughout its history, Lebanon has been a melting pot of different cultures and civilizations of the Middle East. In recent decades, it experienced large waves of immigration from neighboring countries.

A flourishing service economy prevailed until the military turmoil that started in 1975 and ended in 1989 with the Taïf Agreement. The outcome of this long lasting conflict was a full dislocation of the government and the economy.

The year 1992 saw the advent of a somehow strong political government headed by Prime Minister Rafiq HARIRI. An ambitious reconstruction program started then aiming at the rehabilitation of all the basic infrastructures. The huge investments over six consecutive years lead however to an unsustainable public debt that caused tremendous dissatisfaction in the country.

The presidential elections of 1998 brought to power General Emile LAHOUD who, in December 98, appointed as prime minister, the former head of parliamentary opposition, Dr Salim AL HOSS. In conformity with the highly praised presidential message of November 98, the government of Dr HOSS pledged to the pre-eminence of the rule of law and the strengthening of the governmental institutions and committed to transparency and accountability in conducting public affairs. In his inaugural speech, the prime minister stated explicitly his intention to submit to parliament approval a privatization law.

General Legislative elections held on August 27^th and September 3^rd were a great defeat to prominent figures in the Government and especially for Prime Minister HOSS. As a result, a new Government is to be formed by the end of October.

The legal system prevailing in Lebanon since its independence in 1943 follows the French tradition. It guarantees the private ownership of property, the free flow of goods and funds in and out of the country and the freedom of contract between parties. The Code of Obligations and Contracts, the Commercial Code and the Code of Money and Credit govern the basic daily economic activity. After stagnation due to 15 years of conflict, an active movement to reform and modernize the laws is underway in Parliament and through special committees formed by experts from the Central Bank, the Ministry of Justice and other public bodies. A law protecting the Intellectual Property Rights has been enacted (June 99) and the Central Bank has been designated as regulatory authority for all e-banking activities (November 99). The privatization law has been submitted to parliament and went through thorough discussion in specialized commissions. A press declaration made by the vice-president of the commission of finance on march 22, 2000 brought to the attention of the general public that the commission agreed to the text of the privatization law presented by the government with ‘appropriate modifications’. The final draft of the law has been eventually published in the Official Gazette in May 2000.

Put in a few words, the successive Lebanese Governments have always been adept of free market economy allowing unrestricted mobility of capital, goods and persons as well as full currency convertibility. The state intervention in the economy was somehow minimal despite its retaining a monopolistic position in some sectors, especially so in the telecom sector. According to political analysts expressing themselves in the press, the new Government is expected to have a more active position towards privatization.

Although no official decision has been made by the Government concerning any IS strategy, some recurrent declarations from prominent ministers to the press indicate a clear understanding of the scope and importance of the issue. Basically, five ministries have to deal with various aspects of the Information Society:

It is worth mentioning that the Industry and Commerce and Trade ministries are destined to merge according to a draft law reducing the number of ministries from twenty-six to eighteen. More over this law mandates the creation of Higher Council for Planning and Development by merging the Council of Development and Reconstruction (CDR), the Council of Greater Beirut Projects and the Council for Reconstruction Projects.

In a recent assessment of the situation concerning the Information Society in Lebanon the Minister of Economy, Dr Nasser SAIDI, reiterated previous declarations concerning an IS strategy for Lebanon. The six main ideas put forward were:

On The 18th of September, an agreement was signed between the European Union and the Government of Lebanon to establish a focal point at the Ministry of Economy and Trade. Minister SAIDI and the EU Ambassador to Lebanon, Dimitri KOURKOULAS made a joint declaration to the press concerning further collaboration within the EUMEDIS initiative.

As earlier stated, no official plans have been presented as formal proposals reflecting the Government views, objectives and priorities. However, a number of international experts have been assisting the Government through OMSAR on the best ways to undertake a vast rehabilitation program for the public Administration that could have favorable repercussions on the socio-economic sphere.

According to Dr R. KHOURY, senior adviser to OMSAR three levels of action are considered to promote the Information Society in the country: the institutional infrastructure level, the hard infrastructure level and the soft infrastructure level.

On the institutional level, the need for a national ICT plan and policy was clearly stated. This should materialize through modern and up-to-date laws and regulations, simpler administrative procedures and well-designed tax and labor incentives. Financial innovations have to be adopted to facilitate the starting-up of new companies dealing with information and communication technologies.

On the hard infrastructure level, there is a need to extend the modern telecommunication infrastructure to cover the whole Lebanese territory and to provide for more powerful communication facilities through broad bandwidth. In this respect, the privatization of the telecom sector is deemed indispensable to attract strategic partners. Along with this privatization, decision the policy has to provide for the establishment of technology parks and zones. The projects now under consideration in this respect are not yet operational and lack a dedicated support from the public authorities. The Beirut Emerging Technology Zone (BETZ) is still at the feasibility study stage, the EDDE Global Village in Jbeil (40 km to the north of Beirut) and the MAKSE Industrial Park in the Bekaa region are still awaiting commitment from the business community. It is worth noting that the Saint-Joseph University has also launched a technology park with the technical assistance of the French Sofia-Antipolis. The project is however at its inception stage.

On the soft infrastructure level, the presentation noted that many important courses of action are underway:

Since it took office in December 98, the government is pushing forward for a better efficiency in the administration, less bureaucracy and greater transparency. With the help of international organizations, reform programs are undertaken that call for the implementation of advanced practices and modern technologies. Computers and telecommunications are efficiently used in some public offices to handle paperless work and get better results.

