Announcement of Twenty-Seven Million Dollar Loan to Lebanon for Construction of a Power and Irrigation Project on August 26, 1955

HOLD FOR RELEASE ~NTERNATIONAL BANK FOR ~E,CONSTRUCTl0N AND DEVELOPMENT (WORLD BANK) 1818 H STREET, N.W., WASHINGTON 25, D.C. TELEPHONE: EXECUTIVE 3-6360 -----------.·~--·------------------------------------1 PRESS RELEASE NO. 420 FCR RELEASE A.M. Newspapers SUBJECT: $27 million Lebanon loan. August 26, 19SS The World Bank today made a loan or $27 million to assist in financing the construction or a power and irrigation project on the Litani River in Lebanon. The project will more than double present electric generating capacity in Lebanon and relieve the power shortage which has existed, particularly in the Beirut area, for the past ten years. It will also permit the irrigation of 8,Soo acres along • the Mediterranean coast, enabling Lebanon to increase the output of agricultural products both for export and home consumption. The loan was made to the Litani River Authority, an autonomous government ag~ncy established in 1954 to execute construction of the project. The Authority has retained engineering consultants to plan and supervise the project, and will itself nanage and operate the power and irrigation works when they ha.c:ve been completed. The Li tani River and its tributaries are the .largest of the undeveloped wtter resources in Lebanon. dly The development. of' the river basin was studied origin5 by technicians of the Lebanese Government and during 1951-54 a plan was ~awn up by the United States Bureau of Reclamatio11 as pa;rt of the United States• \~echnical assistance program for Lebanon. The project for which today's loan was nacle is based on the Bureau's plan and corresponds largely to its recommendations for the •• construction of works to be u.."ldertaken as a first stage in ,the development of the basin~  ... 2 - I,,' 1, ._ \\ The main purpose of the project is to supply additional electric power in Lebanon. The existing power system is overloaded and has ne>. rese~ve capacity;· ';> private· investment in additional power capacity has been insufficient to meet the rapidly expanding demand. There are restriction~ on the us~ of electricity; industry in particular has been handicapped. by this situation, and industrial establishments have had to insta11''uneconomic power w1its of their own. A more ample a?Xi cheaper supply of power from public utilities is an essential pre~ requisite for the further economic development of the country. The Li tani River is 106 miles long and drains an area of about 860 square miles lying entirely within the boundaries of Lebanon. The river rises in north~ eastern Lebanon and in the upper half of its course flows slowly in a southwesterly direction through the Bekaa Valley, between the Lebanon and Anti-Leba,non mountains; it then runs swiftly through deep gorges until it empties into the Medi..terranean ~'. about SO miles south of Beirut. Under the project a dam will be constructed on the Litani at Karaoun, at the sou·th end of the Bekaa Valley; this will create a ~eservoir with a capacity of about 60 m;i.!J"'~dn cubic meters. A S-l/2·-m11e tunnel will be built through the Lebanon moqntains to divert waters from the reservoir into the Bisri River, a stream which flows from the Lebanon mountains,westward to the Sea about 2$ miles south or Beirut. The western end of the tunnel will connect wit,h a 60.,000-kilowatt power plant to be built on the Bisri. A small da.J!! will be built downstream from the Bisri plan~ to divert water into a second tunnel which will provide water for a 24,000-kilowatt plant to be built at Joun on the Bisri Rivef. About 60 miles of tran$Ylission lines m.11 be put up to connect the B:i,~i an,~ Joun power plants with the Beirut power system. In addition:, about 2S miles ot t;ransmission lines will be built along the coast between Saida and Beirut. The irrigation system 1-till be loc&ted on a narrow coastal strip r\lJllling,:-Bouth • ·of Bei:rut to Saida. At present this land i.s only partly cultivated under dry farming;- with i:rrigation it can be intensively cultivated. Because of the favor-, a~l.e climate" i.t is ideally suited to the ~owing pf citrus fruits an:i ba~nas,  \j - 3- • important export crops., and vegetables. The irrigation systan to be built will use water from the Karaoun reservoir cU.~ected through the tunnels am canals to the heac:iworks or· 1h e Joun power plant,. where i't will enter the main irrigation canal. this· canal will be JS miles long, reaching to the sub~bs or Beirut. ?he project is scheduled £or completion in 1961. The total cost is estimated $t the equivalent or· abou.t $40 million. The Bank's loan ot $27 million will b~ used to pay for the services of foreign consultants and contractors and for imports of power generation equipment, transmission lines and substations., constructi9n ·equipment and some construction materials and supplies. The local currency requirements equivalent to about $13 nd,llion will be provided by the Government in the ro:nn of interest-free advances. The earnings of the power system should be ·sufficient to cover service chargee of the loan and, in addition., have surpluses adequate to build up reserves., after repayment of the Government;•s advances. The • cost of constructing and operating the iITigation system. Will b.e covered fran charges for the use of the water and from land improvement taxes. '?his is the first Bank loan in Lebanon. The loa.n is ibr a term of 2$. years arxi bears interest at the rate of 4-3/la% per annum., including the statutory commission of 1%. Amortization paYJD.ents will begin August 1., 1961. The loan is guarant'3ed by the Republic of Lebanon. After having been approved by the Bank's Executive Directors, the loan documents were signed on August 2.5 by His Excellency Dr. Charles Malik., Lebanese Ambassador in the United States., on behalf of the Government, by Andre Tueni, M~ber of the Board of the Authority., on behalf of the Litani River Authority., and by Eugene R. Black., President., on behalf <of the Ba~ • •  -4- • (I SupBiemental Statement on loan.in Lebanon ·Oe.neral. -~~ Both in s:bre and population., Lebanon is one or the smallest Arab nations. It is situated Q'!