PRESENTATION Infrastructure and Privatization Inter Ministerial Committee Progress

PRESENTATION Infrastructure and Privatization Inter -Ministerial Committee Progress Report # 4 Beirut, Lebanon January 30, 2008 0

Today’s objective is to update your Excellencies on progress to-date against Commitment Documents of the respective stakeholders Meeting Objectives 4 Brief on the status of issues raised in the previous IMC and on progress to-date of GR PCO planning and monitoring activities – Following the last IMC dated August 24, 2007: 8 main issues were raised regarding the Power, Telecom and Transport Sectors, and the CDR – To-date, 2 issues were resolved, 1 is in progress, and 5 are delayed 4 Highlight progress and status of implementation of short-term programs in each sector (where available): – Monthly Progress Report against programs charted in commitment documents – New and Emerging Issues 1

Table of Contents 4 GR PCO Planning & Monitoring 4 Monthly Progress Reports – Telecom Sector – Power Sector – Transport Sector – CDR 4 Next Steps 2

The Paris III implementation planning process is generally on track, except for the Power Sector which is delayed, and the Transport Sector, which is still at the initiative identification phase Natural Owner Ministry of Telecom HCP Identification Prioritization of Initiatives ✓ ✓ Program Progress Commitment Charters KPI Setting Report Document Development ✓ ✓ ✓ ✓ Immediate Next Steps 4 Commitment document (no financial requirements) signed by Mo. T 4 Commitment document for Telecom and Power signed by HCP 4 Commitment document signed by TRA Ministry of Energy and Water / EDL Ministry of Transport CDR ✓ ✓ ✓ 50% Not Applicable ✓ ✓ ✓ (Targets missing) ✓ ✓ Not Applicable 4 Finalize KPIs for EDL 4 Commitment document for Power signed with no KPIs 4 Discuss Airport privatization roadmap and ports strategy development plan with Prime Minister/Minister of Transport and HCP SG 4 Commitment document signed by CDR ✓ 3

Table of Contents 4 GR PCO Planning & Monitoring 4 Monthly Progress Reports – Telecom Sector – Power Sector – Transport Sector – CDR 4 Next Steps 4

Monthly progress reports will highlight the status of each program – defined in a commitment document – along implementation, budget, and KPI dimensions Program Status and Budget Performance Definitions Status Implementation KPI 4 Completed on Time Budget Target 4 On Track 4 On Budget 4 Could be Delayed 4 Potential Over 4 Emerging Budget Issues 4 Delayed NS Budget 4 Not Started 4 Over Budget 4 N/A 4 On Target Budget Performance Initial Budget endorsed during an IMC Revised Budget adjusted using a Program Change Request Form endorsed during an IMC Actual Spent Amount spent until date of reporting Remaining Budget Requirements Estimate of the remaining budgetary requirements for the program 4 Off Target 4 N/A 5

Table of Contents 4 GR PCO Planning & Monitoring 4 Monthly Progress Reports – Telecom Sector – Power Sector – Transport Sector – CDR 4 Next Steps 6

Program Dashboard Program Title: TEL-001: Establish the Telecom Regulatory Authority Natural Owner: Minister of Telecom/TRA Period: January 2008 IMC: Infrastructure and Privatization Achievements Since Last Report Key Issues 4 Transfer of qualified staff from Mo. T completed KPI Transfer of Regulatory Functions from Mo. T to TRA Broadband licensing Note: (*) Defined in the legend Baseline 15% 0% Program Overall Status: New: 4 TRA budget approved but not transferred yet 4 Second advanced payment approved but not transferred as of January 18 th, 2008 4 Review and approval of Ministry of Finance for financial procedures still pending Carried Over from Previous IMC: 4 Need to complete the process in transferring documentation and information from Mo. T to TRA – Numbering assignment database – RF planning and studies (ATDI, and other) carried out to the benefit of Mo. T – Transfer of Satellite licensing information 4 Transfer of RF management equipment Current Value 75% 40% Target Status (Closest Date) 100% (April 08) Process launched (June 08) Budget Performance* Initial Budget $13, 500, 000 Revised Budget N/A Actual Spent $2, 000 Remaining Budget Requirements Estimate N/A Status N/A 7

Completed On Track Could be Delayed NS Not started 8

Program Dashboard Program Title: Tel-002: Corporatize and Privatize Liban Telecom Natural Owner: Minister of Telecom Period: January 2008 IMC: Program Overall Status: Infrastructure and Privatization Achievements Since Last Report Key Issues 4 Mo. T launched on IP TV pilot project 4 Mo. T is proceeding with its national project providing broadband services New: 4 None Carried Over from Previous IMC: 4 Need to appoint Liban Telecom Board of Directors or alternative governance structure KPI Liban Telecom Board appointment Percentage of employee migration from Ogero to LT Percentage of asset migration from Ogero to LT Percentage of customer migration from Ogero to LT Percentage of vendor migration from Ogero to LT Note: (*) Defined in the legend Baseline Current Value Delayed 0% 0% Target Status (Closest Date) Completed (Dec. 2007) Completed (Jul. 2008) Completed (Dec. 2008) Budget Performance* Initial Budget N/A Revised Budget N/A Actual Spent N/A Remaining Budget Requirements Estimate N/A Status N/A 9