At the time of writing this report, an announcement was made by Minister SAIDI concerning a conference to be held on the 29^th of September relating to e-government issues. Under the label ‘Lebanon E-Government Seminar’ a number of sessions is planned relating to:

A number of local and international experts are expected to participate coming from the public administration: Central Bank, OMSAR, MPT; from the industry: ORACLE, CISCO, COMPAQ, HP along with eminent consultants from PriceWaterhouse and from Dubai Internet City.

Until now, despite the publication of the law authorizing privatization, the Ministry of Posts and Telecommunications (MPT) <www.mpt.gov.lb> still maintains its monopolistic position. It has therefore the upper hand over every single project relating to the infrastructure, its maintenance and extension, its modernization and its upgrading. The functional body and the regulatory body are not separated though a somehow independent public unit (OGERO) was directly in charge of the field operations. This company founded in 1972 was a private company founded to run the radio communication company of Lebanon called Radio-Orient. When Radio-Orient was transferred to the government Ogero passed under the tutelage of the MPT and, under contract with the general directorate of operations and maintenance, it is maintaining the fixed telephone network and carrying out the connection of new subscribers. On the technical side OGERO is assisted by the expertise of the UK’s Cable & Wireless

Since 1992, a huge rehabilitation effort has been undertaken on the fixed telephone system. A fiber optic network has been installed and spreads to serve the main cities especially those situated on the Mediterranean coast: Beirut, Tripoli, Jounieh, Sidon and Tyre.

The Lebanese government departed somehow from its rigid monopolistic position in the early nineties when it considered awarding the cellular (GSM) system to two private operators on a BOT basis:

FTML (Cellis) < www.cellis.com.lb >, a branch of FTMI (France Telecom Mobiles International) was incorporated in august 94 with a capital of 30 millions USD. Marketed under the name of Cellis in May 95, the cellular phone services have known a rapid growth thus placing the company in the midst of the Lebanese economic activity. The company provides a widespread network over the national territory with an outdoor coverage of over 95% and an indoor coverage of over 80% in Greater Beirut and in the main cities of the country. Cellis serves presently approximately 350,000 subscribers. The company has intensified its coverage over Lebanon to accommodate both the increase in the subscribers and in traffic. 309 base stations have been installed. Two additional switches were installed in 1998.

LibanCell SAL < www.libancell.com.lb > the other mobile operator for Lebanon was incorporated in Beirut in November 94 following the award by the MPT of a BOT contract for establishing a GSM 900MHz cellular network covering the Lebanese territory. Since it started operations, the company aimed at providing the Lebanese community with advanced telecommunication innovations, and welcomed customers to the convenience, versatility and freedom offered by its GSM network. The company was first to introduce prepaid cards in September 1997. LibanCell serves today approximately 350,000 subscribers, manages a network comprising 2 Gateway Mobile Switching Centers, 5 Mobile Switching Centers/Visitor Location Registers, 2 Home Location Registers/Authentication Centers, 27 Base Station Controllers, 306 Radio Base Stations, out of which 53 are micro-cells.

Both companies have developed Digital Nervous Systems connecting private microwave links, Wide Area Networks – WAN, Intranet and Internet infrastructures. Both companies introduced the roaming service since 1997 with approximately 80 live operators in 65 countries

Recently, (May-June) the Government entered into conflict with both mobile phone companies about alleged irregularities. These accusations are firmly denied by the companies, which threaten to call for international arbitrage according to the provisions of the contract. At the same time, the press is regularly reporting on the possibility to see in the near future the BOT agreement turned into a 20 years license, with no restriction as to the number of licenses to be issued, for a value amounting to 1350 million of dollars. The government claims it could not accept the proposal from Cellis and LibanCell at a time when other firms are offering higher prices and better conditions. Apparently, the pan-European mobile phone company Vodaphone Airtouch is negotiating with the government to obtain a third license allowing it to operate a third-generation mobile phone system that would introduce advanced technology to the Lebanese market. Also, the Saudi Bin Laden Group and Egypt’s Sawaris Group are reportedly in contact with the MPT and are ready to offer $1.5 billion per license.

Cellis and LibanCell said that, at $300 per capita, the price they proposed to pay is considered one of the highest prices per capita in the world. Consulting firm Booz Allen & Hamilton, hired by the government to assess the possibility of mobile phone licensing, estimated the value of the new contracts with cell firms at $800-900 million each. Meanwhile, negotiations between the MPT and Cellis and LibanCell are expected to continue.

In parallel with the rehabilitation and extension of the fixed and mobile local phone network, many improvements have been made to the international connections through companies with world wide recognized credentials: fiber optic submarine link between Lebanon and Cyprus (AT&T), digital microwave link between Beirut and Damascus-Syria (Siemens), fiber optic network linking Alexandria–Egypt to Tartous-Syria to Tripoli-Lebanon to Beirut and Saïda (Alcatel Submarcom).

These international infrastructure connections have permitted the start-up of Internet on a limited basis as early as 1994 thanks to the efforts of the American University of Beirut. The year 1996 saw a real development of the Internet service and the spreading out of this activity through 17 operational ISPs (out of some 30 that have been licensed) serving nearly one hundred thousand subscribers, or the equivalent of three hundred thousand users. The prospect of the development of Internet seems bright especially that the expected privatization of the telecom sector will certainly bring in new and better services at lower prices.

A somehow low entry barrier and a high degree of competitiveness characterize the Internet supplier side. A market study made by Infopro, a market research company, reveals that only six among the operating ISPs are getting almost 85% of the market. These companies are:

The study is showing that the first three providers are getting about 20 % of the market each.

