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Middle EastMay 4 2010

Lebanon presses forward with privatisations

Raya Haffar Al Hassanm, Lebanon's minister of financeLebanon's minister of finance, Raya Haffar Al Hassanm, only took office last November but is already making inroads on attracting private investors to the region and tackling structural economic deficiencies. Writer Daniel Maalo
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Lebanon presses forward with privatisations

Q:What were your priorities on taking office in November last year and how have they changed since?

A:From the outset, my main priority was to prepare the national budget for 2010. At that point, however, we were behind schedule in terms of the specified deadline we had been given by Parliament. I started by meeting and consulting with other cabinet ministers in order to discuss proposals that had been prepared by my predecessor. As a new administration had taken office, we had a different set of aims that also needed to be considered. Consequently, I had to construct a new framework for this year's budget based on all those matters.

I have since had to address the scheduled maturity of our government's Eurobonds over the course of this year. Moreover, we have issued two further bonds, one in December 2009 and one in March of this year. Another consideration has been putting together my administration, namely filling key positions within the Ministry of Finance.

Q:How can privatisation measures help the government's finances?

A:Every political party that played a role in preparing our government's ministerial declaration agrees that privatisation of state assets must be a consideration as a part of the Paris III reform agenda. However, this process must be pursued in co-operation with the ministries in charge of the assets in question. At this point, we are awaiting sectoral plans from the relevant ministries before moving forward. Public-private partnerships, which I believe represent a credible first step towards eventual privatisation, are a particularly popular idea. The investment needs of the government are huge and there is no way the Treasury can assume such a burden, so resorting to the private sector makes sense. Involving the private sector is no longer a choice - it is a necessity.

Q:What are likely to be the key factors behind the expected growth of Lebanon's economy this year?

A:We have actually prepared the budget based on a conservative growth rate assumption of 4.5%. I believe this is a standard growth rate for the country but I expect real growth to be higher than that. The real economy is doing well and I predict the projected growth of the tourism sector to supplement that. In addition to tourism, the financial services and property sectors should be strong performers this year. I must add that we are working on having growth drivers that are more productive. We want to tackle the structural deficiencies of our economy and that is what the 2010 budget has attempted to do. Our ambition is to have productive growth that creates job opportunities and promotes investment.

Q:What would you identify as the key risks facing the Lebanese economy in the short to medium term, and how has the 2010 budget addressed them?

A:The 2010 budget is ambitious and expansive. We have announced a one-off increase in government expenditure on the infrastructure needs of the country in the hope that the private sector will then increase its role in this area. As a result, there will be a rise in the country's budget deficit over 2010 and 2011. However, we are committed to maintaining our public debt at 147% of gross domestic product (GDP) - the same rate as last year. Therefore, our debt-to-GDP ratio should be under control. By 2011, I hope there will be growth based on our investment and so our GDP should grow as a result. Ultimately, I expect our public debt to decrease in 2012.

The reform agenda set out at the Paris III conference of 2007 remains a priority for the government. In contrast to Paris I and Paris II, which primarily focused on debt reduction, Paris III looks at ways of achieving economic growth in Lebanon. We want to make the Paris III agenda much more encompassing by including the government's plans, too. We are working with prime minister Saad Hariri to push forward with those structural reforms. On the level of business reforms, we are working seriously on removing the obstacles that are hindering private sector investment in our economy and we will be hosting a workshop on this subject in partnership with the International Finance Corporation in May.

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