Completed On Track Could be Delayed NS Not started 10

Program Dashboard Program Title: TEL-003: Privatize mobile telecom Natural Owner: Secretary General of HCP and Chairman Period: IMC: Infrastructure and Privatization January 2008 Achievements Since Last Report Regulations Issued by the TRA Baseline 4 Current Value 5 New: 4 None Carried Over from Previous IMC: 4 None Target Status (Closest Date) 12 (June 2008) 100% Mobile licensing process completion 0% 85% (May 08) Note: (*) Defined in the legend Program Overall Status: Key Issues 4 Review and finalizing of the 4 regulation issued for consultation (Interconnection, SMP, Consumer Affairs, and Quality of Service and Key Performance Indicators) 4 Issue Type approval regulation for consultation 4 Finalize request for application 4 Finalize information memorandum 4 Launch of the mobile licensing process 4 Opening of the online data room along the auction website 4 Finalize the mobile draft license 4 Finalize all related document (due diligence reports) 4 Finalize draft transaction document (SPA) KPI TRA Budget Performance* Initial Budget $ 13, 500, 000 Revised Budget N/A Actual Spent $ 2, 000 Remaining Budget Requirements Estimate N/A Status N/A 11

Detailed Workplan Progress -- Sep 1, 2007 - Feb 29, 2008 Start Date End Date 1. Privatize mobile telecom 1. a Draft and issue regulations (e. g. , Interconnection, Competition, Consumer Guidelines, Universal Services, National Roaming) 13/12/05 14/01/08 111 wks 02/04/07 28/12/07 40 wks 1. a. i Draft mobile telecom regulations 02/04/07 30/11/07 35. 8 wks TRA 1. a. ii Publish draft regulations on TRA website for review 08/06/07 03/12/07 26. 2 wks TRA Regulations drafted Draft regulations reviewed 1. a. iii Update draft regulations based on review 19/06/07 14/12/07 26. 8 wks TRA Draft regulations updated 1. a. iv Issue telecom regulations 03/07/07 28/12/07 26. 2 wks TRA Regulations issued 13/12/05 31/08/07 91. 4 wks 1. b. iv Negotiate and sign contract with investment bank 14/07/06 06/07/07 52. 6 wks 1. b. v Perform valuation of licenses 09/07/07 31/08/07 8 wks 13/12/06 12/09/07 40. 6 wks 1. c. iv Negotiate and sign contract with consultant 23/04/07 13/07/07 12. 6 wks HCP 1. c. v Conduct statutory audit of MIC accounts (2005 -2006) 02/04/07 31/07/07 18 wks 1. c. vi Reconstruct cash flows (2004 -2006) 01/08/07 29/08/07 4. 2 wks 1. c. vii Conduct vendor due dilligence 01/08/07 12/09/07 6. 2 wks HCP/ Mo. T (OSB) 06/12/06 25/09/07 43. 4 wks 1. d. iv Negotiate and sign contract with consultant 1. d. v Present key findings from technical review and site visits and status of KPI analysis 27/02/07 27/07/07 23 wks HCP Contract signed 01/08/07 21/08/07 3 wks HCP 1. d. v Draft technical section for Information Memorandum 01/08/07 04/09/07 5 wks HCP Key findings presented IM technical section drafted 1. d. vi Undertake KPI analysis 01/08/07 04/09/07 5 wks HCP KPIs determined 1. d. vii Verify networks' asset register 01/08/07 25/09/07 8 wks HCP Asset register verified 1. d. viii Forecast Cap. Ex over 12 month 01/08/07 25/09/07 8 wks HCP Cap. Ex forecasted 1. d. ix Perform network asset replacement valuation 01/08/07 25/09/07 8 wks HCP Valuation performed 1. b Perform valuation of licenses 1. c Perform financial due diligence 1. d Perform technical due diligence Completed On Track Could be Delayed Duration Workstep Responsible Program/ Initiative/ Workstep Deliverable/ Milestone HCP Contract signed HCP supported Valuation report by TRA completed Delayed Contract signed 2005 -2006 audit conducted 2004 -2006 cash flows reconstructed Vendor report submitted NS Not started Status 12