Beirut seems to be attracting also international Internet operators. PSINet Inc., one of the world largest Internet Service Providers and an Internet Super Carrier, announced its entrance into the Lebanese and Middle East markets with the acquisition of New Com SAL, a local ISP. New Com, also operating under the name of Lynx < www.lynx.net.lb > is the fifth largest ISP in Lebanon and serves businesses and consumers with dial-up connectivity, as well as web hosting capabilities. According to PSINet’s regional director, Beirut’s role as a banking and financial center and the attractiveness of the Lebanese market were major factors in the firm’s decision to use Lebanon as a base for its expansion. It is assumed that New Com’s integration into PSINet global network will provide the local customers access to PSINet’s full portfolio of dial-up and dedicated connectivity services, as well as value-added services, including electronic commerce, web hosting, global roaming, Intranet and security services.

According to reliable information reported by the press a huge movement of acquisition of local ISPs is expected in the coming year. Many regional directors of international companies are holding talks with the ISP community and they are all announcing big events soon. One of the most active international carriers, PSINet, has started an advertising campaign on local TV channels.

Lebanon seems to enter into the Wireless Access Protocol (WAP) area. A Beirut-based software company is selling WAP applications on the Microsoft platform. It has created <www.mobilian.com>, a consumer oriented WAP portal, which includes A WAP reservation system for a local circuits of cinemas. It has also developed WAP-based solutions for companies such as Financial Funds Advisor SAL <www.ffa.com.lb> (a brokerage firm) and Obegi Group (a food and consumer goods distributor).

LibanCell, one of the two mobile phone companies has also started a WAP service under commercial name ‘MobileNow’ while the other GSM company, Cellis, has launched the "It’s WAP" service. Preliminary estimates say 3,000 WAP-enabled phones are already in the Lebanese market and prices are dropping. Vendors at the TERMIUM exhibition (19-24 of September) are presenting several special offers on WAP phones. Ericsson displayed an entry-level WAP phone that sells below 200 US$ and LibanCell, in collaboration with DATA FLOW, is offering a free standard cellular line (normal price 200 US$) to buyers of a US$ 450 WAP phone. Experts say that one major problem for Lebanese providers is the shortage of available lines as Cellis and LibanCell have a ceiling of 400,000 lines each.

In the usual language, electronic commerce is a shorthand embracing a complex amalgam of technologies, infrastructures, processes and products and users operating into a global market place through the Internet.

Another source of difficulty is also stemming from the fact that everything is evolving rapidly. Nonetheless, one way of understanding electronic commerce is to consider the elements of its infrastructure and its impact on the traditional market place.

As it has evolved today, electronic commerce requires three types of infrastructure:

A technological infrastructure to create an Internet marketplace, as EC relies on a variety of technologies that are evolving at a very rapid pace.

A process infrastructure to connect the Internet marketplace to the traditional marketplace . This infrastructure can make payment over the Internet possible through adapted means. It also makes possible the distribution and delivery of those products purchased over the Internet to the consumer.

An environmental infrastructure consisting of protocols, laws and regulations. Examples include technical communication and interconnectivity standards, the legality and modality of digital signatures, certification etc. and the disclosure, privacy and contact regulations.

Assuming these infrastructures are implemented, we can understand how EC is becoming an innovation agent that makes it desirable for the performance of the economy. In fact, EC induces process innovations, as it simplifies, makes more efficient, reduces costs or otherwise alters the process by which an existing transaction takes place e.g. an ordering process by phone or fax replaced by an online ordering process can generate money saving and lower the error rate.

EC induces also product innovations as it creates or facilitates new industries and products not previously available e.g. MP3 in the musical activity.

EC induces also market innovations as it creates new markets in time, space and information that heretofore did not exist because transaction and coordination costs were prohibitively high e.g. on line banking that can offer 24 hours cash and bill payment features, reverse auction systems that could inform businesses of the consumers willingness to pay for the products, as well as reduce the consumers purchase cost etc...

The important question to consider here is to what extent this ideal system could be implemented in Lebanon. It goes of course without saying that things have yet a very long way to go. But the evolution of the market is promising and the awareness of the public is growing. Many web sites are being developed to give the customer the possibility to make transactions electronically but as a general rule one can say that if the technical solution is available, the security issue and the legal aspects are not yet entirely satisfactory.

The most sophisticated EC applications available are in the banking sector. Some leading banks operating in Lebanon are offering to their customers, especially in Beirut, some services through the Internet. Examples are:

The case of foreign banks operating in Lebanon is to be singled out as they are implementing very powerful systems already in operation in other branches of their international network.

A leading role in this respect is played by the Central Bank < www.bdl.gov.lb >, which, under a recent legislation voted by Parliament in December 99, is supervising the evolution of e-banking. At many occasions, the governor of the Bank of Lebanon (Central Bank) has made it clear that the future expansion of the banking and financial sector has to go through the electronic channel. It is to be noted that the payment system in Lebanon has been evolving steadily towards electronic sophistication and security under the leadership of the Central Bank and with the technical assistance of the Bank of International Settlements. On the other hand, the Beirut Stock Exchange < www.bse.com.lb >is also evolving into a completely computerized and continuous electronic system of quotation with the technical assistance of the Paris Stock Exchange.

On the industrial and commercial side of the business, a leading role is played by the Beirut Chamber of Commerce, especially in what relates to electronic signature and certification. In this respect, the counseling advise is coming from the International Chamber of Commerce.

Since the beginning of this year, new sites are appearing on the net and proposing their EC services through extensive advertising campaigns in the printed press. Many IT service companies are also heavily advertising for EC solutions that they provide. Small and limited applications are burgeoning and few integrated EC applications are announced. Not surprisingly, these integrated solutions are launched by large companies combining sophisticated information technology tools and proven financial capabilities. The best example of this synergy is given by the association of an ISP (Data Management) < www.dm.net.lb > with a large bank (Crédit Libanais SAL) < www.creditlibanais.com.lb > to start a full ledged EC company named Netcommerce SAL < www.netcommerce.com.lb >.