\ the eastern Mediterranean seab~r~l, and has an area of about 3,87S square miles. The population is 1.4 mil~··:fn;/'it is increasing at a rat,~ of about 2% a ;year. · , · By physical configuration arxl climate., the country is divided into four dis.. t1tnct regions.,, rllllning more or less parallel fran north to south: the coastal plainf 'With a Mediterranean type climate and, vegetation; the Lebanon Mowitains., with/heavy rainfall and a wide range or altitude and cultivation; the high central valley (Bekaa)., with fertile soil but less pr.ecipitation; and the virtually- barren Anti-Lebanon Ra~gf3., along the frontier or Syria. Water resources are more plenti- ful than in most other Middle Eas°t,efn cou.n.triea; the Lebanon Range condenses tn.ost or the moisture blown in ±"'rom the sea by the preva;tling west winds. The scenic beauty of' its mountains am favorable climate make .lebanon a popular tourist center. The majority of the population is still rural, although the town element is strong. The business community is influential and large numbers or people earn their livelihood by service occupati.ons. Stand,rds of living, e:iucation andffhealth a:r·e much above average for the Middle East. While the country is overpopu~ted in relation to its developed productive resources., the population P!;,essure 1:: s1 • lightene~ by emigration; perhaps as many as a million people of Leba ~1ese extraction 1 live abroad, mainly in the Americas and along the west and north coast of Africa • Until the end of World Wa_r I, Lebanon be:J_onged t,o the Ottoman F.mpire., but the central part of the country., largely Christian, enjoyed a certain autonomy~ ~etween the two World Wars., Lebanon was under a Fr1anch mandate; it became fully independent ai'ter World War II. It is now a parliamentary demor.f:racy with proportionate repJtesentation assul'ed to the various religious groups. Since Lebanon gained independence, it has enjoyed a fair measure or internal stability and has established a reputation through its active role in international organizations. It has been a memper of the World Bank s:i.nce 1947. Econanic Situation Lebanon is not ri,phly endowed with na t,.iral productive resources. No large deposits or minerals"are lmown to exist; agricultural land is limited since 80% .or the area is mountiainous and much of it is rc;>cky. I~ is only because or the giga,ntic work or terracing carr:bad out by generations of i'anner~ tnat cultivation has been carried to the most remote and forbidding recesses or the mountains. That the countrrry ~s been able to achieve one of' the highest per ,capita :national incom~s in· the Middle :U:ast and to.make continuous economic progress is due to :lrts f'avoi-at,le geographic location arxl the skills of its \People. . '.cy'lllg at the crossroads of{\the East and; West and posses.~ed of a mixed Mo'.~lem-Christian population, ~t,banon has become a center of: entrepot and trai)sit trade. The • facilities of' the port of Beirut.t :\.ts fre.e zone and its air~\ort are of great im• porta.nce to the entire Middle East. The Lebanese have deveJ~oped special talents as merc~nts and middlemen in botn trade anc:l fj..nance, Beu.-~1t handles a la~g, 1"t  -s- • volume or commercial and financial transactions not only- for Lebanon arxi other Middle· Eastern coW1tries., but in the postwar years also for other c·ou:ntries. There is a free gold and foreign:exchange market in Lebanon which has\helped to attract a large flow of capital. Many Lebanese businessmen who have established lucrative business enterprises in nearly all parts of the world regularly ret~ part of their Pfofits to their homeland. Also other countries, particularly the oil-rich countries or the ¥dddle East., invest in Lebanon. In addition, the Lebanese have capitalized on the moUi,tains and ;good climate to develOp a thriving tourist. business. The national product has averaged r.J. billion ($350 million)- over the past f"ou:r years. In 1954., trade, services., transport., communications., finance and insurance accounted for about half the net national product. Agriculture and industry together accounted for about a ·lihird. While agricultural land is limited, Lebanon has been able to develop an intensive and profitable fruit cultivation. Along the coast, in the valleys and on the mountain slopes., the Lebanese grow a large variety.of fruit ranging from sub-tropical citrus fruits aIXi bananas to apples and pears. At present about u,15 million of fruit is exported annually. On the other hand, Lebanon must import a large proportion of its food staples, such as cereals and li ves·tock. Manufacturing industry amount~ to a little over 12% of the net national product. Since the country offers a limited market and derives much of it_~ prosperity from the prevailin_g_ freedom of trade and exchange, the Goverrnt~·..it is not protecting domestic industry to any significant degree. Despit~ this • and the inadequacy of facilities for meqium.and long-term credit, some industrial development has taken place in recent years. The country now has a fairly broad range of light industries - foodstuffs, beverages, textiles I wearing apparel,, wood and cork, fund ture, cement, printing., leather, rubber, chemicals and metal products. "~ Probably the most important of the natural resources which have not yet been fully utilized is the hy&foelectric and irrigation poten.tial ot the co·untry's rivers ... The Litani river project., which the Bank's l~n is helping ·to finance, should improv~ Pl"oepecte for further indust:ria.l and agicultural development • ••••• • • KARAOIJN OAM ,/ANO RESERVOIR • LEBANON LITANI RIVER PROJECT TUNNELS =====-= IRRIGATION SYSTEM • POWER PLANTS SUBSTATIONS TRANSMISSION LINES • APRIL, 1955