Completed On Track Could be Delayed NS Not started 13

Sector / Natural Owner Issues Register Issue ID Issue Level Issue Description Raised by Date Assigned to Mo. T/ TRA TEL-001 H Need to speed-up the process in transferring documentation, information, and employees (e. g. , TRA Radio Frequency, Licensing Chairman Authorizations, Studies) from Mo. T to TRA TEL-002 TEL-003 H H Minister of Telecom / HCP SG / BAH TRA Need to finalize the decision on Chairman / whether to sell or lease the mobile HCP SG / assets when issuing new licenses BAH 4 Mo. T to transfer frequency data to TRA Deadline Status 17/07/2007 Completed 4 Mo. T and TRA to develop a detailed 27/07/2007 Completed schedule for the transfer of documentation, information, and employees Minister of 4 Minister of Telecom to approve schedule Telecom 03/08/2007 Completed 05/07/2007 Mo. T/ TRA Need to appoint Liban Telecom Board of Directors or alternative governance structure Actions Needed 15/05/2007 Minister of Telecom 4 Mo. T and OGERO to transfer selected staff 20/08/2007 Completed to TRA, after issuing an internal memorandum 4 Transfer to be completed by October 1 st, 01/10/2007 (Expected completion date April 30, 2008) Delayed 4 Mo. T to assign PMO Members, who will report to the Steering Committee 18/05/2007 Delayed 4 Appoint Liban Telecom Board 30/06/2007 Delayed Dept. of 4 Minister of Telecom to transfer the file to 16/07/2007 Completed Legal & the Department of Legal and Legislation Matters (Do. LLM) at the Ministry of Justice Matters (Mo. J) 4 Do. LLM to decide if the assets can be sold 31/07/2007 Completed 15/05/2007 under the current Privatization Law (Assets can be sold) HCP SG 4 HCP/TRA to proceed and accelerate development of tender documents in On-going Completed coordination with Citigroup/JP Morgan 14

Table of Contents 4 GR PCO Planning & Monitoring 4 Monthly Progress Reports – Telecom Sector – Power Sector – Transport Sector – CDR 4 Next Steps 15

Program Dashboard Program Title: POW-001: Strengthen Sector Policy. Natural Owner: Minister of Energy and Water Making Capacity Period: January 2008 IMC: Program Overall Status: Infrastructure and Privatization Achievements Since Last Report Key Issues 4 Recommendations for the Generation segment will be submitted on 17 February 2008 Recommendations for the Transmission segment will be submitted on 17 April 2008 Integrated report will be submitted on 17 July 2008 4 Public Expenditure Review Completed New: 4 New variation order for NCC (New financing required) Carried Over from Previous IMC: 4 None KPI National Control Center implementation Master Plan for generation and transmission development Note: (*) Defined in the legend Baseline In Progress On Track Current Value In Progress On Track Target Status (Closest Date) Completed (Oct. 2008) Completed (Jul. 2008) Budget Performance* Initial Budget N/A Revised Budget N/A Actual Spent N/A Remaining Budget Requirements Estimate N/A Status N/A 16

Completed On Track Could be Delayed NS Not started 17

NS Completed On Track Could be Delayed NS Not started 18

Program Dashboard Program Title: POW-002: Improve EDL Operational Natural Owner: Minister of Energy and Water Efficiency Period: January 2008 IMC: Program Overall Status: Infrastructure and Privatization Achievements Since Last Report Key Issues 4 Viability report for Zouk Power Plant submitted 4 Tender was issued for Zouk and Jieh to perform feasibility study 4 Audit of 2002 accounts issued in draft form New: 4 EDL to provide KPI’s 4 Finalize Audit for 2002 account 4 Signature of Natural Gas agreement with Egypt 4 Proceed with Audit of financial statements from 2003 to 2006 Carried Over from Previous IMC: 4 Need to formalize KEPCO contract 4 EDL to follow up with consultants on the preparation of a technical report on the viability of Jiyyeh power plant 4 Advisors hired for Mo. EW, EDL and HCP have submitted their first deliverables – Decon contacted Azorom – Advisors should coordinate with IFC KPI Target Status (Closest Date) Baseline Current Value Non-Technical losses N/A N/A Bill collection rate N/A N/A N/A Average number of electricity hours per day (Country-wide) Percent distortion in electricity distribution between regions Note: (*) Defined in the legend Budget Performance* Initial Budget N/A Revised Budget N/A N/A Actual Spent Remaining Budget Requirements Estimate N/A Status N/A 19