It makes no doubt that this kind of venture will open new horizons to lebanese businesses by promoting their products over the market worldwide. A leading edge presented by Netcommerce is that it offers a package of high-tech services with a sophisticated billing system through international networks as Visa, MasterCard, etc... with a real-time and on-line connection through the virtual Mall.

Compared to what is already achieved in this respect, the Lebanese experience is not very developed. Its chances for future development are high in as far as it can evolve from the B to C channel to the B to B channel.

On the 19^th of September, Minister SAIDI announced that the Government has approved the draft bill on e-signatures and electronic documents and that the expectations are high that it is ratified by Parliament by the end of the year. If this happens in the near future, Lebanon will be among the first countries in the world to adopt this technology. The ministries of Trade and Industry are the only two government bodies were awareness is high concerning e-procedures.

The Lebanese educational system is based on the baccalaureate concept, as in the French system, that consitutes the final stage of the secondary education. Nearly, 800 thousand pupils constitute presently the population in the secondary education system in its public and private components for general and vocational training. The ministerial authorities in charge of supervising the educational sector are:

The Ministry of National Education, Youth and Sports overseeing the general education up to and including the secondary level);

The Ministry of Vocational Education overseeing the vocational schools and training;

the Ministry of Higher Education and Culture overseeing the Universities and other Institutions of higher learning.

The private sector education is the most developed and up to date. Globally, it is getting the highest performance according to internationally recognized standards. The long lasting turmoil and the financial difficulties in public finances are hindering the efforts to achieve a better public education output. A recent reform of pre-university programs has paved the way to the implementation of new content and modern teaching methods relying on Information Technologies. The effects of this reform are not yet perceivable as not so much time has elapsed since it was put in effect.

A recent decision taken by the government (April 2000) consisted in acquiring one thousand PC to be installed in public schools to begin training instructors to use the hardware and initiate the pupils to some basic software usage. Another implementation in the public school sector (May 2000) was the networking of 24 schools altogether to begin the initiation of the youth to the Internet environment and to start building distance education network. These two innovations were made possible with the contribution of companies dealing with the computer and Information Technologies under the sponsorship of the Professional Computing Association (PCA) < www.pca.org.lb >

Concerning the whole education sector in all its diversity and levels, it is worth mentioning that a recent government decision (October 1999) authorized a non profit organization "Opus Libani" < www.cartage.org.lb > to establish a network dedicated to teaching basic topics up to the secondary level. The project is still in its early stages of implementation.

The situation at the University level, as far as Information Society is concerned, seems fairly good. Nearly, all universities (the public and the private) are well advanced in the teaching of information and computer technologies through courses pertaining to engineering, business, economics and communication faculties.

On the technical side, it is important to note that all major universities are upgrading their installations on a regular basis. The Lebanese University (Public Institution) is entering a phase of huge expansion with the beginning of this academic year.

The seven main universities offering the complete range of disciplines and representing practically 90% of the total enrollment are:

Altogether, the private universities enrollment is about 50 000 sudents compared to the 45 000 or so at the Lebanese University. All Universities, especially those we have cited earlier, award degrees as high as the Ph.D. It is natural therefore to assume that research is at a quite advanced level. The new technologies, and especially Internet, are common usage in these institutions and the research centers specializing in various disciplines are starting to publish on the Net.

Apart from the research centers in the universities, there exists in Lebanon a Lebanese National Center for Scientific Research (LNCSR) < www.cnrs.edu.lb >under the authority of the Ministry of Higher Education and Culture. Its staff are highly skilled academic researchers both in pure and applied sciences. But the financial budget allocated for research has always been a problem.

The LNCSR is the only research institution that has developed and maintained a regular contact with industrial business community. A symposium is held every year to assess the cross fertilization of ideas and innovations between academics and the business community. However this tradition has to gain more maturity to evolve into a truly robust partnership for innovation.

It is worth noting that the US computer giant Cisco Systems Inc., a global leader in networking for the Internet, announced it will open an office in Lebanon. The local branch will report to Cisco’s regional office in Dubai (United Arab Emirates) and will have a staff of ten employees. The firm’s regional manager said business in Lebanon was "very satisfactory" last year and expected the productivity per employee here to exceed the company average worldwide. Cisco has also reached an agreement to designate the American University of Beirut as a member of the regional Cisco academy network, and similar agreements are under consideration with other universities. Cicso provides end-to-end networking solutions to large organizations, service providers and small and medium size businesses. The firm sells its products in approximately 115 countries through a direct sales force, distributors, value-added resellers and system integrators.

The transport sector is undergoing a fundamental transformation as special programs to enhance the productivity in this sector are being implemented with the assistance of international bodies and especially the World Bank.

The road network has been since 1992 rebuilt and extended but it still lacks proper traffic management, adequate parking space and public transport facilities making the traffic flow heavy and slow. All this is causing lengthy delays and a high accident rate. The congestion prevailing on main axes could be solved according to a better system for transmitting information through a network using the latest information technology. Though the idea is accepted by the Ministry of Transport and Public Works < www.public-works.gov.lb >, the implementation of such a system is subject to financial constraints because of budget restrictions.

An interesting application for the use of IT for traffic information was made on a small scale. The ISP Data Management has launched a portal where information on traffic is reported on a continuous basis through webcams installed at two particularily congested crossings in Beirut Center and the north entrance of the capital. This interesting feature can be observed through the portal < www.yalla.com.lb >.

