CONFIDENTIAL
                                                                                  EDS2005-1489
                                                                                December 14, 2005
                                                                                     03:00:08 PM


Statement by Jiayi Zou, Executive Director for China
Date of Meeting: December 15, 2005

                          Lebanon: Country Assistance Strategy



We welcome this opportunity to discuss the Country Assistance Strategy for the Republic of
Lebanon for the Year 2006-2009. We commend the staff for the excellent job done in drafting
this well documented paper. We give our full support to the CAS.

                Sustainable Development and Poverty Reduction in Lebanon

We welcome the progress made by the government of Lebanon in stabilizing and maintaining
the economic development through reform efforts, particularly after the civil war. As stated by
the CAS, post-war Lebanon achieved a strong recovery, restored basic services and basic
infrastructure. To reduce the massive debt burden, the government made great efforts in
stabilizing the debt through deep tax reforms and debt restructuring. All these efforts contributed
to the strong economic boom in the post-war phases.

Nevertheless, Lebanon faces formidable challenges in short term macroeconomic stability and
long term poverty reduction, efforts are needed in increasing its growth rate; improving the
investment climate; creating job opportunities, especially for the young; and reducing poverty.
We believe that with the government’s strong commitment to the reform agenda, Lebanon is
better positioned to tackle the challenges ahead, and achieve sustainable economic growth.

                                The Country Assistance Strategy

We concur with the three pillars set up in the CAS. We think that these three pillars closely align
the Bank’s priorities with the government’s development objectives.

We support the Bank’s efforts in strengthening the economic system through improving the
management of public finances, debt management, SOE reform, statistical capacity building and
so on. While these areas are crucial to the sustainable economic growth, political and
macroeconomic stability serves as the pre-condition for successful implementation of the
program. We support the Bank’s strategy in building the human capital in Lebanon, as human
capital development represents a country’s basic development status and helps achieve social
stability. Given the fact that Lebanon enjoys a high level of human capacity, it is essential for the
government and Bank to work together through well-tailored programs to help create an
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enabling environment to avoid emigration of skilled labors. Lebanon faces the same
environmental difficulties as other developing countries, as its natural resources are degraded to
a certain extent, and water scarcity and quality is a particular problem., we favor the Bank to pay
more attentions in this regard since water management is a common issue need to be addressed
by the MENA region.

                                               The Role of the World Bank

The Bank has a unique role to play in Lebanon given the country’s huge demand for external
resources in undertaking economic reform and addressing poverty. The Bank’s work can be
focused in the following areas:

1. In addressing the fiscal sustainability supported by growth

Fiscal sustainability must be based on sound economic growth. Given Lebanon’s high debt ratio,
the traditional method of fiscal constraint is not sufficient to gain fiscal sustainability. What
matters most is the actual economic growth which can generate stable revenue, raise people’s
living standard and alleviate poverty. In this regard, the Bank support can focus on growth
supporting and ensure the necessary public expenditures to stimulate growth and create job
opportunities. Bank’s activities can include the following: supporting productive activities
through projects; fostering business-friendly taxation policies; restructuring public expenditure
rather than simply cutting aggregate spending.

2. In enhancing the capacity building of the civil service system

The current governance structure of Lebanon doesn’t lead to strong civil service system. We
believe that the Bank’s assistance and efforts should be concentrated on enhancing the capability
of Lebanon’s civil service system, to increase the government’s ability and functions to ensure
that the civil service system can be well functioned and public services can be provided
regardless of government changes or turbulent domestic situations.

3. In strengthening infrastructure development and public-private partnership

For war-torn Lebanon, the infrastructure demands are huge for increased economic activities and
ensure growth. While privatization is necessary to enhance effectiveness and efficiency of the
economy, but it does not necessarily address all the economic problems in the country,
particularly the infrastructure shortages. Therefore, the joint efforts of the Bank and IFC are in
the position to help the country to develop a PPP framework to address the infrastructure needs.
The Bank should support the government to increase investment in infrastructure, while the IFC
can encourage the private sector participation.

To conclude, we reiterate our support to the CAS for Lebanon and wish the government of
Lebanon and its people success in their development efforts.




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may not otherwise be disclosed without the consent of the Executive Director concerned.