Completed On Track Could be Delayed NS Not started 20

Completed On Track Could be Delayed NS Not started 21

Program Dashboard Program Title: POW-003: Corporatize and Privatize Natural Owner: Secretary General of the HCP EDL Period: Jan 2008 IMC: Infrastructure and Privatization Achievements Since Last Report Key Issues 4 EDL restructuring kick off was end of September 2007 4 Sector strategy presented to the PM and IMC committee in January 2008 and approved KPI New: 4 Need for law 462 amendment regarding certain issues Baseline Current Value 0% 10% Legal due diligence Not Started New EDL launch plans Not Started 50% Asset registry EDL Corporatization 5% 20% Establishment of additional production capacity through IPPs 10% 15% Collection Management and Metering 15% 55% Note: (*) Defined in the legend Program Overall Status: Target Status (Closest Date) Completed (Dec. 2008) Completed (Apr. 2008) Completed (March. 2009) Completed (Dec. 2009) Completed (Jun. 2008) Budget Performance* Initial Budget N/A Revised Budget N/A Actual Spent N/A Remaining Budget Requirements Estimate N/A Status N/A 22

Completed On Track Could be Delayed NS Not started 23

Completed On Track Could be Delayed NS Not started 24

Sector / Natural Owner Issues Register Issue ID POW-001 Issue Level H Issue Description Raised by Need to formalize KEPCO contract EDL Lack of consensus on approach regarding CRA issue (1. 2 million meters vs. 16, 800 pilot meters) POW-002 H POW-003 M A technical report on the viability of Zouk and Jiyyeh plants should be IMC developed POW-004 M No stakeholder assigned to undertake EDL asset registry POW-005 M BAH EDL Need to shift focus of auditors to EDL’s 2005 -2006 accounts (or have them work in parallel on 2002 HCP -2004 and 2005 -2006 accounts) Date Assigned to 05/07/2007 EDL Actions Needed 4 Stakeholders to agree on a solution to provide credit line to KEPCO 4 EDL to revise submitted offer of KEPCO Deadline Status 24/07/2007 Delayed 4 Agree on clear assignment of roles and 24/07/2007 Completed responsibilities pertaining to the CRA 16, 800 by Minister of contract, including the number of meters to Mo. EW and Energy be installed in both the short and long 1. 2 M by 05/07/2007 and Water terms HCP (incl. / EDL / funding) with HCP support from Mo. EW 4 EDL to follow up with consultants on the 31/07/2007 Completed preparation of a technical report on the viability of Zouk 05/07/2007 EDL 4 EDL to follow up with consultants on the 31/07/2007 Delayed preparation of a technical report on the viability of Jiyyeh 4 HCP is working on retrieving consultant to 01/10/2007 Delayed undertake EDL asset registration 05/07/2007 HCP EDL/Mo. F 4 Need to quickly secure funding for Grant Thornton 31/07/2007 Completed EDL 4 Audit of 2002 in final form 4 Audit for 2003 onwards not started 20/08/2007 05/07/2007 Delayed 25

Sector / Natural Owner Issues Register Issue ID POW-006 POW-007 Issue Level Issue Description Raised by H Mo. EW could consider the LNG option as an alternative to Natural Gas Minister of Energy and Water and CDR President H Advisors hired for Mo. EW, EDL and HCP might have different Minister of orientations, which could create Finance conflicts or inconsistencies among their recommendations Date 05/07/2007 Assigned to HCP and CDR Actions Needed 4 HCP and CDR to request from their consultants to include the assessment of the supply of LNG to the Beddawi plant within their scope of work Deadline Status 20/08/2007 Completed 4 Current Infrastructure & Privatization IMC 31/08/2007 Completed Sub-Committee (PM, Mo. EW, EDL, HCP, Mo. F) to steer the work of all advisors: The Minister of scope of work of EDL advisors should be Energy channeled toward preparing for the set 05/07/2007 and Water form corporatization, once sector strategy / EDL / is agreed HCP 4 Reinforce the Sub-Committee with some Technical Assistance 26

Table of Contents 4 GR PCO Planning & Monitoring 4 Monthly Progress Reports – Telecom Sector – Power Sector – Transport Sector – CDR 4 Next Steps 27

Airport privatization roadmap and ports privatization approach were developed by the GR PCO consultant, and need to be discussed with the Minister of Transport and HCP Secretary General Transport Sector Progress 4 Following the request of the Prime Minister and the Minister of Transport during the IMC meeting on 5/7/2007, the GR PCO consultant developed the following: – Air Transport: Detailed roadmap for the privatization of the Beirut Rafic Hariri International Airport (BRHIA) – Maritime Transport: Approach to privatizing the different ports, including quick-wins 4 These proposals need to be discussed and finalized with the Prime Minister, the Minister of Transport and HCP Secretary General 28