The Beirut airport has also undergone a thorough rehabilitation program. The technical side of the rehabilitation has been done under contract with the French Société des Aéroports de Paris. The most up to date installation is now close to completion using advanced information technology devices and applications. The transport services through the Beirut International Airport are, consequently, becoming comparable to international standards.

The hospitals sector comprises public and private institutions. The public institutions have suffered the consequences of the long turmoil that prevailed in the country. The huge funds required to put the public health system in good shape are lacking. This is the main reason why the private institutions are presently the best providers of health services. These institutions have good connections with similar foreign institutions of international renown in Europe and in the United States. They are getting through these channels a lot of advanced technological expertise and they are investing a lot in this domain. It is worth noting that medical schools in Lebanon have a long and glorious tradition. The Syndicate of Hospital Owner is an influent body whose primary function is to protect the interests and rights of its members and secure a unified representation vis-à-vis the government. This Syndicate is promoting the usage of new technologies in hospitals and is considering the implementation of a network to connect hospitals all over the country. It has also plans to encourage telemedicine once the appropriate regulations have been internally agreed before submission to the Ministry of Public Health.

The clinics sector is mainly composed of group practices, dispensaries and individual doctors. Some new technologies relating to the Information Society are in use within group practices: computerised system for billing and time management, patient filing follow-ups, paging system for urgencies etc… The use of Internet is not yet considered secure enough to serve the purpose though some developers are pushing for the implementation of such systems.

The auxiliaries comprise mainly the laboratoires, the pharmacies, the physiotherapy centers. Some Internet solution providers are proposing systems to handle the ordering billing systems between labs, pharmacies and their suppliers.

The active labour force is about one third of the total resident population which is estimated at about four millions. The breakdown of the labour force by sectors reveals the constant pre-eminence of the services in the global economic activity. The services sector is representing presently about 65% of the total work force. According to reliable sources reported by the press, the unemployment rate has reached a high level in the order of 15%.

The two main subsectors where information technology is regularily used and up to date is the financial sector and the hospitality-tourism sector. This is where e-commerce is progressing the most despite many handicaps due to security and legal issues combined with the high cost of telecommunications.

Many banks have already stepped into the information age and this is providing a leading edge to young educated technophiles over the traditional techno-illiterate employees.

The various syndicates of workers grouped within the General Union of Workers have not yet shown any sign of accepting the fundamental and necessary transition towards a knowledge and information based economy. Seeing the potential dangers of this transition, no clear policy is presented however as to how they would be able to help the workers adapt to the new environment.

On the employers side, apart from large companies, the middle and small scale companies are questionning the soundness of the move towards the Information Society. A lot of effort seems necessary from the part of the concerned ministries to inform and educate the reluctant employers. Despite many declarations from officials on the necessity of such a move, no formal plan of action has been considered yet.

Above all that, the status of the tele-worker is not well handled by the present work legislation. Most of those who take the initiative of proposing such services are doing so on the basis of least of evils: being a freelancer is better than remaining unemployed. Some recruting companies are considering promoting this line of activity through lobbying the Ministry of Social Affairs.

The constitutional framework as well as the legal system are giving all formal assurances that within the Lebanese economic system the rules of competition are respected.

On the practical ground, this is not so much the case. Influential companies are in fact imposing a kind of oligopoly by setting up and raising entry barriers as is the case in the petroleum sector. In the trade sector, a very much contested law of commercial representation exclusivity is contributing to create monopoly power with the exclusive agent as no other commercial company can import the brands covered by the exclusivity clause. This law has been challenged in court but the issue is still uncertain.

In some cases, where special administrative formalities are necessary to complete a commercial transaction, the attitude of the public servant or the public entity is creating differentiation by power abuse. The present government has launched a strong campaign against corruption but the action has yet a long way to go in order to become satisfactory. A recent declaration (5^th of June) made by the President of Republic gave to think that the anti-corruption campaign would continue. A similar echo is given in a press declaration (15^th of June) by the Minister of State for Administrative Reform (OMSAR) saying that the reform of the Administration will resume after the coming legislative elections due in August. The bad news is that the legislative elections were a big defeat to the Hoss Cabinet

An important prospective issue concerning the competition regulation is emerging with the advent of privatization. The law of privatization has provided for a High Privatization Council (HPC) that will oversee the issue. This HPC is constituted under the chairmanship of the Prime Minister and the membership of the ministers of finance, economy, labour and justice.

With standard provisos concerning confidentiality, the working of the HPC includes the overseeing of the competitive bidding process to be conducted according to clear and simple selection criteria, including the disclosure of purchase price and buyer. Here also there are no good news: the outgoing Prime Minister Hoss declared that privatization could not begin seriously before the end of 2001.

Nothing in the present legal or institutional system is preventing any individual from being connected to the Internet. The digital divide can however be analysed in terms of technical possibility and financial cost of connectivity.

Presently, the cost of access is considered among the highest in the region as far as telecommunication tariffs are concerned. All dial-up subscribers to the Internet are complaining from the high cost of phone bills compared to the monthly cost paid to the ISP. This issue is regularily raised with the Ministry of Posts and Telecommunications but no practical decision has been taken yet to lower the tariffs. The expert analysts of the Internet market seem to agree that no drop in the cost of connection is to be expected before the first privatization phase is launched in the Telecom sector.

Another factor preventing access for all, is the reliability of the telephone system in rural areas. The highly praised rehabilitation program of telecommunications has given absolute priority to urban agglomeration but has neglected the rural network to a large extent. The rural telecom system is considered not reliable enough to allow connection.

A law has recently been adopted by the parliament protecting copyright and intellectual property. This law became effective early June 1999 and is deemed to serve the economic interest of all parties engaged in production and commerce.

Traditionally, intellectual property rights are managed and guarded by the Ministry of Economy and Commerce < www.economy.gov.lb >. A specialized Department in this Ministry is in charge of observing the intellectual, industrial, technical, literary and artistic matters in addition to implementing the related agreements.

Historically, the Intellectual Property Rights legislation goes back to the time of the French Mandate between World War one and World War two. But since the military conflict that prevailed fifteen years in the country, from 1975 till 1989, it fell into obsolescence and disuse.

The new law voted recently (June 99) updated somewhat the old text and brought many new dispositions relating to the field of the new technologies.

The Lebanese public opinion is not in its entirety favorable to the law, though the Government and the majority of Members of Parliament are seeing the long-term advantages of having such legislation. The principal fear is from international bodies, especially the WTO, which could isolate Lebanon from the international community, thus depriving the country of any possible benefit in case of trade sanctions. Moreover, the IPR legislation is undoubtedly a precondition for WTO accession and a central part of the Euromed negotiation that will help to secure bilateral and multilateral aid, as well as securing fair and normal trade relationships. Under the present law, the Department responsible for Intellectual Property Rights protection offers some basic services as:

However, the US-based Business Software Alliance (BSA), an industry group representing the world’s leading computer software developers, said in its annual report that piracy-related losses in Lebanon increased by 91% to $2.1 million in 1999, but the country’s piracy rate dropped to 88% last year from 93% for 1998. The BSA ranked Lebanon first in the Middle East region and fifth in the world in terms of piracy rate. The BSA has been waging recently (June) an anti-piracy campaign in Lebanon since Parliament passed the intellectual property rights law last year.

A recent assessment of the market, made by the attorney representing Microsoft, found that software piracy is still active in Lebanon. Although the industry consensus is that software piracy is decreasing, 18 month on, the Business Software Alliance, a regional group that lobbies against software piracy, said that 88 percent of Business and consumer software in Lebanon is still pirated. It is to be noted that the government exempted students from punishment under the copyright law following a public uproar, although Microsoft is offering its basic package at a discount price.

This question is to be considered in the present situation in Lebanon, on the principles level. The Constitution of Lebanon is providing all the assurances relating to the rights of the citizen, his personal and moral security, his freedom in all respects within the limits of law and public order. It is therefore assumed that once databases are built, some law or regulation would govern its usage in conformity with the dispositions of the Constitution.

In fact, as far as personal statistical data is concerned, the Administration of Central Statistics has to abide by a law imposing professional secrecy on individual data whether pertaining to physical or moral entities. The same goes for the information that could be extracted from medical or judicial files. The case of databases built in relation with the spreading of Internet technology has not yet emerged. However, a special committee within the influential Association of Lawyers, is lobbying the Ministry of Justice to draft a law protecting explicitly personal data gathered and processed on the Internet.

As a rule of thumb, the present status of access to data could be: primary data on individual entity is protected but collective and/or processed data is accessible, some of it could have a price tag in order to be made available.

Legally, consumer protection is within the attributions of the ministry of Commerce. It concerns matters related to consumer prices and quality of goods. No specific laws have been enacted yet concerning data protection and privacy, apart from basic statements provided by the constitution. However, the draft law previously cited concerning the privatization of the telecom sector tackles this issue explicitly. Article 13 in the draft is making clear reference to the protection of privacy and of personal information.

Specific laws are under consideration thanks to the efforts of the Chambers of Commerce who are pushing for a piece of legislation concerning encryption and decryption. Obviously, adopting such legislation would legalize the digital signature and would certainly facilitate the wide extension of electronic commerce.

In as far as the distribution via electronic networks is concerned, the situation seems to be that of total freedom. If we compare the electronic way to express oneself to the traditional way through the printed press or the audio-visual media, we get the impression that the former is far from lending itself to any form of restriction. Some political stances and some morally offensive productions have found a way to spread on the net. Until now, no public authority has claimed the right or showed a will to combat this mode of expression.

In the present situation, the principal ministries acting within various aspects of the Information Society are the Ministry of Economy and Commerce, the Ministry of Administrative Reform and the Ministry of Posts and Telecommunications. We have previously presented the basic actions of the two first cited ministries. We reserve the rest of this presentation to the Ministry of Posts and Telecommunications (MPT) along with other related public bodies.

The MPT is the sole and only authority deciding in matters relating to telecommunications. This ministry is composed of three general directorates. The general directorate of posts, the general directorate of procurement and equipment and the general directorate of management and maintenance. In each directorate, the highest decision maker being the general director under the authority of the minister in charge.

However, because of the urgency needed in speeding up the administrative process and due to the fact that the ministry of planning has been suppressed in 1972, a public authority has been established in early 1977 by decree no 5, partially in replacement of the suppressed ministry. This authority called Council of Development and Reconstruction (CDR) < www.cdr.gov.lb >, reporting directly to the Prime Minister, is in charge of all matters relating to reconstruction and development. With the help of each ministry’s staff, it prepares general plans for the country, and follows up on investment and implementation programs for reconstruction and development projects. It also mobilizes external financing for priority projects within the investment plan approved in the annual budget, and implements projects by appointment from the Council of Ministers. In all instances, it took action in rehabilitating the public administration and reconstructing the infrastructure. It also served as official negotiator in foreign financing agreements. Especially since 1992, the CDR has prepared and implemented gradually the "Horizon 2000" plan that called for 18 billion dollars of public investment through 2007 in co-ordination with all the ministries.