Table of Contents Air Transport Maritime Transport 29

The aviation sector liberalization Law 481 calls for the set up of an Aviation Authority and an Airport Company, and clearly defines the roles and responsibilities of each Planned Institutional Structure of Civil Aviation in Lebanon Entity Government Responsible Agency Ministry of Public Works and Transport (MPWT) Key Roles 4 Propose CAA Board appointment or termination for the Council of Ministers 4 Set compensation and rules for Board Directors 4 Provide guidelines and approve overall aviation policy 4 Propose aviation policy and key initiatives Planning and Regulation Civil Aviation Authority (CAA) 4 Develop and enforce safety and economic regulations for airports, airlines and air traffic control 4 Propose development project for existing and new airports 4 Negotiate international agreements and ensure close cooperation with ICAO and other international and regional organizations Operations Beirut Rafic Hariri International Airport Corporation (BRHIAC) 4 Plan and manage airport operations in coordination with government agencies 4 Plan and decide on subcontracting service providers for airport activities, and ensure supervision and coordination of all providers 4 Provide air navigation, communication, and metrological observation services Source: Law 481, Other Regulations 30

The CAA is the safety and economic regulator, while BRHIAC is the company that is fully responsible for running the Beirut Airport Allocation of Selected Key Aviation Responsibilities Minister of Transport Aviation Policy 4 Set guidelines, approve policies, and 4 Develop draft policy and laws in submit for Co. M (where needed) consultation with stakeholders Safety Standards Accident / Incident Investigation Licensing Personnel, Equipment and Flights Bilateral Agreements Airport / Airline Tariff 4 Accident Investigation office under Minister leads investigations 4 Develop and Enforce safety standards and rules for airport, airline, and ATC 4 Contribute to accident and incident investigation 4 License personnel, aircrafts and airline flights in line with safety and bilaterals 4 Review and process for approval as 4 Conduct negotiations and implement provisions per Lebanese law 4 Approve aviation tariff and/or refer to Co. M as per aviation laws 4 Set fees for services by CAA 4 Review and approve aviation tariff BRHIAC 4 Contribute / Propose own plans 4 Fully comply with all safety standards 4 Contribute / participate 4 Ensure personnel, aircraft and flights admitted are licensed 4 Provide input 4 Collect airport fees and fares 4 Plan and submit studies for airport development and investment initiatives 4 Review compliance with regulations 4 Develop tender and approve and safety guidelines winners in compliance with laws 4 Review plans for compliance with safety and economic regulations Airport developments / investments Outsourcing Contracts and Tenders Operations Management, Outsourcing Supervision Airport Planning and Budgeting CAA 4 Review and submit budget for government approval 4 Review compliance with regulations 4 Plan and manage operations and license personnel and supervise all service providers equipment 4 Develop and propose airport plans and budgets Source: Law 481, Other regulations 31

The Go. L postponed the creation of the CAA and BRHIAC despite the enactment of the aviation Law and the CAA decree since 2002 and 2003 Civil Aviation Institutional Structure – Status of Implementation Current Organization of the Directorate General of Civil Aviation Current Status Director General Technical Affairs Meteorology Aviation Safety Air Transport Research and Studies Airports Air Navigation Directorate Airport Studies Directorate Equipment Maintenance Directorate Beirut Airport Presidency Air Communication Directorate Technical Installation Directorate Source: Directorate General of Civil Aviation 4 In August 2003, the Co. M issued decrees defining and creating the organization of the CAA, as well as incorporating the BIAC 4 Since then, studies have been prepared for detailed organization and manpower of the new institutional set up 4 However, the Go. L has delayed implementation of the decrees, without providing a revised timeline 4 To-date, the CAA Board is not appointed and no progress have been made in setting up BRHIAC 32

The new CAA organization is planned to have two core functions focused on safety and economic regulations Proposed Civil Aviation Authority Organization Structure(1) CAA Board of Directors Performance & Quality Control Administrative Directorate Civil Aviation Safety Directorate Secretariat of the Authority Air Transport Directorate Environment & Meteorology Directorate Lebanese Civil Aviation Training Center Financial Affairs Airworthiness Int’l Agreements & Authorizations Meteorology Promotion & Development Legal Affairs Flight Operations Economic Studies & Financial Revenues Environment & Climate Human Resources & Technology Transfer Personal Affairs & Supplies Licenses Information Technology Aerodrome Public Relations Air Traffic Safety and Economic Regulatory Functions (1) Proposed as part of a study on the organization, job descriptions and manpower plans of the new CAA and BRHIAC Source: Directorate General of Civil Aviation 33