Another public authority instated in 1995 helps the government implementing large infrastructure projects. The Investment Development Authority of Lebanon (IDAL) < www.idal.com.lb > identifies large-scale investment opportunities and facilitates their implementation. IDAL works in close relationship with all concerned ministries and reports directly to the Prime Minister. It provides the investor with the following services:

IDAL is managed and staffed by a team of service-oriented professionals, with experience in the private and public sectors, who understand issues related to investment and economic development. In order to facilitate the foreign direct investment in Lebanon, IDAL implemented in February a One-Stop-Shop organization.

Presently in Lebanon, the national regulatory authority for telecommunications is the Ministry of Posts and Telecommunications. The distinction between the operational function and the regulatory function is not yet established. The draft law of privatization now under discussion in the Council of Ministers is providing for such distinction.

However, if we consider the political system structure as established by the Taif Agreement, any ministry is under the control of the Council of Ministers, which is the supreme executive body. It is assumed that whatever decision is taken within this Council, it will be implemented. For some issues related to the telecom activity, the ministry of Justice and the Ministry of Economy and Commerce are consulted in matters like privacy and consumer protection.

The ministry of Information is the regulatory authority regarding radio and TV broadcasting. The authority of this ministry is based on a recent Audio-Visual Media Information Law (AVIL). Under the provisions of this law, most of the 40 or so wartime stations were closed down from 1994 onwards. From this two major consequences can be drawn. Firstly, it officially ended the nominal monopoly of the national TV, Tele-Liban. Secondly, by issuing a limited number of broadcasting licenses, the government claimed it would insure the commercial viability as well as the quality of stations.

Presently there are seven terrestrial stations four of which have secured channels through satellites.

It is to be noted that each of these stations is owned by a prominent political figure, as if the law, according to its critics in Parliament, has been designed to secure an oligopolistic position.

Digital television, currently revolutionizing the broadcasting industry in the world is not yet in operation in Lebanon though seriously considered by the LBC and Future Television.

The same AVIL law is regulating the radio broadcasting. It has rationalized the number of stations operating on the medium and FM wavelengths.

The allocation of frequencies is a competence of the MPT alone. This ministry has within its staff the expertise to do so. But for national security reasons, this allocation has to be approved by an expert body pertaining to the ministry of defense and the ministry of interior. Concerning the radio and television broadcasting the aforementioned AVIL law is regulating the distribution of frequencies.

The protection of economic competition is presently under the authority of two ministries: the ministry of Justice and the ministry of Economy and Commerce < www.economy.gov.lb >.

The laws governing this protection are being amended, updated and modernized by special commissions in the Parliament to match the modern standards in this respect. New laws or old amended laws are expected to be voted during the coming months. We have presented under section 2.11 above some aspects of the protection of economic competition in relation with the administrative reform (OMSAR) to combat corruption and abuse of power in the public administration.

As a rule, consultative Councils are bodies composed of experts from inside or outside the administration designated for a special mission on an ad hoc basis. Some bodies are more formally constituted however as is the case with the recently instated National Council for Information, whose members are by half designated by the government, the other half being elected by the parliament.

In principle, the Ministry of Industry < www.industry.gov.lb > is overseeing the RTD policy. However, due to understaffing and scarcity of financial resources, no concrete action plan is implemented yet. Since early 1999, the ministry has tried to rehabilitate his staff and his duties. Some international organizations, especially UNIDO, are providing assistance through dedicated programs. A recent agreement has been signed between the government and this international organization.

The Association of Lebanese Industrialists < www.ali.org.lb > is also trying to develop and promote the idea of a national RTD policy. The Universities, through their faculties of engineering, are also contributing to this effort along with the Lebanese National Center of Scientific Research (LNCSR), which holds an annual exhibition for the cross-fertilization of ideas between research centers in universities and the business community under the sponsorship of the Ministry of Industry.

The government has issued no formal designation for such a charge. The Ministry of Economy and Commerce is however appearing as the principal public actor in this respect under the leadership of Minister Dr Nasser SAÏDI. A National ICT Committee has been recently designated to advise the Government over IT matters (See kpco report). A recent agreement signed with the European Union provides for the creation of a focal point for Lebanon to promote inter-alia the Lebanese participation into the EUMEDIS initiative.

From the non-governmental side, the promotion of the IS is the fact of the academic institutions, especially the universities, the IT node in Lebanon and the Professional Computing Association (PCA) < www.pca.org.lb >

Due to the traditional openness of the Lebanese economy, the telecom system had to be linked to similar systems in the neighboring countries. Agreements exist between Lebanon and Syria, Jordan, Egypt and Cyprus. Lebanon has also signed all international agreements, as would any member of the ITU do. Concerning other Information Society related agreements there has been an old and traditional support from French Agencies to the Lebanese audio-visual and cultural sector. Accordingly, the Lebanese State television TELE-LIBAN is getting assistance from FR3 and TV5. French cultural and entertainment programs are regularly broadcasted on a dedicated channel of TELE-LIBAN.

5. Market: privatization, foreign investment, mergers, acquisitions, and call for tenders…

The government that took office in October 92 (first cabinet of prime minister Rafiq HARIRI under president Elias HRAWI) proclaimed a clear willingness to introduce structural reforms. These reforms, especially in the telecommunications sector, were deemed necessary and essential to generate substantial revenues through the development of the activities and services in and throughout all economic sectors. The idea of privatization was from time to time dealt with in political circles and in the press, but the public opinion was not mature enough to accept that formal proposals be transmitted by the Government to the Parliament in order to be discussed and approved to become a law.

In the public debate, the rhetoric about privatization lead to the distinction of the so-called "strategic privatization" and "imposed privatization".