Most of the Beirut Airport activities are currently managed by MEA subsidiaries or private companies Beirut Rafic Hariri International Airport – Privatized Activities Government MEA* Subsidiary Privatized through Concession Comments Infrastructure provision & site management 4 Managed by Directorate General of Civil Aviation (DGCA) Asset / Facility Management 4 Managed by Directorate General of Civil Aviation (DGCA) Free Zone 4 Managed by Directorate General of Civil Aviation (DGCA) Asset / Facility Operation and Maintenance 4 Operated and maintained by Middle East Airports Services (MEAS) 4 15 -year BOT concession won by Al-Khorafi of Kuwait Airport parking Retailing 4 15 -year concession won by Phoenicia-Aer Rianta Company Catering 4 15 -year concession awarded to Abella Fueling 4 15 -year concession won by a consortium of 5 local companies Cargo Ground Handling Aircraft Maintenance Aircraft Catering 4 Cargo handled by Middle East Airlines Ground Handling (MEAG) 4 Ground handling by MEAG, LAT, ASAS, EAS, Flying Carpet, and Beirut Wing 4 Aircraft maintenance by Mideast Aircraft Services Company (MASCO), and TMA 4 Aircraft catering by Lebanese Beirut Airport Catering Company (LBACC) Note: (*) MEA is organized as a private company under the commerce code, but is 96% held by the Go. L and is under the financial responsibility of BDL 34

However, four key requirements need to be addressed upfront to enable the privatization Beirut Rafic Hariri International Airport Privatization – Key Requirements Description 4 Appoint the Board of Directors CAA Set Up 4 Fully develop the organization and build all requisite safety and economic regulations capabilities 4 Appoint the Board of Directors BRHIAC Set Up Government Agencies Coordination Timing 4 Fully develop the organization 4 Transition all airport operating responsibilities and staff from DGCA to BRHIAC as per Law 4 Ensure each government agency understands and accepts its mandate post-privatization 4 Ensure coordination and conflict resolution mechanisms between government agencies 4 Confirm the form of the privatization option and define the process timeline – consider extending Lease term to more than 50 years 4 Determine a transaction timing with favorable growth prospects and political situation Rationale 4 Potential investors need to be reassured about the existence of an independent regulator, as such, they need to know who the regulator will be 4 Potential investors need to be reassured about the split between the regulator and the operator of the airport 4 Unsupportive and uncoordinated work of government security and control agencies directly impacts negatively on airport operations and commercial services 4 The ability to attract investors and the value of privatization proceeds is heavily dependent on traffic growth prospects and political stability 35

As such, the privatization roadmap starts with the establishment of the institutional structure before developing the privatization scheme P RE List of Programs and Initiatives Sector Programs and Initiatives Stakeholders LIM Preliminary Timeline Implem. Comments INA RY 1. Set up Institutional Structure 1 a. Set-up the CAA and appoint the Board of Directors MPWT, Co. M Q 3 2007 1 b. Develop CAA organization and capabilities (Safety CAA Board and economic regulations) 1 c. Set-up BRHIAC and appoint Board of Directors MPWT, Co. M Q 4 2007 1 c. Develop BRHIAC organization and transition responsibilities fro DGCA 1 d. Plan and implement the transition of responsibilities, assets and staff from DGCA to BRHIAC 1 e. Develop necessary laws and regulations for Free Zone / “Airport City” BRHIAC Board Q 4 2007 CAA, MPWT, Co. M Q 4 2007 – Q 2 2008 2 a. Confirm goals of privatization and establish priorities of key stakeholders 2 b. Evaluate privatization options against priorities, airport investment market and financial impact 2 c. Select and approve preferred option HCP Q 3 2007 HCP, BRHIAC, CAA Q 4 2007 Co. M, HCP, MPWT, BRHIAC Q 1 2008 2 d. Draft Terms of Reference HCP, BRHIAC Q 1 2008 2 e. Detail full transaction process and timeline HCP Q 1 2008 2 f. Develop and secure official approval on coordination mechanism of government agencies at the airport CAA, BRHIAC Q 1 2008 – Q 2 2008 Q 3 2007 2. Develop Privatization Scheme and Process XXX Natural Owner IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 36

The privatization can then be launched at the right timing, targeting selected operators and followed by a carefully planned transition PR EL List of Programs and Initiatives Sector Programs and Initiatives Stakeholders Preliminary Timeline Implem. Comments IM INA RY 3. Implement the Privatization Process 3 a. Identify potential local and international operators HCP, BRHIAC Q 2 2008 3 b. Short-list target operators against fit with privatization scheme and political sensitivities 3 c. Finalize Terms of Reference and Tender documentation 3 c. Decide on timing of the launch of process based on growth and political prospects 3 d. Conduct roadshow to short-listed operators and formalize Expressions of Interest through consultative issue of tender documents 3 e. Draft and issue final tender documents and schedule Q&A sessions 3 f. Receive and evaluate bids against criteria MPWT, HCP, BRHIAC Q 2 2008 HCP Q 3 2008 MPWT, HCP, BRHIAC Anytime after Q 2 2008 HCP, BRHIAC Q 4 2008 HCP Q 4 2008 3 g. Select preferred bidder and ensure selection is certified through the right legal process 3 h. Notify bidders of outcome HCP, BRHIAC, MPWT, Co. M Q 1 2009 HCP Q 1 2009 4 a. Sign contract and launch mobilization HCP, BRHIAC, CAA Q 2 2009 4 b. Plan and execute transition to new operators BRHIAC Q 2 2009 – Q 3 2009 4. Transition to Private Operator XXX Natural Owner IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 37

Table of Contents Air Transport Maritime Transport 38

Beirut and Tripoli Ports are currently operated and managed by the Go. L, except for the Container Terminal activities of the Port of Beirut (Po. B) which are outsourced through a concession agreement Ports Components Privatization in Lebanon Government Beirut Port Comments Infrastructure provision & site management 4 Managed by Gestion et Exploitation du Port de Beyrouth (GEPB) Asset / Facility Management 4 Managed by Gestion et Exploitation du Port de Beyrouth (GEPB) Asset / Facility Operations and Maintenance 4 Operated and maintained by Gestion et Exploitation du Port de Beyrouth (GEPB) General Cargo Operations 4 Managed and operated by Gestion et Exploitation du Port de Beyrouth (GEPB) Container Terminal Operation Tripoli Port Privatized through Concession Infrastructure provision & site management Asset / Facility Management Asset / Facility Operations and Maintenance All Cargo and Container Operations Note: (*) Mediterranean Shipping Company (MSC) 4 POB subcontracted container terminal operation to Beirut Container Terminal Consortium (BCTC) in February 2005 4 POB signed a partnership contract with MSC* 4 CMA-CGM also established a hub at POB 39

Three key requirements need to be addressed upfront to enable the privatization of Beirut and Tripoli Ports Privatization – Key Requirements Description Maritime Sector Strategy Maritime Sector Privatization Law Maritime Transport Authority (MTA) Set Up 4 Develop a Maritime Transport Sector Vision for Lebanon 4 Develop a 5 -year Maritime Transport Strategy 4 Clarify the appropriate organization and roles of port administrations, regulatory institutions, and the private sector 4 Develop a Privatization Law for the Maritime Sector 4 Specify the potential privatization options, and define the transition of responsibilities and staff phases Rationale 4 Go. L needs to have a clear vision and strategy allowing it to have a clear maritime structure and privatization path 4 A law (similar to Civil Aviation Law 481) needs to be drafted for the Maritime Sector in order to enable port privatization 4 Establish a Maritime Transport Authority 4 Appoint Board of Directors of MTA 4 Fully develop the organization and build all requisite safety and economic regulations capabilities 4 Potential investors need to be reassured about the existence of an independent regulator 40

Maritime Sector Privatization Roadmap PR EL Preliminary Targets: Sector Policy 1/9/2007 I. 1 Assess Market Demand Economics I. 2 Develop Maritime Sector Strategy I. 3 Define Liberalization and Commercialization Options and Timelines I. 4 Develop Regulatory Structure, Methodologies, and Phased Regulations Sector Liberalization 2008 2009 Ports Privatization 2010 Restructure and Corporatize Functional Areas (when applicable) Develop Port of Beirut by Increasing the Holding Capacity of the Container Terminal* Commercialize Administrative, Human Resources and Internal Services Complete Development Work of the Port of Tripoli* Commercialize Service Provision Determine Implications and Critical Improvements for Infrastructure Model INA RY 2011 Develop & Strengthen Regulator Capability II. 1 IM II. 3 Develop Privatization Plan for Commercial Maritime Assets I. 5 Develop Maritime Sector Privatization Law Strategy Components II. 2 Develop Port and Port-related Business Strategies II. 4 Determine Socio-Economic Implications by Region Operational Restructuring Source: (*) Lebanon Maritime Transport Policy , May 2006 41

As such, the privatization roadmap starts with the development of a sector strategy and establishment of the institutional structure, before developing the privatization scheme PR E List of Programs and Initiatives Sector Programs and Initiatives Stakeholders LIM Preliminary Timeline Implem. Comments INA RY 1. Set up Institutional Structure 1 a. Develop Maritime Sector Strategy (Policy) MPWT Q 4 2007 1 b. Develop Maritime Sector Privatization Law HCP, MPWT, Co. M, Parliament MPWT, Co. M Q 4 2007 MRA Board Q 2 2008 MPWT, MTA Q 2 2008 – Q 3 2008 1 c. Establish the Maritime Transport Authority (MTA) and appoint its Board of Directors* 1 d. Develop MTA organization and capabilities* 1 e. Transfer regulatory responsibilities to the MRA* 1 c. Setup Port Company, and appoint its Board of MPWT, Co. M Directors* 1 c. Develop Port Company organization and plan PBC Board transition of responsibilities from GEPB* 1 d. Plan and implement the transition of PBC Board responsibilities, assets and staff to Port Company* Q 1 2008 Q 4 2008 Q 1 2009 2. Develop Privatization Scheme and Process 2 a. Confirm goals of privatization and establish priorities of key stakeholders* 2 b. Evaluate privatization options against priorities, airport investment market and financial impact* 2 c. Select and approve preferred option* HCP Q 3 2008 HCP, MTA Q 4 2008 HCP, Co. M, MPWT Q 1 2009 2 d. Draft TORs, and design full transaction process and timeline in details* 2 e. Develop and secure official approval on coordination mechanism of government agencies at the ports* HCP Q 1 2009 MTA Q 1 2009 – Q 2 2009 Note: (*) In light of Sector Strategy and Privatization Law outcome XXX Natural Owner IMPLEMENTATION: S: Short term M: Medium Term L: Long Term 42

Sector / Natural Owner Issues Register Issue ID Issue Level Issue Description Raised by Date Assigned to GR PCO TRA-001 H Minister of Strategy relating to privatization of Transport / other public entities (e. g. , airport, Minister of ports) still under development Finance Actions Needed 4 Develop transport sector privatization roadmap, within scope of current legislation Deadline Status 31/07/2007 Completed 15/05/2007 Minister of 4 Align transport sector stakeholders on Transport/ privatization roadmap HCP SG 10/08/2007 Delayed 43

Table of Contents 4 GR PCO Planning & Monitoring 4 Monthly Progress Reports – Telecom Sector – Power Sector – Transport Sector – CDR 4 Next Steps 44

Program Dashboard Program Title: CDR-001: Restructure CDR’s capacity to undertake investments Natural Owner: President of CDR Period: January 2008 IMC: Program Overall Status: Infrastructure and Privatization Achievements Since Last Report Key Issues 4 Job Vacancies List Prepared 4 Consultants on contract basis hired (from foreign grants) 4 New Procurement Law endorsed by Co. M New: 4 None Carried Over from Previous IMC: 4 None KPI Percentage of vacant key positions filled Note: (*) Defined in the legend Baseline Current Value 0% 70% Target Status (Closest Date) 100% (29/02/2008) Budget Performance* Initial Budget $ 2, 000 Revised Budget N/A Actual Spent N/A Remaining Budget Requirements Estimate N/A Status N/A 45

NS NS Completed On Track Could be Delayed NS Not started 46

Program Dashboard Program Title: CDR-002: Develop Public Investment Plan for 2009 -2012 Natural Owner: President of CDR Period: January 2008 IMC: Program Overall Status: Infrastructure and Privatization Achievements Since Last Report Key Issues 4 Public Investment Plan submitted to Council of Ministers New: 4 None Carried Over from Previous IMC: 4 None KPI Note: (*) Defined in the legend Baseline Current Value Target Status (Closest Date) Budget Performance* Initial Budget N/A Revised Budget N/A Actual Spent N/A Remaining Budget Requirements Estimate N/A Status N/A 47

Completed On Track Could be Delayed NS Not started 48

Sector / Natural Owner Issues Register Issue ID Issue Level Issue Description Raised by Date Assigned to Actions Needed Deadline Status 4 A Task Force including the CDR, Mo. F and 23/07/2007 Completed the Office of PCM to be created in order to oversee the development of the Public Investment Plan CDR-001 H CDR needs to develop a Public Investment Plan aligned with Paris CDR III requirements CDR President, 4 CDR and Ministry of Finance to coordinate 20/08/2007 Completed Minister of the preparation of a preliminary Public 05/07/2007 Finance, Investment Plan to be ready for the next and Office IMC of PCM 4 CDR and Ministry of Finance to coordinate 09/09/2007 Completed the development of a draft Public Investment Plan for 2009 -2012 49

Table of Contents 4 GR PCO Planning & Monitoring 4 Monthly Progress Reports – Telecom Sector – Power Sector – Transport Sector – CDR 4 Next Steps 50

Next Steps Actions Required 4 Telecom Sector: – Appoint Liban Telecom Board in order to proceed with the corporatization process – Transfer relevant documentation and information from the Ministry of Telecom to TRA – Transfer TRA budget – Review and approval of Mo. F for financial procedures 4 Power Sector: – Secure financing for the variation order of the NCC – Finalize 2002 audits and proceed with audit of 2003 to 2006 – Formalize KEPCO contract – Follow up with consultants on the preparation of a technical report on the viability of Jiyyeh – Sign the Natural Gas agreement with Egypt 4 Transport Sector: – Align key stakeholders on a roadmap for implementing priority programs – Develop Commitment Document 4 CDR: – Proceed with the recruitment of the key positions 51