The first form of privatization has the effect of strengthening the financial capacity and flexibility of a national public operator whose situation is already satisfactory. Privatization of this kind facilitates agreements and alliances with worldwide operators. It leads to greater transparency in the management of financial and human resources since the State no longer plays the part of the all-powerful shareholder whose decisions have to be approved whatever form they take.

The second form of privatization is to be considered when the financial and management situation of the public operator is already seriously eroded. In this case, privatization is adopted as the lesser of two evils and can therefore be regarded as imposed by the circumstances.

Given the lack of consensus on this topic between the Government on the one hand and the parliament and the public on the other, the BOT scheme was considered the best way to move forward. Even this scheme went through a hot public debate. Because of its novelty, it has to take into account the social and cultural peculiarities of the public and in particular their perception of the role of the state in conducting economic affairs.

There has been much debate concerning the privatization issue in Lebanon. Not all arguments exchanged between pros and cons are ideology-free. The fact is however that, facing a persistent public finance deficit and consequently a huge public debt, the present government is considering privatization to be one way out, even if not sufficient by itself, of this financial turmoil. The government now in office has promised to go ahead with the privatization once the legal framework has been set in accordance with rules and standards sought from the international bodies of expertise. Until now, no new text of law has been sent to the parliament for discussion.

The government of Dr Salim El HOSS that took office in December 1998 presented to the public opinion a clear idea of its intention regarding the privatization issue. The ministerial declaration before Parliament in early 1999 gave to think that there was a broad consensus on the principle of privatization and that the Government would be able to move ahead swiftly.

The initial idea was to carry out the programme in two parts: The first part covering 1999-2000, and the second covering 2001-2003. The telecommunications sector and the electricity sector were the first candidates for this transformation. It has been said elsewhere that the implementation is now behind schedule.

Concerning the telecom sector in particular, an ambitious plan was presented to the Government by the consultancy firm Deloitte & Touch. This firm was conducting studies on restructuring and reorganizing the telecom sector since 1994 with a financing from the World Bank. According to the project submitted, a draft law for privatization was expected to be approved by early 2000. A policy paper defining the privatization strategy, including the regulatory and legal framework, was expected by July 2000. The establishment of an independent regulatory authority was expected by June 2000. While some of these steps were initiated, the defeat of the Government in the August-September elections has automatically postponed any definite action. Press declarations by Prime Minister Hoss indicate that plans for privatization will not occur before 2002.

In our previous Q5 report we noted that a draft law has been prepared by the Minister of Posts and Telecommunications and submitted to the Council of Ministers for discussion before it is sent to Parliament. The draft law is proposing the complete reorganization of the telecom sector with a clear determination to reach privatization.

Article 3 is defining the new extent of authority of the Minister of P&T. He will be responsible for setting the policy framework in all its aspects and submitting it to the Council of Ministers. In particular, he proposes the names of the president and members of the body that will take over from the MPT the responsibility of regulating the telecom sector.

Articles 4, 5 and 6 of the draft presents this new regulatory body along with its attributes, prerogatives and mandate. Specifically, this body will (art.5):

Finally, this authority is requested to publish an annual report that has to be submitted to the Council of Ministers by the end of March, every year.

In this draft also is presented the basic structure of the national operator Liban-Telecom that could be privatized according to the forthcoming law.

The present situation is reflected in the following table where no precise dates are available yet for foreseen events:

	Liberalization status	Comments
Infrastructures
Public telecommunication network	Ministry of Posts and Telecommunication (MPT) monopoly	Privatization considered but no definite date yet. France Telecom and British Telecom often cited as strategic partners.
Local network for voice telephony	MPT monopoly
Leased lines	MPT monopoly	Press reports concerning the privatization of OGERO as provider of this service. Cable & Wireless of UK is assisting OGERO in technical matters.
Alternative infrastructure	n.a.
Broadcasting and cable TV	Partially privatised. Regulated by the law on audio-visual media	Cable TV has no regular status. Proposition under consideration to regulate this completely private business.
Voice telephony
Local communication	MPT monopoly
Domestic Long Distance	MPT monopoly
International communication	MPT monopoly	Internet telephony has been recently considered illegal and was therefore formally forbidden.
Provision of voice services to closed user groups	MPT monopoly	Large companies are getting permission from MPT to install and use private voice networks.
Mobile communication
Analog	n.a.
GSM digital	Totally privatised. Conflict between Government and companies could alter drastically the landscape.	Cellis and LibanCell are the only two operators. A third operator is under consideration. Negotiations under way to convert BOT contracts to licence. Hot debate.
DCS 1800 digital	n.a.	MOU signed with SkyBridge Int’l.
Paging	Totally private	4 companies are offering such services under authorization by the MPT.
Satellite communication	MPT monopoly	Private operators are allowed under licence for VSAT links.
Data transmission	MPT monopoly	4 licences granted. The Opus Libani (1999) licence is dedicated to academic use.
Value added services	Private initiative from ISPs.
Internet services provision	Totally privatised	The MPT is granting licence under tough financial conditions.
Equipment provision	Totally private

The Ministry of Industry < www.industry.gov.lb > has a specialized department to deal with standardization: the Lebanese Standards Institution (LIBNOR) < www.libnor.com >. Its action has been limited until now to issues relating to Total Quality Management and ISO Certification. Its catalogue does not contain yet any reference to the IS standards and it seems to be related to the international body ISO as observer member only.

The ministry itself was expecting an ISO 9002 certification by June 2000 as a first step towards Total Quality Management. No confirmation of this certification has been officially reported yet.

The main objective of this project is to increase customer satisfaction through a better organization of the services provided and a well defined methodology and standardization of internal procedures. This project is a move to secure all stakeholders (i.e. citizens, Industrialists, Government, Suppliers, Society and Environment), by means of: