On 8 December at a meeting in Jerusalem, government ministers from Israel, Greece and Cyprus agreed to continue their promotion of a natural gas pipeline from Israel to Europe. Senior ministry officials also attended the meeting, including from the Israel Ministry of National Infrastructure, Energy, and Water Resources, the Greek Minister of Economy, Development and Tourism and the Cypriot Minister of Energy, Commerce, Industry and Tourism.

The current working assumption is that the cost of a pipeline to northwestern Greece and from there to Italy and Bulgaria will be $5.7 billion; it will be economically worthwhile at prices of $7 – 9 per BTU. Energy sources believe that this estimate of the cost is at least $2 billion lower than the true cost, and that this per BTU price is likely to be non-competitive within a few years, and certainly at a time when Russia is selling 175 BCM a year to Europe, amounting to 43% of all the gas consumed there in 2015, at an average price of $4.40 per BTU. (Globes 08.12)

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1.2 Bank of Israel’s Karnit Flug Says Israel’s Economy is in Good Shape

On 11 December, the Governor of the Bank of Israel told the Globes Israel Business Conference that Israel must focus on the longer term. Flug described the state of the Israeli economy as “good” in comparison with the rest of the world. “Growth in Israel is moderate, but the economy is growing,” Flug declared. “There is improvement in employment, wages are rising, and the general macroeconomic situation is good. We have to focus on the longer term.”

”Essentially, we’re not looking at what other central banks are doing about the interest rate; we are interested in how their decisions affect us. We’re now close to full employment. Wages are rising and all the indications are that the economy is close to full employment.” Flug added, “The central bank cannot do much directly about inequality; it acts as an advisor to the government on economic matters.” She said she was working “very closely with the minister of finance (Moshe Kahlon) to promote reforms that will encourage competition, but which will also maintain stability in the financial system.

”The challenge is to persuade (the politicians) to address the long-term issues, and because the macroeconomic situation is good, we have a reason to talk about the coming generations. We can talk about differential taxation for poor working people. The government supports the entry of people into the labor force, and that is excellent, but these people lack the right capabilities, and this is something that we have to address now.”

Concerning the banking system, Flug said, “The banks in Israel are stable and well-supervised. They are conservative, and were a stabilizing factor during the economic crisis. We want to encourage competition only in places where it is inadequate. We certainly need to keep in mind the significance of a crisis in the financial market. We are therefore in favor of a very balanced reform.” (Globes 11.12)

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1.3 Knesset Votes On Extensive Banking Sector Reforms

On 13 December, Israeli parliamentarians were expected to finalize the language of a banking reform bill aimed at increasing competition, paving the way for its second and third readings in the Knesset on 14 December. The chief provision of the bill will prevent banks from issuing credit cards. Israel’s three credit card companies are currently owned by four banks: Bank Hapoalim owns 98% of Isracard, Leumi Card is controlled by Bank Leumi (80%), and Visa Cal-Israel is held by Discount Bank (72%) and the First International Bank of Israel (28%). Banking revenues from credit companies’ holdings average 657 million shekels ($173 million) a year. Other provisions in the new bill seek to create a new unified authority to supervise the financial system, licensing a cooperative bank, and advancing internet banking.

The bill is based on a report issued by a special commission tasked with proposing ways to increase competition in the financial service industry. In its report, the committee said separating credit card companies from banks could reduce the big banks’ overall market share, introduce new players, and boost credit card companies. The commission also recommended imposing limits on the lines of credit banks can offer their clients, reducing the clearing fees for small businesses, and other measures aimed at reducing market concentration. (Various 13.12)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 OurCrowd’s Global Investor Summit: World’s Largest Equity Crowdfunding Conference

OurCrowd, the world’s leading equity crowdfunding platform, will host the 2017 OurCrowd Global Investor Summit on 16 February 2017 in Jerusalem. It will be the world’s largest equity crowdfunding event and the biggest investor event in the Startup Nation. Registrations have already doubled from this time last year, with up to 5,000 people from the global tech investment community expected to attend. Attendees will span an expected 60 countries, and will include investors, venture and corporate partners, entrepreneurs, 30 global delegations, industry leaders and members of the press. This year, delegates will see the startup technologies changing the world, presented by a stellar lineup of senior executives from some of the largest and most innovative global companies. The 2017 OurCrowd Global Investor Summit theme, “The Future Is Here,” will showcase how 2016’s highlighted cutting-edge technologies are being implemented in businesses now and remaking entire industries. More than 100 startups making news are slated to participate.

Summit attendees will also hear from the venture capital professionals evolving the face of investing, as the startups they support have begun to leverage the collective intelligence and connections of the crowd to super-charge their businesses. They will also experience the power of the crowd hands-on, by participating in onsite real-time synergizing and the Summit’s popular interactive Crowd Investing Hackathon, as well as meeting peers from the largest collaborative venture capital community in the world.

Jerusalem’s OurCrowd is the leading global equity crowdfunding platform for accredited investors. Managed by a team of seasoned investment professionals, OurCrowd vets and selects opportunities, invests its own capital and brings companies to its accredited membership of global investors. OurCrowd provides post-investment support to its portfolio companies, assigns industry experts as mentors, and takes board seats. The OurCrowd community of over 15,000 investors from over 110 countries has invested over $320m into 100 portfolio companies and funds. OurCrowd has already had nine exits to date: two IPOs and seven acquisitions. (OurCrowd 06.12)

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2.2 Secdo Raises $10 Million to Grow Its Incident Response Platform

Secdo has raised $10 million in a Series A round led by RDC and Check Point cofounder and chairman Marius Nacht, with participation from the founders of Anobit, a startup acquired by Apple back in 2011. Founded out of Israel in 2014, Secdo promises to help security teams cut incident response times from hours to minutes. The Secdo platform automates the process of detecting and investigating suspicious activity, thereby “lowering the skills barrier,” as the company puts it, and making security teams more effective. It essentially provides insight and context for every endpoint to establish whether a detected “suspicious” activity indicates a real threat, such as ransomware. The company had previously raised a $3 million seed round from the same investors, and it says its fresh cash injection will be used to expand its U.S. sales operations, customer support and research and development. (Secdo 06.12)

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2.3 NantHealth Inks Exclusive Reseller Agreement for GPS Cancer with Oncotest-Teva in Israel

NantHealth, a leading next-generation, evidence-based, personalized healthcare company, announced that it has entered into an exclusive reseller agreement for GPS Cancer, the leading molecular test that helps guide treatment strategies including choice of standard chemotherapy for oncologists, with Oncotest-Teva, a pioneer in the field of personalized medicine and a subsidiary of Teva Pharmaceutical Industries in Israel. This landmark agreement, which expands the GPS Cancer footprint globally, adds a key international distributor to the growing set of health plans, health systems, and Fortune 50 companies that have committed to covering or using GPS Cancer since its commercial availability in June 2016.

Under the terms of the agreement, Oncotest-Teva will have exclusive rights to distribute GPS Cancer to physicians in Israel. GPS Cancer, which integrates quantitative proteomics with whole genome (DNA) and transcriptome (RNA) sequencing, is the only integrated comprehensive molecular test of its type conducted in CLIA-certified and CAP-accredited laboratories.

Shoham’s Oncotest-Teva is a pioneer in the field of personalized medicine in Israel. For almost two decades, Oncotest-Teva has been focusing on identification of novel approaches to diagnosing malignant diseases and predicting the course of disease, according to the unique genetic profile of the patient and tumor cells, and more precise and more effective matching of therapeutic directions. (NantHealth 06.12)

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2.4 Beamr Announces New Funding from Verizon Ventures

Beamr Imaging secured an additional $4 million in funding from Verizon Ventures. Joining existing investors Eric Schmidt’s fund Innovation Endeavors, Marker and Disruptive, Verizon Ventures’ investment will support Beamr’s contribution to improved network performance and video quality. This new funding enables Beamr to accelerate development of solutions that will feature the company’s highly regarded and patented perceptual quality measure technology.

As continuously improving display technologies boost consumers’ expectations of video quality, and with the rise of 4k, HDR, VR and 360 video formats, Beamr’s H.264 and H.265/HEVC video optimization technology and encoders are finding their place in critical video workflows such as OTT streaming services, cable and satellite systems, and managed IP networks. Through the application of Beamr Optimization, large network operators are seeing the tangible effects of reducing video traffic and storage costs by 20% or more.

Tel Aviv’s Beamr is the leading provider of encoding, and optimization solutions for the world’s top MSOs, OTT streaming service providers, Hollywood studios, web publishers and social content publishing platforms. Founded in 2009 by a team of leading imaging experts, Beamr’s suite of high-performance H.264 and H.265/HEVC video processing solutions are fully scalable for use in on-premise and cloud implementations. Beamr’s flagship product, Beamr Video, represents the industry’s first content adaptive perceptual quality measure driven optimizer that significantly reduces the bitrate of video streams and files without sacrificing quality. Beamr’s encoder product line includes broadcast quality H.265/HEVC and H.264 codec SDK’s for x86 and ARM platforms, while supporting popular operating systems like Windows, Mac OS X, and Linux. (Beamr Imaging 06.12)

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2.5 Acquisition of Karish and Tanin Natural Gas Fields by Energean Approved by Israeli Petroleum Council

The Petroleum Council of Israel approved the acquisition of 100% of the Karish and Tanin Natural Gas Fields by Energean Oil & Gas from Delek Drilling and Avner. The transaction, estimated to be valued at $148m, is being implemented as part of the Israeli Government’s Gas Framework Strategy. The Karish and Tanin Fields, discovered in 2013 and 2011 respectively, have 2C gas resources of circa 2.4TCF. Energean will now proceed towards completion of the transaction, and within six months from that date will submit to the Israeli authorities a Field Development Plan (FDP) for both fields. The Company intends to produce first gas in 2020. The development of Karish and Tanin is expected to involve an investment of circa $1 billion over the next few years.

The Karish and Tanin FDP is the third FDP that Energean is committed to over the next few years with development programs being prepared for the Epsilon (North Aegean Sea) and West Katakolon (Western Greece/Ionian Sea) with combined 2P reserves of circa 25 million barrels. Energean has additional exploration acreage in Western Greece, Montenegro and Egypt. The Company anticipates an investment of around $1.3 billion in exploration and development (including Karish and Tanin) over the next 5 years. (Energean 07.12)

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2.6 Avery Dennison to Acquire Hanita Coatings

Glendale, California’s Avery Dennison Corporation agreed to acquire Hanita Coatings, a pressure-sensitive materials manufacturer of specialty films and laminates from Kibbutz Hanita Coatings and Tene Investment Funds for the purchase price of $75 million, subject to customary adjustments.

With 2015 sales of roughly $50 million, Hanita Coatings currently employs more than 220 employees, most of whom are located at the company’s headquarters in Israel’s Western Galilee. The 33-year-old company generates sales in more than 40 countries. Avery Dennison expects that completion of the transaction will take up to a few months, subject to customary closing conditions and approvals.

Headquartered in Israel with sales and distribution facilities in the United States, Germany, China and Australia, Hanita Coatings develops and manufactures coated, laminated, and metallized polyester films for a range of industrial and commercial applications, all of which require high performance and superior quality. Hanita Coatings’ window films are used in architecture and automotive aftermarkets; its top-coated polyester films are used in the manufacture of durable labels; and its ultra-high barrier films form part of insulation systems used in refrigeration, buildings and cold chain packaging. (AVY 13.12)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 1776 Dubai to Support Lebanese Tech Start-Ups

1776, a Washington, DC-based technology incubator with a direct presence in Dubai, has signed a partnership agreement with the UK Lebanon Tech Hub (UKLTH), a joint initiative by Banque du Liban (Lebanon’s Central Bank) and the UK Government. The partnership is aimed at supporting Lebanon’s fastest-growing tech start-ups and help them break into new international markets such as the UAE and the neighboring Gulf countries. Start-up companies will be jointly selected by UKLTH and 1776 for an acceleration Program in Dubai based on the following criteria: a scalable business model, sectorial focus (EdTech, FinTech, digital health, and smart cities), socio-economic impact, and readiness to enter international markets.

The partnership provides UKLTH start-ups with access to 1776’s global digital platform Union, which was launched at the 2016 Global Entrepreneurship Summit and includes learning resources and a global network of mentors and investors. In addition, they will get a branded working space at the 1776 Dubai campus alongside the Dubai Future Accelerators (DFA) in Emirates Towers and an active participation during the annual 1776 Challenge Cup global start-up competition. The first batch of UKLHT start-ups to be based at 1776 Dubai includes Kamkalima, a web-based platform that helps teachers create engaging assignments in Arabic, Riego, a maker of smart, solar-powered irrigation devices, and Artscoops, an exclusive online auction and sale channel for art buyers worldwide. (Various 07.12)

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3.2 KASOTC & PepperBall Form Strategic Partnership for Customized Non-Lethal Training Course

The King Abdullah II Special Operations Training Center (KASOTC) is the premier training center in the Middle East for police, military, and special operations. In KASOTC’s continuous vision and mission to be at the forefront of integrating training and technology within the region and the world, it is pleased to announce that it has strategically partnered with Illinois’ PepperBall to create a customized non-lethal training course for the police, military and security forces worldwide. PepperBall, a division of United Tactical Systems, LLC, is the world’s leader in non-lethal .68 OC and CS systems.

The KASOTC Non-Lethal PepperBall course consists of a three day weapons, tactics and armorers’ training course. The course features training on the most advanced pneumatic launchers, including PepperBall’s VKS (Variable Kinetic System). The VKS launcher is unique in that its velocity can be adjusted to shoot projectiles from 280fps to 400fps, a single system that can be used for multiple missions. It also offers the ability to fire PepperBall’s round projectiles, as well as its VXR shaped projectiles, which doubles the system’s accurate effective distance.

Illinois’ PepperBall is the world’s premier manufacturer of .68 launchers and OC/PAVA projectiles, supplying high-technology non-lethal products to over 5000 agencies in 45 countries around the world. PepperBall-branded products are developed, manufactured and distributed by United Tactical Systems, LLC (UTS), a privately held company that provides less-lethal weapons for military, government, law enforcement, corrections, private security and consumer markets. (KASOTC 02.12)

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3.3 Slim Chickens & Alghanim Launch International Partnership for Middle Eastern Presence

Fayetteville, Arkansas’ Slim Chickens, a leader in the “better chicken” segment of fast-casual restaurants, will continue expansion of its fresh chicken concept for the first time outside of the United States through a partnership with Alghanim Industries, one of the largest privately owned companies in the Middle East and North Africa (MENA). The two companies announced today that they have entered into a master franchise agreement that will enable Alghanim Industries to introduce the Slim Chickens brand and dining experience across the MENA region.

Alghanim Industries, based in Kuwait City, Kuwait, owns and operates more than 30 businesses in 40 countries across the MENA, Turkey, India and South East Asia. Since its founding more than a century ago, consumer-oriented businesses have grounded the company. Today, its growing portfolio of 300 brands includes a number of US partners, including General Motors, Ford, Mars, Whirlpool, Wendy’s and American Express. The first MENA-region Slim Chickens restaurant is expected to open in Kuwait in March 2017. This will be followed by a rapid brand rollout across the entire region. (Alghanim Industries 06.12)

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3.4 The Cheesecake Factory Opens in Doha, Qatar

The Cheesecake Factory, known for its extensive menu, generous portions and legendary desserts, announced that the first The Cheesecake Factory restaurant in Qatar opened on 10 December 2016 under a licensing agreement. With more than 250 menu selections including nearly 50 lower calorie SkinnyLicious dishes and a new “Super” Foods section – handmade, in-house with fresh ingredients – and more than 40 signature cheesecakes and desserts, The Cheesecake Factory’s opening provides exciting new choices for shoppers and area residents. Featuring imported limestone floors and custom wood columns, hand painted murals and modern lighting, the new restaurant includes the distinctive and contemporary decor that is as creative and imaginative as The Cheesecake Factory’s extensive menu. This is the eleventh licensed The Cheesecake Factory restaurant in the Middle East. (The Cheesecake Factory 12.12)

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3.5 SeaWorld Announces Partnership With Miral To Develop SeaWorld Abu Dhabi

Miral and Florida’s SeaWorld Entertainment announced their partnership to develop SeaWorld Abu Dhabi, a first-of-its-kind marine life themed park on Yas Island. This next generation SeaWorld Abu Dhabi will also include the United Arab Emirates’ first dedicated marine life research, rescue, rehabilitation and return center with world-class facilities and resources for the care and conservation of local marine life. SeaWorld Abu Dhabi will be the first new SeaWorld without orcas, and will integrate up-close animal experiences, mega attractions and a world class aquarium, bringing the latest technology in visitor engagement. The partnership brings together Miral’s expertise in developing Yas Island’s portfolio of destinations with SeaWorld’s 50-plus years of theme park, veterinary medicine, marine science and zoological practice and experience.

SeaWorld Abu Dhabi’s research, rescue, rehabilitation and return center on Yas Island will be the first of its kind in the country, providing a state-of-the-art environment for local and global researchers, scientists and marine conservationists to assist them to better understand and learn from the region’s marine life habitats and conditions. Planned to open ahead of the marine life themed park, the facility will provide an important resource for UAE nationals and residents looking to develop or enhance expertise in marine life sciences and will serve as a hub for collaboration with local and international environmental organizations and projects. The addition of SeaWorld Abu Dhabi expands Miral’s destination portfolio on Yas Island, which is set to double visitor numbers to 48 million by 2022. The growth plans are part of Abu Dhabi’s vision to establish the emirate as a global tourism hub with unique attractions and world-class tourism infrastructure. (SeaWorld 13.12)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Plastic Bags to Cost NIS 0.10 in Israel from 1 January

Starting on 1 January 2017, consumers in Israel will pay NIS 0.10 for a plastic food bag at supermarkets. The measure is designed to reduce the use of environmentally damaging plastic bags. The law is intended to foster reusable shopping bags. In Europe, consumers have learned that plastic bags cost money and many of them pay far more than the price stipulated by the new law in Israel. The figures show that 2.2 billion disposable plastic bags are used annually in Israel, amounting to 350-400 bags per capita. These bags eventually become polluting waste. The average in Europe is 200 bags per capita. The European Union’s goal is to reduce per capita consumption of disposable plastic bags to 90 by 2019 and 40 by 2025.

The Ministry of Environmental Protection is conducting a NIS 29 million campaign offering the large supermarket chains monetary support for distributing reusable bags even before the law goes into effect. The subsidy will total NIS 1.50 for each bag distributed and NIS 1.60 for each bag purchased from an Israeli company. Distribution will be according to amount of a customer’s purchase. The law in question exempts the pharmacy chains; it applies to the 20 largest supermarket chains, as these are defined in the Food Law. (Globes 04.12)

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4.2 ENGIE Group Leverages Ecoppia to Deliver Higher Output in Indian Solar Park Bid

Ecoppia announced an agreement with Solairedirect India, subsidiary of energy multinational ENGIE Group, to deploy its automated system in the 10,000-hectare, 2,255 MW Bhadla Solar Park in Jodhpur, Rajasthan India. Continuing Ecoppia’s commitment to cooperation with large multinational energy conglomerates and its specific focus on the Indian market, the company’s solution will be deployed on a production capacity of 168MWp out of the total 190MWp capacity.

Located in a vast desert area, Bhadla Solar Park is prone to frequent dust storms, which can reduce energy generation by as much as 40% in a matter of minutes. Traditional labor-intensive, water-based panel cleaning solutions are neither cost-effective nor timely when immediate recovery from sandstorms is mission-critical to maintain LCOE. To alleviate the production loss associated with soiling and maintain panels at peak performance year-round, Engie’s site in Bhadla will be cleaned nightly by Ecoppia robots. With the deployment of Ecoppia across its site, ENGIE is expected to save over 1.5 billion of liters of water, and reduce its operating expenses drastically.

Herzliya’s Ecoppia designs and produces innovative photovoltaic panel cleaning solutions to cost-effectively maximize the performance of utility-scale installations. The company’s water-free, automated technology removes dust from panels on a daily basis to ensure peak output, even in the toughest desert conditions. Privately held organization backed by prominent and experienced international investment funds, Ecoppia works with the largest energy companies globally, cleaning millions of solar panels every month. (Ecoppia 07.12)

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4.3 Donors Pledge Approximately $400 Million for Red – Dead Project

Amman has raised approximately $400 million from donor countries and agencies to finance the first phase of the Red Sea-Dead Sea Water Conveyance Project (Red-Dead). The funds were contributed in the form of grants, very easy loans and in-kind assistance, the Ministry of Water and Irrigation said. The US intends to contribute $100 million to the Red-Dead project. In addition, the EU has pledged a grant worth €40 million and a very easy loan of €120 million through the European Investment Bank and the French Development Agency. Also during the donor conference, Japan has announced that it will provide the project with pumps and equipment worth $20 million, while Italy announced that it will extend a grant worth €2 million and a very easy loan worth €50 million and Spain will support the project with an easy loan worth €50 million.

The ministry indicated that construction on the project’s first phase, which costs $1.1 billion, is slated for early 2018 and is scheduled to end in 2020. Authorities have already shortlisted five consortiums out of 17 that have shown interest in implementing the first stage on a build, operate and transfer basis. A total of 85-100mcm of water will be desalinated every year, while the seawater will be pumped out from an intake located in the north of the Gulf of Aqaba. In addition, a conveyor will be extended to transfer desalinated water as well as a pipeline to dump the brine into the Dead Sea to stop its constant decline, estimated at one meter every year. The Kingdom will receive an additional 50mcm of water from the Lake Tiberias Reservoir annually to be added to its share from the desalination station to provide Aqaba with water. (JT 03.12)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Trade Deficit Up by 7.92% to $13.16 Billion in October

According to the Lebanese Customs, Lebanon’s trade deficit broadened by 7.92 % to $13.16B by October 2016, as exports increased by a yearly 2.75% to $2.56B, while imports added 7.04% y-o-y to $15.72B. On the imports’ side, as average oil prices registered a fall from $57.09/barrel by October 2015 to $49.02/barrel by October 2016, mineral products, which constituted 21.10% of the total import value, witnessed a 17.93% y-o-y rise in volume. However, this rise in volume was accompanied with an increase in total value, which surged by 32.11% y-o-y to $3.32B. As for products of the chemical or allied industries, which grasped 10.81% of the total value of imported goods, they rose by a yearly 4.70% to $1.70B. However, machinery and electrical instruments (9.83% of the total value) declined by 8.05% from 2015 to stand at $1.55B by October 2016.

The top countries Lebanon imported from during the first 10 months of the year were China, Italy, USA, Germany and Greece with respective shares of 11.28%, 7.40%, 6.42%, 6.14% and 5.43% of the total value of imports. As for exports, “pearls, precious stones and metals” products, grasping the largest share of exported goods (28.31%), escalated from $379.11M by October 2015 to reach $725.48M by October 2016. As for prepared foodstuffs, beverages and tobacco, they comprised 14.31% of exported goods’ value amounting to $366.86M by October 2016, compared to $402.78M by October 2015. Moreover, exports of machinery and electrical instruments, that take up to 11.30% of the total exports, fell by 15.66% y-o-y to $289.52M by October 2016. The top export destinations for the same period were South Africa, Saudi Arabia, UAE, Syria and Iraq with respective shares of 23.12%, 9.11%, 8.11%, 5.88% and 5.52% of the total value of exports. (LC 06.12)

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5.2 Lebanon’s Gross Public Debt Rose to $74.51 Billion by October 2016

Lebanon’s gross public debt registered a yearly rise of 7.91%, to stand at $74.51b by October 2016. The debt in Lebanese pounds made up 61% of the total gross public debt, growing by 6% y-o-y to $45.50b. The debt in foreign currency increased by 11% y-o-y to $29b by October 2016. BDL was the largest holder of local currency debt, with a share of 44%, while Lebanese commercial banks and other non-financial sectors held the remaining shares of 40.2% and 15.8%, respectively. Moreover, foreign currency debt was mainly constituted of Eurobonds with a share of 92.7%, while multilateral, bilateral and Paris II loans took respective shares of 3.6%, 3.3%, and 0.1%. (BLOM 12.12)

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5.3 World Bank Tries to Revive Jordan’s Slowing Economy

Jordan’s economic growth has been subdued in the last year as spillovers from regional instability take a toll. Jordan has been managing spillovers from the Syrian crisis including closure of trade routes with Iraq and Syria and hosting more than 656,000 registered Syrian refugees with UNCHR with an estimated 1.3 million Syrians in Jordan as per the census. While the Jordanian economy has held up with growth generated from a number of sectors, it has been losing momentum. Growth of 2.1% in the first half of 2016 slightly declined compared to 2.2% in first half of 2015. The outlook is subject to downside risks. Compared to the region, Jordan’s growth forecast of 2.3% for 2016 is in line with the average growth rate for the Middle East and North Africa.

However, higher frequency of security incidents are materializing around Jordan and could further depress consumer and investor confidence. Containing the fiscal deficit and implementing the new IMF program will be challenging as some adjustment measures could be considered socially sensitive. In parallel, the implementation of planned reforms to improve the functioning of the labor market, improve the investment climate and unlock access to finance which are vital to stimulate economic activity, and improve welfare. Finally, Jordan’s external position will face further pressures if expected grants and concessional financing do not materialize and grants are not sustained and increased. (WB 24.11)

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5.4 World Bank & Jordan Sign Agreement for $250 Million in Concessional Finance

The World Bank and Jordan have signed a $250 million financial package that aims to accelerate the Government’s quest to redress fiscal imbalances in the energy and water sectors and improve public service delivery. The Second Programmatic Energy and Water Sector Reforms Development Policy Loan was signed on 11 December 2016, by Jordan’s Minister of Planning and International Cooperation Fakhoury, and the World Bank’s Director for the Middle East at an official ceremony in Amman.

Fakhoury lauded the Bank’s support to Jordan and said the new loan would contribute to the Government’s efforts to shore up the fiscal deficit for 2016 through 2018. He said this support “will help to significantly reduce the debt servicing bill, provide more time for debt repayments and, consequently, lessen dependence on local market borrowing at higher interest rates.” Fakhoury noted that the water sector was the largest consumer of electricity in the kingdom, and the Government’s planned reforms aim to make better use of surface water for drinking purposes, while treating waste water for agricultural and industrial usage.

The loan is the second extended by the World Bank to Jordan supported by the Global Concessional Financing Facility (GCFF). The GCFF offers low-interest conditions normally reserved for the world’s poorest nations, not a middle-income country such as Jordan. The first was approved by the Bank in September 2016, and comprised a $300 million package to help improve economic opportunities for Jordanians and Syrian refugees. The GCFF supports countries hosting large numbers of refugees to strengthen their resilience, notably Jordan and Lebanon.

The new package consists of a $25 million contribution from the GCFF combined with a $225 million loan, repayable over 35 years with a four-and-a-half-year grace period. The project is the second in a two-part series focusing on reforming Jordan’s energy and water sectors. The First Programmatic Energy and Water Sector Reforms Development Policy Loan was concluded in December 2015, and amounted to $250 million. (WB 12.12)

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5.5 Jordan Remains Among Most Economically Free Nations

The 2016 Economic Freedoms report compiled by Canada-based Fraser Institute, based on 2014 data, Jordan ranked 14th worldwide among 159 countries, with an overall rating of 7.82 out of 10 points. In the report, the Hashemite Kingdom came in third among Arab countries, following the UAE (7.98) and Qatar (7.91). The index measures the degree to which the policies and institutions of countries are supportive of economic freedom through five parameters. The parameters are: size of government, legal system and security of property rights, access to sound money, freedom to trade internationally and regulation of credit, labor and business.

Jordan scored highest in the access to sound money (9.5), followed by the size of government and the freedom to trade internationally (8 points for each), 7.5 points for regulations, to finish with the lowest score for the legal system and security of property rights parameter (6.1).

In last year’s report, which drew on data from 2013, Jordan’s overall rating stood at 7.93 out of 10, which entitled the country to the seventh ranking worldwide and the second regionally, topped only by the UAE. The report cites Jordan, Kuwait, the UAE, Oman and Saudi Arabia as the countries with the largest decreases in rankings. (JT 12.12)

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5.6 Amman & USAID Launch Tourism Training Program

Jordan’s Ministry of Tourism and Antiquities, the U.S. Agency for International Development (USAID) and the Vocational Training Corporation (VTC) launched the “Pathways to Professionalism” program, as the first program to be implemented by the hospitality sector in order to improve the skills of workforce in Jordan. The program, which will be applied by 21 hotels, seeks to raise the quality standards in the hotels’ sector jobs through training participants while practicing their work. Minister of Tourism and Antiquities, Lina Annab said this program aims at meeting the hotels sector’s needs and at the same time providing workers the opportunity to progress in their careers. She added that investing in human resources and skills is very important for developing the tourism sector, noting that the sector employs 200,000 people. (AMMONNEWS 05.12)

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►►Arabian Gulf

5.7 Some 16,000 Gulf Nationals Relocated Within the GCC to Find Work in 2015

Statistics from the Information Department at the General Secretariat of the Gulf Cooperation Council show that a total of 16,000 Gulf citizens relocated elsewhere in the GCC for new private sector employment. Kuwait received around 10,000 Gulf economic migrants and the UAE came second with 1,893, closely followed by Saudi Arabia, attracting 1,887, the figures showed. Qatar’s private sector, meanwhile, attracted 959 GCC nationals, while Bahrain and Oman received 512 and 163 respectively.

The government sector in many Gulf countries awards equal treatment to Gulf citizens when it comes to employment. The latest figures showed a 50% increase in the number of GCC nationals in this sector, from 10,000 employees in 2006 to 15,000 in 2015. Here again, Kuwait ranked first in attracting GCC nationals to work in the state sector, with more than 10,000 GCC, non-Kuwaiti employees. The UAE came second with 5,000, while in Qatar the number stood at 1,382.

In total, the figures showed that up to 25 million Gulf nationals moved within the GCC for either work or tourism in 2015, according to a report in Arab News citing the same data. This represents a 92% increase from 13 million in 2006. Bahrain, Saudi Arabia and the UAE were the most attractive for GCC visitors, while Saudi saw the highest number of outbound moves, at 12 million people. Omanis were next, at 4.4 million, followed by Kuwaitis at 3 million, Bahrainis at around 3 million, Qataris at 1.3 million and Emiratis at 1.1 million. The statistics “positively reflect” the impact of social insurance coverage for Gulf nationals working in the GCC outside their country of origin. (AN 06.12)

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5.8 Oman Said to be Looking at Spending Cuts in 2017 Budget

Oman’s Finance Ministry is looking at cutting expenditure again in the state budget for next year to reduce a deficit caused by low oil prices. A draft budget for 2017 foresees a 5% cut in spending from this year’s budget, and no increase in revenues. The draft assumes an average oil price of $45 per barrel. The ministry declined to comment on its 2017 budget plan, which is expected to be released around the end of this year or early next.

The 2016 budget envisaged state expenditure of 11.9 billion rials – down 11% from actual spending in 2015 – and revenues of 8.6 billion rials; officials said their 2016 economic plans also assumed an average oil price of $45. So far, however, the deficit has come in higher than projected, totaling 4.4 billion rials in the first nine months. Financial Affairs Minister Darwish al-Balushi briefed the Shura Council, a top advisory body to the government, on the draft budget in a closed-door session last month, the sources said.

Oman cut benefits for employees of state agencies this year as part of its austerity drive. The 2017 draft budget proposes more cuts to public sector bonuses but foresees no immediate reductions to salaries. The government has said it aims to privatize a range of state assets to boost revenues, but Balushi did not mention specific privatization plans in his briefing. (Reuters 06.12)

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5.9 Saudi Unemployment Rises 12% in Third Quarter to Four-Year High

Unemployment levels in Saudi Arabia rose to 12.1% in Q3/16, a four-year high, although employment growth remained positive, according to new data from Jadwa Investment. Its latest research note on the Gulf kingdom’s labor market said the overall participation rate rose to a record high, reaching 42%, pushed up by higher participation from both Saudi males and females. Jadwa said during the first three quarters of 2016, total net employment in the kingdom saw a significant rise of 892,000, compared with a 417,000 increase between 2014 and 2015. However, Jadwa added that 95% of these positions went to non-Saudis, a blow to the country’s efforts to encourage more locals into the private sector workforce. Saudi net employment reached 45,500 in the year-to-September, trending further down from a record low of 49,900 recorded between 2015 and 2014. Jadwa’s report also said that within the Saudi labor force, female unemployment rose faster than males, while Saudi youth unemployment rose marginally as well. (Jadwa Investment 10.12)

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5.10 Saudi Arabia to Enter Recession in 2017, Says New BMI Research

BMI Research announced on 4 December that Saudi Arabia will fall into recession next year for the first time since 1999. The kingdom’s non-oil sector growth will continue to slow as the government implements fiscal consolidation measures to mitigate the impact of low oil prices. As a result of the continued austerity drive, the Saudi Arabian economy is forecast to contract by 0.2% in real terms in 2017 – the first annual contraction since 1999 – compared to 0.8% growth in 2016.

Meanwhile, oil production is expected to decline to meet OPEC targets and the Saudi economy will slump into recession as economic activity falters. In September, the government announced a package of fiscal measures including cutting the public wage bill and postponing several infrastructure projects. BMI Research predicts these will not be the last such moves, and that more austerity initiatives will be announced over 2017. (BMI 04.12)

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►►North Africa

5.11 Egypt’s November Inflation Hits Highest Level in 7 Years on Pound Float

CAPMAS announced on 8 December that Egypt’s annual headline inflation hit its highest level in at least seven years to register 20.2% in November 2016 compared to 11.8% for the same month last year. The monthly Consumer Price Index (CPI) rose by 5%, compared to a 1.8% rise for October. CAPMAS attributed the spikes to the Central Bank of Egypt’s (CBE) decision in early November to float the pound against the dollar and raise key interest rates, as well as to the government’s decision to reduce fuel subsidies. According to CAPMAS, food and beverage prices registered a five-percent increase in November, while the cost of medical care and transportation rose by 5.5 and 12.6% respectively, compared to October.

Egypt embarked on a fiscal reform program in July 2014 in an attempt to curb the growing state budget deficit, now 12.2% of the GDP, by cutting subsidies and introducing new taxes including the value added tax. In November this year, the petroleum ministry announced new raises for subsidized fuels, including octane, diesel, butane and natural gas and low-quality petroleum. The CBE decided in early November to raise interest rates, surprising markets with a 3% rise in key rates. The bank kept rates unchanged throughout the rest of the month. (Ahram Online 08.12)

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5.12 Egypt Sharply Increases Customs Duties as it Seeks to Curb Imports

Egypt has sharply raised customs duties on more than 300 goods, to 60% for many items, to encourage domestic production and curb a ballooning trade deficit, part of a broader government effort to reform the ailing economy. The Finance Ministry said that the tariff increases on 320 categories of goods targeted manufactured products that are also made locally, such as carpets, ceramics and cosmetics. Tariffs on carpets doubled to 60% from 30%. Duties were also raised on goods that were deemed non-essential, including items such as fresh fruit, shampoo and toothbrushes. The finance ministry said the new tariffs would boost customs revenues by EGP 6 billion ($339 million) a year, if imports remained at current volumes. Duties on cosmetics, dairy products, air conditioners, fans, refrigerators, microwave ovens and a host other goods were increased to 60% from 40%.

The ministry said that the increases, which take immediate effect, were in compliance with World Trade Organization standards. The tariff increases do not apply to countries or blocs with which Egypt has active free trade agreements. They are the second tariff hikes this year in Egypt, which depends on imports of everything from wheat to luxury cars and where inflation is already in double digits. The first round came in January, when Egypt was struggling with a shortage of dollars due to a sharp drop in foreign investment following political turmoil over the past few years. The government also blamed the shortage of dollars partially on excessive reliance on imports. (Reuters 04.12)

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5.13 Egypt Ranks 116th in 2016 Global Enabling Trade Report

Egypt was ranked 11th in the Middle East and North Africa and 116th internationally by the Global Enabling Trade Report 2016, which was issued by the World Economic Forum (WEF). The United Arab Emirates (UAE) was ranked first in MENA and 23rd internationally, followed by Bahrain and Qatar which occupied ranks 42 and 43 respectively. According to the WEF report, the UAE maintained its place in the international ranking since 2014.

Globally, the report concluded that the increase of integration between the economies of the Association of Southeast Asian Nations (ASEAN) and the rest of the world has allowed these countries to become more open to trade in goods, outperforming the European Union and the United States.

The Enabling Trade Index, the core of the Global Enabling Trade Report, measures the factors, policies, and services that facilitate the trade in goods across borders and to destination. It is made up of four sub-indices: market access, border administration, transport and communications infrastructure, and business environment. The report is issued once every two years by the WEF, and is considered an indicator for leaders who hope to promote growth and development in their communities through trade. (ED 01.12)

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5.14 Egypt Announces New Investments In Oil And Gas Exploration Worth $200 Million

Egypt has accepted investment offers in oil and gas drilling and exploration worth $200 million, the petroleum ministry announced. The companies that won the bids include Shell, British Petroleum, Apache and Apex, the ministry said in a statement. The oil and exploration deals are for Egypt’s Gulf of Suez and Western Desert. Egypt is seeking to attract investments in the energy sector to revive an economy battered by years of political instability. (Ahram Online 02.12)

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5.15 American-Moroccan Program to Teach Drâa-Tafilalet Region’s Students English

The regional council of Drâa-Tafilalet issued a communique last Sunday, announcing an agreement with American institution, Midwest American Development Enterprise. The agreement aims to teach English to the students of Drâa-Tafilalet. With the slogan of “Drâa-Tafilalet speaks English by 2030,” the project budget estimates MAD 60 million, in which Drâa-Tafilalet will allocate 51% of its budget to this project. The region’s council said: this project follows “Morocco’s policy to foster receptivity towards foreign languages and Anglo-Saxon culture […] English is the language of economy, science, industry, tourism and international relations. The program will include 64 beneficiaries annually, who will receive an [accredited] and qualified certificate. Approximately 180 linguistic offices will be constructed on the campuses of the institutions and associations. This project will also create approximately 450 job opportunities for the youth of the region, especially those with a BA in English studies, who will be trained under the supervision of distinguished American professors. The regional council of Drâa-Tafilalet is planning to launch exchange programs for the region’s students in partnership with states of Michigan and South Carolina in order to enhance their language and cultural knowledge. (MWN 05.12)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkish Economy Shrinks for First Time Since 2009

Turkey’s gross domestic product (GDP) contracted by a bigger than expected 1.8% in the third quarter of 2016 on weak consumer spending and exports, data from the Turkish Statistical Institute (TUIK) showed on 12 December, marking the first year-on-year decline in quarterly economic growth since 2009. On the expenditure side, household spending dropped by 3.2% in contrast to a 3.7% rise in the second quarter. Exports also plunged 7%, while imports climbed 4.3%. The production-side breakdown of the GDP showed that the agriculture sector shrank 7.7% and industry output fell 1.4%. In the meantime, services output dropped sharply by 8.4%. The construction sector, however, grew 1.4%. On the other hand, government spending surged 23.8% in the third quarter.

Turkey’s GDP contraction in the third quarter was due to the 15 July failed coup attempt, lower tourism revenues and weak external demand, but initial indicators of the last quarter gave positive signs regarding the economy. In the meantime, Turkey revised its second-quarter growth to 4.5% from 3.1% and first-quarter growth to 4.5% from 4.7%.

TUIK said earlier that it was adjusting its methodology in calculating the GDP in order to reflect better ways of producing macroeconomic indicators. The revision work on national accounts, in accordance with the European Union Regulations (ESA 2010), has been completed. After the data was out, the Turkish currency extended its losses to trade against the U.S. dollar at 3.5252, compared to 3.5072 ahead of the data announcement. (HDN 12.12)

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6.2 Turkey’s Leading Arms Firms See Sales Rise by 10%

Turkey’s leading arms companies’ sales rose by more than 10% in 2015, according to market analysis released on 5 December by the Stockholm International Peace Research Institute (SIPRI). The analysis listed two Turkish companies, ASELSAN and Turkish Aerospace Industries (TAI), among the world’s top 100 arms firms. Their sales climbed 10.2% over the year. ASELSAN’s sales stood at $1 billion for the year – up from $979 million in 2014 – while TAI recorded sales of $890 million, an increase on last year’s figure of $736 million. Both companies improved their standing on last year’s figures, with ASELSAN rising from 69th to 74th position and TAI climbing to 78th from 91st. The report cited strong domestic demand and improving exports for their improved performance.

The U.S. remained the world’s largest weapons seller and sold arms worth $209.7 billion, a 2.9% drop on 2014. Lockheed Martin remained the largest arms producer. French arms sales were behind a recent growth in Western Europe, with six companies recording sales of $21.4 billion, a 13.1% rise. Russian companies saw a 6.2% rise to $30.1 billion. (AA 05.12)

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6.3 Turkey Plummets on PISA, the OECD-Wide Education Test

The number of Turkish 15-year-olds who scored below average on the triennial PISA test is three times more than the number of students who scored below average in more successful countries, according to test results. Turkey dropped five places over the previous PISA tests in 2012, regressing from 44th to 49th place.

Some 31.2% of Turkish students below 15 years of age underperformed in mathematics, sciences and reading, according to the results of the PISA test, which is conducted by the Organisation for Economic Co-operation and Development (OECD). In contrast, only 10% of students in countries that neared the top of the list underperformed on math, sciences and reading.

Turkey scored 420 points on the math test to place it 49th out of 72 countries. Turkey was also 52nd in science and 50th in reading. Four years ago, Turkey was 43rd in science and 41st in reading. Singapore was top of the PISA list in all three categories, gaining top spot over the 2012 winners, Shanghai. Japan, Finland and Canada were among the countries which performed highly in the PISA test.

The OECD operates the triennial survey of 15-year-old students around the world as part of PISA, the Program for International Students Assessment. PISA assesses the extent to which 15-year-old students, near the end of their compulsory education, have acquired key knowledge and skills that are essential for full participation in modern societies. The assessment focuses on the core school subjects of science, reading and mathematics. (HDN 07.12)

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6.4 Greek Unemployment Eases to 23.1% in September – Still Eurozone’s Highest

ELSTAT announced on 8 December that Greece’s jobless rate dropped to 23.1% in September from a downwardly revised 23.3% in the previous month as the economy expanded in the third quarter. The number of officially unemployed reached 1.11 million people. Hardest hit were young people aged 15 to 24 years, with their jobless rate dropping to 46.1% from 49.1% in the same month a year earlier. The September data, based on seasonally adjusted data, was the lowest since March 2012 when unemployment stood at similar levels. The jobless rate hit a record high of 27.9% in September 2013.

Greece’s jobless rate has come down from record highs but remains more than double the Eurozone’s average of 9.8% in October, a seven-year low. The economy expanded by 0.8% in July-to-September compared to the second quarter, with Athens projecting a stronger recovery next year after a protracted recession. The government expects unemployment will drop to 22.6% next year, based on its 2017 budget which sees the economy expanding by 2.7%. (ELSTAT 08.12)

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6.5 Greek Students Score Below OECD Average

Greek students scored below average in science, mathematics and reading in the latest PISA test organized by the Organization for Economic Cooperation and Development (OECD). According to the results, the performances of Greek students in science and reading have been deteriorating since 2006. It has remained relatively stable for mathematics. Around 5,500 15 year olds from 212 public and private schools in Greece took part in the test. They ranked 43rd in science, 43rd in math and 41st in reading.

This year’s edition of the test had a special focus on science. It found that students in Colombia, Israel, Macau, Portugal, Qatar and Romania made significant gains in the subject over the last decade. Among the 35 mostly wealthy countries belonging to the OECD, one out of five students on average did not achieve the baseline level of proficiency in science. (Cyprus Mail 07.12)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Chanukah Celebrated in Israel & the World Over

Sunday evening, 24 December, the Jewish world began the observance of the eight day Chanukah holiday. From the Hebrew word for “dedication” or “consecration”, Hanukkah marks the rededication of the Temple in Jerusalem after its desecration by the forces of Seleucid Greeks and commemorates the “miracle of the container of oil”. The re-dedication followed the liberation of Jerusalem by the Jewish forces, or Maccabees, who were fighting to regain their independence against the Greek invaders. There was only enough consecrated olive oil to fuel the eternal flame in the Temple for one day. Miraculously, the oil burned for eight days, which was the length of time it took to press, prepare and consecrate fresh olive oil. The holiday also celebrates the military victory and the restoration of Jewish independence. The holiday lasts until 1 January.

Though business is permitted during this holiday, the week in Israel is marked by many leaving work early to be with the family at nightfall, in time to light the chanukiah or menorah, an eight branched candelabra. The primary observance is to light a single light each night for eight nights. As a universally practiced “beautification” of the mitzvah, the number of lights lit is increased by one each night. There is also a custom of eating foods fried in oil as a culinary way of commemorating the Chanukah miracle after the Maccabees won the war against the Greeks, liberating Israel. While the favored fried Chanukah treat of Israelis is the jelly doughnut, most North American Jews prefer latkes, a grated potato-and-onion pancake fried in oil and served with sour cream or apple sauce.

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7.2 Why Do Men Live So Long in Israel?

In 2013, the average life expectancy for men in Israel was 81 years, in contrast to the OECD average of 77.7 and a world average of 68.8 years. Considering other variables that influence longevity – including wealth and education levels, the health system and the country’s general demographic profile – the Israeli advantage is large and increasing.

An analysis performed by the Taub Center for Social Policy Studies, based on a sample of more than 130 countries, found that military service added more than three years to male life expectancy. This conclusion is reinforced in data showing the differences in the average life expectancy of men and women in Israel and in the OECD. In the 34 OECD countries, women live an average of 5.5 years longer than men, but in Israel, where military service is shorter and in most cases less physically demanding for women, and where religious women do not serve, women’s life expectancy is only three years longer.

Israel’s better-than-predicted life expectancy has been consistent for at least 20 years and has been increasing over time: the gap between predicted life expectancy and actual life expectancy for Israeli men was 3.8 years in 1990 and 5.85 years in 2000.

A second set of variables added is related to religiosity. Many studies point to the positive relationship between religiosity and health, in both developed and developing countries. There are no data on average levels of religiosity in many countries, so the level was judged using proxy variables that looked at the strength of the relationship between religion and state worldwide (2007 to 2012). When these were inserted into the model, Israel’s deviation from its predicted life expectancy fell a further 1.8 years to 3.65 excess years, placing it in 4th place in the OECD ranking and 20th place among 133 countries.

According to World Health Organization (WHO) data from 2013, the 81-year life expectancy ranks Israel in second place in the world out of 170 countries, alongside Iceland, Singapore and Switzerland, with only San Marino ranking higher. (Various 07.12)

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7.3 Knesset Bans Miniskirts

Israel’s Knesset has issued a new dress code, banning visitors and employees from wearing miniskirts and short dresses. The rules were based on an earlier version and were “intended to clarify, as much as possible, the ambiguity that existed in the past — while expressing sensitivity and attempting not to hurt the feelings of our visitors and guests, a Knesset spokesman said. Other banned articles of clothing include tank tops, cropped tops, shorts and three-quarter length pants, ripped pants, shirts with political slogans, flip flops and open back clogs. The rules apply to those over the age of 14. The main difference from previous rules is the additional regulations regarding miniskirts. Guards have been instructed to watch out for dress code violations. (Various 01.12)

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7.4 Health Ministry Says Gay Men & Ethiopian-Born Israelis Can Donate Blood

The controversial policy that prevented Ethiopian-born Israelis, gay men, and older Israelis from donating blood will be abolished, the Health Ministry announced on 8 December. The decision comes 18 months after a committee of experts, led by the head of Haifa University’s School of Public Health, Professor Manfred Green, said the restrictions were no longer necessary thanks to new blood-testing technology and because leading health public health agencies in Europe and the United States, including the FDA, have revised their policies on similar groups. Israel will soon have an upgraded ability to test for hepatitis B, hepatitis C and HIV, which will shorten the window period for detecting infections and thus reduce the risk posed by blood donations from the general public and from those particular groups.

Under the previous policy, blood donations from Ethiopian Israelis were limited to those who were born in Israel. Under the new rules, Ethiopian-born Israelis will be allowed to donate provided that they have not been in the African country – or in any other country with a relatively high prevalence of HIV, hepatitis B, hepatitis C – for 12 consecutive months. This condition is already in place for all other population groups in Israel. Under the new rules, gay men will be allowed to donate blood as long as they have not had sexual relations with other men in the previous 12 months. This recommendation is based on the guidelines issued by the FDA. The Health Ministry will also allow Israelis who are 65 and older to donate blood under the same rules that apply to other population groups. (Various 08.12)

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*REGIONAL:

7.5 Egypt’s Population Increases by 1 Million in 6 Months

On 24 November, Egypt’s population reached 92 million people, CAPMAS said, an increase by 1 million people in just six months. In June, CAPMAS announced that Egypt’s population reached 91 million, also a 1 million increase since December 2015. Egypt’s population is growing at a rate five times higher than that of developed countries and twice as high as developing countries, CAPMAS said in June. In October 2014, then-Prime-Minister Ibrahim Mehleb launched the 2015 – 2030 National Population Strategy, devised to tackle the issue of overpopulation. Egypt has also seen a 23.7% increase in its population in the period between 2006 and early 2016, according to CAPMAS. (CAPMAS 23.11)

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7.6 Morocco is Second-Most Prolific Reader in Arab League

On average, Moroccans read 27 books a year, spending 57 hours consuming knowledge from a variety of subject areas, according to the 2016 Arab Reading Index, which included all 22 members of the Arab League in its region-wide survey. Of the 148,294 residents of the Arab World who responded, 60,680 were students completing various stages of their education, 87,614 others came from different professional and social backgrounds.

Egyptians logged 63.85 hours of reading time annually – highest number of hours of all Arab countries included in the United Nations Development Program sponsored study. The country’s residents completed 27 books a year – just like Moroccans. Lebanese respondents said they read for 59 hours a year, completing 29 books in the process – the highest number of all countries surveyed. Somali respondents reported the weakest reading habits, with citizens diving into a book for just 7.78 hours every year. Moroccan readers also said they diversified their reading, allocating equal amounts of time to texts related to their profession and books chosen out of sheer interest. (MWN 06.12)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Biological Industries’ NutriStem hPSC XF Medium awarded FDA Drug Master File Acceptance

Biological Industries announced that the US FDA has accepted the submission for its Drug Master File (DMF) for the company’s NutriStem hPSC XF Medium, a commercially defined, xeno-free, serum-free media, which is designed to support the growth of human embryonic stem cells (hESCs) and induced pluripotent stem cells (iPSCs). A Drug Master File (DMF) is a confidential detailed document submitted to the FDA by a manufacturer that includes the Chemistry, Manufacturing and Controls (CMC) information about their product. An active DMF enables clinical investigators to cross-reference the DMF in their own sponsored IND-application. NutriStem hPSC XF Medium was developed and launched in 2009, and has been increasingly adopted by leading academic and commercial research labs worldwide for use in the culture of pluripotent stem cells.

Kibbutz Beit HaEmek’s Biological Industries is one of the world’s leading and trusted suppliers to the life sciences industry, with over 30 years’ experience in cell culture media development and manufacturing. BI’s products range from classical cell culture media to supplements and reagents for stem cell research and potential cell therapy applications to serum-free media and many other products for animal cell culture and molecular biology. (BI 30.11)

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8.2 LDS Wins Medical Cannabis Marketing Deal

Jerusalem’s LDS Biotech has signed an agreement in which its technology will be used as the basis for a medical cannabis product to be marketed in the US. Ananda, the US distributor, estimates that its annual revenue will exceed $10 million, an (undisclosed) percentage of which will be given to LDS. LDS’s platform makes it possible to extract the CBD component, an active ingredient with no psychoactive effect, from the cannabis plant, and to produce from that ingredient a drug that can be taken orally. The LDS system carries the wrapped and protected ingredient into the intestine, where it attaches itself to the intestinal walls and decomposes the ingredient into the bloodstream.

CBD is an ingredient in the cannabis plant recognized as significant in the treatment of pain and inflammation. This ingredient is also likely to prove relevant in treatment of autism and epilepsy, where it is especially important to prevent the psychoactive effect of cannabis. The body’s response time to the ingredient with LDS’s technology is 30 minutes, compared with four hours with other cannabis compounds. Ananda has already launched and sold the products in all US states in which marketing medical cannabis is legal. The product is sold over-the-counter in liquid form, a gel for serving with a teaspoon, or drops to be administered orally.

LDS was commercialized by Yissum Technology Transfer Company of the Hebrew University of Jerusalem. LDS’s technology has already been used by a number of major pharmaceutical firms to develop orally administered drugs or to improve delivery for drugs unrelated to cannabis. The company has posted $2.5 million in revenue so far from these agreements, and the products are in clinical or pre-clinical trials. If the trials are successful, the agreements will yield LDS substantial additional revenue. (Globes 04.12)

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8.3 Successful First Transplantation of Second-Generation Injectable Live Human Bone Graft

Bonus BioGroup announced the successful transplant for the first patient in the Company’s second clinical trial for the repair of maxillofacial bone deficiencies. The transplantation was performed a fortnight following collection of the patient’s fat sample, and several weeks following the enrolment of the first three subjects. The entire procedure, which lasted 40 minutes from local anesthesia through to the end of the transplantation, was performed smoothly, without complications.

The injectable bone graft is manufactured in the Company’s manufacturing facility as live autologous human bone tissue; both comprise of various cell types, and do not consist of non-living bone granules. Bonus BioGroup estimates that its live human bone grafts demonstrate qualities superior to any other non-living bone graft. Since the manufactured grafts originate from and return to the same patients, the Company believes that they will be fully integrated and immunologically tolerated by patients. Upon introduction of Bonus BioGroup’s grafts into patients’ bodies, the biological identity of the transplants is expected to be recognized by the patients’ immune system. Thus the common immunological response and rejection typical of foreign donor tissue transplantation are anticipated to be prevented.

Bonus BioGroup estimates that the current clinical trial may be carried out over a time period shorter than that of its first clinical trial. The approval by the Ministry of Health to carry out the Company’s second clinical trial for the repair of jawbone deficiencies may facilitate future approvals by the Israeli Ministry of Health of the Company’s pipeline clinical trials, including a study aimed at repairing orthopedic critical gaps in the extremities, with the second generation injectable bone graft. (Bonus BioGroup 13.12)

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8.4 Gordian Surgical Raises $2.25 Million and Receives FDA Clearance for TroClose1200\

Braun Melsungen, the Trendlines Group and Gordian Surgical jointly announced B. Braun’s lead position in Gordian’s recent financing round of $2.25 million; Gordian Surgical is a medical portfolio company of The Trendlines Group. German medical device company, B. Braun Melsungen led the investment round with €1 million, with the remainder from current shareholders and three VC funds, two of which are Chinese funds. Funds raised in this round will be used to start marketing and distribution in U.S. and European markets.

Concurrently, with the successful fund raising round, Gordian announced it received FDA regulatory clearance for its TroClose1200, an innovative trocar with integrated closure system for the suturing of abdominal wall incisions during laparoscopic surgical procedures. The FDA approval follows Gordian’s receipt of CE Mark certification as announced on 6 September 2016. Gordian Surgical developed TroClose1200 to give surgeons “two-in-one” functionality: the device acts both as a trocar, through which surgical instruments enter the abdomen, and a device to close internal incisions made during surgery. The sutures are inserted into the tissue at the beginning of the procedure and anchored to remain in place throughout the operation, allowing incisions to be closed easily and quickly upon removal of the device.

Trendlines is an innovation commercialization company that invents, discovers, invests in, and incubates innovation-based medical and agricultural technologies to fulfill its mission to improve the human condition. As intensely hands-on investors, Trendlines is involved in all aspects of its portfolio companies from technology development to business building. (Gordian 07.12)

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8.5 Neurim’s Prolonged-Release Melatonin to be Marketed by Kuhnil in South Korea

Neurim Pharmaceuticals signed a license agreement with Kuhnil Pharmaceutical. The agreement grants Kuhnil exclusive marketing rights to market Neurim’s new Rx PedPRM in South Korea. This is Neurim’s second marketing agreement for the new drug, following November’s announcement on a signed agreement with Aspen Australia to market PedPRM in Australia and New Zealand. Neurim’s age-appropriate drug is targeted to treat sleep disorders in children with autism spectrum disorders (ASD) and neurogenetic diseases. It is expected to be the first sleep drug approved for children. Kuhnil has been successfully marketing Neurim’s Circadin, prolonged-release melatonin 2mg indicated to treat primary insomnia in the elderly, since 2014 in South Korea.

Tel Aviv’s Neurim Pharmaceuticals is a neuroscience drug discovery and development company. Its first approved drug Circadin is commercially available in Europe, Asia-Pacific, Latin America, Africa and the Middle East. The company has a strong and innovative product pipeline intended for insomnia, Alzheimer’s disease, dementia, glaucoma and pain. (Neurim Pharmaceuticals 06.12)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 VocalZoom Transforms Voiceprint for Biometrics Authentication Using Optical Sensors

VocalZoom announced voice biometrics technology using its optical sensor that performs all voiceprint acquisition and embedded template matching, eliminates the microphones and noise reduction software of traditional acoustic solutions, and takes voiceprint verification out of an external processor or cloud-based server to the security of an embedded, match-in-sensor architecture. VocalZoom’s patented VoiceMatch-in-Sensor technology for embedded speaker verification products acquires data from users during the biometric enrollment process as their facial skin vibrates during speech. The VocalZoom optical HMC sensor converts this data into a voiceprint associated only with the person who was actually speaking, and stores it inside the sensor. This enables the sensor to meet FIDO compliance requirements, enabling easy plug-and-play installation as compared to existing fingerprint or other biometric sensors that don’t offer secure embedded biometric acquisition and template matching. Each time users authenticate, a voiceprint is again acquired in real time, again optically confirmed to be from a living person rather than a recording, and then securely matched inside the sensor solution against information in its embedded template to verify the user and complete the authentication process.

Yokneam Illit’s VocalZoom supplies Human-to-Machine Communication (HMC) sensors for delivering a, natural, personalized and secure voice-controlled user experience in today’s increasingly mobile and interconnected world. The sensors enable accurate and reliable voice control and biometrics authentication in any environment, regardless of noise. Applications including mobile secure payments, headsets and wearables, mobile phones, access control, smart home solutions and hands-free automotive voice control. (VocalZoom 06.12)

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9.2 Mellanox Stateful Packet Processes at 400Gb/s with the NPS-400 Network Processor

Mellanox Technologies announced the availability of Deep Packet Inspection and Stateful Packet Processing software libraries showing unprecedented performance on Mellanox’s newest NPS-400 Network Processor. These software libraries, coupled with the hardware acceleration capabilities of the NPS-400, enable Deep Packet Inspection processing for application recognition at record breaking processing rates of up to 400Gb/s, in conjunction with handling of 100 million flows with an average packet size of 400 bytes. These processing capabilities enable Mellanox customers to build world-leading Intrusion Detection Systems and Intrusion Prevention Systems and to accelerate processing capabilities for switch routers. The Stateful Packet Processing and the Deep Packet Inspection libraries enable developers to delve deeper into the network packets for better understanding of the network flows. This brings to IT managers the ability to enhance security and prevent malicious access to their data centers. It also allows cost-effective load balancing, network monitoring or any other appliances based on network flow recognition.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet interconnect solutions and services for servers and storage. Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability. Mellanox offers a choice of fast interconnect products: adapters, switches, software and silicon that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage and financial services. (Mellanox Technologies 06.12)

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9.3 Deloitte Ranks INNITEL 9th Fastest Growing Israeli Technology Company

Deloitte has crowned INNITEL as Israel’s 9th fastest growing technology company, following their revenue growth of 737% over the last three years. INNITEL’s placement on the Deloitte Technology Fast 50 comes days after the company was selected to participate in the London Stock Exchange’s Elite Growth program. INNITEL technology enables small to medium sized businesses to interact with potential clients in ways that were previously only available to large enterprise level companies. INNITEL clients in 25 countries have reported huge growth from day one, because the software enables them to minimize dial-time and maximize meaningful client interactions.

The Deloitte Technology Fast 50, one of Israel’s foremost technology award programs, ranks the country’s fastest-growing technology companies based on their growth percentage over the last four years. The Fast 50 ranking honors business growth and technological innovation as well as Israeli entrepreneurial spirit. The “Technology Fast 50” is part of a national and international program run by Deloitte.

INNITEL is a self-funded tech Jerusalem-based startup focused on Contact Center software. INNITEL equips businesses with a full ecosystem of cloud-based software that consolidate the business process and strengthens business intelligence efforts. INNITEL communication products are built on its own proprietary communications infrastructure that provides a multi-channel integrated offering that is scalable and cost effective. (INNITEL 06.12)

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9.4 Altair First to Complete Interoperability Testing for Lightweight M2M

Altair Semiconductor announced that its ALT1160 LTE CAT-1 Chipset has successfully completed interoperability testing with the Open Mobile Alliance’s Lightweight M2M (LwM2M) protocol. The test took place at the recent OMA TestFest, where vendors had the opportunity to test the stability of their LwM2M implementations in a multi-vendor environment, while helping to ensure the quality of OMA specifications. Altair’s LwM2M implementation provides a secure and standards-compliant device management solution to simplify the development of M2M applications. Its intuitive API enables easy customization without the need for extensive knowledge of M2M protocols. In addition, Altair’s highly efficient implementation offers out-of-the-box cloud support, and more than 10 years of battery life, for low-cost and low-power devices.

Hod HaSharon’s Altair Semiconductor is a leading provider of single-mode LTE chipsets. Altair’s portfolio covers the complete spectrum of cellular 4G market needs, from supercharged video-centric applications all the way to ultra-low power, low cost IoT and M2M. Altair has shipped millions of LTE chipsets to date, commercially deployed on the world’s most advanced LTE networks including Verizon Wireless, AT&T, Softbank and KT (Korea Telecom). (Altair 06.12)

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9.5 Rootclaim Launches Open Analysis Platform That Surpasses Human Reasoning

Tel Aviv’s Rootclaim is a collaborative analysis platform that transforms how people understand complex issues. Rootclaim is the first solution to combine the mathematical validity of Bayesian inference with the power of crowdsourced information. The Rootclaim model breaks down highly complex issues into small questions that are simple enough to be answered by humans, and then uses these answers to reach mathematical conclusions. Rootclaim allows anyone to impact an analysis by contributing evidence, rational explanations, and historical data. Unlike polling or voting, a strong claim by one person can beat many widely supported weaker claims. A substantial body of research has shown that the human brain is unreliable when it comes to accurately assessing complex problems. This means the only way to navigate a sea of half-truths is to complement humanity’s fallible intuition with objective probabilistic analysis. At a time in which the line between fact and fiction is increasingly blurred, Rootclaim cuts through the confusion and calculates the true bottom line. (Rootclaim 06.12)

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9.6 Sol Chip Autonomous Wireless Solar Tag for Improving Precision Agriculture & Smart Irrigation

Sol Chip announced the introduction of its Sol Chip Comm autonomous, wireless, solar tag for enabling precision agriculture and smart irrigation. The Sol Chip Comm (SCC) device is an ultra-compact, maintenance-free, solar-powered, wireless tag. SCC powers, controls and wirelessly connects a wide variety of sensors to the Cloud. In precision agriculture and smart irrigation applications, SCC feeds real-time data readings from up to hundreds of agriculture-related sensors, including those that monitor soil moisture, soil temperature, ambient temperature, air temperature, nutrients levels and more, into a precision agriculture application server. This essential data gathered by SCC is analyzed by a precision agriculture application in order to make data-driven adjustments for optimizing water and fertilization consumption and improving crop yields.

Sol-Chip and its new SCC device significantly lower the barrier for the adoption of precision agriculture and smart irrigation. Based on Sol Chip’s innovative energy harvesting technology, SCC is solar-powered and designed to operate continuously for more than ten years with no maintenance requirements, removing the need to constantly replace and discard batteries. As a wireless device, SCC eliminates the significant costs and time associated with deploying and maintaining wires to connect the deployed sensors. SCC’s small size makes the product easy to install and move around any agriculture-related environment, while being unobtrusive and not prone to theft. In addition, the low cost of SCC makes the deployment of wireless sensors for agriculture purposes to be financially accessible.

Haifa’s Sol Chip is an Internet of Things (IoT) systems and energy harvesting solutions provider. Sol Chip develops and manufactures maintenance-free IoT solutions based on its LightBattery Everlasting Solar Battery technology. This compact battery can supply energy for the lifetime of IoT devices with virtually no maintenance. Sol Chip’s technology provides a disruptive platform for applications, such as home automation, smart cities, precision agriculture and many more. (Sol Chip 06.12)

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9.7 PayPal & Israel’s Ben-Gurion University to Collaborate on R&D

Ben-Gurion University of the Negev (BGU) and PayPal, the US company that operates an online payments system, said they would partner in joint research and development in the fields of big data, machine learning and cybersecurity. It is the first such collaboration between PayPal and an Israeli university, BGU said in a statement. The collaboration with BGU will further enable PayPal to use machine learning and big data for cybersecurity, fraud detection and risk management that will enable its 192 million customers worldwide to make safer payment transactions.

PayPal has been intensifying its activities in Israel. The US firm bought Israel’s Fraud Sciences in 2008 and has established a global risk and data sciences R&D center in Tel Aviv. After PayPal acquired Israeli startup CyActive in 2015, which was part of BGU’s incubator program, the company set up a global security products center in Beersheba’s Advanced Technologies Park, adjacent to BGU. (NoCamels 07.12)

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9.8 Transmit Security Wins FT Future of FinTech Innovation Award

Transmit Security has won the first annual Financial Times (FT) Future of Fintech Innovation Award for its ability to create lasting change in the financial services sector on a global scale. The company was selected from more than 200 entrants spanning the fintech sector and the world. Transmit Security will formally announce its new approach to omni-channel authentication in 2017.

Transmit Security allows organizations to implement frictionless omni-channel authentication and authorization without making any modifications to their applications. Transmit Security’s founders created Trusteer (now IBM Security) and Imperva (IMPV on NYSE). The company’s research and development team is made up of former members of Unit 8200, the elite Israeli Intelligence Corps. Transmit Security is self-funded, and based in Boston and Tel Aviv. (Transmit Security 07.12)

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9.9 Giraffic AVA Unlocks Seamless Virtual Reality Streaming for Apps and Mobile Devices

Giraffic announced an extension of its AVA technology that vastly improves the quality and stability of streaming virtual reality (VR) content. This tailored acceleration enhances VR streams, even over less than ideal Wi-Fi or cellular connections, allowing manufacturers and immersive content service providers and developers to provide flawless high-quality, untethered VR experiences, in addition to Giraffic AVA video-on-demand (VOD) and live-streaming offerings.

Giraffic AVA is a software solution that empowers content service providers, streaming platforms developers and CE device manufacturers to overcome unstable cellular connections, Wi-Fi and network congestion challenges. The technology improves network throughput and adaptive bitrate (ABR) playback for video streaming requests up to 200% and reduces buffering pauses by up to 80%, to enable higher quality uninterrupted viewing experience without network or server-side integration. The updated AVA offers customized multi-streaming capabilities to support VR and 360 degree video and can work across split streams for each angle of a video. In addition, AVA customizes the number of streams open during the acceleration process to optimize consumer experience.

Tel Aviv’s Giraffic is the inventor of Adaptive Video Acceleration (AVA) – a patented client-side video experience technology that complements the existing video delivery ecosystem. AVA network throughput optimization and video playback shaping technology enables consumer electronic (CE) devices and Content Providers’ Apps to deliver High Definition video, 4K and VR, without re-buffering pauses or streaming resolution reduction. With 10’s of millions of devices in over 150 countries, Giraffic ground breaking AVA technology has become the de-facto standard on Smart TVs – in 1 of 3 Smart TVs that were shipped in 2015, and validated and adopted by the world’s leading manufacturers, such as LG and Samsung. (Giraffic 07.12)

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9.10 Stratoscale Enables Enterprises’ Cloud Adoption with an On-Prem AWS Region

Stratoscale announced the availability of Stratoscale Symphony 3, the latest generation of Stratoscale’s comprehensive cloud infrastructure software. Stratoscale Symphony 3 expands its holistic software-defined infrastructure solution and enables enterprises to transition toward a hybrid and AWS-based strategy, benefiting from the advantages of the public cloud within their data center. Stratoscale Symphony 3 newly introduced cloud services are fueled by the business demand for agility, flexibility, mobility and short time-to-market and offer a superb cloud experience with an intuitive self-service interface. Symphony transforms any x86 server into elastic, usable and consumable cloud capacity that is AWS compatible. Deployed in minutes, Symphony enables IT organizations to align with an AWS cloud first strategy and offers the sought-after flexibility and simplicity in managing all workloads and resources via a single pane of glass, decoupled from any hardware vendor constraints.

Herzliya’s Stratoscale is the cloud infrastructure company, providing comprehensive cloud infrastructure software solutions for enterprise IT, development teams and service providers. The company’s comprehensive cloud data center software, Stratoscale Symphony, can be deployed in minutes on commodity x86 servers, providing an Amazon Web Services (AWS) experience with the ability to augment aging VMware infrastructure. (Stratoscale 12.12)

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9.11 Mellanox 25G/100G Ethernet Solutions Enables Artificial Intelligence Speech Recognition

Mellanox Technologies announced that one of China’s leading intelligent speech and language technologies’ companies, iFLYTEK, has chosen Mellanox’s end-to-end 25G and 100G Ethernet solutions based on ConnectX adapters and Spectrum switches for their next generation machine learning center. The partnership between Mellanox and iFLYTEK will enable iFLYTEK to achieve a high speech recognition rate of 97%. iFLYTEK is a nationally renowned software enterprise based in China and dedicated to the research of intelligent speech and language technologies, provision of speech information services, and integration of E-government systems. To support a diverse number and growing type of applications, iFLYTEK requires a high performance and efficient data center network solution that needs to be both compatible with the company’s current infrastructure and scalable for future computing and storage requirements.

Mellanox’s Open Ethernet 25G and 100G Spectrum switches enable iFLYTEK to build a high-performance architecture that is flexible, scalable and easily managed. The iFLYTEK machine learning systems can handle massive concurrent traffic and is capable of supporting unpredictable future business growth. Mellanox’s intelligent networking solutions provides iFLYTEK with automatic networking provision and management, convergence network infrastructure with Quality of Service and RDMA over Ethernet (RoCE). In addition, the solution features scalability via a hyper-scale topology that offers full layer 3 BGP as routing and 8/16 ECMP.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage and hyper-converged infrastructure. Mellanox intelligent interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance. (Mellanox 12.12)

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9.12 L7 Defense & Check Point Software Partner to Protect Against Application DDoS Attacks

L7 Defense has partnered with Check Point Software Technologies to protect customers from sophisticated denial of service (DDoS) attacks which mainly target the application Layer (“Layer 7”). The joint solution mitigates DDoS attacks in today’s complex, fast-paced, advanced threat landscape. Like the natural immune system, L7 Defense’s AMMUNE technology protects enterprises from yet unfamiliar DDoS attacks, automatically and quickly. The process of attack discovery is very precise – attacking patterns are extracted from the first sign of attack and are used for immediate attack mitigation. AMMUNE overcomes the major obstacle of “false alarming” of attacks, which are frequently generated by existing solutions in the noisy Data Center environment.

AMMUNE is enterprise-ready and integrates seamlessly with Check Point Next-Generation Threat Prevention appliances or Web Services. Upon installation, AMMUNE automatically adapts itself to the protected applications’ interface. It then continuously updates its baseline to reflect any application change. To face the fast growth of traffic at the initiation of a DDoS attack, the elastic AMMUNE command and control system (CCS) flexibly loads more AMMUNE server instances which are later removed as the attack terminated.

Beer Sheva’s L7 Defense has developed a “Natural intelligence” (NI) platform named Ammune, which uses an innovative approach to identify and stop SaaS and on-premises Distributed Denial of Service (DDoS) attacks, in real time. The software-based technology is fully automated, built to scale and utilizes machine learning components, not requiring any prior knowledge of the attack method or the protected system. (L7 Defense 12.12)

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9.13 Deloitte Ranks Adgorithms 7th Fastest Growing Company in Israel

Adgorithms, creators of Albert, the world’s first artificial intelligence marketing platform, was named one of the 50 fastest-growing technology companies in Israel. Adgorithms has a revenue growth rate of 1102%. The Deloitte Israel annual Technology Fast 50 program recognizes and honors the 50 fastest growing technology companies in Israel (private and publicly-held), based on percentage revenue growth over a four-year period. To qualify, companies must operate in any area of technology and own proprietary technology. Adgorithms’ 1,102% revenue growth is attributed to its first-to-market status in the marketing industry, heavy commitment to R&D, and the successful adoption of its fully autonomous artificial intelligence platform Albert by global brands, including Harley-Davidson, EVISU, and Made.com. Albert fills a great need for digital marketers who are overwhelmed by the number of channels, devices and formats they must wade through to try to keep up with the changing consumer landscape. As a result, the demand for Adgorithms’ offering has accelerated its year-over-year growth.

Founded in 2010, Tel Aviv’s Adgorithms is the maker of “Albert”, the first-ever autonomous marketing platform. Albert serves as a highly intelligent and sophisticated member of brands’ marketing teams that autonomously performs many of the manual, time-consuming tasks that comprise modern digital advertising and marketing campaigns. Albert also offers proactive, ongoing insights and recommendations on information he has learned and uncovered along his journey. (Adgorithms 13.12)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Trade Deficit Widens by 600%

The Central Bureau of Statistics announced on 13 December that Israel experienced a 15.5% drop in high-tech exports and a 4.1% slide in imports of consumer goods in September-November this year, compared with the corresponding period last year. Israel’s trade deficit in November was NIS 2.7 billion. The deficit in trade of goods (excluding ships, airplanes, diamonds, and energy materials) since the beginning of the year totals NIS 28.9 billion, compared with a NIS 4.5 billion deficit in the corresponding period last year.

According to the Central Bureau of Statistics, trade in goods in November was affected by changes in the exchange rate of the shekel against the currencies in which import and export deals are conducted. The shekel fell 0.6% against the dollar and 1.4% against the pound sterling last month. On the other hand, the shekel rose 1.4% against the euro, 3.4% against the Japanese yen, and 0.6% against the Swiss franc. (CBS 13.12)

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10.2 Number of Israelis Traveling Abroad Reaches New Record in 2016

The Central Bureau of Statistics announced that some 6.3 million Israelis, a record number, traveled abroad in 2016, mostly via Ben-Gurion International Airport, but also to the Sinai Peninsula and through the land crossings into Jordan and Egypt. The vast majority of travelers (85%) journeyed abroad once during the year, with 15% going twice and some several times. The numbers for 2016 comprise a 15% rise compared with the same period in 2015, although the country’s total population has only increased by 2%.

From January to November 2016, some 5.9 million Israelis flew out of the country, 15% more than in the same 11 month period in 2015. The month of November, a low season between the high-traffic summer months and the High Holidays and Hanukkah, which this year falls in late December, saw only 389,000 Israelis travel abroad and was the weakest month of the year for outgoing tourism. Approximately 5 million Israelis traveled abroad in the months from June to November.

According to assessments, by the end of 2016, some 7 million Israelis out of the country’s population of 8.6 million will have traveled overseas, an all-time high and a significant jump compared to 2015, which saw 5.88 million Israelis traveling abroad. The rise in the number of Israelis traveling abroad can be attributed to the low dollar exchange rate, which is currently at around NIS 3.8 and a weak euro, which has dropped to an unprecedented low of about NIS 4. Moreover, 2016 saw airfare prices drop, among other reasons over competition in the low-cost flight sector. (CBS 11.12)

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10.3 Latet Claims 29% of Israelis Live in Poverty

According to the alternative poverty report published by the non-government organization Latet, every third Israeli child and every fourth adult live in poverty. This report was issued in anticipation of the official data due to be published by the National Insurance Institute. The data indicate that 2.4 million Israelis, 29% of the country’s population, are poor. More than one million of them are children, 35% of citizens under 18. Some 1.4 million are adults, 25% of Israeli adults. Furthermore, according to the report, 36% of Israeli single mothers live in poverty and deprivation. The report’s figures are based on the Multidimensional Poverty Index, which examines the level of deprivation in relations to the vital needs for a basic standard of life.

According to the report’s figures, 63.3% of citizens supported by aid organizations live in poverty despite being employed or not of working age. This figure jumped 21.5% from last year. It also indicates that more than half (50.6%) of people receiving aid belonged to the middle class in the past, before falling into poverty – a 23.7% jump from 2015.

The percentage of people receiving support who are in debt is almost twice as high as the general population – 65.7%. More than half (54.2%) of the children receiving aid do not have basic school supplies and textbooks; this figure rose 24.3% from last year. More than two thirds of people receiving aid (70.7%) said that they gave up on repairing severe defects in their homes, in comparison with 35.2% of the general population. (Globes 12.12)

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10.4 Inbound Tourism Up 38% in November Hitting Record High

A record 287,900 tourists visited Israel in November, a rise of 38% from the same month in 2015 and 31% from November 2014, the Tourism Ministry said on 8 December. Revenue from incoming tourism in November generated more than NIS 1.5 billion ($393 million), about the same as the ministry’s annual budget for promoting inbound tourism. This is NIS 400 million ($104 million) more than the revenue generated by inbound tourism in November 2014.

Of the 287,900 tourists who entered Israel in November, the vast majority, 254,000, arrived by air. The remaining tourists arrived overland, with 28,000 coming in from Jordan and 6,000 from Egypt. About 20,000 of November’s tourists did not stay overnight, a drop of 20% from November 2015 and November 2014. Some 2.6 million tourists entered Israel between January and November 2016, a 2% increase over the same period last year. (MoT 07.12)

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11: IN DEPTH

11.1 JORDAN: Jordan-Israel Relations: Normalization in the Shadow of Political Deadlock

Oded Eran wrote in INSS Insight on 1 December that progress on implementing infrastructure projects for water and energy between Israel and Jordan indicates the positive potential inherent in separating economic and infrastructure progress in trilateral Jordan-Israel-Palestinian relations from progress on a political solution to the Israeli-Palestinian conflict. This statement is not meant to detract from the urgent necessity of reaching at least a gradual solution to the conflict based on the idea of two states for two nations. Rather, it indicates a reality of shortages of energy resources, drinking water, ports; the need to prevent pollution of crowded population centers; and the irrationality of preventing solutions to these issues if they are made conditional upon comprehensively solving all of the core issues of the Israeli-Palestinian conflict. The water and natural gas agreements with Jordan, as well as the electricity agreement signed between Israel and the Palestinians (September 2016), prove that the sides can reach understandings and perhaps full agreements in many areas, and these can create a positive environment, even if they are not substitutes for political agreements.

On 26 September 2016, Noble Energy announced that it signed a contract with the Jordan Electric Power Company. Noble Energy is the American partner in the consortium that holds the rights to produce natural gas in the Leviathan field, which is within Israel’s exclusive economic zone. The supply of 3 billion cubic meters of gas per year will begin in late 2019 and continue for 15 years. The deal is worth $10 billion, with the price of a cubic meter linked to the price of a barrel of Brent crude oil and a fixed price floor. This deal is of critical importance for Jordan, which encountered problems when its gas supply from Egypt was cut off due both to the bombing of the pipeline in the Sinai Peninsula by the Islamic State, and to Egypt’s difficulties to abide by its agreements to sell gas to Jordan (and to Israel). The deal is also of critical importance to the consortium, which includes three Israeli companies along with the American company, because contracts for future sales enable it to raise the financial resources to develop the Leviathan gas field. Indeed, on 27 November 2016, the consortium’s partners announced that they had signed letters of commitment with two large international banks that committed to provide the consortium with $1.5 – 1.75 billion to fund the first phase of Leviathan development.

Since the announcement of the supply agreement, Jordan has seen ongoing demonstrations and a public campaign against the deal. As part of the protest, for example, Jordan’s citizens were asked to refrain from turning on lights in their homes during certain hours, as specified in the media and social networks.

On 24 November 2016, the Jordanian government, headed by Hani Mulki, won a vote of confidence in parliament. Jordanian parliamentarians of Palestinian origin slammed the government and called for the removal of the Israeli ambassador in Amman and for freezing diplomatic relations with Israel. Yet while evidence that the peace agreement with Israel signed in 1994 has only slightly changed Jordan’s internal political reality, these are little more than a nuisance and not a real challenge for the regime. Indeed, in years past, such an occurrence would only receive secondary headlines in the Jordanian press, as the parliament was meant to serve as a rubber stamp for the royal house. Nonetheless, even the modest expression of the Arab Spring in Jordan prompted the King to make changes to the constitution. While not radical changes, they brought Jordan closer to a true democratic process. Moreover, these changes allowed the beginnings of political parties with a national agenda, and not just a local-tribal platform. Muslim Brotherhood members, after committing a strategic mistake in boycotting the first elections after the constitution was changed, understood the situation. Thus even though their party was disqualified by the authorities, they joined with Christian and other candidates and in the last elections succeeded in creating a significant bloc in parliament.

After the Prime Minister presented his government’s platform and requested the confidence of the parliament, a long debate among the 130 legislators ensued for three days (22-24 November) and many of them requested to speak. Even though most of the government’s platform dealt with economic issues and internal reforms, some of the speakers saw fit to criticize the government for the Jordan Electric Power Company’s deal with Noble Energy to acquire natural gas from the Israeli gas field. A senior Member of Parliament, Wafa Bani Mustafa, a lawyer by training, demanded the agreement be cancelled, claiming that it contradicts article 33 of the Jordanian constitution. Even though it gives the King the authority to sign treaties, it says that “Treaties and agreements that involve expenses to the national treasury or that impact the individual or public rights of Jordanian citizens will not go into effect unless approved by parliament.” Member of Parliament Dima Tahboub of Amman claimed that the price of gas from Israel is higher than the price in international markets. During the parliamentary debate, a meeting of gas experts that included former Minister Ibrahim Badran and Member of Parliament Jammal Gammoh took place in Amman. During the event, initiated by the Jordanian chapter of the BDS movement, all of the speakers came out against the deal with the “Zionist entity,” arguing that one of every three dollars paid by Jordanian citizens will go to the Israeli treasury, and that the Jordan’s purchase far exceeds its needs. Bardan even claimed that most of agreement’s clauses are secret. For his part, MP Gammoh, claimed that the goal of the agreement is to strengthen normalization with Israel, and that the majority of his colleagues in parliament oppose the deal. According to him, he asked Qatar’s ambassador in Amman why his country is not helping to supply gas to Jordan, and the ambassador answered that the Jordanian government did not request such assistance.

In responding to the members of parliament at the end of the debate, Prime Minister Mulki hinted that in fact Jordan does not have good alternatives to the gas to be supplied by Noble Energy (he refrained from mentioning Israel). According to Mulki, Jordan is in talks with Iraq, Algeria, Egypt and the Palestinian Authority, but he also noted the security issue in Iraq, which would delay the provision of gas by pipeline from Basra in southern Iraq to Aqaba in southern Jordan. Mulki added that Qatar made no offer that could compete with the price set in the agreement with the American company, and emphasized that the contract between Jordan Electric Power and the American company would save $300 million a year throughout the supply period, hinting that the price agreed upon would be lower than the price of natural gas in international markets. At the end of the debate, the government received the confidence of 84 members of parliament (the constitution requires 66), while 40 voted against.

Before the ink had dried on the parliament’s decision, the Jordanian Ministry of Water and Irrigation announced (27 November) that five groups of international companies had advanced to the next stage in the process of choosing who carry out the first phase of the project to transfer water from the Red Sea to the Dead Sea. The name is a bit misleading, since the first phase is to construct a facility in Aqaba for desalinating 80 – 100 million cubic meters of water. The announcement also does not mention an important detail, which is that Jordan, Israel and the Palestinian Authority signed an agreement whereby Israel will receive almost half of the water desalinated in Aqaba for use in the Eilat area, provide a similar amount to Jordanians in the north, and increase the amount of water provided to Palestinians. The execution of the project’s first phase is scheduled to begin in the first quarter of 2018 and end in the last quarter of 2020. The project’s other objectives are to be implemented at a later stage; these include transferring the brine separated from the desalinated water and additional water from the Red Sea, to the Dead Sea, in order to preserve it and to produce electricity. Thus, according to the Jordanian announcement, at this stage full funding for the project has not yet been achieved, and aside from the American commitment of $100 million (out of a total that by conservative estimates will reach $500 million) there are no other commitments. In addition, while there are no disagreements between experts on the rationale for desalinating water in the Aqaba-Eilat area and the water exchange agreement between Israel and Jordan, many doubt whether transferring water from the Red Sea is the cheapest and most efficient way to preserve the Dead Sea.

At any rate, progress on implementing these two infrastructure projects for water and energy between Israel and Jordan indicates the positive potential inherent in separating economic and infrastructure progress in trilateral Jordan-Israel-Palestinian relations from progress on a political solution to the Israeli-Palestinian conflict. This statement is not meant to detract from the urgent necessity of reaching at least a gradual solution to the conflict based on the idea of two states for two nations. Rather, it indicates a reality of shortages of energy resources, drinking water, ports; the need to prevent pollution of crowded population centers and the irrationality of preventing solutions to these issues if they are made conditional upon comprehensively solving all of the core issues of the Israeli-Palestinian conflict. The water and natural gas agreements with Jordan, as well as the electricity agreement signed between Israel and the Palestinians (September 2016), prove that the sides can reach understandings and perhaps full agreements in many areas, and these can create a positive environment, even if they are not substitutes for political agreements. The Israeli side presumably “subsidized” and lowered the costs for the other side in the agreements, whether Jordanian or Palestinian. This is worthy subsidy, since in this way Israel contributes to the stability of its local geostrategic environment. (INSS 01.12)

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11.2 JORDAN: How Jordan Survives, Part 2

Dr. Paul Rivlin explains in the Moshe Dayan Center how the Jordanian regime has remained in power despite the challenges it has faced in recent years.

Jordan suffers chronic deficits in the balance of payments and as a result has been dependent on inflows of funds from abroad. These largely consist of remittances from Jordanian workers in the Gulf and grants and investments from Arab states in the Gulf and other countries, most notably the United States. Foreign aid is included in net development assistance in Table 1.

In recent years, the current account of the balance of payments has deteriorated massively. In the period 2001 to 2005, there was a surplus, averaging $127 million per year. From 2006 to 2010, the surplus became a deficit averaging almost $2 billion annually, while from 2011 to 2015 it reached just over $3.4 billion each year. This has occurred despite the fall in the cost of imported oil since 2014. In 2014 the cost of oil imports peaked at $5.5 billion (15.3% of GDP), and in 2015 it fell to an estimated $3.6 billion (9.4%).

Table 1: The Balance of Payments, 2008-2015 ($ billions)

Source: World Bank and Central Bank of Jordan

Weaker economic conditions in the Gulf have reduced the amount of aid and investment, as well the volume of remittances from Jordanian workers. Remittances alone have been equivalent to 15 – 20% of national income. The Gulf is also the main destination for Jordanian exports and it supplies most of its energy requirements. Additionally, Jordan receives substantial grants and foreign direct investment from the GCC.

Inflows of workers’ remittances, foreign investment, and tourism revenues have been negatively affected by regional conflict and tension. Therefore, while the balance on trade improved because of lower oil import costs, the current account, which includes remittances and services, deteriorated. The reduction of these inflows was an important factor in the slowdown of the economy.

The share of foreign debt in gross national income declined from 129% in 2000 to almost 62% in 2008, but has risen since then to 68.5% in 2014. Total public debt, which includes internal and external debt, rose from 89% to 93.4%, and this poses an increasing burden on the budget because of the interest that has to be paid.

The reliance on energy imports meant that Jordan was subject to the instabilities prevailing in international energy markets. These have included fluctuations in prices and disruptions to supply as a result of terrorist attacks on gas pipelines. In 2000, Jordan imported 94.1% of its energy needs and by 2011 this had reached 96.1%. As it has very limited refining capacity, it imports refined as well as crude oil. In 2000, the cost of energy imports came to 7.5% of GDP, in 2010 it was 11.6%, and in 2012 it was 19%, falling to 16.2% in 2013.

The price and availability of fuel has been perhaps the most sensitive issue in Jordan’s delicate political economy. In order to reduce the costs of energy to consumers, the government held prices below those that would be dictated by international costs.

Between 2010 and 2011, the cost of energy subsidies rose from 1.3% of GDP to 6.3%. This was the result of a reversal of policies designed to reduce subsidies that had been implemented since 2005. As a result of rising international prices for oil and shortages of gas imported from Egypt due to terrorist attacks, the government tried to hold down domestic prices. The electricity subsidy was the difference between the National Electric Power Company’s (NEPCO) cost recovery price and the wholesale price charged to distributors. This gap rose almost seven-fold between 2010 and 2011. As a result of attacks on the pipeline bringing gas from Egypt, Jordan had to increase imports of fuel oil. As a result, NEPCO’s debt nearly tripled in those years.

Energy subsidies benefited the better-off, who consumed much more energy than the poor, encouraging consumption and weakening the balance of payments. In 2012, the government ended energy subsidies, with the exception of those on liquid petroleum gas used for cooking. It also introduced a five-year electricity tariff adjustment program that was designed to enable the National Electricity Production Company (NEPCO) to reach full cost recovery by 2017.

This announcement resulted in a major outbreak of unrest throughout the country. These took place as King Abdullah struggled to contain a growing and increasingly diverse opposition that threatened to undermine the tribal support that underlies the Kingdom’s stability. Facing a $3 billion budget deficit, attributed largely to the disappearance of financial aid from the Gulf Arab states, the government tried to reduce fuel subsidies — effectively raising prices by 10% in September 2012, only to reverse itself a day later after thousands took to the streets. The cabinet then announced a cut in subsidies that would result in increases of 14% on prices at the pump and more than 50% for gas used for cooking.

In 2014, as international prices for oil fell, reforms became easier to implement. Energy diversification has been pursued with the opening in 2015 of a liquid national gas (LNG) terminal in Aqaba. This resulted in a very large increase in gas-to-power and reduced reliance on diesel and fuel oil.

In 2016, NEPCO signed an agreement with Noble Energy, under which the latter will provide 40% of the Kingdom’s electricity-generating needs from the Israeli Leviathan gas field. The contract was for 300 million cubic feet (8.5 million cubic meters) of gas per day over a 15-year term.

Jordan is one of the driest countries in the world, yet its population growth rate (both the natural rate and that including refugees) is one of the fastest. In 2014, it had 123 cubic meters of water per person per year, less than 25% of the international water poverty line of 500 cubic meters. Adding the 1.3 million Syrian refugees brought the volume per person down to 105 cubic meters.

The Syrian crisis increased water demand in Jordan by an average of 22%, but in areas where Syrian refugees are concentrated, water demand increased by 40%, which means that water and sanitation infrastructure must expand. Jordan has to do today what normally takes 10 years to accomplish, along with all the associated capital investment.

The Water Authority of Jordan has faced increased demand and reduced subsidies, while water prices in Jordan remain low by international standards. The water collection and distribution systems are inefficient with much water lost due to overdrawing from highland aquifers, resulting in lower water tables and declining water quality. This is unsustainable.

In 2013, Jordan consumed 902 million cubic meters of water: 53% for irrigation and 42% for domestic use, and the rest for industry and other sectors. In that year precipitation yielded 8,194 million cubic meters, 95% of which was lost to evaporation. The volume and predictability of precipitation has been affected by climate change. Population growth and urbanization have increased demand and led to the overexploitation of aquifers and the contamination of supplies. Groundwater has been polluted by fertilizers in the irrigation system.

At the end of 2015, there were 689,053 registered refugees in Jordan and 24,935 asylum seekers. They were equal to 10% of the population. According to the census, there were a total of 1.3 million Syrians, equal to 19% of the population.

The influx of refugees has increased pressure on Jordan’s infrastructure and resources, including its fragile economy and social fabric. The effects of the Syrian refugee crisis on the Jordanian labor market include a drop in average wage levels, lower employment opportunities, harsher working conditions, increasing child labor, and an expansion of the informal labor market. Since 2003, there have also been large numbers of Iraqi refugees in Jordan. The exact number is not known but estimates range between 200,000 and 450,000.

In January 2016, it was reported that rent in towns near the Syrian border had nearly tripled, making housing unaffordable for many Jordanians. The hospitals, schools, sanitation and water systems were also under severe strain. Some Jordanian observers questioned the wisdom of continuing to accept Syrian refugees and warned that resource, budget and demographic pressures might disrupt life in the country for at least a decade. According to an official estimate, the direct cost of the refugee crisis to the government from the beginning of the conflict in Syria was forecast at $4.2 billion by 2016.

Given the magnitude of the economic problems that Jordan faces, preserving financial stability has been an impressive achievement. This should, however, be seen in the wider context of the slowdown of growth and the very alarming state of the labor market. Like elsewhere in the region, unemployment and poverty have generated frustration and encouraged extremist politics, leading to Jordanian participation in terrorism.

The economy does not provide enough employment that meets the requirements of a labor force that is relatively well educated and wants well paid jobs. The result is emigration and unemployment among Jordanians, as well as reliance on imported labor for low skilled tasks. Military spending is high, which is expected given the threats from abroad and the potential for unrest at home. It is, however a burden on the budget. The state budget and balance of payments are in deficit and the inflow of resources from abroad has been unstable. Despite this, the regime has remained in power and Jordan has avoided the chaos that followed the outbreak of the Arab Spring elsewhere. How has this been possible?

Jordan has received refugees in huge numbers since the 1940s. During the Arab-Israel war of 1947-49, hundreds of thousands fled the West Bank to Jordan. More left in 1967 when Jordan lost control of the West Bank. In 1991, large numbers of Jordanians and Palestinians left Kuwait and other Gulf states and returned to Jordan. From the early 1990s, refugees arrived from Iraq and their numbers increased after 2003. The most recent and largest inflow from Syria should be seen in this context.

The ruling Hashemites and their closest supporters and associates, the East Bank Bedouin, have always been a minority in their own country. This was even true after 1967, when Jordan lost the West Bank and part of its Palestinian population. From the country’s foundation there was a division of labor: the Palestinians were dominant in the business community and the East Bankers formed the army, police and civil service. Each side needed the other and the fact that they were both Sunni contributed to stability, especially after the Arab Spring when Sunni-Shiʿa tensions rose throughout the region.

Jordan has been surrounded by countries in conflict for many years. Civil wars are raging in neighboring Iraq and Syria, and the Israeli-Palestinian conflict continues. Although it has been severely weakened, the Islamic State and other Sunni extremist groups remain active and have staged attacks in Jordan. Iran has reemerged following the nuclear agreement and is increasing its influence in Iraq and Syria, while it maintains its foothold in Lebanon through Hezbollah.

King Hussein, who ruled for forty seven years until his death in 1999, was very popular, not only as a symbol of unity, but also because he was seen as effective. His son, Abdullah may not be as popular but he has managed to remain in power and maintain Jordan’s unity and security for nearly two decades. There has been opposition both to the lack of democracy or its weakness, as well as to the corruption of those close to the court. There has also been opposition to the king’s pro-Western policies and relations with Israel. In recent years these have been seen through the prism of religiosity: Jordan’s pro-Western orientation has been seen as anti-Islamic. The king has committed Jordan to the fight against the Islamic State and Islamic radicalism more generally. He has also warned of the danger posed by Iran to Sunni states in the region.

Internally, the Muslim Brotherhood, known as the Islamic Action Front (IAF), boycotted the entire electoral process in 2010 and 2013. Since then, it has had change in leadership and a softening of its ideology, which led to a shift in its position on the elections. In 2015, it took part in the general elections but did not do well. The weak performance of the Front was due to its ties to the Egyptian Muslim Brotherhood, which was removed from government after only a year in power and is now hounded by the Egyptian authorities. Another reason was the hatred and fear of the Islamic State by many, which grew stronger in January 2015, following the brutal murder of a Jordanian pilot, who was held captive by the Islamic State in Syria.

The secret of monarchic survival and the relative stability of Jordan is the ruler’s appeal to all sections of society: he represents tradition, continuity, and stability. The king has also managed to obtain foreign aid and foreign political support including military aid, all designed to maintain stability in Jordan. This has eased the severe economic constraints that prevail.

The September 2016 elections for the lower house of parliament provided an indication of the political challenges facing Jordan. The elections were held under a new law allowing multiple votes for open proportional lists. This replaced the long standing single-vote system, which has been criticized for years by various political players, especially the Muslim Brotherhood. The Muslim Brotherhood, which had boycotted the last two elections decided to contest the poll through its political arm, the Islamic Action Front. In all, 1,252 candidates ran in 226 lists in the elections.

Voter turnout was very low, reflecting discontent with the system of government. Jordan has more than four million registered voters but one million reside outside the country and cannot vote. Voter turnout was only 37%, compared to over 50% in the 2013 elections. A lack of confidence in the role of the legislature and its limited influence on government policies have been cited as reasons for the low turnout. The Islamists won 15 out of the 120 seats. Political parties won approximately 17% of the seats, almost two-thirds of which belonged to Islamist parties. No nationalist or leftist party gained representation. Independent deputies, mainly businessmen, professionals, and tribal figures accounted for the majority of the seats. At least 50 candidates were re-elected.

One new development was that the Maʿan (Together) list made history by winning two seats. This was a modest indication of a growing debate in Jordan within the political elite on the need to create a civic, secular, and democratic society to confront both authoritarian and religiously driven agendas.

After the elections, the king reappointed the same unelected cabinet that had been in office, with only a few minor alterations, and has proceeded to rule by royal decree. Unpopular decisions to buy gas from Israel, and to revise the school curriculum by removing controversial Qurʾanic verses, were issued as royal decrees. In October 2016, these moves were followed by riots in a suburb of Amman, after a series of police raids there.

As the Muslim Brotherhood is seen by many as pro-royal, the aggrieved have found more extreme outlets. As a result, there has been support for the Islamic State despite its brutal execution of the Jordanian pilot.

Despite its Western orientation, Jordan is a deeply conservative country. A reflection of this is the female labor force participation rate: at 13.3% in 2015, it was even lower than Saudi Arabia. The conservative or even fundamentalist nature of significant parts of society was revealed after the September 2016 killing of a well-known journalist, Nahid Hattar. He had been accused of insulting Islam and was shot dead on the steps of Amman’s courthouse before hearings on blasphemy charges. There was much support for his killer on social media in Jordan. With all these conflicting pressures, King Abdullah will have to continue walking an economic and political tightrope for the foreseeable future. (Dayan December 2016)

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11.3 IRAQ: IMF Executive Board Completes First Review of Iraq’s Stand-By Arrangement

On 5 December, the Executive Board of the International Monetary Fund (IMF) completed the first review of Iraq’s three-year Stand-By Arrangement (SBA), which is designed to support Iraq’s economic reform program and restore fiscal balance over the medium term. The Board also completed financing assurances review under the SBA. The SDR 3.831 billion arrangement (about $5.34 billion at the time of approval) was approved in July, 2016. The Board’s approval enables the disbursement of SDR 455 million (about $617.8 million).

As part of the completion of the first review, the Board also approved Iraq’s request for a waiver for the non-observance of the continuous ceiling on new external arrears, and request to modify performance criteria. The Board also approved the request for a waiver of applicability for end of September targets of four performance criteria on the floor on gross international reserves (GIR) of the Central Bank of Iraq (CBI), the ceiling on net domestic assets (NDA) of the CBI, the ceiling on the stock of outstanding arrears to international oil companies and the ceiling on the stock of gross public debt, as well as a request for the re-phasing of the arrangement.

Iraq’s economic reform program supported by the SBA aims to address the urgent balance of payments need, bring spending in line with lower global oil prices, and ensure debt sustainability. The program also includes measures to protect the poor, strengthen public financial management, enhance financial sector stability, and curb corruption. Iraq will require the support of the international community to implement these policies.

Following the Executive Board’s decision, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair of the Board, issued the following statement:

“The economic policies implemented by the Iraqi authorities to deal with the shocks facing Iraq – the armed conflict with ISIS and the ensuing humanitarian crisis and the collapse in oil prices – are appropriate. In the fiscal area, the authorities are implementing a sizable fiscal adjustment, mostly through retrenchment of inefficient capital expenditure while protecting social spending. In the external area, the authorities are maintaining the peg of the Iraqi dinar to the U.S. dollar, which provides a key anchor to the economy. Performance under the Stand-By Arrangement has been mixed; however, understandings have been reached on sufficient corrective actions to keep the program on track. Resolute implementation, together with strong international support, will be key.

“The revised fiscal program in 2016 and the draft budget in 2017 are aligned with the SBA. The composition of the fiscal adjustment should be improved over time by increasing non-oil revenue and reducing current expenditure, including the payroll and pension payments, and reforming the electricity sector, subsidies, and state-owned enterprises, in order to make room for larger but more effective and efficient investment expenditure that is conducive to growth.

“Significantly improving public financial management will be important. Arrears need to be assessed and paid following verification, and expenditure commitment and cash management should be strengthened to prevent the accumulation of new arrears.

“Measures to bolster financial sector stability include strengthening the legal framework of the Central Bank of Iraq, restructuring state-owned banks, and eliminating exchange restrictions. Measures to prevent money-laundering, counter the financing of terrorism, and strengthen the anti-corruption legislation also need to be implemented.

“Implementation of the budget-sharing agreement with the Kurdistan Regional Government would put both the federal government and the Kurdistan Regional Government in a better position to address the shocks to the Iraqi economy.” (IMF 05.12)

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11.4 KUWAIT: Kuwait’s Snap Parliamentary Elections Bring Return of the Opposition

On 29 November, Kristin Smith Diwan at the Arab Gulf States Institute in Washington wrote that on 26 November, Kuwait held parliamentary elections, its fourth in just five years, in a vote that marked the return of the opposition after nearly four years of electoral boycotts. Despite the handicap of a new one vote electoral system, and the short time for preparation due to the early dissolution of the Parliament, the opposition managed to have a strong showing, capitalizing on a public eager to see a stronger Parliament serve as a check on the ruling family-led executive. Voters came out in high numbers seeking new faces: 70% turnout resulted in a turnover of 60% of members of parliament, with most estimates giving the opposition a bloc of 15 with the potential of attracting a majority of the 50 seats on certain issues.

Leading the opposition will be Kuwait’s Sunni Islamists, anchored by the Muslim Brotherhood-affiliated Islamic Constitutional Movement (ICM), looking to repair its standing after a punishing five years out of power. Among the new faces are a number of youthful ones, including the youngest member of parliament ever elected in Kuwait, in addition to one woman. All will face pressure to deliver on pocketbook issues as Kuwait negotiates severe budget deficits. Many members of the opposition will also look to push back on limitations on civil liberties, such as new media and terror laws, the government’s punitive withdrawal of citizenship, and plans to collect citizens’ DNA to aid in security.

The difficult economic and political challenges faced by Kuwait would be best served by collaboration and conciliation within the Parliament and with the executive – something difficult to achieve with the sectarian and political divisions still plaguing the small emirate. Counted among those divisions are ones within the ruling family itself. The competition for the future leadership of the country is escalating as a key transition looms, one in which this Parliament could play a part.

Islamist Opposition Regroups

This election continues a period of marked political instability, as the past seven Parliaments have failed to serve their full term due to dissolutions imposed by the courts on procedural grounds, or by the emir in a constitutionally-permitted maneuver. In the last instance, the emir dissolved the Parliament nine months before its scheduled end of term, citing domestic and regional challenges. However, most analysts judged that the emir moved early for more tactical reasons: to gain advantage over an opposition resolved to return after years of boycotts. This election thus served as the first full test of the new electoral system established with the emir’s decree in 2012, which prompted the electoral boycotts. The reduction of votes from four to one was widely predicted to negatively impact the opposition, which used the multi-vote system to build electoral coalitions.

The most prominent party returning to elections was the Muslim Brotherhood-backed ICM. Under the current emir, and especially since taking a more strongly oppositional stance in 2011, the Muslim Brotherhood has suffered institutionally, losing standing in key ministries to pro-government Salafis, and experiencing increased pressures on its extensive international charitable activities. The movement has been working to separate its political society from the main organization, a move that allowed leadership to emerge from middle tier and younger members. This has allowed the Kuwaiti Brotherhood to avoid the divisions seen in other countries such as Jordan, although a significant minority of ICM members did vote to maintain a boycott in some form in internal elections. The ICM chose a conservative electoral strategy, selecting proven candidates, and mostly running only one per district. This strategy paid off as the ICM won four seats across four different districts, narrowly losing only one seat in a district where it ran two competitive candidates.

Salafi movements in Kuwait are very divided between pro-government candidates and a number of other more activist trends. These elections were punishing to the pro-government candidates, including two former ministers. The activist trends were more successful, returning a number of well-known former members of parliament to the National Assembly, although some others failed in their bid.

The return of the Sunni Islamist opposition, alongside many new independent and reformist candidates in urban districts, resulted in a reduction in Shia members of parliament.

Tribal Constituencies in Transition

Kuwait’s more tribal outer constituencies are experiencing greater political volatility. These once reliably pro-government regions have become more educated and more dissatisfied with their share of the rentier bargain, suffering to a greater extent from the decline in public service and public sector jobs. This trend is exemplified by the undisputed leader of the tribal populists, Musallam al-Barrak. In his long parliamentary career he rejected participation in tribal primaries – the illegal but informally practiced pre-elections to consolidate tribal support behind selected candidates – in favor of building a broader coalition campaigning against corruption and Kuwait’s merchant oligarchy.

Yet with Barrak still in prison over his confrontations with the emir, his powerful Mutair tribe was divided on whether to run pro-government, opposition candidates, or to boycott, thereby weakening its position. Meanwhile, stricter enforcement of the law against tribal primaries, and the implementation of the one vote system wreaked havoc on the voting strategies of Kuwait’s larger tribes. Unable to cast votes for multiple candidates, tribes resorted to voting stratagems designed to divide the electorate among potential members of parliament, organizing their voters, for example, by name. This appeared to have failed, as winners of informal tribal primaries went down to defeat and the three biggest tribes – the Matran, Ajman, and Awazem – reduced their usual parliamentary representation of around 15 seats to only seven. This provided an opening for smaller tribes, some of which have rarely held representation.

New Faces, Including Youth

The high degree of turnover and defeat of some veteran politicians means the Parliament will be infused with some new faces, many of them notably younger than their predecessors. The deputy minister of youth affairs, Alzain Alsabah, sent her congratulations to six elected representatives from among the youth constituency, urging them to help realize the National Youth Policy, now under development. Other sources placed the number of young members of parliament at seven, four new to Parliament. Several of these have voiced strongly reformist programs, with at least two connected to the Kuwaiti Association for Protecting Public Funds, an anti-corruption organization. It remains to be seen if these youthful members can win the confidence of a diverse and ambitious younger generation, among them leading political activists who continue to face legal prosecution and continue to support a boycott of the elections.

Women continued to struggle in this election, with only 15 contesting and only one candidate, former Member of Parliament Safa al-Hashem, winning a seat. Women have failed to build upon the 2009 high of four seats in the Parliament, leading some activists and analysts to call for the implementation of gender quotas.

Parliamentary Dynamics

The 2016 election unquestionably strengthens the opposition; it could hardy do otherwise given the historically pro-government Parliament elected during the boycott. However, the opposition and reformist voices ran mostly as independents and represent significantly different trends. Their ability to coalesce will vary based on issue, and on the conviction of the government, which maintains its 12-member ex-officio voting Cabinet. Internal procedural changes implemented over the past few years will also weaken the ability of parliamentary members to interpolate ministers – their most formidable power.

The ability of the disparate opposition to unify, and consequently to be effective, will face an early test in the election of the speaker of the house. There are currently three candidates hoping to challenge the current speaker, Marzouq al-Ghanem. The opposition needs to coalesce behind one candidate to have any chance of unseating the influential head of Parliament.

Given the populist rhetoric of the campaign, there could be greater resistance to fiscal budgetary cuts, including the unpopular cut in fuel subsidies passed while the Parliament was in summer recess. A broader coalition against privatization and large public tenders may be more susceptible to government influence, and arguments about the need for economic diversification and growth.

Another issue that may garner greater parliamentary scrutiny is tough new surveillance and security measures, which many members of the opposition view as veering toward citizen intimidation. The new media law, the DNA law, and the increasing punitive use of the withdrawal of citizenship were all prominently discussed during the campaign. The ability of the Parliament to change some of these policies may be limited, however, due to executive privilege.

The core group of the Sunni Islamists, and the relative weakness in the tribal populists, may impact the agenda setting of the opposition. The Sunni Islamists expressed strong concern for regional affairs, including the ascendance of Iran. As the Parliament traditionally defers to the executive on foreign policy matters, there is a danger that these concerns will be directed more domestically at the Shia community, perhaps questioning the government handling of the Abdali cell and weapons cache discovered in the summer of 2015. The danger of this Parliament exacerbating sectarian animosity, never far from the surface, is real.

Another factor that will impact the Parliament is the unity of the ruling family-led government itself. The government made progress in its agenda with a more pliable Parliament, but its effectiveness has still been curtailed by the limited capabilities of the bureaucracy. This led the royal court to circumvent the government altogether on high profile public projects, such as youth programs, the new opera, and the renovation of Al Shaheed Park. Royal leadership beyond the current emir, age 87, is hotly contested however, and competition between rival royals has been impacting parliamentary dynamics. The fact that the current parliament could have an impact on any contested succession – a precedent set in 2006 – heightens its importance, and perhaps the likelihood of yet another unscheduled parliamentary dissolution.

Kristin Smith Diwan is a senior resident scholar at the Arab Gulf States Institute in Washington. (AGSIW 29.11)

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11.5 EGYPT: Why Can’t Egyptians Get The Medicines They Need?

Mohamed Saied posted in Al-Monitor on 29 November that Egypt’s decision to float the pound sent drug prices soaring, and drug companies have responded by curtailing imports, leading to a critical shortage.

Mohammed Lufti was desperate to obtain the prescription drugs his mother needed to live. He couldn’t afford them, but he was trying to raise funds for her treatment after a stroke sent her to a Cairo hospital’s intensive care unit. “My mother is dying and we cannot afford the treatment,” he tweeted 19 Nov. But even if he could raise enough money, he hadn’t been able to find the drugs. Egypt has been suffering from an acute shortage of many medicines, especially imported ones, since its Central Bank decided on 3 November to float the Egyptian pound.

“These drugs are imported and … doctors told me that the companies had stopped distributing them following the floating of the Egyptian pound,” Lufti, who works in a clothing factory, told Al-Monitor. He said his mother needed a combination of three antibiotics to live: polymyxins B and E and tigecycline. “But I could not find them and the doctors told me that her condition was deteriorating day after day.” His mother died waiting for the drugs, he said.

The Egyptian government strictly regulates drug prices, so pharmaceutical companies haven’t been able to raise prices. Yet they must pay about twice as much now to import the medicines or their ingredients. Their only alternative, some say, is to curtail imports and set restrictions on distribution, which they have done.

Ahmed El-Ezabi, the chairman of the Pharmaceutical Industry Chamber, told Al-Monitor that the pharmaceutical sector became unstable following the Central Bank’s decision. Agreeing to float the pound, however, helped Egypt secure a $12 billion loan from the International Monetary Fund. The IMF did specify that the government must raise subsidies for food and medicine, which hasn’t been done yet.

Health Minister Ahmed Emad al-Din Rady initially denied claims of a crisis in the pharmaceutical sector, saying drug companies were making such claims as a ruse to justify a call for price hikes. But he retracted that statement on 17 November and acknowledged the lack of imported drugs. He said there are 146 medicines with no available alternatives in the local market.

The Egyptian government has agreed to spend $186 million to import the unavailable drugs. On 16 November, the health minister assigned state-run holding company Vacsera Co. and government-owned Egyptian Pharmaceutical Trading Co. (EPTC) to import the drugs, to avoid price controls among private companies.

Although the drug shortage reached a crisis stage after the government floated the pound, the problem emerged in the first quarter of 2016, when the foreign exchange market suffered from a severe dollar shortage and a major drop in the country’s foreign exchange reserves at the Central Bank. The bank devalued the pound by 14% in March, and it reached 8.78 against the dollar. However, the pound continued to plummet and now stands at 18 pounds to $1.

In mid-May, the Ministry of Health allowed companies to raise the price of the cheapest drugs — those selling for up to 30 pounds ($3.40) per pack — by 20% effective 1 July, and warned drug manufacturers against closing down production. That decision applied to drugs manufactured locally, which rely on imported raw materials affected by the foreign exchange crisis.

Mohammad al-Abed, the chairman of the Pharmacies Committee at the Pharmacists General Union, said that according to the union’s 16 August report, the pharmaceutical market suffered a shortage of 919 types of drugs — local and imported. This is in addition to the 146 imported drugs for which a shortage became apparent after the decision to float the pound, he said.

He added, “The record mentioned only the missing drugs in the private pharmacies, [which make up] two-thirds of the medicines needed by the market. … The drugs that have no alternatives on the Egyptian market are mostly medicines for blood and tumors.”

Sherif al-Sabki, a manager at EPTC, blamed the current situation with locally made drugs on hoarding by consumers who anticipated higher prices and scarce products after the pound was floated. But the true shortage of locally made drugs — which account for about 60% of the market’s needs — will emerge when the raw materials inventory in factories run out, he said, noting that those materials were purchased at the old price of the dollar before the pound was floated.

Sabki acknowledged the current lack of imported drugs, estimating that 15% of those medicines have no alternatives on the local market. “The importing companies will suffer huge losses … as the cost of such drugs has increased by 200%,” he said. He believes the situation is the result of those companies’ accumulated debt in dollars.

He added, “These companies — such as the Egyptian Pharmaceutical Trading Co. — have imported the existing quantities of drugs using deferred checks with the old price of the dollar, which was 8.78 pounds, while this price has doubled in banks following the decision to float the dollar.”

During a 20 November meeting with pharmaceutical companies, the minister of health refused to raise drug prices at that time, deferring the discussion until April. A number of delegates from the Pharmaceutical Industry Chamber protested, but the meeting was adjourned without reaching any solution. Sabki called upon the state to find a swift solution to the rising cost of medicine, to shield consumers against the crisis that is likely to worsen once the reserves of raw materials run out, and in light of the reluctance of some companies to import.

For this part, Ezabi said delegates of 154 factories in the chamber pledged during several meetings with government representatives that they will continue manufacturing as long as they can endure the losses. He called on the government to make up the difference in the price of the pound until it reaches a decision on raising the prices of drugs and the importing companies settle their debts for drugs they bought on credit. He said he expects a breakthrough in the next two months.

Commenting on locally manufactured drugs, Sabki said the only solution is for the government to gradually raise the prices of medicines after studying the actual cost of every medicine type.

As for the importing companies, Sabki believes the government has to take into account the size of the losses they may incur. He expects an inevitable price increase. (Al-Monitor 29.11)

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11.6 TUNISIA: EU Providing €213.5 million to Tunisia for Reforms & Funding Social Infrastructure

The European Commission reaffirms its support to Tunisia with a new financial assistance package worth a total of €213.5 million for reforms and funding social infrastructure. This follows the International Investment Conference TUNISIA 2020 where the European Commission, represented by Commissioner Johannes Hahn, reaffirmed its support towards Tunisia’s transition to a modern democracy based on freedoms, socio-economic development and social justice. The 2016 financial support package for Tunisia will consist of four programs:

1) The ‘Program to support the modernization of public administration and public undertakings, in support of the 2016-2020 Development Plan’ (€73.5 million) aims to assist Tunisia in the process of reforming its public administration with a view to increasing the effectiveness, efficiency, quality and transparency of public services and public undertakings.

2) The ‘Program of support for education, mobility, research and innovation’ (€60 million) is intended to improve access to a high quality education system, making it possible to increase the employability of young people and stimulate socioeconomic integration. This measure, which is targeted particularly at Tunisia’s young people, will complement the major investment by the EU in vocational training. It provides for a mobility component which will allow 1 500 Tunisian students and teachers to access mobility grants under the ERASMUS+ Program. The support for the research and innovation system will promote greater participation by Tunisian researchers and institutions in the Horizon 2020 Program with which Tunisia has been associated since 1 January 2016.

3) The ‘Pilot initiative on integrated local development’ (€60 million) seeks to support the process of decentralization enshrined in the Constitution and to reduce development disparities between the coastal regions and the interior.

4) The ‘Program to support the health sector in Tunisia’ (€20 million) aims to assist Tunisia in strengthening its health system by improving the quality and accessibility of health services for all.

Background

The Programs adopted today, financed by the European Neighborhood Instrument, translate into action the guidelines set out in the Joint Communication of the Commission and the High Representative on Strengthening EU support for Tunisia, adopted on 29 September 2016. That communication reaffirmed the enhanced commitment of the European Union to support the reforms currently being undertaken by the Tunisian Government in order to complete the transition to democracy and to ensure the country’s socioeconomic development.

Since 2011, the EU has more than doubled its financial contribution to cooperation with Tunisia. The country is also the principal beneficiary, in the Southern Neighborhood, of the ‘umbrella’ Program, which allows for increased European financial support to partners working to strengthen democracy and human rights. The combination of grants (over €1.2 billion), macro-financial assistance (MFA €800 million) and loans, including those from the European Investment Bank (€1.5 billion), will bring total support to Tunisia from 2011 to 2016 to approximately €3.5 billion. The scale of the support reflects the EU’s firm commitment to the country. As well as increased support, the last five years have ushered in more diverse approaches and forms of assistance to address Tunisia’s needs in the wake of its historic democratic transition. (European Commission 05.12)

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11.7 TURKEY: How the Turkish Lira Entered Free Fall

Mustafa Sonmez posted in Al-Monitor on 30 November that the European Parliament’s vote to suspend Turkey’s membership talks is the latest move to worsen the rapid decline of the Turkish lira’s foreign exchange rates.

In its heyday, years before the 2009 global financial crisis as well as in the ensuing years, when the United States and Europe pursued liquidity expansion to battle the crisis, Turkey’s ruling Justice and Development Party (AKP) enjoyed abundant inflows of foreign capital, with an annual average of nearly $38 billion for the past 14 years.

Those resources, however, were used mostly toward domestic demand, financing consumer loans and sectors that bring in no foreign exchange gains, such as construction. As a result, Turkey’s current account deficit became a chronic problem and its external debt stock, 40% of which is short-term, swelled to nearly 60% of the GDP. In addition, inflation and unemployment in those years got stuck at 7 – 8% and around 10%, respectively, while investments ground to a halt. Thanks to the global fall in energy prices, the current account deficit — $35 billion annually on average — did not widen, but did not recede either.

The US Federal Reserve’s decision to hike rates, the first signal of which came in 2013, led to occasional outflows of foreign capital and the appreciation trend of the dollar began. Yet the Fed’s vacillations and the European Union’s zero-rate expansionist policies meant that foreign funds were willing to stay in emerging economies such as Turkey’s for some time longer. As a result, the fragile Turkish economy was able to stay on its feet, though the inward structural loss continued.

Turkey’s reliance on external funds had grown, but starting in the second half of 2013, foreign investors began to lose their appetite in Turkey, leading the Turkish lira to lose ground fast. The dollar’s appreciation against the lira since 2013 will be 60% by the end of 2016 if its rise this year is contained at the current 12%. Given that consumer prices have increased 25% in the same period, the economic structural loss caused by the rise of the greenback becomes plain as day.

The economic decline since 2013 has been reflected in the reports of both the International Monetary Fund and credit rating agencies, which serve as a beacon for investors. Along with economic risks, Turkey’s political and geopolitical risks have also been on the rise since 2013. The Gezi Park revolt in the summer of 2013 and the AKP’s acrimonious fallout with longtime ally Fethullah Gulen later in the year were factored in as higher political risks at home. In terms of foreign policy, Turkey’s stance in the Syrian civil war and the Iraqi turmoil, the crisis with Russia and recurring frictions with the United States all went down in the books as increasing geopolitical risks. On top of all this, Ankara’s shift to a path of conflict with the Kurdish movement, followed by the Gulenist coup attempt on 15 July, meant that the risks had hit the ceiling, and credit rating agencies cut Turkey to “non-investment” grade.

In November, two major external developments have further darkened Turkey’s outlook. First, Donald Trump’s election victory in the United States accelerated the flight of foreign capital, underway since the rating downgrade, as Trump’s signals of rate hikes to boost economic growth seemed to encourage investors. This, in turn, intensified the Turkish lira’s slump against the dollar.

The bigger blow, however, came 24 November, when the European Parliament voted in favor of freezing membership talks with Turkey, citing Ankara’s worsening record on human rights and the rule of law. The vote is not binding for European leaders and the general expectation is that member states will not take any further steps against Turkey, making do with the “political message” delivered by the Parliament’s vote. But even this message was enough to further scare off investors.

Earlier on 24 November, the Central Bank’s Monetary Policy Committee had used its rate-hike weapon in a bid to rein in the dollar. Despite President Erdogan’s pressure for lower interest rates, the committee announced a drastic hike of 50 basis points in its policy rate, bringing it to 8%, along with other moves aimed at curbing foreign exchange rates. But before these decisions could make any impact on the markets, the news from the European Parliament propelled the dollar anew, sending it to a record high of 3.47 Turkish liras.

Erdogan and the government, meanwhile, lashed out at the European Parliament, adopting a bellicose attitude and dismissing the criticism on violations of the rule of law, human rights, free speech and media freedoms. According to the prevailing sentiment in the higher echelons in Ankara, the call to freeze membership talks was nothing but a conspiracy against the ruling regime.

No matter what Ankara believes, the European Parliament’s move has compounded the country’s risk aggregate. From the vantage point of investors, the vote signifies a major rift in Turkey-EU ties, the healing of which will take time and depend on conditions.

The real question now is how Turkey will meet its burden of liabilities and contain economic contraction with a dollar that has perched itself at the 3.4 benchmark against the lira. Amid the increased perception of risk, the inflow of foreign capital will further decline, foreign exchange deficits will worsen and meeting liabilities will become more difficult. Hit by huge losses due to the rising price of the dollar, how are economic actors with foreign exchange deficits going to adapt to the new environment?

While the dollar seems unlikely to climb down from its current level, the Central Bank’s rate hikes will push the economy to contract. The more expensive dollar will inevitably lead to cost inflation through the increased price of imported inputs, which, for the Central Bank, will mean further rate hikes. The dollarization of deposits, meanwhile, is also accelerating, as appeals for a return to the Turkish lira seem to bear little fruit. This, too, is creating pressure to hike rates.

In sum, the Turkish economy is now under the double strain of a more expensive dollar and higher interest rates, which are likely to increase further.

Nonfinancial companies have taken the heaviest blow from the dollar’s appreciation. Spurred by too much enthusiasm for Erdogan’s “mastership era,” the rush to external borrowing several years ago has left them with $211 billion in foreign exchange deficit, up from $67 billion in 2009. Now they will have to contend also with higher interest rates and a shrinking domestic market. The private companies’ crunch will inevitably bear on the banks they deal with. Preventing a crisis in the real sector from spilling over to the financial one will not be an easy task. Who can guarantee that efforts to contain such crises using public finances will keep the budget fireproof and not create huge deficits? With a government reluctant to acknowledge its problems, controlling the blaze does not seem easy at all. (Al-Monitor 30.11)

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The Fortnightly newsletter is a free service of Atid, EDI. We are a team of economic and trade development consultants, headquartered in Jerusalem, but active throughout the region and beyond. EDI works with an international clientele interested in identifying and researching business opportunities in the region. We also serve as the regional representative offices for a number of U.S. states and bilateral Chambers of Commerce, as well as European clients.

EDI’s other services include development of feasibility studies and tailored research reports, as well as identification of potential joint ventures for commercial clients. For more information on how we may better assist you, please visit our Web site at: http:// www.atid-edi.com.

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What’s New at EDI – December 2016

December 14, 2016, 6:31 am

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Mississippi Governor Phil Bryant Leads Trade Delegation to Israel

Mississippi Governor Bryant made his third visit to Israel in the last 24 months in November heading a 22 person trade delegation of local exporters interested in pursuing business relationships with Israeli firms. During his visit he spoke at NEXTECH, a major Israeli tech conference, meet with government leaders as well as representatives of Israel’s defense industry to discuss their locating US facilities in Mississippi. EDI represents the trade and investment interests of the state in the Middle East. Following his visit senior executives of the Mississippi Development Authority travelled to Jordan and the UAE to explore potential in those two locations as well, accompanied by EDI Special Events Manager, Aviva Lewis.

Illinois Hosts Meeting of its Overseas Representatives

The Illinois Department of Commerce and Economic Opportunity will host a confab of its overseas representatives from December 4-10. During the visit the group will meet with state officials, participate in an event honoring top exporters and will meet with a variety of companies interested in exploring export opportunities. EDI represents the trade and investment interests of Illinois in the Middle East. EDI Trade Director Seth Vogelman will represent EDI at the event.

EDI Hosts Hong Kong’s Secretary of Economic Development & Commerce

During the week of November 13th EDI hosted the Honorable Mr. Greg So, Hong Kong’s Secretary of Commerce & Economic Development. He visited Israel to meet with officials of the Israeli Ministries of Economy and Tourism to bring them up to date on opportunities in Hong Kong. He also paid a courtesy call on the Chinese Ambassador to Israel, Mr. Zhan Yongxin and met with a number of Israeli startups to speak about opportunities for them in Hong Kong. Invest Hong Kong is the foreign direct investment promotion arm for the Special Administrative Region. EDI has represented the interests of InvestHK in Israel for the last four years. EDI VP for Strategy & Business Development, Michael Platt, hosted Mr. So.

International Business Group to Meet in Williamsburg, Virginia in December

The International Business Group (IBG), an association of 20 business development companies worldwide will hold its annual meeting in Williamsburg, Virginia during the week of December 4^th. EDI is a founding member of the group whose members span the globe from Australia to Singapore, India, South Africa, Europe, the US and Central & South America as well. The meeting will interface with that of SIDO, the State International Development Organizations, Inc., who are holding their winter meeting in the same city. Among other activities, IBG will host a dinner for the SIDO delegates.

EDI to Participate in Annual Meeting of Invest Hong Kong Worldwide Office Representatives

During the week of December 4^th, Invest Hong Kong will host its worldwide representatives for a strategy session at its headquarters in Hong Kong. With close to 60 offices worldwide, the conclave provides an opportunity for the foreign and domestic staffs to interface and for the visitors to interact with the Hong Kong business community as well. EDI has recently been awarded a contract to represent Invest Hong Kong in Israel for another two years. EDI VP for Strategy & Business Development, Michael Platt, will represent EDI at the event.

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Fortnightly, 28 December 2016

December 28, 2016, 2:42 am

≫ Next: What’s New at EDI – January 2017

≪ Previous: What’s New at EDI – December 2016

28 December 2016
28 Kislev 5777
28 Rabi Al-Awwal 1438

TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Netanyahu Government Approves NIS 1.2 Billion Series of Budget Cuts
1.2  Knesset Approves 2017-2018 State Budget Following Marathon Vote
1.3  Israel and Kazakhstan Sign R&D Agreement and MOU

2: ISRAEL MARKET & BUSINESS NEWS

2.1  Israeli High-Tech Industry Sees ‘Exits’ Plummet by 67% to $3.5 Billion in 2016
2.2  Québec Premier Couillard to Lead Multi-Sectoral Mission to Israel
2.3  Intezer Raises $2 Million Led by Samsung NEXT
2.4  Israel to Double Water Supply to Jordan
2.5  Lumus Raises $45 Million to Make Wearable Augmented Reality Displays
2.6  Dynamic Yield Raises $22 Million
2.7  Optimal+ Selected as a 2016 Red Herring ‘Top 100 Global’ Company
2.8  Nevada & Israel Sign Landmark Cooperation Deal on Water Innovation
2.9  Snapchat to Buy Israeli Startup Cimagine for Estimated $40 Million
2.10  Knowmail Raises $3.5 Million to Apply AI to Your In-Box

3: REGIONAL PRIVATE SECTOR NEWS

3.1  Dubai’s MAF Signs Deal to Bring American Girl to the Arabian Gulf
3.2  Oman to Build Gulf’s Largest Egg Supply Facility
3.3  National Oilwell Varco Announces New Composite Pipe Manufacturing Facility in Saudi Arabia
3.4  Choice Hotels International Expands Portfolio in Greece

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Saudi Energy Firm Wins Deal to Build Solar Project in Mexico

5: ARAB STATE DEVELOPMENTS

5.1  Lebanon’s Average Consumer Prices Fell 1.14% y-o-y by November 2016
5.2  Total Number of Lebanon’s Registered New Cars Dropped to 35,976 by November 2016
5.3  Presidential Elections Positively Impact Beirut’s Hotel Occupancy Rate
5.4  German Aid to Jordan in 2016 Totals €471.7 Million
5.5  Japan to Provide $254 Million Grant to Jordan
5.6  World Bank Supports Iraq with $1.5 Billion Package

♦♦Arabian Gulf

5.7  GCC Said to See $25 Billion Annual Revenue Boost from VAT Launch
5.8  In 2017 GCC Economies to Record Weakest Growth Since 2009
5.9  GCC Car Sales Forecast to Rise to 1.4 Million by 2020
5.10  Kuwait Eyes $1.7 Billion Tank Deal with the United States
5.11  UAE’s $13.3 Billion Budget for 2017 to Focus on Education & Healthcare
5.12  UAE Considering Self Sufficiency in Production of Generic Drugs
5.13  Dubai’s Ruler Approves 2017 Budget with $680 Million Deficit
5.14  Dubai Says Seven New Hospitals in Pipeline With Three Others to Expand
5.15  Oman Government Budget Deficit Grows to $12.5 Billion
5.16  Saudi Arabia Projects $53 Billion Deficit in 2017

♦♦North Africa

5.17  World Bank Approves Second Tranche as Egyptian Pound Falls
5.18  Finance Ministry Planning on 5% Economic Growth for Egypt in 2017/18 Budget
5.19  In 2015/16 Egypt’s Oil Ministry Signed 8 Deals Worth $709 Million to Find Energy Reserves
5.20  Egypt Reports Suez Canal Revenues in November at 21 Month Low
5.21  Moroccan Central Bank Lowers Growth Forecasts to 1.2% in 2016

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  Electricity Consumption Soars as Turkey Abandons Winter Time
6.2  Central Bank of Cyprus Sees Growth Rate of 2.8% in 2016 – 2017
6.3  Eurozone to Unblock Greek Short-Term Debt Relief Deal in January

7: GENERAL NEWS AND INTEREST

♦♦REGIONAL

7.1 Lebanon Forms New Government
7.2 Individual Arming Jumps in Turkey

8: ISRAEL LIFE SCIENCE NEWS

8.1  Can-Fite’s Namodenoson (CF102) Inhibits Liver Fibrosis – Supports Potential Treatment Efficacy
8.2  CartiHeal Gets FDA Approval of Its Agili-C Implant for the Treatment of Joint Surface Lesions
8.3  INSIGHTEC’s Exablate Prostate System Gets CE Mark for Treating Locally-Confined Prostate Cancer
8.4  Israeli Researchers Find Revolutionary Deep-Sea Bacteria Treatment for Prostate Cancer

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 IAI’s TaxiBot in Final Stages of Certification for the Airbus 320
9.2  Dragonera Launches New AI-Driven Software Development Service
9.3  Mobiquity and Insert Team up to Provide Real Time, In-App Personalization
9.4  Magna and Innoviz Partner on LiDAR for Autonomous Driving Systems
9.5  Nano Dimension Delivers 3D Printer to One of the 10 Largest U.S. Banks

10: ISRAEL ECONOMIC STATISTICS

10.1  Israel’s CPI Drops By 0.4% in November
10.2  Israel’s Exports Increase by 3% in 2016
10.3  Overnight Stays in Israel by Tourists Surged in November
10.4  Rehovot Leads Israel’s Revenue Per Household
10.5  Israeli Families Below Poverty Line Increase to 19.1% of Population

11: IN DEPTH

11.1  ISRAEL: Greece-Israel-Cyprus Relations: Ripe for Expansion?
11.2  KUWAIT: Fitch Says Kuwait Election a Risk to Reform But Fiscal Strength Robust
11.3  EGYPT: Fitch Affirms Egypt at ‘B’; Outlook Stable
11.4  EGYPT: Egypt Pivots to Medical Tourism
11.5  TURKEY: Fitch – Turkish Bank Outlook Negative Amid Macro, Political Risks
11.6  TURKEY: How Turkey Used Math to Drastically Boost its Economy
11.7  TURKEY: Dollar-Hungry Turkey Eyes Middle Eastern Markets

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu Government Approves NIS 1.2 Billion Series of Budget Cuts

On 18 December, the Netanyahu government approved a round of budget cuts totaling NIS 1.2 billion ($310 million), or 1.25% of the total state budget. The cuts came in response to changes required in government expenditures since the budget was approved several ago and due to expanded coalition agreements. The move followed fierce debate, with a previously proposed tax on the third or more properties belonging to a single owner prompting the various sides to postpone the vote on the proposed budget cuts. However, when it became clear that a separate debate would be held later on the “third apartment” tax, the cuts were voted through.

Among the reasons for the cuts are: the need to provide funds to find housing solutions for the evicted residents of Amona and Ofra; to leave the public broadcasting apparatus as is until the end of April 2017; and to increase funding for the ultra-Orthodox school system as part of the coalition agreements. Shas-run schools will receive a budget infusion of NIS 65 million ($17 million) for 2016, and another NIS 80.5 million ($21 million) the following year.

Major cuts have been made to the budgets of some of the biggest ministries. The Defense Ministry budget will be reduced by some NIS 167 million ($43 million); the Transportation Ministry budget will be cut by NIS 155.9 million ($40 million); the Education Ministry budget will be cut by NIS 88.3 million ($23 million); and the budgets of local authorities will be slashed by NIS 44 million ($11 million). (IH 19.12)

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1.2 Knesset Approves 2017-2018 State Budget Following Marathon Vote

The Knesset approved the 2017-2018 state budget in the early hours of 22 December, with a vote of 60 MKs in favor and 48 against. The budget for the next two years will total NIS 906.8 billion – for 2017 was set at NIS 446.8 billion ($117 billion) and the 2018 budget at NIS 460 billion ($120 billion). The marathon vote, which began on the afternoon of 20 December, also saw lawmakers approve the economic arrangements bill, which complements the state budget bill and incorporates amendments needed for the government to fulfill its economic policy. With additions dependent on revenues, the budget could reach NIS 491.7 billion in 2017 and NIS 502 billion in 2018 for a total of NIS 993.7 billion (gross). The biennial budget reflects a 5.8% lateral cut to all ministries’ budgets.

The budget appropriated NIS 70 billion ($18 billion) for defense spending across the next two years, alongside NIS 57 billion ($15 billion) for education, and NIS 33 billion ($8.6 billion) for health care. The opposition filed a record 8,500 reservations to the budget prior to the vote. (Various 22.12)

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1.3 Israel and Kazakhstan Sign R&D Agreement and MOU

Following a historic meeting earlier in December in Kazakhstan between Israeli Prime Minister Benjamin Netanyahu and the President of Kazakhstan Nazarbayevsi, a new research and development (R&D) agreement between the two nations was signed. The Kazakh economy is the second largest amongst Euro-Asian countries, after Russia. During Netanyahu’s visit to Kazakhstan, a business forum took place in the presence of the Israeli Prime Minister and the Prime Minister of Kazakhstan, Mr. Bakytzhan Sagintayev. The forum was attended by leaders from 70 Israeli companies in the agriculture, water, health, HLS, energy and financial sectors, who accompanied Netanyahu on the official visit.

One of the most interesting contracts between the two countries is between Astana International Financial Centre (AIFC) and Fintech Group Israel, which signed a memorandum of understanding (MOU) to commence collaboration in promoting the development of financial technologies (fintech) ecosystem in Kazakhstan and the region. The MOU identifies key areas of mutual cooperation towards building the “Digital Bridge“ between the two countries, which will create a direct connection between Astana and Israeli technology cluster and help enrich local human capital. Both parties expressed willingness to work together in order to brand AIFC as a leading fintech hub leveraging on the experience and expertise of their new Israeli partners. (Various 22.12)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Israeli High-Tech Industry Sees ‘Exits’ Plummet by 67% to $3.5 Billion in 2016

Israeli tech exits plummeted from $7.2 billion in 2015 to $3.5 billion in 2016, according to a new report by accounting firm PwC. The total value of Israeli high-tech and startup companies sold in 2016 – through acquisitions and IPOs (initial public offerings) – reflects a 67% decline from last year. In total, there were 55 exits in 2016, lower than both 2015 and 2014, with 70 exits each. The average value per exit in 2016 was $64 million, sharply down from $153 million in 2015.

According to Rubi Suliman of PwC, there are not enough “global buyers that are familiar and comfortable enough with the Israeli high-tech to drive a continuous wave of deals. When potential buyers are relatively scarce, deal prices are expected to go down. This is a problem, but also an opportunity, since it points to the enormous potential of the local tech industry.”

One of the largest deals this year was the acquisition of Ravello by Oracle for $430 million. Founded in 2011 by Rami Tamir and Benny Schnaider, Ravello is a cloud service that enables customers to run any type of workload through the cloud. In addition, this year, global chip maker Intel bought Israeli startup Replay Technologies for $175 million. Founded in 2011, the company has developed a method of filming called freeD, which generates instant, real-time 3D replays that have already been used at the 2012 London Olympics, in Yankee Stadium, and at the Consumer Electronics Show (CES) in Las Vegas and most recently in the El Closico soccer showdown between Barcelona and Real Madrid.

This year’s acquisition of Playtika for $4.4 billion is not included in the report, since it was previously sold in 2014 to Caesars Interactive Entertainment, a North American corporation.

Most of the exits in 2016 are in the computing and corporate software sectors; life sciences startups accounted for 15% of total exits. The semiconductors sector is the only one in 2016 that experienced an increase relative to 2015, thanks to the Cisco acquisition of Leaba for $320 million. “Israeli innovation is still strong, and the amount of experience gained while running those successful companies is increasing every year,” Suliman says. “This alone should make us optimistic looking ahead. We will clearly have many more boom years later on.” (PWC 21.12)

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2.2 Québec Premier Couillard to Lead Multi-Sectoral Mission to Israel

Québec Premier Philippe Couillard will lead a multi-sectoral mission to Quebec in Israel and Judea & Samaria from 19 to 24 May 2017. He will be accompanied by the Minister of the Environment, Economics, Science and Innovation, Dominique Anglade, and the Parliamentary Assistant to the Minister of Education, Recreation and Sports and to the Minister responsible for Higher Education, David Birnbaum. This mission will be an opportunity to strengthen and develop new partnerships to stimulate exchanges in key areas of the global economy such as research, innovation, entrepreneurship (start-ups), life sciences, Aerospace, agri-food, information and communications technologies and digital technologies. (Telbec 22.12)

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2.3 Intezer Raises $2 Million Led by Samsung NEXT

Intezer has raised $2 million in a seed round co-led by Samsung NEXT and Alon Cohen founder and former CEO of CyberArk Software and FilesX (now IBM). Several additional angels participated in the round. Intezer has developed a virtual “security camera” for the digital space of the enterprise. This system displays a simple visual map of all the software programs currently active within an organization at any given moment, down to the single code fragment level. It is able to deal with all the unrecognized software, using a unique technology that maps the software’s code DNA to identify its nature and origins.

Tel Aviv’s Intezer is a cyber security company that provides a unique solution for medium to large organizations, giving customers unparalleled visibility and control over their systems. Intezer has developed a virtual “security camera”? for the enterprise cyberspace. This solution displays a simple visual map of all the software running in the organization at any given moment, down to the single code fragment level in the memory — leaving no stone unturned. The solution enables security teams to detect and respond to the most sophisticated cyber-attacks, regardless of the malware’s behavior and signature. (Globes 15.12)

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2.4 Israel to Double Water Supply to Jordan

This coming January, following Supreme Court approval and a 2010 agreement between Israel and Jordan, Mekorot National Water Company will be able to start laying a new pipeline through the Jordan Valley, intended to double water supply to the Kingdom of Jordan. In exchange, as stated in the peace accord between the states, Israel will receive water from the Jordanian desalination plant to be established in Aqaba. The new, 5.5 km Kinneret-Beit Shean pipeline will pass mainly through Jordan Valley agricultural areas and will provide the Hashemite kingdom with up to 100 million cubic meters of water per year, compared with 50 million cubic meters at present. The laying of the new pipeline is of critical importance for Jordan. Due to the ongoing civil war in Syria, millions of refugees have flocked to Jordan, resulting in a real water crisis which has made the need to increase water supply more vital than ever. (Globes 14.12)

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2.5 Lumus Raises $45 Million to Make Wearable Augmented Reality Displays

Lumus has completed a $45 million funding round for its augmented reality displays for smartglasses. Lumus previously announced it had raised $15 million and now it is announcing an additional $30 million as part of the same round. Quanta Computer, one of the biggest Taiwanese laptop makers, led the round, with additional participation from HTC and other strategic investors. Shanda Group and Crystal-Optech also participated.

Lumus technology enables the production of wearable eyeglass displays that are compact, comfortable and fashionable. The Lumus near-to-eye transparent display technology consists of a unique lens that contains an array of ultra-thin transparent reflectors (the patented Light-Guide Optical Element) and a mini-projector that injects an image into the lens, also patented. These two elements are combined to create a wide field of view, true color, daylight brightness and a see-through display.

Rehovot’s Lumus makes the optical engine that empowers AR solutions. Founded in 2000, Lumus is on a mission to create optics that transform the way people interact with their reality. The company is working on optical technology for see-through wearable displays and serves multiple AR vertical markets, including health care, manufacturing logistics, avionics and consumer products. The Lumus solution is based on its patented Light-guide Optical Element (LOE) waveguide, which combines the smallest dimension eyewear for any given field of view. (Lumus 19.12)

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2.6 Dynamic Yield Raises $22 Million

Dynamic Yield has raised $22 million in Series C financing round led by Vertex and ClalTech, with participation from Baidu and Global Founders Capital. Existing investors Bessemer Venture Partners, Marker LLP and Innovation Endeavors also participated. The funds will be used to fuel further global growth of Dynamic Yield’s personalization technology across the world. Dynamic Yield’s advanced machine learning engine builds actionable customer segments in real time, enabling marketers to increase revenue via personalization, recommendations, automatic optimization & 1:1 messaging.

Tel Aviv’s Dynamic Yield was founded in 2012 and has raised $37 million to date, including the latest financing. Dynamic Yield’s platform is being used by product and marketing teams to create machine-learning based personalized experiences that are synchronized across all digital channels including web, mobile web, apps and email. The company has personalized the experiences of more than 500 million people, and it continues to expand its global footprint by serving industry leaders in eCommerce, Media & Publishing, Gaming, Travel, B2B and other verticals. (Dynamic Yield 20.12)

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2.7 Optimal+ Selected as a 2016 Red Herring ‘Top 100 Global’ Company

Optimal+ has been selected as a 2016 Red Herring Top 100 Global company. Optimal+ was selected for its leadership in innovation and technology advancements with other leading private companies from North America, Europe and Asia. With over 50 billion integrated circuits and printed circuit boards analyzed in 2016, Optimal+ has demonstrated that its big data solution enables better enterprise-wide decision-making through increased visibility into the global supply chain.

Red Herring’s Top 100 Global list has become a mark of distinction for identifying promising companies and entrepreneurs. Red Herring editors were among the first to recognize that companies such as Facebook, Twitter, Google, Yahoo, Skype, Salesforce.com, YouTube, and eBay would change the way we live and work.

Holon’s Optimal+ is the only big data analytics software company providing an end-to-end solution that measurably improves quality, yield and productivity for semiconductor and electronics manufacturing. From chip to board to system, their enterprise-grade solutions ensure that all of your global manufacturing data is collected, cleaned and analyzed in real time, enabling decisive actions that enhance, certify and monitor the quality of semiconductor and electronic products over their entire lifetime. With over 50 billion devices processed annually, Optimal+ provides Manufacturing Intelligence solutions that enhance yield and productivity, reduce RMAs and usher in an age of robust, long-term quality products. (Optimal+ 19.12)

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2.8 Nevada & Israel Sign Landmark Cooperation Deal on Water Innovation

Nevada and Israel have signed a memorandum of understanding on water-use innovation, marking a first-of-its-kind collaboration agreement between a US state and a Middle East country. The deal, reached between Nevada’s WaterStart public-private joint venture and Israel’s National Technological Innovation Authority, was signed at BusinessH2O Summit, a one-day conference in Las Vegas organized by the US Chamber of Commerce. This paves the way for Israeli water technology companies to set up research and production facilities in the semi-arid state of Nevada.

The Israeli-American Coalition for Action (IAC for Action), a non-profit that advocates to policymakers on behalf of the Israeli-American community, said the memorandum of understanding “provides new opportunities for cooperation that will benefit both Nevada and Israel by broadening and deepening research and development collaboration in the critical area of water management and conservation.”

Israel has become a regional water empire due to its advanced desalinization plants. Its water technologies are highly sought around the world. From California to Africa, there is a global water shortage, yet Israel, a tiny country in the middle of a desert, has found remarkable solutions. Regularly effected by drought, Israel has prioritized the establishment of desalination plants and the development of economical desalination systems and other innovative solutions. (JNS 14.12)

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2.9 Snapchat to Buy Israeli Startup Cimagine for Estimated $40 Million

Multinational technology and social media company Snap Inc., owner of the popular mobile multimedia messaging application Snapchat, has finalized a deal to buy Israeli augmented reality startup Cimagine Media for an estimated $40 million. This marks Snapchat’s first acquisition in Israel and it will allow Snap to establish its first research and development center in the Middle East. Cimagine’s 20 employees are expected to stay on with the company, which is now looking to expand its workforce.

Founded in 2012, Cimagine specializes in computer vision, real-time image processing, mobile development and international marketing. One of the Israeli company’s developments is True Marketless Augmented Reality – commerce-focused technology that allows users to virtually place furniture and appliances they wish to purchase in the space of their home, on their mobile devices, at the click of a button. Cimagine already does business in the U.S., U.K. and Australia, and has partnerships with Shop Direct, John Lewis and Coca-Cola, increasing its appeal to Snap, which may seek to introduce shopping through Snapchat in the future, as means of exploring additional revenue opportunities. California-based Snapchat is expected to go public as early as March with a valuation of as much as $25 billion. (Snap 26.12)

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2.10 Knowmail Raises $3.5 Million to Apply AI to Your In-Box

Petah Tikva’s Knowmail is building what it calls personalized Artificial Intelligence help employees manage email and other messages better. Knowmail also closed $3.5 million in new funding. Leading the round is CE Ventures, with participation from existing investors AfterDox, Plus Ventures, 2B Angels, INE Ventures, and various unnamed private investors. The company says it plans to use the new capital to continue building out Knowmail’s functionality as it gears up for a full launch early next year.

The problem that Knowmail has set out to solve can perhaps be best described as communication or information overload, something that it believes AI is best positioned to tackle. As the product exists today, Knowmail is an AI engine that installs on top of Outlook, studies your email habits, time management and personal preferences and is able to deliver the emails to you more appropriate to your needs. Specifically, this means the ability to view emails that have been automatically categorized as ‘urgent’ (knowing that these need to be handled before anything else), ‘important’ (when you have additional time to attend to your email), and everything else.

There are a number of additional features enabled by Knowmail’s predictive model, such as one-click moving of a message to the predicted email folder, deferring an email for a later time/day to reduce in-box noise, and intelligent auto-complete search to find the exact email you’re looking for, and more. (Knowmail 14.12)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Dubai’s MAF Signs Deal to Bring American Girl to the Arabian Gulf

Majid Al Futtaim announced an exclusive retail agreement with American Girl, a division of Mattel, and a premium brand for dolls. The deal also includes Majid Al Futtaim being awarded exclusive distribution rights in the UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman, spanning bricks and mortar retail, airport-based retail and e-commerce. The first American Girl store in the UAE is slated to open in 2017 and will feature retail experiences, like the popular Doll Hair Salon and an on-site restaurant, as well as all of the latest product offerings, it said in a statement. The US brand will further bolster MAF’s collection of international brands including LEGO, lululemon athletica, AllSaints and Abercrombie & Fitch. (AB 19.12)

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3.2 Oman to Build Gulf’s Largest Egg Supply Facility

Oman is expected to complete work on the Arabian Gulf’s largest “table egg” facility during the next two years, which will have an annual capacity of 2,300 million eggs. The facility is joint venture between Oman Flour Mills Company, Gulf Japan Food Fund, UAE’s IFFCO group and Japan’s Ise Foods. The first phase, coming up at Ibri, a city located in the country’s northwest, will cost $40 million. Currently, 45% of the country’s requirement for eggs is met through imports, but with the new facility, Oman will be exporting eggs. (AB 21.12)

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3.3 National Oilwell Varco Announces New Composite Pipe Manufacturing Facility in Saudi Arabia

Houston’s National Oilwell Varco announced that it is expanding the operations of its Fiber Glass Systems business unit with a new composite pipe manufacturing facility located near the city of Dammam, Saudi Arabia. The facility will establish NOV as Saudi Arabia’s first local manufacturer of high-pressure spoolable composite pipe and will further enhance the company’s ability to provide lightweight, corrosion-resistant, engineered solutions from its global team of experts supported by 12 manufacturing facilities around the world. The new, state-of-the-art, manufacturing complex will produce spoolable and jointed pipe, including the flagship line of Fiberspar spoolable products, STAR Glass Reinforced Epoxy high pressure line pipe, and downhole tubing and casing. Operations are expected to begin in the first quarter of 2018.

National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations, and the provision of oilfield services to the upstream oil and gas industry. (NOV 22.12)

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3.4 Choice Hotels International Expands Portfolio in Greece

Rockville, Maryland’s Choice Hotels International signed a multi-unit development agreement with GVK Enterprises, a hospitality management and development firm, to introduce and establish a hotel portfolio in Greece. Choice anticipates the first property under the agreement will open by the summer of 2017 under the Comfort brand flag in Athens, and four additional properties will be developed on the Greek mainland and islands under the Comfort, Quality and Clarion brands.

This agreement follows several other EMEA market portfolio expansions that Choice has announced in 2016. In April, the company announced it had signed an agreement to deliver approximately 25 hotels and 8,000 rooms in UAE and Saudi Arabia by 2021. Other deals signed include establishing multiple hotels in Belgium and the co-branding of 19 properties in Germany, Austria and Hungary under the Comfort and Quality brands. Choice recently launched its upscale Ascend Hotel Collection brand in the UK and France, with Turkey to follow in 2017. (CHI 16.12)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Saudi Energy Firm Wins Deal to Build Solar Project in Mexico

Fotowatio Renewable Ventures (FRV), a developer of large-scale solar power plants and part of Saudi-based Abdul Latif Jameel Energy, has been awarded a 30 year 300 MW solar project in Mexico. With this build-operate-own agreement, FRV said it is extending its global footprint into the Mexican market at a rate of $26.99/MWh for the first 15 years of the project. The construction of the plant will begin in mid-2018 and will become operational in mid-2019, and will create approximately 250 local jobs as part of the construction phase and a further 20 jobs during operations. The plant will generate enough green electricity to supply approximately 76,100 homes, while reducing greenhouse gas emissions by approximately 97.7 million tons of CO2.

It added that the agreement was part of a second electricity market auction conducted by the National Energy Control Centre (CENACE). FRV said the help the Federal Commission of Electricity’s plans to generate 35% of its electricity from renewable energy sources by 2024. FRV was acquired by Abdul Latif Jameel Energy in April 2015. (AB 23.12)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Average Consumer Prices Fell 1.14% y-o-y by November 2016

According to the Central Administration of Statistics (CAS), average consumer prices in Lebanon dropped by 1.14% y-o-y by November 2016 as reflected by the average Consumer Price Index (CPI) which decreased from 97.14 points by November 2015 to an average of 96.03 points in the same period of 2016. Average prices of food and non-alcoholic beverages (20.6% of CPI) fell 1.35% y-o-y by November 2016. Moreover, with the decreasing oil prices, transportation (13.1% of CPI) and water, electricity, gas & other fuels (11.9% of CPI) registered average yearly decreases of 4.18% and 9.60%, respectively. Also, health (7.8% of CPI) and communication (4.6% of CPI) recorded respective average falls of 2.14% and 0.24% y-o-y.

However, the education sub-index, which grasps 5.9% of the CPI, rose by 1.86% y-o-y on average by November 2016. Moreover, as tourism activity started to recover during the first eleven months of 2016, average restaurants & hotels prices (2.6% of CPI) increased by 2.61% y-o-y by November 2016. The actual rent sub-index for households (old and new rent), with a weight of 3.4% of the CPI, grew by an average of 4.06% y-o-y. (CAS 22.12)

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5.2 Total Number of Lebanon’s Registered New Cars Dropped to 35,976 by November 2016

According to the Association of Lebanese Car Importers, the total number of newly registered commercial and passenger cars dropped 5.42% year- on- year (y-o-y) to 35,976 cars by November 2016. The number of registered commercial cars grew by 11.62% y-o-y to 2,363, while the number of registered passenger vehicles fell 6.43% to reach 33,613 cars by November 2016. Japanese model cars constituted the largest market share in total passenger cars, with a share of 37% by November 2016, followed by Korean cars, with a market share of 34.47%, and European cars with 20.74% of the total market share. Moreover, American and Chinese cars observed an increase in their sales with a rise y-o-y of 13.70% and 5.74%, respectively, while European, Japanese, and Korean cars’ sales dropped 5.34% and 10.25%, and 6.41%, respectively. In terms of car brands, Kia maintained its the largest share of 19.76% of newly registered passenger cars, followed by Hyundai, Toyota and Nissan with respective shares of 14.55%, 13.22%, and 9.57%. (ALC 17.12)

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5.3 Presidential Elections Positively Impact Beirut’s Hotel Occupancy Rate

According to Ernest and Young’s Hotel Benchmark Survey, Beirut’s hotel occupancy increased to stand at 65%, compared to 57% in November 2015. This sharp increase can be justified by the improving political situation, as a new President had been elected. Moreover, Dubai hotel occupancy rates increased from 84.8% in November 2015 to 89.5% in November 2016 due to the largest construction event in the Middle East. As for Abu Dhabi hospitality market, the Formula1 event allowed occupancy rate to remain constant at 84%.

On a year to date basis, Beirut hotel occupancy rate steadied 58% by November 2016, when compared to the same period last year. This was complemented with hotels dropping their room rates as depicted by both the average rate per room and the revenue per room that dropped by 16.2% and 15.2% y-o-y to reach $137 and $81, respectively. The best performer in the region was Cairo, where its hotel occupancy rates increased by 15 p.p to 63% by November 2016. This rise was also accompanied by annual upticks of 18.8% and 54% in the average rate per room and revenue per room, which reached $132 and $83, respectively. However, Kuwait witnessed the largest loss in hotel occupancy rates of 4 and 5 star hotels by November this year. (EY 19.12)

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5.4 German Aid to Jordan in 2016 Totals €471.7 Million

Jordanian Minister of Planning and International Cooperation Fakhoury, said the total aid commitments from Germany to Jordan in 2016 have reached €471.7 million, some €153 million of which are humanitarian aid related to Syrian refugees. The rest is bilateral development support or projects related to host communities within the Jordan Response Plan to the Syrian refugees’ crisis (JRP) 2016-2018. The German aid to the Kingdom has reached a “historic” level, Fakhoury noted, adding that the majority of the provided, €400 million in grants and €70 million were soft loans. Jordan and Germany has signed all of the aid agreements except for €130 million to be signed in Q1/17.

Meanwhile, Minister Fakhoury and Water & Irrigation Minister Nasser on signed a soft loan and grant agreements worth €33 million to support water and sewage sector. The financial support, provided by the KfW Entwicklungsbank (German Development Bank) will be used for water supply projects and improving sewage networks to save water resources, according to a planning ministry statement. Fakhoury said that the first agreement is a complementary grant worth €3 million for a project to enhance water supply of Syrian refugees’ host communities. (AMMONNEWS 13.12)

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5.5 Japan to Provide $254 Million Grant to Jordan

The Jordanian government signed with a $254 million grant agreement Japan to enhance the financial situation and support development policies to reform public services in the Kingdom. The agreement was signed by Minister of Planning and International Cooperation Fakhoury and the Japanese Ambassador to Jordan Sakurai and chief representative of the Japan International Cooperation Agency in Amman. Fakhoury said that the loan is the third that supports the general budget in order to address challenges that face the Kingdom due to the influx of a large number of Syrian refugees to the Kingdom. The loan comes in the wake of King Abdullah’s visit to Japan last October. The minister praised Japan’s continued support to Jordan as well as its understanding of the economic and social challenges facing the Kingdom due to hosting 1.4 million Syrian refugees. The Japanese ambassador stressed his country’s commitment to provide support to the Kingdom in various domains, thus further boosting bilateral ties. According to official figures, Jordan has received assistance from Japan totaling $1.021 billion since 1999, $491.2 million of which are in the form of grants and the rest as soft loans. (AMMONNEWS 21.12)

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5.6 World Bank Supports Iraq with $1.5 Billion Package

The World Bank Group has endorsed a new $1.485 billion package to support reforms to improve public service delivery and transparency, stimulate private sector growth and support job creation. Iraq continues to face a large humanitarian crisis with 10 million people, over one quarter of the population, estimated to be in need of assistance, of which 3.4 million are internally displaced people and 240,000 refugees. The institution’s Board of Directors approved the Second Expenditure Rationalization, Energy Efficiency and State-Owned Enterprise Governance Development Policy Financing (DPF) Project, for a total of $1.443 billion including guarantees from the governments of the United Kingdom ($371.82 million) and Canada ($72 million), a testament of strong international support to Iraq. (WB 22.12)

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►►Arabian Gulf

5.7 GCC Said to See $25 Billion Annual Revenue Boost from VAT Launch

The adoption of value added tax (VAT) by GCC countries in 2018 is expected to generate additional revenues of more than $25 billion per year, according to EY. The advisory firm said the launch of VAT represents a major shift in tax policy “that will impact all segments of the economy and lead to a fundamental change in the way businesses operate across around the region”. It added that the extra tax revenues will allow GCC governments to amend other fees and charges and increase infrastructure investments.

All GCC countries are working towards VAT implementation by 1 January 2018 to avoid transaction and sales issues that could arise from intra-GCC trade. Businesses that are not ready by the VAT go-live date may suffer fiscal consequences from the inability to pass on the underlying VAT to the end customer. The expected VAT laws are not ‘business as usual’ and may require several months for companies to successfully integrate a VAT functionality into their systems. It is a unique and transformative time for the Gulf. Last month, it was reported that the UAE will use the money generated from VAT to launch new developments projects. (EY 17.12)

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5.8 In 2017 GCC Economies to Record Weakest Growth Since 2009

The Middle East & North Africa (MENA) region will next year record its weakest economic growth since the global financial crisis in 2009, according to the latest outlook from Capital Economics. Capital Economics warns the region will “struggle” again in 2017 as fiscal policies are tightened to plug current account and budget deficits, which have widened in the past two years as a result of persistent low oil prices.

Saudi Arabia is likely to see subdued growth for the most of the year, while, on the other hand, the UAE is expected to be the best performing economy in the Gulf in 2017 going into 2018. Overall average growth in the region is likely to weaken to 1.5% in 2017.

Capital Economics noted that dollar pegs in the Arabian Gulf would remain in place “but that means policymakers will be forced to follow the US Federal Reserve and hike interest rates”. The report says that the UAE should begin gradual recovery in the coming quarters and is likely to be the best performing economy in the Gulf in 2017-18. In Kuwait, meanwhile, economic growth is expected to remain weak due to the “fractured” political environment despite a strong balance sheet. It noted that Qatar’s economy, too, is likely to stay sluggish as fiscal policy becomes more restrictive and credit growth eases, while Bahrain and Oman will “underperform” their Gulf peers. (Capital Economics 13.12)

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5.9 GCC Car Sales Forecast to Rise to 1.4 Million by 2020

The number of passenger cars in use in the GCC region is expected to grow at 5% annually from an estimated 10.3 million in 2015 to 13.2 million in 2020, according to Alpen Capital. Its report said new passenger car sales are projected at 1.4 million in 2020, compared to 1.2 million in 2015. Although new sales declined in 2016 and will be under pressure in 2017, Alpen said it expects to see steady growth starting 2018 as the economic environment stabilizes and creates pent-up demand. The anticipated growth is slower compared to that during last five years as consumers tighten discretionary spending and delay buying new cars, the report said.

Saudi Arabia, the UAE, and Kuwait collectively are expected to continue holding more than 75% of the region’s passenger car fleet in 2020. New car sales in the UAE are projected to grow at an annualized rate of 4.5% to over 267,000 in 2020 from an estimated 214,000 in 2015 while sales of new cars in Saudi Arabia is likely to reach nearly 743,000 in 2020.

The cost of vehicle ownership in the GCC is lower compared to other countries globally, due to a favorable tax structure. Additionally, attractive insurance and financing options makes it easier to own a car in the GCC. One of the key drivers of the automotive industry in the GCC is availability of low-cost fuel. Although oil-based economies have recently resorted to raising energy prices in a bid to reduce subsidies, the cost of fuel is still much below the global average. Alpen added that the presence of several dealers makes the GCC automobile market highly competitive, resulting in price sensitivity and low brand loyalty among consumers. (Alpen Capital 17.12)

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5.10 Kuwait Eyes $1.7 Billion Tank Deal with the United States

The US State Department has approved a possible foreign military sale to the Government of Kuwait of 218 tanks and related equipment, support, and training. The estimated cost of the sale is $1.7 billion. It said the Government of Kuwait has requested the possible sale in support of its recapitalization of 218 M1A2 tanks, to include 240 .50 Cal M2A1 machine guns; 480 7.62mm M240 machine guns; 240 radios; and 1,085 night vision goggles.

Kuwait intends to use the equipment to modernize and extend the service of its fleet of tanks. The proposed sale of this equipment and support will not alter the basic military balance in the region. Implementation of this proposed sale is estimated to require five to seven contractors and 25-30 US government representatives being sent to Kuwait. (DoD 24.12)

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5.11 UAE’s $13.3 Billion Budget for 2017 to Focus on Education & Healthcare

The UAE’s Federal National Council on Tuesday endorsed the budget for 2017, set in late October by the Cabinet at AED48.7 billion ($13.3 billion), with a prime focus on education, social development and health. The budget is a marginal rise on the AED48.5 billion budget set for 2016, suggesting UAE authorities remain cautious about spending as low oil prices pressure state finances. The approval came at a third session of the FNC’s 16th legislative chapter.

About 20.5% of the 2017 budget, or AED10.2 billion, was earmarked to the education sector, 8.6% to the healthcare sector, 8.2% to public sector wages, 6.6% to social development and 3.3% to housing. The UAE budget traditionally accounts for only around 14% of total fiscal spending in the country – the seven individual emirates, mainly oil-producing Abu Dhabi, provide the rest. The IMF projects the UAE will post a consolidated fiscal deficit, including the federal government and all the emirates, of 3.86% of GDP this year. (AB 20.12)

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5.12 UAE Considering Self Sufficiency in Production of Generic Drugs

The UAE is close to being self-sufficient in producing generic drugs as 16 pharmaceutical facilities are manufacturing up to 1,000 such drugs, according to a senior official from the Ministry of Health and Prevention. The UAE is also planning to increase the number of manufacturing facilities to 30 by 2020. This is another indication of the strong growth of the pharmaceutical industry and the efforts being exerted to improve the UAE’s global competitiveness. Different from totally synthesized pharmaceuticals, these include vaccines, blood, blood components, allergenics, somatic cells, gene therapies, tissues, recombinant therapeutic protein and living cells used in cell therapy. (AB 17.12)

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5.13 Dubai’s Ruler Approves 2017 Budget with $680 Million Deficit

On 21 December, Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum approved the 2017 budget for the emirate which will see a deficit of AED2.5 billion ($680 million). Sheikh Mohammed, also Vice President and Prime Minister of the UAE, endorse Dubai’s Department Of Finance budget which has total expenditure of AED47.3 billion, up from AED46.1 billion for 2016. The deficit represents 0.6% of total gross domestic product (GDP). According to the 2017’s budget, oil revenue is expected to represent 6% of the total revenues while 3,500 new jobs are expected to be created. The 2017 budget will see spending on infrastructure next year rise by 27% as the emirate continues to launch development projects ahead of its hosting of the World Expo in 2020. Despite the overall budget deficit, the government expects to run an operating surplus – excluding items such as loan repayments and capital receipts – of AED2.9 billion next year. (AB 21.12)

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5.14 Dubai Says Seven New Hospitals in Pipeline With Three Others to Expand

Dubai Health Authority (DHA) has announced that seven new hospitals are in the pipeline to be built in the emirate to support growth in the healthcare sector as it adapts to a growing and ageing population. Another four hospitals are under review, while three existing hospitals will undergo expansion, the DHA added. Currently Dubai has 26 hospitals, which are among the 2,833 health facilities in the emirate. Of these 22 are internationally accredited and four are in the process of getting accredited. The health facilities include outpatient clinics, diagnostic clinics, pharmacies, hospitals and allied health facilities. (DHA 17.12)

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5.15 Oman Government Budget Deficit Grows to $12.5 Billion

Oman’s government posted a budget deficit of OR4.81 billion ($12.5 billion) in the first 10 months of 2016, according to latest official figures. The January-October deficit compared to a deficit of OR3.26 billion, as low oil export prices slashed its revenues, provisional Finance Ministry data showed. The government’s original 2016 budget plan envisaged state expenditure of OR11.9 billion and revenues at OR8.6 billion. Officials said their 2016 economic plans assumed an average oil price of $45 a barrel.

Oman is imposing a series of austerity measures after it posted a budget deficit of about OR4.5 billion last year. Gasoline and diesel price subsidies have been cut and similar cuts are planned for electricity and liquid petroleum gas. In August, the World Bank said Oman’s subsidy bill is expected to fall by 64% this year as the government seeks to reform its finances amid lower oil prices. (AB 23.12)

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5.16 Saudi Arabia Projects $53 Billion Deficit in 2017

On 22 December, Saudi Arabia projected a 2017 budget deficit of about $53 billion and a lower than expected shortfall for this year after government cost-cutting in response to lower oil prices. Expenses next year will reach 890 billion riyals ($237 billion) against revenues of 692 billion riyals ($184 billion). This year’s deficit will be 297 billion riyals ($79 billion), down 8.9% from 2016’s budget forecast. Revenues for this year are expected at 528 billion riyals, higher than projections a year ago of 513.75 billion. Spending is expected to come in at 825 billion riyals for 2016, 1.8% lower than foreseen.

The world’s biggest oil exporter froze major building projects, cut cabinet ministers’ salaries, and imposed a wage freeze on civil servants in the wake of last year’s record deficit, which reached $97 billion. (AFP 22.12)

►►North Africa

5.17 World Bank Approves Second Tranche as Egyptian Pound Falls

On 20 December, the World Bank agreed to provide Egypt with the second tranche worth $1b of its $3b total loan aimed at supporting job creation and spurring growth. As news of the loan broke, the value of the Egyptian pound depreciated as the US dollar registered a new record high against the pound. The exchange rate hit EGP 19.40 for buying and EGP 19.85 for selling at its highest, while the lowest value was set at EGP 19 for buying and EGP 19.20 for selling. The high demand on the dollar is caused by companies finalizing their budget and foreign companies repatriating their profits abroad, next to the usual demand by importers.

Meanwhile, the Egyptian Exchange (EGX) closed at its highest level at 12,148 points, driven by the exchange rate hike at banks. The EGX increased by 3.37%, supported by foreigners’ purchases worth EGP 112m, while Egyptians bought shares worth EGP 10.8m and Arabs EGP 101.2m. The market capital reached EGP 602.2b during trading on 20 December. (DNE 20.12)

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5.18 Finance Ministry Planning on 5% Economic Growth for Egypt in 2017/18 Budget

Egypt’s Finance Ministry will aim for an economic growth rate of 5% in the next financial year, according to details from its outline 2017/18 budget released on 25 December. The ministry also said it hopes to reduce the budget deficit to 9.5% of GDP and the total public debt to 94%. Egypt’s total public debt amounts to EGP 2.6 trillion or 94.5% of the GDP, according to the central bank’s data. The budget will also aim for an unemployment rate of 11%, down from the current 12.6%. The targeted growth rate will be achieved through adopting a range of economic policies, including support for productive sectors, such as industrial activity, investment and increasing exports. The focus on national mega projects will likewise continue, with growth in mind.

In 2014, Egypt embarked on a plan to introduce a number of fiscal reforms, including fuel-subsidy cuts, as well as imposing new taxes to ease a growing budget deficit. In early November, Egypt’s central bank decided to freely float the pound and raise key interest rates as part of a set of reforms aimed at alleviating a dollar shortage and stabilizing the country’s flagging economy. Egypt’s economic growth rate registered 4.3% of GDP in the fiscal year 2015/16, down from 4.4% in the previous fiscal year. The budget deficit for the fiscal year ending June 2016 registered 12.3% of GDP, according the ministry’s latest monthly bulletin. (Ahram Online 25.12)

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5.19 In 2015/16 Egypt’s Oil Ministry Signed 8 Deals Worth $709 Million to Find Energy Reserves

Egypt’s petroleum ministry said that in 2015/16 it signed eight agreements with six international and local companies to search for oil and gas reserves in the Mediterranean, the Western Desert, the Gulf of Suez and Upper Egypt, with total investments worth $709 million. The ministry said that the agreements also include drilling 33 new energy wells. The ministry highlighted that it has succeeded in increasing the natural gas production per day to around 4.45 billion cubic feet of gas by accelerating the search for natural gas reserves in the Mediterranean. In early December, Egypt announced that it accepted investment offers in oil and gas drilling and exploration worth $200 million from companies including Shell, British Petroleum, Apache and Apex.

The consumption of petroleum and gas products at international prices during the 2015/2016 fiscal year registered at EGP 279 billion, while the cost of providing the fuel to consumers reached EGP 181 billion. The revenue of the subsidized products in the local market amounted to EGP 130 billion, while the subsidies of the petroleum and gas products cost EGP 51 billion.

The government plans to trim the petroleum subsidy bill by 43.5% to reach EGP 35 billion and the electricity subsidy bill by 6.4% to reach EGP 29 billion in 2016/17 due to the drop in global oil prices. Egypt’s economy has been struggling since the 2011 uprising, with a sharp drop in tourism and foreign investment, two main sources of hard currency for the import-dependent country. (Ahram Online 25.12)

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5.20 Egypt Reports Suez Canal Revenues in November at 21 Month Low

Egypt’s revenues from Suez Canal commerce hit a 21 month low in November 2016, generating $389.2 million, down roughly 5% compared to the same month last year, according to data from the Suez Canal Authority (SCA). November’s receipts are the lowest since February 2015, when the vital Egyptian waterway generated $382 million. November’s data also shows a drop in earnings from the previous month, which registered $418.1 million in revenue. The Suez Canal revenue normally sees a decline in revenue from October to November each year.

The canal is the fastest shipping route between Europe and Asia and is one of the country’s main sources of foreign currency. The SCA is considering a new initiative that would require the world’s top container shippers to pay tolls in advance of using the waterway. According to the authority, the carriers would receive discounts in return for being charged in advance. The payments would likely be made three years in advance. (Ahram Online 23.12)

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5.21 Moroccan Central Bank Lowers Growth Forecasts to 1.2% in 2016

On 20 December, the Bank Al Maghrib (the Moroccan central bank) reduced growth forecasts to 1.2% for 2016, with a 9.6% decline in the agricultural value added and a 2.6% deceleration in the nonagricultural GDP. In the medium term and assuming an average crop year in the next two years, growth is expected to accelerate to 4.2% in 2017 and 3.7% in 2018. Nonagricultural GDP would accelerate to 3.4% and 3.7% in 2017 and 2018, respectively, driven by stronger revenues, particularly from the agricultural sector, and accommodative monetary conditions. (MWN 20.12)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Electricity Consumption Soars as Turkey Abandons Winter Time

Turkey’s electricity consumption surged sharply in November due to the country’s move to ditch the winter time system, despite a slight slowdown in the economy and moderate weather conditions. According to a new report by the Chamber of Electrical Engineers (EMO) on power consumption data from the Turkish Electricity Transmission Company (TEIAS), the country’s decision not to set its clocks back as usual led to a rise in electricity consumption, rather than planned energy savings.

Turkey first adopted summer time, also known as daylight saving time, in 1940, and applied it uninterruptedly after the 1970s, following the example of Europe, until this year. Today the system is used across the 28-nation European Union. The clocks did not, however, go back an hour for winter this year at the end of October, putting Turkey three hours ahead of Greenwich Mean Time (GMT), ostensibly in a bid to make energy savings of up to TL 1 billion.

The country’s electricity consumption, however, saw a 6.5% year-on-year increase in November, a record high rise in the last five years, and rose to 22.7 billion kilowatt/hour. Turkey’s electricity consumption was 21.3 billion kWh in November 2015, 21 billion kWh in 2014, 20 billion kWh in 2013, and 20.3 billion kWh in 2012. The change in the decades-long practice triggered strong criticism, as the sun does not rise until almost 8:30 a.m. in western provinces like Istanbul, while many businesses need to work extra hours so as to coincide with Western partners.

Turkey’s Energy Ministry is set to reassess its choice to abandon winter time, which has increased the country’s time difference with Europe amid a series of complaints from across Turkey about the darkness in the mornings. (HDN 22.12)

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6.2 Central Bank of Cyprus Sees Growth Rate of 2.8% in 2016 – 2017

The Central Bank of Cyprus said that it expects the Cypriot economy to expand at an annual rate of around 3% over 2017 until 2019 and upgraded its 2016 projection marginally upwards to 2.8%, as inflation is expected to pick up. The Cypriot economy is forecast to grow 2.8% also next year before growth picks up to 3.1% in 2018. Growth in 2019 is forecast to slow down to 3%.

Private consumption, which rose 2.5% last year, is expected to continue to increase 2.1% every year over the next three-year period reflecting an increase in disposable income, the central bank said. Fixed capital investment is forecast to increase 1.3% next year, after rising 19% this year, and 7.4% and 6.5% in 2018 and 2018 respectively. This will include the expansion of the fuel storage terminal in the Vassilikos area, the Larnaca and Agia Napa marinas, as well as other projects financed by the European Investment Bank and the European Bank of Reconstruction and Development.

Public consumption is forecast to rise 1.6% next year after shrining 0.5% in 2016, before it rises 1.2% in 2018 and 2% in 2019, the central bank said, as the government will start paying compensation to public sector workers for the purchasing power lost to inflation.

The export of goods and services are forecast to increase 2.6% this year and pick up to 3.4% in 2018 and 2019, following a 4.4% increase in 2016, it continued. Imports will increase 1.1% next year before rising 3% and 3.1% in 2018 and 2019 respectively. This year, they are projected to rise 5.1%.

The unemployment rate is expected to drop from 14.9% in 2015 to 12.8% this year to 10.7% in 2017, the central bank said. In 2018, it will drop for the first time to 8.8%, and for the first time since 2012 to a one-digit figure, before it further drops to 6.9% in 2019. Unemployment remained below what Cyprus’s international creditors had predicted “mainly because of the significant reduction of foreign workers in Cyprus, the ongoing recovery in employment and the flexibility demonstrated by the Cypriot labor market concerning salaries”. (CDN 22.12)

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6.3 Eurozone to Unblock Greek Short-Term Debt Relief Deal in January

The Eurozone finance ministers, Eurogroup, will unblock the now suspended short-term debt relief measures for Greece in January after Athens reassured euro zone lenders it would honor its bailout commitments. Lately Greece raised significant concerns regarding the country’s bailout commitments among its euro zone lenders with plans to pay out a Christmas bonus for pensioners and keep lower value added tax on some islands. The lenders decided to suspend a short-term debt relief deal for Athens, which would reduce its public debt by 20% of GDP by 2060, until the effects of the Greek measures on bailout (MoU) targets is fully assessed. (Reuters 24.12)

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7: GENERAL NEWS AND INTEREST

*REGIONAL:

7.1 Lebanon Forms New Government

Lebanon’s President, Michel Aoun, and Prime Minister Saad al-Hariri have formed a new government of 30 ministers drawn from most sides of the country’s political spectrum and from all of its religious sects. Aoun, an ally of the Shi’ite group Hezbollah which dominates the country’s politics, was elected president by members of parliament in October, after more than two years without anyone occupying Lebanon’s highest office of state. His election was partly the result of a political deal under which he would ask Hariri, a former political opponent, to be prime minister. However, some leading Lebanese politicians did not support the deal, contributing to Hariri’s delay in being able to form a government.

Lebanon has had a caretaker government for more than two years, led by former prime minister Tammam Salam, contributing to a political crisis that has weakened government services. Among the main cabinet posts, Gebran Bassil, a Christian and ally of Aoun, stays on as foreign minister, while Ali Hassan Khalil, a member of the Shi’ite Amal party to which Parliament Speaker Nabih Berri belongs, remains finance minister. Nouhad Machnouk, a Sunni Muslim and member of Hariri’s Future Movement, retains his post as interior minister. The new defense minister Yacoub al-Sarraf is a political ally of Aoun. The other important post, energy and water minister, went to Cesar Abou Khalil. (Reuters 19.12)

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7.2 Individual Arming Jumps in Turkey

The individual acquisition of arms is rising in Turkey, with the number of registered and unregistered personal guns up tenfold in the past decade. Most of the weapons are unlicensed, according to a report published by daily Cumhuriyet on 25 December. The daily also said the reason for the move to acquire arms is the lack of “feeling of security in Turkey.” According to a report prepared by the Umut Foundation, which fights against the individual acquisition of arms, the increase in civilian arming stems from the increase in the number of terror attacks and regulations regarding hunting.

According to data obtained by the foundation, there are around 20 million individual weapons in Turkey, nearly 85% of which are unregistered. Nearly everyone in Turkey is capable of obtaining a weapon and some 17 million weapons are without licenses, whereas a small amount, nearly 2.5 million, are licensed. When calculated in terms of population, one in four citizens has a weapon in Turkey, making it 27th in the world in terms of gun ownership. Some 65% of the crimes that are committed with individual weapons are carried out with firearms. Unlicensed weapons are used in nearly 84% of the crimes that are committed with firearms.

According to statistics from the Umut Foundation, 2,175 armed incidents were covered in the news in 2015. Some 71% of the incidents that were committed with firearms and edged weapons were carried out using firearms like rifles and pistols, while 29% were carried out with sharp objects. (HDN 25.12)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Can-Fite’s Namodenoson (CF102) Inhibits Liver Fibrosis – Supports Potential Treatment Efficacy

Can-Fite BioPharma announced that new preclinical data show its liver disease drug candidate Namodenoson (CF102) inhibited, in a dose dependent manner, the growth and proliferation of the liver fibrosis cells. This outcome suggests the anti-fibrotic effect of the drug and supports its development as an agent to combat non-alcoholic fatty liver disease (NAFLD), the precursor to non-alcoholic steatohepatitis (NASH). Pre-clinical studies which evaluated the effects of Namodenoson on fibrogenic hepatic stellate cells were conducted at Hadassah University Hospital, Ein Kerem. These latest study results add to the growing body of data that demonstrate Namodenoson’s potential efficacy in NAFLD and NASH, indications for which there is currently no FDA approved drug. They are advancing Namodenoson into a Phase II trial that we expect to commence in the coming months through leading medical institutions in Israel. By 2025, the addressable pharmaceutical market for NASH is estimated to reach $35-40 billion.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development Company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction. The Company’s lead drug candidate, Piclidenoson, is scheduled to enter Phase III trials in 2016 for two indications, rheumatoid arthritis and psoriasis. The rheumatoid arthritis Phase III protocol has recently been agreed with the European Medicines Agency. Can-Fite’s liver cancer drug Namodenoson is in Phase II trials for patients with liver cancer and is slated to enter Phase II for the treatment of non-alcoholic steatohepatitis (NASH). (Can-Fite 16.12)

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8.2 CartiHeal Gets FDA Approval of Its Agili-C Implant for the Treatment of Joint Surface Lesions

CartiHeal announced the FDA approval of the Investigational Device Exemption (IDE) application submitted by CartiHeal for their Agili-C implant, towards a PMA application. The 2 year-long pivotal study will involve a minimum of 250 patients in US and OUS centers. The study is aimed to show superiority of the Agili-C implant over surgical standard of care, i.e. micro-fracture and debridement, in the treatment of cartilage/osteochondral defects in both osteoarthritic knees and in knees without degenerative changes, making it the first approved study of such broad indications using a single implant. The study is designed as a prospective, multicenter, open-label, randomized and controlled trial, involving up to 3 lesions in the same joint and with a total treatable area of 1-7cm2. Results of these prior investigations demonstrated the potential for cartilage regeneration and remodeling of the underlying subchondral bone, along with pain and symptom relief.

Kfar Saba’s CartiHeal develops proprietary implants for the treatment of cartilage and osteochondral defects in traumatic and osteoarthritic joints. Backed by extensive pre-clinical and clinical data, its flagship product Agili-C, an aragonite-based biodegradable scaffold, has been shown to promote restoration of hyaline cartilage and remodeling of its underlying subchondral bone through a natural process, without the use of cells or growth factors. Clinical results in the knee, ankle and big toe demonstrated the potential of significant improvement in pain reduction, as well as reduction in related symptoms – through a simple, single-step implantation procedure. In the United States, the Agili-C is an investigational device that is limited to use in the IDE study. It is not available for sale. (CartiHeal 20.12)

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8.3 INSIGHTEC’s Exablate Prostate System Gets CE Mark for Treating Locally-Confined Prostate Cancer

INSIGHTEC announced that the Exablate Prostate system received CE Mark for treating locally-confined prostate cancer with MR-guided Focused Ultrasound (MRgFUS). The Exablate Prostate system is based on INSIGHTEC’s proprietary MRI-guided focused ultrasound technology. It uses focused ultrasound waves to precisely target and ablate (destroy), the targeted tissue in the prostate, while minimizing damage to adjacent structures. The treatment is done under Magnetic Resonance Imaging (MRI) guidance for high resolution visualization of the patient’s anatomy as well as real-time temperature monitoring. The treatment does not require incisions, is performed in a single session, allowing patients to quickly return to normal activity. The Exablate Prostate system features an endorectal probe integrated into a treatment bed which is compatible with GE MRI 1.5 and 3T. Ultrasound energy is delivered by a high frequency, 1,000-element phased array transducer which delivers focal therapy under MRI guidance and real time thermal feedback. This enables the physician to control and personalize the therapy.

Haifa’s INSIGHTEC is the world leader in MR-guided Focused Ultrasound (MRgFUS). The company’s non-invasive therapy platforms, Exablate and Exablate Neuro, are transforming patient treatments for various indications in Neurosurgery, Oncology and Women’s health. A growing number of renowned physicians are realizing the clinical and economical value of focused ultrasound around the world. (INSIGHTEC 20.12)

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8.4 Israeli Researchers Find Revolutionary Deep-Sea Bacteria Treatment for Prostate Cancer

Using lasers and a drug made from deep-sea bacteria, Israeli scientists have now developed a non-surgical method to treat men in the early stages of prostate cancer, drastically improving their chances of completely eliminating the disease without the need to remove the gland. The novel approach, which has already been tested across Europe, eliminates tumors with minimal side effects. In the treatment, doctors inject a light-sensitive drug derived from deep-sea bacteria into a patient’s bloodstream, killing cancer cells without destroying healthy tissue.

The treatment, called vascular-targeted photodynamic therapy or VTP, was developed at Israel’s Weizmann Institute of Science, in collaboration with the privately-owned company STEBA Biotech, and additional researchers from Europe. Results of a clinical trial in 413 patients at 47 hospitals in 10 countries across Europe, most of which were performing VTP for the first time, showed that the drug, which is activated with a laser to destroy tumor tissue in the prostate, was so effective that 49% of patients go into complete remission, compared to 13.5% in the control group. That is almost four times more effective.

As reported in the published study, WST11, the light-sensitive drug used, is derived from bacteria found at the bottom of the ocean. To survive with very little sunlight, they have evolved to convert light into energy with incredible efficiency. The Weizmann scientists exploited this feature to develop WST11, a compound that releases free radicals to kill surrounding cells when activated by laser light.

Men with low-risk prostate cancer are currently put under active surveillance, where the disease is monitored and only treated when it becomes more severe. Radical therapy, which involves surgically removing or irradiating the whole prostate, has significant long-term side effects, so it is only used to treat high-risk cancers. While radical therapy causes lifelong erectile problems and incontinence, VTP only caused short-term urinary and erectile problems that are resolved within three months, the researchers said. No significant side effects remained after two years. In the trial, only 6% of patients treated with VTP needed radical therapy, compared with 30% of patients in the control group. (NoCamels 21.12)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 IAI’s TaxiBot in Final Stages of Certification for the Airbus 320

Israel Aerospace Industries (IAI) is continuing to progress with its TaxiBot, the semi-robotic pilot-controlled vehicle for dispatch towing. Certification tests on an Airbus 320neo were completed successfully at Airbus facilities in Toulouse, France on 8 December 2016. The TaxiBot reached its maximum speed of 23 knots, performed multiple turns at different speeds and tight turns at low speed. An engine start of one and both engines of the A320neo during TaxiBotting was performed satisfactorily, as were other tests conducted by Airbus test pilots.

TaxiBot, a semi-robotic pilot-controlled vehicle, is designed to transport commercial airline aircraft from terminal gates to the runway and back, without using the airplane’s own engines. TaxiBot started dispatch-towing commercial Lufthansa Boeing 737 (Classic) flights departing out of Frankfurt Airport in November 2014. Since 2008, IAI, together with its industrial risk-sharing partner TLD, has been cooperating with Lufthansa LEOS in the development of the TaxiBot, with support of both OEMs Airbus and Boeing. Lufthansa LEOS has integrated the TaxiBot project into its “E-PORT-AN” initiative, aimed at taking passenger airplane towing and surface-traffic performance beyond the existing limits of environmental sustainability at Frankfurt Airport.

Israel Aerospace Industries (IAI) is Israel’s largest aerospace and defense company and a globally recognized technology and innovation leader specializing in developing and manufacturing advanced, state-of-the-art systems for air, space, sea, land, cyber and homeland security. Since 1953, the company has provided advanced technology solutions to government and commercial customers worldwide including: satellites, missiles, weapon systems and munitions, unmanned systems, robotic systems, electronics, radars, C4ISR, navigation systems and EO payloads. (IAI 13.12)

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9.2 Dragonera Launches New AI-Driven Software Development Service

Dragonera has raised $3 million in seed funding from Singulariteam. The new funding will allow the company to accelerate the roll out of its automated development service to new markets. When companies want to launch a new product, there is often a long and tedious delay between the initial idea and when an early version is available. Dragonera is looking to accelerate that process with a new service that can automate up to 70% of the early development of new products and services. Dragonera has created an AI-based software development service to build software products end-to-end. By relying on AI and microservices, Dragonera is able to deliver everything from prototypes to final production products at a fraction of the cost in a fraction of the time. The remaining parts of the product that are not covered by microservices are covered by Dragonera’s experienced designer and developer network. Dragonera’s use of AI and automation minimizes cost, with services starting at a few thousands of dollars for a Minimal Viable Product (MVP).

Founded in 2016 and after raising $3M seed round from Singulariteam, Dragonera launches the platform that assists companies and entrepreneurs to overcome hurdles that involve designing and building their MVP. Dragonera provides end to end solutions by learning the needs and aspirations, defining the product, building it and deliver it successfully. (Dragonera 20.12)

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9.3 Mobiquity and Insert Team up to Provide Real Time, In-App Personalization

Mobiquity, a digital engagement provider for Fortune 500 companies, and Insert announced a partnership to deliver real-time, in-app personalization to mobile users. The partnership brings together Mobiquity’s end-to-end mobile services with Insert’s technology for rapidly deploying in-app engagement features, allowing app owners and mobile marketers to develop more meaningful customer relationships. As enterprise brands increasingly rely on mobile solutions for improving customer engagement and business outcomes, they must deliver the right mobile moments, at the right time, in the right context. However, providing these personalized experiences requires a deep understanding of customer data and can take weeks of development time to deliver.

Through their partnership, Mobiquity and Insert will enable brands to enhance an existing solution, or build a new app, for maximizing customer interactions in real-time. Mobiquity will focus on mobile strategy, design, and development while Insert’s platform can be used to add dozens of pre-built features to an app, including messages, videos, surveys, and tooltips, without any coding or app store approval. App owners and mobile marketers can then leverage the data that Insert provides to optimize these features and achieve their goals.

Yakum’s Insert is the first automated in-app marketing platform. It offers a broad set of customizable features – “inserts” – which can be launched into any live app in minutes, with no coding. These pre-built features include videos, banners, messages, surveys and more – allowing app marketers to better engage, convert and retain their customers. Insert was created to enable mobile marketers and product managers to drive user loyalty and conversion, without writing a single line of code. (Mobiquity 20.12)

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9.4 Magna and Innoviz Partner on LiDAR for Autonomous Driving Systems

Aurora, Ontario’s Magna International and Innoviz Technologies announced they are partnering to deliver LiDAR remote sensing solutions for the implementation of autonomous driving features and full autonomy in future vehicles. Recognizing that LiDAR is imperative for achieving the desired levels of performance and safety, Magna selected Innoviz’s technology to be integrated into its autonomous driving systems to provide a complete sensor-fusion solution to automakers. Driven by a unique hardware architecture and innovative software technologies, Innoviz offers a comprehensive market solution. The high-definition, solid-state LiDAR enables 3D remote sensing to produce highly accurate real-time images of the vehicle’s surroundings while meeting automotive standards and significantly reducing cost and size. Varying from solutions currently on the market, the Innoviz LiDAR can be seamlessly integrated into any vehicle and is designed to effectively manage changing light and weather conditions.

Kfar Saba’s Innoviz provides LiDAR remote sensing solutions for fully autonomous vehicles as well as 3D Computer Vision solutions including Object Detection, Tracking and Classification and accurate Mapping and Localization. Innoviz’s growing team is comprised of leading experts in Electro-Optics, Computer Vision, MEMS design, Digital Signal Processing and more. (Magna 20.12)

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9.5 Nano Dimension Delivers 3D Printer to One of the 10 Largest U.S. Banks

Nano Dimension Technologies has delivered, in return for payment, a DragonFly 2020 3D Printer to a Fortune 500 company, one of the 10 largest bank holding companies in the United States. The printer will be installed in the client’s hardware development center. This marks Nano Dimension’s sixth delivery of the DragonFly 2020 3D Printer in 2016 to a beta customer. With this delivery, Nano Dimension has met its targets for 2016, as presented to investors. The beta customer conducts activities related to electronics and hardware development for the financial services sector. Previous deliveries to leading companies from a variety of industries include a U.S.-based Fortune 100 multinational corporation in the technology industry; U.S.-based FATHOM; one of the top 10 largest defense companies in the world; PHYTEC, based in Germany; and a leading defense company in Israel.

Nano Dimension’s beta program involves the delivery of the company’s DragonFly 2020 3D Printers to leading companies and partners worldwide. The customers are pioneers of additive manufacturing technology’s entry into the world of electronics. They will qualify the DragonFly 2020 technology and use it, amongst other possibilities, to speed up their product development times. The DragonFly 2020 3D printer also has the potential to strengthen the customer’s in-house innovation capabilities while providing them with enhanced R&D IP security. In return, the company receives valuable feedback for product development and other considerations, including payment.

Ness Ziona’s Nano Dimension, founded in 2012, focuses on development of advanced 3D printed electronics systems and advanced additive manufacturing. Nano Dimension’s unique products combine three advanced technologies: 3D inkjet, 3D software and nanomaterials. The company’s primary products include the first 3D printer dedicated to printing multi-layer PCBs (printed circuit boards) and advanced nanotechnology-based conductive and dielectric inks. (Nano Dimension 20.12)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s CPI Drops By 0.4% in November

The Central Bureau of Statistics announced that Israel’s Consumer Price Index fell by 0.4% in November, bringing the rate of inflation for the year to date to minus 0.2%. Prominent price drops last month were in fresh produce (-5.9%), transport (-0.6%) and food (-0.4%). The clothing item rose by 2%. The housing price index rose 0.9%, bringing the annual rate of price rises in housing to 8.7%. This follows a 1.3% rise in October. (CBS 15.12)

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10.2 Israel’s Exports Increase by 3% in 2016

Israel’s exports of goods and services totaled $95 billion in 2016, 3% more than in 2015, according to an initial summary by the Israel Export and Industrial Cooperation Institute published on 27 December. Excluding the sale of startups and diamonds, exports totaled $86 billion, 2% more than in 2015. High-tech exports (industrial and services) totaled $41 billion, up 4%, compared with the preceding year, and are projected to account for 43% of Israel’s exports of goods and services. The increase is a result of rapid growth in exports of computer, software and R&D services, in line with the trend in recent years. According to the Export Institute’s forecast, exports are projected to grow by 6% in dollar terms to over $100 billion in 2017. Export Institute economists predict a real 4% rise in exports. (IE&ICI 27.12)

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10.3 Overnight Stays in Israel by Tourists Surged in November

The Israel Hotel Association said on 26 December that some 970,000 tourists stayed at least one night in Israel in November, an increase of about 38% compared to November 2015. The number of tourists who stayed overnight in November this year was also 23% higher than in the equivalent period in 2014, which followed Operation Protective Edge in Gaza, and on par with November 2013. Earlier this month, it was reported that record numbers of tourists visited Israel in November 2016. Revenue from incoming tourism in November generated more than NIS 1.5 billion ($390 million), about the same as the Tourism Ministry’s annual budget for promoting inbound tourism. This is NIS 400 million ($100 million) more than the revenue generated by inbound tourism in November 2014. (Various 27.12)

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10.4 Rehovot Leads Israel’s Revenue Per Household

According to the Central Bureau of Statistics 2015 Household Expenditure Survey on the 14 Largest Cities in Israel, Rehovot has the highest net revenue per household – NIS 19,099. The data indicates that the gross average revenue per household in Israel is NIS 18,671, while net revenue is NIS 15,427. Average expenditure is NIS 12,323. In contrast to Rehovot, Bat Yam has Israel’s lowest revenue per household – NIS 11,005. Of Israel’s large cities, Tel Aviv has Israel’s highest net revenue per capita and expenditure per capita – NIS 8,053 and NIS 6,419, respectively. Rehovot also has the largest gap between net revenue and expenditure – NIS 5,974; the smallest gap was noted in Ashkelon and Bnei Brak – about NIS 250.

In Rehovot, Ashdod, Petah Tikva and Rishon LeZion – over 80% of revenue is from salaries, while in Bnei Brak about 25% is from allowances and financial aid, over twice the national average. In all cities, the highest household expenditure article is housing (24.7%). Ashdod has Israel’s highest percentage of expenditure on food (18.8%), healthcare (7%) and clothing and shoes (4%). The national average of people living in homes they own is 67.6%, and the percentage of people living in rented apartments is 26.7%. In Rishon LeZion, Rehovot, Bnei Brak and Ashdod over 70% of households live in apartments they own. Tel Aviv, as should have been expected, has the highest average rent price – NIS 4,563 per month. (Globes 19.12)

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10.5 Israeli Families Below Poverty Line Increase to 19.1% of Population

Almost one in every five Israeli families lives beneath the poverty line, the National Insurance Institute (NII) report for 2015 revealed. The report found that although there was a slight fall in the number of poor people, the poor have become poorer. Israel also remains at the top of the rankings in terms of the level of poverty and inequality in OECD countries. The NII found that there were 468,800 families living under the poverty line in Israel in 2015, comprising 1,217,900 people including 764,200 children. The report found that although the number of poor actually fell slightly, the percentage of poor families rose from 18.8% in 2014 to 19.1% in 2015.

The report shows that the level of the poverty among poor families, as expressed by the gap between the level of income of the families and the poverty line, has grown by 3.2%. The National Insurance Institute pointed out that a contributing factor to increased poverty was a 3.3% rise in the standard of living while welfare payments remained unchanged. The biggest rise in poverty was recorded in the age group that actually has the lowest level of poverty – 46 to pension age. Poverty in this age group grew by 17%. Even so the level of poverty in this age group remains well below the average. At the same time there was a sharp drop of 13% in the number of one-parent families living below the poverty line, while their proportion among the poor fell 16%. However, poverty among families with children grew by 4%.

The report found that poverty in the Israeli Arab population continued to grow. In 2015, 53.3% of Israeli Arabs lived below the poverty line compared with 52.6% in 2014. However, poverty in the Haredi (ultra-orthodox Jewish) population fell sharply from 54.3% to 48.7% over this period. This stems from increased child allowance payments and work income. (Globes 15.12)

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11: IN DEPTH

11.1 ISRAEL: Greece-Israel-Cyprus Relations: Ripe for Expansion?

Dr. George Voskopoulos wrote on 18 December in the Jerusalem Center for Public Affairs Institute for Contemporary Affairs that inter-state relations consist of rational choices aimed at producing desired outcomes. For Greece, Cyprus and Israel, this means a continuation of stability and security in the chaos that has erupted from the Arab Spring. In light of this upheaval in the Middle East, cooperation between Greece, Cyprus and Israel is essential to produce a haven of stability.

First, for Israel, Greece and Cyprus represent a bridge of stability to Europe, a stable region close to home. This security dimension is important for a country surrounded by pockets of instability and sources of radicalism. Both countries provide Israel with an allied neighbor and bring Israel closer to Europe in terms of security, trade and energy.

Second, Israel is also a crucial security actor in a region affected by drastic domestic changes within states lacking a culture of peaceful co-existence. Currently, Greece is heavily saddled by the influx of refugees fleeing war. Cyprus, Greece and Israel share similar significant interests such as security, energy security, and the need to deal with radicalism and terrorism.

Third, Israel, Greece and Cyprus are the only working democracies in a region of undemocratic, semi-democratic and failing states. This is a powerful motivation factor for cooperation since democratic values are a fundamental criterion for partnerships. This strategic partnership could set the groundwork for future cooperation among these states.

In the last few years, Greek-Israeli relations have intensified due to the intensity of threats, the urgency and the need to solidify relations in a region tormented by multifaceted threats. Israeli-Greek relations have advanced to a degree where the militaries are conducting joint air force operations and joint maneuvers by Greek and Israeli navies. Greece permitted an overfly mission by Israeli military aircraft in Greek air space in 2014. An Israeli military attaché has been stationed in Athens since 2014. These are major choices on the part of Athens, whose foreign policy of the past had focused exclusively on building a one-way relationship with the Arab world, leaving Israel out of the picture.

Israel expressed deep gratitude to both countries for sending fire-fighting aircraft when widespread fires hit Israel in November 2016.

A Stable Axis of Power

Greece-Cyprus-Israel relations are setting clear ground rules of engagement for states to operate as regional stabilizers. Jerusalem, Athens and Nicosia constitute a stable axis of power that should be expanded to fill the vacuum of leadership in the region. The tripartite cooperation between the three countries as well as the joint declarations that followed recent meetings were labeled “non-exclusive,” thus leaving the door open for others willing to participate. Yet, any potential candidates for joining this cooperation will have to be clear about its intentions, policy choices and above all their support for peace and democracy. These trilateral understandings are a message to the region. Israel, Greece and Cyprus are initiating an alliance of stable nations, who share common values, and are willing to fight (in different ways) terrorism.

The recent advances constitute just the security dimension of this new tripartite cooperation. Cyprus and Greece provide Israel with close proximity to Europe, a continent where, despite problems, democracy flourishes. The intensity of threats, as well as the deteriorating security in the Middle East, point to the need of further cooperation between the stable forces in the region. This is a historic moment for the future of this region and the time is ripe to produce more allied relationships amidst the chaos of the Middle East.

In a very promising development, Greece, Israel and Cyprus have decided to formalize their proposal for the construction of a pipeline from gas fields off the coast of Israel. They are taking their case to the EU Climate Action and Energy Commissioner, thus making a formal step in materializing the project. The feasibility report of the proposal and its financial competitiveness are encouraging. The project possesses strategic advantages since it uses the safest route to Europe. The three democratic countries can guarantee in the long-term a secure means of delivery in the effort to minimize Europe’s dependence on Russian gas.

George Voskopoulos, Ph.D., is Associate Professor of European Studies at the University of Macedonia, Thessaloniki, Greece, and the former head of the department. (JCPA 18.12)

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11.2 KUWAIT: Fitch Says Kuwait Election a Risk to Reform But Fiscal Strength Robust

Kuwait’s recent elections will increase tensions between the executive and legislature, hindering economic and fiscal reforms, although the extent to which this will happen is unclear, Fitch Ratings said on 8 December.

The composition of Kuwait’s parliament changed substantially in elections late last month, after most opposition groups revoked their boycott and took part in the poll. The absence of a formal party system makes it hard to quantify the precise size of parliamentary opposition, but it appears that pro-government MPs (including voting ministers) will constitute a tiny majority at best.

The outcome is in line with our view that the elections would deliver a less government-friendly legislature, as we commented when we affirmed Kuwait’s ‘AA’/Stable sovereign rating earlier in November. We believe mounting parliamentary opposition to the government’s fiscal program was the key trigger for dissolution by the Emir, which precipitated the election.

The nature of the post-election relationship between the executive and legislature remains to be seen. The fragmented nature of the parliament could enable the government to forge political alliances. The prime minister may be able to placate opponents by recommending to the Emir some ministerial candidates from their ranks. But the Emir’s re-appointment of the previous prime minister may suggest that the government is preparing to take a more confrontational stance.

Kuwait’s parliamentary system creates substantial opportunities for MPs to obstruct the government’s agenda by rejecting proposals. The parliament’s power to summon ministers for questioning and revoke confidence in ministers gives it influence even on issues that would not formally require a parliamentary vote, such as recent fuel subsidy reforms. The government may back down from more substantive initiatives such as public sector pay reform, particularly if the oil price recovery is sustained. Nevertheless, it could still pursue some of its fiscal agenda with smaller, less contentious measures, for example enforcing existing subsidy rules or linking public sector bonuses to job attendance.

If parliament were dissolved again, the likely popular frustration about lack of representation and perceived unfair reforms could return Kuwait to the kind of political uncertainty of 2011-2013, when there were three dissolutions of parliament and widespread protests.

Kuwait’s exceptional fiscal strengths, which underpin its sovereign rating, would not be immediately affected by a return to this level of political volatility. We forecast the fiscal breakeven price at $46/bbl in FY16/17, one of the lowest among Fitch-rated oil exporters, taking into account wealth fund investment income in revenue, and excluding statutory transfers to wealth funds from expenditure. We estimate that the assets of the Kuwait Investment Authority, if the government were prepared to fully use them, could last decades if financing needs stayed at the level we expect for FY16/17.

High execution risk means our fiscal forecasts have not assumed full effect of fiscal measures even where they are already being implemented. One of the most tangible results of the political instability of 2011-2013 was poor execution of infrastructure spending, which if repeated would support fiscal balances, although at the expense of development goals.

But a reversal of economic and institutional reform would reinforce rating weaknesses, which include heavy oil dependence (leading to GDP and budget revenue volatility), weak governance and competitiveness indicators, and a weak economic policy framework compared with rating peers. A generous welfare state and the large economic role of the public sector present long-term structural challenges as the population grows. (Fitch Ratings 08.12)

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11.3 EGYPT: Fitch Affirms Egypt at ‘B’; Outlook Stable

On 15 December 2016, Fitch Ratings has affirmed Egypt’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘B’ with a Stable Outlook. The issue ratings on Egypt’s senior unsecured foreign- and local-currency bonds are also affirmed at ‘B’. The Country Ceiling and the Short-Term Foreign- and Local-Currency IDRs are all affirmed at ‘B’.

Key Rating Drivers

Egypt’s ratings balance a large fiscal deficit, a high general government debt/GDP ratio, strains on the balance of payments and recent volatile political history, with low albeit rising external debt and renewed progress in implementing an economic and fiscal reform program.

The government’s program of economic and fiscal reform has regained momentum, after stalling in the fiscal year to June 2016 when the budget deficit widened to a preliminary 12.2% of GDP. In July the government implemented a second round of electricity subsidy reform by raising prices 35% – 40%. VAT came into effect in September, after parliament approved an amended law, which put the rate at 13% initially and 14% at the start of FY17.

The central bank floated the EGP on 3 November, leading to a sharp depreciation of the currency, which has since averaged EGP17.1 against the USD (up to 12 December), compared with a prior auction rate of EGP8.8. This followed an extended period of pressure on the currency amid depressed levels of foreign exchange, which was severely limiting economic activity. The government also enacted a second round of fuel subsidy reform (the first round was in mid-2014), raising fuel prices by 30.5%-46.8%. This step was part of the government’s program following the EGP flotation to control the fiscal cost of imported fuel.

IMF board approval for the three-year $12b extended fund facility followed these reforms, on 11 November with a first tranche of $2.7b disbursed immediately. Details of the IMF agreement have yet to be released beyond the following general aims: reducing government debt/GDP by almost 10 percentage points by the end of the program, implementing structural reforms and entrenching the newly liberalized exchange rate regime.

Egypt has also been raising external financing from a number of other sources, including the GCC, the World Bank, a currency swap with China worth around $2.6b, and $2b from a consortium of international banks. The liberalization of the EGP has attracted renewed portfolio inflows. Egypt’s stock of international reserves climbed to $23.1b at end-November, from $19.1b in October and a low of $15.6b in July. We estimate that current reserve levels are just above four months of current external payments (CXP), a ratio that had been less than three in 2012-15.

Net external debt/GDP (11.7%) and net sovereign external debt/GDP (8.1%) are lower than the ‘B’ peer medians in 2016, but are rising on the back of greater recourse to foreign financing. Nevertheless, the bulk of sovereign external debt is concessional and the ratings are supported by the absence of a recent history of debt restructuring.

The public finances will remain a key weakness of Egypt’s credit profile. Despite VAT and subsidy reforms, we expect only modest narrowing in the budget deficit in FY17, to 11.6% of GDP. Tax revenue growth will be strong and the civil service law (approved by parliament in October) will continue to restrain public-sector wage growth. However, the subsidy bill will increase because the impact of the weaker EGP on import costs of fuel, for example, outweighs the subsidy price reform. Also, the higher interest rates that accompanied the EGP flotation imply a substantial increase in interest payments. We expect greater fiscal consolidation in FY18, with the budget deficit narrowing to 9% of GDP and the primary deficit to 0.3% of GDP.

Government debt/GDP is likely to peak in FY17, at around 99%, pushed higher by the combined effect of large additions to external debt and a sharply weaker EGP (assuming an end-June exchange rate of EGP16 to the $). We forecast government debt/GDP to fall to 93% in FY18, on a smaller budget deficit and currency appreciation to EGP14.5. The level of guaranteed debt and contingent liabilities is currently unclear. The Public Finance Management unit, recently established within the MoF, expects to release data on this in early 2017.

We expect that GDP growth will be weaker in FY17, at 3.3%, given the challenges the economy was facing before the EGP flotation, especially in manufacturing and tourism, and because the fiscal and monetary reforms will initially be a drag on private consumption. Despite fiscal consolidation, we forecast stronger GDP growth in FY18, at 4.5%, as the exchange rate adjustment beds in, as gas production starts at the giant Zohr field, and with stronger investment.

With inflation set to rise above 20% in the first half of 2017, fiscal and monetary reforms present some risk of social backlash, especially given ongoing structural problems including high youth unemployment, deficiencies in governance and the business environment, as well as intermittent security issues. The government is seeking to mitigate these risks by emphasizing that it is bolstering social safety nets (including cash transfer schemes) and that the reforms will deliver better economic performance and employment. Furthermore, food subsidy allocations have increased and electricity provision has improved markedly.

Rating Sensitivities

The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the ratings are currently balanced.

The main factors that, individually or collectively, could lead to a positive action are:

-A track record of progress on fiscal consolidation leading to declining government debt/GDP.

-Sustained stronger economic growth supported by reforms to the business environment leading to increased investment and employment.

-Significant accumulation of international reserves following a sustained narrowing of the current account deficit and higher net foreign direct investments.

The main factors that, individually or collectively, could lead to a negative rating action are:

-Failure to narrow the fiscal deficit and put government debt/GDP on a downward trend.

-Reversal of fiscal and/or monetary reforms, for example in the face of social unrest.

-Renewed downward pressure on international reserves due to further strains on the balance of payments, including weaker access to foreign financing.

Key Assumptions

Fitch assumes local banks remain willing and able to finance the fiscal deficit. The political environment is assumed to be more stable than in 2011-2013, although sporadic, and at times serious, attacks on security forces are assumed to continue and underlying political tensions will remain. (Fitch Ratings 15.12)

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11.4 EGYPT: Egypt Pivots to Medical Tourism

Ahmed Hidji observed on 13 December in Al-Monitor that an Egyptian pharmaceutical company launched a campaign that highlights low-cost treatment to hepatitis C patients from all over the world as part of efforts to promote medical tourism to the country.

“Tour n’ Cure, what are you waiting for?” With these words, English journalist and documentary filmmaker Tim Coleman ended a video message 12 June, in which he relays his journey to being treated for the hepatitis C virus in Egypt, after having contracted it over 30 years ago.

Coleman said in the video that his particular treatment in England with what are being called revolutionary drugs would cost £120,000 (roughly $152,000) and that he has sought to get free treatment from the English National Health Service (NHS), but still has not received it. He said that during a trip to Cairo, he saw the Tour n’ Cure campaign ad and found out that the Egyptian campaign offers a complete course of hepatitis C medication for no more than £1,200 ($1,500). He said that he received free treatment in Egypt with the new drugs for six months starting 15 February and feels much better.

He had applied to be treated under the NHS program in 2015. In part because the treatment is so expensive in Britain, NHS England is rationing care. It is planning to fund 10,0000 hepatitis C courses annually, although 160,000 people are estimated to have the disease in England. A 12-week course there can cost up to around $50,000; some patients require more than one course.

The Tour n’ Cure is a campaign that Prime Pharma, a private Egyptian pharmaceutical company, launched on 24 May after six months of promotional efforts to revive therapeutic tourism in Egypt. According to the official website of the campaign, it started its activity by attracting hepatitis C patients from around the globe and offering them low-cost treatment and a one-week sightseeing program. Tamer Wajih, the chairman of Prime Pharma, told Al-Monitor, “Researchers at the company succeeded in innovating low-cost therapeutic protocols with 97% cure rates instead of relying on imported medication reaching $100,000 per treatment regimen.”

According to a recent field survey conducted by the Egyptian Health Ministry in December 2015, the number of Egyptian citizens with hepatitis C is estimated at 3.6 million, or 4.4% of the population.

In October, the World Health Organization held an event that celebrated the treatment of 1 million patients in low- and medium-income countries in 2015 and 2016 under the new treatment regimen. Qadri al-Said, the CEO of the Egyptian National Committee for the Control of Viral Hepatitis, said in his speech during the event that this figure included 830,000 Egyptians. Wajih said that Egypt’s success in developing a cure for hepatitis C, in addition to the five-year period needed to register the medication in European markets, have made the therapeutic tourism campaign inevitable. The aim is to extract the most economic benefits by offering a treatment and an entertainment program that costs €4,900 ($5,200) at most, including the cost of medication.

Wajih added, “We want to bring in 100,000 patients in 2017. The campaign seeks to turn the spotlight on Egypt as the world healer of hepatitis C, so that patients would need to come to Egypt. Besides, the patient’s daily expenditure would exceed that of a tourist visiting Egypt only for tourism and opting for the cheapest choices. Tour n’ Cure packages include residence in five-star hotels, direct flights and daily leisure tours.”

Wajih detailed the steps that a patient must take before deciding to travel to Egypt: The patient must provide the campaign with the home country’s test results so that the medical team can look into the case and assess whether the patient is eligible for treatment in Egypt. According to him, the medical team is focusing on countries that are relatively close to Egypt geographically, such as Spain and Italy as well as England, as they have a high number of hepatitis C patients. He said, “The citizens of these countries know Egypt well. They can easily be persuaded with the quality of touristic and therapeutic services we offer.”

Wajih emphasized the complete coordination between the campaign and the relevant ministries, namely the Civil Aviation, Health and Tourism ministries. He said that Minister of Health Ahmed Emad El-Din Rady suggested using the state hospitals and labs, but the campaign had already signed contracts with private labs and hospitals. Wajih expected the campaign to expand its activity to include cancer patients. He did not seem worried about foreign patients’ treatment in public hospitals.

In this regard, the director of the Therapeutic Tourism Department at the Ministry of Health, Abdelati al-Manai, told Al-Monitor, “The Health Ministry has been capitalizing on the infrastructure of some public health facilities and on the skills of Egyptian medics to attract patients from Arab and African states.” Wajih said this doesn’t mean he doesn’t trust public hospitals, but that they opted for private hospitals to give patients the most appropriate medical service in Egypt.

The Tour n’ Cure campaign chose Cairo as a starting point for its activity. Wajih said that the capital abounds with human resources and medical facilities. He said that patients could be welcomed in Sharm el-Sheikh hotels if the influx exceeds the capacity of Cairo’s facilities.

International soccer players are also promoting therapeutic tourism in Egypt. Wajih said, “The campaign has teamed up with FC Barcelona’s striker, the Argentinian Lionel Messi, to launch the initiative from Cairo to ensure the right of hepatitis C patients to receive low-cost treatment.” The head of the Egyptian Tourism Activation Authority, Hisham al-Demiri, told Al-Monitor over the phone that he fully supports the campaign and that his committee is trying to promote therapeutic tourism in Egypt. He asserted that this sort of tourism is popular around the world, and that it can attract foreigners who are not used to visiting Egypt for tourism purposes. The aim is to help Egypt’s tourism sector to overcome its current stagnation.

The tourism sector in Egypt has been stagnating for five years. According to the Central Agency for Public Mobilization and Statistics, 506,200 tourists visited Egypt in October 2016 as opposed to 909,400 in October 2015 — a 44.3% decline. The economic performance indicators that the Ministry of Planning issued in early December showed that the tourism sector witnessed a 28.7% decline during the 2015-16 fiscal year, while it had achieved a 19.5% growth in the preceding fiscal year.

Demiri said, “People traveling for treatment do not come alone. They are often accompanied by family members. During and after the treatment, they get the chance to discover Egypt, and they might be interested in visiting again even after being healed.”

On whether the campaign can bring 100,000 patients to Egypt in 2017, Demiri said, “Egypt is new to the therapeutic tourism sector, and it is still in the promotion phase. The committee has not assessed the outcome of the promotional campaigns yet.” He concluded that some European tourism companies in Spain, Belgium and the Netherlands are interested in the medical treatment programs in Egypt. (Al-Monitor 13.12)

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11.5 TURKEY: Fitch – Turkish Bank Outlook Negative Amid Macro, Political Risks

On 7 December Fitch Ratings revised the Turkish bank sector Outlook for 2017 to Negative from Stable. We expect heightened risks to political stability and the operating environment to put pressure on bank credit fundamentals and increase the potential for further currency and interest-rate volatility. High levels of short-term foreign-currency wholesale funding leave banks exposed to significant refinancing risks and swings in investor sentiment towards Turkish country risks.

Political uncertainty, as demonstrated by July’s attempted coup, is likely to undermine Turkey’s longer-term economic performance and bank asset quality. Foreign-currency lending makes up about a third of total loans and is at risk as the Turkish lira has fallen sharply since 2013 and could fall further. Many borrowers are likely to be hedged only in the fairly short term or partially.

SME lending is significant at about a quarter of the portfolio and is particularly sensitive to slower growth. Problems could also arise from relatively small segments, such as tourism, which has been hit by worsening security conditions, and energy, which has been under pressure from low energy prices and the weak lira.

However, we forecast the sector’s non-performing loans ratio will increase only moderately to about 4% at end-2017 from 3.3% at end-9M16. The economy is still growing and the fairly long-term nature of most foreign-currency loans mean they will season relatively slowly. Regulatory forbearance also supports a gradual increase in the bad debt ratio. Nevertheless, performing ‘watch list’ loans that have been restructured are likely to continue to rise to reflect a weakening of asset quality. Single-name concentrations could also push up our non-performing loans ratio forecast.

Turkish banks rely heavily on short-term external funding, but this risk is long-standing and financing has been resilient in the aftermath of July’s attempted coup. Nevertheless, funding costs could increase further in 2017, depending on investor sentiment and perception of Turkish country risks, while investor demand and rollover rates could also weaken. We believe Fitch-rated banks have the ability to raise sufficient foreign-currency liquidity to service their foreign debt for up to a year, although prolonged market closure would put pressure on their liquidity and on Turkey’s external finances more generally.

The move to a Negative rating Outlook was also influenced by the fact that about 80% of Fitch-rated Turkish banks are on Negative Outlook, largely to reflect the sovereign rating Outlook. The Negative Outlook reflects the potential for a deterioration in the government’s ability to provide support for state-owned banks and for a downgrade of the Country Ceiling for foreign-owned banks. For privately owned banks, Negative Outlooks reflect the negative impact of a weakening operating environment on standalone credit profiles. (Fitch Ratings 07.12)

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11.6 TURKEY: How Turkey Used Math to Drastically Boost its Economy

Mustafa Sonmez posted in Al-Monitor on 20 December that a 20% upward revision in the size of the Turkish economy will notably improve the country’s economic profile on paper, but not without controversy over the new calculation method and the discrepancies it created.

The Turkish Statistical Institute (TUIK), an official agency attached to the prime minister’s office, had announced a while ago its intention to change the calculation method used to determine the country’s main economic indicators. The new method was to be based on ESA2010, the European Union’s accounting framework, to align with the way EU countries calculated their gross domestic product (GDP). With this explanation at hand, the planned change seemed necessary and reasonable.

On 12 December, however, the release of the new GDP data sparked myriad objections and criticism disputing the scientific merits and objectivity of the way the revision was made. Pundits had been especially curious about the third-quarter growth rate, which was expected to be in the negative. So it turned out, but according to the TUIK, the economy contracted 1.8% in the third quarter, well beyond the 0.5% expected in line with earlier data sets. Then the entire picture painted by the new calculation method raised questions, both in terms of methodology and consistency.

According to the new data, Turkey’s GDP was, in fact, bigger than what the previous calculation had found. The difference is staggering — nearly 20%. In 2015, for instance, the Turkish economy was said to have produced goods and services worth TL1.953 trillion at current prices. The new calculation method puts the figure at TL 2.338 trillion, meaning that an extra TL 385 billion in GDP had been somehow “discovered.” This amounts to about $140 billion, based on the average exchange rate last year. So the Turkish economy’s size for 2015 grew from $718 billion to $857 billion overnight. Accordingly, the per capita income also increased — from $9,257 to $11,082.

The revision is said to be made according to EU standards, but unlike the EU, which took 2010 as the basis year, Ankara opted for 2009, a crisis year in which the Turkish economy had contracted by about 5%. Relevant to 2009, GDP increases in following years turned in bigger, meaning that an important part of the overall increase stemmed from the choice of a problematic basis year.

While applying the EU method, the TUIK seems to have thought the construction sector was not done justice previously, for its share in the GDP increased from 4.4% to 8.2%. The share of the manufacturing industry, meanwhile, rose by 1% to 16.7%. In short, a third of the 20% increase in the revised GDP came from the construction sector, which is now ranked third in size after the manufacturing and commerce sectors.

Similarly, the TUIK seems to have thought that investment expenditures were under-calculated, revising them up by 74%. This means that domestic savings, too, are now bigger than what we previously knew, amounting to 24% of GDP and not 14%, as stated in the government’s medium-term economic program, adopted in September.

The revisions produced a new set of growth data, whose credibility was also called into question. In the 2013-2015 period, for instance, the average growth rate rose to 6.5% per year, up from 3.7% previously. More importantly, the new growth data looks out of sync with unemployment figures. For 2013, for example, the growth rate was raised from 4.2% to 6.5%. In an economy with such a robust growth, the jobless rate is expected to decrease, at least a little bit. Yet according to the TUIK’s labor force data, not only did it not decrease, but it rose from 8.8% to 9.1%.

No doubt, the 20% upward revision in GDP impacts positively a number of other indicators, which are important for foreign investors in particular. To start with, Turkey’s overall economic profile has now improved. With some $720 billion in GDP and per capita income of about $9,000, Turkey had dropped out of the world’s top 20 economies. Now it will make it back to the list.

Major indicators, watched closely by the International Monetary Fund (IMF) and credit-rating agencies, will now speak of a lesser fragility. Take, for instance, the current account deficit-GDP ratio, which denotes the foreign exchange deficit. It stood at 4.5% for 2015, but will now go down to 3.7%. Similarly, the $421 billion external debt stock’s ratio to GDP will decrease by a few percentage points from its previous level of some 60 % and Turkey’s borrowing capacity will look stronger. Military expenditures, too, will look more “reasonable” in proportion to GDP. With a higher GDP, the related public debt and budget deficit ratios will also improve, contributing to a more pleasant shop window for the country.

Some figures, meanwhile, will look worse. The ratios of health, education and social benefit spending to GDP are seen as important indicators when comparing countries and government policies. With the upward revision in GDP, the ratios will fall, and what Ankara spends for its people in those realms will look more inadequate. “If the cake was found to be 20% bigger, who got the newly discovered slice?” many will ask, and the credibility of income distribution and poverty surveys will be questioned further.

Inevitably, the new GDP requires revision in Ankara’s medium-term program, which outlines economic targets for the next three years. The program was already destined for revision after the economy began to contract fast in the third quarter, sending crisis signals and dampening expectations. How the government will review targets for 2017 and the following two years remains to be seen. An even more crucial question is how credible the new GDP figure will be in the eyes of the IMF and other foreign actors.

Mustafa Sonmez is a Turkish economist and writer. He has worked as an economic commentator and editor for more than 30 years and authored some 30 books on the Turkish economy, media and the Kurdish question. (Al-Monitor 20.12)

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11.7 TURKEY: Dollar-Hungry Turkey Eyes Middle Eastern Markets

Mustafa Sonmez posted in Al-Monitor on 13 December that scrambling to overcome a foreign exchange crunch, Turkey’s government has outlined incentives to prop up exporters. While Middle Eastern markets figure high on the target list, Ankara’s political conflicts with neighbors present an obstacle that needs to be addressed.

The turbulence in the Turkish economy, marked by a dramatic depreciation of the Turkish lira, is forcing Ankara to consider emergency measures. While President Recep Tayyip Erdogan led a campaign against the threat of dollarization, the government recently unveiled a package of measures to appease and buoy up economic actors. With the domestic market expected to shrink, the measures focus on encouraging exports and overseas contracting. As part of this drive to open up abroad and generate foreign exchange, the potential of Middle Eastern markets is remembered anew. Turkish traders and contractors had performed impressively in the region before wars and political conflicts hit economic ties. Whether and how they can revive that performance are issues with both economic and political question marks.

Erdogan’s call on citizens to convert dollar assets to Turkish liras appeared to bear fruit for a couple of days, but after regaining some ground against the dollar, the national currency began to slide again.

Prime Minister Binali Yildirim announced that some $10 billion had been converted to Turkish liras as part of the campaign, but soon it became clear that the shift was driven not by citizens, but by state banks and other public institutions converting their foreign exchange reserves to Turkish liras. After an initial retreat, the dollar rose again, fueled mostly by foreign investors exiting the Turkish stock exchange. The official sell-off figures were not yet announced at the time this article was written.

The sell-off seems to have been driven by the relative decline of the dollar price. How? Short-term foreign investments in Turkish stocks and government bonds amount to about $61 billion. These investments, however, are made in Turkish liras, and when investors want to go, they tend to await the right moment with more favorable exchange rates. Hence, the retreat of the dollar provided such a window of opportunity.

Deterring foreign investors from leaving Turkish markets is not the only option in overcoming the foreign exchange deficit. Earning foreign exchange is another way to battle the crunch, and that’s what led the government to outline a series of incentives for exporters.

Announcing the measures after a meeting of the Economic Coordination Board on 8 December, Yildirim said, “Companies need cash on the market. We are creating a credit line of up to 250 billion Turkish liras [$72 billion] … to ease the cash crunch and even boost employment. It’s a new fund to overcome the cash crunch of exporters and small- and medium-sized enterprises.”

As a country hit by a foreign exchange deficit, Turkey has indeed neglected exports as a way of generating foreign exchange. In the 2010-2015 period, the average worth of exports was $142 billion per year while imports were $227 billion, meaning an annual average deficit of $85 billion. The biggest deficit in this period — $105 billion — was in 2011, while the smallest — $63 billion — was in 2015 under the impact of falling energy prices and the country’s weakening economic growth.

Amid a continued slowdown (growth is expected to be 2% this year), the deficit will decrease a bit more, but it obviously remains an acute problem that needs to be tackled. Tourism revenues alone cannot heal a foreign trade deficit of $85 billion per year, covering only a fourth of the gap. Thus, Turkey continues to be a fragile economy with a chronic current account deficit. Its maneuvering room is further narrowed by a $421 billion external debt stock, the result of both short-term borrowing and bank loans to cover the gap, which means a debt burden of nearly 60% of gross domestic product.

In short, the country was late in remembering exports — but as the Turkish proverb says, “No matter where you cut on losses, it’s a gain.” If the European Union is the first region to be targeted with the export incentives, the Near and Middle East is the second, being a market where Turkey had once had good economic ties and is now compelled to remember.

In the 2010-2015 period, Turkey’s imports from Middle Eastern countries were worth $18.5 billion per year, while its exports amounted to $33 billion, meaning an annual foreign trade surplus of nearly $15 billion.

Turkey began to focus on the region in 2003, which led to the trade volume surging from $9 billion to $64 billion in 2012. Turkey’s increased energy exports from the region played an important part in the staggering 611% increase, but the importance it placed on Middle Eastern markets was equally effective, as evidenced by the fact that Iraq became the second-largest market for Turkish exporters after Germany.

Here’s how things stand today, according to the latest available data: In the first 10 months of 2016, Turkey’s trade volume with the Near and Middle East region amounted to about $36 billion, or 13% of its total $280 billion foreign trade, which is hardly a satisfactory figure.

With an $8 billion bilateral trade volume, Iran is now Turkey’s top regional partner. Due to the fall in global energy prices, Turkey, which buys gas and oil from Iran, has secured a $600 million net export advantage against its eastern neighbor. The United Arab Emirates is another major partner, with $6.5 billion in bilateral trade and a $1 billion advantage in Turkey’s favor. Trade with Iraq has notably declined in recent years, but the country remains high on the list, buying $6 billion worth of Turkish goods, which makes it Turkey’s third-biggest market after Germany and Britain. Saudi Arabia and Israel are two other regional countries that stand out, importing $2.5 billion worth of Turkish goods each in the first 10 months of the year. In total, the five Middle Eastern countries mentioned above account for 72% of Turkey’s $36 billion trade volume with the region.

The upward trend in oil prices, decreasing war expenditures and Iran’s warming ties with the West mean that Turkey stands a chance to boost its regional trade. This, however, is only a potential. To make it a reality, Turkey needs to improve its political ties in the neighborhood, and regional countries need to tackle their own economic and political problems to rise above annual growth rates of some 3% projected by the International Monetary Fund for the region.

Direct investment presents another major potential for Turkey. The direct investment in Turkey from the region is worth no more than $2 billion. Attracting more regional investment to Turkey, expanding cooperation in the tourism sector and boosting the volume of construction projects could also come to the agenda in the coming days if peace efforts in the region bear fruit. It all depends on the establishment of peace, cohesion and a mutual spirit of cooperation. (Al-Monitor 13.12)

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What’s New at EDI – January 2017

January 2, 2017, 7:50 am

≫ Next: ISRAEL UP & DOWN

≪ Previous: Fortnightly, 28 December 2016

Ontario to Feature Three Companies at Cybertech Israel 2017

The Province of Ontario will have a booth at the upcoming Cybertech Israel 2017 exhibition and conference in Tel Aviv at the end of January. Three Ontario-based cyber companies will exhibit and the province will also use the venue to promote Israeli foreign direct investment into Ontario. The conference will run from January 30-February 1. EDI represents the trade and investment interests of the province in Israel.

Indiana to be Represented at Cybertech Israel 2017

The Indiana Economic Development Corporation will have a booth at the upcoming Cybertech Israel 2017 exhibition and conference in Tel Aviv at the end of January. Indiana will send a delegation headed by the state’s Secretary of Commerce for the purpose of promoting Indiana as a foreign direct investment destination for Israeli companies considering opening facilities in the US. EDI represents the investment interests of Indiana in Israel.

Illinois Features 8 Companies at Arab Health 2017 in Dubai

Illinois will bring eight local exporters to Dubai at the end of January to exhibit at the state’s pavilion at Arab Health 2017 in Dubai. The show, which runs from January 30-February 2, is the second largest life sciences exhibition in the world after MEDICA in Germany. This is the sixth year that Illinois will have a booth at the show. Representing the trade and investment interests of the state in the Middle East, EDI is arranging meetings for the participating companies, and EDI staff will help to administer the booth and promote the companies.

Michigan Companies to Participate in Cybertech Israel 2017

Michigan’s Governor will travel to Israel at the end of January to speak at the Cybertech Israel 2017 conference in Tel Aviv and will be accompanied by a number of Michigan companies active in that field as well. EDI, which represents the Michigan-Israel Business Bridge in Israel, is arranging B2B meetings for a number of firms traveling to Israel with the governor.

Illinois Hosts Meeting of its Overseas Representatives

The Illinois Department of Commerce and Economic Opportunity hosted a confab of its overseas representatives from December 4-10. During the visit, the group met with state officials, participated in an event honoring top exporters and met with a variety of companies interested in exploring export opportunities. EDI represents the trade and investment interests of Illinois in the Middle East. EDI Trade Director Seth Vogelman represented EDI at the event.

International Business Group Meets in Williamsburg, Virginia in December

The International Business Group (IBG), an association of 20 business development companies worldwide held its annual meeting in Williamsburg, Virginia during the week of December 4^th. EDI is a founding member of the group whose members span the globe from Australia to Singapore, India, South Africa, Europe, the US and Central & South America as well. The meeting interfaced with that of SIDO, the State International Development Organization who held their winter meeting in the same city. Among other activities, IBG hosted a dinner for the SIDO delegates and were hosted by the Greater Williamsburg Chamber & Tourism Alliance.

EDI Participated in the Annual Meeting of Invest Hong Kong Worldwide Office Representatives

During the week of December 4^th, Invest Hong Kong hosted its worldwide representatives for a strategy session at its headquarters in Hong Kong. With close to 60 offices worldwide, the conclave provided an opportunity for the foreign and domestic staffs to interface and for the visitors to interact with the Hong Kong business community as well. EDI has recently been awarded a contract to represent Invest Hong Kong in Israel for another two years. EDI VP for Strategy & Business Development Michael Platt represented EDI at the event.

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ISRAEL UP & DOWN

January 2, 2017, 8:06 am

≫ Next: Fortnightly, 11 January 2017

≪ Previous: What’s New at EDI – January 2017

Two pieces of economic news came out of Israel recently showing both the ups and downs of the local tech scene.

On the up side, during its meeting on December 13, 2016, held in Tel Aviv, Israel, the Board of Governors of the Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation approved $7.2 million in funding for eight new projects between U.S. and Israeli companies. In addition to the grants from BIRD, the projects will access private sector funding, boosting the total value of all projects to approximately $17 million.

As is known, the BIRD Foundation promotes collaboration between U.S. and Israeli companies in various technological fields for the purpose of joint product development. In addition to providing conditional grants of up to $1 million for approved projects, the Foundation assists by working with companies to identify potential strategic partners and facilitate introductions.

The eight projects approved by the Board of Governors are in addition to about 940 projects which the BIRD Foundation has approved for funding during its 39 year history. To date, BIRD’s total investment in joint projects has been over $330 million, helping to generate direct and indirect sales of more than $10 billion.

Some of the projects approved include: Motorola Solutions Israel and Eclipse Identity Recognition Corporation (Campbell, CA) for the development of distributed enhanced video analysis; NovellusDX and Christiana Care Health System (Newark, DE) for the development of in-vitro mutagenesis for a functional characterization of patient mutations and their response to drugs; Pluristem Therapeutics and The New York Blood Center (New York, NY) for the development of placenta derived PLX-R18 cells to improve the efficiency of cord blood for hematopoietic regeneration; along with Vimmi Communications and Tech Mahindra Technologies (Wilmington, DE) for the development of a system to significantly reduce resources required for transmitting video on mobile networks, among others. Clearly, the strategic cooperation between Israeli and overseas firms (in this case from the US) continues apace.

In the same week, PwC Israel issued a report that high tech exits in Israel dropped by 67% in 2016, to $3.5 billion from $10.69 billion the prior year. (Exits are defined as initial public offerings and merger and acquisition deals.) According to Rubi Suliman, high-tech leader at PwC Israel, the decline did not necessarily indicate a problem but mean among other possibilities that the market was taking a “breather” after the latest boom in acquisitions, which reached highs in 2014 and 2015.

The two top deals in 2016 were Oracle’s acquisition of Ravello for $430m and Francisco Partners’ purchase of SintecMedia for $400m, according to the PwC report.

So while the pace of tech development continues to grow (some say there are 20 new startups a week in Israel, with others putting the figure as high as 40) and off shore companies continue to seek partnerships with Israeli firms, it may well be that the reduced pace of exits means something other than a slowing down of the tech sector.

Some of the companies who would normally exit early in their development may have decided to remain as Israeli owned companies a while longer and some of them may aspire to become the next world class company headquartered in Israel. If that’s the case, even what might seem on the surface to be a negative development could actually bode well the future of Israel’s economy.

A good example of this is Playtika, which was bought in 2016 by a consortium of Chinese companies led by Shanghai Giant Network Technology for $4.4 Billion, one of the largest deals in the country’s history. Following the transaction, Playtika has made a commitment to run independently with its headquarters remaining in Israel, and its existing management team will continue to run day-to-day operations.

The company, a social and mobile gaming company founded in 2010 has since opened studios and offices in the US, Argentina, Australia, Belarus, Canada, Japan, Romania and Ukraine but has kept its main operation in Israel. It has grown from a 10-person startup into a global leader. Playtika today is a highly profitable growth company with more than 1,300 employees, multiple top grossing titles and millions of daily users.

Hopefully Israel will see more of these examples as the economy gestates more successful companies.

Sherwin Pomerantz

President

Sherwin Pomerantz is president of Atid-EDI Ltd., an economic development consulting firm with 24 years’ experience in assisting overseas companies and public entities in their export promotion and foreign direct investment attraction efforts.

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Fortnightly, 11 January 2017

January 11, 2017, 12:15 pm

≫ Next: ISRAEL REMAINS THE INVESTMENT DESTINATION OF CHOICE

≪ Previous: ISRAEL UP & DOWN

11 January 2017
13 Tevet 5777
13 Rabi Al-Akbar 1438

TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Israel’s 2017 National Health Basket is Largest in a Decade
1.2  Israel Adds 106 New Drugs and Treatments to Healthcare Basket
1.3  Israel to Fund Northern Sector
1.4  Israel Agrees to Take 20,000 Chinese Building Workers
1.5  Bank of Israel Governor Flug Wants Higher Taxes in 2017

2: ISRAEL MARKET & BUSINESS NEWS

2.1  Qoros to Establish Smart Car R&D Center in Israel
2.2  ARTSaVIT Raises $6.3 Million
2.3  Gap to Shut Down Operations in Israel
2.4  Flytrex Raises $3 Million
2.5  Taboola Doubles Down on Personalization Through Acquisition of Commerce Sciences
2.6  MySize Launches SizeUp “Measurement from the Air” App
2.7  Air Transat Adds Tel Aviv to its Summer Program

3: REGIONAL PRIVATE SECTOR NEWS

3.1 OriginClear Responds to New Water Mandates in North Africa With Strategic Alliance

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  Israel’s Plastic Bag Law Brings Sharp Decline in Disposable Bag Usage
4.2  Haifa Port Company Hit with Hefty Fine for Air Pollution Violations
4.3  Solar Power Installed in Tripoli Hospital

5: ARAB STATE DEVELOPMENTS

5.1  Lebanon’s Trade Deficit Widens by 6.3% y-o-y by November 2016
5.2  Lebanon Ranked 63rd out of 137 Countries in the Global Entrepreneurship Index
5.3  Jordan’s Budget Deficit Declines to JD803 Million After Grants
5.4  Amman Plans to Hike Fuel Prices & Unify Sales Tax at 16%
5.5  Jordanian Public Transport Fares to be Raised by 10%
5.6  Aqaba Received 532,000 Tourists During First 10 Months of 2016

♦♦Arabian Gulf

5.7  Qatar’s GDP Growth Set to rebound in 2017 on World Cup spending
5.8  UAE Nuclear Power Plant Reactors are 75% Complete
5.9  Sharjah Sets Largest Ever Budget of Nearly $6 Billion for 2017
5.10  Saudi Arabia Mulling Cancellation of $20 Billion Projects
5.11  Saudi Private Sector Growth Rebounds After Hitting Record Low in October

♦♦North Africa

5.12  Egypt’s Annual Core Inflation Jumps to 25.86% in December
5.13  Moroccan Domestic Demand Grows by 4.2% in Third Quarter
5.14  Morocco’s GDP to Increase by 3.9% in 2017’s First Quarter
5.15  Car Sales in Morocco Registers a New Record in 2016

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  Turkey’s Inflation Rate Rises More Than Expected After Hikes in Tobacco & Alcohol Prices
6.2  Turkey’s Exports Decreased to $142.6 Billion in 2016
6.3  Foreign Tourist Arrivals to Turkey Drop 21% During November
6.4  Number of Foreign Tourists Visiting Istanbul Plunges for First Time in 16 Years
6.5  Turkish Lira Falls to New Record Low Against Dollar
6.6  Cyprus’ November Jobless Rate Rises to 14.2%
6.7  Greek Exports Continued Their Recovery in November
6.8  New Year Brings Fresh Challenges for Over-Burdened Greek Households

7: GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1  Israel’s Population Grew by 2% During 2016
7.2  Israel Sees Record Number of Organ Transplants In 2016
7.3  Mekorot Digs 13 Kilometer Water Tunnel to Jerusalem

♦♦ISRAEL

7.4 Dubai Eyes Zero Food Waste Status with Launch of UAE Food Bank

8: ISRAEL LIFE SCIENCE NEWS

8.1  Neuronix Reports Positive Results From Its Multi-Center Alzheimer’s Study
8.2  XTL’s Studies Demonstrate Therapeutic Potential for Sjogren’s Syndrome Treatment
8.3  Yiling Pharmaceuticals to Invest $20 Million in HealthWatch

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 SuperCom Awarded $9 Million Secure Web Land System Contract in South America
9.2  Autotalks & RoyalTek Join Forces to Defend Pedestrians from Accidents
9.3  Mellanox Ethernet Solutions Selected to Accelerate Baidu’s Machine Learning Platforms
9.4  Radiflow’s New Smart Agent Enables Using Centralized Industrial Intrusion Detection Systems

10: ISRAEL ECONOMIC STATISTICS

10.1  Israel’s Economy Grew by 3.5% in 2016
10.2  Israel’s Budget Deficit Down to 2.15% in 2016
10.3  Tourism to Israel Increases by 3.6% in 2016
10.4  Record Numbers Flood Ben Gurion Airport in 2016

11: IN DEPTH

11.1  ISRAEL: IVC-Meitar Announces 2016 High-Tech Exits Up 12%
11.2  ISRAEL: Israeli Startups Raise Record $4.8 Billion in 2016
11.3  QATAR: IMF Staff Concluding Statement of the 2016 Article IV Mission
11.4  OMAN: Fitch Publishes Oman’s ‘BBB’ IDRs; Outlook Stable
11.5  SAUDI ARABIA: What Has King Salman Achieved in his Two-Year Reign?
11.6  EGYPT: Egypt Considers Blocking Doctors from Working Abroad

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Israel’s 2017 National Health Basket is Largest in a Decade

At NIS 500 million (almost $130 million), the 2017 national health basket is the largest in a decade. Some NIS 460 million ($119.4 million) of the basket will go toward subsidizing medications, while the remaining NIS 40 million ($10.4 million) will subsidize dental care for children under the age of 16. About half the medication budget will benefit cancer patients, with around 230 million shekels ($59.6 million) subsidizing cancer treatments that include innovative and costly immunomodulatory therapies. In addition, the government will now subsidize some prescription medicines that were not previously covered, including for Parkinson’s disease, HIV, rheumatic diseases and heart failure. Genetic testing for Jews of Bukharan and Ashkenazi descent, Arabs and Druze has also been added to the 2017 basket. The Health Basket Committee authorized an additional 106 medications and prescriptions that will go toward the treatment of over 85,000 patients. Twenty-five of these medications were added to the existing basket at no additional cost. (IH 04.01)

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1.2 Israel Adds 106 New Drugs and Treatments to Healthcare Basket

The Health Ministry announced on 10 January that the 2017 healthcare basket, a list of government-subsidized medicine and medical treatments, has added 106 drugs, chemical preparations and new technologies, benefitting over 85,000 new patients. The healthcare basket committee had a budget of NIS 460 million – NIS 160 million more than the budget in recent years. It was headed by Shaare Zedek Medical Center Director Prof. Jonathan Halevy. It also included the Director of Medical Technology and Infrastructure Administration at the Health Ministry, Dr. Osnat Luxenburg, as well as representatives from the HMOs, the Health and Finance ministries, and representatives of the public.

Over the past few months, the committee discussed some 700 drugs, chemical preparations and new technologies priced at a total of over NIS 2 billion. Part of its budget, NIS 40 million, was allocated to Health Minister Rabbi Yaakov Litzman’s dental care reform, which will include free dental treatments to children until the age of 15 starting next week. The committee’s recommendations will now be submitted to the health minister and to the Health Council, and later be brought to the government for approval. The full list will be available to the general public in several weeks.

Some 50% of the healthcare basket’s funds were allocated to cancer treatment. One of the more significant additions this year is the immunotherapy drugs (which bolster or suppress the immune system) Keytruda and Opdivo for lung cancer patients who have a protein expression indicating the drugs may be useful to them. Keytruda will be given to certain patients as a first option of treatment while Opdivo will be given as a second option of treatment. For some patients, these drugs could replace chemotherapy, which has serious side effects. In addition, the drug Lynparza for treatment of patients with some mutations of ovarian cancer, which costs NIS 1.5 million to add to the healthcare basket, was also included, alongside Avastin to treat cervical cancer patients at moderate and high risk levels, which costs over NIS 3 million. (Various 09.01)

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1.3 Israel to Fund Northern Sector

Finance Minister Kahlon and Minister for the Development of the Periphery, Negev and the Galilee Deri have put forth their plan to develop and strengthen the north of Israel. Approximately NIS 15 billion will be invested in the region over the next two to five years. The money will come from various government agencies, as well as the Jewish National Fund. The money will be used to support infrastructure projects, promote business and industry in the region, fix the public health care system, strengthen local governments, and help improve education. Key IDF bases will also be moving to the north. The deal was facilitated with the coordination of various government ministries, as well as by working with the various regional councils.

According to the plan, NIS 600 million will be invested into getting financial services companies to set up in the north, and will also be used in grants which will increase productivity and growth in the sector. Small and medium sized businesses located in the north will be the recipients of grants and tourism initiatives will be funded as well. Meanwhile, NIS 12 billion will be used on infrastructure projects, including upgrading roads, building a light rail between Haifa and Nazareth, expanding the Metronit bus system in Haifa to outlying areas and more. A further billion shekels will be used to improve the education system in the north. NIS 930 million will be allocated to upgrading health services in the north. (Ynetnews 27.12)

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1.4 Israel Agrees to Take 20,000 Chinese Building Workers

On 4 January 2017, Israel’s construction sector received a boost after an Israeli delegation signed a bilateral agreement with the Chinese Ministry of Trade and the Chinese Association of Contractors to bring more than 6,000 Chinese laborers to Israel in first half of 2017. Israel’s Finance Ministry had long been promising to open Israel’s doors to some 20,000 Chinese laborers, but the government’s efforts have until now been unsuccessful.

In contrast to the agreements signed with Eastern European countries, the agreement with the Chinese government stipulates that the Chinese authorities will be responsible for selecting the workers sent to Israel through special companies established for this purpose. In Eastern Europe, Israeli representatives from both the Ministry of Construction and Housing and the Association of Builders and Contractors have been responsible for this. (Globes 04.01)

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1.5 Bank of Israel Governor Flug Wants Higher Taxes in 2017

Governor of the Bank of Israel Karnit Flug wants higher civilian expenditure to combat growing poverty. On a recent TV show, Dr. Flug said that ultimately Israel needs to collect more taxes in order to increase civilian expenditure in the longer term. She felt that taking into account high growth figures and low unemployment and growing poverty that might see tax hikes in the near future. Flug was ambiguous about the tax on third homes. (Globes 01.01)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Qoros to Establish Smart Car R&D Center in Israel

Chinese auto manufacturer Qoros, controlled by Kenon Holdings and Chinese company Chery, is opening an auto R&D center in Israel aimed at developing a smart car. The measure is part of the company’s recently announced focus on rechargeable electric and hybrid cars and the development of autonomous driving technology. As part of this plan, Qoros recently set up a mobility division headed by its deputy CEO. The announcement in China stated that the R&D center in Israel would develop networks for charging electric vehicles, vehicle sharing, etc.

Qoros plans to launch a fully electric car with a battery range of 350 kilometers in China this year and will launch its second generation of vehicles based on electric propulsion, artificial intelligence, autonomous driving and other innovations in 2020. The measure is part of the global auto industry’s broad focus on Israel and Israeli know-how in smart vehicles and related technologies.

General Motors already has a large R&D center in Israel and Renault, Daimler, and other companies also conduct R&D in Israel. Qoros, which is mired in debt, can meanwhile take comfort in the fact that the important Chinese Autohome auto website rated its Qoros 5 four-wheel drive vehicle in first place in a quality review of dozens of selected models this year, including models made by Toyota, Lexus, Cadillac, BMW, and a series of Chinese brands. The review stated that Qoros’s vehicle had the fewest malfunctions per kilometer. (Globes 29.01)

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2.2 ARTSaVIT Raises $6.3 Million

ARTSaVIT announced that it has completed a $6.3 million Series A round of financing led by Arkin Bio Ventures and Pontifax, with participation of Merck Ventures, Carmel Innovation and Carmel – Haifa University Economic Corporation. ARTSaVIT was co-founded by Carmel, the economic corporation of the University of Haifa, Carmel Innovations Fund and Professor Sarit Larisch from the University of Haifa, Israel. Prof. Larisch has identified and characterized ARTS, a protein which regulates the levels of several important anti-apoptotic proteins by promoting their degradation. Apoptosis is a highly regulated process of natural cell death. Faulty regulation of apoptosis is implicated in many human diseases, including cancer. Moreover, resistance to apoptosis is a hallmark of most human cancers.

The insights gathered by Prof. Larisch and the unique function of ARTS led to the establishment of the company, which is developing small molecule ARTS mimetics designed to selectively induce apoptosis in cancer cells. The company received seed investment from the Carmel Innovations Fund, which supported the research and development of the company to its current stage.

ARTSaVIT will move from its facilities at Carmel, University of Haifa, to the state-of-the-art facilities at the Merck Ventures Israel BioIncubator, which will support the development of the start-up with its infrastructure and a wide range of incubation facilities and services.

Haifa’s ARTSaVIT are developing a cancer drug, using the research of Professor Sarit Larisch from the University of Haifa, Israel. Faulty regulation of apoptosis is implicated in many human diseases, including cancer. Moreover, resistance to apoptosis is a hallmark of most human cancers. (ARTSaVIT 04.01)

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2.3 Gap to Shut Down Operations in Israel

American clothing and accessories retailer Gap announced that it will shut down its stores in Israel in 2017 due to considerable losses. Gap’s Israeli franchise holder Gottex Brands has lost NIS 30 million ($7.8 million) in operating costs. Gap arrived in Israel in late 2009. Opening its first stores in Tel Aviv and Jerusalem, the franchise soon expanded to seven stores nationwide, adding stores in Petah Tikva, Herzliya, Netanya, Ra’anana and Beit Shemesh. Gottex Brands announced it will make efforts to absorb Gap’s employees in its other stores.

The Gap has been plagued by plummeting sales worldwide in the past years, finding it difficult to compete with Zara and H&M. In 2015 the company announced it was closing 175 of its 675 stores in North America. (Globes 02.01)

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2.4 Flytrex Raises $3 Million

Flytrex, which is developing a drone delivery solution, has raised $3 million, “TechCrunch” reported. The round was led by Swiss-based Armada VC, owned by Daniel Aegerter, as well as private angel investors Daniel Gutenberg and Joey Low with the participation of several unnamed private angel investors. Flytrex began by creating a ‘black box’-style flight recorder and cloud service to track drones and is currently working in countries where regulators understand that drone delivery is an inevitability.

Tel Aviv’s Flytrex’ platform designed for delivery companies or large retailers desiring to implement drone delivery. The platform provides a cloud solution for the tracking and management of delivery drones. The company is also developing drone hardware tailored for point-to-point or point-to-area delivery. (Flytrex 04.01)

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2.5 Taboola Doubles Down on Personalization Through Acquisition of Commerce Sciences

Taboola announced the acquisition of Commerce Sciences. This acquisition furthers Taboola’s personalization strategy, as publishers need to be increasingly strategic about what content and experiences they deliver to each consumer. People exhibit an array of behaviors and interests on the web, depending on situational factors such as time of day, device type, location, referral source and more. Rather than grouping people based solely on demographics, Commerce Sciences’ personalization technology is able to analyze the implied characteristics of each visitor, given the particular time and context, meaning that the same person may be more inclined to interact with different on-site experiences throughout the day. Both Taboola and Commerce Sciences have developed powerful personalization products and combining these will provide a best in class personalization offering for publishers. The deal was closed on 01/01/2017. Commerce Sciences employees will join Taboola’s Tel Aviv offices.

Founded in 2012, Israel’s Commerce Sciences, a pioneer in web personalization and on-site optimization, spent five years actually focusing on the commerce industry, helping ecommerce sites customize the entire site experience in real time based on variants they’ve created with the platform. Tel Aviv’s Taboola is the leading discovery platform, serving over 360 billion editorial and video recommendations to over 1 billion unique visitors every month on some of the Web’s most innovative publisher sites, including USA TODAY, Huffington Post, MSN, Business Insider, Chicago Tribune and The Weather Channel. (Taboola 05.01)

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2.6 MySize Launches SizeUp “Measurement from the Air” App

MySize announced the official launch of its SizeUp DIY “measurement from the air” app for iOS. The android version will be introduced in the near future. The new technology enables users to instantly and accurately measure just about any object, flat surfaced or otherwise, by moving their Smartphone, in the air, from the starting point to the end point of an object. Measurements can be taken in either inches or centimeters. MySize’s vast pipeline of smartphone measurement applications are inspiring a paradigm shift in online shopping by empowering customers to always purchase the right size of a product, the first time. SizeUp ‘measurement from the air’ is intended for customers shopping for home furnishings or who need to send a package. Airport City’s href=”http://www.mysizeid.com”>MySize has developed a unique measurement technology based on sophisticated algorithms with broad applications including apparel, e-commerce, shipping and parcel measurement. The technology is driven by several patent-pending algorithms which are able to calculate and record measurements in a variety of novel ways. (MySize 10.01)

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2.7 Air Transat Adds Tel Aviv to its Summer Program

Air Transat announced that it will be offering direct flights from Montréal to Tel Aviv. Also available from Toronto with a connection in Montréal, this non-stop flight between the Montréal–Trudeau airport and the David Ben-Gurion international airport of Tel Aviv will operate twice weekly, on Wednesdays and Sundays, from June 18 until late October. Transat will also be offering an array of packages, guided tours and hotels for discovering Tel Aviv and Jerusalem, as well as the region’s many tourist attractions.

This new Montréal-Tel Aviv flight on Airbus A330-300 aircraft consisting of 345 seats will allow travelers to enjoy an unparalleled flight experience with Air Transat, named Best North American Leisure Airline five years in a row. The cabin comfort, personal entertainment system accessible via individual touch screens, complimentary checked baggage allowance and attentive crew are just some of the reasons flying Air Transat is so enjoyable. Travelers passing through the Montréal –Trudeau airport can also feel the joy of vacations in the new Espace Air Transat section, offering an immersive multimedia experience designed by Moment Factory, among other features. Flights to Tel Aviv will soon be available for booking on the Air Transat website and at travel agencies. (Air Transat 10.01)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 OriginClear Responds to New Water Mandates in North Africa With Strategic Alliance

Los Angeles’ OriginClear, a leading provider of water treatment solutions, announced that it has responded to EU-level water infrastructure mandates by North African governments by working with French engineering company UltraEpur. OriginClear Technologies entered a technology license agreement and UltraEpur purchased a laboratory demonstration unit, which it plans to exhibit at the SIEE Pollutec trade show in Algiers in February. UltraEpur is active in France, where it is headquartered, but also in North Africa and French-speaking Western African countries such as Ivory Coast. While UltraEpur is not relying on government funding for its commercial activities, development of the country’s water supply system is a high priority for the Algerian government in its new five-year plan. (OriginClear 05.01)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Israel’s Plastic Bag Law Brings Sharp Decline in Disposable Bag Usage

On 1 January, Israel joined a host of countries worldwide seeking to dramatically reduce the use of lightweight plastic bags, as its Plastic Bag Law came into effect. The law bans the free distribution of thin plastic bags in large grocery chains entirely and consumers will now have to pay a 10 agora (3 cent) fee for thicker ones. Under the law, bags that come in direct contact with food, such as those provided in supermarket produce sections or delis, are still available for free. Already the law has already had a significant impact on the country’s use of disposable plastic bags.

According to the Environmental Protection Ministry, alongside damage the plastic bags cause to the environment, there is also economic damage, because the stores pass the cost of the disposable bags on to consumers through products pricing. (IH 03.01)

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4.2 Haifa Port Company Hit with Hefty Fine for Air Pollution Violations

The Environmental Protection Ministry on Monday fined the Haifa Port Company NIS 2.2 million (about $570,000) due to air pollution violations. The violations include unloading materials not in accordance with directives, in such a manner that could cause a dust hazard; failure to install equipment to monitor dust; and failure to implement dust sampling as required.

At the end of September and beginning of October 2014, the Haifa Port Company unloaded a ship carrying solid bulk cargo in a manner not complying with instructions it had received and without installing the required means to prevent air pollution due to the dispersion of dust. Additionally, the company failed to install cameras connected to a control center by the necessary date as a means to visually and electronically monitor the production of dust as a result of loading and unloading. In contravention of directives received, the company failed to present a sampling plan and did not take environmental samples during 2013 and 2014.

The Environmental Protection Ministry reduced the fine by 40% in accordance with regulations for the reduction of sanctions and fine payment plans as the company has, among other things, taken steps to prevent the recurrence of violations and to reduce the damage. (IH 04.01)

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4.3 Solar Power Installed in Tripoli Hospital

In a first for Libya, solar power panels have been installed at the Abu Sleem Accidents and Emergency hospital in the capital Tripoli, to offer steady electricity for the hospital’s Intensive Care unit. Similar installations will be offered to three other hospitals in Tripoli: Ali Omar Askar Neuro Surgery, Tripoli Medical Centre and Cordoba Centre for Services and Renal Hemodialysis. When all are up and running, the panels will help boost the health sector in the country because about 50,000 Libyans will be able to go to hospitals where there are no electricity problems and can enjoy proper health care. The clean source of energy will enable hospitals to continuously operate vital medical equipment such as dialyzers, medicine refrigeration, surgery rooms and ICUs. The installations for the Tripoli hospitals are funded by the United Nations Central Emergency Response Fund (CERF) which supports rapid humanitarian response. (UNSMIL 09.01)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Trade Deficit Widens by 6.3% y-o-y by November 2016

Data from the Customs reveal the Lebanese trade deficit spiraled by 6.3% y-o-y to reach $14.4B by November 2016 as exports increased by a yearly 3.47% to $2.81B and imports rose by 5.81% y-o-y to $17.2B. In terms of imports, Mineral Products constituting 20.33% of total imports increased in value by 23% y-o-y to $3.5B despite the fall of average oil prices from $54.97/barrel by November 2015 to $44.26/barrel by November 2016. This is justified by the 27% y-o-y surge recorded in the volume of mineral products to 8.19M tons. Similarly, Products of the Chemical or Allied Industries grasped 10.85% of the total value of imports and rose by a yearly 4.77% to $1.9B. However, Machinery and Electrical Instruments, which constitute 10.01% of total imports, declined by 6.98% yearly, to stand at $1.72B by November 2016.

By November 2016, Lebanon imported mostly from China, Italy, USA, Germany and Greece, with the respective shares of 11.17%, 7.4%, 6.37%, 6.21%, and 5.48% of total imports. In terms of Exports, Pearls, Precious stones and Metals constituting 30.46% of total exports rose by 91.7% y-o-y to reach $780.7M by Nov. 2016. However, Prepared foodstuffs, beverages, tobacco which make up 15.45% of total exports fell by a yearly 8.62% and settled at $406.32M by Nov.2016. Machinery and electrical instruments (12.66% of total exports) also declined from $378.9M by Nov.2015 to $324.4M by Nov. 2016. Similarly, Products of the chemical or allied industries (10.72% of total exports) decreased most by 26.42% y-o-y to stand at $274.8M by Nov.2016. The main destinations for Lebanon’s exports over the same period were: South Africa, Saudi Arabia, UAE, Syria and Iraq with respective weights of 22%, 9%, 8%, 6%, and 5% of the total value of exports. (CAE 03.01)

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5.2 Lebanon Ranked 63rd out of 137 Countries in the Global Entrepreneurship Index

The Global Entrepreneurship Index (GEI), released by the Global Entrepreneurship and Development Institute (GEDI), is an annual index that measures the health of the entrepreneurship ecosystems in 137 countries. The index is divided into 14 pillars including start-up skills, opportunity perception, internationalization, and networking. As such, Lebanon ranked 63rd out of 137 countries in the GEI for 2016-2017, as compared to the 50th rank a year earlier. With a score of 29 out of 100, Lebanon ranked 10th of 15 in the MENA region, with Israel claiming the first place, followed by the United Arab Emirates, Qatar and Saudi Arabia. On a different note, Lebanon’s strongest area among the pillars was Start-up skills, while its weakest area was risk acceptance. Moreover, according to the report, if Lebanon were to improve the conditions for entrepreneurship by 10%, this could be translated by an additional $13B to the economy. (GEI 29.12)

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5.3 Jordan’s Budget Deficit Declines to JD803 Million After Grants

Jordan’s overall budget deficit stood at JD803.3 million at the end of November 2016 after adding foreign grants, compared to JD1.25 billion in the same period of 2015, according to the Ministry of Finance. The deficit before foreign grants stood at JD1.209 billion, compared to JD1.47 billion in the same period last year. Domestic revenues and foreign grants reached JD6.187 billion compared to JD5.735 billion, a rise of JD452 million. Foreign grants stood at JD404 million compared JD448 million in the same period of 2015. Government spending at the end of November 2016 reached JD6.99 billion compared to JD6.76 billion in the same period of 2015. (AMMONNEWS 09.01)

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5.4 Amman Plans to Hike Fuel Prices & Unify Sales Tax at 16%

The Jordanian government plans to raise the prices of fuel derivatives by JD0.07 per liter starting from next month, Finance Minister Malhas told members of the Lower House Finance Committee, in the presence of Prime Minister Mulki. He said that the price of the gas cylinder used for cooking and heating would also be raised by JD1.5 Malhas also said that the government also plans to unify the sales tax at 16%, cancelling the zero tax on certain items. The minister noted that the price and tax hikes are part of a plan to collect JD3 billion in the coming years, including JD450 million in 2017, JD520 million next year and JD570 million in 2019.

Fuel prices in Jordan are set by a government committee which meets monthly and adjusts fuel prices to correspond with changes in oil prices on the international market. Prices of oil derivatives on the local market are calculated based on international prices, with the addition of other costs such as shipment, handling and taxes, including the new hike. Before adding the new seven-piasters increase, overall taxes on oil derivatives were as follows: 22% on 90 octane, 40% on 95-octane, and 6% for all other fuel products, except heavy oil. In June, the government also decided to impose a fixed Treasury allowance on fuel amounting to 25 fils per liter, in line with Jordan’s agreement with the International Monetary Fund, and in implementation of the Cabinet’s decision to add 25 fils to fuel prices to support the budget. (Petra 09.01)

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5.5 Jordanian Public Transport Fares to be Raised by 10%

Jordanian public transport fares were raised by 10% as on 5 January, under a decision taken by Land Transport Regulatory Commission (LTRC). The decision covers medium and heavy transport buses and all taxis; the increase is based on inflation and the prices of fuel. The last increase in transport fares was in 2012 — a 10% increase for gasoline fueled vehicles and 11% for diesel fueled vehicles. The LTRC will give taxi drivers a two-week duration to rectify their status and adjust their meters in accordance with the new tariff.

The LTRC is responsible for the transport sector and providing incentives to operators, as well as boosting investments, and there is a discussion of a potential 75% income tax exemption for investors. The transport sector accounts for 26% of the GDP. The LTRC has been urging individual transport business owners to form coalitions. (AMMONNEWS 29.12)

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5.6 Aqaba Received 532,000 Tourists During First 10 Months of 2016

During the first 10 months of 2016, Aqaba city hosted around 532,000 tourists, most of whom came through direct charter flights. Russian tourists topped the list, with around 60,000 visitors, followed by Saudi Arabians (around 13,000) and Americans (around 9,000), with significant numbers of German, Arab Israeli and French visitors. The majority of tourists visited between July to October, registering “outstanding” numbers.

In the first 10 months of 2015, the King Hussein International Airport in Aqaba received 96,000 passengers. It received 154,000 in 2014, and 160,000 in 2013. A key contributor to the rise in the number of visitors to Aqaba in 2016 was receiving a large number of charter flights. While direct charter flights started off in modest numbers at the beginning of the year, they picked up towards the end of the year, with 140 charter flights arriving in Aqaba, with some 18,000 passengers in September and October alone. (AMMONNEWS 31.12)

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►►Arabian Gulf

5.7 Qatar’s GDP Growth Set to rebound in 2017 on World Cup spending

Qatar’s real GDP growth is expected to moderate to about 2.7% in 2016 but is projected to reach 3.4% in 2017 as the country effectively adjusts to the new reality of sustained lower energy prices, according to the International Monetary Fund (IMF). In a new research note, the IMF said the rise in 2017 growth reflects an expansion in the non-hydrocarbon sector due to World Cup-related spending and supported by added output from the new Barzan gas project. It added that during 2017–18, the Gulf state will see further subsidy cuts, increase in public fees, a moderate recovery in global commodity prices and the implementation of a VAT which will drive inflation, which is expected to moderate back to low levels over the medium term.

The IMF said the main risks to the economy are related to the possibility of lower hydrocarbon prices compared to the baseline assumption and to the public investment program. In addition, the prospects of further rises in the US interest rates may complicate efforts to bolster economic growth. It noted that spillovers to the non-oil sector would be transmitted through slower government spending and declining liquidity in the banking system. The report said financial risks in the banking sector are moderate as banks’ balance sheets remain strong. However, the loan-to-deposit ratio has risen, possibly implying increased credit risk.

The drop in international oil and gas prices has put considerable pressure on Qatar’s fiscal and external positions. However, the IMF said the authorities’ policy response has been adequate, underpinned by cuts to current expenditures and renewed efforts towards increasing non-oil revenues. The authorities’ plan to implement excises on tobacco and sugary drinks starting in 2017 in line with a GCC-wide agreement will yield additional revenue. The IMF said complementary revenue measures should be explored, including broadening the corporate income tax base to include GCC companies. Additional measures are needed to further strengthen the business environment, including by enhanced contract enforcement, and improved education quality, said the research note. (AB 07.01)

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5.8 UAE Nuclear Power Plant Reactors are 75% Complete

The Emirates Nuclear Energy Corporation (ENEC) said construction of units 1 to 4 at Barakah Nuclear Energy Plant are 75% complete. The plant’s four reactors are scheduled to come online in 2020, with construction having started in 2012. The facility will deliver up to 25% of the UAE’s electricity needs and save up to 12 million tonnes in carbon emissions every year. According to the company, it has successfully set in place of unit 3’s reactor containment building (RCB) liner dome section, effectively installing the roof of the structure which now houses the reactor vessel (RV). Further, unit 4’s turbine generator operating deck and the last reactor containment liner plate rings have been achieved. The work has been done in collaboration with Korean Electric Power Corporation, a prime contractor and joint venture partner. With the setting of unit 3’s RCB liner dome section, it is now more than 62% complete. The completion of RCB is expected in the first quarter of 2017, while the construction of unit 4 is 35% complete, the company said. (AB 08.01)

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5.9 Sharjah Sets Largest Ever Budget of Nearly $6 Billion for 2017

Sharjah has set its 2017 budget at AED22 billion ($5.99 billion), the largest in the emirate’s history, as it focuses spending on infrastructure. Sheikh Mohammed bin Saud Al Qasimi, chairman of the Central Department of Finance in Sharjah, said about 30% of total government expenditures have been allocated to infrastructure next year. Last year, Sharjah approved its government budget for 2016 which included a two% rise in spending to AED20.3 billion. He added that although the budget will fund economic, social, scientific and cultural sectors, the highest priority remains investing in the infrastructure of the emirate, along with providing social support to its citizens.

Dr Tariq bin Khadem, chairman of the Human Resources Department, estimated that the budget will enable Sharjah to provide 3,500 more jobs to Emiratis. Some 41% of the total budget would be spent on the economic development sector as the government aims to make the emirate more competitive. In September, Sharjah launched a new initiative to encourage business people across the world to invest in the emirate. The brand is also in line with the strategy of Sharjah Investment and Development Authority (Shurooq) to position Sharjah as a strategic investment destination. Invest in Sharjah will reach out to local, regional and global investors to explore investment opportunities in the emirate. (AB 03.01)

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5.10 Saudi Arabia Mulling Cancellation of $20 Billion Projects

Saudi Arabia is reportedly working with PricewaterhouseCoopers on plans to cancel about $20 billion of projects as the Gulf kingdom battle with lower revenues amid lower oil prices. Bloomberg reported that the Ministry of Economy and Planning has appointed PwC to review $69 billion of government contracts with a view to cutting about a third of them, citing two people familiar with the matter. It said that projects under review include contracts awarded by the ministries of housing, transport, health and education.

Last month, Saudi Arabia said it had successfully cut into its huge state budget deficit this year and will increase government spending in 2017 to boost flagging economic growth. The deficit shrank to 297 billion riyals ($79 billion) in 2016. That was well below a record 367 billion gap in 2015, and below the government’s projection in its original 2016 budget plan of a deficit of 326 billion riyals. The financial challenges for Saudi Arabia stem largely from the fall in the global price of oil. Riyadh slashed spending on infrastructure and perks for civil servants to get its finances under control. For the first time in years, it kept its spending below its original budget projection in 2016; actual spending was 825 billion riyals compared with a projection of 840 billion riyals. (AB 09.01)

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5.11 Saudi Private Sector Growth Rebounds After Hitting Record Low in October

Saudi Arabia’s non-oil private sector strengthened again in December after touching record lows in October, according to data from the Emirates NBD Saudi Arabia Purchasing Managers’ Index (PMI). This showed that output rose at the sharpest rate since August, while new orders increased at a marked, albeit slightly slower, rate. Companies responded to increased requirements by raising their purchasing activity and boosting inventories amid positive growth projections, the survey said. However, with the rate of expansion in new work remaining below its long-run trend, staffing levels continued to be increased only slightly, it added. The survey said that underpinning overall growth was an acceleration in the rate of expansion of output to a four-month high. Latest data marked the second month in a row that production growth has risen following the record low pace of expansion seen in October. Despite evidence of modest pressure on capacity, staffing levels in the Saudi non-oil private sector increased only marginally and at the slowest pace in a year during December. Just 2% of the survey panel reported an increase in staffing levels over the month. (AB 06.01)

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►►North Africa

5.12 Egypt’s Annual Core Inflation Jumps to 25.86% in December

Egypt’s annual core inflation jumped to 25.86% in December from 20.73% in November, the central bank said on 10 January. The core consumer price index that the Central Bank of Egypt (CBE) uses to measure the level of prices – after excluding the volatile cost commodities such fruits and vegetables – started to hit the double-digits in May 2016, when it recorded a seven-year-high rate of 12.2%. Egypt’s annual headline inflation jumped to 24.3% in December compared to 20.2% in the previous month, weeks after the country freely floated its currency in November. The CBE decided in early November to float the pound against the dollar and raise key interest rates. (CBE 10.01)

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5.13 Moroccan Domestic Demand Grows by 4.2% in Third Quarter

Domestic demand grew in Morocco by 4.2% in the third quarter of the year 2016, against 0.1% year on year, according to Morocco’s High Planning Commission (HCP). Domestic demand contributed by 4.5% to economic growth in the third quarter of 2016, instead of 0.1% in the same period a year earlier. In this context, households’ final consumption expenditure increased by 2.9% instead of 2.5% in the same period of the previous year, contributing by 1.7% in the growth instead of 1.5%. Final consumption by public administrations posted a slowdown in its growth rate from 1.5% to 1.1% in the third quarter of 2016, with a contribution to growth of 0.2% instead of 03% year on year. (MWN 31.12)

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5.14 Morocco’s GDP to Increase by 3.9% in 2017’s First Quarter

Morocco’s economy will post a 3.9% growth in the first quarter of 2017, compared to 1.7% a year earlier, the High Commission for Planning (HCP) announced. This performance is the result of an 11.1% rise in agricultural added value. This year will be marked by a 3.2% increase in global demand for Morocco, which will boost the profits of several exporting industries, including the automotive, electronics and textile industries. Morocco’s economy posted a 1.2% growth in the fourth quarter of 2016, compared to 0.8 % in the previous quarter. During this period, revenues from Moroccans living abroad posted an increase of 1.8%, the HCP said. (HCP 05.01)

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5.15 Car Sales in Morocco Registers a New Record in 2016

Car sales in Morocco registered a record in 2016 with more than 163,000 new registrations, 30,000 more than in 2015. The statistics for FY2016 highlight a new record in Morocco in the sale of new cars, which includes the sale of 152,324 passenger cars, adding around 30,000 more units than in 2015. Morocco’s Association of Importers of Motor Vehicles (AIVAM) released its statistics, showing that dealers sold a total of 163,110 units in 2016. This represents an increase of more than 25% compared to 2015, which held the previous record. 152,324 passenger cars were sold in addition to 10,786 light commercial vehicles.

Despite a difficult 2015-2016 agricultural season exacerbated by droughts, commercial vehicles were able to maintain sales above the symbolic mark of 10,000 units. This was due to the optimism that resulted from the last rainfall. As expected, Dacia registered the highest sales with 42,279 cars sold in 2016, capturing a market share of over 27%. The second biggest share of the market (11%) went to Renault, with 17,121 units sold last year. Both brands are owned by the group Renault Maroc, which possesses two assembly sites in Tangiers and Casablanca. (MWN 08.01)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkey’s Inflation Rate Rises More Than Expected After Hikes in Tobacco & Alcohol Prices

Turkey’s inflation rate rose more than expected in December mainly due to hikes in prices of tobacco products and alcoholic beverages, a data from the Turkish Statistics Institute (TUIK) showed on 3 January. The annual inflation rate rose to 8.53% in December from 7% in November. On a monthly basis, consumer prices rose by 1.64% in December, following a 0.52% gain in the prior month. An increase by 0.9% was initially expected. The government also raised its forecasts for consumer price inflation in October. It predicted an inflation rate of 7.5% at the end of 2016 and 6.5% in 2017, raising the forecast for the next year from a previous 6%.

The highest monthly and annual increases were seen in alcoholic beverage and tobacco product prices. While the prices of these products saw a monthly increase of 7.3%, the highest annual increase in these products was recorded at 31.6%. In December 2016, the indices for food and non-alcoholic beverages rose by 3.29%, 1.97% for transportation, 1.42% for recreation and culture, and 1.28% for furnishing and household equipment. Transportation with 12.36% of annual increase, miscellaneous goods and services with 11.08%, health services with 9.73%, and education with 9.47% were the other main groups that experienced high annual increases. (TUIK 03.01)

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6.2 Turkey’s Exports Decreased to $142.6 Billion in 2016

Turkey’s exports declined to $142.6 billion in 2016 with a 0.8% decrease compared to 2015, according to officials, who expected a better year for exports thanks to a number of fresh measures. The Turkish Exporters’ Assembly (TIM) said Turkey completed 2016 with a 0.8% of year-on-year decrease, but this shrinkage was not a big deal considering its difficult year. The value of Turkey’s exports in U.S. dollar per kilogram regressed to 1.37 in 2016 from 1.44 in 2015. This regression costs $3.5 billion of loss in exports.

In addition to Turkey’s crisis with Russia, the ongoing conflicts in Iraq, Syria and Libya constituted another key factor that hit exports. Turkish exports to these countries decreased $3.7 billion in 2016 compared to the previous year. Another key factor that hit exports was the loss of value of the Turkish Lira and the British pound against the dollar. This loss due to the parities was $1.5 billion in 2016. All of these equaled to $8.7 billion in loss.

The automotive sector was the biggest exporter last year with around $23.9 billion in exports, up from $21.3 billion in 2015. The second largest exporting sector, which was textiles, also witnessed a slight increase in exports last year compared to the previous year, closing 2016 at almost $17 billion. (AA 03.01)

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6.3 Foreign Tourist Arrivals to Turkey Drop 21% During November

The number of foreign arrivals to Turkey dropped by 21.3% to 1.35 million in November, compared to the same month in 2015, preliminary data from the Tourism Ministry showed on 29 December. This was the smallest shrinkage in foreign arrivals in the last eight months, as Turkey’s tourism industry struggles amid political and security concerns. However, the plunge in arrivals from Europe continued in November.

The number of foreign people visiting Turkey declined to 24.05 million in the first 11 months of 2016, a 30.8% drop compared to the same period of 2015, after a series of bomb attacks, a diplomatic crisis with Russia, and the failed 15 July military coup attempt. The number of Russian tourists visiting Turkey saw a 77.3% decline in the first 11 months of the year, plummeting to 822,159. However, a visible increase has been seen in arrivals since normalization started in bilateral ties between the two countries. Georgia became the leading tourist source to Turkey, with more than 173,968 tourists visiting the country in November. Germany followed Georgia, with more than 131,217 Germans visiting the country in November, with an average 49% fall in arrivals from this country. (HDN 30.12)

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6.4 Number of Foreign Tourists Visiting Istanbul Plunges for First Time in 16 Years

The number of foreign tourists visiting Istanbul declined to 9.2 million in 2016, a 26% decrease compared to the previous year, data from the Istanbul Culture and Tourism Directorate has shown. This was the first year-on-year decrease in the number of foreign arrivals to Istanbul since 2000, amid escalating security concerns. The highest monthly plunge was seen in June, as the number of foreign arrivals saw a 35.2% decline compared to the same month of 2015. While 4.45 million foreigners visited Istanbul, the country’s top tourism destination, in the first half of the year, this figure rose to 4.76 million in the second half. While arrivals by air declined 23% in 2016 compared to 2015, arrivals by sea plunged 89%.

Greatest drop was seen in arrivals from the United States, Iraq and Russia in 2016 compared to the previous year. While the number of U.S. tourists visiting Istanbul saw a year-on-year decrease of 43.2%, this was 43% for Iraqi tourists. The number of arrivals from Russia also decreased by 39.2% in 2016 compared to 2015. The largest number of foreign tourists came from Europe with 3.9 million arrivals and the Middle East with 2.3 million. These were followed by Asia, Africa, North America, Latin America and Oceania. Germans topped the list by taking 10.9% of the share in total arrivals in 2016, followed by Iranians at 7%, Saudi Arabians at 5.2%, Britons at 4%, French tourists at 3.9%, Americans at 3.5% and Russians at 3.2%, according to official data.

The number of foreign arrivals into the Mediterranean resort of Antalya, another top tourism destination, also plummeted to their lowest since 2004. The number of foreign arrivals to Antalya declined to 6 million in 2016, a 43% decrease compared to 2015, mainly due to the Russian crisis and rising security concerns. The number of Russian arrivals decreased to 500,000 in 2016 from around 3.5 million, while German arrivals fell from 3 million to 1.9 million, according to data from the local tourism authority. Germany was the top tourist source for Antalya, taking 32% of the share in total arrivals in 2016, followed by Ukraine. Russia ranked third on the list, thanks to a dramatic rise in arrivals from the country after a normalization of bilateral ties started in late summer. (HDN 06.01)

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6.5 Turkish Lira Falls to New Record Low Against Dollar

Turkey’s currency weakened 1% to a record low of TL3.7250 against the dollar on 9 January as the U.S. dollar strengthened after payrolls data showed strong underlying wage growth, boosting the case for more rate increases in 2017. The Turkish lira has been hit by domestic political, security and economic concerns for the recent months. The dollar gained broadly against major currencies after the U.S. non-farm payrolls report on 6 January showed a slowing in hiring in December but an increase in wages, setting the economy up for further interest rate increases from the Federal Reserve this year. (HDN 09.01)

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6.6 Cyprus’ November Jobless Rate Rises to 14.2%

Cyprus’s unemployment rate rose to 14.2% in November, from 13.2% in the respective month of 2015, and 13.8% in October, Eurostat announced on 10 January. The number of people out of job in November was 61,000, compared to 55,000 a year before, and 59,000 in October. Figures are seasonally adjusted. The average jobless rate in the European Union was 8.3% while that of the euro area was 9.8%. In November, Cyprus had the third highest unemployment rate in the EU after Greece and Spain, which recorded 23.1% and 19.2% respectively, Eurostat said. The unemployment rate among males stood in November at 14% and among women at 14.4%, Eurostat said. (Eurostat 10.01)

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6.7 Greek Exports Continued Their Recovery in November

The rise in Greek exports continued in November, coming to 4.2% on a monthly basis or 11.1% not including fuel products. This was the fourth consecutive month with a rise in the value of exports, which has reduced to just 2.1% the total decline on an annual basis recorded in the first 11 months of 2016. Data analyzed by the Panhellenic Exporters’ Association showed that the total value of exports came to €2.21 billion in November, up from €2.12 billion in October. The sum of exports in the year to end-November came to €23.1 billion against €23.6 billion in the first 11 months of 2015. Exporters’ association sources say that the figures collected make it possible that a new exports record could be recorded in 2016 for a second year in a row, when the December figures come in too.

At the same time, an improvement of the climate in commerce has also resulted in the rise of imports, which increased 2.9% in November from October 2016 and taking the rise of 2016 (in the January-to-November period) to 0.5%, or 6.4% not including fuel products. Consequently the country’s trade deficit expanded by 4.3% year-on-year to €16.9 billion including fuel, or by 11.8% excluding fuel products. (EKathimerini 10.01)

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6.8 New Year Brings Fresh Challenges for Over-Burdened Greek Households

The new year is expected to bring fresh challenges for Greek households struggling to make ends meet, with new taxes and price hikes on a number of consumer products. For salaried workers and pensioners, 2017 will see the introduction a new tax scale with a lower tax-free threshold and a higher so-called solidarity tax levied from all of their incomes for 2016, while property owners with tenants will pay as much as 36.4% more tax on the rent they receive. The excise tax on petrol will increase by 3 cents per liter, from 0.67 to 0.70 euros, while diesel will rise by 8 cents per liter, from 0.33 to 0.41, and propane will go up 10 cents a liter from 0.33 to 0.43. This will push up retail prices, which are expected to reach an additional 5 cents per liter on petrol, 8 cents on diesel and 0.12-0.13 cents on liter for propane.

A hike also went into effect on 1 January on the special consumption tax on cigarettes and other tobacco products, pushing retail prices up by between 20 and 26%, while a new excise tax is also being levied on imported and domestically produced coffee, nudging up the price per kilo by €2-3 for roasted coffee and €4 per kilo for instant. Vapers will not be spared either, as a special consumption tax is being introduced on the liquids used in electronic cigarettes. Meanwhile, consumers will also have to pay more their telecoms with the introduction a 5% tax on flat rates. (EKathimerini 02.01)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel’s Population Grew by 2% During 2016

At the end of 2016, the population of Israel numbered 8.63 million, the Central Bureau of Statistics reported. Over the past year, the country’s population has grown by 2%, totaling 167,000 additional people. The Jewish population has reached 6.45 million (74.8%), the Arab population 1.796 million (20.8%), while 384,000 (4.4%) are defined as others. The population should surpass 9 million in the first quarter of 2019 and 10 million by 2025. Over the past year, 181,000 babies were born, and 36,000 new immigrants came to the country including 24,000 Jewish immigrants. Some 18% of the Jewish new immigrants came from France, 22% from Ukraine, 27% from Russia and 10% from the US. (CBS 01.01)

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7.2 Israel Sees Record Number of Organ Transplants In 2016

A record 504 organ transplants were performed in Israel in 2016, a significant increase from the 433 in 2015, according to data from the National Transplant Center. The transplanted organs were taken from both the deceased and the living, giving new life and hope to terminally ill patients. Despite the rise in organ donations and transplants in Israel, the center said that on the first day of 2017, 1,116 patients were still waiting for organs: 847 for a kidney, 104 for a liver, 63 for a heart, 89 for a lung, six for a heart and a lung, and seven for a kidney and a pancreas. In 2016, 122 patients, 11% of the patients on the waiting list, died before receiving the organs they needed. According to the data, 274 operations were conducted in 2016 to harvest organs from the deceased, an increase of 12% over 2015 and an Israeli record.

The number of live donor transplants also jumped, with 222 kidney transplants in 2016, compared to 174 in 2015. Ninety-three kidney donors were relatives of the recipients, while 129 donors decided to give one of their kidneys to friends or strangers. A further eight liver lobe transplants from living donors were performed, in most cases parents who donated to their children. Also in 2016, Israeli hospitals carried out 707 corneal transplants, with 923 patients still waiting for corneas. (IH 09.01)

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7.3 Mekorot Digs 13 Kilometer Water Tunnel to Jerusalem

In order to meet the demand for water in Jerusalem and the surrounding area for the next 50 years, Mekorot National Water Company and Austrian company Zublin Spezialtiefbau began digging in January a fifth system for Jerusalem. The system consists of a 13 kilometer tunnel through which water will flow from the Eshtaol area near Beit Shemesh to Ein Kerem. When the work is completed in three years, it will be the longest tunnel in the world for transporting water under pressure. The TBM machine, built specially for mining the limestone in the Jerusalem hills, has a 3.9 meter diameter and is 240 meters long. This machine is equipped with a 170 ton mining head, arms that support the machine during mining, and devices for early detection of hollow spaces along the route. This “tunnel mole” is expected to work 24/7 and finish 24 meters a day. Jerusalem’s fifth water supply system is part of a project for building the new national water carrier promoted by Mekorot in recent years to connect the five desalinization facilities built along the coast to the national water system, and from there to other parts of Israel. (Globes 01.01)

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*REGIONAL:

7.4 Dubai Eyes Zero Food Waste Status with Launch of UAE Food Bank

On 3 January, Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum launched the UAE Food Bank project, as part of the UAE’s Year of Giving initiative. The UAE Food Bank, a non-profit charitable organization committed to distributing food to those in need while eliminating food waste, aims to make Dubai the first city in the Middle East to achieve zero food waste. It will collaborate with local authorities as well as local and international charities to introduce a comprehensive ecosystem improving the efficiency of food storage, packaging and distribution. It will partner with food producers such as hotels, restaurants and supermarkets and farms to store and package excess fresh food effectively. It will then work with volunteers and partners to distribute the well-packaged food within and outside of the UAE. The Food Bank’s operations will begin in Dubai and will expand to other underdeveloped communities in the region and around the world, a statement said.

The initiative, which has been launched under the Mohammed bin Rashid Al Maktoum Global Initiatives Foundation (MBRGI), will also benefit Dubai’s economy as the UAE currently incurs about AED13 billion annually in food loss, which can be redirected to benefit other social sectors. (AB 03.01)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Neuronix Reports Positive Results From Its Multi-Center Alzheimer’s Study

Neuronix announced positive results from its pivotal double-blind, placebo-controlled, multi-center clinical study for the assessment of the safety and efficacy of the neuroAD Therapy System in the treatment of mild to moderate Alzheimer’s disease. The Study enrolled 131 patients at nine medical centers in the United States and one in Israel. The Study evaluated the safety and efficacy of the neuroAD Therapy System in comparison to placebo, following six weeks of treatment and additional six weeks of follow-up, using the cognitive and behavioral standard scales for the evaluation of patients with Alzheimer’s disease – ADAS-Cog and CGI-C, respectively.

Positive efficacy results were reported for patients with milder disease as determined by the Baseline ADAS-Cog. In that group of patients, which represented 85% of the enrolled population, a positive and statistically significant difference of -1.8 points in ADAS-Cog was noted between treatment group and placebo group, at the 12 week follow-up. In the entire Study cohort, including those with more severe disease at baseline based on the ADAS-Cog, results did not reach statistical significance. In addition, results showed a favorable safety profile, with no patients experiencing seizures or other persistent, serious adverse events. Patients also showed a high degree of adherence to the treatment, with few discontinuations and a high rate of treatment completion.

Yokneam’s Neuronix develops, manufactures and markets novel breakthrough medical-device technologies for treatment of Alzheimer’s disease. The neuroAD Therapy System is a patent-protected, non-invasive medical device, uniquely combining transcranial magnetic stimulation (TMS) with cognitive training, to concurrently target brain regions affected by Alzheimer’s disease. This dual-stimulation is designed to improve cognitive performance of patients, following an intervention protocol, which lasts for six weeks, five days per week, with one hour-long session per day. In the United States, the neuroAD Therapy System is an experimental device and is not available for sale. (Neuronix 04.01)

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8.2 XTL’s Studies Demonstrate Therapeutic Potential for Sjogren’s Syndrome Treatment

XTL Biopharmaceuticals announced the company intends to pursue Sjogren’s syndrome as the second indication for its lead drug candidate hCDR1. Currently in development for the treatment of systemic lupus erythematosus (SLE), hCDR1 has been tested in over 400 patients, and is set to enter a global Phase 2 trial for SLE. New in-vitro data from studies evaluating cells obtained from serum samples of patients with Sjogren’s syndrome demonstrate that incubation with hCDR1 resulted in a significant reduction of gene expression of three cytokines considered to be pathogenic in Sjogren’s syndrome. These data correspond to some of the in vitro data obtained in studies testing serum samples from patients with SLE.

Sjogren’s syndrome impacts more than twice the number of people as SLE does in the U.S. and represents a significant unmet therapeutic need. While there are currently only a handful of drugs in clinical trials to treat Sjogren’s syndrome, there is no specific FDA approved therapy to treat the systemic manifestations of the disease. Given the similarities of the disease manifestations between Sjogren’s syndrome and SLE, these new in-vitro data further support the clinical results achieved in the prior Phase 2 trial of hCDR1 in SLE. A patent application has been filed with the U.S. Patent and Trademark Office for hCDR1 in the treatment of Sjogren’s syndrome.

hCDR1 is a novel compound with a unique mechanism of action and clinical data on over 400 patients in three clinical studies. The drug has a favorable safety profile, is well tolerated by patients and has demonstrated efficacy in at least one clinically meaningful endpoint.

Ra’anana’s XTL Biopharmaceuticals is a clinical-stage biotech company focused on the development of pharmaceutical products for the treatment of autoimmune diseases. The Company’s lead drug candidate, hCDR1, is a world-class clinical asset for the treatment of autoimmune diseases including systemic lupus erythematosus (SLE) and Sjogren’s Syndrome (SS). The few treatments currently on the market for these diseases are not effective enough for most patients and some have significant side effects. hCDR1 has robust clinical data in three clinical trials with 400 patients and over 200 preclinical studies with data published in more than 40 peer reviewed scientific journals. (XTL 05.01)

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8.3 Yiling Pharmaceuticals to Invest $20 Million in HealthWatch

HealthWatch, an Israeli company that has developed the world’s first medical-grade smart clothing technology, announced today that Yiling Pharmaceuticals, traded on the China Shenzhen Stock Exchange, will invest $20 million in HealthWatch. Out of the proceeds, $15 million will be used to purchase a 23% share in HealthWatch, to support the continued development of its healthcare IoT smart clothing technology and product range. A further $5 million will be paid for Chinese distribution rights, with Yiling Pharmaceuticals forming and further investing into a local subsidiary company to oversee the product commercialization process and expedite entry into the Chinese market.

HealthWatch has developed the only CE/FDA-approved, medical device garment that continuously monitors ECG and wider vital signs, to a quality before not achievable outside the hospital setting. The wearer’s processed medical data is sent in real-time to a smartphone and/or remote medical professional for review and action. Based on patented textile-sensing technology, HealthWatch’s comfortable, machine-washable garments are intended to help wearers stay healthy and gain peace of mind, without affecting their lifestyle.

Kfar Saba’s HealthWatch is a healthcare IoT company that has developed the world’s first medical-grade smart clothing technology. Harnessing patented textile technology, HealthWatch’s FDA/CE-approved, machine-washable, comfortable garments, monitor ECG and other vital-sign signals to a quality before not achievable outside the hospital setting. The medical data is transmitted to a smartphone application and to the Cloud, where physicians can remotely track patients’ conditions. The delivery of actionable data in real-time, empowers both patients and caregivers to identify severe health conditions earlier, before they become life-threatening. (HealthWatch 09.01)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 SuperCom Awarded $9 Million Secure Web Land System Contract in South America

SuperCom announced that it, together with its local partner, has been awarded by a new large Latin America government customer a contract to migrate and implement nationwide SuperCom’s proprietary state-of-the-art, secured web-based Land and Geographical Registration and Information Management System. The project was won through a formal competitive bid process with other established industry players. The project is and to be completed by July 2018. SuperCom expects to recognize the majority of the contract value in 2017. The first stage of the contract, migration and software customization of SuperCom’s web-based LIS (Land Information System) and GIS (Geographical Information System) platform is expected to commence today. According to project timelines, within 8 months the next stage will commence consisting of a full nationwide implementation and deployment of the cloud-based system together with our local partner.

Since 1988, Herzliya’s SuperCom has been a global provider of traditional and digital identity solutions, providing advanced safety, identification and security solutions to governments and organizations, both private and public, throughout the world. Through its proprietary e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, SuperCom has inspired governments and national agencies to design and issue secured Multi-ID documents and robust digital identity solutions to its citizens and visitors. (SuperCom 30.12)

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9.2 Autotalks & RoyalTek Join Forces to Defend Pedestrians from Accidents

Autotalks and Taiwan’s RoyalTek, a leader in global positioning systems (GPS) and satellite navigation technology announced their cooperation at CES 2017. The two companies joined forces to improve road safety by developing an innovative solution for vehicle to pedestrian (V2P) use-case. Vehicles equipped with Autotalks’ V2X chipset will be able to “talk to” RoyalTek’s OMEN, also equipped with the chipset, using 5.9GHz WAVE/DSRC technology. The OMEN is designed as a phone case to be used by pedestrians, bicyclists, motorcyclists and people with disabilities. The OMEN’s software is developed by ITRI (Industrial Technology Research Institute), a Taiwan based R&D organization that has been active in V2X software development since 2008. This unique product, using Autotalks truly secure technology with multiple defense layers to protect against hackers, is enabling consumer-grade unsecure mobile phone to be part of a safety-critical network. It gives pedestrians road safety without compromising privacy, reliability or security.

Kfar Netter’s Autotalks, founded in 2008, is a V2X-chipset market pioneer and leader providing OEMs, Tier 1 and Tier 2 customers with comprehensive V2X solutions. Autotalks chipsets enable the V2X communication revolution by providing the most advanced, truly secure V2X solution created for autonomous vehicles. The chipsets are pre-integrated and designed to shorten development schedules and reduced costs. Autotalks’ cutting-edge technology addresses all key V2X challenges: communication reliability, security, positioning accuracy and vehicle installation. (Autotalks 05.01)

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9.3 Mellanox Ethernet Solutions Selected to Accelerate Baidu’s Machine Learning Platforms

Mellanox Technologies announced that Spectrum Ethernet switches and ConnectX-4 100Gb/s Ethernet adapters have been selected by Baidu, the leading Chinese language Internet search provider, for Baidu’s Machine Learning platforms. The need for higher data speed and most efficient data movement placed Spectrum and RDMA-enabled ConnectX-4 adapters as key components to enable world leading machine learning platforms. With the Mellanox solutions, Baidu was able to demonstrate 200% improvement in machine learning training times, resulting in faster decision making.

In 2013, Baidu established the Institute of Deep Learning, IDL, with the goal of better leveraging Machine Learning as it applies to image recognition, voice recognition and search, and advertising CTR forecast (i.e., Click Through Rate prediction, pCTR). To support IDL networking requirements, the Baidu RDMA solution guarantees businesses can transfer with no disruption or downtime. Even if RDMA encounters problems, the network can automatically switch over to TCP in order to guarantee continuous system operation. Baidu RDMA application solutions and Mellanox RDMA technology will continue to support Baidu’s IDL to drive future innovation and breakthrough technology solutions.

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9.4 Radiflow’s New Smart Agent Enables Using Centralized Industrial Intrusion Detection Systems

Tel Aviv’s Radiflow introduced a new Smart Agent for centralized Industrial Intrusion Detection Systems (IDSs). By sending compressed, filtered industrial information to a centrally-installed IDS, the Smart Agent overcomes the innate problem of network overloading usually associated with using a centralized IDS for protecting multiple ICS-based sites. Radiflow’s patent-pending Smart Agent enables companies in a wide range of industries-power generation, oil and gas, water treatment, manufacturing, hospitals and other-to secure their distributed assets. The Smart Agent, a plug-and-play product, overcomes one of the major challenges in implementing centralized IDS: network overloading, caused by the vast amounts of data sent from distributed sites for analysis. To do so, a Smart Agent at each remote site receives a copy of all network traffic at the site. The network traffic is compressed and filtered locally using an advanced algorithm (patent pending) developed by Radiflow. The compressed data from multiple remote sites is in turn sent to a central industrial IDS for analysis. As a large number of Smart Agents at multiple remote sites can be used in parallel, infrastructures are able to implement a single central IDS to protect the entire ICS network, rather than an IDS at each remote site. This provides a huge advantage for operators of distributed ICS-based operations with multiple remote sites. (Radiflow 10.01)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Economy Grew by 3.5% in 2016

Israel’s economy grew by 3.5% in 2016, the Bank of Israel’s Research Department announced on 28 December. Bank data indicated that the standard of living in Israel grew by 2.9%, private consumption rose by 5.9% and per capita growth increased by 1.5%. In addition, unemployment fell to a record low of 4.8%. The Bank of Israel’s had originally predicted a 0.5% per capita growth in 2016.

Overall investments jumped by 10% — double the original projection. Imports, excluding defense imports, rose by 10.2%, and overall consumption, excluding defense consumption, grew by 4.3%. Nevertheless, 2016 was a weak year for exports, which rose by only 2.2%, attributable to the depreciation in dollar and euro exchange rates. While 2016 is expected to see a negative 0.3% inflation rate, the bank projects 1% inflation in 2017 and a 1.5% inflation rate in 2018. Economic growth is forecast at 3.2% for 2017 and 3.1% for 2018. (Various 02.01)

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10.2 Israel’s Budget Deficit Down to 2.15% in 2016

State revenues exceeded the forecast by nearly NIS 9 billion in 2016, making the budget deficit 2.15% for the year, according to an initial estimate for the implementation of the state budget published on 9 January by the Ministry of Finance Accountant General department. The budget deficit target was 2.9% of GDP, but the actual deficit was much less than the target for the second straight year. The 2015 deficit was also 2.15%, compared with a 2.7% of GDP target. The difference between the actual deficit and the target in 2015 resulted from revenues exceeding the forecast by NIS 3.6 billion and spending falling NIS 3.3 billion short of the amounts allotted in the budget. In 2016, on the other hand, the different is almost completely attributed to revenues in excess of the forecast by no less than NIS 8.8 billion, while state spending was only NIS 300 less than the budgeted amount.

In view of these revenue figures, Minister of Finance Moshe Kahlon said that he would consider another tax cut towards the end of the first quarter of 2017. State revenues totaled NIS 321.1 billion in 2016, compared with a NIS 312.3 billion forecast. Tax receipts totaled NIS 283.2 billion, 5.6% higher than in 2015 in nominal terms. In retrospect, the 2016 revenue figures justify Kahlon’s decision to cut taxes at the end of 2015, against the Bank of Israel’s professional opinion. According to the figures, without Kahlon’s decision to cut VAT by 1% starting on October 1, 2015 and corporate tax by 1.5% starting on January 1, 2016, state tax revenues would have been NIS 4.3 billion higher (a total of more than NIS 10 billion higher than the forecasts). The tax revenue figures indicate a continuation of the accelerated rise in state tax revenues at a rate of 6-7% a year.

The lower-than-expected budget deficit enabled the government to sharply cut back its debt raising in the domestic capital market. Government debt issues totaled NIS 19.7 billion in 2016, compared with a planned NIS 26.2 billion. (Globes 08.01)

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10.3 Tourism to Israel Increases by 3.6% in 2016

The Ministry of Tourism announced in 9 January that Israel’s incoming tourism in 2016 totaled 2.9 million tourists, up 3.6%, compared with 2015. Tourism hit an all-time high in September-December 2016, with 250,000 tourists arriving in Israel in December alone. The Ministry of Tourism’s budget reached NIS 500 million this year. Most of its marketing was aimed at specific targets with potential, with an emphasis on new markets, such as India and China (the beginning of direct flights to Beijing by Chinese carrier Hainan Airlines was stressed). In addition to pilgrimage tourism, Israel was also marketed as a destination for city break leisure and entertainment vacations, a winter campaign for Eilat (including grants to airlines conducting direct flights to Ovda), and cooperation with influential websites, such as Expedia and TripAdvisor.

The countries from which tourism to Israel grew the most substantially in 2016, compared with 2015, were China (69%), Croatia (62%), Belarus, Latvia and Georgia (41%), Malaysia (35%), Philippines (27%) and India (13%). The US and Russia continue to lead in the number of tourists arriving in Israel, followed by France, the UK, Germany and Ukraine. The winter campaign of direct flights to Eilat from nine European countries is in progress. Every airline flying directly to Eilat receives a €45 subsidy per passenger. The cost of the project is NIS 18 million.

In addition to the NIS 35 million spent on the campaign to bring tourists from India and China, campaigns are also being conducted for the first time in many years in the Netherlands, Scandinavia and Spain. A new NIS 80 million comprehensive campaign is currently promoting a city break vacation in Tel Aviv and Jerusalem simultaneously in eight countries. US tourists are also being exposed to campaigns through large-scale activity among religious communities, at a cost of NIS 50 million. (Globes 09.01)

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10.4 Record Numbers Flood Ben Gurion Airport in 2016

According to the Israel Airports Authority, 17,387,971 international travelers passed through Ben Gurion Airport in 2016, representing an 11% rise over 2015. Including domestic travel, more than 18 million people utilized the country’s main airport last year. Leading destinations for travel to and from Israel included Turkey (1.6 passengers, most of whom were in transit), the United States (1.45 million), Germany (1.2 million), Italy (1.5 million). One million passengers travelled to both Russia and France.

Top airlines included Israel’s national carrier El Al (5.5 million passengers), Turkish Airlines (932,000), easyJet (719,000), Aeroflot (704,000), Arkia (650,000) and Israir (548,000). Currently, more than 100 airlines fly out of Israel to 135 international destinations – numbers that are unusual for an airport of Ben Gurion’s size. Some 36% of travelers check in for flights online from home and 9% use kiosks in the departures hall. Ninety percent of passengers on low-cost airlines checked in online and printed boarding passes at home. (IAA 09.01)

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11: IN DEPTH

11.1 ISRAEL: IVC-Meitar Announces 2016 High-Tech Exits Up 12%

Globes announced that IVC-Meitar reported Israeli high-tech companies closed 104 deals in 2016 worth $10 billion.

Israeli high-tech companies closed 104 deals in 2016 worth $10 billion, up 12% from 2015, according to the IVC – Meitar High-Tech Exits Report. The figure includes 93 M&A deals worth nearly $8.8 billion including the $4.4 billion Playtika acquisition, eight buyouts that generated $1.22 billion and three small IPOs totaling $15.1 million.

By far the largest acquisition in 2016 was of Playtika by Chinese online gaming company Giant Interactive Group, for $4.4 billion, following the $160 million acquisition by Caesars Entertainment in 2011. According to the report editors, since the two mega deals, Playtika in 2016, and NDS in 2012, each accounted for about 50% of M&As in their respective years, this skews the data, and they were left out of the M&As and IPOs analysis.

Meitar Liquornik Geva Leshem Tal partner Adv. Alon Sahar said, “Following several years of growth both in terms of deal numbers and their proceeds, 2016 presents an obvious slowdown. The analysis excluding the Playtika deal yields figures that are substantially lower than in previous years. It’s impossible to tell whether this is the beginning of a new trend or a natural correction due to significant hikes in previous years. We will need to wait a few quarters to see whether or not the market is facing a profound change.”

Looking at the majority of exit deals (excluding buyouts and the two megadeals), the average exit deal was $46.3 million, 31% below 2015’s average, which was $67.2 million, and 21% below the five-year average.

IVC Research Center CEO Koby Simana said, “2016 was by no means sub-par. In fact, it proved better than the previous year in terms of the average exit multiple, and was one of the best in multiples overall. This, coupled with the relatively lower volume of deals compared to 2015, suggests to us that entrepreneurs and investors may not be pushing for exits as they once did. Instead, it seems investors are looking closely into other alternatives. An opportunity to sell requires positive returns and substantial multiples, otherwise companies and investors choose to wait patiently, opting for company growth.”

Meitar Liquornik Geva Leshem Tal partner Adv. Dan Shamgar added, “Generally speaking, the low interest environment and high cash balance of strategic acquirers, as well as the growth demands of young companies, justify buyers’ continued interest in deal-making. We should hope that part of the explanation lies in the readiness of entrepreneurs and investors, against the backdrop of a certain slowdown on the buyers’ side, to show patience and implement a long-term growth strategy to establish more profitable companies and get higher valuations in longer periods. The availability of capital, especially this year, allowed companies to raise unprecedented amounts and somewhat undermined their readiness to sell companies.”

The second largest deal in 2016 was the $811 million acquisition of EZchip by Mellanox Technologies. This deal, along with the Leaba acquisition by Cisco and Sony’s acquisition of Altair, established the semiconductors sector as a clear leader in 2016 exits, with an all-time record of $1.39 billion, 32% of exits and over twice its average in the past five years.

As an acquisition where both acquirer and acquired companies were Israeli, the EZchip-Mellanox deal highlights another important trend in local M&As. According to the report editors, two sided Israeli deals have been gaining prominence over the past three years, with 27% of the M&As performed in 2016 involving local high-tech companies as both acquirer and acquiree. Like Mellanox, nearly 50 other Israeli companies have recognized the importance of corporate M&As as an inorganic growth mechanism and made at least one M&A deal in 2016, either in Israel or abroad. The result was an all-time record of $3.28 billion in M&A expenditures by Israeli companies, in addition to over $45 billion in M&A deals made by Teva Pharmaceutical Industries alone in 2016.

This year, the IVC-Meitar High-Tech Exits Report includes a new analysis focused on three prominent technology clusters – adtech, cyber security and automotive – chosen for their importance in understanding some of the trends in Israeli high-tech in general and their exits in particular.

According to the IVC-Online Database, there are nearly 420 Israeli high-tech companies operating in the adtech cluster in Israel, although numbers have been gradually dropping, due to market changes. In the past three years, 35 companies have been acquired or merged, five held IPOs (four in 2014) and one was acquired in a buyout, resulting in $1.89 billion in exits. The largest deals during that period include the $200 million acquisition of Exelate by Nielsen and the $150 million acquisition of SuperSonic by ironSource, both of which took place in 2015. According to the report, the adtech cluster is losing momentum, as demonstrated by the drop in capital raising for adtech companies, making the cluster a prime candidate for further exits – particularly M&As.

Cyber security is one of the strongest technology clusters in Israel, and numbers suggest it will continue to be so. While capital raising for cyber security reached a record number – with nearly $700 million raised in 2016 – the number of exit deals and their proceeds have dropped. Fourteen Israeli cyber security exits were closed in 2016, garnering a total of $662 million, a sharp 48% drop, compared to 2015’s $1.27 billion in 20 deals. Average exit multiples for the cluster have also dropped, from 6.93x in 2015 to 5.54x in 2016, although still far above the industry average. The largest cyber exit in 2016 was the $293 million acquisition of CloudLock by Cisco, slightly below 2015’s Adallom acquisition by Microsoft, which closed at $320 million. The fact the cluster continues to generate superb returns, and the obvious interest from investors – including growth rounds and late-stage capital – means companies are not pressured to make exits, and that deals are closed only when they benefit both investors and entrepreneurs. With over 450 active Israeli cyber security companies today, this sector is likely to continue to expand, while producing individual exits.

The automotive cluster has been receiving much media attention over the past few years with companies like Gett on the local scene, and Uber on the global scene, making a splash, as the first autonomous cars are roaming the roads around the globe. While Israel’s automotive cluster is smaller than the other two mentioned above, with a little over 260 companies operating, it has generated some serious interest worldwide. The cluster’s local leader is MobilEye, which logged both the largest buyout deal of $400 million in 2013, and the largest IPO, generating over $1 billion in 2014 while its market cap nearly doubled since. Another high profile automotive exit was the Waze $1.2 billion acquisition by Google in 2013. In 2016, six exit deals earned $205 million. (Globes 03.01)

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11.2 ISRAEL: Israeli Startups Raise Record $4.8 Billion in 2016

Israeli high-tech companies raised a record $4.8 billion in 2016, up 11% from $4.3 billion in 2015, the latest IVC – ZAG (Zysman Aharoni, Gayer & Co. law firm) survey has found. The average financing round, which has been constantly growing over the past five years, reached $7.2 million in 2016, 19% above the $5.1 million five-year average.

However, the fourth quarter of 2016 saw $1.02 billion raised in 151 transactions, down 8% from $1.11 billion in 202 deals in the corresponding quarter of 2015, but up 9% from $933 million raised in 140 deals in the preceding quarter. The average financing round stood at $6.7 million in the fourth quarter of 2016, similar to the past two-year quarterly average of $6.6 million.

IVC Research Center CEO Koby Simana said, “As expected, 2016 ended as a record year in Israeli high-tech capital raising. However, despite the higher total amount, it was characterized by a smaller number of financing rounds, along with a higher average capital raising per round. When we looked into the numbers to try and explain the trend, we found what I would call a ‘B Crunch’ – a 30% drop in the number of second rounds closed in 2016 compared to 2015, while the number of earlier rounds slightly increased. This is a troubling trend for the Israeli VC funnel, since the majority of capital goes into later rounds – if there are no companies lined up for later investments, there could be a more serious issue later on.”

The IVC-ZAG Survey reveals that, while capital-raising reached new heights in 2016, the number of financing rounds were fewer than expected, with 659 deals closed in 2016, marginally above the five-year average of 657 deals and 7% below 2015’s record 706 deals. While the number of early rounds (seed and A rounds) increased slightly (5%), the number of B rounds dropped 30% and the number of later rounds – C or higher – was responsible for more than 60% of the capital, down 11% from 2015. B rounds’ share of capital raising also decreased, falling from 25% in 2015 ($1.07 billion) to 16% in 2016 ($743 million), while early rounds and later rounds generated more capital and took up larger shares than the year before.

The IVC-ZAG Survey also reveals an upsurge in large deals (above $20 million) in 2016, both in terms of deal number and capital raised – with 76 deals and $2.68 billion, respectively – a 22% increase from the $2.19 billion raised in 68 deals in 2015.

Adv. Oded Har-Even, ZAG-S&W partner responsible for its US office, offers a possible explanation, “The increase in capital raising in mid- to late stages could imply a growing use of mezzanine funding in mature companies, gearing towards a possible M&A or IPO (preferably on NASDAQ). If this is indeed the case, then it’s a very welcome trend, revealing a mature market considered to be on the ‘quick exit route’ following early stage investments.” Adv, Shmulik Zysman, founding partner of ZAG-S&W agrees, adding: “We expect the uptrend in capital raising activity to continue in 2017, though possibly at slower rates.”

Fifteen deals above $20 million reached a total of $573 million, or 56%, of all capital raised in the fourth quarter of 2016. This compares with $430 million (38%), raised in 14 deals in the corresponding quarter of 2015, and $517 million (55%) raised in 18 transactions in the preceding quarter of 2016.

Israeli VC Fund Investment Activity

Israeli venture capital funds invested a total of $634 million in Israeli high-tech companies in 2016, slightly up from $627 million invested in 2015. In the past five years, Israeli venture capital fund investments steadily increased, from $482 million in 2012 to the current level. At the same time, their share of total capital invested has been decreasing gradually, from 26% in 2012 down to 13% in 2016, the lowest yet.

In the fourth quarter of 2016, $111 million was invested by Israeli venture capital funds in local high-tech companies, 44% below the $198 million invested in the corresponding quarter of 2015 and 20% below the $139 million invested in the preceding quarter of 2016. Israeli venture capital funds’ share was down to 11% in the fourth quarter of 2016, from 18% and 15% in the corresponding quarter of 2015 and the preceding quarter of 2016, respectively.

Capital Raised By Sector

Software companies led capital-raising in 2016 with $1.7 billion, up from 2015 when the sector attracted $1.4 billion (32%), also placing first. Internet capital raising has noticeably decreased in 2016, when the sector attracted only $744 million or a mere 16% of total capital, compared with $1.12 billion raised in 2015, when Internet placed second with a 26% share.

Zysman observed that there was a 14% fall in life science capital raising in 2016. “Despite the decrease in life science capital raising in 2016, we remain optimistic with regards to the industry’s potential in Israel, due to three major reasons: the continuous interest shown by Chinese investors, good chances for the return of European and US investors to Israeli life science investments, and Donald Trump’s imminent presidency. According to his campaign, Trump is expected to ease price control on drugs and medical services, bringing an optimistic note to the industry, which may increase the appetite for investments, Israel included.” (IVC 10.01)

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11.3 QATAR: IMF Staff Concluding Statement of the 2016 Article IV Mission

Qatar is effectively adjusting to the new reality of sustained lower energy prices. The drop in international oil and gas prices has put considerable pressure on the fiscal and external positions. However, the authorities’ policy response has been adequate, underpinned by cuts to current expenditures and renewed efforts towards increasing non-oil revenues. Tariffs of some utilities (water and electricity) have been increased from October 2015 and the increase in gasoline prices in January 2016 was followed in May by the implementation of a regular price adjustment mechanism.

Despite the availability of substantial buffers, the reduced hydrocarbon prices have adversely affected macroeconomic performance. Growth slowed to 1.7% (year-on-year) during the first half of 2016 and inflation picked up, reaching 2.2% in October 2016 (year-on-year), in part due to higher domestic energy costs. The central government surplus fell from 12.3% of GDP in 2014 to 1.2% in 2015 and government debt as a ratio of GDP moved from 32.3 to 34.9% of GDP during the same period. The authorities, unlike many other hydrocarbon exporting countries, financed the fiscal deficit mainly through domestic and foreign borrowing without drawing down their sovereign wealth fund. Qatar has already raised a total of $14.5 billion of external debt and issued $ 2.6 billion of domestic bonds and Sukuk (Islamic bonds). The decline in energy prices has reduced Qatar’s current account surplus, from 24% in 2014 to 8.4% of GDP in 2015. While bank credit to the public sector has increased private sector credit growth, though moderating in recent months, remains robust. Despite tightening liquidity in the banking system, banks remain sound and well capitalized, with a non-performing loan ratio of about 1.2%, the lowest in the GCC region.

Macroeconomic performance is expected to remain resilient under the baseline. Real GDP growth is expected to moderate to about 2.7% in 2016 and is projected to reach 3.4% in 2017, reflecting expansion in the non-hydrocarbon sector due to World Cup-related spending and supported by added output from the new Barzan gas project. In 2016, average inflation is expected to inch up to 3%. The fiscal adjustment planned in 2017 by the authorities is moving in the right direction. [1] During 2017–18, further subsidy cuts, increase in public fees, a moderate recovery in global commodity prices and the implementation of a VAT will drive inflation, which is expected to moderate back to low levels over the medium term. Fiscal and external balances are projected to persist in the near term, though improvements are projected for the medium term, as hydrocarbon prices recover slightly and fiscal adjustment advances.

The main risks are related to the possibility of lower hydrocarbon prices compared to the baseline assumption and to the public investment program. The main external risk remains the possibility of persistently lower energy prices. In addition, the prospects of further rises in the US interest rates may complicate efforts to bolster economic growth. Spillovers to the non-oil sector would be transmitted through slower government spending and declining liquidity in the banking system. Domestic risks are related to the ongoing public investment program. While crucial for further economic development and diversification, it could bring about over-heating in the near term, potential resource misallocation and reduced expenditure efficiency in the medium term. Overall, financial risks in the banking sector are moderate as banks’ balance sheets remain strong. However, the loan-to-deposit ratio has risen, possibly implying increased credit risk. Moreover, the expansion strategy of some banks into riskier foreign jurisdictions could potentially increase downside risks for their asset quality.

Economic Policies

Fiscal consolidation should be well-sequenced and take into consideration the potential impact on growth:

-The pace and the composition of the adjustment should strike a balance between revenue increases and expenditure restraint in the medium term. Containing the wage bill, public service benefits, subsidies, and goods and services expenditure are some avenues to rein in public spending, while preserving growth-promoting public investment.

-The GCC agreement on the introduction of VAT by 2018 is a welcome development, and Qatar is already taking actions to ensure its smooth and timely implementation.

-The authorities’ plan to implement excises on tobacco and sugary drinks starting in 2017 in line with a GCC-wide agreement will yield additional revenue.

-Complementary revenue measures should be explored, including broadening the corporate income tax base to include GCC companies.

-Deficit financing should remain supportive of private sector credit growth without jeopardizing external debt sustainability. Financing the deficit mainly through external borrowing as well as asset drawdown seems appropriate, taking into consideration the risk-return tradeoff between the cost of external borrowing versus the return on accumulated assets.

The authorities have made good progress in public investment management. A new tender law and public finance law were recently approved. Building on these developments, further efforts to enhance monitoring of public expenditures will help improve efficiency and better management of investment spending.

The authorities need to carefully manage liquidity pressures. Increasing transparency of T-bill auctions and improving communication with respect to the QCB’s liquidity operations would allow banks to better anticipate liquidity conditions in the interbank market and strengthen their liquidity management.

The fixed exchange rate regime remains appropriate. The peg to the U.S. dollar continues to serve Qatar well. Nevertheless, given that the Qatari economy is evolving towards more diversification, the pegged exchange regime should be periodically assessed over the medium term to ensure it remains the best option.

Deepening domestic financial markets will promote saving and offer borrowing and investment opportunities. Investment projects increase the need for diverse sources of funding with long-term maturities and reduced cost of borrowing. Qatar has continued to develop its domestic debt market, deepest in the GCC region, by issuing bonds and Sukuk in September 2016, even though secondary trading is very limited. Building on Qatar’s strategic plans, the deepening of domestic financial markets should be actively pursued.

Banking supervision and regulation, including the macro-prudential framework, are being strengthened. Progress has been made in implementing Basel III and related regulations, including liquidity ratios, counter-cyclical buffers, and buffers for systemically important domestic banks. An Early Warning System is being developed. Efforts to enhance the AML/CFT framework are underway. However, potential financial stability risks could include continued liquidity pressures, concentration risks, construction sector exposure, cross-border lending, and foreign currency exposure. Further extending and strengthening the early warning indicators should be a priority to improve financial sector monitoring.

Qatar’s competitiveness indicators are the strongest in the GCC region, but there is scope for improvement compared to non-GCC peers. The authorities have implemented a number of measures to boost diversification, including strengthening the private sector, promoting SMEs, and incentivizing nationals to work in non-government jobs. They are accelerating efforts toward ensuring contract enforcement and simplifying business registration. Additional measures are needed to further strengthen the business environment, including by enhanced contract enforcement, and improved education quality.

The vast infrastructure spending has put a spotlight on labor market conditions for expatriates. The authorities are addressing reports about working conditions of certain expatriate workers. Committed to improving the situation, the authorities have put in place a new labor law abolishing the Kafala, which came into effect in December 2016. The law makes it easier for workers to switch jobs and exit the country.

The authorities should continue efforts to further improve macroeconomic statistics. The authorities have started publishing quarterly GDP by expenditure and finalized the compilation of the Foreign Investment Survey. They are contemplating a new investment survey with a view to addressing the remaining gaps and improving the IIP and BOP statistics. Progress is being made on compiling fiscal data according to the GFSM 2001 and in subscribing to the SDDS. (IMF 03.01)

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11.4 OMAN: Fitch Publishes Oman’s ‘BBB’ IDRs; Outlook Stable

On 03 January Fitch Ratings published Oman’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of ‘BBB’ with a Stable Outlook. Fitch has also published the Country Ceiling of ‘A-‘, and Short-Term Foreign and Local Currency IDRs of ‘F2’.

Key Rating Drivers

Oman’s ratings reflect its low public and external debt, strong balance sheet and high GDP per capita, balanced against its double-digit fiscal deficit and a very hydrocarbon-dependent budget and economy. Its World Bank governance indicators are at the ‘BBB’ median level but are held back by low scores on ‘Voice and Accountability’.

Fitch expects that external debt issuance and draw-downs from wealth funds to finance budget deficits will result in sovereign net foreign assets falling to 28% of GDP by 2018 from 48.5% of GDP at end-2016. Fitch forecasts the government’s net domestic assets (mostly bank deposits minus local debt) will remain above 10% of GDP. At those levels, the government would still have a stronger balance sheet than most countries in the ‘BBB’ rating category.

The earlier sharp fall in oil and gas prices has hit Oman hard. We expect hydrocarbon revenues to fall by 22% in 2016, after a 41% drop in 2015, but they will still make up around 70% of government revenue. We expect current spending to fall by 5% in 2016, after a 15% cut in 2015, mostly due to a drop in subsidy expenditure as a result of lower oil prices and the removal of subsidies. Nevertheless, the government budget deficit will still have widened to 17.2% of GDP in 2016 from 16.5% of GDP in 2015. Outturns for the first 10 months of 2016 indicate that the deficit will overshoot the budget target of OMR2.7b (our forecast is OMR4.5b).

We expect deficits to decline as oil prices recover and fiscal measures take effect, to 14.4% of GDP in 2017 and 6.4% of GDP in 2018. Electricity tariffs will be hiked for large consumers in 2017, further lowering the subsidy bill. Increases to various fees and levies, removal of corporate tax exemptions and an increase in corporate tax rates could boost non-oil revenue by 1% of GDP in 2017. In 2018, the introduction of VAT could add around 1% of GDP, an increase in oil prices by $10/bbl could add 5% of GDP, and more gas production could add another 1% of GDP to revenue in 2018. Risks to this fiscal adjustment are skewed to the downside, with oil prices expected to stay well below our estimates of fiscal breakeven levels for Oman ($80/bbl in 2016, dropping to $69/bbl by 2018).

The government is using its reserve funds for deficit financing, having built them up in years of higher oil prices. In 2016, the government made a $4b withdrawal from the State General Reserve Fund (SGRF), the value of which peaked at $25b or 36% of GDP in 2015 and which is mostly invested abroad. We expect the value of the SGRF to decline to 23.3% of GDP by 2018. The government also took an $800m loan from its Infrastructure Projects Financing Account (IPFA), following withdrawals of around $7.8b since 2014. As a result the IPFA value will fall to around $300m (less than 0.5% of GDP) from nearly $9b (13% of GDP) in 2014. The government also financed some of its 2015 deficit by depleting its accumulated surplus account.

The government is planning to meet two-thirds of its financing need through external debt issuance and the remainder through reserve draw-downs. We assume a further $2.5b of international issuance by the government in 2017-18, accompanied by $1.5b of withdrawals from the SGRF. In 2016, the government issued $4.5b in bonds and sukuk, and received $2b in export financing, and Petroleum Development Oman has borrowed $4b to finance the government’s contribution to its expenditures. The government has also built up arrears to contractors and postponed recapitalization payments to pension funds.

Fitch forecasts real GDP will grow 3% in 2016, mainly due to strong increases in oil and gas production. We assume hydrocarbon production will be flat in 2017 but will increase in 2018 as the Khazzan gas field comes on stream, potentially adding up to 25% or $5b to gas production. However, we expect non-oil activity growth to slow to 2.5% in 2016 and 2% in 2017, with risks tilted to the downside. Non-oil GDP contracted by 1.5% yoy in nominal terms in H1/16. High-frequency indicators show a more mixed picture of economic activity, with employment and hotel activity numbers up but new vehicle registrations falling.

We expect bank credit to the private sector to grow by nearly 11% this year, well in excess of deposit growth. The ratio of total loans to deposits reached 107% in October 2016, up from 102% in 2015 but interest rates did not evidence liquidity stress. Liquidity was supported by measures to allow banks to count their holdings of government securities as part of required reserves. Capital adequacy and loan quality ratios are high, thanks to the conservative regulation.

Uncertainty remains surrounding the succession to 76-year old Sultan Qaboos, who recently underwent extensive medical treatment abroad but has not publicly designated a successor. The constitution stipulates that the ruling family must choose a new Sultan within three days of the post becoming vacant; otherwise a letter is opened with the Sultan’s recommendation.

Rating Sensitivities

The main factor that could lead to negative rating action would be a failure to reduce the large budget deficit, leading to depletion of fiscal and external reserves and build-up of public and external debt.

The main factors that could lead to positive rating action are:

– A reduction of the budget deficit and a stabilization of the government debt/GDP ratio at moderate levels, either through active fiscal measures or a sustained increase in oil prices.

– Improvement in structural factors such as reduction in hydrocarbon dependence, and a strengthening in governance and the business environment.

Key Assumptions

Fitch assumes that Brent crude will average $45/bbl in 2017 and $55/bbl in 2018.

Fitch assumes that an eventual transition of power from Sultan Qaboos will be smooth and ensure broad policy continuity.

Fitch assumes no change to the peg of the Omani rial to the US dollar. (Fitch 03.01)

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11.5 SAUDI ARABIA: What Has King Salman Achieved in his Two-Year Reign?

Bruce Riedel posted in Al-Monitor on 5 January that in his two years on the throne, King Salman bin Abdul-Aziz Al Saud has been an innovative leader who has addressed some of Saudi Arabia’s most pressing concerns. His foreign policy is more confrontational toward Iran than any of his predecessors. His signature policy is the war in Yemen, which has not been a success.

Salman just celebrated his ascension as measured by the Islamic calendar. The Saudi leader has been touted as a “paradigm shift” in the management of the country. Perhaps his most significant decision was to advance change in the succession process and turn to a younger generation of royals to lead it. At the age of 81, the king has focused on the choice of his successor from his first day in office.

Salman appointed Prince Mohammed bin Nayef to be deputy crown prince shortly after gaining the crown and then deposed his half-brother Prince Muqrin two months later, elevating the 57-year-old Nayef to be crown prince. If Nayef does ascend to the throne he will be the first Saudi monarch who is not a son of the modern kingdom’s founder King Abdul-Aziz Al Saud, who died in 1953. It will be a generational change in leadership.

Crown Prince Mohammed bin Nayef is unquestionably the most qualified prince of his generation. He has been at the front of the kingdom’s war against terrorism for over a decade. He has survived four assassination attempts by al-Qaeda. He has developed extensive contacts with security chiefs and services around the world. As crown prince, he has the opportunity to broaden his experience and competence.

The king’s son, Deputy Crown Prince and Defense Minister Mohammed bin Salman, has developed a creative plan to transform the kingdom by 2030. Salman has placed unprecedented powers in his son’s hands, including command of the economy. The son’s Saudi Vision 2030 recognizes that the Saudi welfare state is unsustainable with low oil prices. Much of the program remains to be implemented, but it is crucial that the kingdom recognize the imperative of change. This year, 2017, is the one where the vision needs to be fleshed out and implemented in its initial stages.

The king followed through on the promise of his predecessor King Abdullah to allow Saudi women to vote and run for office in the country’s municipal councils. It is an important symbolic step for the monarchy. Harder decisions about women’s rights will be crucial if Saudi Vision 2030 is to work.

Abdullah’s foreign policy was risk averse and cautious. During the Arab Spring, the kingdom became the leader of counterrevolution in Bahrain and Egypt. In Yemen it sought to replace Ali Abdullah Saleh with a compliant regime that would accept Saudi dominance. In Syria the kingdom saw an opportunity to unseat Iran’s oldest ally in the Arab world.

Salman has been much more aggressive and confrontational than his brother. Relations with Iran have been severed, preventing Iranians from attending the hajj. A 40-member Islamic military alliance (led by the Saudi defense minister) has been created, excluding Iran and Iraq. Last month Oman, which has long sought to cool tensions in the Gulf, officially joined the Saudi military alliance. An aggressive intelligence campaign has been launched against Iranian proxies such as Hezbollah. Money has been sent to the rebels fighting Syrian President Bashar al-Assad.

Saudi relations with Washington deteriorated on Abdullah’s watch. Riyadh was appalled that President Barack Obama urged Egyptian President Hosni Mubarak to give up office. American pressure on Bahrain’s Sunni monarchy to accommodate the Shiite majority’s demands for change prompted Abdullah to send troops across the King Fahd causeway to support the Sunnis and repress the Shiites. Almost six years later they are still there.

Salman shared his predecessor’s skepticism about Obama. He snubbed an invitation to Washington. The kingdom has been quietly critical of the Iran nuclear deal and the lifting of sanctions on Tehran. Nonetheless the Obama administration has sold over $110 billion in arms to the Saudis in eight years.

Only two months after ascending to the throne, Salman intervened in Yemen in response to the takeover of the capital by loyalists of Saleh and the Zaydi Shiite Houthi rebels. Riyadh feared that the Iranians were on the verge of creating a satellite state on their southern border. A Saudi-led coalition has blockaded Yemen and installed a friendly government in Aden.

Two years later, a Yemeni child starves to death every 10 minutes, according to UNICEF. Millions of Yemenis are malnourished and without medical care. All the warring parties bear blame for this humanitarian catastrophe. But the reality is that the richest countries in the Arab world have attacked the poorest country in the Arab world. The international community has done virtually nothing to stop the carnage. The United States and United Kingdom have provided the aircraft, munitions, logistics and intelligence that facilitate the war. The Saudis have been given the assistance essential to waging war with only occasional constraints, which are mostly due to congressional pressure and outrage.

Salman needs to find an honorable end to the war. Saudi Vision 2030 is likely to be a mirage if the kingdom remains bogged down in a quagmire in Yemen. The king is planning a visit to Oman this year. Omani Sultan Qabos can be a credible intermediary between the warring Yemeni parties. It’s time to end the bloodshed. (Al-Monitor 05.01)

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11.6 EGYPT: Egypt Considers Blocking Doctors from Working Abroad

Khalid Hassan posted on 28 December in Al-Monitor that Dr. Shadia Thabet, a member of the Egyptian parliament’s health committee, is determined to advance a bill that bans doctors from traveling abroad unless they spend 10 years serving in public hospitals. Critics call it a clear violation of the rights of doctors and health specialists, as well as a violation of constitutional guarantees for citizens’ freedom of movement and emigration.

In a press statement on 6 December, Thabet said the law will soon be submitted to parliament for approval in the next few days as soon as all its articles are completed. Thabet gave her reasoning for the bill. She said, “We have a shortage of doctors and nurses in the emergency rooms of most public hospitals. Besides, we do not have enough medical staff and engineers, among other specialists capable of developing the state. Therefore, legislation to curb this phenomenon must be put forth.”

Thabet said she had just finished six articles for the bill, including unattainable conditions for doctors who wish to travel abroad. For instance, they would have to pay 20% of their monthly salary earned outside Egypt to the Egyptian treasury in foreign currency, not Egyptian pounds, and also repay the costs of their education. Another article limits the emigration of specialized staff such as engineers, with the state determining the need for them.

As soon as Thabet disclosed these details, the doctors’ syndicate, of which she is a member, responded by saying the bill is unreasonable. They claim the bill aims to obstruct doctors and stands in the way of their ambition because it deprives them of their right to travel to improve their standards of living, as opposed to the little money they earn in Egypt.

The doctors’ syndicate was not the only professional organization to attack Thabet. The council of the engineers syndicate issued an official statement voicing its rejection of the bill and its provisions. The council promised to protect engineers’ right to travel and work under the constitution, and warned that such a bill would only breed more social tension and serve the interests of parties that want to “destroy the country.”

Article 62 of Egypt’s constitution guarantees Egyptians’ freedom of movement, residence and emigration. It states, “No citizen may be expelled from state territory or banned from returning thereto. No citizen may be banned from leaving state territory, placed under house arrest or banned from residing in a certain area except by a causal judicial order for a specified period of time, and in cases specified by the law.”

Article 92 of the constitution notes, “The rights and freedoms of individual citizens may not be suspended or reduced. No law that regulates the exercise of rights and freedoms may restrict them in such a way as infringes upon their essence and foundation.”

Doctors in Egypt face tough living circumstances due to their low incomes, the lack of medical equipment in hospitals and their constant feeling that the state ignores them and dedicates resources to military officers, police officers and judges. They are tempted to travel abroad as soon as they graduate to improve their living standards and continue their education. Their situation is the same as that of engineers and other highly educated individuals.

In general, a doctor in a public Egyptian hospital earns around EGP1,500 ($78) per month from the Ministry of Health, while another in a private hospital might earn EGP3,000 ($157). While salaries vary according to specialization and experience, the highest paid doctors in Egypt work in private clinics.

Thabet added, “I proposed the bill because we have a serious shortage of doctors in Egypt. There are 377 public hospitals that have been shut down in the country due to lack of doctors and specialists. Villagers are suffering from a lack of services in their provinces, and it is hard for them to head to Cairo to receive treatment due to the cost involved. “We have 24 ERs in Imbaba Fever Hospital [a public hospital in Cairo]. We are only able to keep 10 of them open. The 14 that remain are closed due to the medical shortage. So I had to take quick action to end the crisis.”

Tarek Kamel, a member of the doctors’ syndicate, told Al-Monitor, “What will Thabet do with judges who leave for Arab states? What about teachers who go to the Gulf countries as part of educational missions? What about other professionals whom the state invested in educating, be they lawyers, journalists or media staff? Why is Thabet insisting on discriminating between doctors and other social groups? The principle is wrong, and it is unacceptable that a parliamentarian representing the people in parliament would utter it.”

He added, “Didn’t Thabet ask why doctors are leaving their country as soon as they graduate? Doesn’t she see their deteriorating financial situation? Doesn’t she know that a doctor earns 1,200 pounds [$62] per month as soon as he graduates? Is this sum enough to provide a good life for them?” “The main problem is not a shortage of doctors, but rather the bad geographical and specialization-based distribution of medical staff. Doctors need to be reassigned to resolve the crisis, rather than be forced to work in Egypt.” (Al-Monitor 28.12)

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ISRAEL REMAINS THE INVESTMENT DESTINATION OF CHOICE

January 22, 2017, 1:28 am

≫ Next: Fortnightly, 25 January 2017

≪ Previous: Fortnightly, 11 January 2017

A new report by Israel’s IVC Research Center and local attorneys Zag-S&W shows Israeli high-tech companies raised an all-time annual high of $4.8 billion in 2016, 11% above the $4.3 billion raised in 2015.

The average financing round, which has been constantly rising over the past five years, reached $7.2 million in 2016, 19% above the $5.1 million five-year average. The average financing round stood at $6.7 million in Q4 2016, similar to the past two-year quarterly average of $6.6 million.

While capital-raising reached new heights in 2016, there were fewer financing rounds compared to 2015. There were 659 financing deals that closed in 2016, marginally above the five-year average of 657 deals but 7% below 2015’s record 706 deals.

Most of the investment deals in 2016 were in later stage companies. Later round investments – C stage or higher — when investors inject money into an already successful business — were responsible for more than 60% of the capital invested in 2016. Early stage deals — seed and A round funding — increased 5%, while the number of B financing rounds — investments into companies that are past development stage and taking their business to the next level — dropped 30%.

Software companies led capital-raising in 2016 with $1.7 billion, up from 2015 when the sector attracted $1.4 billion, or a 32% share of the total, also placing first. Capital raised by internet companies decreased in 2016, with the sector attracting only $744 million or a mere 16% of total capital, compared to $1.12 billion raised in 2015, when internet placed second with a 26% share. Life sciences companies witnessed a 14% drop in funding in 2016, the survey showed.

So what are we to make from all of this? A number of points stand out to be sure:

-High tech in Israel continues to be an attractive investment vehicle for venture capitalists and others who seek significant returns on their capital.

-The investment community continues to view Israel as a leader in tech development with an implied faith in the continued growth of that sector independent of the political realities in the region, quite amazing to be sure.

-Early stage funding may be getting more difficult to attract from venture funds (although some early stage funding is still available from government sources) and investors are seeking companies who have at least some track record of success.

-In this new era of a creative app coming down the pike seemingly every day, software has risen again as the major investment of choice together with the increasingly critical field of cyber security)

The bottom line, of course, is that business people look past the current regional conflicts to the future which, if the investment patterns here are any indication, still holds attraction to investors and multinationals.

EDI stands ready and willing to assist off shore investors to scout the latest technologies in Israel and identify the most promising prospects for success.

Sherwin Pomerantz

President

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↧

Fortnightly, 25 January 2017

January 25, 2017, 6:20 am

≫ Next: What’s New at EDI – February 2017

≪ Previous: ISRAEL REMAINS THE INVESTMENT DESTINATION OF CHOICE

25 January 2017
27 Tevet 5777
27 Rabi Al-Akbar 1438

TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Eli Cohen Appointed Minister of Economy
1.2 Israeli Government to Fund Medical Cannabis Research

2: ISRAEL MARKET & BUSINESS NEWS

2.1  Canada’s New Tax Treaty with Israel Now in Force
2.2  Andersen Global Initiates Expansion in Israel
2.3  Oracle Opens Israel Startup Accelerator
2.4  Israel’s Corephotonics Raises $15 Million
2.5  Fraugster, a Startup That Uses AI to Detect Payment Fraud, Raises $5 Million
2.6  UK’s PA Group Invests in Wochit
2.7  AppsFlyer Raises $56 Million to Deliver Measurement Innovation in the Mobile Era
2.8  Rivulis & Eurodrip Announce Merger to Create a World Leader in Micro Irrigation
2.9  Cybellum Raises $2.5 Million
2.10  illusive networks’ Microsoft Ventures Investment Follows Accelerated Global Growth
2.11  Secret Double Octopus Raises $6 Million to Protect Identity Using Nuclear Launch Code Safety Algorithms

3: REGIONAL PRIVATE SECTOR NEWS

3.1  US’ WestPoint Home Opens New Bahrain Textiles Factory
3.2  Emirates Set to Launch ‘Fifth Freedom’ Route to US via Athens
3.3  Castle Hall Alternatives Expands to Abu Dhabi
3.4  Dictum Health Expands Globally, Providing Clinical Care Anytime, Anywhere
3.5  Nahdi Medical Chooses Opterus for Store Communications and Operational Execution
3.6  Airbus Said to Finalize Deal to Sell Over 60 Jets to Saudi’s Flynas
3.7  Pfizer Opens New $50 Million Saudi Manufacturing Hub
3.8  Dow Says Saudi Innovation Center Set to Open in 2018
3.9  Turkey’s First Ever Test of 5G Technologies Achieved Speeds of 24.7 Gbps

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  Ecoppia Completes 40MW Deployment in EDF RE /Arava-Power Middle Eastern Solar Park
4.2  UAE to Spend $163 Billion on Clean Energy Revolution
4.3  Construction of Phase 3 of Giant Dubai Solar Park to Start By End January
4.4  Saudi Arabia to Launch $30 – 50 Billion Renewable Energy Program
4.5  Infinity Solar & Coca-Cola Agree on Establishing EGP 40 Million Solar Plant

5: ARAB STATE DEVELOPMENTS

5.1  Tourist Spending in Lebanon Ended 2016 on a Decelerated Shortfall
5.2  Lebanon Sees 6.67% Reduction in Newly-Registered Cars by December 2016
5.3  Jordan’s King Reshuffles Cabinet Amid Growing Security & Economic Challenges
5.4  Jordan’s Trade Balance Deficit Declines 8.6%
5.5  Study Finds Jordan Second in Arab World for Economic Freedom
5.6  Jordan’s Tourism Revenues Total JOD2.8 Billion

♦♦Arabian Gulf

5.7  New Zealand Presses Arabian Gulf States to Finalize Stalled Trade Deal
5.8  Qatar Inflation Rate Falls to 2016 Low in December
5.9  UAE to See Lowest Inflation Rate in Six Years
5.10  Dubai Set to Unveil New Plans for Mandatory Health Insurance
5.11  Saudi Inflation Rate Hits 10 Year Low Amid Slower Growth5.12 Riyadh Could Shelve $13.3 Billion in Projects in 2017
5.12  Riyadh Could Shelve $13.3 Billion in Projects in 2017
5.13  Saudi Arabia Introduces New Process to Grant Business Visa within 24 Hours
5.14  Saudi Arabia Tells Expats to Register Fingerprints or Face Problems

♦♦North Africa

5.15 Egypt Sees Gas Self-Sufficiency By 2018
5.16 Bloomberg Again Names Morocco Among 50 Most Innovative Economies in the World

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Central Bank of Cyprus Sees Growth Rate at 2.8% in 2016 & 2017

7: GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1 Israelis Express Greater Trust in Legal System

♦♦REGIONAL

7.2 Final Court Ruling Declares Egyptian Sovereignty over Tiran & Sanafir Islands

8: ISRAEL LIFE SCIENCE NEWS

8.1  DarioHealth Raises $3 Million to Expand Markets for Smart Blood Glucose Monitoring System
8.2  Monsanto & NRGene Global Licensing Agreement for Big Data Genomic Analysis Technology
8.3  Illumina & NRGene Accelerate Development of New Molecular Breeding Tools for Cattle
8.4  Kitov Enters Immuno-Oncology Field Through Acquisition of TyrNovo
8.5  Zebra Medical Vision’s New Algorithm Detects Compression & Other Vertebral Fractures
8.6  RondinX Accelerates Drug Development with a Breakthrough Computational Platform
8.7  Medasense Launches New Pain Monitoring Device Following CE Approval
8.8  Vention Medical Acquires Lithotech Medical

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 BIRD Foundation Issues New Call for Proposals to Foster Advanced Technologies for First Responders
9.2  Kaymera Launches Fully-Secured Version of Google Pixel Phone
9.3  Mantaro & Beeper to Develop Advanced Technologies for Public Safety
9.4  Elbit Systems Wins $17 Million Contract to Supply BrightNite Systems to a NATO Air Force
9.5  GuardiCore Named Finalist in Info Security Product Guide’s 2017 Global Excellence Awards
9.6  Inomize is Helping the Vision-Impaired to See
9.7  Transmit Security Makes Passwords Obsolete Using Mobile Device as Primary Authenticator

10: ISRAEL ECONOMIC STATISTICS

10.1  For Third Consecutive Year Israel Registers Negative Inflation
10.2  Israel’s Third Quarter Growth Revised Upwards
10.3  Israel’s Debt-to-GDP Ratio Falls in 2016
10.4  Israel’s High-Tech Exports Drop by 7% in 2016

11: IN DEPTH

11.1  GCC: Major Challenges Remain to Gulf’s Move Away From Oil
11.2  KUWAIT: IMF Executive Board Concludes 2016 Article IV Consultation with Kuwait
11.3  SAUDI ARABIA: A New Social and Political Order for Saudi Arabia?
11.4  EGYPT: Will New Law Attract More Foreign Investment to Egypt?
11.5  TUNISIA: Tunisia’s Fledgling Gulf Relations
11.6  TURKEY: Turkey Faces Financial Disaster
11.7  TURKEY: Turkey’s AKP Scrambles to Curb Economic Woes Until Referendum
11.8  GREECE: Greece ‘B-/B’ Ratings Affirmed; Outlook Remains Stable

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Eli Cohen Appointed Minister of Economy

On 22 January, the cabinet unanimously approved the appointment of MK Ayoob Kara (Likud) as Minister without portfolio and MK Eli Cohen (Kulanu) as Minister of Economy and Industry. The appointments are designed to make the government more stable and prevent unrest in the two parties.

Up until now, Cohen, 44, has chaired the Special Committee to Discuss the Bill for Increasing Competition and Reducing Concentration in Israel’s Banking Market, which was founded under the coalition agreement with Kulanu, headed by Minister of Finance Moshe Kahlon. Kahlon was seeking to use this committee to bypass the Knesset Finance Committee in order to pass important reforms that he was advocating. Following the resignation of Avi Gabai as Minister of Environmental Protection, one of Kulanu’s founders, Kahlon preferred Cohen as Minister of Construction and Housing in place of MK Yoav Galant, another Kulanu member, whom Kahlon wanted to appoint as Minister of Economy and Industry. The distant relations between Galant and Kahlon since the government was formed and the transfer of employment from the Ministry of Economy and Industry to the Ministry of Labor, Welfare, and Social Services, however, have prevented this measure. (Globes 22.01)

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1.2 Israeli Government to Fund Medical Cannabis Research

Israel’s Ministries of Agriculture and Health will provide NIS 8 million in funding for 13 medical cannabis studies. The measure is the first cooperative effort of its kind between the Ministry of Health medical cannabis unit and the Ministry of Agriculture chief scientist unit. The studies, which will be financed through a fund operated by the chief scientist unit, will deal with biochemical and medical aspects, as well as improving medical cannabis crop yields. The Ministry of Agriculture said on 24 January that funding the studies was a pioneering step for Israel that could enable researchers to conduct basic and applied research for five years, during which tools and infrastructure would be developed to facilitate the next generation of cannabis plant products for medical use.

Among the biochemical and medical studies approved by the Ministries of Agriculture and Health are identification and specification of new ingredients in strains of medical cannabis, the use of cannabis and its effect on vision, involvement of cannabis in the development of colon cancer, treatment of multiple sclerosis using cannabis, the use of cannabis to prevent rejection of transplanted organs, and a test of the plant’s ability to delay the development of harmful bacteria. These studies will soon receive government funding.

In addition to these trials, in the coming years, the state will fund research examining the development of new and improved technologies for irrigating and fertilizing cannabis plants, improved ways of dealing with plant diseases and pests that attack the cannabis plant, development of methods for multiplying and grafting cannabis plants, establishing a genetic bank and national bank of medical cannabis plants, improving and developing new cannabis strains, and more. A special committee examined the proposals, and made its selection for state financial support from the 30 submitted. (Globes 23.01)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Canada’s New Tax Treaty with Israel Now in Force

The new Canada-Israel tax treaty entered into force on 21 December 2016. The treaty was first signed on 21 September 2016. Among other provisions, the new treaty adds a “one of the main purposes” test as an anti-treaty shopping measure to the treaty articles on dividends, interest, royalties and capital gains. Regarding the taxation of capital gains, there is a “one-year holding period test” to determine whether shares or partnership and trust interests derive more than 50% of their value directly or indirectly from immovable property. Under the new treaty, withholding tax will generally be limited to 15% for payments of dividends (or 5% for dividends paid to a company that holds directly (or indirectly) at least 25% of the capital of the company that paid the dividends) or 10% for payments of interest and royalties.

The treaty will have effect in Canada for tax withheld at source on amounts paid or credited to non-residents on or after 1 January 2017. For other taxes, the treaty will have effect for taxation years beginning on or after 1 January 2017. (KPMG 17.01)

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2.2 Andersen Global Initiates Expansion in Israel

San Francisco’s Andersen Global announced its collaboration with Beneli Tax Boutique, a tax firm located in Tel Aviv, Israel. The establishment of a Collaboration Agreement with Beneli Tax Boutique broadens Andersen’s presence globally to include the Middle East and is the initial stage to becoming a member firm of Andersen Global. Beneli Tax Boutique assists U.S. and Israeli multinationals, startups and high net-worth individuals with their international tax matters including mergers and acquisitions, tax due diligence, equity compensation, tax accounting and tax efficient corporate structuring. With the addition of Beneli Tax Boutique, Andersen Global now has a presence in 56 locations worldwide. (Andersen Global 16.01)

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2.3 Oracle Opens Israel Startup Accelerator

U.S. software provider Oracle Corp announced today that it was opening an accelerator program in Israel for startups developing cloud technologies or whose technologies are based in the cloud. Run by Oracle’s research and development team, the program provides six months of mentoring from technical and business experts, advanced technology, access to Oracle’s customers, and partners and investors. A pilot program was first launched in India and more centers will be announced soon. Oracle said this was a multi-million dollar program but did not disclose how much it would invest in each center. Oracle’s startup cloud accelerator program builds on its excellence center for Israeli startups, which was established in 2003 by Oracle Israel in cooperation with the government to support the growth of early stage startups. Thirty six companies were approved to take part in the excellence center, totaling more than $150 million in estimated exits. (NoCamels 16.01)

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2.4 Israel’s Corephotonics Raises $15 Million

Corephotonics recently completed a $15 million funding round. To date, the company has raised more than $50 million. Participating in the current funding round are a number of strategic investors: Samsung Ventures; Foxconn, the world’s largest electronic components manufacturer, which among other things manufactures the iPhone; Taiwan’s MediaTek, one of the largest mobile semiconductor companies in the world; and a tier-1 smartphone OEM. Two additional investment funds participated in this funding round, one from China and the other from Hong Kong. Corephotonics’ current investors include Magma VC, Samsung Ventures, Amiti Ventures, Chinese billionaire Li Ka-shing and Solina Chau’s Horizon Ventures, OurCrowd – the equity crowdfunding firm, flash storage solutions company SanDisk, Chinese telephony services provider CK Telecom, and additional private investors.

Corephotonics is the pioneer and market leader of dual camera technologies for smartphones. The company’s technology improves the image quality, and enables imaging capabilities that until now were only available in professional cameras. The technology is based on the combination of two cameras, which enables stills photography with optical zoom of up to 3x and up to 8x zoom in video, even in low light conditions. It also enables creating a bokeh effect (blurring the picture’s background and making the main subject stand out), a considerable improvement in picture resolution, and preventing motion blur.

The investment, along with the existing cash on hand and revenue forecast for 2017, will be used for developing next generation cameras for smartphones, and for expanding existing products’ penetration. In addition, the new funding will help Corephotonics expand into the automotive, drone, surveillance, and action camera markets.

Established in 2012, Tel Aviv’s Corephotonics is the leading licensor of dual camera imaging technologies. The company provides end-to-end dual camera solutions which dramatically improve the image quality and user experience of mobile imaging, while introducing optical zoom, superb low-light performance, Bokeh and depth features, and optical image stabilization in an incredibly slim form factor. Thus far, Corephotonics has raised more than $50 million. (Corephotonics 11.01)

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2.5 Fraugster, a Startup That Uses AI to Detect Payment Fraud, Raises $5 Million

Fraugster, a German and Israeli startup that has developed Artificial Intelligence (AI) technology to help eliminate payment fraud, has raised $5 million in funding. Earlybird led the round, alongside existing investors Speedinvest, Seedcamp and an unnamed large Swiss family office. The new capital will be used to add to Fraugster’s headcount as it expands internationally. Its AI-powered fraud detection technology learns from each transaction in real-time and claims to be able to anticipate fraudulent attacks even before they happen. The result is that Fraugster can reduce fraud by 70% while increasing conversion rates by as much as 35%. The point of any fraud detection technology, AI-driven or otherwise, is to stop fraudulent transactions whilst eliminating false positives.

Once integrated, Fraugster starts collecting transaction data points such as name, email address, and billing and shipping address. This is then enriched with around 2,000 extra data points, such as an IP latency check to measure the real distance from the user, IP connection type, distance between key strokes, and email name match. Then the enriched dataset is sent to the AI engine for analysis. (Various 16.01)

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2.6 UK’s PA Group Invests in Wochit

PA Group – the parent company of the Press Association (PA), the national news agency for the UK and Ireland – has made a strategic investment in Israeli social video creation platform Wochit. Details of the investment were not disclosed, PA Group’s investment will contribute to the development of new tools and features to further enhance Wochit’s award-winning technology, while supporting the expansion of Wochit’s business around the world. The relationship also sees a selection of PA’s News, Sport and Entertainment content added to Wochit’s proprietary library of rights-cleared assets, a resource that allows content creators’ to rapidly produce video packages on trending topics.

Beit Dagan’s Wochit is a video creation platform empowering newsrooms, editorial teams and social media editors to capture and expand audience attention through the power of video. Founded in 2012, Wochit makes video accessible for all businesses to produce and share at scale across all social and digital platforms. With Wochit, videos can be created quickly, using pre-negotiated, rights-cleared assets from AP, Reuters, Getty, Bloomberg and many more sources. Wochit is among the 2016-2017 EContent’s Top 100 companies in the digital content industry as well as the winner of both the Gutenberg Prize for its disruptive technology in the field of journalism and Digiday’s Best Video Technology Innovation for its positive impact on clients’ bottom line. (Various 18.01)

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2.7 AppsFlyer Raises $56 Million to Deliver Measurement Innovation in the Mobile Era

AppsFlyer, a Herzliya, Israel marketing technology platform for apps, has raised $56 million in Series C funding led by Qumra Capital, with Goldman Sachs Private Capital Investing, Deutsche Telekom Capital Partners, Pitango Growth and existing investors participating. The company did not disclose its valuation.

CEO Oren Kaniel co-founded the company in 2011 when he noticed that app makers and the burgeoning market for app install ads had little in the way of measurement tools. AppsFlyer measures the effectiveness of app-install ads, as well as any traffic coming to a specific app, be it via organic Facebook post, QR code, user invite, or email marketing. The company’s software development kit has been installed on more than 2.5 billion unique smartphone devices, which it estimates includes 98% of smartphones. Revenue is tripling each year.

Herzliya’s AppsFlyer has emerged as the mobile measurement industry standard because it empowers advertisers with unbiased and transparent attribution analytics. Most importantly, it values the integrity of maintaining their clients’ data private and secure, which has earned the trust of more than 2000 network and analytics partners who have integrated with us. This vision has attracted the best and brightest to AppsFlyer. The product’s growth is spurred by the dynamic team-player environment we cultivate, which fosters growth and the never-ending learning process. We believe that this atmosphere is a catalyst for innovation and experimentation, ultimately leading to developing the best analytics platform possible. (AppsFlyer 17.01)

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2.8 Rivulis & Eurodrip Announce Merger to Create a World Leader in Micro Irrigation

Rivulis Irrigation of Israel and Eurodrip of Greece have entered into a definitive merger agreement in an all-share transaction, creating a global leader in micro irrigation. Transaction closing is subject to satisfaction of certain conditions including, but not limited to, regulatory approvals. The merged company will have unparalleled market coverage with 18 factories around the world and 1,800 employees across 5 continents and 30 countries. Growers around the world will benefit from an extensive product and solution offering, consisting of trusted industry brands such as T-Tape, Ro-Drip, Hydrogol, D5000, Eolos, Compact, PC2 and Olympos. The merged company will be headquartered in Gvat, Israel and will be named Rivulis Irrigation.

All current shareholders of the two companies – FIMI Opportunity Funds, Israel’s leading private equity fund (FIMI), U.S. based Paine & Partners, LLC (Paine & Partners) and Dhanna Engineering of India – will remain shareholders of the merged company and will remain active on the Board of Directors, ensuring continuity and providing strong support for the success of the merged company. The company will continue to support both the Rivulis and Eurodrip brands, and will remain strongly committed to its mission of providing continuous innovation, and strong service to help growers to optimize yields sustainably and economically while addressing water and land scarcity.

Rivulis Irrigation is one of the leading drip and micro irrigation manufacturers worldwide. Rivulis Irrigation is a major player impacting the growing move of agriculture to drip irrigation. (Rivulis Irrigation 10.01)

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2.9 Cybellum Raises $2.5 Million

Cybellum has raised $2.5 million in a seed financing round led by Blumberg Capital. Tel Aviv-based Cybellum will use the funding to fuel its expansion, including opening a US office in 2017 and to further its R&D efforts. The company also announced the discovery of three new zero-day vulnerabilities that are currently unpublished, unpatched and are potentially being used in the wild. Cybellum has developed the first deterministic zero-day prevention platform to protect companies from zero-day attacks. Zero-day attacks are cyber attacks against software flaws that are unknown and unpatched.

Founded in 2015, Cybellum‘s mission is to create a real and direct solution to cyber problems, specifically zero-day attacks, eliminating the cat and mouse game between the adversary and the organization. Cybellum’s First-Step Threat Protection is the only solution that detects and stops zero-day exploits at the very first step, which is the initial vulnerability stage. Unlike behavioral, machine learning and signature-based solutions that generate a number or percentage of the likelihood of infection, Cybellum’s core technology generates decisive solutions which eliminates the chances of false positives and prevents the attack from spreading to an organization. (Globes 24.01)

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2.10 illusive networks’ Microsoft Ventures Investment Follows Accelerated Global Growth

illusive networks announced a strategic investment by Microsoft Ventures. The new funding will be used to advance global expansion, invest in sales and marketing, and expand the engineering and support teams for the company’s patent-pending cybersecurity deception technology. Microsoft Ventures joins current investors New Enterprise Associates (NEA), one of the world’s largest and most active venture capital firms, Bessemer Venture Partners, Marker LLC, Citi Ventures, Cisco Investments, and Eric Schmidt’s Innovation Endeavors. The earlier Series A and B investments total over $30m.

Tel Aviv’s illusive networks is deployed across dozens of leading financial institutions, insurance, retailers, law firms, healthcare providers, energy and telecommunication companies in the United States, EMEA and APAC. illusive networks’ Deceptions Everywhere solutions, delivered via agentless patent pending technology, blanket a company’s entire network — every endpoint, server and network component — with information that deceives would-be attackers. When attackers act upon the false information, illusive networks neutralizes the attack and triggers a detailed breach report enabling security administrators to detect, track and contain the attack in its early stages. (illusive networks 24.01)

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2.11 Secret Double Octopus Raises $6 Million to Protect Identity Using Nuclear Launch Code Safety Algorithms

Secret Double Octopus, the pioneer of keyless multi-shield connectivity and authentication, announced today that it has closed a $6 million Series A funding round. The financing round included Jerusalem Venture Partners, Liberty Media’s Israel Venture Fund, Iris Capital, Benhamou Global Ventures and angel investor Yaniv Tal. The investment will be used to expand R&D efforts and accelerate growth in key markets, including the US and Europe.

Based on Secret Sharing algorithms, originally developed to protect nuclear launch codes, Secret Double Octopus has developed the only solution on the market that applies keyless authentication and data-in-motion protection for cloud, mobile, and IoT. The Company’s technology prevents cyber attackers from accessing enough critical information to be useful for attacks such as brute force, man-in-the-middle, PKI manipulation, key theft and certificate authority weaknesses.

Beer Sheva’s Secret Double Octopus has developed the world’s only keyless multi-shield connectivity technology to protect identity and data across cloud, mobile and IoT environments. Based on Secret Sharing algorithms, originally developed to protect nuclear launch codes, Secret Double Octopus’ technology prevents cyber attackers from accessing enough critical information to be useful for attacks, eliminating brute force, man-in-the-middle, PKI manipulation, key theft and certificate authority weaknesses. The Company was founded in 2015 by a seasoned leadership team with more than 100 years’ combined academic and industry experience. Secret Double Octopus is backed by Jerusalem Venture Partners, Iris Capital, Liberty Media and Benhamou Global Ventures. (Secret Double Octopus 24.01)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 US’ WestPoint Home Opens New Bahrain Textiles Factory

WestPoint Home, a NY based textiles manufacturer, has inaugurated its new spinning facility in Bahrain as part of the company’s ongoing growth in the Gulf kingdom. The new $9 million investment marks WestPoint Home’s third expansion in Bahrain over the past five years and more than $160 million of investments over the past 10 years, where products produced generate over 50% of its total global revenues annually. Works on the third spinning expansion were initiated in 2015 with the aim of mitigating the negative financial impacts of the 2016 expiration of the tariff preference level that allowed it and other textile manufacturers in Bahrain to import certain support materials, such as yarn, and export finished goods into the US duty free. The company said also under discussion at the inauguration ceremony were additional future investments in Bahrain including further expansions in production capacity aimed at capitalizing on growth opportunities in the GCC and European markets in addition to the US. (AB 20.01)

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3.2 Emirates Set to Launch ‘Fifth Freedom’ Route to US via Athens

Emirates announced on 23 January that it will launch a new daily service from Dubai to Newark Liberty International Airport via Athens, starting on 12 March. The new ‘fifth freedom’ route complements Emirates’ existing four daily flights between Dubai and New York’s JFK airport. Fifth freedom rights allow an airline to fly between two foreign countries so long as the flight originates or ends in the airline’s home country. Emirates already offers fifth freedom services between Milan and New York.

The announcement comes as three of the largest carriers in the US continue to urge the government to directly intervene and block further flights being launched by Gulf carriers. Delta and other US airlines have accused Emirates, Etihad Airways and Qatar Airways of receiving more than $40 billion in unfair subsidies, and the US airlines’ unions have urged their government to halt the Open Skies agreement. The Gulf carriers have dismissed the charges as false. (AB 24.01)

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3.3 Castle Hall Alternatives Expands to Abu Dhabi

Castle Hall Alternatives has opened an office within Abu Dhabi Global Market (ADGM), the international financial center in Abu Dhabi, UAE. With this expansion, Castle Hall has further broadened its global presence: the firm also has offices in Montreal and Halifax, Canada; Zurich, Switzerland; and Sydney, Australia. Montréal’s Castle Hall Alternatives, a member of AIMA, helps global institutional investors, fund of funds, advisors, family offices and endowments identify and manage the business, operational, cyber and investment risks of asset managers. With a team of 50 professionals, Castle Hall deploys one of the industry’s largest and most experienced due diligence teams. (Castle Hall Alternatives 18.01)

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3.4 Dictum Health Expands Globally, Providing Clinical Care Anytime, Anywhere

Oakland, California’s Dictum Health, an innovative leader in end-to-end telehealth, announced that it received clearances from the FDA of Saudi Arabia, and the Ministry of Health of the United Arab Emirates, for its fully-integrated IDM100 medical tablet. Saudi Arabia and the United Arab Emirates are experiencing increases in aging populations and chronic diseases, resulting in higher demands on clinical care providers. In addition, many patients need ongoing care, or specialist care, in rural, remote, and home settings. To address these challenges, health care providers need an advanced solution that extends clinical reach to patients and expands patient access to care without sacrificing care quality. Dictum Health’s FDA-Cleared IDM100 and Care Central Cloud Services serve as that advanced, telehealth solution by connecting patients and clinicians with real-time video, patient data and alerts.

Dictum Health’s telehealth solution features a virtual exam room with video conferencing and simultaneous streaming of vital signs, cardiopulmonary data, and medical images — allowing even the most at risk patients to be remotely monitored, examined, and treated — with the same clinical accuracy as an in-office exam. Thus, clinics can provide patients with the care that they need, regardless of location, using Dictum Health’s IDM100 and Care Central. (Dictum Health 16.01)

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3.5 Nahdi Medical Chooses Opterus for Store Communications and Operational Execution

Toronto’s Opterus, the leading global provider of cost-effective, web-based store communications and task management solutions, announced that Nahdi Medical Company, the largest retail pharmacy chain in the Middle East and North Africa, has implemented the Opterus solution to their entire retail chain. Nahdi Medical Company serves about 83 million guests annually in more than 130 cities and villages in the Middle East and North Africa. Opterus’ Store Ops-Center is an intuitive, easy-to-use cloud solution designed specifically for retailers to simply and effectively manage and execute store tasks and communications. The solution measures and increases operational compliance, communicates corporate policy, manages day-to-day objectives and tasks, and handles issues between corporate office and store locations. A simple and agile solution, Store Ops-Center allows for rapid implementation and strong user acceptance. (Opterus 16.01)

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3.6 Airbus Said to Finalize Deal to Sell Over 60 Jets to Saudi’s Flynas

Airbus has finalized an agreement to sell more than 60 jets to Saudi Arabian budget carrier Flynas, a move that could help the European manufacturer keep ahead of Boeing in the annual race for new orders. The order from Flynas, partly owned by Saudi billionaire Prince al-Waleed bin Talal’s investment vehicle, is expected to cover over 60 A320neo narrow body jets. An order for 60 A320neos would be worth $6.4 billion at list prices though it is common for manufacturers to grant discounts. Including purchasing options, the agreement includes 100 A320neos.

The A320neo sale would be Airbus’s first in the Middle East since Qatar Airways refused deliveries in December 2015 and said it would swap its order for a larger version. Flynas, which launched as Nas Air in 2007 and first turned a profit in 2015, has been negotiating an order for at least 60 narrow body jets with Airbus and rival Boeing since as early as April 2016. The order, which would replace and expand a fleet of leased A320s, would give flynas one of the largest Middle East low cost fleets after state-owned flydubai, which operate 57 Boeing 737-800s and has more than 100 scheduled for delivery by 2023.

Flynas is facing increasing competition domestically, where it conducts the majority of its operations. Start-up SaudiGulf Airlines and Saudi-owned, Egypt-based Nesma airline were both granted domestic operating licenses in 2016, while state-owned Saudi Arabian Airlines has announced plans for its own budget carrier, Flyadeal, to launch in mid-2017 with a target of 50 jets by 2020. Qatar Airways-owned Al Maha is waiting for a domestic Saudi operating license. (Reuters 10.01)

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3.7 Pfizer Opens New $50 Million Saudi Manufacturing Hub

The Saudi subsidiary of pharmaceutical giant Pfizer has announced the opening of a new $50 million manufacturing facility in the Gulf kingdom. Pfizer Saudi Limited has launched its factory in King Abdullah Economic City (KAEC) and announced the start of manufacturing of a number of life-changing medicines for patients in Saudi Arabia. The opening of this manufacturing facility is part of Pfizer’s support for the Saudi government’s Vision 2030 National Transformation Program. Pfizer said that initially, the plant will produce 16 of the company’s pharmaceutical products in different phases to meet Saudi health needs in five therapeutic areas – cardiovascular, pain, anti-infective, urology and neurology. The Pfizer facility represents investment of around $50 million and the site offers potential for expansion to meet future requirements, the company added. The development incorporates medicine manufacturing and packaging technologies within one complex and is set to create new, skilled employment opportunities for Saudis. (AB 13.01)

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3.8 Dow Says Saudi Innovation Center Set to Open in 2018

Dow announced the “topping out” of its new innovation center in Saudi Arabia, which is expected to become operational in the second half of 2018. Dow reported good progress in the construction of the Dow Middle East Innovation Center at King Abdullah University of Science & Technology (KAUST) in Saudi Arabia. The new center will be the second largest building in KAUST when completed.

Dow currently has an R&D Center at the KAUST Innovation Cluster, focusing on themes such as water, energy efficiency, and reducing environmental footprints that address critical needs in Saudi Arabia and the broader Middle East region. Dow is a founding member of the KAUST Industrial Collaboration Program which aims to commercialize research into practical applications. In 2015, Dow had annual sales of nearly $49 billion and employed approximately 49,000 people worldwide. (Dow 13.01)

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3.9 Turkey’s First Ever Test of 5G Technologies Achieved Speeds of 24.7 Gbps

Turkcell is continuing its work on 5G technologies at full speed. Turkcell and Ericsson completed Turkey’s first ever 5G test, achieving download speeds of 24.7 Gbps on the 15 GHz spectrum, the broadest available. The test was also one of the first in the entire world. Having been working on 5G technologies since 2013, Turkcell will also manage 5G field tests to be carried out globally by NGMN in 2017 and 2018. Thanks to the high speeds offered by 5G, a 100 GB file that can currently be transferred in around 30 minutes at 500Mbps on a 4.5G network will eventually be downloaded in 30 seconds at 25Gbps. (Turkcell 16.01)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Ecoppia Completes 40MW Deployment in EDF RE /Arava-Power Middle Eastern Solar Park

Ecoppia announced the full deployment of its E4 robotic solution in the Ketura Solar photovoltaic facility. The deployment in the jointly-owned EDF RE and Arava Power facility reinforces the company’s leadership position in the region, and joins a growing list of successful Ecoppia deployments worldwide.

Soiling – the accumulation of dirt and dust on photovoltaic solar panel surfaces – is one of the greatest impediments to solar energy production. Located in the hot southern stretch the Arava desert, between the Gulf of Aqaba and the southern tip of the Dead Sea, Ketura Solar is close to dust-intensive agricultural sites, suffers from frequent sandstorms, and enjoys virtually no rain. Traditional labor-intensive, water-based cleaning solutions are neither cost-effective nor timely, since immediate recovery from sandstorms is mission-critical to maintain the facility’s LCOE. Ecoppia is the only solution able to restore an entire site to peak energy production in just hours – without water or external electricity consumption.

Arava Power, a pioneer in the field of solar energy, established the first commercial solar field in Israel in 2011 in Kibbutz Ketura. Since then seven additional solar fields have been established and connected to the national grid, including the 40 MW Ketura Solar project. Fifteen additional projects are presently in various stages of development.

Herzliya’s Ecoppia designs and produces innovative photovoltaic panel cleaning solutions to cost-effectively maximize the performance of utility-scale installations. The company’s water-free, automated technology removes dust from panels on a daily basis to ensure peak output, even in the toughest desert conditions. (Ecoppia 16.01)

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4.2 UAE to Spend $163 Billion on Clean Energy Revolution

The UAE will spend AED600 billion ($163.3 billion) over the next three decades in developing the country’s energy market, with a plan for clean energy to power 50% of the sector by 2050. The first unified energy strategy for the UAE has been announced which aims to balance economic needs and environmental goals. The Dubai Media Office feed revealed that the energy plan will combine nuclear and renewables with clean fossil energy with an investment of $600 billion by 2050. The new strategy also aims to boost consumption capabilities by 40%, as well as increasing the contribution of clean energy by 50%, resulting in savings of AED700 billion. The equation targeted by the plan is 44% clean energy, 38% gas, 12% clean coal and 6% nuclear. Dubai already has a clean energy plan for the period to 2050 but this is the first UAE-wide strategy.

The Mohammed bin Rashid Solar Park, which was announced in January 2012 and is currently under construction, is a major part of the Dubai Clean Energy Strategy 2050, which aims to make Dubai a global center of clean energy and green economy. Under the strategy guidelines, the emirate aims to provide seven% of Dubai’s energy from clean energy sources by 2020, increasing this target to 25% by 2030 and 75% by 2050. (AB 10.01)

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4.3 Construction of Phase 3 of Giant Dubai Solar Park to Start By End January

Construction of the 800 MW phase 3 of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai will start at the end of January following the award of the engineering, procurement and construction (EPC) contract for the project. The EPC contract agreement has been awarded to an international consortium led by renewable energy contractor GranSolar of Spain, alongside Acciona, also from Spain, and Ghella of Italy. A Masdar-led consortium was selected last June by Dubai Electricity and Water Authority (DEWA) to develop what will be the world’s largest solar park on a single plot on completion, after setting a record-low bid price for solar power generation of 2.99 cents per kilowatt-hour (kWh). The agreement follows the launch of the Dubai Clean Energy Strategy 2050, which aims to diversify the energy mix so clean energy will generate 7% of Dubai’s total power output by 2020, 25% by 2030 and 75% by 2050.

Construction of the 16 sq. km phase 3 expansion of the Dubai Solar Park will occur in three stages. The first 200MW stage is expected to be completed by the first half of 2018 and the next 300MW phase is due the following year, with the final 300MW tranche to come on stream in the first half of 2020. The Mohammed Bin Rashid Al Maktoum Solar Park is expected to displace an estimated 6.5 million tonnes of carbon dioxide per annum on completion in 2030. (AB 18.01)

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4.4 Saudi Arabia to Launch $30 – 50 Billion Renewable Energy Program

Saudi Arabia will soon launch a renewable energy program that is expected to involve investment of between $30 billion and $50 billion by 2023, Saudi Energy Minister Khalid al-Falih said. Falih said Riyadh would soon start the first round of bidding for projects under the program, which would produce 10 gigawatts of power. In addition to that program, Riyadh is in the early stages of feasibility and design studies for its first two commercial nuclear reactors, which will total 2.8 gigawatts, he said. Under an economic reform program launched last year, Saudi Arabia is seeking to use non-oil means to generate much of its additional future energy needs, to avoid running down oil resources which are required to generate foreign exchange through exports. Falih said Saudi Arabia was working on ways to connect its renewable energy projects with Yemen, Jordan and Egypt. Its finances strained by low oil prices, Riyadh wants to conduct many of its future infrastructure projects through partnerships in which private companies from within the kingdom and abroad would bear much of the cost and risk. (AB 16.01)

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4.5 Infinity Solar & Coca-Cola Agree on Establishing EGP 40 Million Solar Plant

Infinity Solar Systems and Coca-Cola have agreed to establish a solar power plant at the latter’s factory in Alexandria. The plant will produce 1.5 MW at a cost of EGP 40m. Infinity Solar Systems said that Coca-Cola aims to develop its factory in Alexandria to operate on solar power and LED lights, which would improve the consumption of the factory to 97%. QNB ALAHLI and Banque Misr have agreed to finance the Green Company Project, which costs EGP 100m. The project will also include recycling wastewater, establishment of a solar plant, use LED lights, and improve electricity consumption. Infinity will complete the establishment of the plant in six months from the date of signing the contracts, and will be linked to the national electricity grid according to the feed-in tariff policies. (DNE 18.01)

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5: ARAB STATE DEVELOPMENTS

5.1 Tourist Spending in Lebanon Ended 2016 on a Decelerated Shortfall

Although total tourist spending in Lebanon during H1/16 plunged by 14% y-o-y, it improved in H2/16. According to Global Blue, tourist spending in 2016 recorded a decelerated plunge of 9% year-on-year thanks to positive developments in the second half of the year. Spending by Emirati visitors in 2016 was 14%, the largest share of total tourist spending, closely followed by Saudi’s 13% when compared to the year ended 2015. Kuwaiti and Egyptian visitors spent 6%, while Syrians, Jordanian and French expenses stood at 5% each. Notably, the spending of tourists from Kuwait, the US and Qatar particularly increased by70%, 15%, and 14% respectively in Q4/16 compared to the same period last year, while expenditures from other countries all remained negative. In 2016, Fashion and Clothing alone grasped a 73% share of total spending, as well watches and jewelry constituted 13%. However, the significant drop recorded in all categories by Q3/16 was buffered in Q4/16 by an 8% increase for spending on Fashion and Clothing, 21% on Souvenirs and Gifts and 19% on Home and Garden, while Watches and Jewelry declined by 43% compared to Q42015. Nationally, 80% of tourist expenditures were concentrated in Beirut. (Blom 12.01)

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5.2 Lebanon Sees 6.67% Reduction in Newly-Registered Cars by December 2016

Data from the Association of Lebanese Car Importers reveals a 6.67% y-o-y decline in the total number of newly-registered commercial and passenger cars by December 2016, to stand at 38,874 cars. The deterioration goes hand in hand with Blom Bank’s PMI of 47, which signals a moderate deterioration in the health of Lebanon’s private sector economy by end-2016. Of total new cars registered, the number of commercial cars grew by 11.12% y-o-y to 2,548, while the number of registered passenger vehicles declined by 7.71% to reach 36,326 cars by December 2016. By December 2016, Japanese model-cars comprised 37% of total passenger cars, the largest market share. Korean and European cars followed, grabbing 34.3% and 21% of the total market share. Compared to the same period last year, only American and Chinese cars recorded sales increases of 14.6% and 3.8% respectively, while Japanese, Korean, and European car sales declined by 11%, 8%, and 7% respectively. By 2016, the new cars market share was dominated by the Kia brand, which constituted a 19.49%share of newly registered passenger cars. Hyundai, Toyota, and Nissan followed with respective shares of 14.61%, 12.83%, and 9.83%. (Blom 16.01)

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5.3 Jordan’s King Reshuffles Cabinet Amid Growing Security & Economic Challenges

Jordan’s King Abdullah reshuffled his cabinet but retained Hani Mulki as prime minister, granting him more scope to tackle the threat of Islamist militants and to press ahead with unpopular IMF-mandated reforms to cut spiraling public debt. The reshuffle, the second since the business-friendly Mulki was appointed last May, comes at a time of sluggish economic growth, poor business sentiment and concerns over Jordan’s political stability following a series of security lapses. Jordan has stepped up its role in the US-led military campaign against Islamic State in the region and risks being drawn into a prolonged conflict with the militants.

In the reshuffle, Finance Minister Omar Malhas kept his job, in which he is overseeing a tough three-year program agreed with the IMF that aims to cut public debt to 77% of national output GDP by 2021 from 94% now. Politicians and economists say the tough fiscal consolidation plan, which includes raising taxes on basic food and fuel items in the coming months and cutting subsidies, will worsen the plight of poorer Jordanians. Removing subsidies has triggered civil unrest in the past. Jordan’s economy is expected to have grown by 2.4% last year, below an IMF target of 2.8%. (Reuters 15.01)

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5.4 Jordan’s Trade Balance Deficit Declines 8.6%

Jordan’s trade balance deficit declined by 8.6% during the January-November period of 2016, according to the Department of Statistics (DoS). The DoS reported that the value of national export during that period amounted to JD9.3 billion, down by 6.9% compared with the same period in 2015. It added that imports for the same period decreased by 7% to reach JD12.44 billion. As for the main exported commodities, the report said the value of national exports of clothes and related accessories increased by 2.6%; pharmaceutical products (16.9%); while fruits and vegetables exports went down by 22% and raw phosphate by 14%, crude potash by 33%, and fertilizers by 33%. (AMMONNEWS 22.01)

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5.5 Study Finds Jordan Second in Arab World for Economic Freedom

Jordan has been ranked second in the Arab world for “economic freedom”, according to a report published by neoliberal think tanks, with the United Arab Emirates (UAE) maintaining first place, which last year it shared with the Kingdom. The annual Economic Freedom in the Arab World Index 2016, published by the Fraser Institute and the Friedrich Naumann Foundation for Freedom (FNF), awarded Jordan a score of 8.1 out of a maximum score of 10, a fall of 0.1 points.

The index ranks 21 of the 22 Arab League nations, with the exception of Somalia, according to five key criteria, namely: size of government, legal and property rights, access to “sound money”, freedom to trade internationally and the regulation of credit, labor and business.

On individual criteria, Jordan stayed in 3rd place for size of government, rising from 8th to 7th for legal structure and property rights, and ranking 2nd in terms of access to sound money. Despite the Kingdom’s score remaining unchanged at 8 for freedom to trade internationally, it fell from 5th to 6th place. For business, labor and credit regulation, Jordan moved up from 7th to 6th place, even with a 0.1 decrease in this area.

The UAE’s overall score of 8.2 remains unchanged from last year, with Bahrain coming third with a rating of 8. Syria is the “least economically free nation in the Arab world”, according to the report, with a score of 5.4. It was followed by Algeria with 5.5 and Libya with 5.6. (AMMONNEWS 16.01)

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5.6 Jordan’s Tourism Revenues Total JOD2.8 Billion

Jordan’s revenues of tourism have come to stabilize in past two years despite regional turmoil, reaching some JOD2.871 billion in 2016, the Minister of Tourism said. The minister told a press conference that the tourism sector is on the “right path”, and will see major developments in 2017. She indicated that the number of overnight tourists picked up by 2.6% in 2016 while the number of overnight tourist groups jumped by 19.9%. She also noted that 70 tourism projects were completed in 2016 at a total value of 12 million. According to Minister Ennab, around 60,000 people work in the tourism sector in addition to 120,000 others in related sectors. (AMMONNEWS 16.01)

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►►Arabian Gulf

5.7 New Zealand Presses Arabian Gulf States to Finalize Stalled Trade Deal

New Zealand is pressing to finalize a stalled free trade deal with the six-nation Gulf Cooperation Council (GCC) that includes two of the Middle East’s largest economies, Saudi Arabia and the United Arab Emirates. NZ Trade Minister McClay visited the UAE and Kuwait recently in an effort to promote the deal with the GCC, his country’s sixth largest trading partner. The GCC comprises Saudi Arabia, the UAE, Kuwait, Qatar, Bahrain and Oman. New Zealand wrapped up talks on the trade pact in 2009 but it has never been ratified.

Two-way trade between New Zealand and the GCC is worth around NZ$3 billion ($2.16 billion) annually. New Zealand’s main exports to the region include dairy, sheep meat and wood, key components in the Pacific nation’s export basket. McClay’s regional visit follows a meeting with his Saudi Arabian counterpart Majid bin Abdullah Al Qasabi last September when both ministers agreed to complete the deal.

Arabian Gulf states are undergoing a period of economic reform following more than two years of low global oil prices that forced a tightening of regional budgets. McClay said the pressure of low oil prices and other changes in the global economy had prompted the Arabian Gulf states to rethink their policies on foreign trade. (Reuters 17.01)

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5.8 Qatar Inflation Rate Falls to 2016 Low in December

Qatar’s inflation rate fell to 1.8% in December, the lowest mark in 2016, according to Qatar’s Statistics Authority. The December consumer price data shows that the inflation rate fell from 2% in November and from 2.7% in December 2015. The figures showed that housing and utility costs, which account for 22% of the consumer basket, rose 1.1% from a year earlier while food and beverage costs, which account for nearly 13%, sank 3.2%. Earlier this month, the International Monetary Fund (IMF) said that Qatar’s real GDP growth is expected to moderate to about 2.7% in 2016 but is projected to reach 3.4% in 2017. In a new research note, the IMF said that during 2017–18, the Gulf state will see further subsidy cuts, increase in public fees, a moderate recovery in global commodity prices and the implementation of a VAT which will drive inflation, which is expected to moderate back to low levels over the medium term. (QSA 14.01)

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5.9 UAE to See Lowest Inflation Rate in Six Years

Inflation in the UAE will stay low throughout 2017 as the impact of subsidy cuts wears off. The headline consumer price index (CPI) will average 1.8% over the course of the year, the joint-lowest annual average for six years, according to the latest paper from BMI Research. The impact of subsidy cuts made throughout 2015 and 2016 is likely to wear off, while the continued strength of the US dollar – to which the UAE dirham is pegged – and subdued economic growth will combine to keep inflation “very low”. House price inflation is set to remain deflationary in line with a broader slowdown in the regional economy and a significant increase in construction activity anticipated in 2017, the report said. It added that inflation is expected to be higher in Dubai than Abu Dhabi, though, because of the lower level of subsidies in Dubai. Housing and food will be the main drivers of inflation in 2017. The report said the UAE Central Bank is set to follow the US Federal Reserve’s fiscal tightening measures as the dirham is pegged to the dollar. (AB 22.01)

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5.10 Dubai Set to Unveil New Plans for Mandatory Health Insurance

The Dubai government will soon be releasing an update on the mandatory health insurance scheme. In December last year, the Dubai Health Authority (DHA) said that the deadline (31 December 2016) had been extended, allowing insurance companies to accept health insurance applications in 2017. More than four million – or 98% – of residents are said to have taken health insurance so far. No further details were shared of the planned announcement, but DHA official advised residents to get their insurance policies at the earliest.

Though DHA had said that those failing to register under the scheme would face fines of $136.24 (AED500) a month, it has exempted residents from paying this fine for now. Under the Dubai Health Insurance Law No. 11 of 2013, which became effective from January 2014, every sponsor is legally obliged to provide an insurance package – priced between $150 (AED550) and $191 (AED700) – so that those with salaries under $1,090 (AED4,000) receive adequate cover. The scheme is now being enforced for families and dependents. (AB 16.01)

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5.11 Saudi Inflation Rate Hits 10 Year Low Amid Slower Growth

Saudi Arabia’s inflation rate fell to its lowest mark in 10 years in December, according to figures released by the country’s Central Department of Statistics. Consumer price data showed that inflation dropped to 1.7% last month, down from 2.3% the previous month. The figures showed that food and beverage prices fell 4.3% from a year earlier, partly because of the strong US dollar, to which the Saudi riyal is pegged. Prices of housing and utilities climbed 6.4% and transport costs jumped 7.5%, the data also showed.

The figures come just days after the International Monetary Fund (IMF) lowered its growth outlook for Saudi Arabia on back of lower oil production and capital spending. In its World Economic Outlook report update, the IMF said gross domestic product (GDP) will expand 0.4% in 2017. It compares with the fund’s October prediction of 2% growth in the October 2016 report. In December, the Saudi government said growth slowed to 1.4% in 2016, below the average of 4% in the past decade. (AB 23.01)

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5.12 Riyadh Could Shelve $13.3 Billion in Projects in 2017

At least $13.3 billion of government projects are at risk of being cancelled in Saudi Arabia this year because of fiscal pressures and changing government priorities, according to a study by consultants Faithful+Gould. The total value of project awards for 2017 is forecast at $27 billion and could rise to $32 billion if the Makkah Metro project, which was originally expected to be awarded in 2016, goes through this year. The figures suggest $20 billion in contracts were awarded last year, compared with $35.5 billion in 2015.

Faithful+Gould’s 2017 forecast assumes a major infrastructure project will be awarded by “exception or royal decree”, according to the firm’s 17 January Construction Intelligence Report on Saudi Arabia. It referred to expenditure under the 2017 state budget that appears to make room for a big new infrastructure scheme. The report said about 20% of Saudi Arabia’s long-term projects pipeline of $820 billion, or $168 billion worth of projects, could be at risk of being cancelled because of the reprioritization program.

The question really remains around the potential to switch the Makkah Metro scheme from central government funding to a type of PPP (public-private partnership) model or bringing other forms of finance to the table, for example main contractor funding. The value of Saudi contract awards has varied widely year-on-year over the past eight years as state spending ebbed and flowed, with a peak in 2011 of $75.9 billion. Following the sharp drop in oil prices, the government and private companies have taken a much more conservative stance.

Under the government’s economic development plans, vanity projects are being separated from essential schemes. The cancellation of 10 football stadiums that Saudi Aramco had been tasked with developing in major cities around the country is an example of this. (Bloomberg 17.01)

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5.13 Saudi Arabia Introduces New Process to Grant Business Visa within 24 Hours

Saudi Arabia has introduced new measures to grant business visa for foreign investors within 24 hours which came into effect on 1 January. The new rule will allow allowing foreign investors to obtain business visas electronically within a day. The Saudi Kingdom is also introducing a new process for visit visas for commercial firms working in Saudi Arabia. The Saudi Arabian General Investment Authority (SAGIA) has been in contact with businesspeople who have previously been issued with visas to discuss possible investment in Saudi Arabia. SAGIA is also looking to improve reduce its process of requests from foreign business delegations to two days, instead of the current 30-day wait period. (AN 11.01)

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5.14 Saudi Arabia Tells Expats to Register Fingerprints or Face Problems

Saudi Arabia’s Passports Department (Jawazat) has told expatriates to register their fingerprints and those of any dependents aged above six years in order not to lose access to electronic services. Jawazat said it will freeze residents’ computer records and thus their access to electronic services if they do not register. Fingerprinting centers have been set up in the Kingdom and the process will be smooth and hassle free, Jawazat claimed. Earlier, Jawazat denied it is about to launch the second part of a three phase crackdown on illegals in the country. According to the reports, illegal expatriates would be given three months to leave the country or face being imprisoned, blacklisted and deported with no chance of being allowed back in. The organization has, however, reminded people in Saudi Arabia on visit visas to leave before the visa expires, or face legal action. The punishments for overstayers include imprisonment an/or fines, plus deportation. Legal residents and citizens were reminded that they are also responsible for the behavior of visitors on their sponsorship and could face punishment for not reporting overstayers. (AB 18.01)

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►►North Africa

5.15 Egypt Sees Gas Self-Sufficiency By 2018

Egyptian Minister of Petroleum Tarek el-Molla expects Egypt to supply all of its own natural gas needs within two years. This further reduces the chances of exporting gas from Israel’s Tamar reservoir to Egypt, following two approvals granted by Egypt for liquefying Egyptian gas for export at the country’s liquefaction facilities. As of now, Egypt is producing 47 BCM of natural gas a year.

According to the report, in addition to its own production, Egypt is currently spending $250 million a month on imports of liquefied gas. According to el-Molla, these imports are enough to supply all the Egyptian economy’s needs, with an emphasis on industry and electricity production. El-Molla’s optimism about Egypt’s own independent supply is based, among other things, on the beginning of gas production from the huge Zohr reservoir, with production slated to reach an annual 11 BCM by the end of this year. A further supply will be obtained from increased production at the existing fields, among other things 5.2 BCM in increased production from the northern Alexandria field, starting in mid-2017. The Noras gas field, which currently produces 9 BCM annually, is also expected to increase production. In addition, Egypt is taking measures to step up exploration at potential gas fields. Several international companies were recently awarded exploration licenses, and oil and gas exploration agreements totaling $220 million were signed with BP and French company Total. (Globes 16.01)

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5.16 Bloomberg Again Names Morocco Among 50 Most Innovative Economies in the World

Morocco was again named among the 50 most innovative economies in the world and one of just two such economies in Africa by the 2017 Bloomberg Innovation Index said on 17 January. Morocco’s highest rankings were in the areas of R&D intensity, manufacturing value-added, and high-tech density, reflecting the North African country’s success in implementing its longtime strategy to develop its auto and aerospace manufacturing sectors, as well as its leadership in renewable energy development.

According to Morocco’s Minister of Industry, Trade, Investment and the Digital Economy Moulay Hafid Elalamy, Morocco’s aeronautics industry has grown by a factor of six in just a decade, and today boasts 121 companies. In September 2016, the Kingdom and Seattle-based aerospace company Boeing announced plans to establish a Boeing industrial ecosystem in Morocco that will bring 120 Boeing suppliers to the country, create 8,200 skilled jobs, and generate $1 billion in exports. Meanwhile, Morocco is now home to the world’s largest solar power plant. Indeed the 2016 Climate Performance Index ranked Morocco among the top ten countries making the most progress in addressing climate change and number one among “newly industrialized countries,” citing the country’s commitment to generating 42% of its energy needs from renewable sources by 2020. This number was since raised to 52% by 2030. Reflecting Morocco’s commitment to R&D, King Mohammed VI recently inaugurated the Mohammed VI Polytechnic University, a hub for research, training and innovation in Benguerir, Morocco. (MACP 19.01)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Central Bank of Cyprus Sees Growth Rate at 2.8% in 2016 & 2017

Private consumption which rose 2.5% last year, is expected to continue to increase 2.1% every year over the next three-year period reflecting an increase in disposable income, the central bank said. Fixed capital investment is forecast to increase 1.3% next year, after rising 19% this year, and 7.4% and 6.5% in 2018 and 2018 respectively and will include the expansion of the fuel storage terminal in the Vassilikos area, the Larnaca and Agia Napa marinas, as well as other projects financed by the European Investment Bank and the European Bank of Reconstruction and Development. Public consumption is forecast to rise 1.6% next year after shrining 0.5% in 2016, before it rises 1.2% in 2018 and 2% in 2019, the central bank said, as the government will start paying compensation to public sector workers for the purchasing power lost to inflation. (Cyprus Mail 22.01)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israelis Express Greater Trust in Legal System

The Israeli public’s trust in the Supreme Court, the Attorney General and the State Prosecutor’s office rose in 2016, according to the 15th annual public sector performance index published by Haifa University and Ben Gurion University of the Negev (the index began in 2001, but was omitted in 2015). According to the index, public trust was the highest it has been since the index was first published in 2001, following a prolonged downtrend in public trust in the legal system in recent years.

The data, which were gathered until September 2016, show that public trust in the Attorney General and the State Prosecutor’s Office is at the highest level since the index began. Trust in judges in general, especially military judges, is high. The index examines public trust in a large number of institutions and public servants and rates them on a scale of 1 to 5, with ratings of 1 and 2 corresponding to great distrust and distrust, respectively, 3 corresponding to medium trust, and ratings of 4 and 5 corresponding to trust and great trust, respectively. The index, currently the most comprehensive in Israel, is based on conservative and reliable methodology providing consistent reporting using tools for a comparative assessment of the public’s views and concepts towards a wide range of the services it receives. This is the only index currently capable of providing a comprehensive long-term perspective on the connection between the public, public administration, and government in Israel. A representative sample of the entire adult population in Israel numbering 453 people participated in the survey. The data were gathered in May-September 2016.

Public trust in the legal system reached a peak of 3.25, the highest level since the index was started in 2001, compared with 3.07 in 2014. This puts the legal system in fifth place in Israel among the 22 public institutions examined. The level of trust in the judges themselves is high to very high. The level of trust is in military judges 3.47 and 3.38 in non-military judges. (Globes 23.01)

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*REGIONAL:

7.2 Final Court Ruling Declares Egyptian Sovereignty over Tiran & Sanafir Islands

Egypt’s Supreme Administrative Court (SAC) issued a final ruling on 23 January confirming Egypt’s sovereignty over the Red Sea islands of Tiran and Sanafir, stating that the Egyptian government has not provided adequate evidence supporting Saudi Arabia’s claim to the land. According to the ruling, therefore, the executive branch of Egypt’s government does not have the administrative authority to cede the territory to Saudi Arabia.

In April, a lawsuit was filed in the Court of Administrative Justice (CAJ) to challenge the controversial agreement signed by Egyptian Prime Minister Sherif Ismail and Saudi Arabian Deputy Crown Prince and Defense Minister Mohamed bin Salman during King Salman bin Abdel Aziz’s April 2016 visit to Cairo. The CAJ ruled in June that Prime Minister Sherif Ismail violated the Constitution by signing the agreement and nullified his signature — the court could not rule on the legitimacy of the agreement itself, however, as international agreements fall outside of its jurisdiction. The government challenged this ruling on several fronts: appealing the decision, filing a request for injunction to stay its implementation, preemptively submitting the deal to Parliament and attempting to circumvent and challenge judicial jurisdiction.

While Monday’s ruling was the final verdict in the appellate process within the State Council regarding the agreement, the state filed a separate appeal in August before the Supreme Constitutional Court (SCC) claiming the State Council has no jurisdiction over international agreements. This appeal remains pending, having been adjourned to 12 February. (Mada Masr 16.01)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 DarioHealth Raises $3 Million to Expand Markets for Smart Blood Glucose Monitoring System

DarioHealth announced the execution of definitive agreements for an aggregate raise of $5.1 million. The private placement transaction was organized by DarioHealth. DarioHealth closed on $3.1 million of the transaction on 9 January 2017, with the closing of the remaining $2 million to occur upon receipt of stockholders approval pursuant to NASDAQ rules. The offerings are expected to result in gross proceeds of approximately $5.1 million, assuming stockholder approval for the $2 million portion of the transactions is obtained.

Crowdfunding equity platform OurCrowd Qure led the investment round. The company, which has also done business as LabStyle, said it will use the funding to expand the company’s existing markets as well as move into new geographic areas. Dario launched in the US in March 2016 after receiving FDA clearance, and launched in Canada in 2015. They’ve had a CE Mark for the system since 2013. The pocket-sized Dario device consists of a glucose meter, a disposable test strip cartridge, and lancing device. The companion app, available on iOS and Android devices, includes a nutrition guide, logbook, and monitoring system. The app allows users to view all their information as well as insights and patterns in their data.

Jerusalem’s DarioHealth is a leader in digital health self-management solutions. DarioHealth delivers the ability to combine and analyze consumer health data to personalize treatment and advance medical knowledge. Dario’s smart diabetes management solution is a platform for diabetes management that combines the Dario Blood Glucose Monitoring System all-in-one blood glucose meter, native smart phone app, website portal and a wide variety of treatment tools to support more proactive and better informed decisions by users living with diabetes, their doctors and healthcare systems. Having recently launched in the largest market in the world for glucose monitoring, U.S. sales are expected to have a significant impact on revenues and gross margins. (DarioHealth 12.01)

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8.2 Monsanto & NRGene Global Licensing Agreement for Big Data Genomic Analysis Technology

Monsanto Company and NRGene have reached a non-exclusive, multi-year global licensing agreement on NRGene’s genome-analysis technology to enhance Monsanto’s ability to predict, compare and select the best genetic makeup from its vast data sets of genetic, genomic and trait information. NRGene’s platform, GenoMAGIC, was developed by a unique mix of highly experienced algorithm designers, software engineers, plant breeders and plant geneticists and is used by seed companies and major academic and research institutions around the world.

Both companies noted their dedication to developing technologies that support farmers as they work to grow better harvests, protect their crops and deliver more to society in the face of mounting environmental challenges. Monsanto’s research and development (R&D) pipeline is focused on providing solutions to those challenges through plant breeding, plant biotechnology, crop protection, ag biologicals, and data science.

With nearly half of Monsanto’s annual R&D investment focused on plant breeding, the use of leading genome analysis technologies like GenoMAGIC – along with the industry’s largest testing capability and scale and premier discovery technologies – are expected to increase current genetic gain. Monsanto may expand its relationship with NRGene into a longer-term commitment following an in-depth evaluation of the technology. The GenoMAGIC platform extends Monsanto’s capabilities for genome selection, trait discovery, and genome enhancement.

Ness Ziona’s NRGene is a genomic big data company developing cutting-edge software and algorithms to reveal the complexity and diversity of crop plants, animals and aquatic organisms for the most advanced, sophisticated breeding. NRGene tools have already been employed by some of the world’s leading seed companies, as well as the most influential teams in academia. (Monsanto 12.01)

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8.3 Illumina & NRGene Accelerate Development of New Molecular Breeding Tools for Cattle

San Diego’s Illumina and NRGene announced a collaboration to develop new molecular breeding tools for cattle. As a first step, the companies also announced the completion of a high quality genome assembly of the Nellore cattle in conjunction with researchers at the Universidade Estadual Paulista in Brazil. The companies will work together to sequence and assemble additional cattle individuals from different breeds to accelerate knowledge of genetic variation across all cattle breeds. This information will aid in the development of new commercial tools that can be used for genomic selection and other genomic technologies in cattle, helping to accelerate breeding programs to enhance global food (meat and milk) production efforts.

Nellore (bos indicus) is the most dominant zebu beef cattle breed for food production in the tropical regions of the world. The sequencing and assembly of its genome was completed using Illumina next-generation sequence data and NRGene’s cloud-based DeNovoMAGIC 3.0 assembly software package. As more cattle genomes are generated, NRGene’s PanMAGIC will be used to compare the complete genome sequences of multiple individual samples to capture the broad genomic diversity. This information will be used to design more efficient genotyping tools to support cattle breeding programs.

The combination of NRGene’s and Illumina’s technologies has already been used for other agriculture projects to decode some of the most complex genomes including the hexaploid bread wheat, tetraploid heterozygote mango, octoploid heterozygote strawberry, along with dozens of new maize, soybean, cotton, and canola genomes.

Ness Ziona’s NRGene is a genomic big data company developing cutting-edge software and algorithms to reveal the complexity and diversity of crop plants, animals and aquatic organisms for supporting the most advanced and sophisticated breeding programs. NRGene tools have already been employed by some of the leading seed companies worldwide as well as the most influential research teams in academia. (Illumina 12.01)

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8.4 Kitov Enters Immuno-Oncology Field Through Acquisition of TyrNovo

Kitov Pharmaceuticals Holdings announced the expansion of its pipeline through the acquisition of a majority stake in TyrNovo, a privately held developer of novel small molecules in the immuno-oncology therapeutic field. The expansion into developing immuno-oncology drugs comes as Kitov plans to file its New Drug Application (NDA) with the U.S. FDA for its flagship combination drug, KIT-302, which is intended to treat osteoarthritis pain and hypertension simultaneously, in Q1/17, with commercial launch anticipated for the first half of 2018. Kitov plans to harness its development and regulatory capabilities in proceeding towards submitting an investigational new drug (IND) application with the U.S. FDA and initiate clinical trials for its newly acquired drug, NT219.

Kitov will initially acquire an approximately 56% equity stake in TyrNovo from its majority shareholder, for consideration of $2 million in cash and $1.8 million equivalent ordinary shares of Kitov based on the closing price of Kitov’s shares on the TASE on January 11, 2017. Following the closing of this initial acquisition, which is expected to take place on January 13, 2017, Kitov anticipates that it may acquire additional equity stakes in TyrNovo from all or part of TyrNovo’s additional minority shareholders for consideration consisting of ordinary shares of Kitov in such amounts as to be agreed with the shareholders.

Herzliya’s TyrNovo is developing NT219, a small molecule originally developed by Dr. Hadas Reuveni and Prof. Alexander Levitzki at the Hebrew University, and exclusively licensed from Yissum, the Hebrew University Research Development Company. TyrNovo demonstrated the potential of NT219 to overcome resistance to multiple anti-cancer drugs, by using the Patient-Derived Xenograft (PDX) models.

Tel Aviv’s Kitov Pharmaceuticals is an innovative biopharmaceutical drug development company. Leveraging deep regulatory and clinical-trial expertise, Kitov’s veteran team of healthcare professionals maintains a proven track record in streamlined end-to-end drug development and approval. Kitov’s flagship combination drug, KIT-302, intended to treat osteoarthritis pain and hypertension simultaneously, achieved the primary efficacy endpoint for its Phase III clinical trial and its New Drug Application with the U.S. FDA is currently being prepared for submission. (Kitov Pharmaceuticals 12.01)

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8.5 Zebra Medical Vision’s New Algorithm Detects Compression & Other Vertebral Fractures

Zebra Medical Vision announced the latest algorithm to be included in its growing Deep Learning Imaging Analytics platform. The algorithm, capable of detecting vertebral fractures, is the latest addition to a line of automated tools that were announced in the past year, among them algorithms that automatically detect low bone mineral density, breast cancer, fatty liver, coronary artery calcium, emphysema and more.

The Zebra VCF algorithm automatically identifies and localizes compression fractures. The algorithm uses deep learning to differentiate between compression fractures and more ubiquitous degenerative endplate changes and osteophytes. This knowledge assists healthcare providers in accurately identifying people at risk and placing them under supervision or fracture prevention programs to reduce the risks of subsequent osteoporotic fractures. The new algorithm, once released commercially, will be offered as part of Zebra’s Imaging Analytics engine for care providers, as well as on its Profound platform, which allows users to upload their imaging scans and receive automated insights regarding their imaging data.

Kibbutz Shefayim’s Zebra Medical Vision uses machine and deep learning to create and provide next generation products and services to the healthcare industry. Its Imaging Analytics Platform allows healthcare institutions to identify patients at risk of disease, and offer improved, preventative treatment pathways to improve patient care. (Zebra Medical Vision 17.01)

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8.6 RondinX Accelerates Drug Development with a Breakthrough Computational Platform

RondinX unveiled a novel approach to discovering how changes in the human microbiome affect health and disease. RondinX’ cloud-based technology platform adds a new dimension to the microbiome drug development process by profiling and predicting microbial growth dynamics from single metagenomic samples. The scientific foundation was established at the Weizmann Institute of Science and exclusively licensed to RondinX from its commercial arm YEDA Research and Development Company. RondinX is also closely collaborating with Weizmann research groups. The company was seed financed by a group of early-stage investors including Elevator Fund and 8VC and has established a leadership team at its new premises in Tel Aviv.

The current generation of microbiome drug discovery platforms provide merely a snapshot of the microbiota, a breakdown of the types of organisms present and their relative frequency in a patient’s gut. This static snapshot falls short of providing the industry with a comprehensive tool for understanding the relationship between human microbiomes and disease. Furthermore, RondinX platform has proven to be hypersensitive to various types of microbiome perturbations and is able to prioritize and streamline potential therapeutic strategies. By using microbiome analytics including growth dynamics, the link between certain members of the microbiome community and specific diseases states has been demonstrated.

Founded in 2016 by leading microbiome experts, Ramat HaSharon’s RondinX has built a cutting-edge microbiome technology platform set to unlock the potential of microbiome therapeutics. RondinX technology, including its PTR (Peak-to-Trough) family of algorithms, exclusively licensed from YEDA (the commercial arm of the Weizmann Institute of Science), is a proprietary, cloud-based, computational pipeline, integrating raw metagenomics, other omics and patient metadata to derive both static and dynamic strain level insights into the bacterial ecosystem. (RondinX 17.01)

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8.7 Medasense Launches New Pain Monitoring Device Following CE Approval

Medasense Biometrics has received CE mark approval for its novel Pain Monitoring Device, PMD200. This new technology is now available to help physicians objectively assess a patient’s pain in critical care situations, where patients are unable to communicate. This allows physicians to ensure pain is properly managed. To address these challenges Medasense has developed PMD200, a pain monitoring device based on the patented NOL technology that quantifies patients’ physiological response to pain. The easy-to-use system consists of a non-invasive finger probe which acquires physiological signals from four different sensors and calculates dozens of pain-related physiological parameters. This data is then analyzed by artificial intelligence algorithms and converted into a single pain index, the Nociception Level (NOL) index, where 0 = no pain and 100 = extreme pain.

The company is also conducting research in other forms of pain, for example chronic pain including long-term back pain, with the aim of broadening the situations where the NOL Index could help with pain management.

Ramat Gan’s Medasense develops innovative medical devices and applications in the field of objective pain monitoring. The company is led by experienced professionals in the fields of signal processing and computer engineering, together with an extensive team of medical industry veterans and prominent pain specialists. Following extensive multidisciplinary research, the company has developed a novel index that quantifies the physiological response to pain. The breakthrough NOL (Nociception level) index technology paves the way for precision medicine, allowing for personalized and optimized pain care. (Medasense 18.01)

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8.8 Vention Medical Acquires Lithotech Medical

South Plainfield, NJ’s Vention Medical announced its recent acquisition of Lithotech Medical, an industry leader in complex nitinol wire-based technologies based in Israel. The acquisition will expand Vention’s broad portfolio of advanced components and technologies for the development and manufacturing of medical devices for the interventional market. In addition to supplying discrete nitinol components, Vention will now have the capability to seamlessly integrate nitinol into customers’ design and development projects. With its ability to scale, Vention will be able to leverage nitinol-based technologies for the manufacturing and assembly of devices from low-volume prototypes to high-volume production.

Founded in 2001, Katzrin’s Lithotech Medical employs a multidisciplinary team of technical experts including physicists, material and mechanical engineers, and regulatory and quality control experts. The team has designed and developed more than 100 products for customers worldwide, with dozens of products currently on the market. (Vention Medical 24.01)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 BIRD Foundation Issues New Call for Proposals to Foster Advanced Technologies for First Responders

The Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation announced a new Call for Proposals for ‘NextGen First Responder Technologies’ to promote and fund U.S.-Israel joint development in advanced technologies for First Responders. Projects can receive a conditional grant of up to 50% of their joint R&D budget, maximum $1m per project.

The program was established by the U.S. Department of Homeland Security (DHS) Science and Technology Directorate (S&T) and the Israeli Ministry of Public Security (MOPS). Projects selected should focus on technologies relating to First Responders (Law Enforcement, Firefighters and Emergency Medical Services) and demonstrate significant commercial potential. Projects are defined as two companies or a company and a university/research institution (one from the U.S. and one from Israel) that are engaged in R&D cooperation and commercialization. Projects should demonstrate innovation in areas such as: Command, Control and Coordination, Communications, Data Analysis, Explosive & Hazards Detection, Protective Clothing, Sensors, Simulation & Training, Situational Awareness, Wearable Technologies and others.

Submission details and a full list of capability gaps are available on the Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation website. The deadline for executive summaries is February 15, 2017 and final proposals are due by April 5, 2017. Decisions will take place in June 2017. (BIRD Foundation 17.01)

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9.2 Kaymera Launches Fully-Secured Version of Google Pixel Phone

Kaymera Technologies announced the launch of the Kaymera Secured Pixel, a unique fully-hardened and secured version of Google’s flagship smartphone. Kaymera’s secured version of the Pixel phone uses the original Google device’s purpose-built hardware and retains all of the Pixel’s features and ergonomics, including the fingerprint scanner. It enables users to continue using all of their preferred Android applications, while ensuring that the phone, data stored on it and all communications (voice, data and messaging) are fully secured. The device is immune to all types of external exploit attempts. The secured Pixel phones are also fully managed using Kaymera’s management console. Kaymera devices are centrally managed via the company’s management dashboard, which shows the real-time risk status of each device, and gives users the maximum functionality, productivity, and ease of use according to their current environment.

Tel Aviv’s Kaymera offers government agencies, enterprises and SMEs worldwide the most powerful and versatile Mobile Threat Defense platform. With a contextual, self-learning risk analytics engine and multi-layer mitigation capabilities at its core, the platform can detect and prevent any mobile threat – in real time. (Kaymera Technologies 11.01)

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9.3 Mantaro & Beeper to Develop Advanced Technologies for Public Safety

Mantaro and Beeper Group have entered into a definitive letter of intent to enter into partnership for the purpose of further advancing their products, through the integration of their proprietary technologies. This partnership will better serve their Public Safety, First Responder and Commercial customers. Mantaro Networks, a Germantown Maryland based corporation, has been designing and manufacturing telepresence and robotic systems since 2010. Mantaro’s robotic products are sold to and serve commercial business, healthcare, construction and law enforcement customers. Beeper specializes in the development and manufacture of advanced wireless Bonding technology modems on boards and related components for the wireless broadband communication market. The company is focusing on development of data, voice and video link aggregators, and bonding which enable operators and service providers to deliver high-speed, mobile and “ad-hoc,” cost effective internet and telephony applications to corporate telecommuters, small businesses, home offices and residential users. The two companies have made a strategic decision to leverage their individual technologies, in order to enable wireless operators, NOC’s and broadcasters the ability to provide high speed, integrated video, voice and data on multiple platforms and means, to Police, FR, HLS, Military, MOD and other related “mission critical” end users. The companies will immediately commence with their work together, and expect to be introducing new products and solutions with customers by Q2/17.

Ramat Gan’s Beeper Communications is a leading provider of emergency communication and critical messaging services for Israel’s major security, military and homeland defense organizations. Established in 1988, Beeper develops and operates the following cost effective, end-to-end solutions: mass alert notification system and critical messaging solutions; SD-WAN and 3G/4G multi-channel bonder; earthquake early warning; M2M metering control and energy management Scada system. (Mantaro 12.01)

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9.4 Elbit Systems Wins $17 Million Contract to Supply BrightNite Systems to a NATO Air Force

Elbit Systems was awarded a contract to supply ground breaking, multi spectral BrightNite systems to an air force in a NATO country. The contract, in an amount of approximately $17 million, will be performed over a thirty-month period. Low-flying helicopters are especially vulnerable to threats such as difficult terrain, enemy fire and obstacles in the flight path. Sorties must be performed both day and night and often carried out in DVE conditions, adding to the already heavy workload. Prior to BrightNite, flight crews have had to rely on night vision goggles (which have limited capabilities) to accomplish their mission. Factors like complete darkness, poor weather conditions, brownouts, whiteouts and sandstorms limit the pilots’ Field of View (FOV). Lightweight, compact and cost-effective, BrightNite delivers a crystal clear visual of the landscape, flight data and especially the mission data, directly to both eyes of the pilot, enabling intuitive flight in a head-up, eyes-out orientation in pitch dark and other DVE and low visibility landing conditions.

Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense, homeland security and commercial programs throughout the world. The company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems. Elbit also focuses on the upgrading of existing platforms, developing new technologies for defense, homeland security and commercial applications and providing a range of support services, including training and simulation systems. (Elbit Systems 17.01)

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9.5 GuardiCore Named Finalist in Info Security Product Guide’s 2017 Global Excellence Awards

GuardiCore announced that Info Security Products Guide, the industry’s leading information security research and advisory guide, has named the company as a Security Startup of the Year finalist and Product Excellence of the Year finalist in the Deception category for the 13th Annual 2017 Info Security Products Guide Global Excellence Awards. These prestigious global awards recognize security and IT vendors with advanced, ground-breaking products and solutions that are helping set the bar higher for others in all areas of security and technologies.

GuardiCore is an innovator in internal data center security focused on delivering more accurate and effective ways to stop advanced threats through real-time breach detection and response. GuardiCore’s flagship product, the GuardiCore Centra Security Platform, is the only security product on the market today that provides a single, scalable platform that covers five critical capabilities for effective data center security and protection: flow visualization, micro-segmentation, breach detection, automated analysis and response. GuardiCore provides customers with un-paralleled visibility into their data center traffic, the ability to translate this visibility into fine-grained micro-segmentation security policies, and couples it with real-time breach detection and response capabilities based on innovative and dynamic deception methods and technology. All of this is accomplished without impacting server performance or traffic. The net result for GuardiCore customers is they are able to gain detailed visibility into their data center traffic, make well-informed policy decisions for micro-segmentation, and reduce the “dwell time” for active breaches to stop them before they result in data theft or other damage.

Tel Aviv’s GuardiCore is an innovator in internal data center security focused on delivering more accurate and effective ways to stop advanced threats through real-time breach detection and response. Developed by the top cyber security experts in their field, GuardiCore is changing the way organizations are fighting cyber attacks in their data centers. (GuardiCore 16.01)

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9.6 Inomize is Helping the Vision-Impaired to See

Inomize, a leading provider of turnkey ASIC design solutions, announced it was selected by Herzliya’s Nano-Retina for the design of their bionic retina ASICs. Inomize was selected by Nano-Retina to develop their ASICs, designed for revolutionary sight restoration product. Inomize was responsible for the analog design, verification, and back-end work. The Nano Retina solution is built from 2 ASIC components consist of mixed signal electronic circuitry, CMOS photo-sensors and IR recipients. The ASIC, implementing Nano-Retina 3DNi Technology was successfully delivered. Nano Retina’s product incorporates various miniature components in one tiny implant, approximating the size of a child’s fingernail bed.

Inomize is a leading provider of turnkey ASIC and SoC designs and specializes in managing complex ASIC projects. Inomize’ services includes system definition, architecture, algorithm, digital, verification, analog mixed signal, RF, synthesis backend, manufacturing and silicon validation. Inomize’ comprehensive expertise in semiconductors covers advanced CPU subsystems, a variety of modems (wireless and wire-line), video and imaging.

Netanya’s Inomize is a professional Research & Development firm specializing in the design and delivery of hardware solutions. Inomize offers a wide range of services tailored to meet your project needs and product constraints in terms of cost, performance and power consumption. Inomize successfully delivers ambitious projects on time and on budget. Inomize gets the maximum out of the available technology and, when necessary, pushes it to the limit using the latest advancements to meet the customer’s project needs. With years of experience and a proactive project management approach, Inomize reduces development time and minimize risks of complex hardware design projects. (Inomize 17.01)

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9.7 Transmit Security Makes Passwords Obsolete Using Mobile Device as Primary Authenticator

Transmit Security announced a $40m self-funded round of financing and unveiled a platform that will disrupt the $10b authentication software market. The technology enables organizations to displace passwords and implement any form of identity verification, on any device, across all their customer/partner facing channels. The Transmit Security Platform (SP) uses mobile devices as the primary delivery mechanism to add any form of primary or secondary identity verification (facial/selfie, eye, touch ID and fingerprint, voice biometrics, SMS, etc.) to any application (web, mobile, call center, point of sale, ATMs, etc.). Once deployed, an enterprise can make changes to all their authentication methods and identity risk flows without any code changes to their applications.

To eliminate the need to embed authenticators into each application, Transmit SP uses a simple interface to offload all authentication and provisioning tasks. It provides a wide set of built-in authentication methods that enable organizations to mix-and-match any combination of facial, eye, voice, fingerprint recognition, one time passwords (OTP), push notifications, pattern drawing, Device ID, and other 3rd party or internally developed authenticators. Once an application is connected to Transmit SP, any of the authenticators and any authentication process can be changed, added or removed without any software development. Transmit SP also supports any existing third-party authentication or anti-fraud products in use, and can orchestrate real-time responses based on customer configured policies.

Tel Aviv’s Transmit Security allows organizations to implement frictionless omni-channel (web, mobile, phone, ATM, branch) authentication without modifying their applications. The company’s technology supports any authentication technology, from any vendor, in one modular, micro-services platform that slashes time-to-market and cost-to-market for new identity related projects. (Transmit Security 11.01)

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10: ISRAEL ECONOMIC STATISTICS

10.1 For Third Consecutive Year Israel Registers Negative Inflation

Israel’s Consumer Price Index (CPI) was unchanged in December, as expected, the Central Bureau of Statistics reports, after falling 0.4% in November. This means that the CPI fell 0.2% in 2016. This was the third consecutive year that Israel had negative inflation, with prices falling 0.25% in 2014 and 1% in 2015. Outstanding price falls in December were: fresh fruit (3.6%) and culture and entertainment (1.8%). Outstanding price rises last month were: clothing and footwear (6.5%), fresh vegetables (4.6%). However, home prices rose 0.4% in October, November and have risen 8.1% over the past 12 months. (CBS 15.01)

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10.2 Israel’s Third Quarter Growth Revised Upwards

The Central Bureau of Statistics has upwardly revised Israel’s growth figures for Q3/16. The new figures for the third revision show 3.6% annualized growth, compared with the previous figure of 3.4% and the original figure of 3.2%. Private spending was up by an annualized 3.4%. Exports of goods and services rose by only 0.3%, showing that a problem exists, because this item includes both high-tech exports and exports of physical goods; since high-tech exports performed reasonably, exports of physical goods were clearly very low.

Investment in fixed assets jumped by an annualized 15.3% in the third quarter. This figure reflects mainly real estate purchases, due to the fact that according to various analyses by senior economists in Israel, investments in machinery and manufacturing equipment has been either very low or almost non-existent in recent years.

Business product rose by an annualized 4.2% in the third quarter, following rises of 5.4% in the second quarter and 2.5% in the first quarter. The Central Bureau of Statistics notes that the development of business product in the third quarter reflects increases in output in industry, mining and quarrying (an annualized 9.7%), construction (7.5%), transportation, storage and mail (8.3%), information and communications (5.5%), and financial services, insurance, real estate, and miscellaneous (9.5%). Output in commerce and hosting services was down by an annualized 2.8%. (CBS 16.01)

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10.3 Israel’s Debt-to-GDP Ratio Falls in 2016

On 22 January, Israel’s Ministry of Finance Accountant General Michal Abadi-Boiangiu published an initial estimate of the ratio of public and government debt to GDP in 2016. According to the estimate, the ratio, which includes debts of the local authorities, is projected to drop substantially to 62.1%. Excluding the local authorities’ debts, the ratio is projected to fall from 62.4% in the preceding year to 60.5%, a 1.9% decrease. The upward revision of growth figures by the Central Bureau of Statistics pushed the debt ratio lower than expected. The ratio of debt to GDP is a key indicator of Israel’s financial soundness, and is important in determining its credit rating. The final estimate of the debt-to-GDP ratio will be published in a few months in the framework of the annual report by the Financing and Credit section in the Ministry of Finance Debt Accountant General Department.

A comparative study by the Accountant General Department showed that Israel’s success in lowering its debt ratio was exceptional on an international scale. Israel’s debt-to-GDP ratio fell by 1.9% in 2015-2016, more than in any other Western country other than Germany and Slovenia. Since 2007, Israel has managed to cut its debt-to-GDP ratio by 11%, more than in any other developed country in the world, except for Norway.

The Ministry of Finance states that the main factors contributing to the reduction in the debt ratio are the nominal growth rate, the low budget deficit, and market factors, such as the negative increase in the Consumer Price Index, the strengthening of the shekel against the dollar and euro, and the ongoing fall in the interest rate on the government debt, a result of effective debt management by the Accountant General and her department. (Various 22.01)

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10.4 Israel’s High-Tech Exports Drop by 7% in 2016

On 16 January, the Central Bureau of Statistics announced that Israel’s hi-tech exports fell by 7.1% in 2016 from 2015. The figures show that exports by mixed high-tech industries dropped by 9.7% and exports by conventional technology industries by 0.5%. In contrast, exports by mixed conventional technology industries were up 13.9%.

One of the reasons that high-tech exports fell was that the Intel fab in Kiryat Gat closed down for work on its expansion, mainly in the first half of the year. Computer and electronic and optical devices exports, which account for 10.1% of total high-tech exports, sank by NIS 5 billion in 2016, out of a total NIS 6 billion decline in high-tech exports. Hi-tech accounted for 49% of all Israel’s NIS 200 billion exports of goods in 2016. It should be noted that most of Israel’s high-tech exporting power in recent years has consisted of exports of services (figures for which have not yet been published), including software products, rather than exports of hardware-based goods.

The trade figures show a NIS 50 billion trade deficit in 2016, the largest since 2012. While exports of goods were down 4.6%, imports of goods, excluding ships, aircraft, diamonds and energy products, climbed by 8.7%. Fuel imports plunged 22%, due among other things to plunging oil prices and increased use of natural gas, instead of imported coal. The Central Bureau of Statistics noted that the development of trade in goods in 2016 was affected by changes in the shekel rate against the currencies in which import and export transactions were conducted. The average shekel exchange rate fell 1.2% against the US dollar, 1.5% against the euro and 14.1% against the British pound, while rising 9.2% against the Japanese yen. (CBS 12.01)

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11: IN DEPTH

11.1 GCC: Major Challenges Remain to Gulf’s Move Away From Oil

Overall sovereign creditworthiness in the Arabian Gulf has continued to deteriorate, weighed by a weakening performance in Saudi Arabia, the region’s largest economy, according to Standard & Poor’s. A new research note that covers a total of 13 sovereigns in the region including Abu Dhabi, Bahrain, Kuwait, Oman, Qatar, Ras Al Khaimah, Saudi Arabia and Sharjah, said the average rating has suffered due to rating downgrade on Saudi Arabia. The ratings agency added that “significant challenges” remain to plans by GCC countries to diversify government revenues away from oil.

“We rate eight of the 13 MENA sovereigns in the ‘BBB’ rating category or above,” said S&P Global Ratings sovereign credit analyst Trevor Cullinan. “The average MENA sovereign rating is closer to ‘BBB’ than ‘BBB-‘, but has been trending downward. When weighted by GDP, the average moves closer to ‘BBB+’.” This average, weighted by nominal GDP, has fallen more sharply than the unweighted average over the past 12 months mainly because the rating on the region’s largest economy, Saudi Arabia has been lowered as the Gulf kingdom battles to protect its fiscal position against lower oil prices, he added.

Since July, S&P has also lowered its rating on Bahrain to ‘BB-‘ from ‘BB’ while revising outlooks on Egypt and Lebanon to stable from negative, and outlooks on Oman and Sharjah to negative from stable.

Available data for 2016 shows a weakening trend in GCC economic activity, reflecting the impact of low oil prices and the resulting fiscal consolidation and reduced banking sector liquidity. Cullinan said: “We expect average GCC GDP growth to slow to about 2% in 2016, compared with closer to 4% in 2015 and to remain around these relatively weak growth rates in 2017. “Governments across the region implemented expenditure cuts and subsidy reforms that have weakened both corporate and household activity, while reduced hydrocarbon deposits in regional banking systems and government domestic borrowing have increased interbank rates and squeezed banking sector liquidity.”

S&P said the long-term sustainability of GCC economic growth and the ability of their economies to absorb future increases in their working populations and diversify government revenues away from the hydrocarbons sector will rely on the prospects for growth in the non-hydrocarbon sector. “In our view, significant challenges remain in this regard and meaningful diversification will not happen in the short term,” its report said. S&P Global Ratings publishes a MENA sovereign ratings outlook twice a year, with the next one to be published in July. (S&P 21.01)

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11.2 KUWAIT: IMF Executive Board Concludes 2016 Article IV Consultation with Kuwait

On January 6, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kuwait and considered and endorsed the staff appraisal without a meeting.

Economic activity in the nonoil sector has continued to expand, albeit at a slower pace, reflecting the impact of lower oil prices. Nonhydrocarbon growth slowed from 5% to an estimated 3½% in 2015, as higher uncertainty weighed on consumption. Notwithstanding an improvement in project implementation under the five-year Development Plan (DP), available indicators point to a further modest softening in nonoil growth this year. Inflation, which has been hovering at around 3%, is set for an uptick to about 3½ this year, reflecting the recent gasoline price increases.

Notwithstanding efforts to contain government spending, the fiscal and external accounts have deteriorated markedly and budget financing needs have emerged. The authorities’ principal measure of the fiscal balance – which excludes mandatory transfers to the Future Generations Fund (FGF) and investment income and better reflects the government’s gross financing challenge – has swung into a large deficit (17½% of GDP in 2016/17). Even when including investment income and before transfers to the FGF, fiscal surpluses have vanished.

The financial sector has remained sound and credit conditions favorable. As of June 2016, banks featured high capitalization (capital adequacy ratio of 17.9%), robust profitability (return on assets of 1%), low nonperforming loans (ratio of 2.4%), and high loan-loss provisioning (206% coverage). Bank liquidity has been comfortable. Credit to the private sector has been increasing at a solid pace, driven mainly by installment loans.

Executive Board Assessment

In concluding the 2016 Article IV Consultation with Kuwait, Executive Directors endorsed staff’s appraisal, as follows:

Kuwait is well positioned to mitigate the impact of lower oil prices on the economy. The fiscal and external positions have deteriorated significantly and nonhydrocarbon growth has moderated—from 5% in 2014 to about 3¼% this year—as a result of the drop in oil prices. However, large financial buffers and low debt provide policy space to implement the necessary fiscal consolidation gradually while increasing public investment to support growth. Against this backdrop, the fiscal and external positions are projected to improve as adjustment proceeds and oil prices recover somewhat, and nonoil growth is projected to regain momentum to about 4% over the medium term supported by a continued improvement in project implementation under the five-year Development Plan. The main risk to the outlook stems from a further sustained decline in oil prices. Slow project implementation, more volatile global financial conditions and spillovers from heightened regional security risks could also affect economic prospects.

Nonetheless, “lower-for-longer” oil prices call for steadfast implementation of reforms. The government’s six-pillar reform strategy is rightly focused on reforming public finances and promoting a greater role for the private sector in generating growth and jobs for nationals. Efforts to streamline current spending, including the recent gasoline and utility price reforms, and measures to facilitate business licensing are steps in the right direction. Maintaining consensus in favor of economic transformation and sustaining the reform momentum is paramount for the success of the strategy.

Fiscal reforms should focus on addressing underlying fiscal vulnerabilities and be designed so as to minimize any dampening impact on growth. Gradual removal of fuel and electricity subsidies and control of the wage bill through a well-designed reform that avoids significant upfront costs would help reduce budget rigidities, while the introduction of the VAT and business profit tax and the repricing of government services would go a long way in diversifying revenue away from oil. These fiscal reforms should be designed and sequenced with a view to striking a balance between generating fiscal savings in line with intergenerational equity levels and mitigating the drawbacks of fiscal consolidation on economic activity. A comprehensive medium-term fiscal framework based on a top-down approach and articulated around clearly-specified medium-term fiscal objectives would help guide the consolidation plans and reduce implementation risks.

Fiscal financing options should be assessed within a comprehensive asset/liability management framework with due consideration to macro-financial linkages. Consistent with the government’s current approach, a balanced financing mix that combines continued drawdown of assets in the GRF, measured amounts of domestic bond issuance and some external borrowing would mitigate potential crowding out of private sector credit while maintaining a high level of liquid buffers. Continued progress toward strengthening the institutional and legal frameworks, including to support a more comprehensive and longer-term view on asset and liability management, improving debt issuance processes, and fostering increased transparency would ensure effective debt management and support the development of domestic fixed income markets.

Steps can be taken to further strengthen financial sector resilience. In light of the potential risks from a sustained further decline in oil prices and given the financial sector risks inherent to a largely undiversified economy, the CBK initiatives to enhance financial sector surveillance are welcome. A formal framework for operationalizing macro-prudential measures, reforms to facilitate debt recovery, developing a liquidity forecasting framework, and strengthening the crisis management framework, including by introducing a special resolution regime for banks and a deposit insurance mechanism, would help further enhance financial sector resilience and ensure orderly resolution of banks in the event of stress.

The peg to an undisclosed basket of currencies is appropriate and can be further underpinned by fiscal adjustment. The peg has provided an effective nominal anchor. A moderate current account gap can be largely closed by increasing fiscal savings as recommended over the medium term.

Labor market reforms and efforts to promote the role of the private sector are important to foster diversification and boost job creation for nationals. Better aligning labor market incentives is necessary to encourage nationals to take on private sector jobs and private firms to create opportunities for them. Greater use of privatization and partnerships with the private sector will help boost productivity, private sector investment and job creation for nationals. Relying on stronger legal and institutional frameworks that foster competition and reduce hidden costs and contingent liabilities for the government is important for the success of this strategy. This should be combined with further steps to improve the business environment, including reforms to facilitate access to land and finance, reduce the burden of administrative procedures and excessive regulations, foster competition, and facilitate SMEs’ access to finance. (IMF 17.01)

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11.3 SAUDI ARABIA: A New Social and Political Order for Saudi Arabia?

Mohamed Elmeshad wrote in Sada on 12 January that Saudi Arabia’s plans of privatizing the economy to overcome oil dependence hinge on opening up its political sphere.

Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman has not only been at the forefront of the kingdom’s political and military forays in the region, but also at the center of what could represent a more profound economic change. Under his leadership, the government announced Vision 2030, seeking to diversify the economy and streamline welfare and subsidy spending. However, the vision is missing long-term political and social reform necessary to break the oil dependency, namely dismantling the political order and drawing new social contracts that are not based on the distribution of oil rents.

Saudi Arabia’s oil wealth is a major reason the ruling system has been stable for so long. This wealth has not only allowed the government to maintain powerful global allegiances and domestic security, but also provided it with the means to keep the population generally content. With Vision 2030, this crutch will be weakened. As the kingdom prepares to shift from a rentier economy to a production-based economy (and eventually a knowledge-based one), a more inclusive and participatory political system necessary for economic development is still missing. One without the other will not be possible, yet political reform does not seem to be factored into the grand vision.

The government’s policies and spending patterns that have helped maintain its power had always been inextricably linked to the price of oil and its revenue. During the boom in oil prices between 2003 and 2013, the Saudi government was able to invest heavily in education, health, infrastructure and job creation. This is in addition to the funds necessary to sustain the expenses and exorbitant set monthly stipends for every member of the royal family, probably the world’s richest. Furthermore, the ruling classes provided citizens easy access to high-paying, public-sector employment, thereby discouraging engagement in productive entrepreneurial activity. The private sector was unable to attract much local talent, as public-sector jobs were paying on average three times more than the private sector. The state was the primary provider of everyday income, rather than a welfare services provider, allowing the government to maintain its “authoritarian bargain.”

However, over the past three years, the government experienced its first fiscal deficits in nearly two decades, and the 2016 deficit is estimated to be well over $75 billion. The kingdom hopes that the plan laid out in Vision 2030 will make the economy, spearheaded by the private sector, more mature, prosperous, and sustainable. An integral element within that proposed mechanism inherently entails profound shifts in the social contract between the government and its people. In order for the private sector to produce more than 65% of GDP, as envisioned, labor must be shifted away from the reliable and high-paying but low-productivity public sector. In order for the government to truly diversify its own income, it must expand its tax collection system. However, the issue of tax collection generally entails the expectation of higher accountability from governments. For a Saudi regime that is now experimenting with income tax increases as part of a new economic plan, it does not seem to be making similar efforts to shift political institutions to reflect citizens’ expectations of transparency – not a hallmark of this monarchy. In short, the government and system of rule would shift from that of patronage to more conventional administrations of the public domain.

This shift is further complicated by citizens’ continued expectations of state patronage. Citizens have become used to viewing the state – by extension, the monarchy – as providers. The state had in the past reinforced that by providing expansive social programs and direct cash transfers of the oil wealth to keep locals quiet. In 2011, when the Arab Spring swept the region, the late King Abdullah bin Abdulaziz Al Saud gave out cash handouts worth a reported $37 billion to the population. At the same time, the government also signed off on nearly $130 billion to finance the creation of 120,000 new public sector jobs and building 500,000 houses. They set a minimum wage of $800 in the public sector, gave all civil servants a bonus, and set up a new unemployment assistance scheme. While these transfers were effective at the time, the government will not be able to afford them, based on the current direction of budget cuts – especially if the budget becomes less liquid as it moves away from oil dependency. This is not to discount some of the more admirable and effective means of public spending, such as an immense foreign scholarship program, and the relatively high levels of spending on scientific research and medical programs. However, even those have become subject to budget cuts.

For the Saudi citizen to wholeheartedly accept such a shift, government institutions would need to lead the way by exhibiting changes in their own right. The Saudi monarchy does not seem to be looking for any structural change to its governance, apart from the deputy crown prince’s nominally modern and forward-thinking approach. To the contrary, there have been indications that freedom of speech and political opposition will continue not to be tolerated in the future – especially regarding religion or the ruling family, issues where recent judicial convictions and even death sentences show the monarchy still clings to the traditional power structure based on religion, tribalism and oil. Even the spread of ideas that could challenge or gradually develop these structures risks being obstructed, creating an intellectual barrier between the monarchy and the outside world. Though Saudi politics are highly complex, at the very least the economic liberalization the monarchy desires would develop more efficiently if there were more openness to progress on all levels.

In the past, Saudi Arabia has focused on implementing counter-cyclical fiscal policies, whereas the need for political change might be just as pressing. While the monarchy had bought some time by introducing these measures, it did not address the need for political and economic institutional transformation to prepare for when the oil cycle was broken, or at least profoundly altered. Even though oil wealth (and periodic price booms) offered the Saudi regime a comfortable cushion to maintain order despite minimal political freedoms, this cannot be the assumption moving forward, especially after acknowledging that the economic order must be changed.

Mohamed Elmeshad is an Egyptian journalist and PhD student at the School of Oriental and African Studies (SOAS) in London, where he is also a researcher. (Sada 12.01)

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11.4 EGYPT: Will New Law Attract More Foreign Investment to Egypt?

Nayrouz Talaat posted on 13 January in Al-Monitor that experts say drafting a new investment law is not enough to lure foreign investors back to Egypt — the entire business climate will need to change.

Egypt has finally come out with the much-anticipated new investment law, raising debate among economists about whether the amendments introduced to the law would lure more foreign direct investment (FDI) to the country. The new draft law, released by the Ministry of Investment at the end of December 2016, included a number of incentives that decision-makers hope will help draw in more investments and create an attractive business climate.

According to the Ministry of Investment data, foreign direct investments grew by 49.3% to $6.9 billion in 2015, up from $4.6 billion a year earlier. Since its issuance late last year, the law has been bogged down in discussions between economists and investors who believe that the new law has brought long-awaited amendments to many of its articles.

According to Article 15 of the new investment law, the Egyptian government will totally ensure fair agreements to foreign investors on an equal footing with local investors. According to the same article, foreign investors will obtain a residence during the period of the investment project. Investors will also be exempt from stamp taxes and fees for documenting the company, according to Article 30 of the law. In addition, investors can recruit 20% of foreign employees in their projects, up from the 10% stated in the previous law.

Lawyer Ahmed Khalil said the new investment law is promising, as it will help create “out-of-court discussions to settle investor-state disputes and grant incentives for investment in specific sectors.” Khalil told Al-Monitor, “According to the investment law, the General Authority for Investments and Free Zones will be a one-stop shop for investors, an important step to end prolonged procedures of establishing a business and eliminate bureaucracy.” Khalil said the new investment law offers a better approach in settling foreign investors’ disputes. “Regarding disputes, the law sets out equal treatment to both local and foreign investors, as both can pay a bail to drop a court ruling,” he said.

Moreover, the law offers a 2% unified custom tax on imported equipment and machinery. In addition, a technology-based system for registering companies will be implemented after 90 days from the date of issuing the law.

According to the World Bank’s Ease of Doing Business Index 2013 report, Egypt has made progress in reducing the number of procedures required to start a business to six and the number of days to seven. According to the Investment Ministry reports, the most populous country saw its ranking in global FDI inflows increase from 15th globally the previous year to fifth place in 2016.

Economist Gouda Abdel el-Khaleq said that attracting investments to the country cannot take place only by drafting a new law, but the whole business climate must be attractive. “The government should take certain moves, such as cutting customs taxes, lowering inflation rates and guaranteeing high rates of returns on such investments,” he told Al-Monitor. The Egyptian government has recently been introducing economic reforms to stimulate economic growth, reduce its budget deficit and attract foreign investors.

The Central Bank of Egypt devalued the Egyptian pound in November 2016. The Egyptian pound was floated to 13 Egyptian pounds per US dollar. But the average rate currently ranges to hit 18 Egyptian pounds versus $1. Prior to the devaluation, the US dollar’s official selling price was 8.88 Egyptian pounds, while the buying price stood at 8.85 pounds. The step, which aims to regain stability in the local economy, was taken by the government to solve the hard currency crunch in recent months that scared off some foreign investors.

Khaleq said the country has to boost its overall macroeconomic outlook. “There must be economic stability, and foreign investors should feel that in order to pump their investment in,” he added.

The country has witnessed two revolutions — in January 25, 2011, and June 30, 2013, ousting former Presidents Hosni Mubarak and Mohammed Morsi. The unrest that followed the two revolutions has scared off both tourists and foreign investors, putting much pressure on the national economy.

In 2015, Egypt held a major investment conference to draw back foreign businessmen. The conference offered investment opportunities to investors from the Gulf, Asia and Africa, together with some European countries in different sectors including energy, textiles, automotive and transportation. Egypt is among the top 10 signatories of Bilateral Investment Treaties worldwide, with a total of over a hundred treaties. It is also ranked second, after Angola, in the list of top African countries, according to UNCTAD World Investment Report 2016.

Ahmed Koura, a banking expert, said that the country should start giving training programs to personnel dealing with investors to guarantee facilitations in paper documentation and license issuance. “In addition, the facilitation of money transfer anytime must be enforced and executed as shown in the articles of the new investment law,” he added. “Tools of enforcing laws bring fruitful results, not only the law itself,” the expert noted. (Al-Monitor 13.01)

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11.5 TUNISIA: Tunisia’s Fledgling Gulf Relations

On 17 January, Sada posted Youssef Cherif’s comments that tensions persist between Tunisia and its former ally the UAE, but Tunisia hopes renewed ties could balance out its current dependence on Qatar.

The weak Emirati attendance at Tunisia 2020, Tunisia’s investment conference held between 29 and 30 November 2016, highlights the country’s uneven relations across the Arabian Gulf. The only Emiratis present were two executives from Dubai Holding, a company owned by Emir of Dubai Sheikh Mohammed bin Rashid Al Maktoum. They were deferentially received by Prime Minister Youssef Chahed as heads of state. Yet though more than $14 billion in loans, grants and investments were pledged during the conference, and several large-scale projects were announced, the UAE’s only announcement at the conference was that EIT (part of Dubai Holding) was selling its 35% stake in Tunisia’s phone operator Tunisie Telecom.

By contrast, Qatari Emir Sheikh Tamim bin Hamad Al Thani, the only foreign head of state attending, announced a financial package of $1.25 billion and the Qatari ambassador to Tunisia signed an additional $2.2 million check to cover the costs of the conference. Overall, Tunisia 2020 looked like Qatar’s response to the UAE-organized Egypt Economic and Development Conference (EEDC) in March 2015, which had allowed the UAE to expand its influence in that country.

Tunisia’s relationship with Qatar grew closer after the 2011 revolution, partly because Al Jazeera had criticized Zine El Abidine Ben Ali’s policies in previous years. Under the Ennahda led-coalition between 2011 and 2013, cooperation between the two countries grew across various sectors, including the economy, social and political development, and military and security. For example, in 2012 former Emir Hamad bin Khalifa Al Thani signed ten agreements with the Tunisian government, including investment and construction deals and to provide humanitarian services and vocational training. Later that year, the Tunisian Ministry of Defense announced that Tunisian armed forces participate in military drills in Qatar even as Doha supplied vehicles to the Tunisian army. Ennahda’s opponents alleged that Qatar was showering money on Islamist organizations like Ennahda and, to a lesser extent, on other political parties like the Congress for the Republic (CPR). At the time, Tunisia was counted as a main Qatari ally, together with Turkey, Egypt, Libya, and non-state actors including Hamas and some segments of the Syrian and Yemeni opposition.

Once Ennahda resigned from government in January 2014 following a protracted domestic impasse and growing tension, Qatar’s standing in Tunisia became less certain. However, Qatar could still claim Tunisia as a foreign policy success – it had supported a country whose democratic transition seemed to work. Qatar has kept backing Tunisia through loans and donations, and continues to provide positive media coverage through influential state-supported outlets such as Al Jazeera and Al-Araby Al-Jadid.

In contrast, the UAE, which had been Tunisia’s second-largest trading partner in the Arab world (after Libya), saw its bilateral ties grow tense after 2011. On the pretext that the future of Tunisia’s politics and security were too uncertain, it halted its investments in the country and gradually distanced itself diplomatically from Tunisia, a divide that peaked with the withdrawal of the Emirati ambassador to Tunis in September 2013. Tunisia’s inclusion of Islamists in politics, its policy of neutrality in Libya and the alliances the country joined were in opposition to the UAE’s own strategic interests.

However, as Qatar’s favored actors in Tunisia – Ennahda and the CPR – were weakening, the UAE opened channels of communication with the opposition, mainly Nidaa Tounes. Once the latter came to power in early 2015, the UAE sent Foreign Minister Abdullah Bin Zayed Al Nahyan to Tunis, his first visit since May 2011. He met with President Beji Caid Essebsi, the founder of Nidaa Tounes, inviting him to visit Abu Dhabi, as several Tunisian officials did later that year. Essebsi also visited to the UAE’s client Abdel Fattah el-Sisi, inviting him to visit Tunisia. The Emirati leadership was looking to move Tunisia into its own camp and away from Qatar’s. They had calculated that their support for Nidaa Tounes would exclude Islamists from the political scene and lead Tunisia to recognize Libya’s eastern government and Khalifa Haftar, its military strongman and Abu Dhabi’s ally. Neither outcome materialized. Furthermore, the government formed by Nidaa Tounes kept excellent ties with Qatar.

As a result, Emirati–Tunisian relations remained tense. By mid-2015, many Tunisian businessmen complained that their visa applications to the UAE were refused for unclear reasons, and Tunisian expatriates living there had difficulties renewing their work permits. The Emirati ambassador to Tunis argued that this was merely the result of increased measures against violent Islamist extremism, given the large number of Tunisian youth leaving to fight in Syria. Many among those whose applications were turned down, however, had no known links to either radical movements or Islamist politics, and the Emirati response seemed instead a means of pressure on the Tunisian government.

President Essebsi attempted to improve the situation in September 2015 by flying to Dubai for the funeral of Sheikh Rashid bin Mohammed bin Rashid Al Maktoum, son of the Emir of Dubai, but he was unable to arrange a meeting with Mohammed Bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi and the country’s de facto leader. Essebsi was later scheduled to visit Abu Dhabi in October 2015, but the Emiratis reportedly postponed this meeting.

In September 2015, perhaps in an attempt to strike back, Prime Minister Habib Essid suddenly called for a ministerial meeting to examine Emirati mega-projects that had been announced prior to 2011 but never implemented due to subsequent corruption investigations involving Ben Ali’s family. Yet the Emiratis did not want to abandon these projects, hoping to make them bargaining tools to influence Tunisian party politics. They would make promises that once the political crisis was resolved, meaning once their preferred Tunisian allies were secure in power, they would again invest in those projects, keeping their Tunisian partners running after a mirage. Yet Essid threatened to cancel the deals altogether and find other investors if the Emiratis were not willing to move forward.

As tensions continue, Emirati media and research outlets remain critical of Tunisia’s ongoing transition, also encouraging a number of Tunisian journalists, prominent figures and intellectuals to share these criticisms. For example, stories and opinions previously expressed by Emirati channels are frequently reproduced by some Tunisian outlets. Meanwhile stalled economic cooperation is costing Tunisia billions of dollars in frozen investments, and visas remain an issue. As evidenced by the UAE’s small showing at Tunisia 2020, there are no signs of improvement.

Yet Tunisia hopes to move away from being dependent on Qatar alone and has been courting the UAE in order to balance out this relationship. Given the uncertainty of future U.S. and E.U. support, Tunisia is looking to strengthen its ties across the Gulf. Tunisia hopes that scaling back ties with Qatar will also calm its internal political tensions, calculating that perhaps greater Emirati support for leading secular parties could counterbalance Qatari support for Ennahda.

The Emiratis have so far favored a zero-sum game: either the Tunisian government accepts their conditions of keeping Islamists out of government and building stronger ties with the pro-Haftar government in eastern Libya, or it gets nothing. But Saudi Arabia, the UAE’s main ally, might be able to influence the UAE’s approach to Tunisia. Riyadh already pledged $850 million during Tunisia 2020 after years of cold relations between the two countries.

However, tensions between Saudi Arabia and the UAE are mounting regarding Riyadh’s warming relations with Qatar and Turkey, its growing rift with Egypt, the UAE’s client regime; and other foreign policy disagreements over Libya, Syria, and Yemen. Even if the Saudis have lost their political leverage over the UAE, they could still assume their former place as one of Tunisia’s largest Arab trading partners, as least so long as Saudi Arabia’s ongoing financial strains allow it to invest significant amounts abroad.

Youssef Cherif is a Tunisian commentator and consultant on North African politics. (Sada 17.01)

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11.6 TURKEY: Turkey Faces Financial Disaster

Cengiz Candar posted in Al-Monitor on 13 January that Turkey’s decision-makers need to step up and change their destructive policies rather than inventing an international conspiracy to blame for the country’s currency crisis.

Gauging the value of the Turkish lira against the US dollar has required the power of divination so far this year. Anxiety is high as Turks wait to see whether the lira will tumble more and reach the once-unimaginable level of 4 lira per $1.

In the first days of 2017, the lira’s value declined so rapidly that even the Turkish Central Bank’s actions could not stop the drop. On 10 January, the bank lowered the level of foreign exchange reserves so it could add $1.5 billion of liquidity to stabilize the lira’s value.

Less than six months ago, when the parity level was 3 lira to $1, the gloomy forecast for 2017 predicted parity could reach 3.85 and stay there until 2018. Within the first 10 days of 2017, the level exceeded that figure, and on 12 January, parity temporarily surpassed the “psychological threshold” of 3.90. Now, 4 lira to a dollar is entirely possible and is seen as a harbinger of the big financial crisis to come.

The Financial Times observed on 10 January, “Turkey appears closer to a full-blown currency crisis than at any point since the ruling AK [Justice and Development] party took power in 2002. In the past three months, the lira has lost almost a fifth of its value against the dollar, as both global and domestic investors lose confidence in their country’s economic prospects.”

In another story on 8 January, the Financial Times observed, “Turkey has gone from investor darling to crisis candidate in a few years. … Ankara enters 2017 little-loved by investors.” The currency dropped more than 9% against the dollar in the year’s first eight trading days, and this figure adds to last year’s 17% slump. The Turkish lira’s depreciation made it one of the worst emerging-market performers in 2016.

To the Financial Times, the headwinds facing Turkey outweigh those of every other major developing country: “With investors wary of committing money, the rehabilitation trade that has supported bonds, equities and currencies in four of the so-called ‘Fragile Five’ – Brazil, South Africa, Indonesia and India – currently eludes Turkey. … The Fragile Five were identified three years ago as the countries most vulnerable to rising US interest rates and a stronger dollar thanks to their large current account deficits. While the rest have recovered their balance and made current account adjustments, Turkey is lagging behind. And long-term investors say the mood appears bleak.”

Last year, Moody’s Investors Service followed Standard & Poor’s by downgrading Turkey’s credit rating to junk, leaving Fitch Ratings as the only major agency that rates the country as investment-grade. But in its latest report, Fitch mentioned Turkey as one of the “most fragile countries against the systemic risk,” along with Venezuela and Ethiopia.

The data indicates Turkey will be facing an inevitable financial collapse or at least a severe economic crisis this year. Such a crisis will worsen the security situation in Turkey, which suffered a terror attack within the first hours of the new year in Istanbul.

Such a gloomy prospect is the consequence of Turkey’s decision-makers, above all President Recep Tayyip Erdogan, who insists on the wrong prognosis. Speaking on 12 January about the meltdown of the Turkish lira against the dollar, he said, “You know that the economy is manipulated for the objective of attacking Turkey. There is no single difference between the terrorist who carries a weapon in his hand and the terrorist who possesses a dollar or euro in his pocket. Both aim to divert Turkey from its targets. They use currency as a weapon.”

Erdogan and government ministers aren’t the only ones voicing that theory recently. It is also entertained by pro-government Islamist circles. They tend to see the financial hardships as the result of a coordinated assault on Turkey by the West in the wake of the 15 July failed coup. Abdurrahman Dilipak, a prominent Islamist columnist for the Islamist daily Yeni Akit, wrote on 11 January, “The value of the Turkish lira dropped even below the Saudi riyal. Fitch is waiting in ambush. There is a collective assault against the Turkish lira.”

In a critical note, he added, “What is MIT [Turkish National Intelligence] doing against this? The dollar operation is the continuation of 15 July. When will an operation be launched against those who take part in this operation?”

Experts, however, say Turkey is suffering from a self-inflicted crisis of confidence and only a swift and sizable rise in interest rates will stabilize the lira. There is an unmistakable correlation between the lira’s unstoppable slump and proposed constitutional amendments to give Erdogan stronger executive powers. The debate in parliament is incredible – each time the subject is broached, there are fistfights and broken noses. Under such political tension, the Turkish lira keeps eroding.

In the 8 January article, the Financial Times reported, “The overwhelming worry is that systemic weakness could unravel into crisis. … Economic growth has plunged amid terrorism, a sharp tourism slump and devaluation. After averaging 6% in 2015, [gross domestic product] growth in the year to the third quarter of 2016 was minus 1.8%. This was before the oil price [rise] of the fourth quarter and the worst of the devaluation.”

Turkey has yet to make the tough decisions that will mend its economy. It seems it will not. Erdogan prefers to blame economic problems on a nefarious conspiracy of international financiers. Though there is a consensus that the only remedy in the short run is for Turkey to raise interest rates dramatically. Erdogan is against it because, obviously, high interest rates will prevent economic growth.

The danger now is not only that Turkey’s economic growth will stop, but that it will stop under rising inflation. The worst-case scenario for economists — stagflation — might be awaiting Turkey.

Though the economy was once a major boon to Erdogan’s political success, he will be haunted by its collapse. The blame, many believe, falls on his suicidal policies.

Cengiz Candar is a columnist for Al-Monitor’s Turkey Pulse. A journalist since 1976, he is the author of seven books in the Turkish language, mainly on Middle East issues, including the best-seller Mesopotamia Express: A Journey in History. Currently, he is a Distinguished Visiting Scholar at the Stockholm University Institute of Turkish Studies (SUITS). (Al-Monitor 13.01)

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11.7 TURKEY: Turkey’s AKP Scrambles to Curb Economic Woes Until Referendum

Mustafa Sonmez posted in Al-Monitor on 20 January that Turkey’s government has mobilized public funds to avert a full-blown economic crisis ahead of a critical referendum on transition to a presidential system, expected in early spring.

After 14 years in power, the Justice and Development Party (AKP), the representative of radical Islam in Turkey, has finally focused on its main objective: a regime change to install a one-man rule. A set of constitutional amendments, drawn up and brought to parliament by the AKP, needs the support of at least 330 deputies in the 550-member legislature to make it through. The ruling party, which holds 317 seats, hopes to pass the bill with backing from the 40 deputies of the Nationalist Action Party, which shares nationalist and Islamic values with the AKP. Should the bill get the necessary support in the upcoming vote, it will be put to a referendum within two months’ time.

If approved, the amendment will legitimize the de facto executive presidency that President Recep Tayyip Erdogan is already exercising, while handing him a number of powers that currently belong to the legislature, the prime minister’s office and the judiciary.

Under the draft, the president can be the leader of his or her political party and determine its candidates in parliamentary elections, dissolve parliament, draw up the budget, issue legislative decrees and veto bills passed by parliament. In the judicial realm, the draft entitles the president to appoint the chair and six of the 13 members of the Judges and Prosecutors Board as well as 12 of the 15 judges of the Constitutional Court. In terms of executive powers, the president would be entitled to appoint the ministers and senior bureaucrats (including ambassadors), shape educational and military institutions, approve international agreements, determine national security policies and declare states of emergency. As commander in chief, the president will also bear on how the country’s armed forces are used.

According to the draft, the president can serve three terms and use all his or her powers without any accountability. He or she can only stand trial at the Constitutional Court if as many as 400 deputies in the 600 member legislature vote in favor of such a move.

This final stretch in the AKP’s 14 year marathon toward a one-man regime has coincided with the Turkish economy’s descent into crisis. The referendum outcome will depend on voters who have begun to slowly feel the heat of the crisis.

In Turkey, the base of Islamist voters is estimated at some 20% of the total electorate. The rest of the AKP’s vote — 49.5% in the last elections in 2015 — has come partially from the collapsed center-right and partially from fluctuating voters. The fluctuating voters have backed the party largely as a result of being gratified by a growing economy, the result of favorable domestic and external conditions from 2003 to 2013.

The economic growth that took place until recently relied heavily on the inflow of foreign funds and loans, amounting to an average of $40 billion per year. This provided jobs and income to voters, even if on a modest level. Coupled with a privatization drive, the economic growth boosted tax revenues and public income, which resulted in new, voter-oriented services in health care, education, transport and social assistance that impressed the masses. Also, some of the foreign funds flowing to Turkey were transformed into consumer loans and credit-card borrowing by banks, which allowed the electorate to spend more, even if on debt, while bonding it to the ruling regime.

Since mid-2013, however, the tide has been turning. Foreign funds, which used Turkey as a temporary parking lot during the global crisis, began to look to the United States amid signals of growth and rate hikes, boding an end to the tailwinds the AKP had enjoyed for a decade. The era of the cheap dollar was over. Besides the economic risks, Turkey also accumulated political and geopolitical risks, which further scared off foreign investors. In 2015, the dollar rose 25% against the Turkish lira, followed by another 20% increase in 2016 and a sharp upward trend in the first weeks of 2017.

The greenback’s dramatic appreciation caught the Turkish economy off guard, upsetting all macroeconomic balances just as the regime-change operation got underway. This, of course, is a cause of concern for the AKP. The government has now intensified efforts to weather the referendum before the fire from the economic crisis engulfs the street, resorting even to providing “referendum candies” to the electorate.

Hiking interest rates on the lira is the antidote of the rising dollar price. This, however, could further slow the domestic market. Erdogan, in particular, is averse to rate hikes, sending chilly messages to the Central Bank. The bank itself is not sure whether hiking rates can do the trick because the dollar has been fueled not only by the flight of short-term foreign investments but also by the heightened demand of Turkish companies indebted in foreign currency. As the Central Bank’s latest Financial Stability Report indicates, the foreign-exchange deficit of companies involved in the government’s “megaprojects” is particularly worrisome.

Yet, the core reason behind the dollar’s extraordinary rise against the lira stems from Turkey’s unrelenting political risks. Instead of seeking normalization to reduce the risks, the AKP has fanned the climate of conflict by bringing up the constitutional change, which hardly helps in luring foreign funds or easing the dollar demand at home.

The government is now seeking a controlled use of the interest-rate weapon, trying to avoid any shock measures until the referendum. In this context, the Central Bank has implicitly raised the banks’ borrowing rate to curb their dollar purchases.

The government has also pressed public agencies and pro-AKP quarters to convert their foreign-currency funds to Turkish lira, but this has had little effect. With the greenback refusing to climb down from 3.75 lira, some measures are being considered to prop up the private sector as companies of all sizes in all sectors are struggling to cope with such a high exchange rate. These include a pledge of government guarantees for credit lines the banks are urged to open. In the meantime, however, the reluctant banks are being accused of “opportunism” as they try to strengthen their foreign-exchange positions and reduce loan repayment risks, with Erdogan personally threatening the sector.

Meanwhile, a long-standing “fiscal discipline,” which has cut the budget deficit to as low as 1% of gross domestic product, seems to allow the government some generosity in the face of the crisis, especially ahead of the expected referendum. But this also requires utmost caution. Turkey’s bitter experience before 2000 teaches a good lesson on how difficult it is to pull things together once budget deficits spiral out of control.

Still, the government is not shying away from pumping money into where it is needed. While public banks are being directed to provide lifesavers, hard-pressed construction companies that enjoy government favor are being offered facilities via state housing developer TOKI, and the state is buying the excess housing stocks of private firms to relieve the sector.

In short, the central government budget and other public funds seem mobilized to prevent the crisis from biting voters ahead of the expected referendum. Yet, the crisis is growing with such menacing speed that fending off popular frustration by sweeping the problems under the rug could prove difficult, even in the short term.

On 16 January, the newest unemployment data came as the omen of an approaching avalanche. The unemployment rate jumped from 11.3% to 11.8% in only one month. This puts the number of jobless at 3.67 million in October, half a million more than a year before. The fact that nearly 1 million of them hold university degrees makes the outlook even more alarming. (Al-Monitor 20.01)

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11.8 GREECE: Greece ‘B-/B’ Ratings Affirmed; Outlook Remains Stable

On 20 January 2017, S&P Global Ratings affirmed its ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on the Hellenic Republic (Greece). The outlook is stable.

Rationale

The affirmation reflects our assessment that:

The Greek government is meeting–albeit with delays–the formal terms of its €86 billion financial support program (Third Economic Adjustment Program) financed by Eurozone member states via the European Stability Mechanism (ESM).

We expect program disbursements to meet debt servicing needs, including the redemption of commercial debt of about €2 billion in July 2017, and to reduce the stock of government arrears to the rest of the economy.

The Greek authorities’ relationship with its official creditors, and the IMF in particular, continues to be tested by the composition of Greek general government budgetary spending rather than headline fiscal results. Specifically, spending on pensions absorbs most of Greece’s fiscal resources at the expense of spending on health, education, and the unemployed. The pension system is operating an unsustainably high deficit of close to 11% of GDP, representing an outsized intertemporal transfer from participants in Greece’s heavily taxed labor market to pensioners. At the same time, the IMF publicly supports a more relaxed pace of fiscal austerity in Greece, not a tightening as is often suggested.

The IMF’s participation in the program is yet to be determined. Nor is the inclusion of Greek government securities in the ECB’s asset purchase program yet a certainty, though QE eligibility remains a strong incentive for the government to reach an accord with its EU creditors and the IMF.

Economic growth over 2017-2020 will be supported by tourism, and a gradually improving jobs market. The outlook for investment remains constrained, given challenges to Greece’s banks.

The banking sector will remain impaired over the forecast horizon. The Bank of Greece targets a reduction in overall banks’ nonperforming exposures (NPEs) to 34% in 2019 from 51% currently. Moreover, despite the incremental easing of capital controls, we expect deposits will return to the system quite slowly, maintaining the system’s reliance on official funding.

Despite the high stock of general government debt (at an estimated 180% of GDP in 2016, Greece has the second highest debt-to-GDP ratio of all the sovereigns we rate), the cost of debt servicing is very low, currently ranging between 1.0% and 1.5%. In contrast to most of the governments we rate, the lion’s share of Greece’s sovereign debt – about 84% – is official, with over four-fifths lent by Eurozone governments and institutions at highly concessional rates and maturities, including grace periods on principal payments averaging between three years for the Greek Loan Facility (GLF) to 17 years for ESM loans.

In our view, Greece’s protracted economic crisis has weakened the country’s administrative capacity. One example is the weak absorption of available subsidized financing to Greece to improve conditions in the country’s numerous refugee camps. Impediments introduced by central and local governments have contributed to this low absorption rate, in our opinion.

Compared to our forecast of a 1% contraction in real GDP in our July 2016 review, we now estimate a small statistical recovery for the year. This has been driven by a rebound in investment and private consumption. Employment has been rising, albeit largely in more precarious temporary, rather than permanent, positions. Although down from its peak in 2014, at 23% in October, Greek unemployment remains the highest in the EU and the Organization for Economic Co-operation and Development.

Over 2017-2020, we expect the economy to grow on average by nearly 3% in the absence of any large, disruptive events. We base this forecast on our expectation of a gradual strengthening of the labor market, an improvement in private sector liquidity following the pay-down of government arrears, and the steady, albeit incremental, easing of capital controls. All of these should boost consumer and investor confidence, as would the completion of program benchmarks and restructuring of Greek banks’ high stock of NPEs. An acceleration of the ongoing privatization of state assets, were it to materialize, would also potentially attract foreign capital into the country and boost investment activity.

The outlook for Greece’s major services sectors is mixed. Shipping remains mired in a supply glut, combined with a global slowdown in trade. The performance of the tourism sector, which is a larger contributor to overall GDP compared to shipping, has remained relatively strong, however, enabling the current account deficit to turn into a small surplus of an estimated 1% of GDP in 2016. The current account has also been helped by ongoing import compression, lower prices of imported energy, and EU creditors extending interest rate subsidies to the Greek government on its external debt. We expect that the current account surplus will gradually decline toward balance through 2020, alongside gradually strengthening import demand.

Despite our projections of relatively strong real growth, we still expect that the Greek economy, which has lost a third of its value since 2009, will be about 15% smaller compared to 2008. We estimate investment will amount to below 10% of GDP in 2017 compared to about 25% before the global financial crisis.

The recouping of this lost value will be conditional upon the recovery in Greece’s distressed financial sector, in our opinion. Greek banks depend on official financing, with the ECB and emergency liquidity assistance (ELA) lines covering 25% of assets. Between September 2010 and November 2016, an estimated €128 billion or 70% of estimated 2017 GDP (cumulatively) of deposits exited the Greek banking system, though levels appeared to stabilize in the second half of 2016. With NPEs at 51% of total exposures (on balance sheet only), banks are not in a position to finance private-sector investment, while companies and households may choose to prioritize payment of their rising tax debt (which the Greek tax administration estimates at 50% of GDP) rather than their bank loans.

Distress in the banking system represents a potential contingent liability to the state. Our projections for public-sector debt don’t reflect any further government capital injections into domestic banks, although there is a material risk that additional public support is required. We think that the ECB’s reinstating of its waiver on the eligibility of Greek sovereign and sovereign-guaranteed bank collateral for ECB financing, rather than costlier Bank of Greece ELA, will lift the profitability of Greece’s highly challenged banking system. We anticipate, however, an only gradual lifting of the capital controls still in place, including withdrawal limits on household deposits.

We understand that one of the program’s objectives is to enable the Greek government to refinance itself fully in the commercial debt markets by August 2018, when the program concludes. Despite delays to the second review and the occasional flaring up of tensions between Greece and its creditors, we anticipate broad adherence to program objectives by the Greek authorities. We estimate that the general government primary surplus will accordingly increase through to 2018, putting the general government debt-to-GDP ratio on a downward trajectory. Even then, we estimate that net general government debt will amount to 168% of GDP, among the highest projected debt burdens of all rated sovereigns.

Given the narrow majority of three seats for the Syriza-led government and the rising popularity of the largest opposition party, New Democracy, the probability of implementing long-term reforms, for instance to the judicial system and public administration, seems low. The government’s delivery on structural and particularly labor market reforms appears to us to be piecemeal, with limited success in attracting private foreign capital into sectors that could create employment.

Risks to program disbursements remain: most recently as a consequence of the Tsipras government’s introduction of fiscal easing measures, including a Christmas bonus to pensioners and a freeze on VAT rates for some Aegean islands. As a consequence, Greece’s creditors are delaying short-term debt relief measures to smooth the repayment profile to the EFSF and to fix Greece’s formerly floating interest rate payment schedule on EFSF obligations.

Although we view these short-term debt measures as helpful in backstopping the sustainability of Greece’s concessional debt burden, we don’t see future net present value reductions as equivalent to frontloaded principal write-downs if the goal is to restore confidence in Greece’s solvency, and to enable Greece to finance itself in commercial debt markets at low interest rates and long maturities. Understandably, however, Greece’s creditors are reluctant to concede outright debt write-offs, particularly in a year with a busy electoral calendar.

We think it unlikely that Greece would be included in the ECB’s asset purchase program until the conclusion of the second review and until some of the short-term debt relief measures are implemented. Our forecasts for Greece do not assume that Greek government bonds will be eligible for inclusion in the ECB’s quantitative easing program in the current year. However, if they were to be, we believe that apart from a direct reduction in government bond yields, the borrowing costs for other non-sovereign entities could potentially be lower. Further, a boost to confidence could further aid economic recovery and also the process of deposits returning to the banking system.

Our baseline expectation is that Greece can and will service its limited commercial debt stock (about one-sixth of the total or about 30% of GDP) when it comes due. In 2017, excluding Treasury bills, Greece faces about €11 billion of loan repayments and debt redemptions against an estimated €10 billion of deposit assets (as of September 2016), including about €3 billion in the Treasury Single Account. This means it has some headroom if program reviews are delayed. Having said that, Greece faces a particularly heavy repayment period in July this year with about €6.4 billion coming due, including about €2 billion in commercial redemptions.

Outlook

The stable outlook indicates our view that, over the next 12 months, risks to our ‘B-‘ rating on Greece are balanced.

We could consider an upgrade if we saw stronger growth performance and measurable progress in reducing the still-high ratio of nonperforming loans in Greece’s banking system alongside compliance with the parameters of the ESM program. Rating upside would also stem from the lifting of capital controls, including deposit withdrawal limits, which would be a strong indication of recovered confidence in financial stability and, in turn, growth. We could also consider raising the rating in the event of an unexpected write-down of Greece’s level of net general government debt.

We could lower the ratings on Greece if the delay in or non-implementation of reforms stipulated under the program resulted in a prolonged period where the government’s financing needs weren’t met by disbursements. This could, over time, lead to a default on Greek government debt, including on commercial obligations, and reverse the nascent economic recovery. (S&P 20.01)

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What’s New at EDI – February 2017

February 1, 2017, 10:45 am

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SelectUSA Event Planned for Tel Aviv on February 22^nd

The American State Offices Association in cooperation with SelectUSA and the US Embassy in Israel, will host a day-long event in Tel Aviv on Wednesday, February 22^nd. Totally devoted to one-on-one meetings between Israeli companies seeking to expand to the US and the state and regional representatives based in Israel, the event is organized and administered by EDI in its role as Chair of the Association. It is expected that well over 100 Israeli companies will participate and the event will be hosted by the Manufacturers’ Association of Israel.

Ontario Features Three Companies at Cybertech Israel 2017

The Province of Ontario had a booth at Cybertech Israel 2017 exhibition and conference in Tel Aviv at the end of January. Four Ontario-based cyber entities exhibited there and the province also used the venue to promote Israeli foreign direct investment into Ontario. The conference ran from January 30-February 1. EDI represents the trade and investment interests of the province in Israel.

Indiana Visits Israel and is Represented at Cybertech Israel 2017

The Indiana Economic Development Corporation had a booth at the Cybertech Israel 2017 exhibition and conference in Tel Aviv at the end of January. Indiana also sent a delegation headed by the state’s newly installed Secretary of Commerce, Jim Schellinger, for the purpose of promoting Indiana as a foreign direct investment destination for Israeli companies considering opening facilities in the US. EDI represents the investment interests of Indiana in Israel.

Illinois Features 8 Companies at Arab Health 2017 in Dubai

Illinois brought eight local exporters to Dubai at the end of January to exhibit at the state’s pavilion at Arab Health 2017 in Dubai. The show, which ran from January 30-February 2, is the second largest life sciences exhibition in the world after MEDICA in Germany. This is the sixth year that Illinois will have a pavilion at the show. EDI represents the trade and investment interests of the state in the Middle East.

Michigan Companies Participate in Cybertech Israel 2017

Michigan’s Governor travelled to Israel at the end of January to speak at the Cybertech Israel 2017 conference in Tel Aviv and was accompanied by a number of Michigan exporters in that space as well. EDI, which represents the Michigan-Israel Business Bridge in Israel, arranged B2B meetings for five firms traveling to Israel with the governor.

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Fortnightly, 8 February 2017

February 8, 2017, 6:15 am

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8 February 2017
12 Shevat 5777
11 Jumada Al-Awwal 1438

TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Greece, Israel & Cyprus Sign Regional Cooperation Agreement
1.2  Israel & Japan Bolster Ties and Sign Bilateral Investment Treaty
1.3  Health Ministry Introduces New Anti-Smoking Measures

2: ISRAEL MARKET & BUSINESS NEWS

2.1  S&P Reaffirms Israel’s A+ Credit Rating – Praising Thriving Economy
2.2  Israeli Startups Raise Nearly $400 Million in 2016
2.3  Feedvisor Raises $20 Million
2.4  Northforge Expands Its Software Development Services With New Israel Subsidiary
2.5  Mindspace Raises $15 Million to Expand Its Co-working Business within Europe & into the US
2.6  Ryanair Boosts Operations in Israel
2.7  Aperio Wins Innovation Prize at Cybertech 2017
2.8  BIRD Invests $900,000 in NovellusDx – Christiana Care Gene Editing Institute Collaboration
2.9  SodaStream to Feature Israeli Flag on All Its Products

3: REGIONAL PRIVATE SECTOR NEWS

3.1  Lockheed Martin in $7 Million Iraq Support Contract
3.2  US Firm Wins $200 Million Iraq Defense Contract
3.3  Christian Cross Dropped from Real Madrid Logo in GCC Clothing Deal
3.4  Kuwait Set To Launch Stem Cell Research Center During 2017
3.5  WhatsApp & Facebook Named as Most Used Social Media in UAE
3.6  Dubai Laboratory Launches Service to Verify Halal Cosmetics
3.7  Barilla Signs Partnership Deal for Saudi Expansion

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 IDF’s Solar Farm to Provide Half of Ramon Airbase’s Electricity
4.2 Saudi Arabia to Invite Bids for Green Energy Projects in April

5: ARAB STATE DEVELOPMENTS

5.1  Marginal Drop in Average Lebanese Consumer Prices for 2016
5.2  Lebanese Trade Deficit Widens by 3.56% y-o-y by December 2016
5.3  Lebanese Tourist Arrival Numbers Climb 11.23% for 2016

♦♦Arabian Gulf

5.4  GCC Banks Forecast to Remain Resilient Amid Economic Slowdown
5.5  GCC Said to be Planning $240 Billion in Rail Investments
5.6  GCC Countries Rank High in $26.9 Billion Remittances to Philippines
5.7  Kuwait Launches New Plan to Transform Economy by 2035
5.8  Qatar’s Foreign Trade Surplus Shows First 2016 Rise in December
5.9  India Overtakes the UAE in List of World’s Leading Emerging Markets/a>
5.10  UAE’s Non-Oil Foreign Trade Hits $320 Billion in First Nine Months of 2016
5.11  UAE & India Seek Action Plan to Increase Bilateral Trade by 60%
5.12  UAE Ranked World’s Top Halal Travel Destination
5.13  UAE Approves Issuing of ‘Visa on Arrival’ for Russian Citizens
5.14  UAE Military Vehicle Maker Targets European Market Breakthrough
5.15  Abu Dhabi Set to Slow Down Spending Cuts in 2017, Says Fitch
5.16  Oman’s Government Budget Deficit Swells to $12.8 Billion
5.17  Saudi Arabia Approves Measures Ahead of VAT Launch

♦♦North Africa

5.18 Saudi Arabia Approves Measures Ahead of VAT Launch

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Political Rift Kills Turkey-Austria Engine Deal
6.2 IMF in Disagreement Over Greek Bailout Measures

7: GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1  Israelis’ Rising Life Expectancy Poses Health Care Challenge
7.2  Israel’s Health Ministry Proposes New Anti-Smoking Laws
7.3  Bank of Israel Unveils New Bill Designs
7.4  IDF Sees Rise in Number of Women Serving in Combat Units

♦♦REGIONAL

7.5  Landmark Ruling in Lebanon Says Homosexuality Not ‘Illegal’
7.6  Kuwait Executes Member of Al-Sabah Royal Family
7.7  Abu Dhabi Chosen to Host 2019 Special Olympics World Games
7.8  PwC Says UAE Needs 175,000 Extra School Places by 2020

8: ISRAEL LIFE SCIENCE NEWS

8.1  StemRad’s Cosmic Ray Suit Set for Mars Trial
8.2  FDA Approval of Teva’s Two New RespiClick Maintenance Inhalers for Asthma Treatment
8.3  Degania Silicone & Control Flo Medical Make Patented ResQ Urological Catheter System

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Israel to be the Fourth Country to Land a Vehicle on the Moon
9.2  IAI Introduces ADA- New System Designed for Hardening GPS Systems against Jamming
9.3  Mellanox Data Center Packet Processing Platform Based on Indigo Network Processor
9.4  mPrest Completes Project With Israel Electric Corporation
9.5  Avelacom Builds Network from London to Moscow with PacketLight Transport Solution
9.6  LightCyber Introduces New Tools for Corporate Security Assurance

10: ISRAEL ECONOMIC STATISTICS

10.1  Unemployment in Israel Falls to New Low
10.2  Israel Made NIS 3 Billion in Natural Gas Royalties in 2016
10.3  Israel Ranks 28 in Global Corruption Index

11: IN DEPTH

11.1  ISRAEL: State of Israel Ratings Affirmed At ‘A+/A‐1’; Outlook Stable
11.2  ISRAEL: Record Private Equity Investment in Israel in 2016
11.3  LEBANON: IMF Executive Board Concludes Article IV Consultation
11.4  GCC: Cross-Border Cooperation – A Game-Changer for Gulf Cybersecurity
11.5  SAUDI ARABIA: Slowly but Surely: Growing Relations between Saudi Arabia & China
11.6  EGYPT: The Trials of the Egyptian Pound
11.7  EGYPT: Egypt’s Contraceptive Crisis Worsened by Illegal Stockpiling
11.8  MOROCCO: IMF Executive Board Concludes 2016 Article IV Consultation with Morocco
11.9  TURKEY: Will Turkey’s New Inflation Calculations Impact More Than Just Economy?

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Greece, Israel & Cyprus Sign Regional Cooperation Agreement

The Greek, Israeli and Cypriot heads of parliaments on 26 January signed a memorandum of understanding to increase cooperation and enhance ties between the three allies. The signing took place at the Knesset, following a trilateral meeting between Knesset Speaker Edelstein, Cyprus House of Representatives President Syllouris and Hellenic Parliament President Voutsis. During the meeting, the three discussed ways to combat anti-Semitism and hate crimes and possible ways to help young entrepreneurs. (IH 29.01)

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1.2 Israel & Japan Bolster Ties and Sign Bilateral Investment Treaty

Israel and Japan on 1 February signed a bilateral investment treaty, in another move to strengthen diplomatic and trade ties between the two nations. Finance Minister Kahlon and Japanese Foreign Minister Kishida signed the treaty, negotiated between Jerusalem and Tokyo between May 2015 and December 2016, in a ceremony at the Finance Ministry in Jerusalem. Japan is the world’s third-largest economy by nominal gross domestic product and the world’s second-largest developed economy. Japan’s GDP in 2015 came to $4 trillion, and its GDP per capita adjusted by purchasing power parity came to $32,000. (IH 05.02)

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1.3 Health Ministry Introduces New Anti-Smoking Measures

New anti-smoking measures aimed at protecting non-smokers and discouraging the use of tobacco products were unveiled by the Health Ministry on 25 January. The new measures aim to limit the use of electronic cigarettes in public, impose new taxes on tobacco products, and lead to cigarette packs displaying graphic images of the potential health consequences of smoking. Planned legislation would outlaw advertising cigarettes on any platform, including online. It would also extend the current restrictions on smoking to electronic cigarettes to ensure that public venues, including sports facilities, zoos and public playgrounds, are cigarette-free. A separate initiative would increase taxes on electronic cigarettes and rolling tobacco products. The ministry is also poised to launch a new public awareness campaign, the first in years. Special emphasis will be placed on the Arab population, where it is estimated that 40%of the population smokes. (IH 24.01)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 S&P Reaffirms Israel’s A+ Credit Rating – Praising Thriving Economy

International financial services and credit ratings agency Standard & Poor’s on 3 February reaffirmed Israel’s international credit ratings and economic outlook, giving it an A+ score. The agency gave Israel a “stable” economic outlook, saying its analysts expected the Israeli government to maintain is cautious fiscal policies. S&P’s report noted the Israeli economy is “diverse and thriving,” saying it is characterized by a strong export industry, strong external accounts, and a flexible monetary framework. The Israeli economy’s main constraints are its high debt and the potential destabilizing effects of geopolitical threats, S&P warned, adding rising housing prices continue to be a risk factor, as they may lead to “negative economic effects.”

The credit ratings agency believes Israel’s economy could grow by an average 3.1% a year between 2017 and 2020. Growth would be private-consumption driven, and will also be fueled by corporate investments and the export of services, both of which are supported by monetary flexibility. (Various 05.02)

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2.2 Israeli Startups Raise Nearly $400 Million in 2016

In 2016, Israeli startups raised a record $4.8 billion, up 11% from $4.3 billion the previous year, according to IVC-ZAG. With some four weeks past of 2017, it seems that the same record pace of fund raising is being maintained. Globes has found that 17 Israeli companies have raised nearly $400 million so far this year.

In keeping with last year’s trend, it seems that fewer Israeli startups are raising more money, in later stage financing rounds. These include flash storage company Caminario, which raised $75 million, cyber security company SentinelOne, which raised $70 million, and mobile app tracking company AppsFlyer, which raised $56 million. Other significant sums were raised by cyber security company Transmit Security ($40 million), Valens Semiconductor (raising $20 million), Aquarius Engines (raising $20 million) smart shirt company Healthwatch ($20 million), co-working space company Mindspace ($15 million), smartphone camera company Corephotonics ($15 million), and power electronics company visIC ($11.6 million).

Cyber security remains the fastest growing startup sector and only yesterday three companies announced financing rounds – Secret Double Octopus ($6 million), Cybellum ($2.5 million) and illusive networks (undisclosed from Microsoft Ventures). Capital is also being raised by Israeli companies on stock markets. IC Power has filed to raise up to $389 million on the NYSE, and cyber security company CheckMarx is planning a NASDAQ secondary offering. Two biomed companies – Pluristem Therapeutics and Can-Fite BioPharma raised $15 million and $5 million respectively. (Globes 25.01)

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2.3 Feedvisor Raises $20 Million

Feedvisor has raised $20 million in a Series B financing round led by General Catalyst, which included participation from existing investors Square Peg Capital, Jal Ventures, Oryzn Capital and Titanium Investments. This latest round comes on the heels of consistent growth for Feedvisor. In each of the past three years, Feedvisor’s revenue and workforce have grown 100%. Today, Feedvisor has 100 employees and manages over $2 billion in GMV. The company plans to double its staff this year across all locations.

Ramat Gan’s Feedvisor is pioneering Algo-Commerce – the discipline of using Big Data and Machine Learning Algorithms to make business critical decisions for online retailers. Feedvisor’s cloud-based Algorithmic Repricing and Revenue Intelligence solutions power millions of pricing decisions daily; providing retailers with actionable insights to maximize profitability and drive their business growth. (Globes 31.01)

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2.4 Northforge Expands Its Software Development Services With New Israel Subsidiary

Ottawa’s Northforge Innovations, an expert software consulting and development company, announced the establishment of a new subsidiary, Northforge Innovations Israel, which will extend and expand the company’s efforts to advance the security, speed and intelligence of the communications infrastructure. The subsidiary, located near Tel Aviv, will provide Northforge with greater access to technologists with specialized network infrastructure expertise, particularly in cyber security. Northforge Innovations Israel is a growing group of engineers and technologists who are providing software consulting and development services to Northforge’s customers.

Northforge Innovations is an expert software consulting and development company focused on advancing the speed, security, and intelligence of the communications infrastructure. It helps customers bring innovation and quality to their network infrastructure, network security and multimedia systems products and services. (Northforge Innovations 30.01)

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2.5 Mindspace Raises $15 Million to Expand Its Co-working Business within Europe & into the US

Mindspace has raised $15 million in series A funding from private investors. As Mindspace continues its fast-paced global expansion, the company has also announced the planned opening of five new locations, bringing its total member count to 5,000 across nine locations that span over 350,000 square feet. Mindspace puts a strong emphasis on creating a lifestyle and community experience for its members. Each location boasts a beautiful boutique design concept, as well as diverse community events, activities and partnerships.

Mindspace’s prime and trendy locations attract professionals and creators who value the convenience created by dedicated services as well as access to a productive and diverse community. In addition, Mindspace supports business growth by providing a quick and cost effective solution for growing companies, offering flexible contracts designed for their needs.

Tel Aviv’s Mindspace is in the business of creating incredible co-working spaces and diverse communities by providing a high quality user experience through exquisite service, boutique approach and hip design. The company offers the office-as-a-service concept and aims to change the way people work. Mindspace was founded in 2014 and caters to corporations, startups and freelancers who expect more from their work environment. (Mindspace 25.01)

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2.6 Ryanair Boosts Operations in Israel

Low-cost Irish airline Ryanair officially released their new flight schedule for the current winter season on 1 February, with 19 regular routes to Israel. Seven new routes will service Tel Aviv’s Ben-Gurion International Airport, and eight new destinations will join the four existing routes servicing Eilat’s Ovda Airport, which fly to Bratislava, Budapest, Krakow and Kaunas. Ryanair’s Chief Commercial Manager said that the company will offer seats starting at €20 (about $22) for a one-way ticket to Paphos, Cyprus, to celebrate the launch of the 2017 winter flight schedule in Israel.

Ryanair’s new routes from Ben-Gurion Airport will provide service to Baden-Baden, Gdansk, Krakow, Poznan and Wroclaw twice a week, to Milan four times a week and to Paphos daily. The eight new routes from Ovda Airport will be twice a week to Baden-Baden, Berlin, Frankfurt, Brussels, Gdansk, Milan, Poznan and Warsaw. Israeli Transportation Minister Katz is due to speak with Ryanair about the option of establishing a base of operations at Ramon Airport in southern Israel, which is expected to open in October. (IH 05.02)

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2.7 Aperio Wins Innovation Prize at Cybertech 2017

Aperio Systems was selected as the most innovative startup in the Cybertech Startup Competition powered by YL Ventures held as part of the recent Cybertech 2017 Conference at the Tel Aviv Convention Center. This was the fourth time Cybertech, the world’s second-largest cyber technologies exhibition, took place in Israel. The conference brought together brought together hundreds of leading investors, entrepreneurs and cyber companies and thousands of visitors from around the world. Haifa’s APERIO Systems was founded to address the challenge of critical control systems by inventing a new paradigm. It develops critical control systems to defend users from external and internal cyber threats. They are a team of hackers, physicists and engineers inventing ways to implement smart resilience in control systems. (APERIO 05.02)

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2.8 BIRD Invests $900,000 in NovellusDx – Christiana Care Gene Editing Institute Collaboration

The Philadelphia-Israel Chamber of Commerce (PICC), a representative of the U.S.-Israel Binational Industrial R&D Foundation (BIRD) in Pennsylvania and Delaware, announced that the BIRD Foundation approved a $900,000 grant to a collaboration between the Helen F. Graham Cancer Center and Research Institute at Christiana Care and NovellusDx. This grant was part of a $7.2 million in funding for eight new projects between U.S. and Israeli companies.

The BIRD Foundation promotes collaboration between U.S. and Israeli companies in various industries for the purpose of advanced product development. In addition to providing conditional grants of up to $1 million for approved projects, the Foundation assists by working with companies to identify potential strategic partners and facilitate introductions. The PICC also represents the US-Israel Binational Industrial Research and Development Foundation (BIRD), which has made more than $10 million in industrial R&D grants regionally to U.S.-Israeli technology ventures. (PICC 31.01)

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2.9 Sodastream to Feature Israeli Flag on All Its Products

The SodaStream company has decided to feature an Israeli flag on all its products, which are sold in 45 countries. “The company management wants to send a message of national pride, particularly in days when many of us hide our Israeli identity from the world,” the company, which manufactures sparkling water makers for home use, said in a statement this week. The Israeli flag is accompanied by the English message reading, “This product is made by Arabs and Jews working side by side in peace and harmony.”

SodaStream International CEO Daniel Birnbaum said that “as a proud Israeli company, we have always taken care to keep our Israeli profile high, even if that means fighting for our place in the face of the European Union and economic terrorism from the boycott, divestment, and sanctions movement. Asked if the company was concerned that the move might hurt its sales, Birnbaum said: “We are not motivated by fear. SodaStream is a proud global Israeli company, and we believe that our flag and our values as Israelis are a source of pride.” (Various 07.02)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Lockheed Martin in $7 Million Iraq Support Contract

Lockheed Martin has been awarded a $7,702,239 cost-plus-fixed fee contract for contractor logistics support for the Iraq integrated air defense system. Work will be performed at Manassas, Virginia, and is expected to be complete by 31 January 2018. This contract is 100% foreign military sales to Iraq. Air Force Life Cycle Management Center, Hanscom Air Force Base, Massachusetts, is the contracting activity. (DoD 01.02)

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3.2 US Firm Wins $200 Million Iraq Defense Contract

Virginia’s Sallyport Global Holdings has been awarded a $200-million modification on a previously awarded contract for base life support, base operations support, and security for Iraq’s Balad Air Base. Work will be performed at Balad Air Base and is expected to be complete by 31 July 2017. Sallyport was founded in 2003 to support the post war reconstruction efforts in Iraq and has since expanded its operations to other countries. (DoD 30.01)

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3.3 Christian Cross Dropped from Real Madrid Logo in GCC Clothing Deal

The club crest of Spanish soccer team Real Madrid will not feature the traditional Christian cross on clothing sold in some Middle East countries under a regional deal. Marka, a retailing group in the UAE, has been granted exclusive rights to “manufacture, distribute and sell Real Madrid products” in the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain and Oman, the company said on 24 January. However, Marka said Real Madrid has two versions of the crest for the Middle East market and that Marka would use the one without the Christian cross due to cultural sensitivities.

The six Gulf Arab countries where Marka will sell and distribute Real Madrid products are all Muslim-majority. The redesigning of the crest would require only a minor change. The original features a very small Christian cross at the top of a crown on the crest. The agreement allows Marka to sell clothing such as t-shirts, polo shirts and swim wear featuring the Real Madrid name and crest. Sales will start by March. The deal does not cover replica jerseys, which are sold in Dubai featuring the cross.

This is not the first time the symbol has been altered. In 2014, Real Madrid removed the Christian cross from its crest when used by its sponsor the National Bank of Abu Dhabi. Dubai-based airline Emirates is Real Madrid’s main shirt sponsor, while the club is also sponsored by Abu Dhabi investment fund IPIC. (Reuters 24.01)

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3.4 Kuwait Set To Launch Stem Cell Research Center During 2017

The Kuwait Projects Company (KIPCO) has announced that it will hand over the pioneering Sheikha Salwa Sabah Al Ahmad Stem Cell and Umbilical Cord Centre in mid-September. The company said that 70% of the construction is now complete on the project. It is the Arabian Gulf’s first center to be dedicated to stem cell research and the storage of umbilical cords. The center is being built over a 12,000 sq m plot of land in the Al Sabah Health Zone, and includes a three-floor main building, a utilities building, in addition to external landscaping and parking. The facility includes testing and research laboratories, blood and cord storage banks, research and medical libraries, as well as a lecture theatre. (AB 28.01)

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3.5 WhatsApp & Facebook Named as Most Used Social Media in UAE

WhatsApp is the most popular social media app in the UAE, with 97% of population using the messaging service, according to the Federal Competitiveness and Statistics Authority. Facebook is the next most popular with 89%, followed by YouTube with 73%. Snapchat and LinkedIn are the least popular form of social media are, with 27% and 16% respectively. The UAE authority said, however, that LinkedIn is used mostly by the age group between 22 and 34 years old, while the age group with the highest rate of social media usage was aged between 18 and 21 years old. Abdullah Lootah, director-general of the Federal Competitiveness and Statistics Authority, said that with the level of technological growth in the UAE, it was important to learn about new developments in social media, the diversity of its audience and its new technological platforms. (AB 29.01)

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3.6 Dubai Laboratory Launches Service to Verify Halal Cosmetics

Dubai Central Laboratory (DCL) at Dubai Municipality has launched a new service to verify Halal cosmetics and personal care products. The Halal testing is being conducted with the help of the best technologies and international practices by DCL experts. Halal pharmaceutical and cosmetics continue to expand as awareness about ingredients rises and new product development, such as permeable nail polish, the development of Halal vaccines and new ranges of nutraceuticals. Muslim spend is expected to reach $213 billion by 2021 in aggregate. The service is being provided to protect the community from the “undesirable nature of ingredients and methods used in the manufacturing” of some cosmetic products. (WAM 25.01)

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3.7 Barilla Signs Partnership Deal for Saudi Expansion

Barilla, the world’s leading pasta brand, has announced regional expansion into Saudi Arabia in partnership with Mayar Foods for distribution of its Italian products through retailers across the kingdom. The pasta market size in Saudi Arabia is 55 thousand metric tons, with nearly 2 kg. consumption per capita per year and the numbers continue to grow. Barilla said it will be catering to the Saudi Arabia market through a diverse range of traditional pasta products that is expected to grow 5% in the next five years. The pasta brand is currently working with more than 2,000 retail stores, 5,000 restaurants and 5 airlines, across the GCC with majority of distribution in UAE, Qatar and Oman served by the Dubai headquarters via regional partners. Barilla’s regional expansion comes as a result to a shift in dietary preferences in the region, where the Mediterranean diet is becoming more popular and people are keen to try authentic Italian food.

In 2014, Barilla opened its regional headquarters in Dubai and has since announced expansion into North Africa and now Saudi Arabia. Barilla Restaurant Group, part of the Barilla family of brands, has also just opened its first restaurant in the region in Dubai and is planning further expansion in 2017. (AB 27.01)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 IDF’s Solar Farm to Provide Half of Ramon Airbase’s Electricity

The IDF is about to inaugurate its largest solar project yet when it begins running a solar farm at the Ramon Airbase, which is expected to produce half of the base’s electricity. This is a drastic increase from the currently low percentage of electricity (about 2%) that the IDF gets from solar energy, which mirrors the national figure.

The Ramon Airbase solar farm produces 5 MW. Its size is 50 dunams of which 30 dunams contain an active 16,000 solar panels, built with budgetary assistance from the US. The solar farm is part of an overall plan that the IDF is implementing to vary its power sources. In 2011, the military installed solar panels on the roves of army bases, and by 2011, nearly 20 such systems had been installed throughout the country with the Enlight Renewable Energy company. This works by the BOT method: Build-Operate-Transfer. In this framework, Enlight will maintain the infrastructure for about 15 years, and they will split the profits. Thus, the army also benefits from electrical consumption at no extra charge and also receives part of the proceeds from the Israel Electric Corporation for generating electricity. Today, 95% of the electric used by the defense establishment purchases is produced with gas. This project has saved the IDF millions of shekels since 2014. (Ynetnews 28.01)

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4.2 Saudi Arabia to Invite Bids for Green Energy Projects in April

Saudi Arabia will invite international and domestic companies to bid for renewable energy projects in April, the energy minister said on 1 February, adding that he expected to award the deals in September. Energy Minister Khalid al-Falih said the projects would include two new solar and wind power plants with a capacity to produce 700 MW of power. The projects are part of a major renewable energy supply program which is expected to involve investments of between $30 billion and $50 billion by 2023. (AB 01.02)

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5: ARAB STATE DEVELOPMENTS

5.1 Marginal Drop in Average Lebanese Consumer Prices for 2016

Data published by the Lebanese Central Administration of Statistics (CAS) revealed that average consumer prices declined by a mere 0.78% y-o-y by the end of 2016, as the average Consumer Price Index (CPI) contracted to 96.27 points by December 2016, from 97.03 points in the same period last year. The steepest decline of 8.35% y-o-y was recorded for average prices of water, electricity, gas & other fuels (11.9% of CPI) by December 2016. Average prices of food & non-alcoholic beverages, which constitute 20.6% of CPI, also dropped by 1.2% y-o-y over the same period. Similarly, transportation (13.1% of CPI), health (7.8% of CPI) and communication average prices fell by 3.62%, 2.04%, and 0.23% y-o-y, respectively.

However, as tourism activity picked up especially during the December festive season, clothing & footwear (5.4% of CPI), restaurants & hotels (2.6% of CPI), as well as recreation, amusement, & culture (2.3% of CPI) all registered average yearly advances of 4.97%, 2.6%, and 1.94%, respectively. As for the Actual rent sub-index for households (old and new rent), which constitutes 3.4% of CPI, it grew by an average of 4.41% y-o-y, while the Education sub-index that grasps 5.9% of CPI rose by 1.99% y-o-y on average by December 2016. (CAS 25.01)

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5.2 Lebanese Trade Deficit Widens by 3.56% y-o-y by December 2016

Data from the Lebanese Customs Administration revealed that the Lebanese trade deficit rose by 3.56% y-o-y to reach $15.65B by Dec. 2016, as imports climbed by 3.54% y-o-y to $18.7B, and exports increased by a yearly 3.45% to $3.1B. In terms of imports, the value of Mineral Products constituting 19.98% of total imports increased by 8.71% y-o-y to $3.73B. Products of the Chemical or Allied Industries grasping 10.85% of the total value of imports also rose by a yearly 4.41% to $2.03B. Moreover, Vehicles, aircraft, vessels, and transport equipment, which constituted 9.49% of total exports, rose by 0.99% to $1.78B. However, Machinery and Electrical Instruments, which constitute 10.07% of total imports, declined by 5.49% yearly, to stand at $1.88B by Dec.2016. By Dec. 2016, the lion’s share of Lebanon’s imports were from Greece, Russia, China, Italy and Kuwait, with the respective shares of 13.86%, 11.07%, 8.81%, 8.09%, and 5.49% of total imports. As for Exports, Pearls, Precious stones and Metals constituting 32.33% of total exports rose by 90.88% y-o-y to reach $828.53M by Dec. 2016, as the average price of Gold rose by 7.63% to stand at $1,247.95. However, Prepared foodstuffs, beverages, tobacco which made up 17.44% of total exports fell by a yearly 7.4% and settled at $447M by Dec.2016. Machinery and electrical instruments (13.69% of total exports) also declined from $413.81M by Dec.2015 to $350.97M by Dec. 2016. Similarly, Products of the chemical or allied industries (11.73% of total exports) decreased by 26.84% y-o-y to stand at $300.7M over the same period. By the end of 2016, Lebanon had mainly exported to: Turkey, Syria, Saudi Arabia, UAE and Kuwait, carrying the respective weights of 15.2%, 14.85%, 8.05%, 5.38%, and 5.2% of the total value of exports. (LCA 29.01)

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5.3 Lebanese Tourist Arrival Numbers Climb 11.23% for 2016

According to the Lebanese Ministry of Tourism, the number of tourist arrivals by the end of 2016 rose by a yearly 11.23% to 1.69M by December. This rise was partly due to the political breakthrough in Lebanon by the end of Q4/16 and partly due to the rise in the number of tourists from Europe, Arab countries, as well as North America, which altogether add up to 82% of total tourists arriving to Lebanon.

European visitors constituted 33.43%, the largest share of total visitors, rising by 11.72% y-o-y to 564,499 by December. Swedish tourists particularly rose by an annual 22.01% to 34,622. Visitors from Turkey and Germany also increased in number by 21.21% and 17.03% to 25,487 and 87,567, respectively, by December 2016.

Moreover, despite the ban imposed during Q1/16 by GCC governments discouraging nationals from visiting Lebanon in fear of political instabilities, total tourist arrivals from the Arab countries picked up by the end of the year, recording a yearly 8.78% uptick to 522,922, which constituted 30.97% of total tourist arrivals in 2016. However, it is worthy to note that the number of tourists from the UAE, Kuwait and Saudi Arabia were most effected by the ban, registering yearly falls of 74.33%, 19.72%, and 15.55%, respectively, to stand at, 2,114 Emiratis, 25,653 Kuwaitis, and 40,391 Saudis. Notably, Iraqis seeking refuge from their country’s political turmoil fled to Lebanon this year, raising the number of Iraqi visitors to 236,013, up 23.19% compared to the same period last year.

In their turn, visitors from the Americas constituted 17.58% of total tourist arrivals and increased by an annual 12.42% to 296,831 by December 2016. This boost of visitors from the region was mainly driven by the number of visitors from Venezuela, the US and Brazil which rose by 24.92%, 13.63%, and 11.54% to 13,208, 154,095, and 17,661 respectively in 2016. (MoT 03.02)

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►►Arabian Gulf

5.4 GCC Banks Forecast to Remain Resilient Amid Economic Slowdown

The weak economic environment will continue to weigh on the financial profiles of banks in GCC countries in 2017 and 2018, according to S&P Global Ratings. In a new report, S&P said it believes the three key risks are a difficult operating environment, a higher cost of risk and lower liquidity. However, it added that most GCC banks have built sufficient capital buffers to remain resilient to their weakened operating environment.

“The end of the commodities super-cycle has resulted in a significant decline in the economic prospects of the GCC region, implying lower growth opportunities for its banking systems and deteriorating liquidity,” said S&P global Ratings credit analyst Mohamed Damak. “The end of the commodities boom has also increased the pressure on GCC banks’ asset quality and profitability indicators.” He added: “Although we expect to see further weakening in some of these indicators in 2017-2018, we think that GCC banks have built sufficient buffers to make the overall impact on their financial profiles manageable.”

Rated banks in the GCC continued to display good asset quality indicators, profitability and capitalization in 2016 by global standards, albeit with signs of deterioration from 2015, S&P said. It added that over the past year, the agency has taken several negative rating actions on banks in the GCC. Most of these were concentrated in Bahrain, Oman and Saudi Arabia. “While we have taken a few negative rating actions in other GCC countries, these were primarily for idiosyncratic reasons. Overall, 31% of our rated banks in the GCC have negative outlooks or are on CreditWatch with negative implications,” it added. (AB 27.01)

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5.5 GCC Said to be Planning $240 Billion in Rail Investments

The total value of planned rail investments in the GCC stands at over $240 billion, with around $130 billion of projects in the pipeline in Saudi Arabia, it has been estimated. A recent report shows that Saudi Arabia is the GCC leader when it comes to planned railway expenditure, with the kingdom accounting for more than 50% of the total followed by the UAE with 18% ($30 billion of projects) and Qatar with 17% ($40 billion). Key projects expected to be awarded to contractors in Saudi Arabia in 2017 are Zulfi – Al Majmaah Passenger Railway, North South Rail, Waad Al Shimal, Turaif, Al Jouf (ST320), Makkah Mass Rail Transit (MMRT), and Makkah Metro. The UAE’s planned $30b of rail investments include Abu Dhabi Metro and Light Rail, skyTran Yas Island, the next stages of the Etihad Rail national network, the Dubai Metro extension for Expo 2020 and the new stages of the Al Sufouh Tram. (AB 06.02)

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5.6 GCC Countries Rank High in $26.9 Billion Remittances to Philippines

Overseas remittances to the Philippines reached $26.9 billion (AED98.72b) in January to November period, growing 5.1% year-on-year. The majority of these remittances come from Gulf countries – the UAE, Saudi Arabia and Qatar – and the United States, Bangko Sentral ng Pilipinas, the central bank, said. Remittances from overseas Filipinos reached $2.4b (AE654m) in November 2016, rising 18.4% from the year-ago level. Bangko Sentral ng Pilipinas said the increase in personal remittances was driven by the 7.8% expansion in transfers from land-based workers with work contracts of one year or more to reach $20.9b (AED5.69b). By country source, the bulk of cash remittances came from the US, Saudi Arabia, the UAE, Singapore, the United Kingdom, Japan, Qatar, Kuwait, Hong Kong, and Germany. Combined remittances from these countries accounted for more than 80% of the total cash remittances in the first 11 months of 2016, the bank said.

The World Bank estimated in October last year that weak global growth is likely to slow down remittances to developing countries, adding inflows from Filipinos abroad will reach the slowest pace in 10 years. It expected remittance flows to low- and middle-income countries to reach $442b (AED120.43b) in 2016, rising 0.8% than $438.6b (AED119.51b) in 2015. (AB 25.01)

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5.7 Kuwait Launches New Plan to Transform Economy by 2035

Kuwait has unveiled a new plan to transform the country into a regional financial and cultural hub by 2035 through 164 strategic development programs. The Government said the Kuwait National Development Plan, branded as “New Kuwait”, sets the nation’s long-term development priorities. The Kuwait National Development Plan’s short-to-medium terms objectives include positioning Kuwait as a global hub for the petrochemical industry and increasing direct foreign investment by 300%. It also aims to attract more than KD400 million to information technology, services, and renewable energy in the short-term medium term. It is organized around five themes, or desired outcomes, and seven pillars, or areas of focus for investment and improvement. Each pillar has a number of strategic programs and projects that are designed to have the most impact on achieving the vision of a New Kuwait.

The Kuwait National Development Plan also aims to develop the country’s tourism sector to generate additional revenue streams and create a new jobs market and plans to further develop the country’s transportation and power sectors by building on the recent success in IWPP and PPP projects. New Kuwait will build on the recent momentum in urban development and housing with the introduction of new master plan developments and cities while introducing social and economic empowerment programs and care targeting youth, women, SMEs and the elderly. Built into the plan are 20 key global indicators, and additional sub-indicators, each tracking and measuring Kuwait’s progress with the plan and its performance compared to other countries, the statement added. (AB 31.01)

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5.8 Qatar’s Foreign Trade Surplus Shows First 2016 Rise in December

Qatar’s December trade surplus increased 21.7% from a year earlier, its only monthly rise in 2016. The country’s surplus rose to QR10.7 billion ($2.9 billion) in December from QR9.7 billion in November and up from QR8.8 billion in December 2015. According to the latest data released by the Ministry of Development, Planning and Statistics, the increase was due to a sharp fall in imports in December. The data also showed that exports of petroleum gases and other gaseous hydrocarbons fell 6.6% to QR11.86 billion during the month.

The International Monetary Fund (IMF) has forecast that Qatar’s real GDP growth is expected to reach 3.4% in 2017 from about 2.7% in 2016 as the country effectively adjusts to the new reality of sustained lower energy prices. In a research note, the IMF said the rise in 2017 growth reflects an expansion in the non-hydrocarbon sector due to World Cup-related spending and supported by added output from the new Barzan gas project. It added that during 2017/8, the Gulf state will see further subsidy cuts, increase in public fees, a moderate recovery in global commodity prices and the implementation of a VAT which will drive inflation, which is expected to moderate back to low levels over the medium term. (AB 03.02)

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5.9 India Overtakes the UAE in List of World’s Leading Emerging Markets

The UAE has fallen one place to third in a global list ranking the world’s best emerging markets but still boasts the best business climate, according to the 2017 Agility Emerging Markets Logistics Index. The Index ranked China top while India moved above the UAE to take second spot compared to last year. In the business climate sector, the UAE was followed by Qatar in second place, Oman in third and Bahrain in fourth while Saudi Arabia ranked 7th and Kuwait 10th. The index also said the UAE had the best transport and logistics connections. It said Bahrain climbed five spots in the overall rankings to 23th, rebounding after years of social unrest that damaged its economy and dampened investment.

The index, now in its eighth year, offers an annual snapshot of industry sentiment and ranks the world’s leading emerging markets by size, business conditions, and transport infrastructure and connections. It includes a survey of more than 800 global logistics executives. The index looked at the strength of the service sector, urbanization, security, foreign investment, wealth distribution, and the levels of bureaucracy and regulation confronted by businesses. The index also highlighted the emergence of Iran after years of international isolation, leaping eight spots to 18th. (AB 24.01)

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5.10 UAE’s Non-Oil Foreign Trade Hits $320 Billion in First Nine Months of 2016

The UAE’s non-oil foreign trade totaled AED1.172 trillion ($320 billion) for the first nine months of 2016, up by 0.1% on the same period in the previous year. Preliminary data of the Federal Customs Authority (FCA) indicated that the share of imports in the UAE’s total non-oil trade amounted to AED721.2 billion, a rise of 1%. The FCA said that the UAE’s exports grew by 6% to total AED149.1 billion, with gold leading the list with AED43.3 billion, representing 29% of the total. Re-exports were valued at AED301.4 billion, with mobile phones the most traded commodity with a value of AED48.1 billion at 16% of the total re-exports.

According to the FCA, Asia, Australia and the Pacific region was the UAE’s top trade partners with a share of AED465.7 billion, equivalent to 42% of the total non-oil trade. It added that Saudi Arabia was the top Gulf partner with AED54.8 billion of trade recorded, 43% of the total non-oil trade with GCC countries. (AB 01.02)

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5.11 UAE & India Seek Action Plan to Increase Bilateral Trade by 60%

The UAE and India are to develop action plans by June in a bid to increase bilateral trade by 60% over the next five years. Indian Prime Minister Modi and Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi, agreed that the UAE and India must continue to cooperate closely in order to expand mutual trade and economic opportunities. They said that in order to develop a medium and long term strategy for increasing bilateral trade by 60% over the next five years, the two sides will conduct studies to come up with action plans by the middle of 2017. These will focus on identification of potential sectors and the impeding tariff and non-tariff barriers, exploring opportunities in services sector and formulating a sector-specific strategy to boost two way trade and investments. (AB 26.01)

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5.12 UAE Ranked World’s Top Halal Travel Destination

The UAE ranked first in the global assessment of travel destinations with the “best developed halal ecosystems” by the 2016-2017 Global Islamic Economy Report, developed and produced by Thomson Reuters. UAE was followed by Malaysia and Turkey in the global ranking system. The report evaluated the countries based on four criteria: inbound Muslim travel, the quality of their Halal-friendly ecosystems, awareness campaigns, and the sector’s contribution to employment.

Valued at $151 billion in 2015, the halal travel market is steadily expanding, marking a year-on-year growth of 4.9% – is higher than overall travel industry growth of 3%. The halal market, 72% of which originated from Organization of Islamic Cooperation (OIC) countries, is the second largest travel market next only to China ($168 billion) and ahead of the United States ($147 billion). (AB 24.01)

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5.13 UAE Approves Issuing of ‘Visa on Arrival’ for Russian Citizens

UAE prime minister Sheikh Mohammed has approved a cabinet decree that will see Russian citizens granted an entry visa at all entry points to the county. The visa will allow citizens of the Russian Federation an entry visa for 30 days for the first time, renewable one time only for another 30 days, as per UAE regulations. The decree is hoped to develop economic and tourism ties between the two countries, and strengthen the UAE’s international competitiveness as a vibrant economic, commercial, and tourist hub in the region. More than 600,000 Russian tourists visited the UAE during the past two years, aided by the 56 weekly flights between the two countries by UAE National carriers Emirates and Etihad Airways. The number of flights are expected to increaser on the back of this decree. The UAE also ranks first in the GCC states as Russia’s most important business partner, with non-oil trade reaching $2.45 billion (AED9b) in 2015. (AB 29.01)

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5.14 UAE Military Vehicle Maker Targets European Market Breakthrough

United Arab Emirates-based military vehicles maker NIMR Automotive is teaming up with Czech state defense equipment company VOP CZ to try to break into European markets in the coming years. NIMR, a subsidiary of state-owned Emirates Defence Industries Company (EDIC) and a leading military vehicles manufacturer in the Middle East, is on a push to expand its global reach and boost production of its light- and medium-weight 4×4 and 6×6 vehicles. It wants to get into European markets as the continent’s NATO military alliance members step up defense spending but will be entering a crowded market and competing with the likes of General Dynamics, France’s Nexter or Patria of Finland. NIMR expects a final agreement with VOP in the coming months. VOP is an integrator and supplier of defense equipment and services. It also maintains and retrofits military vehicles, and is already a NIMR supplier.

NIMR launched a new production facility last year. It has delivered almost 2,000 vehicles in the past three years. The UAE’s armed forces are its biggest customer and it has also a joint venture for production with Algeria. NIMR’s collaboration with VOP could lead to around 1,000 vehicles being produced in the next three to five years. The Czech defense ministry plans to buy armored vehicles in 2017, including Pandurs produced by General Dynamics and Titus 6×6 vehicles from Nexter. (AB 25.01)

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5.15 Abu Dhabi Set to Slow Down Spending Cuts in 2017, Says Fitch

The pace of fiscal adjustment in Abu Dhabi is forecast to slow in 2017, after large spending cuts in 2015-2016, according to Fitch Ratings. The ratings agency said in a research note that it expects a government deficit of 5.9% of GDP in 2017, based on Brent crude averaging $45 per barrel, nearly unchanged from 2016. In affirming Abu Dhabi’s long-term foreign and local currency issuer default ratings at ‘AA’ with a stable outlook, Fitch said that Abu Dhabi’s total spending could edge up by 3% in 2017, having contracted by 10.3% in 2016 and 18.1% in 2015.

Spending in 2016 is estimated to have been above budget. Non-oil revenue targets have been scaled back and will now be met largely by dividends from state-owned and government-related enterprises, it added. Fitch said the emirate’s hydrocarbon revenues have the potential to exceed forecasts, reducing the urgency for new policy measures.

“In 2018, we expect the government budget to post a surplus of 1.5% of GDP, as Brent recovers to $55/barrel and the introduction of VAT yields around 0.5% of GDP,” the statement said. “New taxes on hotel stays and rents paid by non-nationals were introduced in 2016 but the fiscal effect of these will be small. Earlier liberalization of fuel prices and hikes to utility prices should help rein in the subsidy as oil prices recover,” it added.

Fitch said it estimates that non-hydrocarbon growth slowed to around 3.5% in 2016 from 7.6% in 2015, reflecting lower public sector demand, weak economic sentiment, tighter banking sector liquidity and effective exchange rate appreciation. The agency expects non-oil growth to pick up to 4% in 2017 and 4.5% in 2018 as consolidation eases and oil prices recover.

In its forecast, the government faces a fiscal financing need of 11.8% of GDP in 2017 and 4.6% of GDP in 2018 – assuming that the government finances the deficit excluding income from Abu Dhabi Investment Authority (ADIA). ADIA’s assets are not officially disclosed, but Fitch estimates that strong returns helped propel their value to $639 billion in 2016, from $627 billion in 2015. Fitch expects the value of ADIA assets to be little changed by end-2018 as investment returns would offset drawdowns for financing. (AB 04.02)

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5.16 Oman’s Government Budget Deficit Swells to $12.8 Billion

Oman’s government posted a budget deficit of OR4.94 billion ($12.8 billion) in the first 11 months of 2016 compared with a deficit of OR4.07 billion a year earlier, according to latest official figures. It also rose month-on-month from OR4.81 billion in the first 10 months of 2016 as low oil export prices slashed its revenues, provisional Finance Ministry data showed. The government’s original 2016 budget plan envisaged state expenditure of OR11.9 billion and revenues of OR8.6 billion. Officials said their 2016 economic plans assumed an average oil price of $45 a barrel. Oman is imposing a series of austerity measures after it posted a budget deficit of about OR4.5 billion last year. Gasoline and diesel price subsidies have been cut and similar cuts are planned for electricity and liquid petroleum gas. In August, the World Bank said Oman’s subsidy bill is expected to fall by 64% this year as the government seeks to reform its finances amid lower oil prices. (AB 27.01)

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5.17 Saudi Arabia Approves Measures Ahead of VAT Launch

Saudi Arabia’s cabinet on 30 January approved the GCC agreement for imposing a value added tax (VAT) from next year. In a session chaired by King Salman in Riyadh, the council of ministers gave its official approval to the measure, confirming that the kingdom is ready to implement it. Under the plans, a 5% levy will apply to certain goods following an agreement signed by the six-nation Gulf Cooperation Council last June. The move is in line with an International Monetary Fund (IMF) recommendation for Arabian Gulf states to introduce further revenue-raising measures to help adjust to low oil prices that have hampered their economic growth. Many GCC countries have already agreed to impose taxes on cigarettes and soft drinks this year. Saudi Arabia’s 2017 state budget also recommended a five% VAT from 2018. (AB 31.01)

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►►North Africa

5.18 Morocco Rejoins African Union with Overwhelming Majority of AU Member Votes

An overwhelming majority of African Union (AU) member states voted on 30 January to admit Morocco to the pan-African organization after a 33 year hiatus. The historic decision, in which 39 of 54 member states voted in favor, is a crowning achievement for Moroccan King Mohammed VI’s diplomatic goals and vision for the continent.

Since ascending the throne in 1999, King Mohammed VI has made Africa a foreign policy priority, making 38 visits to African countries and signing more than 350 bilateral agreements on economic, political, security, religious, and educational issues. Morocco is the second largest African investor in the continent, and between 2003 and 2013, 51% of its foreign direct investment went to Sub-Saharan Africa, peaking at 88% in 2010. Meanwhile, Moroccan trade with the rest of Africa increased by 12% annually in that same period. In late 2013 the King established a program to train imams from across the continent in Morocco’s open, moderate form of Islam; and in June 2016, inaugurated the Mohammed VI Foundation for African Oulema with a mission of strengthening age-old historical and religious ties between Morocco and its African neighbors. With Morocco serving as the host country, the King also ensured that Africa’s interests on climate change policy were represented at the 22nd Conference of the Parties to the United Nations Framework Convention on Climate Change summit in Marrakesh in November 2016, hosting a special meeting for African leaders at the event. (MACP 31.01)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Political Rift Kills Turkey-Austria Engine Deal

Growing political tensions between Ankara and Vienna in recent months have resulted in the termination of an otherwise prospective deal between a Turkish and an Austrian company, both engine specialists. In October 2015, TUMOSAN, a privately owned Turkish engine maker, signed a deal with AVL List, an Austrian firm, for technical support for the engine that the Turkish company had been commissioned to develop. Under the deal, TUMOSAN would get technical support from AVL for the power unit of the Altay, Turkey’s first indigenous, new-generation main battle tank in the making. AVL also would provide know-how for the integration of the engine to the tank. The Turkish government insisted that the country should finally have the intellectual property rights and export licenses for each part of the engine.

In March 2015, TUMOSAN signed a €190 million (some $200 million) contract with the Turkish government to design an engine for the Altay. The program involves the indigenous design, development, prototype production, testing and qualification of an engine for the Altay. TUMOSAN also will design and develop a transmission for the tank and produce critical parts for its engine, including the diesel pump, electronic control unit and injector. With know-how from AVL, TUMOSAN hoped it would conclude the program within 54 months.

But TUMOSAN recently announced that it terminated its contract with the Austrian company due to unresolved disputes over export licenses. Under the AVL contract, the company had to provide the necessary Austrian government licenses within 90 days. After the company’s requests for extension for several times it became clear that the Austrian government insisted on issuing export licenses on conditions that it would be interfering with the domestic affairs of Turkey. After those conditions were rejected by SSM [Turkey’s procurement agency, the Undersecretariat for Defense Industries] TUMOSON canceled the Technical Support Provider agreement with AVL.

Turkey and Austria have had problematic relations in recent months after Vienna began to loudly criticize Turkey’s alleged democratic shortage, especially after Ankara announced an emergency rule in response to a failed coup last July. TUMOSAN’s deal with AVL was the first of its kind, ending up in failure due to political rift between Turkey and a western country. But it may not be the last. (DN 24.01)

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6.2 IMF in Disagreement Over Greek Bailout Measures

Greece’s government says members of the International Monetary Fund’s executive are in disagreement on bailout measures required for the debt-plagued country, further complicating efforts to break an impasse in talks. A government spokesman leveled the accusation on 7 February, hours after the IMF board issued a gloomy statement on Greece’s debt outlook. The Greek government, he said, is opposed to demands being made by the IMF, including a contingency austerity program after the current bailout program ends next year. Greece needs to agree with the IMF and its European creditors on more reforms in order to keep tapping its bailout program. Although Greece insists it doesn’t have pressing cash needs, without the money, it would eventually face the renewed possibility of default – something that nearly caused it to fall out of the euro bloc in 2015.

But negotiations over Greece’s reforms remain mired in disagreement. The Greek government opposes labor reforms and the IMF is at odds with European lenders over the extent to which the country’s massive debts should be eased. The IMF’s statement said that the proposed reforms were supported by “most directors” – suggesting disagreement within the fund. However, the document also noted: “Directors emphasized the need to preserve and not reverse existing labor market reforms … to bring Greece’s collective-dismissal and industrial-action frameworks in line with best practices.”

Unease over Greece’s bailout – and its future in the euro – has been heightened by more widespread political uncertainty in Europe, with anti-EU parties gaining popularity ahead of national elections in key countries, such as the Netherlands and France. (EKathimerini 07.02)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israelis’ Rising Life Expectancy Poses Health Care Challenge

On 30 July, the Ministry of Health announced that Israelis’ life expectancy has increased by two years over the past decade, essentially growing at a pace of five hours a day. Life expectancy for Israeli women rose from 82.2 years in 2005 to 84.1 years in 2015. Meanwhile, life expectancy for Israeli men has grown from 78.2 years in 2005 to 80.1 years in 2015. The data was published ahead of a conference on the health care costs associated with an aging population. According to the ministry’s projections, the number of Israelis aged 75 and older, which stood at 410,000 in 2015, will almost double to 811,000 in 2039.

This will have major ramifications on Israel’s state-run health care providers, as the budget they receive is based on the number of people they treat, not their age. The costs of treating Israelis 75 and up are four times as high as those associated with younger age groups, some NIS 23,000 ($6,100) compared to NIS 5,500 ($1,500). The ministry said that the number of Israelis aged 65 and up who seek medical treatment is triple the number of patients among younger Israelis. Likewise, the costs associated with their medication consumption is 2.6 times as high. (MoH 30.01)

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7.2 Israel’s Health Ministry Proposes New Anti-Smoking Laws

On 25 January, Director of Public Health Services Prof. Grotto submitted to the Knesset a list of proposed steps intended to reduce the number of Israeli citizens suffering from second-hand smoking. Israel has anti-smoking laws and smoking is forbidden in many public areas, though the laws are not always enforced. In practice, if a given municipality chooses not to enforce the laws, it is up to the private citizen to call the police – and often, by the time the police arrive, the smoker has already left the area.

These proposals and initiatives are things which the Health Ministry intends to advance, such as raising the tax on electronic cigarettes to match that of regular cigarettes, limiting tobacco advertisements in all media, enlarging the areas in which smoking is forbidden and others. They seek to also forbid smoking in public areas such as open stadiums and enlarge the no-smoking radius around preschools and playgrounds. Grotto also said these laws can be advanced quickly and without going through the usual legislative process. Even though smoking was on the decline in 2016, nearly 40% of Israelis are smokers by the time they finish their mandatory IDF service. (Arutz Sheva 25.01)

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7.3 Bank of Israel Unveils New Bill Designs

The Bank of Israel is moving towards replacing NIS 20 and NIS 100 bills. The portraits selected for the new bills will be poetess Rachel for the NIS 20 bill and Leah Goldberg for the NIS 100 bill. The Bank of Israel said that 90% of the NIS 50 bills in circulation had been replaced (the new bills were launched in 2014) and half of the NIS 200 bills (the new bills were launched in 2015). The Bank of Israel added that all of the old NIS 200 bills would be replaced by the end of the year.

According to the Bank of Israel, the new bills have security paper with an embedded watermark comprising the portrait and the denomination value; a security thread that changes color with three windows in which the portrait and denomination appear; raised ink on both sides of the banknote; tiny holes in the shape of the denomination; combination of shapes; microtext; KINEGRAM VOLUME security foil stripe; color changing ink; and transparent ink. (Globes 31.01)

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7.4 IDF Sees Rise in Number of Women Serving in Combat Units

The significant increase in the number of women in combat units of the Israel Defense Forces continues: This year, about 2,800 women will serve in combat roles. The number of women serving in combat roles in the IDF’s Homefront Command is up by 38%, the number of women combat soldiers in artillery units is up by 19%, the Israeli Navy has seen the number of women in combat roles increase by 93% and the number of women in combat service in the Border Police has doubled. These figures were reported in a meeting of the Knesset Foreign Affairs and Defense Committee devoted to the subject of female IDF soldiers in combat roles by the head of the Planning Brigade and Manpower Administration in the IDF Personnel Directorate. The army was working to establish its first-ever training base for mixed-gender battalions, including the fourth mixed-gender battalion that will be founded with the upcoming March draft.

Lt. Col. Dr. Lena Feldman-Koren, chief of medical services for the IDF ground forces, discussed the physiological differences between men and women that she says demand that training be adjusted to the needs of female soldiers. (IH 31.01)

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*REGIONAL:

7.5 Landmark Ruling in Lebanon Says Homosexuality Not ‘Illegal’

Lebanon’s Court of Cassation ruled on 26 January that homosexuality cannot be considered a criminal act, potentially setting a precedent for the LGBT community in the nation. Lebanon is considered one of the most progressive Arab nations when it comes to gay rights. In its ruling, the court said homosexual acts do not violate the country’s criminal code because they do not contravene the “order of nature.” The judges ruled that the defendants in the case, who were charged with having homosexual relations, were innocent because “homosexuality is a personal choice, and is not a punishable offence.” Similar cases in the past led to convictions and prison sentences, but the new ruling may now lead to legalizing homosexuality. Not long after the ruling, anti-gay Lebanese took to social media to protest the decision and called for severe punishment of the defendants. (IH 29.01)

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7.6 Kuwait Executes Member of Al-Sabah Royal Family

Kuwait hanged a prince in the ruling Al-Sabah family on 25 January for premeditated murder, in what appeared to be the first execution of a member of the royal family in the Arabian Gulf state. Sheikh Faisal Abdullah Al-Jaber Al-Sabah was hanged at Kuwait’s central prison alongside six other prisoners, including a woman convicted of killing dozens of people at her husband’s wedding to second wife. Al-Sabah’s crime was “premeditated murder and possession of a firearm and ammunition without a license,” the state news agency said. The prince was sentenced to death in 2010 for killing his nephew, another prince, according to Kuwaiti newspapers.

Nusra al-Enezi, a Kuwaiti woman found guilty of setting fire to a tent at her husband’s wedding as he married a second wife and killing over 40 women and children, was also executed. The other three men and two women hanged hailed from Bangladesh, Egypt, Ethiopia and the Philippines and were convicted of offences ranging from murder, attempted murder, kidnapping and rape. The executions were the first in Kuwait since 2013 and come amid a rise in the use of the death penalty throughout the Arabian Gulf. (Reuters 25.01)

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7.7 Abu Dhabi Chosen to Host 2019 Special Olympics World Games

Abu Dhabi will be the host of the 2019 Special Olympics World Games, the world’s largest humanitarian and sporting event – the first time the event has been held in the Middle East. The games will take place in venues throughout Abu Dhabi from 14-21 March 2019. The Special Olympic World Games celebrate the skills, talents and sporting achievements of athletes with intellectual disabilities from across the world. The last Special Olympics was held in Los Angeles in 2015.

About 7,000 athletes and their families, from 170 countries will compete in 22 sports, taking place at multiple venues throughout the city, including ADNEC, Zayed Sports City and the IPIC arena. Being awarded host city status further acknowledges Abu Dhabi’s longstanding commitment to encouraging social inclusion at home and across the Middle East, organizers said in a statement.

Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, has issued a resolution setting up the Higher Committee to host the Special Olympics in Abu Dhabi under the chairmanship of Mohammad Abdullah Al Junaibi. (AB 24.01)

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7.8 PwC Says UAE Needs 175,000 Extra School Places by 2020

The private school sector is expected to continue to drive the growth of the UAE’s education market to 2020, according to a new PwC study. Over 175,000 additional seats are predicted to be required in the K-12 segment in the next four years, and 90% of this will come from private school enrollees. The report also showed that based on historic demographic trends, Dubai is forecast to require 74,500 additional seats in 50 new private schools by 2020, while 62,000 additional seats in 52 new private schools in the same period will be needed in Abu Dhabi. Almost all of the UAE, led by Dubai, are witnessing growth in private K-12 enrolment, with the exception of Fujairah. However, as more quality schools are opening, efforts to attract and retain students will become a more pressing issue for school operators.

The report also noted that given the increasing number and quality of schools, parents have a better selection of schools in which to enroll their children. It added that cost will play a critical role in changing the supply-demand dynamic, with calls for Dubai to have more quality schools below the average annual tuition of AED40,000. The study said that in Dubai, UK and Indian curriculum schools continue to dominate while in Abu Dhabi, Indian and American curriculum schools are driving growth but British curriculum schools remain popular choices with parents considering admission to lower cost European higher education institutes. The data was released through a study published by PwC Middle East ahead of Global Education Supplies and Solutions (GESS) Dubai 2017. (AB 04.02)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 StemRad’s Cosmic Ray Suit Set for Mars Trial

An innovative protective suit against cosmic rays developed by Israeli startup StemRad is set to head for outer space. The Israel Space Agency and the Ministry of Science, Technology and Space signed an agreement with the German Aerospace Center for launching the Israeli company’s innovative suit as part of the next trial flight of NASA’s Orion satellite. The company’s suit is designed for the first manned flight by Orion to Mars planned by NASA.

The German Aerospace Center is responsible for research into the effects of deep space radiation on the human body. As part of this research, Orion will be sent to the moon in 2018 with dummies on its deck, some of which will be dressed in StemRad’s protective suit, while other dummies will remain exposed. With the return of Orion to the Earth a month later, the dummies, which will contain thousands of radiation detectors, will be checked under laboratory conditions and the level of radiation penetrating through StemRad’s suit and absorbed by them, if any, will be tested. The object is to make adjustments in the suit, if needed, in preparation for the manned mission to Mars scheduled for 2021.

The Israeli startup is cooperating in the innovative suit’s development with Lockheed Martin, which is also involved in NASA’s program for launching a manned flight to Mars. The main hazard to which astronauts flying to Mars will be exposed is radiation from solar flares. These flares are liable to continue for many days and Orion has limited space for its crew to protect themselves from dangerous radiation when solar flares are occurring. The function of the suit is to enable the satellite’s crew to function normally if a prolonged solar flare emitting large amounts of radiation takes place.

StemRad’s suit protects mainly bone marrow, the lungs, chest, stomach, intestine, and the ovaries among women. These organs are particularly sensitive to the formation of malignant tumors as a result of exposure to radiation. The suit itself is made out of hydrogen-rich materials and worn like a vest.

Ramat HaChayal, Tel Aviv’s StemRad‘s revolutionary technology, which ties together partial bone marrow shielding with the human body’s remarkable regenerative biological processes, brings about an expanded set of response possibilities to nuclear catastrophes. When exposed to high-levels of gamma radiation, the immediate concern to individuals is that of Acute Radiation Syndrome (ARS), also referred to as radiation sickness. In such cases, damage to the body’s bone marrow leads to fatal aplastic anemia, the hallmark of which is a severe lack of red blood cells, white blood cells and platelets. The pelvic bones contain the body’s largest concentration of bone marrow, so protecting them from the harmful effects of gamma radiation is crucial. The StemRad 360 Gamma is worn around the pelvic area, affording highly effective protection to the body’s “life factory.” In situations of exposure to high doses of gamma radiation this could mean the difference between life and death. Protection from gamma radiation, while at the same time allowing for full mobility, was not possible before StemRad developed the revolutionary 360 Gamma. (Globes 31.01)

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8.2 FDA Approval of Teva’s Two New RespiClick Maintenance Inhalers for Asthma Treatment

Teva Pharmaceutical Industries announced that the U.S. FDA approved two products for adolescent and adult patients with asthma. These products, AirDuo RespiClick (fluticasone propionate and salmeterol inhalation powder) and ArmonAir RespiClick (fluticasone propionate inhalation powder), include medication delivered via Teva’s RespiClick breath-activated, multi-dose dry powder inhaler (MDPI) which is used with other approved medicines in Teva’s respiratory product portfolio.

AirDuo RespiClick is a fixed dose combination product containing the same active ingredients as Advair. AirDuo RespiClick is a corticosteroid and a long-acting beta2-adrenergic agonist (LABA) indicated for the treatment of asthma in patients aged 12 years and older. ArmonAir RespiClick is an inhaled corticosteroid (ICS) containing the same active ingredient as Flovent, and is indicated for the maintenance treatment of asthma as prophylactic therapy in patients 12 years and older.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. (Teva 30.01)

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8.3 Degania Silicone & Control Flo Medical Make Patented ResQ Urological Catheter System

Birmingham, Alabama’s Control Flo Medical, a urological medical device company and developer of the ResQ Catheter System, announced a design and supply agreement with Degania Silicone of Kibbutz Degania Bet, Israel. The ResQ Urological Catheter System is a patented, revolutionary disruptive technology and a first-in-class urinary blockage and drainage catheter. The ResQ Catheter System represents a new disruptive technology for indwelling and intermittent catheter users.

Degania Silicone is one of the world’s leading groups specializing in the supply of indwelling medical catheters, silicone medical products and medical devices for critical care and operating rooms, as well as direct-to-customer products. Degania has six state-of-the-art production facilities located in France, India, Slovakia and Israel. (Control Flo Medical 26.01)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Israel to be the Fourth Country to Land a Vehicle on the Moon

Israel is scheduled to become the fourth country to land a spacecraft on the moon, with a launch planned for the end of 2017 by billionaire businessman Elon Musk’s company SpaceX. The scheduled launch is also set to send several satellites into space, but the Israeli spacecraft is the only one designed to continue to the moon. The dishwasher-sized spacecraft was built by the Israeli SpaceIL team for Google’s Lunar XPRIZE competition, which aims to promote space technology and interest in the private sector. Thanks to advanced innovation and engineering, the Israeli team was the first to reserve a spot for a space launch out of 33 teams that began the competition. Only five teams remain that have clinched spots on space launches, but all the others are set for after SpaceIL’s scheduled launch at the end of 2017.

After landing on the moon, the spacecraft is expected to take photos and videos of the moon and broadcast them to Earth. The spacecraft is designed to travel 500 yards across the surface of the moon by hopping, instead of roving like other spacecraft in the competition. If all goes as planned, SpaceIL will meet the conditions of Google’s XPRIZE competition and win $20 million. The team plans to use the prize money to promote science in Israel. (Israel Hayom. 26.01)

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9.2 IAI Introduces ADA- New System Designed for Hardening GPS Systems against Jamming

Israel Aerospace Industries (IAI) is unveiling ADA – an advanced system that protects avionic systems from GPS jamming. ADA has already been integrated into several systems and platforms operating both in Israel and abroad. The ADA system recently won a tender from Israel’s Ministry of Defense, for integration into one of the main platforms of the Israel Air Force. ADA was developed by IAI’s MALAM Division, a national center of excellence for Anti-Jamming protection of Global Navigation Satellite Systems (GNSS) receivers.

Under the terms of the project with the Israeli Air Force, IAI will deliver a turnkey solution based on its multi-channel Controlled Reception Pattern Antenna (CRPA) technology. The ADA integration will ensure the operational continuity of the aircraft fleet, allowing avionic systems which rely on satellite navigation systems to continue uninterrupted operation even under direct electronic attack, when the enemy uses GPS jammers or other methods of interference.

Based on an advanced electronic architecture and the implementation of sophisticated digital processing, the agile ADA system, developed by IAI MLM, protects a broad range of GNSS systems operating on manned and unmanned combat aircraft and helicopters. ADA variants are also used in land-based platforms such as main battle tanks and APCs, and on naval systems. Other derivatives of the system are integrated in various guided weapons.

Israel Aerospace Industries is Israel’s largest aerospace and defense company and a globally recognized technology and innovation leader, specializing in developing and manufacturing advanced, state-of-the-art systems for air, space, sea, land, cyber and homeland security. Since 1953, the company has provided advanced technology solutions to government and commercial customers worldwide including: satellites, missiles, weapon systems and munitions, unmanned and robotic systems, radars, C4ISR and more. IAI also designs and manufactures business jets and aerostructures, performs overhaul and maintenance on commercial aircraft and converts passenger aircraft to refueling and cargo configurations. (IAI 31.01)

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9.3 Mellanox Data Center Packet Processing Platform Based on Indigo Network Processor

Mellanox Technologies announced the IDG4400 Flex Network platform based on Indigo, Mellanox’s newest network processor (previously known as NPS-400). The Indigo high-end network processor is capable of sophisticated packet processing combined with unprecedented performance. Indigo’s L2-L7 packet processing solution offers powerful capabilities positioning it to become a world-leading platform for a wide range of applications, including router-type functions, intrusion prevention and detection, application recognition, firewall, DDoS prevention and more. Indigo hardware acceleration features, coupled with powerful software libraries, have demonstrated stateful packet processing at record rates of 500Gb/s and deep packet inspection (DPI) at 320Gb/s over millions of flows; 20 times higher versus other offerings at this scale.

A single IDG4400 network processor platform is capable of realizing the DPI processing capability of a full rack of servers. In addition, the Indigo platform may be used in conjunction with Mellanox’s Spectrum Ethernet switch systems for increased scalability. The Spectrum switch systems provide Ethernet connectivity of 10, 25, 40, 50 and 100Gb/s, and the deterministic zero packet loss performance and mega scale make it a most efficient data center building block. By combining Indigo IDG4400 and Spectrum Ethernet switching solutions, data center managers gain a cost efficient, comprehensive L2–L7 switching and packet processing solution capable of analyzing data in depth as it passes through the network.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet smart interconnect solutions and services for servers and storage. Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability. Mellanox offers a choice of fast interconnect products: adapters, switches, software and silicon that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage and financial services. (Mellanox 31.01)

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9.4 mPrest Completes Project With Israel Electric Corporation

mPrest announced the completion of their Information Grid project – a platform enabling the Israel Electric Corporation (IEC) to optimize and further secure the management and control of all its disparate systems, process, assets, facilities and infrastructure. Using mPrest’s command, control and analytics product, tens of thousands of IEC’s sensors across 600 sites and mobile assets are now connected through a single platform, which aggregates, analyzes and outputs data while enabling real-time end-to-end processes and integration of IT and Operational Technology (OT) platforms. Adoption of the mPrest platform provided all IEC departments a holistic and aggregated, real-time picture of their operations. The project is a model for the services mPrest provides to other power utilities worldwide. mPrest’s current customers are spread around the United States, Asia-Pacific and Europe.

Petah Tikva’s mPrest is a global provider of mission-critical monitoring and control software for the utilities, Industrial Internet of Things (IIoT), security and defense sectors. With its expansive technology platform and a proven track record, mPrest delivers unrivalled flexibility to optimize asset performance and productivity, deliver operational and energy efficiency, and help large organizations reduce costs significantly. (mPrest 30.01)

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9.5 Avelacom Builds Network from London to Moscow with PacketLight Transport Solution

PacketLight Networks announced a partnership with Avelacom to build out their high speed network from London to Moscow with PacketLight’s optical transport solutions. Avelacom is one of the fastest growing international telecom/IT companies in Europe, and leveraged PacketLight hardware to reduce the network latency, allowing them to meet the growing demands of capital markets for low latency data transport across the continent. Avelacom selected PacketLight’s PL-1000GT muxponder/transponder solution, as well as the PL-1000IL, to meet the aggressive demands of building a 100G low latency DWDM long-haul network stretching 1100 km with full add/drop capability at all major sites. Their carrier-grade solution provided the necessary throughput rate of 100G in a compact, easy-to-configure 1U box, with full Optical Transport Network (OTN) integration and remote management and troubleshooting capabilities.

Tel Aviv’s PacketLight Networks offers a suite of Leading 1U Metro and Long Haul CWDM/DWDM and OTN solutions, as well as Layer 1 optical encryption for transport of data, voice and video applications, over dark fiber and WDM networks. Their products are known for their high quality, state of the art technology, reliability and performance with encryption capability at affordable prices. PacketLight products are distinguished by providing the entire optical layer transport solution within a highly integrated compact platform, designed to enable maximum flexibility, ease of maintenance, operation and provide real pay-as you-grow architecture. (PacketLight 07.02)

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9.6 LightCyber Introduces New Tools for Corporate Security Assurance

LightCyber announced new tools that equip enterprises to meet increasing demands for security accountability and compliance with internal and industry regulations, such as the General Data Protection Regulation (GDPR). LightCyber also introduced updated metrics from customer production systems and an online calculator so that prospective customers can quickly and easily assess current operational efficiency and the gains that they will receive from a LightCyber Magna deployment.

The new Security Assurance report from LightCyber Magna demonstrates the summary status of attack behavior, and can demonstrate when all anomalous attack behaviors are resolved or remediated. The report serves as an important component for security accountability in an age when most attacks can only be detected after the damage is done.

The new LightCyber Security Operations Center (SOC) OPEX Calculator helps quantify the accuracy and efficiency of security tools and their impact on security teams. The LightCyber SOC OPEX Calculator is based upon accuracy and efficiency metrics data aggregated and anonymized from customer production deployments. In the period from July 1, 2016 to December 31, 2016, LightCyber customers achieved a mean efficiency of 0.9 alerts per 1,000 endpoints per day. For example, a company with 5,000 endpoints would expect to receive 4.5 total alerts per day from LightCyber Magna. The mean accuracy reported for LightCyber customers is 99% for confirmed alerts and 61%% for all alerts, which is a measure of the alerts usefulness according to user classification.

Ramat Gan’s LightCyber is a leading provider of Behavioral Attack Detection solutions that provide accurate and efficient security visibility into attacks that have slipped through the cracks of traditional security controls. The LightCyber Magna platform is the first security product to integrate user, network and endpoint context to provide security visibility into a range of attack activity. Founded in 2012 and led by world-class cyber security experts, the company’s products have been successfully deployed by top-tier customers around the world in industries including the financial, legal, telecom, government, media and technology sectors. (LightCyber 01.02)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Unemployment in Israel Falls to New Low

Israel’s unemployment rate fell to 4.3% in December, according to figures published on 31 January by the Central Bureau of Statistics, breaking the previous record low of 4.5% set in November. As in the two preceding months, most of the increase in employment was in full-time jobs. The rate of participation in the labor force dipped slightly among men and rose among women.

The unemployment rate fell below 5% in 2016 for the first time, while the average salary rose by an annual 2.5-3% for the second straight year. The Central Bureau of Statistics’ annual figures show that the unemployment rate among those age 15 and up fell to 4.8% in 2016, compared with 5.3% in 2015. The unemployment rate among men age 15 and up dropped from 5.1% in 2015 to 4.7% in 2016, and the unemployment rate among women age 15 and up dropped from 5.4% in 2015 to 4.9% in 2016.

The rate of participation in the labor force in the 25-64 age bracket rose from 79.8% in 2015 to 79.9% in 2016. The rate among men in this age bracket fell from 85.1% in 2015 to 84.9% in 2016, while it rose from 74.7% in 2015 to 75.1% among women in this age bracket. The unemployment rate in the labor force in the 25-64 age bracket fell from 4.5% in 2015 to 4.1% in 2016, from 4.5% in 2015 to 4.1% in 2016 among men in this age bracket and from 4.6% in 2015 to 4.2% among women in this age bracket.

The number of employed people working full-time in Q4/16 (35 or more hours a week) rose 2.9%, compared with Q3 (72,000 more employees), while the proportion of those working part-time in Q4/16 (less than 35 hours a week), dropped 4.4%, compared with the third quarter (46,000 fewer employees). (CBS 31.01)

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10.2 Israel Made NIS 3 Billion in Natural Gas Royalties in 2016

Israel’s royalties from the production of natural gas came to NIS 3 billion ($798 billion) in 2016, Energy Minister Yuval Steinitz said on 2 February, during a media tour aboard the Atwood Advantage, an ultra-deepwater drill ship exploring the Tamar offshore gas field. Atwood Advantage is one of the three largest vessels of its kind in the world. It is expected to finish its work in Tamar by April 2017 and move on to the development of the nearby Leviathan offshore gas field.

Tamar, discovered some 80 kilometers (50 miles) off the Haifa coast in 2009, is believed to have reserves of up to 8.4 trillion cubic feet. Leviathan, discovered in 2010 roughly 130 kilometers (81 miles) from the Haifa coast, holds an estimated 22 trillion cubic feet of natural gas.

A delegation from the Turkish Energy Ministry visited for talks about a joint gas pipeline that would pump gas from Israel to Turkey and Europe. This was the third meeting between Israel and Turkish energy officials on the matter, and Steinitz described it as a sign of seriousness about promoting the joint project. He said Israel is also pursuing a similar pipeline venture with Italy, in a project that would involve Greece and Cyprus. According to Steinitz, Israel’s energy market currently consists of 60% gas and 40% coal. He said the goal is to reach a balance of 90% gas and 10% coal within a few years, which would also significantly improve air quality in Israel. (IH 06.02)

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10.3 Israel Ranks 28 in Global Corruption Index

Israel ranked 28th on the 2016 Transparency International Corruption Perception Index, marking a four-position improvement from 2015. The index ranked 176 countries based on public opinion, national assessments and academic research into political and public sector corruption. It uses a scale of 0 (very corrupt) to 100 (very clean). The lower the score, the more corrupt the country is perceived to be.

In 2015, Israel received a score of 61, placing 32nd out of 168 countries. Israel’s score in 2016 was 64, placing it 28th out of 176 countries. Denmark and New Zealand both ranked as least corrupt with scores of 90 each, followed by Finland (89), Sweden (88), and Switzerland (86). The three most corrupt countries in the world according to the index were North Korea (12), South Sudan (11), and Somalia, which scored 10 points, for the 10th year running.

Despite the improvement in its scores, Israel’s ranking is still low, as the 28th slot is in the bottom third for OECD members. Still, its overall ranking in the group has improved by two slots from 2015. Most Arab countries saw a sharp plunge, and 90%of them scored below 50. Iraq, Libya, Sudan, Yemen and Syria were marked as the most corrupt in the region due to political instability, war and terrorism. (Various 26.01)

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11: IN DEPTH

11.1 ISRAEL: State of Israel Ratings Affirmed At ‘A+/A‐1′; Outlook Stable

On 3 February 2017, S&P Global Ratings affirmed its ‘A+/A‐1’ long‐ and short‐term foreign and local currency sovereign credit ratings on the State of Israel. The outlook is stable.

Rationale

The ratings are supported by Israel’s prosperous and diverse economy, its strong external balance sheet, and its flexible monetary framework. The ratings are constrained by Israel’s relatively high debt burden and significant security and geopolitical risks.

Israel’s economy is prosperous and well diversified, with high value‐added manufacturing and service sectors, especially in the field of information technology. The information and communication sector occupies a 9.8% share of gross value added, and scientific and technical activities 2.8%. This is underpinned by high expenditures in research and development, exceeding 4% of GDP on average, the highest among member countries of the Organization for Economic Co‐operation and Development (OECD). We assume Israel’s economy will grow at an average rate of about 3.1% in 2017‐2020, which is a relatively high rate compared with peers with similar wealth levels. Growth will be driven by private consumption, continued corporate investment activity, and healthy service exports, and supported by loose monetary policy. In per capita terms, this equates to growth of around 1.4% per year, reflecting robust population growth.

The ruling coalition that was formed in May 2015 passed the biennial budget for 2017-2018 without internal quarrels. However, the coalition’s structure remains heterogeneous, which in our view may constrain the government capacity to substantially improve public finances and implement measures that boost economic productivity.

We believe the enhancement of infrastructure, especially in transportation, could help to engender the productivity gains that have been lacking in the Israeli economy. However, we expect the infrastructure gap to remain, given the capacity and administrative constraints facing the sector. We also expect only limited progress in tackling the other structural issues the Israeli economy is confronted by, including improvements in the business environment, because any controversial measures are unlikely to receive coalition support. Moreover, some previously implemented measures to boost educational achievements and labor supply have been reversed in order to secure support from the Ultra Orthodox party.

Stronger tax revenues have supported the general government’s fiscal performance for a second year in a row, with a fiscal balance averaging 2.2% of GDP in 2015-2016. However, given plans in the 2017-2018 budget to increase expenditures on health, education, and infrastructure, as well as potentially weaker revenue growth, we expect fiscal performance to weaken somewhat in the medium term, with the central government deficit approaching the recently increased legislated ceiling of 2.9% of GDP. Israel has a good track record of containing fiscal pressures and a very stringent fiscal framework, whose breach might lead to snap elections. Therefore, we do not expect any material fiscal slippage in our base-case scenario. The materialization of any contingent or security risks, along with continued relaxation of fiscal rules to accommodate expenditure pressures, could present a downside rating scenario, however.

High nominal GDP growth rates and low inflation (over 40% of Israel’s general government debt is linked to the consumer price index) have continued to push Israel’s gross government debt down. Subtracting liquid assets (mostly in the form of deposits at the central bank) from gross debt, we estimate that net general government debt to GDP declined to about 60.6% in 2016 compared with 61.3% a year before. Even without taking into account possible land sales and privatization proceeds, which could reduce government financing needs, we expect the net debt ratio will remain relatively stable as a percentage of GDP for the remainder of the forecast period through 2020.

As a result of Israel’s strong export performance, in particular as regards booming high value-added services exports, and sustained current account surpluses, its external balance sheet is strong and its net creditor position versus the rest of the world continues to grow. We forecast that Israel’s liquid external assets will outstrip its gross external debt over the forecast horizon. These dynamics are also lowering the country’s gross external financing needs, indicating low dependency on external financing.

In addition, we consider Israel’s monetary policy flexibility to be a credit strength. The Bank of Israel (BoI; the central bank) has been intervening more in foreign exchange markets, over and above its commitment to purchase foreign currencies to offset the impact of improvements in economic fundamentals, supporting the appreciation of the shekel, on the balance of payments, such as domestic natural gas production. We view the exchange rate regime as a managed float, which somewhat hampers monetary policy flexibility.

Additionally, the BoI is sticking to the accommodative stance of monetary policy, countering the strength of the shekel to maintain the competitiveness of Israeli exports. It has maintained the historical low of 0.1% as its key policy rate since March 2015, but the shekel has continued to appreciate against the currencies of Israel’s key trading partners owing to current account surpluses and strong net foreign direct investment (FDI). Over 2016, the shekel appreciated by 6.2% in terms of the nominal effective exchange rate. The exchange rate poses a pricing risk, adding to the need for continued innovation to remain externally competitive, in our view.

One of the key challenges to monetary policy continues to be Israel’s rising house prices. After years of relative stability, real house prices have increased by over 60% since the end of 2007. The BoI’s past attempts to dampen the housing market by raising interest rates delivered limited results, only pushing up the foreign exchange rate of the shekel significantly. The government has implemented a comprehensive set of measures to increase housing supply, including freeing up more land for development, changing the tendering criteria, and speeding up administrative processes for construction permissions. Given capacity constraints in the construction industry, the time needed to build houses, and continued growth in demand, we do not expect the government’s measures to fully address the supply shortage in the near term, however.

Israeli banks’ exposure to the local real estate sector, mainly to residential mortgage loans, has grown in recent years. The banking sector’s exposure to real estate and construction (including residential and commercial construction and infrastructure credit) is currently close to 20%, which is the BoI’s allowed maximum. Despite the fact that the tightening of macroprudential measures has reduced systemic risks to Israel’s banking industry, any abrupt correction in house prices could still have other negative economic effects.

Overall, institutional and governance structures in Israel are generally effective, with a satisfactory degree of transparency and accountability. However, we consider that the persistent territorial dispute with the Palestinians threatens political stability and weighs on policy predictability. That said, the ratings remain constrained by geopolitical risks. Repeated violent clashes with the Palestinians not only inflict social and economic costs, but also risk reactions by the international community. On the northern border, the conflict in Syria and Iraq, as well as instability in the Sinai region, pose medium‐term security risks. Any significant armed conflict could have a negative impact on the ratings if it materially deterred investment, weakened the economy’s growth potential, or strained fiscal flexibility. Shifts in the U.S. policy toward the region triggered by the recent change of the U.S. administration might also imply security risks for Israel, although there is currently little visibility on such potential developments.

Outlook

The stable outlook on Israel reflects our opinion that the government will stick to its prudent macroeconomic policies and ensure the stabilization of general government debt over 2017‐2020, despite expected weakening in fiscal accounts driven by spending pressures and likely weaker revenues. The stable outlook also factors in our expectation that security risks to the Israeli economy will not escalate and the impact from them will be contained.

We could consider raising our ratings in the next 24 months if government finance metrics improve beyond our expectations, for example, if the government delivered fiscal results comparable with those reported in 2015-2016 and/or if we observed a sustainable decline in net general government debt. Noticeable reduction in external security risks could also result in a positive rating action.

We could lower the ratings if the economic growth perspective were to weaken substantially, due to an abrupt correction in the housing market or unaddressed structural weaknesses. A downgrade would also become more likely if the government is unable to resist existing spending pressures for more social or security expenditures, which would result into much weaker fiscal and debt metrics than we currently expect. Moreover, if a perceived loss of international support were to further isolate the Israeli economy, we could lower the ratings. (S&P 03.02)

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11.2 ISRAEL: Record Private Equity Investment in Israel in 2016

In 2016, Israeli and foreign private equity funds invested a record $3.5 billion in 68 deals, 14% up from just under the $3.1 billion in 2015, and 29% up from $2.73 billion in 2014, IVC – Shibolet reports. The number of deals, however, dropped 17% in 2016, down from 103 deals in 2015, and 17% below the five-year average of 82 private equity deal.

The four largest deals closed in 2016 were all buyouts above $100 million each, accounting for $2.54 billion, or 72%, of proceeds. The buyout of Keter Plastic by BC Partners for $1.4 billion – the largest Israeli private equity deal recorded in five years – was followed by the $643 million buyout of Xura by Siris Capital. In third place was the $400 million buyout of Sintec Media by Francisco Partners, while FIMI carried out a $100 million buyout of G4S Israel.

Shibolet & Co. partner Omer Ben-Zvi said, “Israel experienced a substantial decrease in the number of private equity investment deals during 2016. This is in line with the decline in the US private equity market. However, the 2016 annual private equity deal amount – the highest ever recorded – was encouraging, as was the stable activity of foreign PE funds with another annual record. Another strength sign is the continued activity of the private equity technology sector. We therefore believe it is too early to conclude that we are witnessing the beginning of a slowdown in the Israeli private equity industry.”

He added, “We see positive signs in the continued fundraising by venture capital funds focusing on the Israeli high-tech industry and the increasing number of growth opportunities, as well as fundraising by Israeli PE funds and foreign PE funds expressing interest in Israel.”

In the fourth quarter of 2016, Israeli private equity deal-making decreased, as 16 private equity deals accounted for $412 million, 46% below the $757 million invested in 25 deals in the fourth quarter of 2015, and a 74% drop from the $1.6 billion invested in 14 deals in the previous quarter. Both the amount and number of deals were below the five-year average, a decrease of 38% and 24%, respectively.

Israeli private equity fund activity fell in 2016, with 30 funds investing $630 million, 18% of proceeds – the lowest share for Israeli PE fund investments in the past five years. This compared with the record $1.06 billion (34%) invested by 36 Israeli PE funds in 2015. The number of deals was also down – 28% with 38 deals, compared to the five-year average of 53 deals.

Three buyouts performed by Israeli PE funds in 2016 were above $50 million each, capturing 37% of total Israeli PE fund investments. FIMI led, with two prominent deals, both in the fourth quarter of 2016 – a buyout of G4S Israel for $100 million, followed by the $76 million buyout of Galam. Reality Fund acquired 65% of Arena Mall in Herzliya for NIS 90 million in the first quarter of 2016.

Foreign PE fund investments retained last year’s average activity levels, with 33 deals in 2016, despite the fact that the number of funds investing in 2016 dropped 26% – from 43 actively-involved foreign PE funds in 2015 to only 32 funds in the following year. However, in terms of capital, foreign private equity investments peaked, with $2.9 billion (82%), up from $2.03 billion (66%) invested in 2015. Three buyouts were responsible for this record amount, capturing 85% of foreign private equity investments in 2016, including the Keter Plastic, Xura and Sintec Media buyouts.

IVC research manager Marianna Shapira draws a direct line between the state of private equity fundraising and the decline in deal-making during the second half of the year: “Analyzing the notable slowdown in the number of investments made in 2016, we saw Israeli fund activity fall below average levels, and far more dramatically than foreign funds’ investments. This is not due to lack of opportunities in the Israeli market, nor a result of foreign competition, but rather seems to be related to the capital available for new investments. Both the number of active local PE funds, and the number of funds to raise new capital in 2016 dropped compared to previous years. With six funds currently in the process of raising capital, it seems that many major funds have been focused on their fundraising efforts, resulting in fewer deals made.”

There are currently 39 active Israeli private equity management companies monitored by IVC Research Center, with $12.12 billion under management, and an estimated $1.2 billion available for new investments. In 2016, four Israeli private equity funds raised $1.3 billion.

Technology deals kept a strong momentum in PE deals, with 44 transactions performed in 2016, the same as the five-year average, accounting for 65% of the deals, and generating $1.61 billion, or 46%, of capital volume. Two of the top buyouts mentioned – the Xura and Sintec Media deals, contributed. (Globes 07.02)

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11.3 LEBANON: IMF Executive Board Concludes Article IV Consultation

On 12 December 2016, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Lebanon. The protracted conflict in Syria continues to dominate Lebanon’s outlook, with registered refugees now comprising over one-quarter of the population. The refugee presence is straining local communities, adding to poverty and unemployment, and placing further pressure on the economy’s already-weak public finances and infrastructure.

Domestically, following a two-and-a-half-year impasse, Lebanon elected a president on 31 October 2016 and appointed a new prime minister soon thereafter. Consultations to form a new government are ongoing.

Growth remains subdued. Following a sharp drop in 2011, growth edged upward briefly to 2–3%, but has now slowed once again. IMF staff estimate that GDP increased by 1% in 2015 and project a similar growth rate in 2016. Lebanon’s traditional growth drivers (tourism, real estate and construction) have received a significant blow and a strong rebound is unlikely based on current trends. In the absence of a turnaround in confidence, or a resolution of the Syrian conflict, growth is unlikely to return to potential (4%) soon. Inflation also declined sharply in 2016 on the back of lower oil prices, but should return to trend (about 2%) by early-2017.

On the fiscal side, low oil prices have helped secure a primary surplus of 1.4% of GDP in 2015, and staff project a similar surplus (1.1%) in 2016. But public debt is high (138% of GDP in 2015) and without decisive corrective action, Lebanon’s debt burden will increase further.

In the context of Lebanon’s fixed exchange rate regime, foreign exchange inflows slowed in H1/16, resulting in a drop in official international reserves. In response, during May – October the Banque du Liban (BdL) engaged in an unconventional financial operation which, among other objectives, helped boost reserves to above 2015 levels. At the same time, the operation also created sizable excess Lebanese pound liquidity and increased commercial banks’ exposure to the sovereign.

Downside risks dominate the outlook, but there are also significant upside risks. If remaining political milestones are met quickly, the recent election of a president and appointment of a prime minister could pave the way for much needed reform and adjustment, boost the economy, and help correct macroeconomic imbalances. A resolution of the Syria conflict would also significantly boost Lebanon’s economy. On the downside, however, foreign exchange inflows could decelerate, excess Lebanese pound liquidity and reduced banks’ foreign exchange liquidity could put pressure on the foreign exchange reserves, growth might remain subdued, and fiscal imbalances could widen.

Executive Board Assessment

Executive Directors commended the authorities for preserving macroeconomic stability and market confidence in very difficult circumstances, especially the significant spillovers from the conflict in Syria, including refugee inflows. These spillovers have affected growth and overwhelmed the country’s already-strained public infrastructure and services. Directors recognized that, by hosting Syrian refugees, Lebanon is providing a global public good and that the international community needs to be more supportive of Lebanon’s efforts.

Directors observed that the recent election of a president and appointment of a new prime minister could set the stage for a revitalization of Lebanon’s policymaking framework. In this context, they noted Lebanon’s rising vulnerabilities and underscored the need for a change in policy direction, to anchor confidence and help secure improved economic performance.

Directors stressed that a sustained and balanced fiscal adjustment is essential. They welcomed Lebanon’s primary surpluses, but observed that that, without further adjustment, Lebanon’s public debt burden will continue to rise, adding to existing vulnerabilities and ultimately crowding out essential public investment and social spending.

In this regard, Directors urged passage of a budget for 2017. They also stressed the immediate need for reform in the electricity sector, which remains a large drain on the budget and a key bottleneck to improved competitiveness and equity.

More broadly, Directors stated that it was critical to place public debt on a sustainable downward path. They observed that there is significant scope to increase revenue equitably, including by improving compliance and broadening the tax base, starting with fuel taxation.

Directors noted the challenges faced by monetary policy in the current environment of tighter international financial conditions and slowing inflows. They agreed that monetary policy should remain geared to supporting the peg and commended the BdL for maintaining adequate international reserves. In this context, Directors underscored that, although the BdL’s recent financial operation has successfully bolstered BdL’s gross international reserves and banks’ capital, it was not a sustainable solution to Lebanon’s funding needs. They also called for a medium-term strategy to improve the BdL’s balance sheet.

Directors stressed the critical role of Lebanon’s banking system in securing sustained, broad based economic growth. Taking note of the findings of the recent FSAP, they appreciated the authorities’ close oversight of the financial system, but highlighted the need for continued vigilance. In particular, they stressed the benefits of measures that would introduce forward-looking capital planning; strengthen regulation and supervision by, among others, aligning loan classification rules and sovereign risk weights with international good practice; and support liquidity risk management. Directors noted that progress had been made since the last full assessment of Lebanon’s AML/CFT framework, but observed that some gaps remain and that the framework needs to be enhanced further.

Directors urged the authorities to advance structural reforms. In addition to electricity reform, they stressed the need for legislation to reinvigorate private investment, including in the oil and gas sector; and for better service provision and stronger safety nets. In this context, Directors pointed out that increased growth was also important in supporting Lebanon’s ability to cope with the recent refugee inflows. Directors also urged the authorities to move decisively to improve Lebanon’s statistical system, building on ongoing progress. (IMF 24.01)

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11.4 GCC: Cross-Border Cooperation – A Game-Changer for Gulf Cybersecurity

On 29 January, Wajdi Al Quliti wrote in the Cipher Brief Newsletter that recent years have witnessed a series of increasingly audacious and unprecedented cyber-attacks, leading up to the recent accusations of Russian hacking throughout last year’s U.S. presidential election season.

In the Middle East, the Arabian Gulf region has also experienced its fair share of the threat from cyberspace. In fact, proportional to its population and attack surface, the Gulf faces more cyber-attacks than any other region in the world.

The Middle East’s rising cyber problem

Arabian Gulf states are dealing with a cybersecurity landscape that is among the most challenging in the world. Cyber-attacks in the region increased by 15% in the first quarter of 2016 in comparison to the previous year. Five percent of all global cyber-attacks are targeted against the United Arab Emirates alone, a country home to only 0.13% of the world’s population.

The primary targets of cyber-attacks in the Gulf are financial centers – particularly Dubai’s financial district – followed by oil and gas infrastructure. In addition, rising digitization in services, transport, infrastructure and communications is increasing cybersecurity challenges. The largest bank in the Middle East, the Qatar National Bank, was recently hacked, leading to significant data damage and financial loss.

In 2012, Saudi Arabia’s state-owned company Aramco was subjected to a massive hack destroying 35,000 computers. A few months later, Qatar’s RasGas was attacked with the same virus, leading to significant damage to its servers. In December 2016, Saudi Arabia was again significantly attacked. Hackers used the same Shamoon virus that was used against Aramco in 2012. This attack removed all files on infected hard drives with the infamous image of drowned Syrian toddler Aylan Kurdi and then took over the boot record to prevent the computers from being turned on again. The brunt of the attack was against the Saudi General Authority of Civil Aviation but other companies in the energy, manufacturing and transportation sectors were also harmed by the attack.

According to a recent Price Waterhouse Coopers report, the region’s dramatic strides toward digitization – expected to add over $800 billion to GDP and over 4 million jobs by 2020 – is making the Arabian Gulf a major target for fast evolving cyber threats.

So how does the Gulf region and wider Islamic world address a challenge that in nature and scale is unprecedented?

That was an issue the Organization of Islamic Cooperation (OIC) focused on at its annual cybersecurity conference last month. There, several possible responses to cybersecurity challenges across the Gulf region and wider Islamic world were discussed.

Deterrents and the criminal justice system

Some proposed responses focused on using deterrents and the criminal justice system. The use of deterrents requires the cost of a cyber-attack to outweigh the benefits. This can be either the cost of starting an attack or of being caught.

However, to be effective, this approach faces many jurisdictional issues. There was an attempt to overcome this through the Convention on Cybersecurity, colloquially known as the Budapest Convention, with the hope of mitigating the threat of cybercrime. However, no Gulf nation has signed the Convention. Therefore, they do not have harmonized cybersecurity laws and there is no obligation on foreign nations to deport suspects to the Middle East.

The other glaring issue with the criminal justice system is that cyber-crime can be very difficult to attribute. The most common known attack vector is using SQL injection, which manipulates unsecured code to inject harmful malware into data-driven applications. These injections can be very difficult to trace and therefore nations are often at a loss as to who is behind the attack. Other attack vectors, such as DDoS attacks, use hundreds of IP addresses to mask the addresses belonging to the attackers. All of this makes it very difficult to determine who to prosecute.

Harmonizing laws across legal jurisdictions

There have been attempts to build a common cybersecurity framework in the Arabian Gulf region, though this is complicated by different legal systems and “free zones” that have distinct legal structures. Nevertheless, progress is still being made in collaboration with Western cyber and defense experts.

Cross-border cooperation and common cybersecurity structures could prove to be a game-changing advantage in the fight against cybercrime. In this area, the Organization of Islamic Cooperation has been working extensively during the past few years to establish a collective Computer Emergency Response Teams (CERT) network – a team of different national IT experts who assist in cybersecurity emergencies – in the Islamic world. Since 2006, there have been annual meetings in member states to meet with OIC-CERTs, national-CERTS, and commercial CERTS. The OIC-CERTs are also partnered with Africa-CERT and Asia Pacific-CERT. This initiative allows the OIC to easily tap into its 57 member states’ human talent.

The elephant in the room, however, is the issue of state-sponsored hacking, in which case harmonized laws are unlikely to make a difference. Ultimately, a UN agreement on state-sponsored hacking will likely be needed, and without majority international support, such attacks will only escalate.

Balancing privacy and security

As the drive towards digitization continues, how the region balances its privacy laws and its security priorities will be another critical detail in setting the tone for the fight against cyber threats. Increasing digitization makes potential damage from cyber-attacks significantly more dangerous.

Kaspersky Lab recently warned that the region’s heavy dependence on oil and gas, as well as the oil and gas-powered desalination plants that provide much of the region’s fresh water, is a source of cyber vulnerability. Any cyber-attack on these installations could prove catastrophic and might result in a humanitarian disaster.

One successful method to maintain this balance has been adoption of data protection laws in Dubai’s International Financial Center. These laws have required the same level of encryption and security as data protection laws in the UK and EU. Similar laws in other Gulf nations will be a major step forward in data protection.

Building a common cybersecurity program

Middle Eastern governments and the private sector have launched a series of measures to tackle cyber threats, including prevention techniques, cyber education, and emergency response. The cyber market in the region is expected to be worth $10 billion by 2019, while the private sector alone spends $1 billion on cyber security annually.

In recent years, there have been more conferences and events bringing together industry experts, aimed at establishing a robust cyber security program that can face a wide array of cyber threats. One took place at the OIC-CERT conference last month with participation by experts from over 20 countries and six continents and included prominent cybersecurity firms like BAE Systems and FireEye.

Public education to enhance cybersecurity

Cyber education is one area where the Gulf has taken a lead. In a 2016 survey, it was revealed that two-thirds of 18- to 26-year-olds globally have never been taught about cybersecurity, while in the Gulf region, the number reaches around 40%. Moreover, only 16% of Gulf students have never attended a cybersecurity class, while the global number is 45%.

In 2013, the UAE introduced cybersecurity curricula for primary schools aimed at educating people against cyber threats and building a solid prevention scheme from the bottom up. Similar awareness programs are also being rolled out in other Gulf countries. Such developments could prove to be effective in the long term, since strong preventative controls are far more successful compared to reactive measures. (The Cipher Brief 29.01)

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11.5 SAUDI ARABIA: Slowly but Surely: Growing Relations between Saudi Arabia & China

Yoel Guzansky and Assaf Orion posted in INSS Insight No. 891 on 29 January that from China’s perspective, enhanced relations with the Saudi kingdom address a variety of interests. From Saudi Arabia’s perspective, China constitutes a stable and reliable strategic partner that complements the kingdom’s strategic relations with the United States, mainly on economic and political dimensions, and without the unpleasant Western criticism on issues relating to human rights and democratization. Thus, both countries are finding a common comfort zone in mutual respect of their sovereignties without trying to change each other. There may be potential to promote common topics of interest in the China-Saudi Arabia-Israel triangle as long as they are of low visibility and of sufficient deniability. Considering that China has proven advantages in developing economic infrastructure, while Saudi Arabia can and wants to have an economic-strategic impact on the region, Israel would do well to continue striving to tap the potential in the partnership between them to stabilize its strategic environment, with an emphasis on those countries that are at peace with Israel – Egypt and Jordan – as well as the Palestinian arena.

On 27 October 2016, a joint anti-terrorism exercise was completed in China, with dozens of combatants from the Chinese and Saudi Arabian special forces participating. The exercise, the first of its kind, invites an examination of trends in China-Saudi relations as part of the network of ties between world powers and leading Middle East states.

From China’s perspective, enhanced relations with the Saudi kingdom address a variety of interests, including: promoting security and energy interests and boosting its economy; balancing its strategic posture, which is heavily based in East Asia, by turning westward; improving its internal stability in western China by striving to stabilize the near periphery in central Asia and the distant periphery in the Middle East; alleviating the domestic threats of radical Islam (posed particularly by the Uyghur minority in the Xinjiang region) and minimizing the external criticism of China’s treatment of its Muslim citizens; and finally, recognition of its standing as a global power, while increasing its involvement in an asset-rich region.

From Saudi Arabia’s perspective, China constitutes a stable and reliable strategic partner that complements the kingdom’s strategic relations with the United States, mainly on economic and political dimensions, and without the unpleasant Western criticism on issues relating to human rights and democratization. Therefore, both countries are finding a common comfort zone in mutual respect of their sovereignties without trying to change each other: they are both concerned about the challenges to their internal stability posed by the upheavals in the Middle East; both are seeking stability and security in the Middle East and a safe flow of energy; and they both recognize a zone of common interest in economic development while safeguarding governmental order.

The regimes manage the bilateral relations while maneuvering impressively between areas of contention and while finding points of delicate balance for mitigating possible tensions. China successfully implements its traditional Middle Eastern policy (“getting along with everyone”), conducting parallel but separate relationships with Iran and with Tehran’s sworn enemies, Saudi Arabia and Israel. China’s support for Russia and the Assad regime in Syria is diametrically opposed to Saudi positions; Beijing has also called for an end to the fighting in Yemen, while avoiding substantive criticism of the kingdom’s fighting there. For its part, Saudi Arabia has deepened its economic relations with China, without damaging its trade relations with the United States, let alone its security and political relations with Washington. To a great extent, this maneuvering was successful because China has consistently refrained from explicit declaration of a concrete regional policy, from taking clear sides on points of contention or expressly supporting sides to conflicts, and from public wrangling – this within the scope of a policy replete with internal contradictions that coexist harmoniously in ambiguity.

A recent study by the Rand Institute defined China and its involvement in the Middle East as “an economic heavyweight, a political lightweight, and a military featherweight.” This pattern of involvement is also evident in its relations with Saudi Arabia, with its lion’s share in the economic sphere (according to data from the UN Comtrade database, bilateral trade totaled about $51 billion in 2015 and about $21 billion during the first half of 2016), focusing on energy. While oil exports from Saudi Arabia to the United States have diminished gradually, due to increased US oil shale production, China, the largest oil importer in the world, has become Saudi Arabia’s principal customer. Saudi Arabia is now seeking to sustain its dominance in the Chinese energy market in the face of intensifying competition, mainly on the part of Iran and Russia. To this end, and to help stabilize the supply, Saudi Arabia is operating in China through investments and the establishment of oil refineries and strategic stockpiling facilities for Saudi oil in China. Furthermore, many Chinese companies are operating in the Saudi market in the fields of infrastructure, construction, and communications, and employ tens of thousands of Chinese workers. Both countries also agreed to cooperate in the field of renewable energies, including nuclear energy, and in the field of aerospace.

Diplomatic relations, led by visits by senior officials and cooperation agreements, have also risen over the last decade, and most of their achievements are geared to promote trade and economic relations. Between 2008 and 2013, Chinese officials visited Saudi Arabia twice a year on average, compared to an average of 2.8 visits per annum by their counterparts from the United States. Notable in this context were the visit to Saudi Arabia by China’s President Xi Jinping in January 2016 and the reciprocal visit to China by Deputy Crown Prince and Minister of Defense Mohammad bin Salman in September, during which they signed memoranda of understandings on a series of topics and announced the deepening of the bilateral security dialogue. In this context, a five-year security cooperation contract was signed on November 6, 2016, focusing on joint security training between Saudi Arabia and China.

Thus far, security relations have focused primarily on weapons sales from China to Saudi Arabia, particularly systems that other suppliers refused to sell to Saudi Arabia, inter alia, due to the restrictions of nonproliferation regimes and pressure from Israel. Notable in this context are the sale of dozens of CSS-2 and DF-3 ballistic missiles in 1988, the sale of DF-21 ballistic missiles in 2007, and in the last years, perhaps even cruise missiles, and highly likely, reconnaissance and attack UAVs, which Saudi Arabia apparently employs in the fighting in Yemen. Nevertheless, overall, Chinese security exports to Saudi Arabia constitute merely a niche, since over the years, Saudi Arabia acquired most weapons from the West (mainly from the United States and the United Kingdom), while imports from China were only marginal in volume, though qualitative strategically.

Saudi Arabia understands that currently there is no substitute for the American military presence in the Gulf to curb Iranian encroachment, but it is not interested in finding itself, overall, becoming completely dependent on the United States, particularly as the image of the United States as a stable pillar for security was damaged during the Obama years. The disagreements with the United States were exacerbated as a result of the administration’s policy toward Egypt, its siding with the Muslim Brotherhood, its weakness vis-à-vis Assad’s regime and Putin’s moves in general, and in Syria in particular, and the nuclear agreement signed with Iran, which the Saudis see as a highly negative development.

These tensions pushed Saudi Arabia to attempt to improve its relations with various countries as much as possible, including China, and perhaps this, inter alia, served to signal to the new administration that the relations between the countries must be restored to the status quo ante. The recent military exercises enabled both Saudi Arabia and China to gradually improve their military ties on “soft” issues (e.g., combatting terrorism), as a supplementary layer to their mutually beneficial economic relations, and serve their mutual political and strategic interests. For China, the military exercises constitute another cautious measure toward promoting relations and interests both in mainland China and beyond its borders, at a very low risk level. It is possible on the basis of the current military cooperation to build relations with the top Saudi security officials, and in particular, Prince Mohammad bin Salman, who potentially could reach the throne in the coming years.

Nonetheless, China cannot and is not interested in supplanting the United States as the strategic security guarantor of the kingdom’s safety and of regional stability, shouldering the burden this entails. The scope of the United States military presence and its ability to project power, coupled with the quality of its weapon systems, the depth of its military and political relations, and its interoperability with allied militaries, are beyond China’s competitive capabilities, at least in the near and medium range.

Against this background, and coupled with the rapid development of the Israel-China trade relations on the one hand, and the wider spheres of common interests between Israel and Saudi Arabia on the other, there may be potential to promote common topics of interest in the China-Saudi Arabia-Israel triangle as long as they are of low visibility and of sufficient deniability. Considering that China has proven advantages in developing economic infrastructure, while Saudi Arabia can and wants to have an economic-strategic impact on the region, Israel would do well to continue striving to tap the potential in the partnership between them to stabilize its strategic environment, with an emphasis on those countries that are at peace with Israel – Egypt and Jordan – as well as the Palestinian arena.

Israel should likewise continue monitoring the development of relations between China and Saudi Arabia in the security dimension (visits, agreements, military exercises, delegations and, in the future, possibly military bases and the presence of forces in the region), and monitoring the regional implications. First and foremost, Israel should monitor nuclear-related developments and the arrival of special weapon systems, particularly missiles (surface-to-surface, surface-to-air, anti-ship) and UAVs, which could affect the military balance in the region and Israel’s qualitative and quantitative edges. Furthermore, as the Saudi regime is analyzing ways to promote its national strength by establishing indigenous industries, it would be advisable to monitor the growth of China-assisted military industries in the kingdom, as a possible source of potential threats in the region. These are issues that should be discussed between the defense establishments in Israel and the United States, as well as between the Israeli government and the Chinese government and, if possible, between Israel and Saudi representatives.

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11.6 EGYPT: The Trials of the Egyptian Pound

Brendan Meighan wrote in Sada on 7 February that Egypt’s suddenly depreciated pound will likely rebound in the long run, but in the meantime will suffer from pent-up demand for U.S. dollars.

Egypt agreed with the International Monetary Fund on11 November 2016 for a $12 billion loan in exchange for a series of economic reforms. These have already fundamentally transformed the Egyptian economy, particularly and most recognizably, depreciating the Egyptian pound against the U.S. dollar. The reforms package won praise at home and abroad for its foreign exchange market liberalization. Yet this move, which allows the price of the Egyptian pound to be determined by market forces instead of the Central Bank of Egypt (CBE), resulted in the pound-to-dollar exchange rate falling from EGP 8.88 to the dollar in early November to more than EGP 19.50 by late December.

While the pound has recovered slightly, currently standing at about EGP 18.45 to the dollar, the average Egyptian lost over half of their savings and had their monthly income cut substantially. Given Egypt’s dependence on imports, the devaluation of the pound in dollar terms also drove up the already troublingly high rate of inflation, with year-on-year core consumer price index (CPI) inflation hitting 20.73% in November 2016 and 25.86% in December.

The inflation levels are likely to die down once the effects of the currency float and subsequent devaluation have had enough time to filter through the economy. Right now, however, the most pressing question is whether the price of the pound will ever bounce back.

Prior to the IMF loan agreement and the concurrent efforts to liberalize the foreign exchange market, the CBE used to auction off roughly $120 million each week to the various domestic banks in Egypt at a fixed exchange rate. The domestic banks would then resell the dollars to their corporate clients to import goods and services from abroad and, in the case of multinational corporations with headquarters outside of Egypt, move profits out of the country. Once the supply of U.S. dollars had been spent, the only options available were currency traders or the black market exchange bureaus. For companies wishing to make larger transactions, buying dollars on the street was not feasible.

Since the reforms, the CBE has been is relying on foreign currency inflows to supply the interbank market. With the exception of one auction on 3 November, when the shock liberalization took place, individuals and corporate banks could only obtain foreign currency on the interbank foreign exchange market. While there have been rumors that the CBE may make some reserve foreign currency available to the interbank market, this has yet to happen.

The thinking behind this move was that by abruptly stepping away from the foreign exchange market, the pound would depreciate naturally until supply and demand achieve equilibrium. As the value of the pound falls to a more natural level, domestic assets become more attractive to foreign investors, who can now buy more with their dollars. While neither the CBE nor the IMF was expecting the value of the pound to fall as much as it did, the consensus in the business community has been that the Egyptian pound will appreciate in the coming year, for a number of reasons.

Sudden currency depreciations are often followed by gradual appreciations, an effect known as “overshooting.” When a currency rapidly depreciates, domestic prices are often slow to adjust to the new value of the domestic currency despite the rapid adjustments seen in financial markets. Additionally, import needs are often fixed in the short term due to contractual obligations and the lack of domestic substitutes. The demand for foreign currency falls in the long term as domestic businesses are able to ramp up production of substitutes for imports, and foreign investment increases due to lower costs of inputs needed for producing exports.

Moreover, while the CBE has formally stepped out of the foreign exchange market, the amount of its reserves strengthens the credibility of the Egyptian government. As the announced macroeconomic reforms are implemented and the IMF loan tranches are delivered, reserve levels will rise. Already, reserves have hit $26.36 billion – a level not seen since 2011 – and the IMF expects them to reach the Mubarak-era levels of $33 billion by fiscal year 2018/9. By boosting reserves higher than they were expected to reach, Egypt’s economy will be seen as a better environment for foreign investors, which will increase demand for the pound and push its price up.

Higher reserves have already allowed Egypt to begin repaying foreign creditor nations and international firms—a strong indication of financial stability. When the Egyptian government put dollar-denominated bonds on sale on 29 January with the initial intention to sell $2.5 billion, investor turnout was high enough to sell $4 billion worth. As Egypt develops a more accommodating and attractive investment environment under the reform program, the country may also begin exporting natural gas toward the end of the decade. Egypt’s natural gas production is expected to climb from 3.8 billion cubic feet per day (bcfd) in summer 2016 to 7.7 bcfd in three years. While Egypt still consumes 5.2 bcfd, the anticipated excess gas can then be exported to the international markets. This will increase Egypt’s heavy industry and manufacturing export potential once natural gas shortages are resolved and reduce Egypt’s demand for foreign natural gas imports, further increasing demand for the pound.

The prospects for Egypt’s long-term economic growth are promising, and the reforms have already begun to attract substantial foreign investment. But despite this case for optimism, there are other factors that should bring pause to investors considering the currency as a low risk asset or consumers expecting a rebound in value any time soon.

One such factor is the continued tightening of U.S. monetary policy. The Federal Reserve raised fund rates at the end of 2015 for the first time in nine years and followed that up with another rate increase at the end of 2016. While the most recent rate increase largely spared the emerging markets, including Egypt, the December 2015 increase made them comparatively less attractive to investors, pushing emerging market stocks down 20% between November 2015 and January 2016.

Also, there are several indicators that Egypt’s pent-up demand for dollars does not reflect the broader potential needs of the market. While the eventual aim of the CBE and IMF is to have a fully functioning foreign exchange market with relatively free flows of capital in and out of the country, Egyptian banks have thus far been somewhat stingy with their distribution of hard currency. This has resulted in a substantial backlog of foreign exchange requests needed for imports. Local media reported in mid-January that Egyptian banks were taking up to 70 days to meet foreign currency requests for manufacturing production inputs and Egyptian companies were still sourcing anywhere from 15 to 100% of their foreign exchange needs from the black market. Additionally, at the end of November, the Egyptian government suggested that it would allow banks to release dollars for the purpose of repatriating profits, but there has been little evidence of this. Instead, importers of basic goods, such as foodstuffs and medicine, are still given priority when it comes to foreign currency and it appears that even top investors are unsure of what the CBE’s current rules are for profit repatriation.

This means that the demand for U.S. dollars may be substantially larger than what Egyptian companies have requested so far, and any upward pressure on the pound will almost certainly be counteracted by this demand for dollars. The present realized demand is largely coming from companies that need the dollars for basic goods, and it does not reflect the full extent of the Egyptian market’s need for hard currency once one factors in importers of non-essential goods and multinationals looking to move profits out of the country. In other words, the restrictions on the uses of dollars have likely suppressed demand because companies that are effectively prohibited from using dollars are not currently in the market for them.

According to the IMF extended fund facility report, Egypt is aiming to have a fully functioning foreign exchange market by 30 June. That will mean lifting the $100,000 restriction on individuals’ dollar transfers abroad and the $50,000 limit on cash deposits for importing non-essential goods. As more restrictions on the use of foreign currency in Egypt are lifted, the downward pressure on the pound may increase, cutting further into the savings and salaries of most Egyptians.

Any appreciation to the Egyptian pound would certainly be a great boon to the economy and Egyptian consumers, but it is not clear that it will take place any time soon. However, future fiscal responsibility and a continuation of the IMF reform package will make the economy of Egypt stronger in the long run and, as a result, strengthen the Egyptian pound. As the most populous Arab country, Egypt has the greatest economic potential in the Middle East, and a healthy, diversified, and inclusive economy is key to unlocking that potential.

Brendan Meighan is a macroeconomic analyst focusing on the Middle East. (Sada 07.02)

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11.7 EGYPT: Egypt’s Contraceptive Crisis Worsened by Illegal Stockpiling

Amy Smekar posted in Al-Monitor on 26 January that as contraceptive pills disappear from pharmacies in Egypt, allegations arise of illegal stockpiling by pharmaceutical companies in anticipation of a government-mandated price increase on the medication.

For months, Egypt has been experiencing medication shortages. Popular types of imported contraceptive pills were among the first to disappear from pharmacies and move to the black market, causing concerns in a country already experiencing overpopulation, rising fertility rates and a severe economic crisis. Al-Monitor found evidence of illegal stockpiling of medications in anticipation of a significant government-mandated price increase to be partially responsible for the shortages.

The foreign contraceptive pills Gynera, Yasmin, Yaz and Microlut cost 30, 39, 65 and 16 Egyptian pounds ($1.60, $2, $3.40 and $0.80), respectively, until the price hike goes into effect, in comparison with the 1 and 4.5 pound prices ($0.05 and $0.20) for the Egyptian-manufactured Microcept and Triocept. In February, 15% of all domestic medications and 20% of imported medications will see price increases of between 30% and 50%, and another subset will undergo an increase in July.

In a conversation with Al-Monitor, Adel Moussa, a prominent pharmacy owner in Mohandessin who asked to go by a pseudonym, discussed his struggle in dealing with import shortages and black market demands. “The importing company tells pharmacists that they are out of stock of contraceptives, such as Gynera and Yasmin, because of problems on the foreign market. In reality, they are waiting for the government to raise prices based on the new worth of the US dollar.”

SoficoPharm — the private corporation responsible for importing the popular foreign contraceptive pills Gynera, Yasmin, Yaz and Microlut — has not distributed contraceptives to Moussa’s pharmacy for months. Every time he attempts to place an order, a representative tells him that the company is out of stock due to import issues.

The Egyptian Pharmaceutical Trading Company, a government-owned company that receives a supply of imported contraceptives from SoficoPharm, only allowed Moussa to purchase 10 individual, one-month strips of medication at a time. This restriction caused him to run out of the medication quickly, especially when clients fearing the shortage asked for multiple strips.

The black market is highly profitable, but Moussa will not risk sullying a pharmacy that has been a family business for generations. He instead sells his medications for the prices set by the government because he respects his clientele and knows they are aware of prices. Still, when desperate clients ask for medications that are out of stock, he will tell them to turn to other pharmacies operating on the black market.

Pharmacists caught participating in the black market risk at least one year of jail time, a fine of up to 20,000 Egyptian pounds (an amount just over $1,000) and even temporary forced closing of their pharmacies. Inspectors check pharmacy stocks periodically to ensure that no medications are being stockpiled or withheld from the public. However, Moussa explained that some pharmacists get around inspections by bribing officials.

Al-Monitor conducted a survey of over a dozen pharmacies throughout downtown Cairo and Mohandessin, which turned up no boxes of Gynera and only one box of Yasmin, sold at an illegal 15% price hike. Several pharmacists complained that SoficoPharm had ceased to distribute any medicines to their pharmacies. One pharmacist even encouraged clients to report shortage issues to the Health Ministry and to include complaints about SoficoPharm’s failure to distribute Gynera, Yasmin, Yaz and Microlut.

When Al-Monitor asked SoficoPharm about allegations that the company would no longer distribute these medications, Sameh Kheir — who is responsible for sales and distribution of the contraceptives line at SoficoPharm — rejected the claims and maintained that all contraceptive pills SoficoPharm imports are “available in pharmacies throughout all of Cairo.”

He also denied that SoficoPharm is keeping stocks of medicine, saying, “This is not true, and the most important thing to our company is to sell the medicine.” Kheir then referred to the other distributor of imported contraceptives, the Egyptian Pharmaceutical Trading Company, to argue that competition would prevent SoficoPharm from stockpiling medications.

“We are not the only company selling Gynera in Egypt. If we were keeping stocks, it would give the other company an opportunity to sell Gynera over us,” Kheir said. He did not mention, though, that SoficoPharm is the sole company responsible for importing Gynera, Yaz, Yasmin and Microlut, and actually sells these drugs to the Egyptian Pharmaceutical Trading Company in limited quantities. When pressed again on whether this meant SoficoPharm was playing a role in shortages, Kheir promised that the general manager would return our call in half an hour. Al-Monitor attempted to contact Kheir after a day of no response but — after an initial call went unanswered — received only this automated message: “The mobile you have called is not available.”

Adel Tolba, former chairman of the Egyptian Pharmaceutical Trading Company, said in an interview with Al-Monitor on 4 January: “I don’t know whether the other companies keep stocks or not, but for me I sell what I have. We are not responsible for the crisis regarding Gynera and Yasmin. SoficoPharm is responsible for importing these medications. We are distributing the Egyptian medicine Microcept and Triocept. These are available and there is no problem, and we are selling it to anyone according to the official price. For sure, they are available in pharmacies throughout Egypt.”

Less than a week after his interview with Al-Monitor, Tolba offered his resignation from the Egyptian Pharmaceutical Trading Company. A Health Ministry source told Veto Gate, an independent newspaper in Egypt, that he was threatened with dismissal after the company was found to be storing medication in “secret warehouses.”

In an interview with Al-Monitor, Souad Abdel Magid, head of the Department of Population and Family Planning at the Health Ministry, denied that there is a contraceptive crisis in Egypt, saying, “All Egyptian-manufactured contraceptive pills offered by the government [Microcept and Triocept] are available and sufficient for one year. There is no shortage.”

However, a shortage of Egyptian pills seems to exist, despite denials from the Health Ministry and the Egyptian Pharmaceutical Trading Company. Al-Monitor’s survey of pharmacies throughout Mohandessin and Downtown found that only two of 12 pharmacies had Microcept in stock and several were selling Triocept on the black market for prices as high as 16.5 pounds — nearly four times the 4.5-pound price set by the Egyptian government last year.

The director of the Egyptian Center to Protect the Right for Medicine, Mahmoud Fouad, confirmed suspicions that pharmaceutical distributors are withholding stocks to sell at higher prices. He told Al-Monitor, “Contraceptives such as Gynera and Yasmin are in Cairo in huge quantities, but they are stockpiled by small pharmacies and the distributing companies know that they will sell them at high prices soon. … They are just seeking profit.”

According to Fouad, members of the parliament’s Health Committee have discussed the disappearance of imported medications from the market, and they exposed information about stockpiling and black market activity prior to the start of the new year. Karim Abdelaaty, an adviser in the Cabinet, told the Egyptian Center to Protect the Right for Medicine that the Health Ministry is taking steps toward regulating prices of old stocks because allowing companies to sell them at new prices would reward illegal stockpiling.

Indeed, a Health Ministry statement established that only medications produced after the official announcement of a new price index, expected in February, can be sold at new prices. It remains to be seen if pharmacies will comply with these regulations.

In the end, it is low-income Egyptians who will likely suffer most. Fouad fears that, as a result of stockpiling and price increases, they may simply give up trying to find suitable and affordable contraceptive methods, further contributing to such issues as overpopulation, infant and female mortality and teenage pregnancy. (Al-Monitor 26.01)

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11.8 MOROCCO: IMF Executive Board Concludes 2016 Article IV Consultation with Morocco

On January 23, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with Morocco.

Morocco’s macroeconomic conditions have improved since 2012, but growth has remained sluggish. In 2016, growth slowed due to a sharp contraction in agricultural output and subdued non-agricultural activity. The unemployment rate decreased to 9.6% in Q3/16 while youth unemployment remains high at 21.8%. Headline inflation (year-on-year) reached 1.6%, reflecting higher food and energy prices.

External imbalances have fallen substantially since 2012, even though the current account deficit increased to 2.9% of GDP in 2016, against 2.2% in 2015. Strong manufacturing and agriculture exports, and a rebound in tourism and remittances, have more than offset the impact of increased equipment and food imports and low phosphate prices. As a result, and with continued robust foreign direct investment (FDI), international reserves strengthened to about seven months of imports.

Fiscal consolidation has continued with a deficit down from 4.4% in 2015 to about 4% of GDP against the objective of 3.5% of GDP for 2016. This reflects resilient tax revenues and well contained current expenditures, which offset the grant shortfall of about 0.3% of GDP and allowed for an increase in investment spending.

Banks are well capitalized and have stable funding, but nonperforming loans are rising and credit concentration risks, while declining, are still elevated. The expansion of Moroccan banks into Sub-Saharan Africa opens new channels of risk transmission, but cooperation with host country supervisors is intensifying and supervisory requirements for cross-border activities are being upgraded.

Morocco’s medium-term prospects are favorable, with growth expected to rebound to 4.4% in 2017 and reach 4.5% by 2021. However, risks remain substantial, and relate mainly to growth in advanced and emerging countries, geopolitical tensions in the region, world energy prices, and global financial market volatility. Stronger medium-term growth will hinge on continued implementation of comprehensive reforms with regard to labor participation and labor market efficiency, access to finance, quality education, public spending efficiency and further improvements to the business environment. Continued poverty reduction, and lower regional and gender disparities, will also be crucial to achieve higher, sustainable and more inclusive growth.

Executive Board Assessment

Executive Directors commended the authorities for their sound macroeconomic policies and reforms, which have helped reduce domestic and external vulnerabilities, enhance the fiscal and financial policy frameworks, and increase economic diversification. Directors noted that, while the medium term outlook is favorable, risks remain elevated. Against this backdrop, they welcomed the authorities’ continued strong commitment to sound policies, and encouraged them to sustain their reform efforts to further reduce vulnerabilities and promote stronger job creation and more inclusive growth.

Directors commended the continued progress made in fiscal consolidation, particularly the recent containment of current spending, the energy subsidy reform, and the reform of the public pension system. Going forward, they encouraged the authorities to gradually reduce the level of public debt over the medium term while preserving pro-growth and social spending. Directors agreed that efforts should focus on accelerating tax reforms to broaden the tax base and on careful and well-planned implementation of the fiscal decentralization to mitigate any related fiscal risks. Directors also encouraged the authorities to reform the civil service to help contain the public wage bill.

Directors endorsed the currently accommodative monetary policy stance in the context of moderate inflation and the nascent credit growth recovery. They supported the authorities’ intention to move gradually to a more flexible exchange rate regime and a new monetary policy framework, which will help preserve competitiveness and better insulate the economy against shocks. In this regard, Directors concurred that the conditions for a successful transition in 2017 are in place. Directors also encouraged the authorities to submit to parliament the draft central bank law, which will strengthen Bank Al-Maghrib’s (BAM) independence and expand its roles in the promotion of financial stability and inclusion.

Directors welcomed that the banking sector remains sound and well capitalized, and stressed that rising non-performing loans, credit concentration risks, and the expansion into Sub-Saharan Africa require continued monitoring. They also welcomed BAM’s continued efforts to strengthen the financial regulatory and supervisory framework in line with 2015 Financial Sector Assessment Program recommendations, including ongoing advances on cross border bank oversight, more risk based and forward looking supervision, a stronger macroprudential policy framework and efforts to strengthen supervisory resources in view of expanding responsibilities.

Directors emphasized the importance of sustained implementation of structural reforms to promote higher and more inclusive growth. They recommended continued efforts to improve the business climate, particularly for small and medium sized enterprises, including by enhancing their access to financing. Directors also called for improved labor market regulations as well as increased efficiency of public spending on education and vocational training that better addresses skill mismatches, which will be critical to bolster growth, reduce unemployment—especially among the youth—, lower gender gaps, and strengthen competitiveness. Directors welcomed ongoing efforts to reinforce the governance and oversight of public enterprises, and looked forward to further progress in implementing the national strategy to fight corruption. (IMF 23.01)

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11.9 TURKEY: Will Turkey’s New Inflation Calculations Impact More Than Just Economy?

Zilfikar Dogan posted in Al-Monitor on 2 February that realizing that double-digit inflation could negatively affect the upcoming presidential system referendum, Turkey has changed its method of calculating the inflation rate.

The Official Statistical Agency of Turkey (TUIK), which has been routinely coming out with creative reconfigurations of its methods of calculation of essential data, introduced its latest innovation on 25 January with changes it made to the “inflation basket.” In December 2016, the TUIK had altered the national income calculation method, which increased, on paper, national per capita income from $9,130 to above $11,000 overnight; this became a topic of bitter humor.

The reliability of the TUIK, whose calculation methods have been questioned, particularly when calculating unemployment, the numbers of tourists and tourism revenues, is now being challenged by its reconfiguration of the “inflation basket” with new indexed weights of items.

Inflation reached 8.53%, exceeding 2016 predictions by 1.5% and seemed likely to reach double-digit numbers this year. That now may not happen because of the changes in the basket, as the weights of major components such as food, nonalcoholic beverages, clothing, housing, health, and electricity and natural gas were all reduced.

The weight of food was lowered from 23.68% to 21.77%; clothing from 7.43% to 7.33%; housing, electricity, water and natural gas from 15.93% to 14.85% and health expenses from 2. 66% to 2.63%. Weights of alcoholic beverages, cigarettes and tobacco products were increased. Transportation expenses were upped to 16.31% from 14.31%.

But in its latest family expenditures statistics, the TUIK noted that the “largest portion of family spending was for food and housing-rents.” Although the weight of alcoholic beverages, cigarettes and tobacco products was increased to 5.87% in 2017 from 4.98% a year before, it is known that the portion of these items in family budgets has been constant at 4.2% since 2012.

The Monetary Policies Council of the central bank had been cautioning about further increases in inflation. In its 24 January statement, the council said “extreme volatility of foreign exchange rates has added new risks for inflation. Because of the delayed effects of foreign currency parities and the unpredictability of prices of unprocessed food items, the inflation rate is likely to continue rising in the short term.”

When the TUIK altered the weights of items in the inflation basket a day after the central bank statement, it became obvious that the TUIK was finding a way to lower the inflation rate on paper. When food, housing and rent expenses of families are reaching 50%, the move by TUIK to lower their weights raised eyebrows with its timing. The official justification for the changes was not convincing.

The vice chairman of the TUIK, Mehmet Aktas, said the weight of food was lowered because of the decreasing number of tourists and corresponding declines in tourist spending on food and drink. Aktas defended the changes, saying, “The basic change in the portion of food in calculation is because of the decline in foreign visitors. There is a decline in direct foreign visitor spending for food.”

Financial experts and academics say that the gap between “real inflation and official inflation” will widen under these TUIK changes. The experts note that as income levels go down, the ratio of food expenditures in family budgets goes up. They warn that major changes in the index could wipe out the utility of the “inflation basket” as an economic indicator.

Nongovernmental organizations dealing with pensioners say the TUIK inflation basket and the prices pensioners have to cope with in the markets do not mesh. These NGOs maintain that the TUIK should consult with them when determining the weight of items in the basket, particularly because pensions are calculated on the basis of the inflation rate the TUIK announces. In other words, if the inflation rate is low on paper, then the pensions of retired civil servants and other workers will be lower than what they otherwise would have been.

Opposition parties have also reacted to the TUIK changes. Erdogan Toprak, a member of parliament from the main opposition Republican People’s Party, said the government, on the eve of the presidential system referendum, “is trying to keep inflation low on paper by index manipulation and by saying that all is well in economy.”

Toprak said: “The TUIK has lowered the weights of major consumption items in the inflation basket. The index weights of items [such] as alcoholic beverages, cigarettes, eating in restaurants and staying at luxury hotels have been increased as if people can afford them. The ploy is obvious. Just as they did when they changed the national income calculation in one day and made us all $2,000 richer on paper, now they aim to lower, on paper, inflation that is heading to a double-digit rate on the eve of the referendum.”

The constitutional amendment referendum that is likely to be held in April is of vital importance for President Recep Tayyip Erdogan and his Justice and Development Party government while the economy is under severe pressure because of rising unemployment, the Turkish currency’s loss of value and security costs.

The lowering of Turkey’s credit rating by Fitch and Standard & Poor’s on 27 January were clear warnings of the economic woes the country is facing. Turkey has lost its rating of safe for investment. According to latest figures issued by the Economy Ministry, in the January-November 2016 period direct foreign investment diminished by 42% compared with the same period in 2015. Confidence in the Turkish economy and the willingness to invest in Turkey has undoubtedly been losing ground.

Already deteriorating economic conditions for the people are likely to worsen as the referendum approaches. The only way to assure “yes” votes for Erdogan may well be the calculation tricks on paper that the TUIK excels in. (Al-Monitor 02.02)

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Fortnightly, 22 February 2017

February 22, 2017, 6:18 am

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22 February 2017
26 Shevat 5777
25 Jumada Al-Awwal 1438

TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Knesset Committee Approves Stock Exchange Ownership Reform
1.2  Israel Collects Record Tax Revenues in January
1.3  Israel’s Gas Royalties Increase by 8.5% During 2016
1.4  Israeli Accelerator Launched for Arab Entrepreneurs

2: ISRAEL MARKET & BUSINESS NEWS

2.1  Strategic Alliance Between Midea and Servotronix Announced
2.2  GE Digital Acquires Nurego
2.3  Demisto Raises $20 Million to Meet Growing Global Demand for Automated Incident Response
2.4  empow Secures $9 Million in Funding
2.5  Javelin Networks Announces Funding for Growth
2.6  Israeli Defense Deals with Lockheed Martin Increase By 33%
2.7  Intuition Robotics Investment from iRobot and OurCrowd
2.8  Noble Energy to Invest $550 Million in Leviathan Gas Field
2.9  Sapiens to Acquire U.S.-based StoneRiver for Approximately $102 Million
2.10  OurCrowd Continues Asia Expansion, First Platform to Bring Equity Crowdfunding to Taiwan
2.11 Kerogen Capital invests in Energean Israel
2.12  Apple Purchases Facial Recognition Startup RealFace
2.13  HemaCare Signs Distribution Agreement with Israeli-Based Partner

3: REGIONAL PRIVATE SECTOR NEWS

3.1  TSYS Signs Payments Agreement with International Bank of Qatar
3.2  Dubai Set to Host First Legoland Hotel in the Middle East
3.3  Dubai Eyes Launch of World’s First Driverless Flying Cars in July
3.4  UAE Retail Leader Reveals Plan for Major Saudi Expansion
3.5  Harris Corporation Receives $189 Million UAE Battlefield Management System Contract
3.6  Affygility Solutions Opens New Regional Office in Dubai
3.7  Snap Opens First Middle East Office in Dubai
3.8  Harris Corporation Provides Turkey with Air Traffic Management Communication System

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Arava Institute’s 2017 Spring Semester Begins

5: ARAB STATE DEVELOPMENTS

5.1 Amman Approves By-Law to Set Cap on Top-Echelon Salaries

♦♦Arabian Gulf

5.2  Six Gulf Nations Aiming for Simultaneous VAT Adoption in January
5.3  Most of GCC Considered ‘Low’ Political Risk for 2017
5.4  Qatar to Increase Its $2 Billion Investment in Russian Direct Investment Fund
5.5  UAE Inflation Drops to 1.2% in December
5.6  UAE Awards $1.9 Billion in Military Contracts to Russia
5.7  China Buying into Abu Dhabi Oil with New Concession Stake
5.8  Dubai Says 14.9 Million Tourists Visited During 2016

♦♦North Africa

5.9 Tourism Shows Signs of Recovery in Egypt
5.10 Morocco Trade Deficit Rises by 29%

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Greece Compromises on Bailout Reforms

7: GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1 Israel Rated Third Best Country to Raise Children
7.2 Israel Plans to Send Largest Ever Delegation to 2018 Winter Olympic Games

♦♦REGIONAL

7.3  UAE Plans to Build ‘Mini City’ on Mars by 2117
7.4  Rania Nasher Named Saudi’s First Female Commercial Bank CEO
7.5  Egypt to Appoint Its First Woman Governor

8: ISRAEL LIFE SCIENCE NEWS

8.1  Evogene and ICL Innovation Sign Collaboration for Development of Crop Enhancers
8.2  GluSense Receives Investment from JDRF T1D Fund
8.3  Intensix Raises $8.3 Million for Machine-Learning Tech to Head Off ICU Complications
8.4  Beyond Verbal Recognized for Using Vocal Biomarkers to Detect Health Conditions Using Tone of Voice

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Israel Sends 2 Miniature Research Satellites Into Space
9.2  CyberArk Announces Support for Amazon Inspector for Enhanced Cloud Security
9.3  Plarium Partners with Twentieth Century Fox to Bring Acclaimed Rio Franchise to Mobile Gaming
9.4  SES and Gilat Join Forces to Make Connectivity at Sea More Accessible
9.5  Mellanox Improves Crypto Performance with Innova IPsec 40G Ethernet Network Adapter
9.6  Tadiran Telecom Announces the Release of Aeonix Version 3 UC&C Solution
9.7  Colorado DOT Adopts Datumate’s Cutting Edge Mapping Tools
9.8  illusive Adds Kill Switch Capabilities to its Deceptions Everywhere Cybersecurity Platform
9.9  hiSky Smartellite Introduces a Ka-Band Satellite Terminal for Affordable MSS and IoT Applications
9.10  Oi Selects CellMining SON Solution

10: ISRAEL ECONOMIC STATISTICS

10.1  January’s Inflation Falls by 0.2% as Home Prices Fall
10.2  Israel’s Economy Grew at 6.2% in the Fourth Quarter
10.3  Israel’s Foreign Currency Reserves Hit Record High of Over $100 Billion
10.4  Israel’s Housing Prices See Highest Drop in a Decade
10.5  Medical Equipment Leads Increase in Israel’s Exports

11: IN DEPTH

11.1  ISRAEL: IMF Concluding Statement of the 2017 Article IV Mission
11.2  ISRAEL: Dispelling the Myth That Israel is the Largest Beneficiary of US Military Aid
11.3  LEBANON: Grasping a Golden Opportunity for a Macroeconomic Uplift
11.4  LEBANON: Is Lebanon on the Path to Decriminalizing Homosexuality?
11.5  JORDAN: Why the King’s Visit to Washington Was Essential for Jordan
11.6  BAHRAIN: Fitch Affirms Bahrain at ‘BB+’; Outlook Stable
11.7  EGYPT: New Cabinet Members Sworn in After Tough Search
11.8  TUNISIA: IMF Statement on Tunisia
11.9  TUNISIA: New Tunisian Electoral Law Raises Issue of Military’s Role in Politics
11.10  MOROCCO: What’s on Morocco’s Agenda as it Rejoins the African Union?
11.11  MOROCCO: 2017 Predicted to be Good Year for Morocco in Key Areas
11.12  GREECE: Priorities for a Return to Sustainable Growth

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Knesset Committee Approves Stock Exchange Ownership Reform

The Knesset Finance Committee today approved a structural change in the Tel Aviv Stock Exchange (TASE). According to the bill, ownership of the TASE will henceforth be separated from its members, i.e. the owners will be separated from the providers of trading services. This structural change is designed to increase competition and lower TASE trading fees. Following the reform, the TASE will become a profit-making corporation that will be able to distribute dividends to its shareholders, and more companies will be able to trade on it and provide trading services. Up until now, only TASE shareholders, mainly the banks, could trade on it and provide these services.

The banks will now be forced to reduce their share in the TASE to 5% by selling most of their holdings in the TASE within five years of the date on which the law is passed. The estimated NIS 500 million in profits from the sale in excess of the capital accumulated in the TASE will pass to the state. Senior capital market sources expect the designated change to give the public control of the TASE, which will be managed like any other public company. The second and third votes in the Knesset plenum for final passage of the bill will be held in the coming days.

The reform is projected to drastically change TASE ownership in the coming years from a total of 22 owners to many more companies. The proportions of ownership of the TASE will change accordingly. While 71% of the shares are currently held by the banks, their combined holdings are slated to fall to 35%, with a maximum of 5% for each bank (to be precise, 4.99%). After the bill becomes law, the state’s supervisory and enforcement authority over the TASE will increase, and supervision will become tighter, because the state has the status of a regulator over the TASE through the Israel Securities Authority, even though it does not own shares in it. The Securities Authority chairman will be able to veto the appointment of senior TASE officeholders, and to unseat the current officeholders.

Concerning trading days on the TASE, the issue of Friday trading was raised during the discussion of the bill. It was eventually decided that the matter would be addressed and settled through the TASE Rules and Regulations as part of regulations to be brought before the Finance Committee for approval, rather than through the initial legislation. It was also agreed that the banks and companies providing trading services would be obligated to report the fees they charge to the customers, including in comparison with the other companies operating on the TASE. (Globes 20.02)

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1.2 Israel Collects Record Tax Revenues in January

Israel’s government tax revenues totaled a record NIS 27.6 billion in January, improving on the previous record of NIS 26.8 billion set in January 2016, resulting in a NIS 4.2 billion budget surplus for the month. The budget deficit in February 2016-January 2017 was a mere 2.1% of GDP. The Ministry of Finance stated that a budget surplus was a frequent occurrence in January, because revenues are usually high and spending low in this month. The Ministry of Finance announcement said that the figure included a “one-time NIS 1.2 billion payment from a capital gain on the sale of a large company.” The Israel Tax Authority declined to release particulars about the deal involved, but market sources believe that it involves the sale of Keter Plastic in July, in which brothers Yitzhak and Sami Sagol sold 80% of their private company to BC Partners for $1.4 billion (controlling shareholders currently pay 30% capital gains tax). (Globes 09.02)

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1.3 Israel’s Gas Royalties Increase by 8.5% During 2016

Natural gas royalties from the Tamar reservoir totaled NIS 819 million in 2016, accounting for most of the royalties from natural resources in that year. 2016 natural resources royalties totaled NIS 854 million, up 8.5%, compared with NIS 788 million in 2015. Additional natural gas royalties came from the Yam Tethys (NIS 1.8 million), Meged (NIS 4.7 million), Heletz (NIS 313,000), and Tamrur Cliff (NIS 11,000) gas fields. According to the Ministry of National Infrastructure, Energy, and Water Resources, royalties from Tamar grew 7%, despite the fall in the price of natural gas. Fees from various projects totaled NIS 5 million. Royalties from minerals rose from NIS 11.9 million in 2015 to NIS 23.5 million in 2016, a 98% increase. The Sheshinski 2 Committee recommendation for an increase in the royalty rate on minerals from 2% to 5%, which took effect in 2016, accounted for the increase. (Globes 16.02)

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1.4 Israeli Accelerator Launched for Arab Entrepreneurs

Five startups have been accepted into the first four month LEAP Haifa course operated by PresenTense, with the support of CITI Israel. A new startup accelerator has been launched in Haifa to assist Arab entrepreneurs. The program targets startups that have completed Series A financing, already developed a prototype product and/or received funding from the Israel Innovation Authority (formerly the Office of the Chief Scientist). The program called LEAP Haifa is operated by PresenTense, which promotes community entrepreneurship with support from CITI Israel. The program will last four months and each startup participating must have at least one Arab entrepreneur. PresenTense estimates that there are 100-150 Arab startup entrepreneurs active in Israel.

There are five startups in LEAP’s first program, which began last month. AgRobic is an environmental startup developing anaerobic wastewater treatment; HealthyMize monitors Chronic Obstructive Pulmonary Disease (COPD) patients; Innosphere is developing an innovative wearable device for treating ADHD; MindoLife is an Internet-of-Things company developing a platform for smart homes; and BambooBike, which is developing ultra-light, eco-friendly bicycles made from bamboo. (Globes 20.02)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Strategic Alliance Between Midea and Servotronix Announced

China’s Midea Group Co., a leading global supplier of consumer appliances, HVAC systems, robotics and industrial automation systems, announced the establishment of a strategic partnership with Servotronix Motion Control, a leading Israeli company with a broad scope of international business in the development and sales of advanced motion control and automation systems. All condition precedents of the strategic partnership have been satisfied and the relevant regulatory approvals have been obtained. The alliance with Servotronix is the first collaboration of this type for Midea in Israel.

Petah Tikva’s Servotronix was founded in 1987 and develops and manufactures comprehensive and high performance motion control solutions, ranging from advanced encoders, servo drives to multi-axis motion controllers, for a wide variety of industries including industrial robots, electronics assembly, semiconductor, machine tools and medical equipment. Servotronix will continue to operate from its headquarters in Petah Tikva, Israel, and coordinate its global activity, including marketing, sales and product development. (Midea 09.02)

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2.2 GE Digital Acquires Nurego

General Electric Digital has acquired Israeli Nurego, a company that supports operations for IoT networks that link industrial machines. The acquisition comes after a two-year relationship between GE and Nurego, in which the startup operated GE’s platform Predix, software that GE called “the operating system for the Industrial Internet”. The platform also has several native apps for industrial IoT (IIOT) companies to use. Apparently the company has become indispensable for the Predix platform. The company is the byproduct of a collaboration between The Hive and EMC (Dell). The Hive, Paul Maritz and EMC were the company’s primary investors, and Maritz holds a seat on the board.

Herzliya’s Nurego is a business operations (BizOps) and monetization solution for industrial and technology companies, who are transitioning to or adding cloud-native products to their existing portfolios. Nurego BizOps solution manages all aspects of subscription business operations, while avoiding isolated systems and processes that run separately from existing opportunity-to-cash processes. Nurego applies lean and agile methodologies to easily build measure, adapt and scale dynamic and opportunistic business models, keeping pace with rapid market disruption without the need for developer resources. (Nurego 12.02)

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2.3 Demisto Raises $20 Million to Meet Growing Global Demand for Automated Incident Response

Demisto announced that it has closed its $20 million Series B round of funding. Round participants included Accel, Slack Fund and other strategic investors. The funds will be used to expand operations to accelerate new product innovation and customer rollouts, and ramp sales and marketing to meet growing global demand for incident response management, automation, and real-time collaboration across security teams. Today’s funding brings the company’s total funding to $26 million. In 2016 Demisto saw rapid adoption of its incident response solution due to expanding market demand and a significant partner ecosystem which now includes more than 100 integration partners.

Demisto also announced general availability of Demisto Enterprise 2.0, making Demisto Enterprise the industry’s first comprehensive incident management platform to offer integrated threat intelligence. The new capabilities enable customers to integrate leading threat feeds with Demisto to manage indicators and automate threat hunting operations, saving time and significantly reducing the risk of exposure.

Tel Aviv’s Demisto helps Security Operations Centers increase efficiency, improve incident response times and processes. Demisto Enterprise combines security orchestration, collaboration and threat management to reduce manual work and provide decision support for SOC analysts. At the heart of Demisto’s technology is DBot, a security chatbot that is integrated with dozens of products and understands hundreds of security commands. (Demisto 09.02)

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2.4 empow Secures $9 Million in Funding

Cybersecurity startup empow has raised $9 million, which it will use to further develop its platform and help bring its revolutionary approach for elevating cybersecurity for the enterprise to the American market. empow will begin its expansion with a Boston office, which will provide high-level sales and support.

empow’s innovative approach employs its proprietary “security abstraction” to break down an organization’s existing security configuration into abstracted primary components called “Security Particles.” Utilizing deep learning, empow’s platform clearly defines the security role of each particle, using one common language. This enables the platform to instantly coordinate between the previously siloed tools, and deploy a new, unique response for every security event detected. In this way, empow investigates and mitigates the most advanced attack campaigns in real time, with speed and intelligence impossible before. empow’s unique cybersecurity paradigm, with funding from both private investors and the Office of the Chief Scientist at the Israel Ministry of Economy, is already in use by major U.S. enterprises and service providers.

empow is a cybersecurity startup founded in October 2014 in Tel Aviv with the motto: “rather than spend more, deploy smarter.” empow’s platform turns what organizations have into what they need by integrating with their existing security infrastructure and creating the optimal security solution which detects, investigates and mitigates the most advanced attack campaigns. empow breaks down existing security tools into “Security Particles” to create an abstracted smart layer that sits above current security configurations and which can be reassembled to deploy a new, targeted security apparatus for each individual attack, in real time. This gives any organization the ability to respond faster and smarter, with better coordination and more insight. In this way, empow makes more of what organizations already have. (empow 09.02)

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2.5 Javelin Networks Announces Funding for Growth

Javelin Networks, the only company that protects Active Directory and provides autonomous breach prevention, containment, threat hunting and incident response capabilities, in an all-in-one artificial intelligence driven platform, announced a $5 million Series-A Financing Round to fuel its development and growth. Investors participating in the Series-A financing are RSL Capital, Hillsven Capital, UpWest Labs, Tomer Weingarten, CEO of SentinelOne and other Private Investors.

Tel Aviv’s Javelin Networks protects Active Directory and provides autonomous prevention, containment, incident response, and threat hunting capabilities in an all-in-one artificial intelligence driven platform. It’s the only agentless solution that immediately contains attackers after they compromise a machine, preventing them from using Active Directory credentials and moving laterally into the network. Javelin protects the one asset that attackers know is unprotected. (Javelin

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2.6 Israeli Defense Deals with Lockheed Martin Increase By 33%

Israel’s Ministry of Defense said deals with Lockheed Martin increased by 33% in 2016. Israel’s dealings with the F-35 Adir fighter jet manufacturer, made as part of the reciprocal acquisitions deal signed in 2010, have so far resulted in deals amounting to $1 billion, according to the Ministry’s Air and Sea Procurement Subdivision, which operates under its Procurement and Production Directorate. Deals worth some $258 million were signed between Israel’s military industries and Lockheed Martin in 2016, representing a 33% increase in sales, the subdivision’s report showed. The data also showed that Israel’s defense industries were able to increase their F-35-related commercial contracts with Lockheed Martin in 2016.

A joint venture by Elbit Systems and Rockwell Collins that produces the specialized helmets used by F-35 pilots increased its contract by $206 million; Israel Aerospace Industries has expanded its wing production contract by $26 million; and Elbit subsidiary Cyclone, which produces part of the jet’s fuselage, has seen orders increase by $16.6 million. Other Israeli industries that are involved in producing F-35 systems, such as SimiGon, which develops the jet’s flight simulation software; Tadiran, which produces its radio components; and microchip technology developer Gilboa, have all reported increases in their dealings with Lockheed Martin. (Various 14.02)

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2.7 Intuition Robotics Investment from iRobot and OurCrowd

Intuition Robotics, developer of social companion technologies, announced funding from strategic investor iRobot Corp. and equity crowdfunding platform OurCrowd. This investment brings the total funding in the company to $6m across various funding instruments. The new investors join Terra Venture Partners, who led the Intuition Robotics seed round, as well as other original investors including Bloomberg Beta, Maniv Mobility, and additional private investors. iRobot Ventures is the strategic investment arm of iRobot, the leading global consumer robot company. OurCrowd is the world’s leading global equity crowdfunding platform for accredited investors. Intuition Robotics will open its U.S. Headquarters in Silicon Valley this year to bring on board key talent and start go-to-market operations in the US.

Ramat Gan’s Intuition Robotics is developing social companion technology to positively impact the lives of millions of older adults by connecting them seamlessly with family and friends, making technology accessible and intuitive, and proactively promoting an active lifestyle. The company was founded by former corporate executives and entrepreneurs who previously founded and managed CloudBand, a disruptive cloud telecom venture within Alcatel-Lucent. The founders created Intuition Robotics to pursue their passion for creating technology and products to improve people’s quality of life. (Intuition Robotics 14.02)

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2.8 Noble Energy to Invest $550 Million in Leviathan Gas Field

U.S. producer Noble Energy is expected to announce in the coming days an investment of $550 million in the development of Israel’s Leviathan gas field, according to a company outlook and guidance report for 2017. The $550 million represents one-fifth of the company’s global investments of $2.3 to $2.6 billion for 2017. The report also said, “Capital expenditures in the Eastern Mediterranean for the initial development of the Leviathan project include drilling one production well, long-lead investment items, and ramp up of construction activities. The company will also complete an additional production well at Tamar [gas field], which was drilled in the fourth quarter of 2016.” Israel is presently engaged in discussions with Turkey, Cyprus, Greece and Italy over the possibility of exporting its natural gas via underwater pipelines. (Various 14.02)

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2.9 Sapiens to Acquire U.S.-based StoneRiver for Approximately $102 Million

Sapiens International Corporation entered into a definitive agreement (subject to customary closing conditions) to acquire privately held StoneRiver, Inc., for approximately $102 million in cash (subject to certain adjustments). StoneRiver delivers a wide range of solutions and services for the insurance industry in North America. Headquartered in Denver, Colorado, StoneRiver’s versatile product portfolio is comprised of a policy administration suite, rating, underwriting, illustrations, reinsurance, and finance & compliance solutions for all major insurance business lines, across both property and casualty (P&C) and life and annuities (L&A).

The acquisition of StoneRiver expands Sapiens’ North American P&C portfolio with StreamSuite, a state-of-the-art insurance suite targeting the higher tier carriers, complementing Sapiens’ Stingray solution that is targeting the lower tier in the sector. The company will also gain entry into the workers’ compensation sector, a new area for Sapiens. Combining Sapiens’ and StoneRiver’s reinsurance solutions is expected to create a comprehensive market offering and will allow Sapiens to better serve its customers.

Holon’s Sapiens International Corporation is a leading global provider of software solutions for the insurance industry, with a growing presence in the financial services sector. Sapiens offers core, end-to-end solutions to the global general insurance, property and casualty, life, pension and annuities, reinsurance and retirement markets, as well as business decision management software. The company has a track record of over 30 years in delivering superior software solutions to more than 200 financial services organizations. (Sapiens 15.02)

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2.10 OurCrowd Continues Asia Expansion, First Platform to Bring Equity Crowdfunding to Taiwan

OurCrowd announced its expansion in Asia with a new Taipei office and financial partner, Shanghai Commercial & Savings Bank (SCSB). Recently, SCSB received the approval of the Financial Supervisory Commission, to invest in Israel’s equity crowdfunding platform OurCrowd, making it Taiwan’s first bank to invest in an overseas FinTech equity crowdfunding platform, and becoming OurCrowd’s strategic alliance partner in Taiwan. SCSB, in collaboration with the Taiwanese Financial Supervisory Commission, is innovating digital science and technology to create a smart financial vision, by actively utilizing financial technology to promote internet banking and mobile banking services. It also aims to use bigdata analysis for precision marketing, and to deepen social media to promote digital marketing.

Jerusalem’s OurCrowd is the leading global equity crowdfunding platform for accredited investors. Managed by a team of seasoned investment professionals and led by serial entrepreneur Jon Medved, OurCrowd vets and selects opportunities, invests its own capital, and brings companies to its accredited membership of global investors. OurCrowd provides post-investment support to its portfolio companies, assigns industry experts as mentors, and takes board seats. The OurCrowd community of almost 17,000 investors from over 110 countries has invested over $400M into 110 portfolio companies and funds. OurCrowd already has thirteen exits to date, two IPO’s and eleven acquisitions. (OurCrowd 16.02)

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2.11 Kerogen Capital invests in Energean Israel

Energean Oil & Gas announced that Kerogen Capital has committed to invest an initial $50 million in Energean Israel, a subsidiary of Energean, ahead of the planned $1.3 billion development of the Karish and Tanin gas fields, offshore Israel. Energean Israel is the operator of and holds a 100% interest in each of the Karish and Tanin leases, acquired from Delek Group in December 2016, for an upfront consideration of $40mm as well as $108.5mm in contingent payments. Proceeds from Kerogen’s investment in Energean Israel will finance the acquisition and key workstreams to investment sanction including FEED studies and the Field Development Plan currently being prepared in cooperation with TechnipFMC. The fields contain at least 2.4 Tcf of Gas contingent resources (NSAI report), and will be developed through an FPSO that will be the first to be installed and operated in the East Mediterranean. The gas produced from the fields will supply Israel’s growing domestic gas market, with first gas expected in 2020.

Kerogen’s investment is subject to approval by the Israeli Government, after which Kerogen will own a 50% interest in Energean Israel with Energean holding the balance.

Greece’s Energean is a leading independent E&P company focused on the Eastern Mediterranean region where it already holds seven E&P licenses, encompassing Greece, the Adriatic, offshore Israel and onshore North Africa. Kerogen Capital is an independent private equity fund manager specializing in the international oil and gas sector. Kerogen Capital was established in 2007 and manages approximately $2 billion across its funds. Its investors comprise a range of blue-chip institutions including endowment funds, foundations, pension plans, fund of funds, international corporations and family offices. (Energean 15.02)

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2.12 Apple Purchases Facial Recognition Startup RealFace

Apple has purchased Israeli startup RealFace Technology for an estimated $2 million, it was reported on 19 February. Founded in 2014, the Tel Aviv-based startup is a leading developer of facial recognition technology. Its software offers users a smart biometric login, with the aim of making passwords redundant when accessing mobile devices or personal computers. RealFace has 10 employees and has raised $1 million prior to Apple’s acquisition. The company’s software is sold in Israel, China, Europe, and the United States.

According to the financial daily Calcalist, this is Apple’s fourth acquisition in Israel. In 2011, Apple acquired flash memory maker Anobit for a reported $400 million; in November 2013 it bought 3D sensor company PrimeSense for a reported $345 million; and in 2015 it purchased LinX for an estimated $20 million. (Various 20.02)

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2.13 HemaCare Signs Distribution Agreement with Israeli-Based Partner

Los Angeles’ HemaCare Corporation, a leader in cell and tissue collection, processing, and cell therapy solutions, has expanded its global capabilities through a strategic distribution agreement in Israel with Almog Diagnostic. This partnership ensures researchers in the Israeli life sciences community can access HemaCare’s human healthy and disease state hematopoietic cell products for their basic scientific and cell therapy research and development needs in a timely manner and with local regional support. HemaCare distribution agreements enable partners to actively provide support to customers. Researchers will be able to obtain human biological material collected from HemaCare’s FDA-registered donor collection centers, as well as fresh and frozen hematopoietic cell products derived from its cell isolation laboratory in California, while receiving customer service and technical support in their native language through specially trained representatives locally in their region. To ensure best in class service and support, HemaCare provides ongoing technical training and marketing support to its global partners. (HemaCare 20.02)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 TSYS Signs Payments Agreement with International Bank of Qatar

Columbus, Georgia’s TSYS announced that one of the oldest banks in Qatar, International Bank of Qatar (ibq), has signed an agreement to license TSYS’ future-focused PRIMESM payment solutions platform. ibq has selected PRIME to manage all of its Visa and MasterCard credit and debit card issuing and ATM acquiring business as part of a single-platform solution. ibq will benefit from PRIME’s integrated capability for authorization and switching, fraud monitoring and risk management, disputes and chargeback handling and ATM management. ibq will further leverage PRIME’s unique integration layer to enable greater interoperability with the bank’s existing systems, allowing for operational and business improvements, while empowering its certified developers to develop against the integration layer whilst protecting their investment, and the security and performance of the core PRIME platform. TSYS has approximately 400 clients across more than 80 countries around the globe. Its PRIME licensing footprint extends across the Middle East region, and is now licensed by 6 of the top 10 banks in Qatar. (TSYS 21.02)

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3.2 Dubai Set to Host First Legoland Hotel in the Middle East

Details have been revealed about plans to build the first Legoland Hotel in the Middle East in Dubai. DXB Entertainments, a Dubai-based company, and Merlin Entertainments Group, one of the world’s biggest theme park and attraction operators, will open the hotel at Dubai Parks and Resorts. Every room in the first Legoland Hotel in the Middle East and the seventh to open worldwide will have Lego models and theming. From the disco elevator to the Castle Play Area, Legoland designers have integrated Lego storylines for every guest to create a memorable adventure. The hotel will be built close to Legoland Dubai which has more than 40 rides and attractions, and Legoland Water Park which has 20 slides. The Legoland Dubai Hotel is a 60:40 joint venture between DXB Entertainments PJSC and Merlin Entertainments, and will be operated by Merlin Entertainments once opened. (AB 15.02)

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3.3 Dubai Eyes Launch of World’s First Driverless Flying Cars in July

Dubai’s Roads and Transport Authority (RTA), in collaboration with the Chinese EHANG Company, announced that it had carried out the first test run of an autonomous aerial vehicle (AAV) capable of carrying a human, a world first. RTA said in a statement that it is set to start the operation of the AAV, named EHANG184 – effectively a driverless flying car – as early as July. The EHANG184 vehicle is fitted with a touchscreen to the front of the passenger seat displaying a map of all destinations in the form of dots. It has preset routes from which the rider chooses a destination. The vehicle will then start automatically, take off and cruise to the set destination before descending and landing in a specific spot. A ground control center will monitor and control the entire operation, the RTA added.

The AAV is designed to fly for a maximum of 30 minutes at a maximum cruising speed of 160km/h and a maximum cruising height of 3,000 feet. It is designed to operate under all climatic conditions apart from thunderstorms. Dubai Civil Aviation Authority issued the permits for the trial while Etisalat provided the 4G data network used to communicate between the AAV and the ground control center. (AB 13.02)

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3.4 UAE Retail Leader Reveals Plan for Major Saudi Expansion

UAE-based retail major Lulu Group has announced plans to add 20 more hypermarkets in the Saudi market, nearly tripling its presence in the Gulf kingdom by 2020. The details of the expansion plans, which will build on the retailer’s existing eight hypermarkets in the country, were revealed during the launch its 133rd hypermarket in the city of Hail, north-western province of Saudi Arabia. The new hypermarket is spread over about 160,000 square feet and will serve the residents of Al Jamiyeen District and its surrounding areas, a statement said.

In November, it was reported that the Abu Dhabi-based Lulu Group International will invest $545 million to develop three new malls in the UAE. Mall of Umm Al Quwain will be the first to open by end-2017 followed by Avenues Mall Sharjah by end-2018 and Avenues Mall in Dubai Silicon Oasis in first quarter 2019, it was reported. (Lulu Group 11.02)

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3.5 Harris Corporation Receives $189 Million UAE Battlefield Management System Contract

Melbourne, Florida Harris Corporation has received a two-year, $189 million contract to provide an integrated battle management system (BMS) to the United Arab Emirates Armed Forces. The contract was received during the first quarter of Harris’ fiscal 2017. The Harris system will provide the UAE with initial operational capabilities as the country implements enhanced battlefield management solutions. The contract was issued under the Emirates Command & Control System (ECCS) Land Tactical System (ELTS) program, a major C4ISR program that will integrate, coordinate and maximize the combined efficiency of UAE Armed Forces assets.

Harris Corporation is a leading technology innovator, solving customers’ toughest mission-critical challenges by providing solutions that connect, inform and protect. Harris supports government and commercial customers in more than 100 countries and has approximately $6 billion in annual revenue. (Harris Corporation 20.02)

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3.6 Affygility Solutions Opens New Regional Office in Dubai

Broomfield, Colorado’s Affygility Solutions (Affygility), a leading provider of occupational health, toxicology, and industrial hygiene services for the life science industry, announced today the launch of its regional branch office in Dubai, United Arab Emirates to serve the IMEA region. The regional branch office will be located in the Dubai Science Park in Dubai, UAE. The Dubai Science Park is home to over 280 international life science companies. The regional branch office will serve as a hub for the India, Middle East and North Africa (IMEA) region, thus allowing for Affygility to serve their customers in the region more effectively and faster than ever before. (Affygility 08.02)

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3.7 Snap Opens First Middle East Office in Dubai

Los Angeles’ Snap, the company behind the popular app Snapchat, has opened its first Middle East office in Dubai Internet City to target regional markets. Snap has expanded to the region to primarily work with advertisers and local partners in the UAE and Saudi Arabia, it said. Snapchat, which was first launched in 2011 as Picaboo, currently has over 150 million daily active users worldwide, who create over 2.5 million ‘snaps’ per day. (AB 07.02)

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3.8 Harris Corporation Provides Turkey with Air Traffic Management Communication System

Melbourne, Florida’s Harris Corporation was selected to supply a next-generation, VoIP communication system to support the Republic of Turkey’s air traffic management (ATM) services. Harris was chosen following a rigorous review by Devlet Hava Meydanlari Isletmesi (DHMI), Turkey’s air navigation service provider (ANSP). Harris will provide DHMI with its cloud-based Voice Communication System for the 21st Century (VCS21). The system modernizes ATM programs by delivering net-centric voice communications that reduce dependency on traditional point-to-point communications, while supporting an efficient transition to IP-based communications. It will be installed at seven facilities in Turkey, and will include more than 337 controller working positions that can access up to 52 radio sites across DHMI control operations. (Harris Corporation 16.02)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Arava Institute’s 2017 Spring Semester Begins

On 14 February, the Arava Institute opened its doors to the students of the 2017 Spring Semester. They received a large contingent of over 50 students and interns from Israel, the Palestinian Authority, Jordan, Egypt, the U.S., Europe, and Africa. It is one of the largest and most diverse semesters in the history of the Institute. The academic staff worked diligently to get the campus ready, prepare the syllabi for courses, set up the orientation schedule and finalize trip plans for the semester. For Israelis, Palestinians, Jordanians and students from around the world, security is, of course, a real concern, and at the Arava Institute, they take that concern very seriously. All students are interviewed by us prior to acceptance, and the appropriate security precautions are taken by the Israeli government when issuing their students visas and permits.

Kibbutz Ketura’s Arava Institute for Environmental Studies is a leading environmental studies and research program in the Middle East. It houses academic programs in partnership with Ben Gurion University, research centers, and international cooperation initiatives focusing on a range of environmental concerns and challenges. With a student body comprised of Jordanians, Palestinians, Israelis and students from around the world, the Arava Institute offers students an exceptional opportunity to learn from leading professionals while forming friendships and developing skills that enable them to lead the region and the world in solving today’s most pressing environmental challenges. (AI 20.02)

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5: ARAB STATE DEVELOPMENTS

5.1 Amman Approves By-Law to Set Cap on Top-Echelon Salaries

On 20 February, the Jordanian cabinet approved the mandating reasons for a draft by-law on controlling the salaries of public employees and referred it to its Legal Committee for endorsement. Finance Minister Malhas recommended the new regulations to Prime Minister Mulki following the state budget discussions with MPs, where the premier pledged to set a maximum limit for high salaries at ministries and public departments. Earlier this month, the Cabinet decided to deduct 10% of any sum above JD2,000 in monthly salaries of civil servants, and set a cap of JD3,500 on public sector salaries. The funds collected from these regulations, which also apply to the prime minister and ministers, among other top-ranking officials as of 1 February, will go to support the Treasury as part of a broader plan to rationalize public spending.

The Council of Ministers also approved completing the GPS tracking project of public vehicles, under a special tender that allows expanding the scheme to include 20,000 vehicles. Under the first phase of the project, 5,000 tracking devices have been installed on public vehicles, which are monitored by a control room at the Transport Ministry to identify the location and trip purpose of state-owned cars, according to Petra.

Meanwhile, the Cabinet decided to cancel the exclusiveness of government purchases from the King Abdullah II Design and Development Bureau (KADDB) and affiliated companies, in order to ensure equality for all Jordanian companies that produce similar products. The group aims at establishing “new and growing businesses in the defense and security industries along with various services that would complement these industries. The Cabinet decision is aimed at supporting local industries, providing fair competitive criteria and stimulating the Jordanian economy, under prevailing economic challenges and the decline of export volume to traditional markets due to border closures, Petra added. (JT 20.02)

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►►Arabian Gulf

5.2 Six Gulf Nations Aiming for Simultaneous VAT Adoption in January

Policy makers in the six-nation Gulf Cooperation Council are aiming to introduce a 5% value-added tax at the start of next year, despite administrative and technical obstacles. The GCC, its finances strained by low oil prices, has long planned to adopt the tax in 2018 as a way to increase non-oil revenues, but economists and officials in some countries have said privately that simultaneous introduction in all countries may not be feasible. That is because of the complexity of creating the administrative infrastructure to collect the tax and the difficulty of training companies to comply with it, in a region where taxation is minimal. The other GCC members are Saudi Arabia, Kuwait, Qatar, Oman and Bahrain.

The UAE expects around $3.3 billion of revenue from the tax in its first year. That would be about 0.9% of the UAE’s GDP of $371 billion in 2015, official data shows. From the start, authorities will seek to register all companies with annual revenues exceeding $100,000 for the tax, and anticipate 95% or more of companies will comply in the initial stage. Revenues from the tax may increase gradually with economic growth but the government is not at present considering any increase of the tax above 5%, and would not raise it in the future without a thorough study of the economic and social impact.

To broaden its fund-raising options, the UAE has been working on a debt law that would allow the federal government, not just the seven individual emirates, to issue sovereign bonds. Once the law is passed, the federal government will aim to start issuing debt within six months, but its minimal budget deficit means the debt will not be used to fund the budget. Instead, it will be issued in conjunction with the central bank to manage liquidity in the banking system, he said. (Reuters 12.02)

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5.3 Most of GCC Considered ‘Low’ Political Risk for 2017

All of the GCC countries except Saudi Arabia have been labelled as “low risk” this year in a global analysis by consultancy Control Risks. The kingdom was described as “medium” risk, according to Control Risks’ 2017 Risk Map highlighting the factors affecting political, economic and business security across the world. The map showed Qatar, Kuwait, the UAE, Oman and Bahrain as having low levels of risk facing businesses operating within their borders. The report warned of an increasingly complex global business landscape. Geopolitics, cybercrime and increasing privatization of state-owned companies are among the top drivers of overall risk in the Middle East in 2017, Control Risks said.

Regulatory issues brought about by fiscal consolidation, the weakening of Islamic State (ISIL) and a push for greater foreign direct investment (FDI), increasing the need for due diligence, are also likely to drive risk in the region. The “black swan” of 2017 for the Middle East region will be the potential unravelling of the nuclear deal with Iran as a result of changes in US foreign policy under US President Trump.

The report said countries such as Saudi Arabia, Egypt, Qatar and Iran will look to build or consolidate bridges with China, Japan, India and/or Russia to hedge against the uncertainty surrounding US’ and Europe’s engagement in the region. Such policy realignments are likely to play out in the commercial sphere when it comes to major project awards and bilateral trade agreements.

Another issue is the collapse of IS territory, which could prompt a global exodus of foreign fighters, according to the report. Many will be killed, some will be captured and others may be recruited into other groups or return to their home countries in Europe, Russia, the GCC or elsewhere and try to build extremist networks there. (AB 08.02)

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5.4 Qatar to Increase Its $2 Billion Investment in Russian Direct Investment Fund

Qatar Investment Authority (QIA) is set to increase its investment in the $2 billion joint venture with the state-backed Russian Direct Investment Fund (RDIF). The QIA pledged an initial $2 billion to invest in Russia jointly with RDIF following its landmark deal to buy a stake in Russia’s state-owned oil giant Rosneft earlier this month. The joint-venture has already invested $500 million across transactions in the financial, retail and mining sectors and in infrastructure. The RDIF is expected to receive over $1 billion in new capital from the government by the end of 2017. President Putin said in June that Russia planned to boost RDIF’s capital. There have been discussions on transferring some government stakes in companies to RDIF to manage given its successful track record, but nothing had been finalized.

The RDIF and Saudi’s sovereign funds were seeking further co-investment opportunities in Russian infrastructure and agriculture, while the Russia-Japan Investment Fund, a joint venture with the Japan Bank for International Co-operation, was expected to make some key investments this year. The RDIF was set up in 2011 to buy stakes in companies alongside foreign financial and strategic investors. It can invest up to 20% of its capital outside Russia. It has reserved capital of $10 billion under management and another $30 billion in commitments from foreign partners. It has co-investment ventures with several other sovereign funds, including those of China, Qatar and France. (AB 08.02)

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5.5 UAE Inflation Drops to 1.2% in December

The UAE’s inflation rate fell sharply on an annual basis to 1.20% in December compared to 2.6% in November, according to the UAE National Bureau of Statistics. The figures, cited by Reuters, showed that housing and utility costs, which account for over 34.1% of consumer expenses, rose 1.6% from a year earlier. Food and soft drink prices, which account for nearly 14.3%, climbed 0.5% while transport costs rose 0.4% after the UAE increased domestic fuel prices for December. London-based consultancy BMI Research said inflation in the UAE will stay low throughout 2017 as the impact of subsidy cuts wears off. The headline consumer price index will average 1.8%, the joint-lowest annual average for six years, with housing and food to be the main drivers of inflation, the consultancy said. (AB 19.02)

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5.6 UAE Awards $1.9 Billion in Military Contracts to Russia

On 20 February, the United Arab Emirates on Monday awarded $1.9 billion of military procurement deals including an AED 2.6 billion contract for Russia’s Rosoboronexport, during the Idex military exhibition. Rosoboronexport will supply 5,000 anti-armor missiles plus training and support to the UAE armed forces. Sweden’s SAAB AB won a contract for AED 865.7 million to provide new airborne surveillance systems and spares, while UAE firm Maximus Air was awarded an AED 1.8 billion contract to supply air cargo planes. On 19 February, the UAE awarded AED 4.5 billion worth of contracts. Idex is the region’s largest military show, with over 1,200 companies participating. (Reuters 21.02)

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5.7 China Buying into Abu Dhabi Oil with New Concession Stake

State-run Abu Dhabi National Oil Company (ADNOC) said it had signed an agreement giving China National Petroleum Corporation (CNPC) an 8% stake in a 40-year onshore oil concession. CNPC contributed a sign up bonus of $1.8 billion to enter the concession ADNOC said. The onshore concession is operated by the Abu Dhabi Company for Onshore Petroleum Operations (ADCO). The ADCO concession, including the Bab, Bu Hasa, Shah and Asab fields, has total resources of 20-30 billion barrels of oil equivalent over the term of the concession. The fields produce 1.6 million barrels per day (bpd) and are expected to reach 1.8 million bpd from 2017. (AB 19.02)

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5.8 Dubai Says 14.9 Million Tourists Visited During 2016

Dubai’s Department of Tourism and Commerce Marketing (Dubai Tourism) said that the emirate attracted 14.9 million overnight visitors in 2016, up 5% on the previous year. Officials said that they are firmly on track to meet the target of attracting 20 million annual tourists by 2020. Dubai Tourism said the strong performance came despite a “particularly turbulent year” across the world as the city continued to grow its share of outbound travel market despite three of its largest source markets witnessing “unique disruptions”.

The Gulf Cooperation Council (GCC) remained the number one volume generator for tourism to Dubai, delivering the highest share of visitor volumes for 2016, with a total of 3.4 million, up 5%, with Saudis topping the list. On a regional level, Western Europe followed closely as second highest demand driver for travel to Dubai, accounting for 21% of the 2016 total, followed by the UK and Germany. The latest data showed that India brought in just under 1.8 million overnight tourists, up 12%, while Pakistan also featured in the top 10 markets, delivering 607,000 tourists.

With 540,000 Chinese tourists last year, China dominated the demand from Asia, firmly cementing its status as a top 10 market, and is predicted to strengthen its contribution in light of the visa exemption policies that came into force in November. The Americas collectively brought in just short of 1 million overnight travelers, led by the United States while Russia, CIS and Central European markets accounted for about 5% of the overall tourism volumes to Dubai in 2016, led by recoveries from both Russia and Ukraine. The African region saw a 7% decline in travelers to Dubai last year while the Australasia region dropped 9%. (AB 07.02)

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►►North Africa

5.9 Tourism Shows Signs of Recovery in Egypt

Tourists are slowly returning to Egypt, easing pressure on a key sector battered by years of turmoil and the 2015 bombing of a plane carrying Russian holidaymakers. Visitors from China, Japan and Ukraine account for a large part of the growth. China’s top public travel agency, China International Travel Service, reported a 58% increase in tourists flying to Egypt compared with 2015. The increase is a sign of hope for a country also reeling from the shock of an economic reform program that has triggered massive inflation.

Once a key foreign currency earner, the tourism sector crashed in 2011 after a popular uprising overthrew veteran strongman Hosni Mubarak, ushering in years of sporadic unrest. Recoveries in the sector since then have been set back by new crises. In June 2015, a massacre of tourists at a Luxor temple was narrowly averted when assailants armed with assault rifles and explosives bungled the attack and were intercepted by police. But in October that year, militants, who are waging an insurgency in the eastern Sinai Peninsula, struck again. They bombed a Russian airliner carrying holidaymakers home from the popular Red Sea resort of Sharm El Sheikh. All 224 people on board were killed. Russia suspended flights to Egypt and Britain cut air links with Sharm El Sheikh. Visitor numbers plunged from 9.3 million in 2015 to 5.3 million the following year.

But industry officials have cautiously welcomed what they say is a noticeable improvement since October. In December 2016, 551,600 tourists visited Egypt compared with 440,000 the year before, according to the government’s statistics agency. This included a 30% increase in Ukrainian tourists and a 60% increase in visitors from China, with daily flights to Aswan, a southern city rich in ancient sites. Japan’s HIS travel agency said the number of tourists heading to Egypt “multiplied by four to five times” last year. Since charter flights from Japan to Egypt resumed in April 2016, they have been on average 80% full, said a spokesman for the Japan Association of Travel agents. Egypt hosted a record 14.7 million foreign tourists in 2010, a year before Mubarak’s overthrow and the ensuing economic nosedive. (AFP 19.02)

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5.10 Morocco Trade Deficit Rises by 29%

According to the preliminary studies done by the Moroccan Foreign Exchange Office of external trading, the trade deficit increased by 29%, a rise of MAD 2.74 billion compared to the same period of the previous year. Foreign Exchange Office numbers showed that Morocco registered an increase in imports of goods (MAD +3.556 billion) greater than that of exports (MAD +810 million). Imports reached MAD 32,338 billion against MAD 28.782 billion in January 2016, an increase of 12.4%, which they attributed largely to the increase in purchases of energy products (MAD +2.311 billion) in relation to the increase in the purchase price on the international market. Excluding purchases of energy products, imports increased only by 4.9% or MAD +1.245 billion. The increase also concerned imports of capital goods (MAD +591 million) and finished consumer products (MAD +447 million). On the other hand, food supplies fell by MAD 423 million, notably wheat (MAD -753 million).

Exports rose by 4.2%, MAD 20.274 billion instead of MAD 19.464 billion a year earlier, which was mainly due to the increase in sales of phosphates by MAD 757 million (MAD 3.755 billion instead of 2.998 billion), which represents 93.5% of the total increase in exports. Thus, the trade deficit stood at MAD 12.064 billion in January 2017 against MAD 9.318 billion a year earlier and the coverage rate at 62.7% against 67.6%.

Remittances from Moroccan living abroad (MRE) were up by 2.6%, with an additional of MAD 121 million. The amount generated by MREs in the first month of 2017 is MAD 4.71 billion. (MWN 16.02)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Greece Compromises on Bailout Reforms

On 20 February, Greece agreed to compromise on new bailout reforms in a bid to break a deadlock with its EU- International Monetary Fund (IMF) creditors that has sparked fears of a new Grexit crisis. Officials representing the lenders will return to Athens shortly for talks on new measures. Austerity-hit Greece’s Eurozone and the IMF lenders have been locked for months in a standoff over debt relief and budget targets.

Creditor officials left Athens in December after failing to sign off on the second review of Greece’s bailout and freeing up new funds. Markets have been spooked by fears of a return of the “Grexit” crisis, with Athens at risk of default this summer if it cannot unlock the latest tranche of the huge €86 billion ($91 billion) bailout agreed in 2015. Fears are that a long series of elections, starting with the Netherlands in March and France in April, could delay matters dangerously.

Greek Finance Minister Euclid Tsakalotos approved measures that will be automatically triggered if Athens fails to meet budget targets. The Greek side agreed to legislate the reforms which will take effect from 2019. But the deal will include an “inviolable” clause that there will not be “one single euro more of austerity. The measures must still be approved by the Greek parliament, most likely in mid-March, a step that has caused problems in previous deals. (AFP 20.02)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel Rated Third Best Country to Raise Children

InterNations, the world’s largest network for people who live and work as expats abroad, ranked Israel third on their list of 19 countries for raising a family. First place was Finland, with the Czech Republic taking second place. Just behind Israel, placing fourth and fifth respectively, were Austria and Sweden. The other countries, in descending order, were: Norway, Australia, Taiwan, Belgium, Germany, France, Poland, Netherlands, Luxembourg, South Africa, Singapore, Philippines, Mexico and South Korea. The UK and US were not on the list.

The InterNations survey rated 43 different aspects of life abroad on a scale of 1-7. One of the sub-indexes is the Family Life Index, which consists of 45 countries. Expats were asked to rate everything from childcare and education, to children’s health and safety. Each country had to have at least 31 respondents raising dependent children abroad, for the nation to be included in the index.

Third ranked Israel advanced one place from last year’s fourth place ranking. According to the survey, 81% of expat parents were “happy with the childcare options” in Israel and are similarly positive about Israel’s education options, with an impressive 84% expressing “general satisfaction” in that area. According Israel’s Central Bureau of Statistics, in 2016, there were approximately 1.96 million families in Israel in 2014, compared with 1.65 million in 2005. The average Israeli family size in 2014 was 3.7 people, the same as the decade before and high compared to Europe. (NoCamels 15.02)

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7.2 Israel Plans to Send Largest Ever Delegation to 2018 Winter Olympic Games

Israel is planning to send its largest delegation ever to the Winter Olympics that begin in PyeongChang, South Korea, on 25 February 2018. Israel wants to expand the number of its participants in four sports: figure skating, speed skating, Alpine skiing and bobsled. In PyeongChang, for the second time in Olympic history, team figure skating will be an event and will include the 10 best teams in the world. If the Israeli skaters receive a sufficiently high adjusted calculated score from the World Championships and other competitions, they will qualify for the team event.

Ironically perhaps, most members of the Israeli delegation do not live in Israel and speaking Hebrew is often a struggle for them. Israeli-based members of the delegation are mainly management personnel who travel to seminars abroad and visit Israeli training camps throughout the United States and Canada, sometimes even without knowing the athletes they are traveling to evaluate.

The Israeli Olympic Committee’s Elite Sport Department is aiming for a historic medal in short track speed skating. Israel may also make history in the bobsled competition. The large number of participants in the alpine ski competition, over 300, means Israel will also be represented. (IH 20.02)

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*REGIONAL:

7.3 UAE Plans to Build ‘Mini City’ on Mars by 2117

Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum announced the Mars 2117 project which aims to build a miniature city on the Red Planet within 100 years. Sheikh Mohammed, also Vice President and Prime Minister of the UAE, said the UAE was currently among the world’s top nine investors in space science. In a series of tweets accompanied by photos of what it describes as the planet’s first miniature city, he said the 2117 Mars project aimed to build knowledge and scientific capabilities, involving the conversion of local universities into research centers. The project, launched at the World Government Summit, will focus on parallel research into exploring means of mobility, housing, energy and food as well as speeding up the time it takes to travel to the planet.

The first phase of the project will focus on preparing the human cadres able to achieve scientific breakthrough to facilitate the arrival of humans to the Red Planet in the next decades. The Mars 2117 Project will start with an Emirati scientific team and will be extended to include international scientists and researchers. In November, Sheikh Mohammed approved the final designs of the UAE’s Mars Hope probe which is scheduled to reach the Red Planet in 2021. He gave the green light to start manufacturing the probe’s prototypes, the Arab world’s first Mars probe. The approval came as Sheikh Mohammed inaugurated a new satellite manufacturing facility at the Mohammed bin Rashid Space Centre in Dubai.

The Hope probe is scheduled to leave Earth in 2020 and aims to produce entirely new types of data that will enable scientists to build the first truly holistic models of the Martian atmosphere. The probe will be the first to study changes in the Martian atmosphere throughout its daily and seasonal cycles. Hope will be a compact spacecraft the size and weight of a small car. It will blast off in a launcher rocket, then detach and accelerate into deep space. The probe will orbit the Red Planet until at least 2023, with an option to extend the mission until 2025. It will send back more than 1000 GB of data to be analyzed by teams of researchers in the UAE, and shared freely with more than 200 institutions worldwide for the benefit of thousands of space specialists. (AB 14.02)

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7.4 Rania Nasher Named Saudi’s First Female Commercial Bank CEO

Rania Nashar was named chief executive of Samba Financial Group on 20 February, becoming the first female CEO of a listed Saudi commercial bank in line with the government’s economic and social reforms. Nashar is a board member of Samba’s global markets subsidiary and a Pakistani unit, and has nearly 20 years of experience in banking.

Women, banned from driving in Saudi Arabia and subject to a system of male guardianship, hold few top posts in the financial sector. But reforms which Saudi Arabia launched last year to make the economy more efficient and less reliant on oil exports include boosting the role of women in the economy. The Saudi Stock Exchange recently appointed its first female chair, Sarah al-Suhaimi, who became the first female chief executive of a Saudi investment bank when she took the helm of NCB Capital in 2014. Saudi Arabia’s reform plans aim to have women account for 30% of the workforce in coming years, up from the current 22%. (Reuters 20.02)

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7.5 Egypt to Appoint Its First Woman Governor

Five new provincial governors were to be sworn-in by President Abdel Fattah al-Sisi, including a woman for the first time. Nadia Abdou became the first female governor in Egypt. She was named as governor of al-Beheira Governorate after her remarkable efforts to promote Hepatitis C treatment in the city. Abdou was appointed as the deputy governor of Behiera in August 2013. She graduated in 1968 with a degree in chemical engineering and then received a Masters degree in health engineering from Alexandria University. She also headed a drinking water company for 12 years. Abdou was previously nominated to be a governor of Alexandria after receiving the Dubai-based Mohammed Bin Rashid Al Maktoum Business Excellence Award for outstanding Arab women managers. (Al Arabiya 16.02)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Evogene and ICL Innovation Sign Collaboration for Development of Crop Enhancers

Evogene announced they have entered a multi-year research and development collaboration for the discovery of novel crop enhancers for the improvement of nutrient use efficiency in selected crops. Under the terms of the agreement, Evogene will utilize its computational discovery platform to identify the potential of certain compounds to improve nutrient use efficiency. Successful candidates identified from the collaboration may be integrated into ICL’s product pipeline for further development and formulation. Expected commercialization of products derived from the joint efforts may occur as early as five years from initiation of the research and development activities.

Rehovot’s Evogene is a leading biotechnology company for the improvement of crop productivity for the food, feed and fuel industries. The Company operates in three key market segments: improved seed traits (addressing yield increase, tolerance to environmental stresses and resistance to insects and diseases); innovative ag-chemicals (developing novel herbicide solutions for weed control); and ag-biologicals. Evogene has collaborations with world-leading seed and ag-chemical companies.

Tel Aviv’s ICL is a global manufacturer of products based on specialty minerals that fulfill humanity’s essential needs primarily in three markets: agriculture, food and engineered materials. ICL is a public company whose shares are dual listed on the New York Stock Exchange and the Tel Aviv Stock Exchange. (Evogene 14.02)

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8.2 GluSense Receives Investment from JDRF T1D Fund

GluSense received an investment from the JDRF T1D Fund, a venture philanthropy fund exclusively devoted to finding and funding the best early-stage T1D commercial programs. The T1D Fund’s investment will be used to bring the Glyde CGM closer to the first in-human clinical trial, a key step in the commercialization process. GluSense’s technology uses a proprietary fluorescent glucose-sensitive biosensor that ensures accurate glucose measurement across the full physiological range, with enhanced accuracy at the medically-important hypo glucose range. Another GluSense breakthrough ensures that the biosensor level in the implant is maintained stable over the long term using engineered live cells that constantly replenish the biosensor in the implant. The stable biosensor level enables calibration frequency to be significantly reduced, freeing users from the daily hassle of multiple calibration finger pricks.

Rehovot’s GluSense was founded by Rainbow Medical, the premier Israeli Innovation and Investment House. GluSense team includes top scientists and engineers dedicated to creating advanced technologies and breakthrough products that will improve the lives of people with diabetes worldwide. The company is funded by Rainbow Medical, several venture funds from US and China, Israel’s Innovation Authority and the JDRF T1D Fund. (GluSense 18.02)

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8.3 Intensix Raises $8.3 Million for Machine-Learning Tech to Head Off ICU Complications

Intensix reeled in an $8.3 million Series A. The funds are pegged for the expansion of its sales and marketing ops in North America as well as further development of its predictive analytics platform. While it is easy to recognize that something has gone wrong when, for example, a patient’s blood pressure drops, signs of deterioration can come too late. Results from a prospective study at Tel Aviv Medical Center showed that the platform could recognize deterioration before care teams notice it might occur. The study started out modeling sepsis, the leading cause of death in the ICU, and its results have become the starting point of an interventional study. The company teamed up with the Mayo Clinic last year to look into the feasibility of using its platform to predict deterioration associated with infection. The results will be published later this month.

Intensix is also in discussions with different institutions in the U.S. to conduct more studies of the platform, Salomon. The company will focus on collecting information and verifying the accuracy of the technology in order to be ready for the commercial phase next year. As more players start using the tech, its predictive ability will only improve.

Netanya’s Intensix platform applies machine learning to the early detection of life-threatening complications in intensive care. A proliferation of structured and unstructured ICU data—from vital signs to historical and demographic data—goes into the system, is run through a set of models and results in predictions. ICU staff and management could use these predictions to head off deterioration before it happens. Studies have shown that the tech could potentially save lives, reduce the length of hospital stays and lower costs, the company said in a statement. (Intensix 08.02)

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8.4 Beyond Verbal Recognized for Using Vocal Biomarkers to Detect Health Conditions Using Tone of Voice

Beyond Verbal has been recognized by Frost & Sullivan as the winner of the 2016 Global Voice Analytics for Disorder Diagnostics Visionary Innovation Leadership Award. Beyond Verbal earned Frost & Sullivan’s 2016 Global Visionary award for its commitment to advancing long-standing screening, monitoring, and diagnostic problems with a unique, non-intrusive approach. Beyond Verbal has proven that vocal intonations can provide significant insights into the inner-workings of human beings, and the company recently found a significant connection between vocal biomarkers and Coronary Artery Disease (CAD) with the Mayo Clinic.

Beyond Verbal’s technology enables the understanding of emotions, well-being, and health conditions through the human voice. The company will be attending the Health IT Conference 2017 (HIMSS17) in Orlando from 19-23 February 2017.

Since its launch in 2012, Tel Aviv’s Beyond Verbal has been using voice-driven emotions AI to dramatically change the way we can detect emotions and reveal health conditions. The only input needed is the human voice, making this technology non-intrusive, passive, and cost effective. Beyond Verbal’s technology has been developed based on ongoing research into the science of emotions that started in 1995. By combining the company’s patented technology with its proprietary machine learning-based algorithms and AI, Beyond Verbal is focusing on emotions understanding and discovering vocal biomarkers. During the past 22 years, the company has been able to hone its technology through multiple internal tests and independent external validations. (Beyond Verbal 21.02)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Israel Sends 2 Miniature Research Satellites Into Space

Two Israeli civilian satellites developed with the support of the Israel Space Agency were be launched into space on 8 February, via the Indian Space Research Organization in Bangalore. The satellites will be two of the record-breaking 104 satellites from around the world to be catapulted into orbit on the same launcher. The miniature Israeli satellites are designed to assist in the research of climate phenomena and to perform medical experiments. Both satellites have been integrated with innovative technologies that enable Israeli researchers to guide their experiments and receive information directly.

One of the satellites is BGUSAT, developed by the Israel Aerospace Industries and the Science Ministry for a research mission held at Ben-Gurion University of the Negev. BGUSAT, which weighs 5 kilograms (11 pounds) and is around the size of a milk carton, is fitted with special cameras capable of identifying different climate phenomena and a control system that allows for the selection of areas to photograph and research. The satellite will enable researchers to receive high-quality images of the kind they were previously only able to access through costly requests from foreign satellites. The Israel Space Agency has allocated NIS 1 million to pay for the cost of the images sent back to Earth.

The second miniature satellite is owned by Israeli firm SpacePharma, which developed the world’s first nanosatellite to include an experimental lab. SpacePharma scientists will be able to view the four experiments in the lab in real-time through the use of a smartphone application. The integrated and automated laboratory system also allows scientists to use the application to make changes in the course of the experiment, to receive data on radiation and temperature, and to record microscopic images in real time. (IH 14.02)

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9.2 CyberArk Announces Support for Amazon Inspector for Enhanced Cloud Security

CyberArk announced expanded privileged account security solutions for Amazon Web Services (AWS) to help customers better protect against, detect and respond to advanced threats. For enterprises migrating to the cloud, CyberArk helps customers seamlessly extend and consistently enforce the security policies they have in place today on their on-premises infrastructure into their emerging cloud and DevOps environments. When a leading provider of value-added services to telecommunication operators and retailers in Latin America chose to move its data center to AWS, it recognized the importance of ensuring privileged account security was in place to protect its cloud assets from the beginning. It chose to work with CyberArk to improve the process of managing security.

Within organizations’ cloud environments, the rapid creation and deletion of instances and their associated administrator accounts must be closely managed. CyberArk can detect and rotate credentials based on company policy, and monitor and record privileged access to deliver greater visibility into the security of cloud assets. In addition to AWS, CyberArk supports customers across multiple cloud environments including AWS, Azure, Google, Alibaba, mixed, hybrid, on-premises and as well as DevOps environments.

Petah Tikva’s CyberArk is the only security company focused on eliminating the most advanced cyber threats; those that use insider privileges to attack the heart of the enterprise. Dedicated to stopping attacks before they stop business, CyberArk proactively secures against cyber threats before attacks can escalate and do irreparable damage. The company is trusted by the world’s leading companies – including 45% of the Fortune 100 – to protect their highest value information assets, infrastructure and applications. (CyberArk 09.02)

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9.3 Plarium Partners with Twentieth Century Fox to Bring Acclaimed Rio Franchise to Mobile Gaming

Plarium announced a partnership with Twentieth Century Fox to bring the Academy Award-nominated Rio franchise to fans worldwide on Android and iOS mobile devices with Rio: Match 3 Party. Releasing this spring, the game features a creative mix of match-3 puzzles, mini-games, and character collection to create a fun and exciting Rio experience for players of all ages. The game will also feature fan-favorite characters from the film including Blu, Nico, Jewel, Roberto, Gabi, Luiz, Pedro, Rafael, Bia and more.

Rio (2011) and Rio 2 (2014) feature a star-studded cast led by voice work from Jesse Eisenberg (Social Network, Batman v. Superman) that follows the adventures of Blu, a rare Blue Spix’s Macaw, as he makes his way through Rio de Janeiro, and the jungles of the Amazon. The new Rio mobile game will allow fans to play through these beautiful and iconic locations.

Founded in 2009, Herzliya’s Plarium Global is dedicated to creating the best mobile and social experience for hardcore gamers worldwide. With over 250 million registered users, we’re proud to be consistently ranked among Facebook’s top hardcore game developers. Plarium employs more than 1000 individuals and is headquartered in Israel with eight offices and development studios across Europe and the United States. (Plarium 15.02)

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9.4 SES and Gilat Join Forces to Make Connectivity at Sea More Accessible

Luxembourg’s SES S.A. and Gilat Satellite Networks announced a strategic collaboration focused on delivering affordable connectivity to a broad range of small ships and vessels left underserved at sea in the Caribbean and beyond. Set for commercial launch in April 2017, the plug-and-play platform is the latest offering within the SES Maritime+ service, which was first introduced late last year. The new collaborative solution bundles Gilat’s MarineRay 60P all-in-one Ku-band maritime VSAT (very small aperture terminal) antenna package with SES’s tailored maritime capacity on both wide beam and upcoming high throughput satellite (HTS) capacity to help small yachts and ship operators break through barriers to entry.

The collaborative solution, sold through a network of authorized dealers across the globe, will be available first to small yachts and vessels traversing Caribbean waters, followed by small craft operating in the Mediterranean Sea, North Sea, and ocean waters throughout Southeast Asia.

Petah Tikva’s Gilat Satellite Networks is a leading global provider of satellite-based broadband communications. With 30 years of experience, we design and manufacture cutting-edge ground segment equipment, and provide comprehensive solutions and end-to-end services, powered by our innovative technology. Delivering high value competitive solutions, their portfolio comprises of a cloud based VSAT network platform, high-speed modems, high performance on-the-move antennas and high efficiency, high power Solid State Amplifiers (SSPA) and Block Upconverters (BUC). Gilat’s comprehensive solutions support multiple applications with a full portfolio of products to address key applications including broadband access, cellular backhaul, enterprise, in-flight connectivity, maritime, trains, defense and public safety, all while meeting the most stringent service level requirements. (Gilat 15.02)

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9.5 Mellanox Improves Crypto Performance with Innova IPsec 40G Ethernet Network Adapter

Mellanox Technologies announced superior crypto throughput of line rate using Mellanox’s Innova IPsec Network Adapter, demonstrating more than three times higher throughput and more than four times better CPU utilization when compared to x86 software-based server offerings. Mellanox’s Innova IPsec adapter provides seamless crypto capabilities and advanced network accelerations to modern data centers, thereby enabling the ubiquitous use of encryption across the network while sustaining unmatched performance, scalability and efficiency. By replacing software-based offerings, Innova can reduce data center expenses by 60% or more.

The Innova IPsec adapter addresses the growing need for security and “encryption by default” by combining Mellanox ConnectX advanced network adapter accelerations with IPsec offload capabilities to deliver end-to-end data protection in a low profile PCIe form factor. The Innova IPsec adapter offers multiple integrated crypto and security protocols and performs the encryption/decryption of data-in-motion, freeing up costly CPU cycles.

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9.6 Tadiran Telecom Announces the Release of Aeonix Version 3 UC&C Solution

Tadiran Telecom, a global provider of Unified Communications & Collaboration (UC&C), Contact Center, and Control Room Software, today announced the release of Aeonix Version 3, the most powerful, robust and easy to use version of their Aeonix Unified Communications & Collaboration (UC&C) platform.

Aeonix is a pure software based Unified Communications & collaboration (UC&C) solution that consolidates diverse business applications into a single powerful platform. It is an open architecture system based on a strong foundation that is fault tolerant. Aeonix can be deployed in a private or public cloud environment and as an on premise or hybrid solution.

Petah Tikva’s Tadiran Telecom is an established global provider of Unified Communications & Collaboration (UC&C), Contact Center and Control Room software, serving businesses of all sizes, including tier-1 organizations in various market segments in 41 countries worldwide. UC&C solutions from Tadiran feature a comprehensive family of products including their Aeonix, contact centers, and Dispatch Console platforms, as well as a full line of IP phones and applications for mobility and desktop needs. (Tadiran Telecom 16.02)

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9.7 Colorado DOT Adopts Datumate’s Cutting Edge Mapping Tools

Datumate’s professional Site Survey Solution has helped the Colorado Department of Transportation (CDOT) to quickly and safely survey a water pond located at the highway intersection of Colorado Boulevard and I-25 in the Denver Metro area. Denver has an additional 300 water quality ponds and this technology will be primarily used to monitor the capacity of new ponds. Datumate’s leading technologies will help Colorado’s DOT expedite projects such as asset management, infrastructure and bridge intersection surveying, project and incident management and more, while maintaining high accuracy as well as employee safety. DatuSurvey Enterprise is photogrammetry software that automates professional surveying office work. DatuSurvey Enterprise turns drone and camera based images to accurate, georeferenced 2D maps and 3D models, generating a variety of outputs and calculations to expedite deliveries, save time and dramatically reduce costs.

Yokneam Illit’s Datumate is digitally transforming civil engineering processes used in construction, surveying and infrastructure inspection markets with fully automated, highly precise and cost effective solutions that keep field crews safe. Datumate utilizes state-of-the-art image-processing and advanced drones and camera technologies that dramatically reduce the amount of time surveying crews spend in the field, speed up construction progress checks and shorten infrastructure inspection duration, while maintaining survey grade accuracy. (Datumate 16.02)

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9.8 illusive Adds Kill Switch Capabilities to its Deceptions Everywhere Cybersecurity Platform

illusive networks has successfully achieved Cisco compatibility certification with Cisco’s Identify Services Engine (ISE) Platform Exchange Grid (pxGrid) and Cisco Umbrella. The Internet of Everything (IoE) continues to bring together people, processes, data and things to enhance the relevancy of network connections. As a member of the Cisco Solution Partner Program, illusive networks is able to quickly create and deploy solutions to enhance the capabilities, performance and management of the network to capture value in the IoE. Illusive’s integration of Cisco pxGrid powers enhanced prevention, providing customers with the earliest, most effective, and accurate attack detection. Incorporating kill switch capabilities into their advanced deceptions technology, data is collected from the compromised hosts as soon as an attack is detected. This data is then sent to the pxGrid platform, triggering ISE to execute containment of the compromised hosts. Customers have full control of the level of containment, actions taken per deception policy and designation of the host’s mitigation status, alongside comprehensive forensics information in real-time.

Tel Aviv’s illusive networks is pioneering deception-based cybersecurity with its patent-pending Deceptions Everywhere technology that neutralizes targeted attacks and Advanced Persistent Threats (APT) by creating a deceptive layer across the entire network. By providing an endless source of false information, illusive networks disrupts and detects attacks with real-time forensics and without disruption to business. (illusive networks 20.02)

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9.9 hiSky Smartellite Introduces a Ka-Band Satellite Terminal for Affordable MSS and IoT Applications

hiSky, the pioneer in affordable voice and data satellite communications, announced today the introduction of its revolutionary Ka-band based solution, a small portable device combining its state of the art technology. Smartellite, uses advanced phased array beam steering antennas to automatically locate satellites at any location. A proprietary built-in modem designed for low-to-medium bit rates allows for the fast acquisition of satellite signals while the advanced network management system is designed to provide voice and low bit-rate data communication services. hiSky already has several registered patents for this solution. hiSky’s develops an end-to-end solution, including its proprietary hub base station, hardware and software.

Rosh HaAyin’s hiSky brings innovative technology to the field of voice and data satellite communications. Offering mobile connectivity that is affordable, portable, and easy to use, hiSky’s Smartellite makes satellite communication accessible even in the most remote and extreme locations, on land, at sea or in the air. (hiSky 21.02)

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9.10 Oi Selects CellMining SON Solution

CellMining, along with its Brazilian partner AsGa Sistemas, announced that Oi has selected CellMining’s unique SON solution to automatically optimize its network and improve the Quality of Experience (QoE) for mobile network subscribers nationwide. Oi chose CellMining’s SON solution, which is driven by Subscriber-Network Analytics technology, after a rigorous selection process that included several SON and network equipment vendors in the market. It also incorporated a Proof of Concept trial, which demonstrated the accuracy and effectiveness of CellMining’s unique customer-centric analysis approach, making trace tools obsolete and providing Oi’s engineers with a demonstrable improvement in network performance when closed-loop SON actions were performed. CellMining’s business partner AsGa Sistemas played a key role in winning the contract.

Caesarea’s CellMining provides Mobile Network Operators with a unique toolset for optimizing user experience and network performance based on real-time metrics of subscriber data. The company’s ground-breaking Subscriber Network Analytics technology monitors subscriber experience data, identifies usage patterns, and reconstructs entire call and communication flows for individuals and business customer groups. CellMining has pioneered the integration of SON (Self-Optimizing Networks) with CEM (Customer Experience Management), to provide mobile operators with a world-class solution to optimize their networks for subscriber experience excellence. (CellMining 21.02)

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10: ISRAEL ECONOMIC STATISTICS

10.1 January’s Inflation Falls by 0.2% as Home Prices Fall

On 15 February, the Central Bureau of Statistics announced the Consumer Price Index (CPI) for January. The CPI fell by 0.2%, rising by just 0.1% over the past 12 months. During January, clothing prices fell 9%, footwear prices fell 10%, vehicle insurance fell 6.2% and housing services costs fell 0.8%. Price rises in January included fuel (3.3%) and electricity (3.5%). (CBS 15.02)

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10.2 Israel’s Economy Grew at 6.2% in the Fourth Quarter

Israel’s GDP grew by an annualized 6.2% in Israel in the fourth quarter of 2016, according to a Central Bureau of Statistics estimate. The figure is the highest quarterly growth rate since the second quarter of 2013. According to this estimate, the economy grew 5% in the second half of 2016, following 3.2% growth in the first half of the year. Growth for 2016 as a whole was raised to 4% from the previous estimate of 3.8%, and per capita growth was 1.9%. The fourth quarter growth estimate is subject to revision. In an analysis of GDP elements, business product jumped 5.9% in the fourth quarter, while exports of goods and services were up 4.5% and investments in fixed assets climbed by a whopping 10.2%. Spending on private consumption rose by a relatively moderate 2.9%. (CBS 16.02)

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10.3 Israel’s Foreign Currency Reserves Hit Record High of Over $100 Billion

Israel’s foreign currency reserves crossed the $100 billion mark in January, their highest level since the Bank of Israel was established in 1954. Foreign currency reserves stood at $101.6 billion at the end of January, an increase of $3.16 billion from the end of the previous month. The bank attributed the increase to foreign currency purchases, which came to $50 million; a revaluation that increased the reserves by about $868 million; overseas government transfers totaling some $2.2 billion; and private sector transfers amounting to some $28 million. A breakdown of Israel’s foreign currency reserves shows that at the end of 2016, 70% of reserves were in dollars, 25% in euros and 5% in British pounds. Israel’s foreign currency reserves came to $98.4 billion at the end of 2016, following a $1.2 billion increase in December. Many of the foreign currency purchases by the Bank of Israel in 2016 and during January were made as part of its policy of intervening in forex trading to prevent shekel appreciation. (BoI 07.02)

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10.4 Israel’s Housing Prices See Highest Drop in a Decade

Housing prices in Israel marked the highest drop in a decade in the last two months of 2016, the Central Bureau of Statistics said on 15 February. According to the report, housing prices decreased by a total of 1.2% in November and December, the highest drop over the past 10 years. The period between January to October saw a 6.4% rise in prices. This price drop corresponds with Finance Minister Moshe Kahlon’s assertion that home prices have been coming down moderately. The data also revealed that while the prices of bigger apartments remained the same or dropped moderately, the prices of small apartments have gone up. The average price of a 1.5- to two-bedroom apartment has gone up by 1.5%, while the price for a 3.5- to four-bedroom apartment has dropped by 0.5%. According to the report, in the fourth quarter of 2016, the average price of a four-bedroom apartment increased by 2%. (CBS 15.02)

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10.5 Medical Equipment Leads Increase in Israel’s Exports

Figures published on 16 February by the Israel Export and Industrial Cooperation Institute show that the rising trend in exports of goods from Israel continued in November 2016 – January 2017. Exports of goods, excluding diamonds, totaled $12.3 billion during this period, 2% more than in the corresponding period in the preceding year. Excluding the sharp downturn in exports of electronic components over the past three months, Israeli exports rose by 9%.

The Export Institute regards these figures as further evidence that Israeli exports are recovering, following a prolonged period of stagnation and decline that began in 2012. The Export Institute says that recovery is taking place despite a steep decline in exports of electronic components from Israel, which totaled only $980 million in November 2016 – January 2017, 43% less than in the corresponding period in the preceding year. This decrease was caused by the upgrading of US manufacturer Intel’s main fab in Kiryat Gat, which includes setting up an advanced innovative production line.

The increase in exports of goods in November 2016 – January 2017 follows a 1.8% rise in July – October 2016. The Export Institute says that the trend continued in November 2016-January 2017, with key export sectors substantially increasing their volume of activity. Pharmaceutical exports were up 8% to $2 billion during this period, and exports of electronic and computer equipment and optical devices used for medical purposes shot up 46% to $2.8 billion. Exports of machinery and equipment, including equipment for agro-technology, renewable energy, irrigation systems, robotics, food, and printing, grew 28% to $1.6 billion. (IE&ICI 16.02)

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11: IN DEPTH

11.1 ISRAEL: IMF Concluding Statement of the 2017 Article IV Mission

On 8 February the IMF issued a concluding statement to describe the preliminary findings of IMF staff at the end of an official staff visit to Israel.

Israel is enjoying solid economic growth and low unemployment, making this an especially favorable time to undertake reforms to help sustain strong and inclusive growth. Monetary policy should continue to support the return of inflation to the target band. Major progress has been achieved in reducing public debt, a trend that should be maintained while raising potential growth through sound investments in education, health, and infrastructure. Establishing deposit insurance and enhancing bank resolution tools would enable further steps to ease entry into the banking system. Recent housing initiatives may moderate prices in the near term, but deeper reforms are needed to durably enhance supply and affordability. Israel can achieve substantial productivity gains through well designed reforms, including steps to ensure that regulation achieves its public policy goals at lower cost. Progress on raising labor participation must continue. This will require greater efforts to close gaps in education and mobility, complemented by increased support for the working poor.

Recent developments and outlook

Israel’s economy is growing solidly and unemployment has declined, yet inflation remains low. Early estimates are for 3.8% growth in 2016, although this partly reflects one-off factors especially a surge in vehicle purchases. Job creation is strong, at almost 3% in 2016, helping reduce the unemployment rate to only 4.4% by the fourth quarter, and supporting a rise in wage growth from low levels. CPI inflation was ~0.2% in 2016, with core inflation (excluding the impact of energy costs, fruit and vegetable prices and government measures) low yet positive at 0.4%.

The economic outlook is positive in the near term but challenges will increase over time. Domestic demand growth is projected to moderate but a firming in exports will help keep real GDP growth at around 3% in 2017. Growth is expected to remain around 3% in the medium term, but there are significant risks from regional tensions and from uncertain trading partner growth. Domestically, growth could be impeded if infrastructure or skill bottlenecks emerge, or if progress in closing the gaps in the labor participation and productivity of the Haredi (Ultra-Orthodox Jewish) or Israeli-Arab populations is insufficient.

Monetary policy

Inflation is expected to increase gradually but there are uncertainties around the timing of this increase. A further rise in wage growth, together with higher foreign inflation and commodity prices, makes an eventual increase in Israeli inflation likely. Yet lower import prices, in part due to the appreciation of the shekel in recent years, may continue to drag on inflation in the near term, and there is also uncertainty about when domestic wage growth will affect inflation. Moreover, margins appear to be narrowing, perhaps linked to competition from rising internet purchases, which may continue to weigh on inflation going forward.

Monetary policy should remain accommodative pending a durable rise in inflation and inflation expectations. The Bank of Israel (BOI) maintained an appropriately accommodative monetary policy in 2015-16 given spillovers from low foreign inflation and easy monetary policies in major advanced economies. This policy stance, together with the BOI’s guidance that monetary policy will remain accommodative for a considerable time, has helped keep long-term inflation expectations near the center of the 1-3% target band. Nonetheless, there has been some decline in short and medium-term expectations, which, together with the uncertainties around the pace of inflation increases, argues for avoiding a premature monetary tightening and waiting until inflation is heading back toward target on a durable basis before acting.

Housing and Macroprudential Policies

Housing prices have risen to high levels as demand growth meets inadequate supply, with the heaviest impacts on low income households. Even after doubling in real terms since 2007, Israeli housing prices rose almost 8% on average in 2016. Housing completions have failed to keep pace with the formation of new households. Affordability is low, with the ratio of house prices to income rising to levels significantly exceeding those in many other countries. In the past decade, a growing share of households therefore needs to rent, and rising rents reduce the income left for other spending, especially for low income households.

Recent housing market reforms include useful measures, but some initiatives are costly and may not have lasting benefits. Bringing the relevant authorities under the Ministry of Finance (MOF) is already expediting land planning. The Housing Cabinet has helped address financing issues and impediments to urban renewal, which should be expanded substantially to boost supply where it is needed most. Although recent tax measures may dampen price rises in the near term owing to investor sales, without a supply change the price trend is unlikely to be altered significantly. The Buyer’s Price scheme helps households purchase a first house, yet it benefits relatively few households that win a lottery, and comes at significant off-budget fiscal cost.

Reforms that enable a durable expansion of housing supply are needed to improve affordability over time and thereby also lower macro-financial risks. Municipalities face disincentives to releasing land for residential development and to granting building permits in a timely manner, because residential property taxes are well below those on commercial real estate. Blanket agreements with municipalities are overcoming these frictions in the case of major residential projects, but correcting municipal incentives would ensure the supply of residential property becomes more responsive to demand on a lasting basis. Improved public transport provisions is important to help relieve housing shortages in major centers. Construction costs and the time to build should be reduced by streamlining extensive building regulations and further opening the residential construction market to foreign competition, which could also help ease shortage of skilled workers. Finally, municipalities could charge taxes on undeveloped privately held land to promote its use. Macroprudential measures have avoided high housing prices leading to excessive household debt and the BOI should continue to monitor developments closely.

Financial Sector Policies

Maintaining strong supervision is critical for the continued health of Israel’s financial system. The robustness of Israel’s banking system, which enabled it to come through the global financial crisis without public financial support, is underpinned by rigorous BOI supervision. While preserving these high standards, it is welcome that a more risk-focused supervisory approach is being adopted to lower compliance costs. The establishment of an independent Capital Markets, Insurance and Savings Authority is a notable step forward. It is also important to put the Solvency II framework into operation for the insurance sector in order to ensure its resilience to shocks and thus its capacity to meet commitments to clients. To improve coordination among regulators, especially the sharing of information, the legislation for the Financial Stability Committee needs to be enacted.

The Israeli authorities are taking a range of measures to promote the efficiency of the financial sector in delivering services to firms and households. A banking ID card is available to improve information for customers. A credit register is in development, which will broaden access to credit and help lenders compete. Policies to enable electronic banking have been established, access to the payment systems has been expanded and scope for sharing IT infrastructure has been increased. Banks are also scaling back branch and staffing costs, aided by temporary relief in capital requirements. To promote competition, credit card companies will be separated from the two largest banks, while keeping them under BOI supervision given their importance for the payments system. Enacting the securitization legislation is important to facilitate the funding of these companies.

Further strengthening the financial stability framework while reducing regulatory uncertainty is needed to fully realize the benefits of greater competition. A more contestable banking market increases the need for deposit insurance with appropriate coverage limits, together with enhanced bank resolution tools, to protect stability and contain potential costs. Hence, both of these instruments should be established before lowering minimum capital requirements for bank entry. More broadly, in the wake of major decisions on financial sector reform, it is important to safeguard the operational independence of each financial regulator from political pressures, including to ensure that potential new entrants are not deterred by uncertainty about future regulatory arrangements.

Fiscal Policy

Israel extended its record of reducing public debt in 2016. The central government deficit came in at 2.1% of GDP, well below the 2.9% target, as spending was kept within budget and revenues exceeded projections, partly owing to exceptionally high vehicle sales. General government debt declined by almost 2% to 62% of GDP thanks to the low deficit, strong nominal GDP growth, and significant non-debt financing.

However, despite Israel’s solid economic prospects, the two-year budget for 2017–18 allows higher deficits and gradually rising debt. Central government deficit targets for both 2017 and 2018 were raised to 2.9% of GDP, from 2½ and 2¼% respectively. Some of the new spending measures contained in the budget are welcome, yet investment rises little. In practice, the deficit is likely to be about 2¾% of GDP in 2017/8 given prudent revenue projections and firm spending control. On existing commitments, deficits of about 3% of GDP can be expected in later years. The debt ratio is therefore projected to rise 1½% in the next five years, to a level that exceeds the advanced economy median.

Fiscal policy should be doing more to support Israel’s growth potential. Reforms of education and vocational training, supported by additional resources, could narrow the wide gaps in educational outcomes, bolster the skills of those already in work and help Arab women and Haredi men enter the work force. Prospects for rising road congestion threaten productivity. Timely implementation of current public transportation projects is needed, and higher than planned investment appears advisable. Healthcare services are achieving good results, yet queues are much longer for public services, making recent steps to contain pressures on resources from private insurers appropriate, even at some budgetary cost.

Funding these essential public investments in human and physical capital while protecting Israel’s fiscal buffers will require a balanced approach. Defense spending accounts for a substantial share of public expenditure (6% of GDP, 20% of central government spending), making it important during peacetime to adhere to the multi-year defense budget to contain this spending in a durable manner. Additional savings can be achieved by raising the efficiency of central government administration and by further improving public procurement. Revenues can be significantly enhanced by scaling back tax benefits (which total 5% of GDP), replacing blanket VAT exemptions with targeted transfers, and through planned steps to enhance revenue administration.

Altogether, fiscal policy should aim to keep the deficit around 2% of GDP on average over the cycle. A central government deficit on this scale (equivalent to 3% of GDP for general government on a Government Finance Statistics basis) would generate a gradual debt decline in normal times, rebuilding fiscal space after recessions result in higher deficits and debt through the automatic stabilizers. Nonetheless, if structural reforms with clear benefits for potential growth are adopted, a deficit that is somewhat higher could be appropriate temporarily if needed to accommodate upfront reform costs. Current macroeconomic conditions support making the modest adjustment needed to reach a 2% target in the coming years. Indeed, if the deficit is below target in 2017, the authorities should seek to lock in that over performance by not cutting taxes or raising spending without offsetting measures.

Important improvements in the medium-term fiscal framework have been made, but political commitment is key to its effectiveness. Enhanced commitment controls (the Numerator rule) improve prospects to contain spending trends. To embed this change, it will be critical for the government to observe this rule in the next few years. The recently adopted expenditure review procedure will ensure that streamlining programs for 2017/8 are implemented and help identify future budget savings. However, the medium-term budget framework remains susceptible to deviations from the fiscal rules. Including concrete measures in the budget document to close such deviations would enhance their credibility. The government should also set clear criteria for that limit changes in the spending and deficit ceilings to exceptional cases such as natural disasters.

Structural Reforms

Inclusiveness is central to sustaining strong growth in Israel. Together Haredi and Arab Israelis make up 26% of the population, but 43% of primary school children, so they play an increasingly important role in shaping Israel’s future. Great strides have been made in broadening employment, especially by Haredi women, yet much room remains to benefit from higher labor participation by Haredi men and Arab- Israeli women. Low average wages for these groups reflect education and skills gaps that, together with inefficiencies in sectors sheltered from international competition, leave Israel with much scope to lift labor productivity closer to the levels of leading advanced economies over time.

Product market reforms are needed to increase competition, boost productivity, and reduce living costs. Regulation should be reviewed and modernized to achieve public policy goals in a low-cost manner. Simple and timely administration of regulations, such as a “one-stop shop,” is critical for the ease of doing business. State enterprise reforms would help reduce costs felt across the economy, with action in the electricity sector key to helping Israel make efficient use of its natural gas resources. Barriers to external competition should be lowered by expanding the coverage of quota increases and tariff cuts, especially on food, with targeted subsidies to support agriculture. Moreover, import procedures should be simplified, Israeli standards aligned with those in other advanced economies, and restrictions that hinder foreign competition in services eased.

Reducing participation and productivity gaps calls for a range of efforts supported by increased resources:

Skills: Innovative programs to enhance the motivation and ability of Haredi men and Arab-Israeli women to gain employment are being introduced with promising results. Over time the resources allocated to these programs (currently only 0.2% of GDP) should be expanded. Close coordination with employers is especially important to ensure the effectiveness of this spending.

Jobs: More jobs are needed in, or close to, Haredi and Israeli-Arab communities. Investments in connecting their towns to main roads need to be increased, alongside improvements in access to public transport. Other supports for local business development, including access to financing, are also needed.

Strengthening progress toward goals for poverty reduction also requires additional support for the working poor. The minimum wage has risen significantly in recent years, to reach about 51% of average wages, which is among the highest by international standards. The priority now, is to substantially increase the Earned Income Tax Credit (EITC), which currently averages just 7% of the minimum wage, at a total fiscal cost of only 0.1% of GDP. Eligibility for the EITC should be expanded, including by lowering the minimum earnings threshold. These steps would give families greater capacity to support the education and health of their children, while reinforcing incentives to work. (IMF 08.02)

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11.2 ISRAEL: Dispelling the Myth That Israel is the Largest Beneficiary of US Military Aid

Executive Summary: Many American detractors of Israel begin by citing that Israel receives the lion’s share of US military aid. The very suggestion conjures the demon of an all-powerful Israel lobby that has turned the US Congress into its pawn. But these figures, while reflecting official direct US military aid, are almost meaningless in comparison to the real costs and benefits of US military aid – above all, American boots on the ground. In reality, Israel receives only a small fraction of American military aid, and most of that was spent in the US to the benefit of the American economy.

On 10 February, Prof. Hillel Frisch wrote in BESA Center Perspectives that countless articles discrediting Israel (as well as many other better-intentioned articles) ask how it is that a country as small as Israel receives the bulk of US military aid. Israel receives 55%, or $3.1 billion per year, followed by Egypt, which receives 23%. This largesse comes at the expense, so it is claimed, of other equal or more important allies, such as Germany, Japan and South Korea. The complaint conjures the specter of an all-powerful Israel lobby that has turned the US Congress into its pawn.

The response to the charge is simple: Israel is not even a major beneficiary of American military aid. The numerical figure reflects official direct US military aid, but is almost meaningless compared to the real costs and benefits of US military aid – which include, above all, American boots on the ground in the host states.

There are 150,500 American troops stationed in seventy countries around the globe. This costs the American taxpayer an annual $85-100 billion, according to David Vine, a professor at American University and author of a book on the subject. In other words, 800-1,000 American soldiers stationed abroad represent $565-665 million of aid to the country in which they are located.

Once the real costs are calculated, the largest aid recipient is revealed to be Japan, where 48,828 US military personnel are stationed. This translates into a US military aid package of over $27 billion (calculated according to Vine’s lower estimation). Germany, with 37,704 US troops on its soil, receives aid equivalent to around $21 billion; South Korea, with 27,553 US troops, receives over $15 billion; and Italy receives at least $6 billion.

If Vine’s estimate is correct, Japan’s US military aid package is nine times larger than that of Israel, Germany’s is seven times larger, and Italy’s is twice as large. The multipliers are even greater for Egypt. Even the Lilliputian Gulf states, Kuwait and Bahrain, whose American bases are home to over 5,000 US military personnel apiece, receive military aid almost equal to what Israel receives.

Yet even these figures grossly underestimate the total costs of US aid to its allies. The cost of maintaining troops abroad does not reflect the considerable expense, deeply buried in classified US military expenditure figures, of numerous US air and sea patrols. Nor does it reflect the high cost of joint ground, air, and maritime exercises with host countries (events only grudgingly acknowledged on NATO’s official site).

US air and naval forces constantly patrol the North, Baltic and China Seas to protect American allies in Europe and in the Pacific – at American expense. Glimpses of the scale of these operations are afforded by incidents like the shadowing of a Russian ship in the Baltics, near run-ins between Chinese Coast Guard ships and US Navy ships dispatched to challenge Chinese claims in the South China Sea, and near collisions between US Air Force planes and their Chinese counterparts in the same area.

In striking contrast, no US plane has ever flown to protect Israel’s airspace. No US Navy ship patrols to protect Israel’s coast. Most importantly, no US military personnel are put at risk to ensure Israel’s safety.

In Japan, South Korea, Germany, Kuwait, Qatar, the Baltic states, Poland and elsewhere, US troops are a vulnerable trip-wire. It is hoped that their presence will deter attack, but there is never any assurance that an attack will not take place. Should such an attack occur, it will no doubt cost American lives.

This cannot happen in Israel, which defends its own turf with its own troops. There is no danger that in Israel, the US might find itself embroiled in wars like those it waged in Iraq and Afghanistan at a cost of $4 trillion, according to Linda J. Bilmes, a public policy professor and Harvard University researcher.

Japan’s presence at the top of the list of US military aid recipients is both understandable and debatable. It is understandable because Japan is critical to US national security in terms of maintaining freedom of the seas and containing a rising China. It is debatable because Japan is a rich country that ought to pay for the US troops stationed within it – or in lieu of that, to significantly strengthen its own army. At present, the Japanese army numbers close to 250,000, but it is facing the rapidly expanding military power of its main adversary, China. A similar case can be made with regard to Germany, both in terms of its wealth and its contribution towards meeting the Russian threat.

What is incomprehensible is not why Israel receives so much US military aid, but why Japan has received nine times more aid than Israel does. This is a curious proportion given the relative power Israel possesses in the Middle East and its potential to advance vital US security interests in times of crisis, compared to the force maintained by Japan relative to China.

Ever since the Turkish parliament’s decision in March 2003 not to join the US-led coalition, and the Turkish government’s refusal to allow movement of American troops across its borders, Israel has been America’s sole ally between Cyprus and India with a strategic air force and (albeit small) rapid force deployment capabilities to counter major threats to vital US interests.

It takes little imagination to envision these potential threats. Iran might decide to occupy Bahrain, which has a Shiite majority seriously at odds with the ruling Sunni monarchy. It might take over the United Arab Emirates, which plays a major role in the air offensive against the Houthis, Iran’s proxies in the war in Yemen. There might be a combined Syrian and Iraqi bid to destabilize Sunni Jordan, in the event that both states subdue their Sunni rebels. Any of these moves would threaten vital energy supplies to the US and its allies. Only Israel can be depended upon completely to provide bases and utilities for a US response and to participate in the effort if needed.

The politicians, pundits and IR scholars who attack Israel and the Israeli lobby for extracting the lion’s share of US military aid from a gullible Congress know full well that this is not true. Israel receives a small fraction of the real outlays of military aid the US indirectly gives its allies and other countries. These experts also know that 74% of military aid to Israel was spent on American arms, equipment, and services. Under the recently signed Memorandum of Understanding, that figure will be changed to 100%. The experts simply cite the wrong figures.

The US is now led by a businessman president who knows his dollars and cents. He has been adamant about the need to curb free-riding by the large recipients of real US aid. He will, one hopes, appreciate the security bargain the US has with Israel – a country that not only shares many common values with the US, but can make a meaningful contribution to American vital interests with no trip-wires attached. (BESA 10.02)

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11.3 LEBANON: Grasping a Golden Opportunity for a Macroeconomic Uplift

Bank Audi observed on 9 February that in 2016, the Lebanese economy did not get out of its state of sluggishness that characterized its performance during the past half a decade. Despite a continuously growing private consumption, economic sluggishness was mainly tied to a weak private investment component within the context of a wait and see attitude among investors delaying major investment decisions in the country. Mirroring the sound growth of private consumption offset by declining private investment, the analysis of Lebanon’s imports and that account for 36% of GDP suggests a rise of 5.2% in imports of non-oil consumption products in 2016 coupled with a stagnation in imports of investment products.

Strong rise in financial inflows, generating a noticeable surplus in the balance of payments

Lebanon’s foreign sector witnessed a significant improvement in activity in 2016, driven by a considerable 44% growth in financial inflows that led to a net surplus in the balance of payments of $1.2 billion for the first time since 2010. In fact, the second half of 2016 reported significant financial inflows mostly driven by the financial engineering operations of the Central Bank.

Significant rise in public finance deficit with a growing indebtedness ratio

Lebanon’s fiscal performance reported a net deterioration in the first eight months of 2016, amidst a faster growth in expenditures (9.5%) relative to that of public revenues (4.1%), as suggested by the most recent figures released by Lebanon’s Ministry of Finance. In fact, Lebanon’s public finance deficit rose by 27% from $2.0 billion in the first eight months of 2015 to $2.5 billion in the first eight months of 2016. The rising fiscal deficit was financed by additional indebtedness. As a percentage of GDP, government debt rose from 138.4% in December 2015 to 142.8% in November 2016.

Noticeable money creation on the back of strong financial inflows following BDL’s swaps

Lebanon’s monetary conditions benefited in 2016 from improved sentiment on the back of domestic political settlement and the Central Bank of Lebanon’s financial engineering operations in the second half of the year, which reinforced BDL’s foreign assets to reach a new historical high level, and contributed to a strong money creation over the year.

Strong banking activity growth amidst BDL financial engineering operations

Lebanon’s banking sector witnessed a vigorous activity growth over the course of the elapsed year, driven by strong deposit growth amidst a surge in financial inflows following the BDL financial engineering operations in the second half of the year. Measured by total assets of banks operating in the country, banking activity grew by 9.9% in 2016 to reach $204.3 billion at year-end. The growth in volume proved 78% higher than the one registered during the previous year and 61% higher than the rise seen on average in the last five years.

Improved capital markets sentiment following domestic political settlement

Lebanon’s capital markets ended the year 2016 with mild equity price gains, mainly supported by the overall domestic political settlement in the last quarter of the year that solved the Presidential conundrum and led to the formation of a national unity government. Yet, the Lebanese Eurobond market saw expansions in bond spreads year-on-year, despite improved investor sentiment, mainly due to local sales to internationals amid a tightening US$ liquidity in the banking system following BDL’s recent swap operation.

Lebanese economy set to rebound in 2017

Our macro forecasts for 2017 post-presidential elections and cabinet formation but with the persisting absence of a regional settlement, rest on a 4% real GDP growth for Lebanon (i.e. more than double the average it reported over the past 6 years, at 1.8%). This could be driven by a 15% growth in private investment and a 7% growth in private consumption within the context of an 18% growth in financial inflows towards Lebanon, benefitting banking activity at large. (Bank Audi 09.02)

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11.4 LEBANON: Is Lebanon on the Path to Decriminalizing Homosexuality?

Florence Massena posted in Al-Monitor on 13 February that education and awareness seem to be the solutions to creating a society and legal system that are more tolerant toward the LGBT community in Lebanon.

On 26 January, Lebanese judge Rabih Maalouf issued a court order stating that “homosexuality is a personal choice and not a punishable offense.” Maalouf is the fourth judge since 2009 to go against Article 534 of the Lebanese penal code, which states sexual acts that “contradict the laws of nature” are punishable by up to a year in prison.

In 2013, the Lebanese Psychiatric Society stated that homosexuality is not a mental disorder and does not need to be treated. In 2015, the society updated the statement, calling for the abolition of Article 534. “These are all small steps aiming to decriminalize homosexuality. This is not a victory,” Bertho Makso, a Lebanese activist from the nongovernmental organization Proud Lebanon, told Al-Monitor. “The real victory will be when Article 534 is changed or abolished. But now the priority is to educate people to avoid homosexuals’ persecution and make change happen.”

Makso said, “This ruling is very important because the judge used a different law about personal freedom not affecting society, adding that the duty of the court is to protect human rights and people’s dignity.” Maalouf referred to Article 183 of the penal code — which states: “An act undertaken in exercise of a right without abuse shall not be regarded as an offense” — and to the International Convention of Human Rights that Lebanon signed in 2006.

According to a source close to the Ministry of Justice, who spoke to Al-Monitor on condition of anonymity, “This ruling adopts a different position than the three previous rulings, whose judges had argued over the impossibility to define ‘nature’ to rule out criminalization by Article 534.”

He added, “I am convinced of this last approach because it brings same-sex conduct out of this text by using logic. Plus, the Lebanese law cannot be opposed to international conventions, having more power than the penal code.”

But he is not optimistic in regard to the amendment or abolition of Article 534. “I really doubt this law can be abolished because of the composition of the Lebanese parliament,” he said. “They are very inspired by religious texts and the Quran says, for example, that homosexuality is a sin and it shouldn’t be talked about publicly. It is a real barrier for LGBT [lesbian, gay, bisexual and transgender] freedom. The only good thing is that most judges — even conservative ones — no longer use jail time as a punishment for homosexuality. Usually it is a fine they have to pay when they are released. The judicial trend in Lebanon is not to be too harsh, but the problem is in the detention part, where LGBT people are often subjected to humiliation and sometimes even torture by the Internal Security Forces [ISF].”

The ISF was in fact using anal examinations on people suspected of same-sex relations, which Human Rights Watch denounced in a 2012 report, saying that “Lebanese public prosecutors often order invasive and abusive, anal examination procedures for men suspected of homosexual sex.”

The same year, the Lebanese Order of Physicians banned doctors from carrying out the “egg tests” — whereby a metal egg-shaped object is inserted into the rectum — on suspected homosexuals as it is related to torture, according to the physicians’ order. Subsequently, a statement by the Ministry of Justice urged the country’s public prosecutor to ban the tests. “The police have threatened people with this test since 2013, but they are no longer subjecting people to it,” Makso said. “Now they use other techniques available to prove that someone is homosexual — by checking his cellphone’s applications, contacts and pictures on social media. Still, members of the LGBT community are proved to be arbitrarily detained and tortured, even psychologically.”

Nasser, whose name has been changed at his request, told Al-Monitor, “As a gay man in Lebanon, I have absolutely no complaints. I get a free pass, like most other gay men before me.” He said, “The dividing lines are ‘women versus men,’ ‘cis versus trans’ and ‘rich versus poor’ — not urban and rural. Gay and trans women and men have it harder than cis gay men. Gay men can take a seat and stop playing victims.” For Nasser, the best way to change the situation for good is “more rights over one’s own body and personal rights’ awareness being discussed in schools in order to make a real political and attitude change in the long term.”

In regard to educating the public on the issue, Makso said, “We will continue leading small fights, but again we have to work on society — maybe with the public support of famous figures and in collaboration with the media.” Education and awareness seem to be the only solutions to create a more tolerant society and legal system toward LGBT people in Lebanon, with small victories like the Jan. 26 court order. (Al-Monitor 13.02)

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11.5 JORDAN: Why the King’s Visit to Washington Was Essential for Jordan

Osama Al Sharif posted in Al-Monitor on 7 February that King Abdullah’s visit to the United States, where he met with President Donald Trump, helped reassure Jordanians that US military and economic support for the kingdom will continue.

Jordanians are feeling a certain sense of pride following King Abdullah’s recent visit to Washington, where he conferred with key administration and congressional officials and became the first Middle Eastern leader to meet with President Donald Trump. Although Abdullah’s 2 February meeting with Trump was brief, taking place on the sidelines of the annual National Prayer Breakfast, it covered an array of issues of particular importance to the Jordanian monarch and the region. The White House issued a statement in which it said that Trump had “conveyed the US’ commitment to Jordan’s stability, security and prosperity.” It added that the president had “highlighted Jordan’s critical contributions to defeating IS [Islamic State] and discussed the possibility of establishing safe zones in Syria.” In addition, it said, Trump “underscored that the United States is committed to strengthening the security and economic partnership with Jordan.” These expressions of commitment signaled the success of the royal visit in the eyes of the king and a majority of Jordanians.

A royal court statement quoted by the Jordan Times said the two leaders also discussed the Syrian crisis, reviving Israeli-Palestinian peace negotiations and ways to boost their strategic partnership and work jointly to combat terrorism. The newspaper also reported, “The two leaders agreed to hold a summit meeting during an official visit King Abdullah will make to the US soon.”

Local media praised the king’s diplomatic breakthrough and one commentator, Fahd al-Khitan, wrote 2 February in al-Ghad that Abdullah had fought a diplomatic battle in the US capital on behalf of all Arabs. He also noted that the Jordanian monarch had met the US president even before Israeli Prime Minister Benjamin Netanyahu had done so. A number of Amman dailies pointed to a 2 February New York Times article in which the authors credited Abdullah for a shift in Trump’s policy on the construction of new Jewish settlements in the Palestinian territories.

In regard to the settlements, on the day of the Abdullah-Trump meeting, the White House issued a statement described by some as a warning to Israel after announcements of new approvals for settlement construction on the West Bank, including in East Jerusalem. The statement read, “While we don’t believe the existence of settlements is an impediment to peace, the construction of new settlements or the expansion of existing settlements beyond their current borders may not be helpful in achieving that goal.”

Trump’s surprising position on one of the most controversial issues impeding the resumption of peace talks between Israel and the Palestinians was hailed by local observers as an important outcome of the king’s visit. In fact, during his five days in Washington, Abdullah did not shy away from highlighting the risks in carrying out Trump’s election promise to relocate the US Embassy from Tel Aviv to Jerusalem. A regular visitor to the US Capitol, Abdullah maintains good relations with senators and representatives on both sides of the aisle and met with chairs and members of various congressional committees on 31 January. According to a royal court statement, “The king warned that moving the US Embassy to Jerusalem will have regional consequences that will diminish the opportunity for peace and reaching the two-state solution. It may also weaken the chances for a successful war on terror.”

Although diplomatically unusual, Abdullah’s working visit to Washington only a few days after Trump’s inauguration was politically essential for Jordan. The king, who will host the annual Arab summit 29 March, wanted to convey Arab concerns about key regional issues — such as Syria, the Israeli-Palestinian peace process, terrorism, instability in Iraq and other matters — before the new administration develops policy on them. Probably even more of a priority was Abdullah’s desire to receive assurances that Jordan’s strategic military and economic relationships with the United States will remain unchanged or perhaps be increased, which he did.

Jordan relies heavily on US economic and military assistance, which was boosted under the Barack Obama administration and in 2016 totaled $1.6 billion. The presence of more than 1.2 million Syrians in the kingdom (including more than 650,000 registered refugees), the war in Syria, the closure of the Jordanian border with Iraq and a decline in aid from Gulf states have exacerbated economic conditions in Jordan. In particular, 2017 will prove to be a difficult year for Jordanians as the government seeks to raise $643 million in additional taxes and tariffs.

Another issue Abdullah underscored during his visit was Jordan’s pivotal role in fighting IS, which presents a threat to the kingdom through its presence in southern Syria, close to Jordan’s borders, as well as internally. He raised the topic in a meeting with Vice President Mike Pence on 30 January and according to a royal statement, “The King emphasized that Muslims are [the] No. 1 victims of the outlaws of Islam, the Khawarej, who pose a global problem and do not represent any faith or nationality and target all of us who do not subscribe to their ideology of hate.” His defense of moderate Islam was important in the wake of Trump’s controversial 27 January executive order banning entry into the United States by visitors from seven majority-Muslim countries.

Amman joined the US-led anti-IS coalition in fall 2014 and paid a heavy price when the terrorist group burned alive a captured Jordanian pilot whose plane had been shot down over Raqqa in December 2014. Although not much has been said about Jordan’s military operations against the organization in recent months, the Jordan Times reported the Jordanian armed forces as having disclosed on 4 February that its jets had destroyed various IS targets in southern Syria. This latest operation indicated Jordan’s readiness to launch preemptive raids against IS targets not far from its borders, something that the Trump administration, which has put the defeat of IS among its top foreign policy objectives, apparently supports.

Political commentator Oraib al-Rantawi told Al-Monitor that it was important for Abdullah to hear Trump’s and other top US officials’ views concerning the Syrian crisis, especially in regard to developments on the southern front and the president’s desire to establish safe zones inside Syria. The king had met with Russian President Vladimir Putin in Moscow on 25 January and praised Russia’s role in trying to resolve the Syrian crisis and in fighting terrorism. “The king has managed to maintain good relations with both Moscow and Washington and followed a policy that safeguarded Jordanian interests away from regional polarizations,” Rantawi said.

In the eyes of former Prime Minister Taher al-Masri, the royal visit represented a triumph of Jordanian diplomacy. “The king managed to secure our national interests in this volatile and complex region,” Masri remarked. He told Al-Monitor that while Trump’s official position on Israeli settlements and Jerusalem remain in question, the king was able to influence the new US administration on these sensitive issues. “We hope the fruits of this visit will materialize soon and will spare this region further suffering,” said Masri. (Al-Monitor 07.02)

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11.6 BAHRAIN: Fitch Affirms Bahrain at ‘BB+’; Outlook Stable

On 15 February Fitch Ratings affirmed Bahrain’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BB+’ with a Stable Outlook. The Country Ceiling has been affirmed at ‘BBB+’ and the Short-Term Foreign and Local Currency IDRs at ‘B’. The issue ratings on Bahrain’s senior unsecured foreign and local currency long-term bonds have been affirmed at ‘BB+’. The ratings on the sukuk trust certificates issued by CBB International Sukuk Company 5 have also been affirmed at ‘BB+’. The issue ratings on Bahrain’s senior unsecured local currency short-term bonds have been affirmed at ‘B’.

Key Rating Drivers

Bahrain’s ratings are supported by high GDP per capita and human development indicators (relative to the BB median), a developed financial sector and the boost to external financing flexibility from strong GCC support. The strengths are balanced by double-digit fiscal deficits, high and rising debt, a highly oil-dependent government budget and domestic political tensions that hamper fiscal adjustment.

Fitch expects the fiscal deficit to fall only moderately to 12.3% of GDP in 2017 (assuming Brent averages $45/bbl), from an estimated 13.6% of GDP in 2016 and 15.4% of GDP in 2015. The estimated fiscal breakeven Brent oil price of $84/bbl for 2017 is well above expected oil prices in the medium term. Continued deficits will push debt to 84% of GDP in 2018 from 75% of GDP in 2016 (well in excess of the BB median of 51% of GDP). Fitch’s deficit numbers include estimated extra-budgetary spending of 2.6% of GDP, and the 2016 fiscal outturns are still preliminary.

Subsidy reform, spending restraint and growing non-oil revenue underpin the adjustment effort. Gradual increases in domestic gas and fuel prices partly offset the negative effect of oil price weakness on hydrocarbon revenue, which Fitch expects to rise 13.4% in 2017 after a fall of only 10% in 2016. Fitch expects spending to grow at a rate below non-oil GDP growth, after a broad-based cut of 8.2% in 2016. The biggest spending cuts were to subsidies and transfers (24%, reflecting the start of utility price reforms), and capital spending (31%). Notably, the nominal wage bill also fell (by 3.1%), for the first time in recent history. The government is increasing non-hydrocarbon revenue by adjusting various fees. Our forecast has it rising by 14.4% in 2017 after 5.8% in 2016. These measures will continue in 2018, supplemented by the introduction of VAT.

Bahrain will finance its deficits through a mixture of foreign and local debt. In our forecast, the government’s foreign borrowing reaches roughly $3.2b in 2017 and $2.2b in 2018, after $2.9b in 2016. Fitch assumes domestic borrowing will be less than a third of these amounts, in line with 2016. A debt management strategy is still in the early stages of development, but the government wishes to limit domestic borrowing.

The government would have recourse to other means of financing in a stress scenario. Its deposits in domestic banks (around 14.2% of GDP in 2016) mostly reflect the assets of the Social Insurance Organisation, which could increase its holdings of government debt. Government-owned Mumtalakat Holding Company has an illiquid portfolio of mostly domestic assets with a balance sheet value of around 30% of GDP.

Fitch expects GDP growth of 2.4% in 2017-2018. This reflects constant hydrocarbon volumes (after a fall in 2016) and a moderation of non-hydrocarbon growth to 3% from an estimated 3.4% in 2016. Spending on projects financed by the $7.5b GCC development fund provides crucial support to growth amid government retrenchment. $3.9b of projects had been awarded to contractors as at end-2016 up from $1.1b at end-2015. Growth is also supported by state-owned enterprise projects (in oil, gas, and aluminum).

Banks are well placed to extend more credit to the economy and the government, enjoying profitability, high levels of capitalization and liquidity, and low nonperforming loan levels. Higher policy rates and yields on government bonds have not yet translated into significantly higher private sector borrowing costs. Fitch expects credit to the private sector to expand by 4%-5% per year in 2017-18, from an estimated 3.5% in 2016.

The GCC development fund reflects the broader support that Bahrain enjoys from some GCC countries, particularly Saudi Arabia and Kuwait. Bahrain gets most of its oil from the Abu Sa’afa field shared with Saudi Arabia (it is entitled to 50% of production, but has sometimes received significantly more as a form of support). In Fitch’s view, further material support from the GCC would be forthcoming in case of extreme political, financial or fiscal instability, given Bahrain’s small size and strategic importance. The expectation of such support has supported Bahrain’s market access and US dollar peg despite a low level of foreign exchange reserves, which had fallen to an estimated 1.2 months of current external payments at the end of 2016.

Tensions continue between the Sunni-led government and the predominantly Shia opposition. Sporadic violence appears to have intensified in H2/16 after Al Wefaq, the main opposition group, was dissolved on charges of harboring terrorism. In Fitch’s view, social pressures and the lack of a sustainable political solution hamper implementation of the fiscal reforms necessary to tackle the worsening debt trajectory.

Rating Sensitivities

The main factors that could lead to negative rating action are:

– Failure to reduce the fiscal deficit leading to a sharper than expected rise in the debt-to-GDP ratio.

– Severe deterioration of the domestic security situation.

The main factors that could lead to positive rating action are:

– A reduction in the budget deficit consistent with a decline of the government debt-to-GDP ratio in the medium term.

– A broadly accepted political solution to domestic political tensions.

Key Assumptions

-Fitch assumes that Brent crude will average $45/bbl in 2017 and $55/bbl in 2018.
-Fitch assumes no change to the rule of the royal family.
-Fitch assumes that regional conflicts will not directly impact Bahrain or its ability to trade.
-Fitch assumes no change to the peg of the Bahraini dinar to the US dollar. (Fitch 15.02)

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11.7 EGYPT: New Cabinet Members Sworn in After Tough Search

Ahmed Aleem posted on 16 February 2017 in Al-Monitor that Egypt faced a lot of rejections before it was able to field nine new Cabinet members.

After months of discussion and after numerous candidates declined to serve, Egypt has nine new Cabinet members and two fewer ministries. Parliament unanimously approved the nominees 14 February and President Abdel Fattah al-Sisi swore in the ministers 16 February.

The International Cooperation Ministry and the Investment Ministry were merged and will be headed by Sahar Nasr. The embattled Supply Ministry was merged with the Trade and Industry Ministry; Ali al-Moselhy will head the new Supply and Trade Ministry.

The government of Prime Minister Sharif Ismail has been widely criticized in the media, so much so that Sisi had announced on 16 January during a meeting with the editors-in-chief of national newspapers, that the reshuffle was imminent. “We will fix what needs to be fixed and improve performance,” Sisi said.

Securing new Cabinet members was a lengthy and difficult task. Ismail told Middle East News Agency on 19 January that many potential Cabinet candidates had declined to serve, especially in some much-criticized ministries. That reluctance coincided with reports indicating high corruption rates in some service ministries, particularly the Supply Ministry and the Health Ministry, during the past six months. A fact-finding committee formed by parliament to investigate corruption in the Supply Ministry issued a report in August that estimated state budget losses from a wheat scandal at EGP 1 billion ($60.6 million).

Parliamentary sources told Innfrad news website that a number of candidates for education minister also declined that post, in light of the large number of tasks entrusted to this ministry and the recent scandals it is facing, such as ones involving leaked exams and a textbook shortage.

Ikram Badr al-Din, a political science professor at Cairo University, told Al-Monitor, “Some candidates are refusing the ministerial portfolio when it comes to service ministries, since these positions are exposed to harsh criticism … by the public.” He explained that a minister in most cases lacks sufficient power, and whenever there is a shortcoming in any of the services provided to the citizens, the media launches a severe attack on that minister. “This scared off numerous candidates,” he said.

“The service ministries are the most rejected ones [by candidates], given their nature and their direct relation to citizens’ living requirements. These ministries are associated with crises such as rising prices [of food and other supplies] in November and the Supply Ministry’s role in this crisis. A crisis also erupted between pharmacists and the Health Ministry due to the rising price of medicines,” he said. “In most cases, the ministers were blamed and held solely accountable for these crises” by the public and the media.

Gamal Shiha, chairman of parliament’s Education Committee, told Al-Monitor, “The rejection of service ministries is not something new, especially in recently years. Many ministers have had different reasons to decline these positions, such as avoiding criticism, low salaries or personal reasons. Therefore, it is difficult to have a clear idea on the reasons behind this.”

Rafaat al-Saeed, chairman of the advisory board of the National Progressive Unionist Party (Tagamoa), suggested another reason it might be difficult to fill some posts: The terms tend to be short. The Cabinet was reshuffled in March 2016, just months after the government was formed in September 2015. “From 2011 until today, there have been about 425 ministers who took office and then resigned. Anyway, the current government is not expected to last long, even after these latest Cabinet reshuffles, especially since a minister would remain in his post for an average of about six months only. This instability in this position makes any candidate reluctant to accept it,” Saeed said. He also cited the amount of criticism that can come with the posts.

“Ministers are afraid to address or confront people’s demands, especially with regard to some basic services. Service ministries are being attacked and criticized by some television channels, which makes things even more complicated,” he added.

In the same vein, Gamal Zahran, head of the political science department at Port Said University, told Al-Monitor, “Some candidates are declining ministerial positions because of the government’s performance in the last period.” Egypt is in the middle of an economic crisis, and its youths face an unemployment rate of more than 30%.

Some parliamentarians have complained because Health Minister Ahmed Emad el-Din Rady retained his post. Sources close to Tahrir news said Rady remained in his position because several university professors and prominent physicians declined offers for the job. During the parliament session, Ismail said that “around 15 or 16 candidates” had declined the position. Some candidates expressed concern about facing criticism, while others said they were concerned about handling confidential dossiers related to the ministry’s work. (Al-Monitor 16.02)

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11.8 TUNISIA: IMF Statement on Tunisia

On 7 February, the IMF announced that Mr. Bjorn Rother, IMF mission chief to Tunisia, made the following statement at the end of a staff visit to discuss the economic outlook and the authorities’ policy intentions under Tunisia’s economic reform program supported by a four-year IMF Extended Fund Facility (EFF) arrangement approved in May 2016:

“The Tunisian economy has remained resilient in a difficult domestic and international environment. Growth is expected to pick up to 2.5% in 2017 from 1.3% in 2016, supported by improved confidence following the successful “Tunisia 2020” conference in November and the adoption of crucial private-sector legislation.

“Significant macroeconomic challenges persist. Public debt has continued to increase, reaching more than 60% of GDP in 2016. Measures taken by the authorities in the 2017 budget law will reduce the overall fiscal deficit modestly to 5.6% of GDP from an estimated 6% in 2016, higher than the initial target under the EFF due to lower growth and fiscal policy slippages. The public wage bill as a share of GDP is among the highest in the world, and the external current account deficit remains elevated.

“The IMF team and the government agree that urgent action is necessary to protect the health of public finances, increase public investment, and accelerate progress with delayed structural reforms. The authorities have outlined their near-term priorities to include mobilizing more tax revenue in a fair and efficient way, rationalizing the public-sector wage bill to create more space for public investment, and implementing the fuel-price adjustment mechanism. Putting the social security system on a sustainable basis is another important priority. These measures are critical to move the Tunisian economy towards higher growth and more jobs, and to ensure that Tunisians continue to benefit from adequate basic services.

“The team welcomes the government’s resolve to move ahead with modernizing the civil service. Efforts are also ongoing to ensure the health of public banks and state-owned enterprises, establish an independent, high anti-corruption authority, and implement effective safety nets for the most vulnerable groups in society.

“The team had constructive discussions with the Head of Government Chahed, Minister of Finance Zribi, Minister of Investment Abdelkefi, Minister of Public Service Briki, and Central Bank Governor Ayari as well as their staff and will remain engaged in a close policy dialogue on reducing fiscal and external imbalances and reinvigorating structural reforms.” (IMF 07.02)

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11.9 TUNISIA: New Tunisian Electoral Law Raises Issue of Military’s Role in Politics

Ahmed Nadhif posted on 16 February in Al-Monitor that the Tunisian parliament approved a new law on municipal elections, which granted military and security members the right to vote and raised concerns that the decision threatens the institutions’ neutrality.

On 2 February, the Tunisian parliament approved a law related to local and municipal elections, granting members of the security and military institutions the right to vote for the first time in the country’s history. This precedent sparked controversy in Tunisia, as some people believe that military officers should enjoy the right to vote, just like their fellow citizens, while others believe that passing such a law will jeopardize the impartiality of the military institution and will involve it in political affairs.

After years of complete neutrality in political and electoral life, Tunisian soldiers, officers and security members will cast their votes in the upcoming municipal and local elections. Chapter 6 of the new local electoral law states that “military and security officers are allowed to vote in local and municipal elections only.” But this law contradicts Article 18 of the Tunisian Constitution, which states, “The national army is a republican army charged with the responsibility to defend the nation, its independence and its territorial integrity. It is required to remain completely impartial.”

The law also contradicts Article 19 of the constitution, which states, “The national security forces are responsible for maintaining security and public order … with complete impartiality.”

In this context, Sami bin Salameh, a former member of the Independent Higher Authority for Elections in Tunisia, told Al-Monitor, “Security and military officers, as well as members of the armed forces, are special citizens. For that reason, we must always adapt their rights as citizens to the respect of principles related to security and military life, hence discipline, loyalty, neutrality and readiness to serve. Granting them the right to vote in elections — even if only municipal — is a dangerous process that could affect these four principles, interfere with their work and involve them in the political arena in spite of themselves. After all, Tunisia is still living an incomplete transitional phase plagued by difficulties and violation attempts from parties.”

The military institution has yet to issue a comment on the law, as its members are quite reserved and do not disclose their opinions to the media. Salemeh pointed out the security hazards of granting security and military officers the right to vote, saying, “Their votes will reveal their political and ideological affiliations, in addition to disclosing their identities and where they are based due to their registration on electoral lists.”

Tunisia has been the stage of several terrorist operations since 2011, some committed by jihadi groups affiliated with al-Qaeda such as Uqba Bin Nafi Battalion and others by groups pledging allegiance to the Islamic State. These terrorist acts have claimed the lives of more than 220 security officers and soldiers and 98 civilians, as per a survey conducted by local website Inkyfada. The latest of such attacks targeted a military vehicle in Jebel Samama, in the west of the country and killed three soldiers in August 2016.

Political analyst and journalist Abdel Sattar al-Aidi told Al-Monitor, “Granting security and military officers the right to vote in local and municipal elections only — rather than in legislative and presidential elections — constitutes a good test for their discipline and commitment to complete neutrality in politics. At the same time, it allows them to enjoy their right of citizenship, especially given that the constitution affirms total and indiscriminate equality — including professional indiscrimination — between citizens and guarantees all Tunisians the right to vote.”

Aidi added, “The assessment of the upcoming municipal elections will be important and useful. If the country finds it difficult to maintain the military and security institutions’ neutrality after granting their members the right to vote, the law will be amended and the article that allows them to vote will be annulled. You never know until you try. If need be, the new electoral law will be amended to suit the needs of society and the state.”

Fida Nasrallah, the director of the Carter Center in Tunisia, which had specialized in electoral monitoring, supervising the drafting process of the constitution and putting in place the elections’ legal framework, told Al-Monitor in a previous interview on 12 October, “Depriving them [military officers and internal security staff] of their right runs contrary to the international obligations of the Republic of Tunisia under the international covenant of the United Nations on civil and political rights. In addition, it is contrary to Article 21 and Article 34 of the Tunisian Constitution.”

Nasrallah said in the same interview, “The fear that the army will not remain neutral and that the vote may be manipulated is an obsession shared by many countries. But these concerns can be reduced by adopting certain measures, not by categorically denying the rights of the armed forces.” The Carter Center had urged the Tunisian parliament in a statement 28 September to grant the military and security forces the right to vote.

The Islamist Ennahda movement first objected to granting military and security officials the right to vote in elections, only to vote later in favor of the new law on 31 January. Apparently, Islamists are sensitive to the military institution, given its history in the region. In Egypt, for instance, former Muslim Brotherhood-affiliated President Mohammed Morsi was toppled by his defense minister, Abdel Fattah al-Sisi, on 3 July 2013. In Turkey, a group of army officers spearheaded the failed coup attempt against Islamist President Erdogan on 15 July 2016.

When the electoral law deliberations took flight in September, former officers in the Tunisian army objected, saying this could potentially cause division in the security and army ranks. Meanwhile, secular parties, especially the Popular Front, which includes 11 parties; leftist, environmental and national groups; and the liberal Afek Tounes Party welcomed the law.

The upcoming elections will be the basis for deciding whether allowing the military and security officers to vote in municipal and local elections was the right thing to do. Still, the concerns of the opponents of this law are justified. Involving the security and military institutions in political life — even if for a good cause — might risk the future of a country still treading carefully toward democracy while fighting an open war against terrorist groups on its eastern borders with Libya and western borders with Algeria. But, at the same time, the upcoming elections will practically test the internal security and military institutions’ ability to maintain their discipline and respect for the neutrality principle stipulated by the constitution while practicing their right to vote. (Al-Monitor 16.02)

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11.10 MOROCCO: What’s on Morocco’s Agenda as it Rejoins the African Union?

Habibulah Mohamed Lamin posted on 10 February in Al-Monitor that Morocco wants to take advantage of its strong economic presence to gain political support in the Western Sahara dispute while becoming a hub for Western investments in the African continent.

Morocco is ready to raise its global stature, flexing its muscle before the world by joining the African Union (AU) and making clear what it can offer — or withhold — in the areas of finance and security.

The country’s investments, security and migration control will remain its power points with which to bargain for political support from the West, which in turn wants a greater presence in Africa.

Morocco wants to put to bed international friction over its decades long battle with the Polisario Front independence movement over disputed Western Sahara territory recognized by some countries as the Sahrawi Arab Democratic Republic (SADR). In fact, Morocco left the AU’s predecessor, the Organization of African Unity, in 1984 to protest the group’s admission of SADR.

But now Morocco is back.

On 31 January, Moroccan King Mohammed VI gave his first speech before the AU at a summit in Addis Ababa, Ethiopia, seeking to open a new relationship with the African bloc. Thirty-nine countries reportedly voted for Morocco’s return to the AU. Counting Morocco, 55 countries are now members of the union. The king has been touring eastern Africa during the past six months to gain support for his country’s AU bid, meeting with African leaders from Nigeria to Ethiopia to sign trade agreements.

Although Morocco has been out of the AU for decades, it maintains economic ties with other African countries. The king made that clear in his speech, emphasizing Morocco’s economic presence in the African continent. “Strong bilateral relations have thus been significantly developed: Since 2000, Morocco has signed nearly a thousand agreements with African countries, in various fields of cooperation,” he said.

Some 85% of Morocco’s foreign investments are in Africa, varying from banks and agriculture to car insurance. Morocco is also Africa’s third-largest exporter after South Africa and Egypt. According to African Development Bank President Akinwumi Adesina, Morocco “is one of the bank’s best-performing portfolios on the continent.”

However, Morocco’s lengthy absence from the highest decision-making body in Africa has left it without much political capital regarding the Western Sahara issue. Africa has a long history of decolonization, and the sensitivity of this particular matter has given the Sahrawi people’s right of self-determination a top priority on the AU agenda. Over the past three decades, the AU has been calling for a UN Security Council referendum on what is considered Africa’s last colony.

Issandr El Amrani is the Crisis Group’s North Africa project director, based in Rabat, Morocco’s capital. He believes there are two reasons Morocco insisted on becoming part of the AU. “First, Morocco has gained little political support on the Western Sahara question within the AU, so it wants to weigh in along with other West African ally states,” he said. “Second, Morocco wants to become the intersection point between the West and West Africa.” Amrani told Al-Monitor that Tanger Med Port in Morocco is considered one of Africa’s most important transshipment points, linking West Africa to the rest of the world, from Europe to North America to Asia.

Perhaps these goals explain the friendly tone of the Moroccan king’s speech, which was well-received and applauded by other African leaders. “It is so good to be back home, after having been away for too long! It is a good day when you can show your affection for your beloved home,” Mohammed said.

Previously, Morocco set the expulsion of SADR as a precondition for it to join the AU. Though that demand has been dropped for now, observers still see the new approach as simply a way for Morocco to get along with others while it develops its long-run plan. Academic and lecturer Patrick Delices, who specializes in African and Caribbean studies, told Al-Monitor, “The policy of Morocco remains the same regarding SADR, but its political approach is different, as it now elects to win over various member states within the AU in hopes of weakening the political influence of SADR, Algeria and South Africa on the continent of Africa.”

Nevertheless, SADR has had the upper hand within the AU for the past 30 years. Its allies — Algeria, South Africa and Nigeria — have been the major powers shaping the continent’s policies. Morocco has watched the developments closely, but has much less influence, so it is entering the union using a new strategy, rather than issuing demands. “By joining the AU, Morocco is planning to become a major economic and political player in Africa by capturing markets and by eroding and subverting the political influence of SADR and its Polisario Front,” Delices said.

Recently, SADR Foreign Minister Mohamed Salem Ould Salek said Morocco’s readmission to the AU constitutes “recognition” of SADR. Later, Moroccan Deputy Foreign Minister Nasser Bourita rejected his adversary’s statement in an interview with Le Desk to say that Morocco does not “and will never recognize … this so-called entity.” Beyond that, Bourita confirmed Delices’ assessment by adding that his country will “redouble its efforts” so African states that recognize SADR “change their position.”

The Moroccan king demonstrated that intention when he traveled to Juba immediately after the AU summit to meet South Sudan’s president, Salva Kiir Mayardit. During the early February state visit, Morocco agreed to fund a $5 million feasibility study on moving South Sudan’s capital from Juba to Ramciel. In 2011, South Sudan estimated the move would cost a total of $10 billion.

The youngest African state had previously recognized and pledged support for SADR. Some observers have alleged that the Moroccan king’s travels to South Sudan and other countries amount to a “bribery expedition” in which Morocco offers financial support to countries in exchange for their votes to revoke SADR’s membership in the AU. “Globally, Morocco does not want to be seen as a kingdom engaged in colonialism and the negativity associated with it — economic exploitation and political oppression. Morocco wants to be viewed favorably by Africa and the rest of the world, especially as Africa’s leading investor,” Delices told Al-Monitor.

Morocco is determined to establish stronger political and economic ties with African and European countries, but its return to the AU comes as the Western Sahara cause is becoming more visible in the European Union.

The EU Court of Justice recently decided to separate Western Sahara imports from EU-Moroccan trade agreements. Though it wasn’t clear why that move would endanger Morocco’s agreements, Morocco threatened to end economic cooperation with the EU unless a farm deal is renewed. Morocco’s state news agency, MAP, reported in an official statement that there would be “further repercussions” on the EU if the agreement isn’t extended.

Morocco has been an important partner in monitoring terrorist activity in Europe. Will the EU be forced to choose between respecting its justice system and taking care of its security concerns? The latter has been more challenging since terror attacks have taken place from France to Germany. As a security partner, Morocco would be hard to lose. But breaching a judicial decision would also harm Europe’s reputation globally. Morocco’s recent moves all demonstrate that it is unafraid to use its strengths as leverage both to dominate its enemy, SADR, and to improve its place in the world order. (Al-Monitor 10.02)

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11.11 MOROCCO: 2017 Predicted to be Good Year for Morocco in Key Areas

The future is looking good for Morocco on several key levels, namely political stability, social standards and economic outlook, according to a new report from BMI Research. Despite the continuing delays in forming a coalition government, Morocco’s 2017 outlook continues to be positive. The report predicts limited risks resulting from Head of Government, Abdelilah Benkirane’s ongoing failure to form the country’s new government.

Forming the government became more complex and challenging than anyone had anticipated when Bekirane was given the task more than four months ago. Conditions forced on him by other parties such as the National Rally of Independents (RNI) and the Popular Movement (MP), who each insisted on the exclusion of the Socialist Union of Popular Forces (USFP), forced Benkirane and the negotiations into a full stall. At one point the RNI had also insisted on the exclusion of the Istiqlal Party (PI).

It is thought by the authors of the BMI Research report that fundamental differences in party ideologies are at the heart of the standstill. Benkirane’s Party, the Justice and Development Party (PJD), espouse a moderate Islamist doctrine battling government corruption. The RNI runs on a more liberal social platform. There is also an interesting theory that the delay could end up being of benefit to the Royal Family by way of curtailing the PJD’s growing popularity. Although the report does not indicate any concern about the PJD challenging the authority of King Mohamed VI, the current blockage could result in stunting the party’s growth.

Recent unrest in the northern Rif region is also not thought to be of great concern regarding the country’s stability. This is because the recent clashes with government officials and security forces continue to be occurring in isolated pockets, such as al Hoceima where clashes occurred over the recent death of a fishmonger when he was crushed in a garbage truck during the confiscation of his merchandise by government officials. The tragedy was taken up as a battle-cry in the areas against government corruption and security force abuse. Researchers at BMI Research, however, do not consider the tensions to be a real threat to overall Moroccan political and social security.

Recent reforms initiated by King Mohammed VI are also being lauded for aiding in the strengthening of the constitutional government, with moves such as the 2011 constitution which somewhat limited the King’s authority.

Although Morocco’s 2017 outlook does appear solid, with a predicted GDP rise of 4.3%, the report does warn, however, that cracks could potentially appear if the coalition government formation doesn’t happen soon. Long-term projections continue to look good, with Morocco placing 4th out of 19 countries in the MENA region, and scoring 69.8% out of 100 for Long-Term Political Risk. Reasons for the continued confidence include Morocco’s commitment to becoming an import/export hub in the region, which makes it extremely attractive to investors. (BMI 16.02)

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11.12 GREECE: Priorities for a Return to Sustainable Growth

Greece should deepen and accelerate reforms, which, together with further debt relief, are needed to allow the economy to return to a sustainable growth path, the IMF said on 7 February in its latest annual assessment of the Greek economy.

The IMF’s Article IV report notes that the country has made progress in reining in its fiscal and external deficits, although this has taken a heavy toll on society. The report identifies a path to sustainable growth and prosperity that requires a two-pronged approach: ambitious policies on the part of the Greek authorities and significant debt relief on the part of Greece’s European partners.

The Q&A below highlights some of the key issues about the country’s progress and its reform priorities for the period ahead.

IMF News: Greece had its last Article IV Consultation in mid-2013. How have the Greek economy and policies evolved since then?

Greece reduced its fiscal and current account deficits significantly since the onset of the crisis. In particular, the fiscal primary and current account deficits declined from 11 and 15% of GDP, respectively, to around zero at the end of 2015. This is an impressive adjustment for a country that is part of a currency union and does not have access to monetary and exchange rate policy tools.

But extensive fiscal consolidation and internal devaluation have come with substantial costs for society. The unemployment rate is still unacceptably high at 23% (October 2016), and Greece has suffered a prolonged recession, with output 25% below its pre-crisis level. The high societal costs have weakened support for ongoing reforms.

The government renewed its reform effort since mid-2015 with a new adjustment program supported by the European Stability Mechanism. Specifically, they legislated a number of important fiscal (e.g. pensions, VAT, income tax), financial (e.g. insolvency legislation, nonperforming loan servicing and sales loans, bank governance) and structural reforms (e.g. privatization, actions to facilitate competition in key sectors). So, in all, there have been some setbacks but also some progress since the last Article IV consultation.

IMF News: Greece now has a new set of policies in place. Are these reforms sufficient for Greece to embark on a sustained recovery?

While Greece has recently made progress with carrying out reforms, challenges remain. In particular, fiscal policies are still not conducive to growth. Half of wage earners are exempt from personal income tax, while the deficit of the pension system remains at a record high (10.5% of GDP, almost four times as high as the euro-area average). At the same time, overdue bank loans make up 45% of total loans and unpaid taxes to the state amount to 70% of GDP. As a result, investment and growth remain weak. For Greece to return to sustainable growth and exit successfully from official financing, it needs to deepen and accelerate reforms.

IMF News: The report mentions that fiscal policies are not growth-friendly. What policies does the IMF recommend?

Greece does not require further austerity at this time. Accounting for ongoing reforms, Greece is expected to achieve a primary fiscal surplus of 1.5% of GDP over the medium and long term. Greece does not need to run a higher primary surplus than that.

But if Greece decides aim for a fiscal surplus higher than 1.5% of GDP, it needs to show how it can credibly achieve this higher target. In this case, additional structural reforms will be needed. However, these reforms should be implemented only once the recovery is well underway.

Regardless of fiscal target, Greece should seek more growth-friendly and equitable policies. Specifically, Greece needs to broaden its personal income tax bases to allow for a more equitable distribution of the tax burden. The revenue this would generate can be used to reduce the high tax rates that are now sending jobs into the informal economy or to neighboring countries. At the same time, further pension reforms are needed to improve the viability of the system and allow for a better and more targeted welfare system to protect those who are most vulnerable.

Greece also needs to address tax evasion and the large tax debt owed to the state by restructuring tax debt for viable taxpayers based on their capacity to pay, and by strengthening enforcement for those who can afford to pay but choose not to do so. The full establishment of the new independent revenue agency will be critical in this regard.

IMF News: You also mentioned that the financial sector is still burdened by very high nonperforming loan ratios. What can Greece do to address this issue?

Nonperforming loans should be reduced rapidly and decisively to allow for a resumption of credit and growth. As long as banks’ balance sheets remain burdened by such nonperforming loans, they will be unable to direct resources to the more productive parts of the economy. Addressing this problem requires the full implementation of the debt restructuring legal framework, with stronger enforcement and an out-of-court mechanism to deal with both bank and tax debt.

At the same time, supervisory tools need to be strengthened to provide incentives to banks to reduce their nonperforming loan stock. Finally, bank governance needs to be further strengthened and capital controls eliminated as soon as prudently possible, while preserving financial stability.

IMF News: Any other reforms that the IMF recommends to support growth?

Labor and product market reforms are essential to support Greece’s long-term growth potential. The labor market reforms of 2011 helped improve the labor-cost competitiveness of the country. However, lagging implementation of product market reforms means that, so far, wage-earners have been bearing the burden of adjustment. But it would be wrong to conclude that Greece should return to the previous, less flexible labor market framework. Instead, existing reforms should be complemented with measures to bring the collective dismissal and industrial action rules in line with best practices and with more decisive efforts to open up remaining closed professions and remove barriers to competition and investment.

IMF News: Can we conclude that with these reforms, Greece will finally overcome the deep downturn and return to growth and prosperity?

Even with full implementation of these policies, Greece cannot grow out of its debt problem. European partners need to provide further debt relief, in addition to the generous relief provided thus far, to put Greece’s debt on a sustainable downward path. This need not involve an upfront haircut and could include instead further extensions of maturity and grace periods, as well as fixing the interest rate on Greece’s official loans to ensure that interest costs remain manageable as global interest rates normalize.

But debt relief alone is also not sufficient to address Greece’s policy challenges. This is why a two-pronged approach is required for Greece to return to sustainable growth and prosperity: ambitious policies on the part of the Greek authorities and ambitious debt relief on the part of Greece’s European partners. (IMF 07.02)

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What’s New at EDI – March 2017

March 2, 2017, 4:03 am

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≪ Previous: Fortnightly, 22 February 2017

Mississippi to Take Trade Mission to the UAE and Jordan

At the end of March, the Mississippi Development Authority (MDA) will bring a trade mission to the Middle East, with stops planned in Dubai and Abu Dhabi in the UAE and Amman, Jordan. Participating companies will have the opportunity to meet potential business partners arranged by EDI in its role as the Middle East Consultant to the MDA. EDI will accompany the group to both locations and administer the visit.

Ontario to Exhibit at MIXii Biomed Israel in May

Ontario will bring a trade delegation to Israel in May to exhibit in the province’s booth at MIXii Biomed Israel 2017, the country’s premier international annual life science conference and exhibition. The event will be held at the David Intercontinental Hotel in Tel Aviv. EDI represents the trade and investment interests of the province in Israel.

SelectUSA Event Held in Tel Aviv on February 22^nd

The American State Offices Association in cooperation with SelectUSA, US Embassy in Israel, the Israel-America Chamber of Commerce (AMCHAM), the Manufacturers’ Association of Israel and the Federation of Israeli Chambers of Commerce, hosted a day-long event in Tel Aviv on Wednesday, February 22^nd. Totally devoted to one-on-one meetings between Israeli companies seeking to expand to the US and the state and regional representatives based in Israel, the event was organized and administered by EDI in its role as Chair of the Association. Over 40 Israeli companies participated and the event was hosted by the Manufacturers’ Association of Israel.

Illinois Featured 8 Companies at Arab Health 2017 in Dubai

Illinois brought eight local exporters to Dubai in early February to exhibit at the state’s booth at Arab Health 2017 in Dubai. The show is the second largest life sciences exhibition in the world after MEDICA in Germany. This is the sixth year that Illinois had a state pavilion at the show. EDI represents the trade and investment interests of the state in the Middle East.

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ISRAEL & HONG KONG: FINTECH SOULMATES

March 6, 2017, 5:50 am

≫ Next: Fortnightly, 8 March 2017

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Israel and Hong Kong have quite a bit in common. For example, despite their small population sizes (Israel’s 8.6 million vs. Hong Kong’s 7.4 million), both are hotbeds of innovation and development that outstrip many of their larger neighbors. As of this month, Cathay Pacific joins El Al in offering nonstop service between Hong Kong and Tel Aviv, making the two locations that much geographically closer.

However, there is a new connecting factor that joins the two in a way that is changing the world.

Both of these locations are known as two of the top international fintech hubs in the world. Both locations host Fintech Week, a week long set of conferences, workshops, hackathons, meetups and social events dedicated to exploring the latest fintech developments and networking among companies active in the field. In addition:

Hong Kong

Besides being home to many of the top fintech companies in the world (including many from Mainland China), Hong Kong has the natural branding as Asia’s largest financial center, providing an immediate attraction for fintech. Hong Kong has one of the highest concentrations of banking institutions anywhere, with 70 of the world’s largest 100 banks having an operation in Hong Kong. The location’s position as Asia’s super connector is particularly attractive for B2B solutions, while its geographic and economic proximity to China gives it privileged access to investment opportunities as well as a huge market. Accenture, DBS and Standard Chartered are just a few names in the extensive list of banks and firms that have created fintech acceleration programs in Hong Kong.

The Hong Kong Monetary Authority (HKMA) has established a Fintech Facilitation Office to exchange ideas among key stakeholders and to provide an interface between market participants and regulators.

Their Securities and Futures Commission (SFC) initiated the Fintech Contact Point to enhance communication with businesses involved in the development and application of financial technology (Fintech) in Hong Kong.

HKMA-ASTRI FinTech Innovation Hub (The Hub) is a facility dedicated to industry players, such as banks, payment service providers, and fintech start-ups. The HKMA operates as a gathering place to brainstorm and review innovative ideas, try out and evaluate new fintech solutions, conduct proof-of-concept trials and gain an early understanding of the general applicability of creative solutions for banking and payment services.

HKMA has also launched a Fintech Supervisory Sandbox to allow banks to test innovative Fintech products and initiatives within a live, controlled environment, before they are fully compliant.

Israel

There are currently over 450 fintech companies active in Israel, accounting for over 10% of the total investment funding garnered by Israeli startups last year. An increasing number of venture capital-backed companies focus on robotics for financial services, payments, and especially blockchain technology. Financial services in Israel are becoming more digital and banks are working on creating their own digital versions, something that is driving more innovation into the financial services space. Major banks HaPoalim and Leumi each have fintech units facilitating the development and testing of new products, while accelerator programs have been created by major banking entities including Citibank and Barclays.

In the past year, several FinTech communities have sprouted in and around Tel Aviv to cater to the growing FinTech startup community. These include Rise Tel Aviv created by Barclays, The Floor (supported by Intel and HSBC, among other partners) and FinTech Aviv.

In light of these complementary strengths, the bond between the two fintech powerhouses can only grow. Fintech companies from both locations can greatly benefit from exploring contacts and market opportunities in the other.

EDI represents the interests of Invest Hong Kong in Israel and stands ready to assist Israeli companies interested in exploring the benefits of creating a presence in Hong Kong.

Michael Platt

Michael, EDI’s VP Strategy & Business Development, Michael assists in the development of opportunities for EDI’s clients and is the Lead Consultant for Invest Hong Kong. His primary responsibilities include international business consulting, marketing consulting, organizing trade missions, developing export opportunities, as well as market research and communication facilitation.

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Fortnightly, 8 March 2017

March 7, 2017, 4:53 am

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8 March 2017
10 Adar 5777
8 Jumada Al-Akhirah 1438

TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Knesset Passes Controversial Biometric Database Law
1.2  Netanyahu Government Approves Decriminalization of Marijuana Use
1.3  Shekel Cements Position as one of the World’s Strongest Currencies

2: ISRAEL MARKET & BUSINESS NEWS

2.1  Israel’s Natural Gas Already Flowing to Jordan
2.2  Wix Acquires DeviantArt, Pairing Wix Capabilities with Global Creative Community
2.3  Fox Set to Open Israel’s First 3 Foot Locker Stores
2.4  Uponit Raises $2.3 Million
2.5  TestCraft Raises $1 Million
2.6  FEMSA Selects Pointer to Provide Fleet and Distribution Services
2.7  innogy & OurCrowd Partnership to Deliver the Next Generation of Energy Solutions in Israel
2.8  China’s SAIC to Open Israel Development Center
2.9  Brayola Raises $5 Million
2.10  Air India to Launch Tel Aviv – New Delhi Flights
2.11 XACT Robotics Raises $5 Million and Signs NIH Agreement
2.12  Three Months into 2017, Israeli Startups Raise $700 Million
2.13  Avery Dennison Completes Hanita Coatings Acquisition
2.14  Cymulate Raises $3 Million
2.15  Legal SaaS A.I. Platform LawGeex Raises $7 Million in Funding Round

3: REGIONAL PRIVATE SECTOR NEWS

3.1  UK Construction Giant Quits All Operations in Middle East
3.2  Healthcare Operator Notes Abu Dhabi Revenue Challenges
3.3  More Details of Warner Bros World Abu Dhabi Revealed
3.4  Saudi Arabia Hires Bechtel to Run Infrastructure Projects Office
3.5  Saudi & US firms Sign Deal to Form Ocean Freight Joint Venture
3.6  Hyatt Announces Plans for First Hyatt-Branded Hotel in Algeria

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  Abu Dhabi to Close $872 Million Solar Plant Financing
4.2  Saudi Energy Firm Inks Deal for Australian Solar Farm
4.3  Morocco Launches Environmental Police

5: ARAB STATE DEVELOPMENTS

5.1  Lebanese Consumer Prices Rose in the First Month of 2017
5.2  Lebanon’s Trade Deficit Stood at $1.37 Billion in January 2017
5.3  Total Number of Lebanese Registered New Cars Fall By January 2017
5.4  Jordanian Revenues from Remittances & Tourism on the Rise
5.5  Incentives Launched as Part of Jordan’s Economic Correction Plan

♦♦Arabian Gulf

5.6  Arabian Gulf States Set to Discuss Regional Rail Project in April
5.7  Bahrain’s Inflation Rate Falls Sharply in January
5.8  Bahrain’s Economic Growth Forecast to Shrink in 2017 – 2018
5.9  Qatar’s Foreign Trade Surplus Jumps 62% in January
5.10  India to Grow Crops to Meet UAE Food Demand
5.11  Abu Dhabi’s New Airport Terminal Opening Delayed to 2019
5.12  Dubai May Opt To Delay Launch of Driverless Flying Taxis
5.13  Saudi Economy Forecast to Continue Slowdown in 2017
5.14  Saudi Arabia Sees First Deflation in More Than a Decade
5.15  Saudi Arabia Seen Saving $96 Billion Through Reforms by 2020

♦♦North Africa

5.16  Egypt’s Trade Deficit Declines by 44% Year-On-Year in January 2017
5.17  Egyptian Expat Remittances Increase by 23% in January
5.18  Egypt’s Suez Canal Generates $395.2 Million in January Revenue
5.19  Morocco Set to Become Manufacturer of Weapons

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  Turkey’s Inflation Hits Double Digits in February for First Time Since 2012
6.2  Turkey Among Top Five Countries to See Most Millionaire Outflow in 2016
6.3  Russian Tourist Numbers to Turkey Rise in January but Foreign Arrivals Keep Declining

7: GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1 Israelis Satisfied With Their Lives, New Survey Shows

♦♦REGIONAL

7.2 King Abdullah Urges Strict, Swift Implementation of Judicial Reform Plan
7.3 Sheikh Hamdan Tries Golden Burger Inspired by Burj Khalifa

8: ISRAEL LIFE SCIENCE NEWS

8.1  MIXiii-Biomed 2017 – Israel’s Premier International Life Sciences Conference and Exhibition
8.2  Phytecs Partners with Yissum to Discover New ECS-Targeting Compounds
8.3  OWC Receives IRB Approval to Start Testing on its Cannabinoid-Infused Psoriasis Cream
8.4  Pharma Two B Closes $30 Million Financing Round
8.5  Can-Fite’s Namodenoson (CF102) Prevents Progression of Liver Fibrosis
8.6  Via Surgical Signs Exclusive U.S Distribution Agreement With Progressive Medical
8.7  RadiAction Medical Raises $5.7 Million
8.8  Medial EarlySign’s System Helps Identify Individuals at High Risk for Colorectal Cancer

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Giraffic and Byond Join Forces to Create Mobile VR Magic
9.2  Mellanox Introduces World-Leading 6WIND-Based Router and IPsec Indigo Platform
9.3  RADWIN Fulfills the Promise of 5G, Today
9.4  Shaw Selects NICE Sales Performance Management to Manage Complex Incentive Plans
9.5  Altair’s CAT-1 IoT Chipset Certified For Operation on T-Mobile’s 4G LTE Network
9.6  Altair and Geotab Team up to Develop LTE-enabled Automotive Telematics Devices
9.7  ASOCS Unveils In-building vRAN Solution Pre-Integrated with HPE Open NFV Platform
9.8  Assa Abloy Implements Industry 4.0 Solution Powered by Magic xpi Integration Platform

10: ISRAEL ECONOMIC STATISTICS

10.1 Ministry of Finance Warns Growth Rests on New Car Sales
10.2 Israeli Women Are More Educated and Live Longer, But Earn Less

11: IN DEPTH

11.1  ISRAEL: Israeli PM’s Visit to the Two Sides of the Caspian Sea
11.2  LEBANON: Republic of Lebanon ‘B-/B’ Ratings Affirmed; Outlook Stable
11.3  IRAQ: Republic of Iraq Ratings Affirmed At ‘B-/B’; Outlook Stable
11.4  EGYPT: Fitch Reviews Egypt’s Rebalancing Continues Ahead of Challenging Year
11.5  EGYPT: Egypt’s First-Ever Female Governor Marches to a Different Drummer
11.6  EGYPT: Will Families With 2 Children Become the Norm in Egypt?
11.7  TUNISIA: Will Tunisia Finally Amend Harsh Cannabis Law?
11.8  ALGERIA: Still Avoiding Austerity
11.9  MOROCCO: Reducing Gender Inequality Can Boost Growth
11.10  GREECE: The Threat of Grexit Returns
11.11  GREECE: Fitch Affirms Greece at ‘CCC’

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Knesset Passes Controversial Biometric Database Law

The controversial Biometric Database Law was ratified by the Knesset on 27 February after passing second and third readings, with 39 coalition MKs voting in favor and 29 opposition lawmakers voting against it. Prior to the law’s approval, a joint committee of representatives from the Constitution, Law and Justice Committee; the Internal Affairs and Environment Committee; and the Science and Technology Committee narrowly voted (6 to 5) to approve the bill. Significant changes were made to the original version of the Biometric Database Law, before it could be applied universally. According to the provisions of the law, the database will contain facial images of every citizen, while each person will have the option of providing his or her fingerprints.

As stated, a person can consent or refuse to give his fingerprints, but those who decline the option will receive passports and ID cards that are valid for a period of only five years. Meanwhile, those who provide their fingerprints will receive identification documents that are valid for 10 years, which is the current standard period of time. The law stipulates that those who consent to providing their fingerprints can change their minds at any time and request deletion of the information from the database. Additionally, the law forbids keeping the fingerprint information of minors under the age of 16. The law also requires the police to adhere to the existing detainment procedure, and forbids the police from using the database at all until the Knesset can approve the relevant new protocols.

Public Security Minister Erdan will have until 1 May to present the new protocols for approval and the Knesset will have until the end of July to approve them. The law will go into effect only after the Knesset approves the protocols; until then the guidelines that have been in place throughout the pilot phase will remain binding. (Various 28.02)

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1.2 Netanyahu Government Approves Decriminalization of Marijuana Use

On 5 March, the Netanyahu government voted in favor of decriminalizing recreational marijuana use, joining some US states and European countries who have adopted a similar approach. The proposal was submitted by Minister for Public Security Gilad Erdan and Minister of Justice Ayelet Shaked. Erdan called the government vote “an important step towards creating new policy that will emphasize explaining (the dangers of drug use) and treatment instead of prosecution.” The vote followed the recommendations of a committee, nominated by Erdan, to impose fines on individuals caught possessing cannabis.

According to the new policy, people caught smoking marijuana would be fined rather than arrested and prosecuted. Criminal procedures would be launched only against those caught repeatedly with the drug. An inter-ministerial committee will now draft new legislation to implement the new policy, which still must be ratified by the Knesset, a process that will likely take months. Selling and growing marijuana would remain criminal offenses.

Shaked said Israeli authorities would now put their focus on education about the possible harmful effects of drug use. Marijuana use is fairly common in Israel. The United Nations Office on Drugs and Crime has said that almost 9% of Israelis use cannabis, though some Israeli experts believe the numbers are higher. Israeli police figures showed only 188 people were arrested in 2015 for recreational use of marijuana, a 56% drop since 2010, and many of those apprehended in that time were never charged. About 25,000 people have a license to use the drug for medicinal purposes in Israel, one of the world leaders in medical marijuana research. In the United States, 28 states have legalized marijuana for medical use and since 2012, several have also approved marijuana for recreational use. (Various 05.03)

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1.3 Shekel Cements Position as one of the World’s Strongest Currencies

The Israeli shekel on 1 March cemented its position as one of the strongest and most solid currencies in the world, marking gains against the top three currencies: the dollar, euro and pound. According to the Bank of Israel, March’s foreign currency trade began with the shekel trading at NIS 3.62 per dollar, the shekel/euro exchange rate was set at NIS 3.82, and the shekel/pound exchange rate came to NIS 4.47. The 1 March dynamic trading day and the gains the shekel marked vis-à-vis all major currencies, especially the 0.74% drop in dollar rates, prompted the Bank of Israel to intervene and purchase foreign currency valued at $300 million in an attempt to curb the trend. The shekel has appreciated by 6% against the dollar over the past year, its strongest level since October 2014. It is also hovering at a 15-year peak against the euro.

The Bank of Israel bought $2.6 billion in foreign currency in the second half of 2016, and another $50 million in January. The shekel is essentially echoing the dollar’s behavior in world markets, as the American currency has been growing stronger against major currencies such as the euro and pound, especially over political turmoil in France. (IH 1.03)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Israel’s Natural Gas Already Flowing to Jordan

Natural gas from Israel’s offshore Tamar reservoir began flowing to Jordan in early 2017, an Israeli energy industry official said on 1 March. The amount of gas is expected to be relatively small and is being delivered via a special pipeline built in the Dead Sea. However, the delivery is just the initiatory step ahead of the more significant developments expected to follow when the offshore Leviathan reservoir goes online. Leviathan is expected to become operational by the end of 2019.

The agreement to deliver the gas to the Arab Potash Company and Jordan Bromine Company, on the Jordanian side of the Dead Sea, was signed in 2014, in conjunction with a subsidiary of Texas-based Noble Energy, which operates Leviathan. Construction of the pipeline from the Dead Sea Works plant on the Israeli side to the Jordanian plants was completed in 2016. As part of the project, a 16 kilometer (9.9 mile) pipeline was laid down on the Israeli side, meeting a pipeline 20 kilometers (12 miles) in length that was laid down on the Jordanian side. The pipeline became operational in early 2017. A separate transport system will deliver gas at far greater quantities from the Leviathan field to the other foreign markets earmarked as destinations. The amount of gas to be delivered each year is estimated at anywhere between 3 and 3.5 billion cubic meters. (IH 01.03)

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2.2 Wix Acquires DeviantArt, Pairing Wix Capabilities with Global Creative Community

Wix.com announced that it acquired Los Angeles’ DeviantArt, one of the world’s largest online communities dedicated to artists, art enthusiasts and designers. The acquisition represents inherent opportunities in key growth areas for Wix including product development, brand recognition and increased traffic potential. Wix will provide DeviantArt users easy access to powerful tools specifically designed to help emerging artists create and showcase their creativity online and build their brands. At the same time, Wix creatives and designers will have access to DeviantArt’s thriving community of tens of millions of visual artists. DeviantArt is consistently one of the most visited websites worldwide and has grown organically for over a decade with virtually no investment in marketing or advertising. Currently, the community boasts over 325 million individual pieces of original art and more than 40 million registered members.

Wix and DeviantArt share a vision to provide designers and artists of all types a platform on which they can create, manage and showcase their work online, grow their audience and build their own global brands. Wix will provide technology and marketing expertise to the DeviantArt universe enabling its users to further their reach and increase engagement, both online and on mobile. DeviantArt’s focus on developing and fostering online collaboration and communities will provide Wix users a platform to engage with creative designers and artists across multiple mediums. Together the companies will strive to create an innovative gallery for artists globally, mixing world class creative with unmatched opportunities for design, display and distribution.

Tel Aviv’s Wix.com is a leading cloud-based web development platform with more than 100 million registered users worldwide. Wix was founded on the belief that the internet should be accessible to everyone to develop, create and contribute. Through free and premium subscriptions, Wix empowers millions of businesses, organizations, professionals and individuals to take their businesses, brands and workflow online. (Wix.com 23.02)

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2.3 Fox Set to Open Israel’s First 3 Foot Locker Stores

The first two branches of the Foot Locker sports stores will open in Israel during the coming months. Fox-Wizel will operate the Israeli franchise for the brand. Another Foot Locker branch will open shortly afterwards in Terminal 1 at Ben Gurion Airport, the Israel Airports Authority reported – as part of the duty free chain at the overhauled terminal. Designated for low cost flights, Terminal 1 is currently undergoing renovations, but is scheduled to resume full activity in July, when the duty free area in the terminal will also be opened. The mix of stores in the Terminal 1 duty free area will be similar to Terminal 3, but the area will be smaller, totaling some 1,650 sq.m.

Some of the franchise operators at Terminal 3, such as James Richardson, have first rights to open a branch at Terminal 1. Sakal Duty Free, which operates a sports store at Terminal 3, does not have this option; Foot Locker won a tender to establish its foothold. Fox, which has the Foot Locker franchise for Israel, is likely to open the first two stores in March-April in two shopping malls scheduled to open: one in Gindi in Tel Aviv and one in Rishonim in Rishon LeZion (owned by Azrieli Group). (Globes 26.02)

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2.4 Uponit Raises $2.3 Million

Israeli ad recovery platform Uponit announced that it has raised $2.3 million in funding. The round was led by Jerusalem Venture Partners (JVP) with a strategic participation from KDC Media Fund, a joint venture of Dick Clark Productions and Keshet. Working with dozens of publishers globally, Uponit has recovered over 6.8 billion ad impressions and will use the investment for continued development of its platform and expansion of its sales and marketing teams.

Uponit was founded in Tel Aviv in 2015 by a team of 5 security experts who served at one of Israel’s elite intelligence units. Using cyber technologies, Uponit helps publishers measure and restore their blocked ad inventory and communicate with their adblocking audience. Uponit’s solution deploys seamlessly, allows publishers to serve direct ad campaigns, supports all ads including display, video and native, maintains original tracking and targeting, and is immune to current ad blockers. Furthermore, the solution accelerates page load times by 20%-30%, improving user experience. (Globes 23.02)

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2.5 TestCraft Raises $1 Million

Tel Aviv’s TestCraft Technologies has raised $1 million in seed funding from a number of serial software entrepreneurs and industry veterans to connect manual software testers to automated DevOps. The company provides continuous testing SaaS-based solutions that allow manual business testers to create test automation without coding. TestCraft intends to use the proceeds of this round to work with customers to further enhance its solution and to expand its core development team. TestCraft allows manual testers to quickly outline test cases on a virtual canvas, which TestCraft then converts to Selenium scripts and connects to common CI/CD suites and multi-platform testing labs. Founded in 2015, with the advancement of DevOps and agile development methodologies, TestCraft expects to be part of a new wave of tools that will empower software developers and their testing teams. (Globes 22.02)

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2.6 FEMSA Selects Pointer to Provide Fleet and Distribution Services

Pointer Telocation, a leading provider of cloud-based Telematics services of Fleet, Mobile Resource Management (MRM) and Internet of Vehicle (IoV) solutions, announced the selection of its Mexican subsidiary, to provide fleet management services for COCA – COLA FEMSA. COCA – COLA FEMSA, the largest public bottler by sales volume of Coca-Cola products in the world, operates a Center of Excellence in Mexico, and is responsible for continuous improvements to its overall activities. FEMSA’s Center of Excellence launched a project to improve all aspects of its distribution to retail outlets. The project focuses on efficiencies and improvements across four major areas: (i) service to customers; (ii) distribution activities; (iii) distribution costs; and (iv) road traffic safety. Pointer was selected as one of the providers to solve these demanding challenges.

Pointer Telocation is a leading provider of technology and services to the automotive and insurance industries, offering a set of services including Fleet Management, Mobile Asset Management, Stolen Vehicle Recovery, Vehicle Diagnosis and a comprehensive solution in the field of Internet of Things. Pointer has a growing list of customers and products installed in 50 countries. Cellocator, a Pointer Products Division, is a leading AVL (Automatic Vehicle Location) solutions provider for stolen vehicle retrieval, fleet management, car & driver safety, public safety, vehicle security and more. (Pointer Telocation 27.02)

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2.7 innogy & OurCrowd Partnership to Deliver the Next Generation of Energy Solutions in Israel

Essen, Germany’s innogy SE, a leading European energy company, and Jerusalem’s OurCrowd, a leading global equity crowdfunding platform, announced a new business partnership. The partnership will combine the strength of OurCrowd’s network and ability to scout investment opportunities in Israeli startups and match the business objectives of innogy to provide innovative products and services beyond the energy market.

OurCrowd, a platform that connects investors and startups around the world, will help funnel Israeli technology startups that support innogy. This partnership will help innogy achieve its goal of enabling people to improve their quality of life by changing and enhancing the energy sector worldwide (and in Europe and Germany in particular) through decarbonization, decentralization and digitalization.

innogy’s Innovation Hub established an outpost in Israel to engage with innovative startups in its areas of interest (Smart & Connected, Urban Solutions, Disruptive Digital, Big Data and Machine Economy/Blockchain), aiming to collaborate and invest in accordance with its open innovation strategy. The innogy Israel outpost is based in Tel Aviv. (OurCrowd 28.02)

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2.8 China’s SAIC to Open Israel Development Center

Shanghai Automotive Industry Corporation (SAIC) will found an R&D center in Israel for advanced auto technologies, the company announced in China. The company said that the center would focus on development and venture capital investment in “electrical propulsion, data networks, car sharing, and smart automated propulsion.” The center is part of a global plan in which the company is expanding its R&D worldwide. It recently opened a similar center in Silicon Valley. The company’s advance team is already in Israel and the company’s branch in Israel is slated to expand to 50 employees. It is believed that SAIC’s business in Israel will be located in the new management center of the Lubinski group in Meuyan Sorek. Lubinski has been the official importer for SAIC in recent years and has sold several thousand units of the brand to date.

SAIC, a Fortune 100 company that is one of the four largest Chinese auto manufacturers, is a Chinese government company selling nearly five million vehicles a year. The auto industry believes that this is only the spearhead of R&D and venture capital investment by Chinese auto manufacturers in Israeli auto-tech. (Globes 26.02)

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2.9 Brayola Raises $5 Million

Israeli startup Brayola has completed a $5 million financing round. The First Time fund led the round with a $4 million investment, with participation from Gett (formerly GetTaxi) founders. Brayola’s market is estimated at $32 billion a year, including $14 billion in the US, where the company is currently focusing. The company’s algorithm enables women to find bras that fit them and offers them a selection of virtual bras, from which they can select the ones they like according to brand and size. The model is successful, reflected in a 10% rate of returns, compared with a 30% average in online bra purchases. Brayola’s algorithm uses a database with information about over five million bras. The company currently cooperates with over 100 brands offering over 10,000 products. (Various 05.03)

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2.10 Air India to Launch Tel Aviv – New Delhi Flights

Air India has submitted a request for flights from New Delhi to Ben Gurion Airport. Three weekly flights on the route will begin in May. The Israel Airports Authority announced that civil aviation between Israel and India has grown significantly in recent years, culminating with a 22.8% increase in activity in 2016, when the number of passengers flying directly between the countries reached 158,000. In addition, many other travelers between the two countries do not fly directly; less than one third of travelers from Israel to India, 27%, use direct flights. Airports Authority figures show that the number passengers flying directly between the two countries rose 12.4% to 130,000 in 2015. An analysis of indirect flights to India shows that 30% of passengers to India flew via Moscow, 14.5% through Istanbul, 11.8% by way of Tashkent, 2.3% via Larnaca, etc.

The main destinations in India for Israelis are Mumbai (62,280 passengers), New Delhi (57,370), Bangalore (11,502), and Goa (6,347). Only El Al Israel Airlines currently runs direct flights between Israel and India. (Globes 02.03)

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2.11 XACT Robotics Raises $5 Million and Signs NIH Agreement

XACT Robotics has raised $5 million in a round led by investment company MEDX Ventures Group. The financing round, XACT Robotics’ second, brings the total amount raised to date by the company to $10 million. At the same time, the Caesarea based company announced the signing of a research cooperation agreement with the National Institutes of Health (NIH) in the US. The agreement concerns joint development of a second generation of XACT Robotics’ product that will be suitable for imaging systems other than CT, for which the product is currently designed.

The product has undergone animal trials, in which the company showed that it can bring the needle to the right place without damaging essential tissue. This trial will probably be enough to obtain marketing approval for the product towards the end of 2017. XACT will also conduct trials on human beings at three medical centers, but this trial is not required for approval of the product; it is designed to support the company’s marketing efforts.

XACT Robotics began operations in August 2013 and is located in Caesarea, Israel. The company is developing a novel platform robotic technology for needle steering in minimally invasive interventional procedures, such as biopsies and ablations. The technology is based on a novel approach to needle steering using a 5 degrees-of-freedom robot, ongoing needle path calculation, and real-time closed-loop control. XACT is currently developing the system for use in CT-guided procedures. (XACT Robotics 02.03)

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2.12 Three Months into 2017, Israeli Startups Raise $700 Million

Globes reported that Israeli startups raised nearly $700 million in January and February. This is keeping pace with last year when Israeli startups raised a record $4.8 billion, according to IVC. In the first quarter of 2016, Israeli startups raised $1.09 billion. The pace of financing is all the more impressive in the light of consistent reports of a downturn in startup financing in the US.

The trend of Israeli startups closing large financing rounds continues, especially in January when nearly $450 million was raised. Flash storage company Kaminario raised $75 million and mobile ad analytics company Appsflyer raised $56 million. Cyber security, as in 2016, remains the hottest sector with SentinelOne raising $70 million, Transmit Security raising $40 million, Demisto raising $20 million and Intsights Cyber Intelligence raising $15 million, among others.

February ended with a flurry of financing rounds, the largest of which was drug development company Pharma Two B, which raised $30 million for a Parkinson’s treatment trial. The first major financing closing of 2017 by an Israeli startup was also in the medical sector with smart shirt company Healthwatch raising $20 million. Other major financing rounds were closed by Valens Semiconductor (raising $20 million), Aquarius Engines (raising $20 million), eCommerce company FeedAdvisor ($20 million), SaaS company Samanage ($20 million), enterprise software company Trax Image Recognition ($19.5 million), artificial intelligence company Chorus.ai ($16 million), co-working space company Mindspace ($15 million), smartphone camera company Corephotonics ($15 million), sports publishing company MinuteMedia ($15 million) and power electronics company visIC ($11.6 million). In fintech, VAT recovery company VATBox raised $20 million, Earnix raised $13.5 million and Credifi raised $13 million. (Globes 01.03)

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2.13 Avery Dennison Completes Hanita Coatings Acquisition

Glendale, California’s Avery Dennison Corporation announced it has completed the acquisition of Hanita Coatings, a pressure-sensitive materials manufacturer of specialty films and laminates, from Kibbutz Hanita and Tene Investment Funds. Headquartered in northern Israel with sales and distribution facilities in the United States, Germany, China and Australia, Hanita develops and manufactures coated, laminated and metallized polyester films for a range of industrial and commercial applications. Hanita Coatings will be known as Avery Dennison Hanita and will continue its operations as a distinct business unit. Avery Dennison is a global leader in pressure-sensitive and functional materials and labeling solutions for the retail apparel market. The company’s applications and technologies are an integral part of products used in every major industry. (Avery Dennison 02.03)

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2.14 Cymulate Raises $3 Million

US investment fund Susquehanna International Group has led a $3 million Series A financing round in Rishon LeTzion’s Cymulate, an Israeli cyber security startup. The company had previously raised $500,000 from Eyal Gruner, a director in the company. Cymulate conducts penetration tests. The company has developed a platform enabling enterprises to simulate cyber attacks in real time, while testing the security system’s resilience from the potential attacker’s perspective. Among other things, Cymulate makes it possible to assess an enterprise’s readiness for ransom and fishing attacks, and for detecting more complicated breaches through which hackers can take over an enterprise’s computers and apps. The $3 million raised will enable Cymulate to continue development of its automatic tool, hire 15 more employees in addition to the eight it already has, and establish a sales apparatus in the US.

The market for information and cyber security testing as part of cyber as a service in which Cymulate operates is estimated at $6 billion in the US and Europe alone. The new realization that it is no longer possible to rely on period testing in large-scale projects carried out by third-party companies is a business opportunity for Cymulate. The company’s platform enables any enterprise to test whenever it wants how it stands against the current attack threats. Cymulate’s system continuously updates research teams and hackers investigating attacks in the operation system, software, apps, and a broad range of services. By using the service, the information security manager gets an up-to-date idea of the enterprise’s state of resistance to cyber attacks. The system also provides suggestions for repairing existing breaches, so that in most cases, by implementing these recommendations, the information security manager blocks and neutralizes quite a few threats. (Globes 07.03)

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2.15 Legal SaaS A.I. Platform LawGeex Raises $7 Million in Funding Round

LawGeex announced the closing of a $7 million Series A funding round. The round was led by a group consisting of high-profile investors, including Japanese-based HR and information services company, Recruit Holdings, the owner of Indeed.com. Previous investors Lool Ventures and LionBird also participated in this round, bringing LawGeex’s total funding to $9.5 million. The LawGeex Artificial Intelligence reviews incoming contracts, approving them if they match pre-defined criteria, or escalating them to the legal team if needed. Legal teams can define their criteria based on best practices, or create their own custom “playbooks”, outlining exactly what the platform should accept or reject in any contract. By enforcing a single set of standards, LawGeex helps companies minimize legal risk and ensure compliance, while reducing legal bottlenecks and shortening contract turn-around time.

LawGeex currently supports a wide range of standard business contracts, from NDAs to purchase orders and software licenses. The additional capital will be used to further advance LawGeex’s A.I. capabilities, enhance its SaaS offering, and continue building a world class team of engineers, data scientists and legal experts.

Tel Aviv’s LawGeex is transforming legal operations using artificial intelligence, and helping businesses save hundreds of hours and thousands of dollars reviewing and approving everyday contracts. Founded in 2014, LawGeex enables businesses to automate their contract approval process, improving consistency, operational efficiency and getting business moving faster. LawGeex combines machine learning algorithms, text analytics and the knowledge of expert lawyers to deliver in-depth contract reviews using the legal team’s pre-defined criteria. LawGeex removes the legal bottleneck, helping customers and their legal teams focus on the big picture without getting lost in the paperwork. (LawGeex 07.03)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 UK Construction Giant Quits All Operations in Middle East

On 21 February Balfour Beatty, the international infrastructure group, announced that it has reached an agreement with its joint venture partner to sell its entire share in Dutco Balfour Beatty and BK Gulf. The company said in a statement that, subject to regulatory approval, the deal is worth £11 million. As part of the transaction, the local partner will assume responsibility for Balfour Beatty’s guarantees of bonding obligations in the joint ventures. Since the start of 2015, Balfour Beatty has exited the Middle East, Indonesia and Australia in order to focus on its chosen markets, in the UK, US and Far East. In 2014, the UK-based construction firm said it has won a $353 million contract from Emaar Properties to build an extension to The Dubai Mall. (AB 22.02)

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3.2 Healthcare Operator Notes Abu Dhabi Revenue Challenges

Private UK based hospital group Mediclinic International has warned it may deliver lower earnings for its Middle East business amid a “challenging” market in Abu Dhabi. The company said that patient volumes and operating performance continue to be below expectations in Abu Dhabi and was particularly pronounced in January. The group said it now expects full year 2016/17 Middle East revenue to be down to AED3 billion ($820 million) with an underlying EBITDA margin of approximately 10-11%.

Mediclinic took over Abu Dhabi’s Al-Noor last year and started consolidating the group’s hospitals with its own Dubai operations. In the Middle East, Mediclinic said its established Dubai business continues to perform well, including a strong ramp up in patient activity at the newly opened Mediclinic City Hospital North Wing. Despite the current economic and trading environment, Mediclinic said it has confidence in its long term Middle East growth strategy. It said significant progress has been made integrating the Al Noor and Mediclinic operations into a single business unit and AED75 million of annualized cost synergies are expected to be realized during the current financial year. (AB 21.02)

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3.3 More Details of Warner Bros World Abu Dhabi Revealed

Miral confirmed that Warner Bros World Abu Dhabi, an indoor theme park spanning 1.65 million square feet, will be home to 29 rides, shows and interactive attractions. The developer announced that the park will also include retail outlets featuring a wide collection of merchandise inspired by Warner Bros franchises as well as a range of dining options. Warner Bros World Abu Dhabi will bring together Super Heroes and Super-Villains from the DC Universe, including Batman, Superman and Wonder Woman, as well as Warner Bros’ iconic animated properties such as Bugs Bunny, Scooby-Doo and Tom and Jerry, creating a family-friendly destination for fans of all ages, the statement said. Theming is currently underway throughout the park. Factory acceptance testing for all rides is nearly done, and delivery and installation of rides has already started.

Warner Bros World Abu Dhabi, which comes as part of Yas Island’s commitment to attracting 48 million annual visits by 2022, is set to open in 2018, and will complement Miral’s Yas Island destination portfolio of themed parks, which includes Ferrari World Abu Dhabi, Yas Waterworld, CLYMB, and SeaWorld Abu Dhabi which is scheduled to launch in 2022. (AB 28.02)

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3.4 Saudi Arabia Hires Bechtel to Run Infrastructure Projects Office

Saudi Arabia has appointed Bechtel Corp, one of the world’s largest industrial contractors, to run a new oversight office tasked with reducing inefficiencies and trimming costs on state infrastructure projects. Bechtel will help the Saudi government set up and run its new National Project Management Organization (NPMO), known in Arabic as Mashroat. The firm has worked on mega-projects in the Islamic kingdom for some 70 years, including airports and the sprawling Jubail and Ras al-Khair industrial cities. It is currently developing two of six lines on the $20 billion Riyadh Metro project.

The Saudi cabinet created the NPMO office last year as part of a broad government effort to overhaul the economy and close a gaping budget deficit, as sustained low oil prices have taken a toll on the kingdom’s finances. Projects throughout Saudi Arabia slowed to a halt last year as the government delayed payments to contractors for their work, in some cases for more than a year.

At least $13.3 billion of government projects are at risk of being cancelled in Saudi Arabia this year because of fiscal pressures and shifting government priorities. The total value of project awards for 2017 is forecast at $27 billion, and could rise to $32 billion if the Mecca Metro project, which was originally expected to be awarded in 2016, goes through this year. (Reuters 21.02)

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3.5 Saudi & US firms Sign Deal to Form Ocean Freight Joint Venture

A subsidiary of the national shipping arm of Saudi Arabia has signed a joint venture agreement to establish an ocean freight supplier for dry bulk import and export flows in and out of the Middle East region. Bahri Dry Bulk Company (BDB), a subsidiary of Bahri Group, and Koninklijke Bunge, a unit of US-based Bunge Limited, a global agribusiness and food company, announced the agreement. The JV, which will operate under the name Bunge Bahri Dry Bulk Ltd, will provide exclusive freight transportation services to regional and other international customers. The company plans to ship over 5 million metric tons in its first year, ramping up volume over time to double-digit figures, a statement said. It added that BDB and Bunge will own 60/40% of the JV respectively, and it will be registered and based in Dubai. Financial terms of the agreements were not disclosed. Bunge buys, sells, stores and transports oilseeds and grains and is headquartered in New York. (AB 22.02)

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3.6 Hyatt Announces Plans for First Hyatt-Branded Hotel in Algeria

Chicago’s Hyatt Hotels Corporation announced that a Hyatt affiliate has entered into a management agreement with Société d Investissement Hôtelière EPE SPA for a Hyatt Regency hotel to be located at Houari Boumediene Airport in Algiers, Algeria. The hotel, expected to open late 2018, will mark the first Hyatt-branded hotel in Algeria. Hyatt Regency Algiers Airport will add to Hyatt’s growing brand presence in Africa, following the successful openings of Hyatt Place Taghazout Bay in Morocco and Park Hyatt Zanzibar in Tanzania in 2015, which brought the total number of Hyatt-branded hotels in Africa to six. Hyatt Regency Algiers Airport will be part of a wider airport expansion in one of North Africa’s largest cities. The 326-room hotel will be situated directly opposite the airport’s new terminal and will be the only terminal-linked hotel.

Société d Investissement Hôtelière EPE SPA is a company whose shareholders are amongst the most important financial and industrial institutions in Algeria. Since its creation in 1997, the company has developed numerous internationally branded hotels throughout the country. (Hyatt 06.03)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Abu Dhabi to Close $872 Million Solar Plant Financing

Abu Dhabi’s government-owned power utility aims to close a financing package for a 3.2 billion dirham ($872 million) solar power plant, which will be the world’s largest, in April. Abu Dhabi Water & Electricity Authority (ADWEA) said it had selected a consortium of Japan’s Marubeni Corp and China’s JinkoSolar Holding to build and operate the 1,177 MW plant. The duo were selected from six bids received by ADWEA in September. The project is ADWEA’S first foray into renewable energy. Abu Dhabi aims to generate 7% of its energy from renewables by 2020; the government’s green energy firm Masdar has launched renewable energy projects including solar plants.

The plant, to become operational in 2019, will be funded 25% by equity and 75% by debt, Adel al-Saeedi, acting director of privatization at ADWEA, said. ADWEA would contribute the equity while local and international banks would fund the debt. The winning bidders offered to provide electricity for 2.42 U.S. cents per kilowatt hour, one of the most competitive prices seen to date in the solar industry, Saeedi said.

A special-purpose company would be formed to operate the project; ADWEA would own 60% of the company while Marubeni and Jinko would hold 40%. Power generated would be sold to Abu Dhabi for 25 years. Initially the plant at Sweihan, east of the city of Abu Dhabi, was to have a capacity of 350 MW, but ADWEA increased the capacity because additional land became available, said Saeedi. (Reuters 05.03)

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4.2 Saudi Energy Firm Inks Deal for Australian Solar Farm

Fotowatio Renewable Ventures (FRV), a developer of large-scale solar power plants and part of Saudi-based Abdul Latif Jameel Energy, has signed a power purchase agreement for the Lilyvale Solar Farm in Queensland, Australia. The deal with Ergon Energy, the Queensland Government-owned electricity retailer, will see Ergon Energy purchase 100% of the electricity and all large scale renewable energy certificates (LRECs) generated by FRV’s 100MW Lilyvale Solar Farm project. The agreement will be effective once the solar facility begins operation, expected to be towards the end of 2018, and run until 2030.

The proposed Lilyvale solar farm is located 50 kilometers North East of Emerald in the Queensland Central Highlands region, known for its many coal mines and cattle farming industry. The project’s location near to major existing network infrastructure makes it ideal for connecting the solar farm to the national electricity grid. The project received approval in September 2015, with construction set to begin mid-2017 and expected to take 12-16 months. FRV estimates up to 200 workers will be needed to complete Lilyvale Solar Farm’s construction. It is expected to power approximately 45,000 homes. The announcement is the third power purchase agreement that FRV has signed in Australia within the last 12 months, following deals with Origin Energy for the Moree Solar Farm in New South Wales and the Clare Solar Farm, near Ayr in North Queensland. (FRV 24.02)

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4.3 Morocco Launches Environmental Police

Morocco’s Ministry of Energy, Mining, Water, and Environment organized a ceremony to launch the environmental police on 23 February in Rabat. The ceremony involved presenting environmental inspector’s cards and the presentation of technical monitoring equipment and vehicles for the environmental police. The creation of regional environmental brigades to protect against environmental damage was first announced in September 2013 by the General Directorate of National Security.

The missions of the environmental police, set by Decree in 2015, include the raising of awareness of environmental issues and the inspection, research, investigation, verbalization and detection of environmental infringements. The offenses that the environmental brigades will police are as numerous as its mission: deposits of waste on private or public land, possession obsolete products or contraband drugs, transport of dangerous goods without authorization.

Offenders may face fines ranging from MAD 100 to MAD 2 million as well as possible imprisonment. Once the infringement has been established by the environmental inspector, this latter is responsible for determining the seriousness of the infringement and the penalty for the infringement. According to the decree, environmental police officers “perform their functions voluntarily, or at the request of the governmental environmental authority, or as part of a national environmental supervisory board set up for purpose of environment protection. (MWN 24.02)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanese Consumer Prices Rose in the First Month of 2017

According to the Central Administration of Statistics (CAS), the Lebanese Consumer Price Index (CPI) showed signs of inflation in the first month of the year. The CPI rose from 94.45 points in January 2016 to 98.47 points by the end of January 2017, recording a 4.25% year-on-year (y-o-y) increase. This rise is mostly attributed to the rising oil quotes this year. In terms of the CPI’s components, “transportation” (13.10% of CPI) and “water, electricity, gas & other fuels” (11.8% of CPI), saw annual growth of 6.88% and 15.68%, respectively. Moreover, the “education” sub-index, constituting 6.60% of the CPI, increased annually by 2.74% in January 2017. Prices of “communication” (4.5% of CPI) and “Clothing and Footwear” (5.2% of CPI), posted respective y-o-y rises of 0.70% and 14.29% over the same period. In addition, “restaurant & hotels” (2.8% of CPI) prices went up by 1.64% y-o-y, which might be due to an improving tourist activity during the first month of the year. Nonetheless, “food and non-alcoholic beverages” prices (20% of CPI) as well as the “Health” (7.7% of CPI) sub-index registered respective drops of 0.28% and 1.06% y-o-y in January 2017. (CAS 22.02)

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5.2 Lebanon’s Trade Deficit Stood at $1.37 Billion in January 2017

Lebanon’s trade deficit for the first month of 2017 stood at $1.37B, widening from the $1.31B registered in the same month last year. Total imports grew by 7.36% year-on-year (y-o-y) to $1.60B and exports rose by 24.81% y-o-y to $231.65M. The top imported goods to Lebanon were Mineral products with a share of 22.58%, followed by 10.93% for products of the chemical and allied industries and 9.73% for machinery and electrical instruments. The value of imported mineral products dropped by 2.80% y-o-y to $362.31M in January 2017. Meanwhile, the value of products of the chemical and allied industries and that of machinery and electrical instruments rose by a yearly 12.76% and 8.29% to reach $175.41M and $156.08M in January, respectively.

In January, the top three import destinations were Greece, China and the US with shares of 10%, 9% and 7%, respectively. As for exports, the top exported products from Lebanon were pearls precious stones and metals with a share of 30.91% of the total followed by shares of 13.91% for prepared foodstuffs, beverages and tobacco and 11.23% for base metals and articles of base metal. Specifically, the value of pearls, precious stones and metals more than doubled in January 2017 to stand at $71.61M, and the value of base metals and articles of base metal rose by 30.76% to $26.01M. Nonetheless, the value of prepared foodstuffs, beverages and tobacco registered a yearly drop of 3.85% to $32.23M. In January, the top three export destinations were South Africa with 18%, followed by Switzerland and Syria with a similar share of 10%. (Blom 01.03)

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5.3 Total Number of Lebanese Registered New Cars Fall By January 2017

According to the Association of Lebanese Car Importers, the total number of newly registered commercial and passenger cars slid by 1.00% year- on- year (y-o-y) to 2,571 cars by January 2017. In details, the number of registered commercial cars dropped by 18.82% y-o-y to 151, while the number of registered passenger vehicles rose by 0.37% to reach 2,420 by January 2017. In terms of car brands, Kia maintained its top rank, with the largest share of 19.23% of newly registered passenger cars, followed by Hyundai, Toyota and Nissan with respective shares of 12.93%, 12.48%, and 10.33%. As for sales per importer, Natco acquired the largest stake of newly registered cars with 15.22% of the total, followed by RYMCO with 15.13%, BUMC and Century Motors with 12.91% and 12.41%, respectively. (BLOM 21.02)

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5.4 Jordanian Revenues from Remittances & Tourism on the Rise

Total income from tourism and remittances by Jordanian expatriates increased by 8.5% in January, reaching $664 million compared to $612 million during January last year, Petra, reported. The Central Bank of Jordan (CBJ) said in a statement that initial data indicated a 4.2% overall increase in Jordanian expatriates’ remittances during January, reaching around $296 million compared with $284 million in the same period last year. Revenues from tourism in January 2017 recorded a 12.2 increase, standing at $368 million, compared with $328 million in January 2016. The CBJ said the increase in tourism income is mainly attributed to an 8.7% increase in overnight tourists, reaching 339,200 tourists in January this year compared to 312,200 in January 2016. Total income from tourism and remittances amounted to $8 billion in 2016, Petra added. (JT 06.03)

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5.5 Incentives Launched as Part of Jordan’s Economic Correction Plan

Amman is carrying on with its administrative reforms and has launched a set of economic incentives to boost the economy’s performance. The government’s efforts to address the budget deficit have started with reducing governmental expenses and was followed by amending previously “deformed” sales tax regulations. The next step is enacting economic incentives, a government spokesman said in a press conference at the Prime Ministry. These “comprehensive national” reforms must be seen in their “bigger picture”, he noted, highlighting that Jordan does not approve of any dictations from external bodies.

Under administrative reform, the government identified the maximum allowance for its representatives on boards of directors of state-owned companies based on an A, B and C classification of the companies. Government representatives on boards of “A” companies will be allowed JD500 monthly, while those on boards of companies “B” and “C” will be allowed JD400 and JD300 monthly, respectively. Surplus money will return to the Treasury through the Finance Ministry. Regarding public servants’ travel allowance, around 90% of travel allowance requests were rejected, with the majority of the remaining 10% being covered by hosts.

The economic incentives include the government’s endorsement of the Jordan Valley Authority’s decision to distribute lands in Ghweibeh area in Southern Ghor to underprivileged families as means of direct support to ease their difficult economic conditions. In addition, companies that offer financial, legal or technical services within the Aqaba Special Economic Zone will be exempted from income tax if 60% of their operations are within the special zone. Work is under way to create an agenda of governmental activities over a period of weeks. This timeframe will allow ministers to view activities of other ministries and seeks to enhance coordination among them in order to serve the government’s broader development and economic goals. (JT 26.02)

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►►Arabian Gulf

5.6 Arabian Gulf States Set to Discuss Regional Rail Project in April

The Gulf Cooperation Council (GCC) will discuss the likelihood of constructing a regional rail network by 2021 at a meeting of regional ministers in April. The regional bloc made up of Saudi Arabia, the UAE, Bahrain, Kuwait, Oman and Qatar last year reached an agreement in principle to delay the 2018 completion date until 2021.

The 2,100-km (1,310-mile) passenger and cargo network stretching through all six Gulf states from Kuwait to Oman has faced technical and bureaucratic obstacles, and stalled as state budgets tightened because of low oil prices. The UAE has suspended further construction of its project while Oman has shifted concentration to building a domestic network linking the ports of Salalah, Sohar and Duqm. Bahrain has said it would not connect its network to a neighboring state, Saudi Arabia, until at least 2023. It later plans to connect to Qatar. The meeting between regional ministers who oversee transport and infrastructure portfolios would “most likely” take place in Saudi Arabia. (Reuters 28.02)

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5.7 Bahrain’s Inflation Rate Falls Sharply in January

Bahrain’s inflation rate fell sharply in January as food prices dropped, according to latest data released by the country’s statistics office. The inflation rate fell to 0.8% last month from 2.3% a year earlier, the figures showed. Although housing and utility costs, which account for 24% of consumer expenses, rose 3% from a year earlier, the prices of food and non-alcoholic beverages, which account for 16%, fell 2.3%. Inflation in Bahrain rose to 3.8% in April 2016, its highest level since December 2013. In December, the CEO of the country’s investment agency said he expects Bahrain to see non-oil sector growth of more than 3% in 2016 and 2.4% in 2017. (AB 21.02)

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5.8 Bahrain’s Economic Growth Forecast to Shrink in 2017 – 2018

Bahrain’s fiscal deficit will fall only marginally to 12.3% of GDP this year from 13.6% in 2016 as oil prices settle well below the country’s breakeven figure, according to ratings agency Fitch. The agency said it expects Brent to average $45 per barrel in 2017, nearly $40 below the breakeven price for the Gulf kingdom. Fitch Ratings affirmed Bahrain’s long-term foreign and local currency issuer default ratings at ‘BB+’ with a stable outlook. It noted that Bahrain’s ratings are supported by high GDP per capita and human development indicators and a developed financial sector. The strengths are balanced by double-digit fiscal deficits, high and rising debt, a highly oil-dependent government budget and domestic political tensions that hamper fiscal adjustment, it added.

Fitch expects GDP growth of 2.4% in 2017-2018 including a moderation of non-hydrocarbon growth to 3% from an estimated 3.4% in 2016. Continued deficits will push debt to 84% of GDP in 2018 from 75% in 2016, Fitch said. It added that the country’s gradual increases in domestic gas and fuel prices will partly offset the negative effect of oil price weakness on hydrocarbon revenue. Fitch said it expects spending to grow at a rate below non-oil GDP growth, after a broad-based cut of 8.2% in 2016. The biggest spending cuts were to subsidies and transfers and capital spending. Notably, the nominal wage bill also fell for the first time in recent history.

In Fitch’s forecast, the government’s foreign borrowing reaches roughly $3.2 billion in 2017 and $2.2 billion in 2018, after $2.9 billion in 2016. It added that banks are well placed to extend more credit to the economy and the government, enjoying profitability, high levels of capitalization and liquidity, and low nonperforming loan levels. (Fitch 05.03)

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5.9 Qatar’s Foreign Trade Surplus Jumps 62% in January

Qatar’s January trade surplus increased by 62.2% from a year earlier, according to data released by the country’s Ministry of Development, Planning and Statistics. The country’s surplus rose to QR10.9 billion ($3 billion) in January from QR10.7 billion in December and up from QR6.7 billion in January 2016. Qatar’s December trade surplus, which increased 21.7% from a year earlier, was its only monthly rise in 2016. Exports of petroleum gases and other gaseous hydrocarbons climbed 13.7% to QR13.27 billion ($3.65 billion).

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5.10 India to Grow Crops to Meet UAE Food Demand

India and the UAE are reportedly working on creating a “farm-to-port” special economic zone to meet the latter’s food security interests. In a joint statement issued during the visit of Abu Dhabi Crown Prince Sheikh Mohammed Bin Zayed to India in January, the two countries agreed that food security remains an area of high priority for the two sides. The statement stated that the Indian side welcomed proposal from the UAE for establishing food security parks, including through creation of high quality food processing infrastructure, integrated cold chain, value addition and preserving technology, packaging of food products and marketing.

The Times of India quoted Amar Sinha, secretary, ministry of external affairs, as saying that the initiative will be similar to a special economic zone but in the style of a corporatized farm, where crops are grown keeping the specific UAE market in mind, with dedicated logistics infrastructure all the way to the port.

The UAE has developed a comprehensive plan to secure food supply, which includes investments in farmlands across Namibia, South Africa, Tunisia, Morocco, Algeria, Sudan and Egypt and improving domestic productivity by using new technologies. However, poor security and political risks affected some of these projects with the UAE now shifting its focus to safer havens such as Eastern Europe, Australia, and North and South America. (AB 07.03)

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5.11 Abu Dhabi’s New Airport Terminal Opening Delayed to 2019

The opening of Abu Dhabi Airports’ $2.94 billion Midfield Terminal has been pushed back by two years, in the latest setback for a project seen as crucial to the emirate’s wider expansion into tourism. Abu Dhabi is investing billions in tourism, infrastructure and industry to diversify its economy away from oil. But some projects have been hit by delays. The expansion of its main airport, Abu Dhabi International, had already been delayed by around five months until December 2017, while the opening of the Louvre Abu Dhabi museum has also been delayed to 2017 due to pending construction work.

The Midfield Terminal will be able to accommodate up to 30 million passengers a year when it opens. Abu Dhabi International Airport will have passenger capacity of 45 million per year when the Midfield Terminal opens, almost double the 23 million passengers it attracted in 2015. A consortium of Turkey’s TAV Insaat, Athens-based Consolidated Contractors Company and Dubai’s Arabtec are building the terminal. (Reuters 06.03)

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5.12 Dubai May Opt To Delay Launch of Driverless Flying Taxis

Dubai’s Roads and Transport Authority (RTA) said it will not commence commercial service of driverless flying taxis until it gets a safety certification. Earlier this month, the RTA in collaboration with China’s Ehang Company announced it had carried the first test run of an autonomous aerial vehicle capable of carrying a human and would put it in operation by July. The RTA is also in talks with UAE’s General Civil Aviation Authority (GCAA), the federal, autonomous body set up to oversee aviation-related activities in the country, for completion of the certification process.

The driverless flying taxis are part of Dubai government’s 2030 initiative, unveiled in April 2016, which aims to have 25% of the emirate’s transport to be autonomous by 2030 and generate economic revenues and savings of up to $5.99 billion (AED22 billion) a year. The RTA is testing the aerial vehicles but will soon set up a budget to buy these autonomous vehicles before starting the service.

The EHANG184 vehicle is fitted with a touchscreen to the front of the passenger seat displaying a map of all destinations in the form of dots and has preset routes from which the rider can choose a destination. The vehicle will then start automatically, take off and cruise to the set destination before descending and landing in a specific spot. The vehicle is fitted with eight main propellers, and in case of any failure in the first propeller, there would be seven other propellers ready to complete the flight. A ground control center will monitor and control the entire operation, the RTA has said. (AB 27.02)

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5.13 Saudi Economy Forecast to Continue Slowdown in 2017

Saudi Arabia’s economy is forecast to continue slowing this year, dragged down by negative growth in the oil sector, according to Jadwa Investment. Its latest report said growth in the oil sector will turn negative due to the kingdom’s compliance with OPEC production cuts, while non-oil sector growth should rebound but “remain subdued” during 2017. Jadwa forecast that growth in the non-oil private sector will accelerate from 25 year lows with non-oil mining and ownership of homes likely to be the fastest growing sectors. It added that growth in wholesale and retail and construction will turn positive following a recession in 2016. Jadwa said that the combination of a rebound in oil revenue as a result of higher oil prices, rising non-oil revenue, and improving efficiency in expenditure will result in the fiscal deficit falling to single digits in 2017. The current account deficit will also shrink considerably, boosted by a rise in oil export revenue, it noted. Jadwa added that the partial impact of fiscal balancing measures will be offset by the government’s focus on restructuring the private sector support mechanism. (AB 24.02)

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5.14 Saudi Arabia Sees First Deflation in More Than a Decade

Inflation turned negative in Saudi Arabia for the first time in more than a decade in January, according to data released on 23 February by the country’s Central Department of Statistics. The figures showed that prices fell by 0.4% last month compared to a rise of more than 4% in January 2016. The fall was partly due to the weakness of the Saudi economy, where low oil prices have slashed the government’s export revenues and forced it to cut spending. Food and beverage prices fell 4.2% from a year earlier, partly because of the strong US dollar, to which the Saudi riyal is pegged. Prices of housing and utilities rose 1.2% and transport costs fell 3.1%, with inflation in both categories down sharply compared to rates in previous months. The government raised prices of domestic fuel and utilities around the end of 2015, and the changes dropped out of calculations this month.

Pressure for prices to rise is expected to increase within months, however. The government plans another round of fuel price increases in mid-2017 and has said it will impose a 50% tax on soft drinks and a 100% levy on tobacco and energy drinks in the second quarter of this year. The government plans to raise fees for foreigners’ work permits and their dependents’ visas, starting this year, and intends to introduce a 5% value-added tax in the first quarter of next year. (CDS 21.02)

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5.15 Saudi Arabia Seen Saving $96 Billion Through Reforms by 2020

Planned fiscal measures in Saudi Arabia by 2020 will lead to savings of around SR362 billion ($96.5 billion), according to estimates by Jadwa Investment. Its latest research note said the Gulf kingdom’s Fiscal Balance Program (FBP) includes initiatives designated for enhancing spending efficiency, reforming energy and water prices, and promoting non-oil revenue. According to Jadwa’s estimates, planned fiscal measures will result in a fiscal surplus of SR162 billion in 2020, compared with a deficit of SR200 billion if no reforms are implemented. The company said its forecast differs slightly from the baseline scenario presented in the Fiscal Balance Program due to its belief that oil revenue will be slightly higher than what the government is expecting.

Jadwa noted that FBP initiatives will help in keeping total government spending in an expansionary mode from 2018 to 2020, adding that it also touches on critical socioeconomic aspects such as the creation of a “household allowance program” to support low-to-mid income Saudi households. Inflation turned negative in Saudi Arabia for the first time in more than a decade in January, according to data released by the country’s Central Department of Statistics. The figures showed that prices fell by 0.4% last month compared to a rise of more than four% in January 2016. The falls were partly due to the weakness of the Saudi economy, where low oil prices have slashed the government’s export revenues and forced it to cut spending. (Jadwa 04.03)

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►►North Africa

5.16 Egypt’s Trade Deficit Declines by 44% Year-On-Year in January 2017

Egypt’s trade deficit declined 44% in January 2017 from $3.49 billion to $1.96 billion compared to the same month in 2016, the Ministry of Trade and Industry said. Minister Kabil announced that non-petroleum exports increased by 25% in January 2017 to $1.6 billion from $1.32 billion in the same month in 2016, while imports decreased by 25% from $4.82 billion to $3.62 billion. In December 2016, the trade deficit declined by 40.5% in December 2016, according to CAPMAS. Year on year, the import of sugar increased drastically by 7,535% in December 2016.

Egypt has been facing a shortage in supplies of sugar, of which the country consumes more than three million tons annually, since September as the foreign currency crisis crippled imports. The sugar crisis eased following the country’s decision to float its currency in November as well as the Ministry of Supply decision to import 120,000 tons of sugar from Brazil and France. Egypt has undergone a hard currency crisis in recent months that resulted in high dollar rates on the black market and left banks unable to provide companies with the currency needed to service imports.

The Central Bank floated the pound against the dollar in November 2016 in an attempt to alleviate the country’s flagging economy, leading the pound to plummet, reaching an average exchange rate of EGP 18.5 to the dollar in early March, compared to EGP 8.88 prior to the flotation. (Ahram Online 05.03)

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5.17 Egyptian Expat Remittances Increase by 23% in January

Remittances from Egyptian citizens working abroad rose by 23% in January to $1.6 billion, compared to $1.3 billion in January 2016, the Central Bank of Egypt said. Since the currency devaluation in November, remittances have risen by about 19.7% to $5 billion as of January, compared to $4.1 billion during the period of comparison. CBE said last month that remittances from the last quarter of 2016 rose by 11.8% compared to the same period last year, to reach $4.6 billion.

The Suez Canal and remittances from Egyptians living abroad are now the sole sources of foreign currency coming into the country, after the halt in gas exports to Israel and Jordan and the struggling tourism sector, which was exacerbated by the downing of the Russian passenger jet in October 2015. Egypt floated the national currency on 3 November. It devalued the Egyptian pound by about a third from the former peg of LE8.8 against the dollar and allowed it to drift lower. Egypt’s dollar peg had drained the central bank’s foreign reserves, which were hit by reduced foreign investment following political turmoil in the past few years, forcing the central bank to impose capital controls and ration dollars. (CBE 06.03)

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5.18 Egypt’s Suez Canal Generates $395.2 Million in January Revenue

Egypt’s revenues from Suez Canal trade declined in January to register $395.2 million compared to $434.8 million in the same month last year, according to data from the Suez Canal Authority (SCA). According to the data, 1,369 ships passed through the Egyptian waterway last month, compared to 1,414 ships in December and 1,411 ships in January 2016. January’s receipts declined slightly compared to the previous month, when it registered to $414.4 million. The canal, which is the fastest shipping route between Europe and Asia, is one of the country’s main sources of foreign currency. (Ahram Online 25.02)

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5.19 Morocco Set to Become Manufacturer of Weapons

Morocco is conducting talks with a number of countries and companies in order to launch consortia for local weapons manufacturing. A report by Strategic Defense Intelligence (SDI) has revealed that Morocco is currently holding talks with Spain, France, and the US, as well as companies in Belgium and the UK, to launch local joint ventures for weapons manufacturing. The attempt seeks to reduce Morocco’s complete dependency on foreign suppliers.

SDI, which delivers proprietary content for the global defense sector, acknowledged that, while Morocco’s military industry is not in a position to export weapons and military equipment, “this is likely to change soon with the government’s attempts to develop and expand the field of domestic arms manufacturing.” The SDI report explained that Morocco’s desire to develop its military arsenal has evolved from its aspiration to become a military power in the continent, bolstered by its macro-economic stability, low level of inflation, and huge reserves of hard currency. As well, Moroccan weapons imports have grown, making the country the world’s 13th biggest importer, and the second in Africa, after Algeria, a position the SDI predicted it would hold until at least 2020. (EDN 27.02)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkey’s Inflation Hits Double Digits in February for First Time Since 2012

Turkey’s annual consumer price inflation hit 10.13% in February, hitting double digits for the first time since April 2012 and coming in higher than analysts’ expectations, as transportation and health costs climbed, according to official data. Consumer prices were up 0.81%, when compared with January, exceeding forecasts, data from the Turkish Statistics Institute (TUIK) showed on 3 March. The report showed that the highest monthly increase was in transportation, at 2.82%, while the main drivers of yearly consumer price inflation on an annual basis were alcoholic beverages and tobacco, together up 21.72%.

The Turkish Lira, which lost more than 1% of its value against the U.S. dollar on 2 March, weakened to as far as 3.7460 after inflation data was released, its weakest since 8 February. It subsequently firmed back to 3.7285.

In January, the Central Bank raised its year-end inflation forecast to 8% from 6.5%. It has taken unorthodox monetary tightening steps to tame price rises and defend the lira after sharp losses at the start of the year. According to analysts, the increases in automotive prices and the delayed impact of the loss in the lira’s value pushed up the transport costs. TUIK in January said it had altered its inflation basket, cutting the weighting of food and non-alcoholic beverages. (AA 03.03)

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6.2 Turkey Among Top Five Countries to See Most Millionaire Outflow in 2016

There were a total of 82,000 millionaire migrants that left for greener pastures in 2016, with Turkey one of the five countries witnessing the greatest such outflow, according to a fresh survey by New World Wealth. France, China, Brazil, India and Turkey saw the highest number of outflows last year. Among the top five, Turkey experienced the highest increase in outflow last year compared to 2015. While some 1,000 millionaires left the country in 2015, this figure rose to 6,000 in 2016, representing a 500% year-on-year increase. France topped the list for a second straight year, as rich people dodge conditions that they consider to be adverse, according to the report. China and India both continue to have net outflows of millionaires, but two of the more interesting countries on this list were Brazil and Turkey, according to the report.

In 2016, Australia was the number-one destination for millionaire migrants, with the United States and Canada being close behind. Millionaire immigration to New Zealand also doubled, while the United Arab Emirates remained a popular location for the wealthy in the Middle East. (HDN 27.02)

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6.3 Russian Tourist Numbers to Turkey Rise in January but Foreign Arrivals Keep Declining

The number of Russian tourists visiting Turkey soared 81.5% in January compared to the same month of 2016, although foreign arrivals to the country continued to decline. According to preliminary data released by the Tourism Ministry on 28 February, some 40,124 Russians visited Turkey in January. Russia thus ranked fifth in the top source of tourists for Turkey, following Georgia, Iran, Germany and Bulgaria. In 2016, the number of arrivals from Russia into Turkey regressed to 866,256 overall, a 76.2% drop from the previous year amid the diplomatic crisis between the two countries. A total of 3.65 million Russians visited Turkey in 2015 and 4.5 million in 2014. (AA 28.02)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israelis Satisfied With Their Lives, New Survey Shows

Some 89% of Israelis are satisfied with their lives, a new Central Bureau of Statistics survey shows. According to the survey, titled “The Wellbeing, Sustainability and National Resilience Indicators – 2015,” 91% of Jewish respondents were satisfied or very satisfied with their lives, as well as 82% of Arab respondents (non-Jews who are not Arab were surveyed together with Jews). The respondents for this survey were aged 20 and up. The categories used to gauge the various indicators were: employment quality; personal security; health care; housing; education and skills; personal and social welfare; the environment; civic involvement; and material wealth.

The number of people who were satisfied with their employment rose from 81.5% in 2002 to 88.4% in 2015. Life expectancy increased between 2000 and 2015 by 3.4 years (from 76.7 to 80.1) among men and by 3.2 years (80.9 to 84.1) among women. The survey found that 71% were satisfied with the health care they received, with 15% saying it was “very good” and 56% saying it was “good.” Some 60% said the Israeli health care system would provide them with the best possible treatment in case of a severe illness: 18% said they believed this “strongly” and the rest (42%) said “somewhat.”

Some 81% of respondents (90% of men and 72% of women) said they felt safe walking alone at night near their homes. In Jerusalem, only 71% said they felt safe walking alone. Answers split along socio-economic lines when it came to housing-related expenses for 2014: Some 55% of families in the poorest decile spent at least 30% of their net income on housing-related expenses, but only 14% of households in the richest decile said the same. By and large, 33.5% of Israeli households spent 30% or more of their income on housing expenses. The survey further showed that the standard net income per capita stood at NIS 97,828 (about $26,700) in 2015, an increase of 2.8% compared to the previous year. (CBS 28.02)

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*REGIONAL:

7.2 King Abdullah Urges Strict, Swift Implementation of Judicial Reform Plan

On 27 February, King Abdullah said that the judiciary is a red line, vowing to personally follow up on the recommendations of a panel tasked to improve the judicial environment in the Kingdom. He made the remarks as he received the report compiled by the Royal Committee for Developing the Judiciary and Enhancing the Rule of Law, which came up with 49 suggestions, some of which have been key demands by advocacy groups and activists for decades. The implementation of the plan will involve changes to, or the introduction of 16 pieces of legislation.

The Royal committee was formed in October 2016 under the chairmanship of former prime minister Zeid Rifai. Its mandate was to draw up a comprehensive strategy within four months to address the challenges facing the judicial reform process and improve legislation. The implementation stage should begin immediately, the King said, urging coordination among the three branches of government to translate the plan into concrete measures and policies within the current year. The King underlined the potential impact of success in this endeavor, especially since it would assure citizens and investors that their rights are protected and transactions completed within reasonable timeframes.

The taskforce also reviewed the achievements of previous committees with a similar mandate and the work of the Judicial Council and the Ministry of Justice, covering all the aspects of the mission, with focus on human rights, criminal and civil laws, tribunal formation, the Judicial Council, public prosecution, judicial inspection, judges’ affairs and judicial environment. This includes ensuring optimal independence of the Judicial Council to appoint, transfer, promote and mandate judges as well as serve their interests and ensure them job security. (JT 26.02)

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7.3 Sheikh Hamdan Tries Golden Burger Inspired by Burj Khalifa

Crown Prince of Dubai Sheikh Hamdan has been spotted trying the 24 carat golden burger at food event Eat The World DXB. The burger priced at $63 (AED230) per piece is topped off with an edible 24 carat gold leaf bun. The $63 burger topped off with an edible 24 carat gold leaf bun consists of five Wagyu beef patties, truffle cheese, seared and “ethically sourced” foie gras, saffron mayonnaise and blackberry ketchup. The Golden Burger was launched by London-based good truck trader The Roadery. (Various 27.02)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 MIXiii-Biomed 2017 – Israel’s Premier International Life Sciences Conference and Exhibition

In May 2017, MIXiii-BIOMED, the leading event of Israel’s life science industry, will mark its 16th anniversary. Throughout the years, this conference emerged as the main annual meeting place for representatives of Israel’s healthcare industry with colleagues from around the globe. Anyone looking for innovation in the life sciences should definitely attend this meeting! Visitors from around the world come to explore the various innovations and experience firsthand the entrepreneurial spirit which is a basis of Israel’s vibrant life science community. Previous successful conferences hosted over 6,000 senior executives, scientists, engineers and investors, including approximately 1,000 participants from over 45 countries.

This year, aging and age-related diseases are the central themes of the conference, which will be dedicated to diseases affecting the elderly population such as chronic diseases, cancer, neuro-degenerative diseases, diabetes and more. Looking at the future of the healthcare system, participants will address ways to monitor, diagnose and treat elderly patients by utilizing new methods and innovations in fields such as precision medicine, genetics, personal diagnostics and more, as well as explore how digital health and health IT address these fields. In addition, issues of cybersecurity will be raised in association with the use of new age-related technologies. Additional fields that will play a crucial role in aging individuals are medical robotics, regenerative and cell therapies and longevity. All these and more will be presented and discussed as part of the growing interest and resources invested by healthcare systems in addressing issues of aging populations. (MIXiii-BIOMED 22.02)

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8.2 Phytecs Partners with Yissum to Discover New ECS-Targeting Compounds

Los Angeles’ Phytecs, a biotechnology company exploring innovative research into and potential treatments targeting the endocannabinoid system (ECS), together with Yissum Research Development Company, the technology-transfer company of the Hebrew University of Jerusalem, announced a new partnership with two aims: to synthesize novel compounds that show increased efficacy over existing phytocannabinoids in targeting specific elements of the ECS, a key homeostatic regulator of the human body; and to continue testing semi-synthetic, patented fluorinated cannabidiol (F-CBD) compounds developed under a previous licensing agreement, which was signed with Yissum, University of Sao Paulo (USP) and Federal University of Rio Grande Do Sul (UFRGS). Work conducted under the new partnership will complement Phytecs’ existing research into therapeutic applications for various phytocannabinoids and terpenoids sourced from cannabis, and combinations thereof. Financial details of the partnership were not disclosed.

Yissum Research Development Company of the Hebrew University of Jerusalem was founded in 1964 to protect and commercialize the Hebrew University’s intellectual property. Products based on Hebrew University technologies that have been commercialized by Yissum currently generate $2 billion in annual sales. Ranked among the top technology transfer companies in the world, Yissum has registered over 9,325 patents covering 2,600 inventions; has licensed out 880 technologies and has spun out 110 companies including Mobileye, Briefcam, Orcam, Avraham Pharmaceuticals, Betalin Therapeutics, CollPlant and Qlight Nanotech. Yissum’s business partners span the globe and include companies such as Microsoft, Intel, Johnson & Johnson, Novartis, Roche, Merck, Teva, Syngenta, Monsanto and many more. (Phytecs 22.02)

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8.3 OWC Receives IRB Approval to Start Testing on its Cannabinoid-Infused Psoriasis Cream

OWC Pharmaceutical Research Corp. has received Institutional Review Board (IRB) approval to conduct safety testing on its proprietary topical creme compound for the treatment of psoriasis and related skin conditions. The approval follows the Company’s 1 February 2017 8K filing announcing an extension to the size and scope of its efficacy study on the same compound, which began in November 2106. The IRB approved study encompasses the cream itself, as a delivery mechanism, as well as the proprietary psoriasis formulation, and is the first to formally make such claims with the NIH Registry. The double-blind study, which will be conducted on healthy volunteers at one of Israel’s leading academic hospitals, is designed to demonstrate the safety of the formulation in treating psoriasis on human skin tissue. Administrators began soliciting for study participants as soon as approval was received.

Petah Tikva’s OWC Pharmaceutical Research Corp., through its wholly-owned Israeli subsidiary, One Word Cannabis, conducts medical research and clinical trials to develop cannabis-based pharmaceuticals and treatments for conditions including multiple myeloma, psoriasis, fibromyalgia, PTSD and migraines. OWC is also developing unique delivery systems for the effective delivery and dosage of medical cannabis. All OWC research is conducted at leading Israeli hospitals and scientific institutions, and led by internationally renowned investigators. (OWC 27.02)

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8.4 Pharma Two B Closes $30 Million Financing Round

Pharma Two B has completed its third round of financing. The $30m funding round was led by Israel Biotech Fund (IBF) which identified the company, led the due diligence and syndicated with leading US and Israeli biotechnology investors, including aMoon and JVC. Current investors, including JK&B and Generali Financial Holdings FCP-FIS SF2 participated in this round as well. The funds raised will be used to complete the final pivotal phase III clinical trial needed to register P2B001, the company’s lead combination product for the treatment of Parkinson’s disease. This round will enable Pharma Two B to expand its portfolio to include additional products.

Rehovot’s Pharma Two B develops clinically differentiated and value-added products, based on approved drugs. The company focuses on Fixed-Dose-combinations of two or more drugs with complementary and synergistic effects, providing high clinical value and shorter regulatory pathways (US 505(b)(2) approach). The company develops products in two therapeutic areas with great unmet needs. The company’s leading product is a combination drug for the treatment of early stage Parkinson’s disease.

Israel Biotech Fund seeks high value returns by identifying and maximizing the success of therapeutic assets of Israel-based biotech companies. Based in Rehovot, Israel’s main Biotech hub, Israel Biotech Fund invests exclusively in Biotech companies developing drugs at or near clinical stages. The Fund has the tools, experience and network required to identify the best opportunities and partner with its portfolio companies to help them go the distance. (Pharma Two B 27.02)

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8.5 Can-Fite’s Namodenoson (CF102) Prevents Progression of Liver Fibrosis

Can-Fite BioPharma announced new data that show its liver disease drug candidate Namodenoson (CF102) prevented liver (hepatic) fibrosis progression in preclinical studies. Liver fibrosis is the excessive accumulation of scar tissue resulting from ongoing inflammation. It can result in diminished blood flow throughout the liver and is associated with NAFLD. Recent preclinical studies in a mouse model of liver fibrosis demonstrated the anti-fibrotic effects of Namodenoson. The Namodenoson treated group exhibited normal liver under macroscopic view, no accumulation of fluid (ascites), a low fibrosis profile, and lower serum levels of transaminases as compared to the control group. In addition, liver protein extracts and mRNA for the alpha smooth muscle actin showed a significant anti-fibrotic effect in the Namodenoson treated group as compared to the control group.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development Company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction. The Company’s lead drug candidate, Piclidenoson, is scheduled to enter Phase III trials in 2017 for two indications, rheumatoid arthritis and psoriasis. The rheumatoid arthritis Phase III protocol has recently been agreed with the European Medicines Agency. (Can-Fite 28.02)

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8.6 Via Surgical Signs Exclusive U.S Distribution Agreement With Progressive Medical

Via Surgical has entered into an exclusive US distribution agreement with St. Louis’ Progressive Medical for distributing its lead product FasTouch across the US. The FasTouch Fixation System is intended for fixation of prosthetic material to soft tissues in various minimally invasive and open surgical procedures such as hernia repairs. FasTouch Sutures, for the first time, provides surgeons fixation that is designed like sutures and delivered like tacks. This next generation technology is the first to provide lockable, flexible suture-like fixation that is truly trans-fascial with less foreign body material. For physicians and patients, this has the potential to increase confidence in fixation, minimize complications such as adhesions and post-op pain and lead to a faster recovery. In addition, The FasTouch Fixation System uses exchangeable cartridges potentially providing increased value and cost savings over traditional fixation devices for Healthcare institutions.

Moshav Amirim’s Via Surgical provides innovative next-generation fixation technology. Realizing that many hernia repairs make use of multiple means for mesh fixation – anchor/helical hernia tacks, manually applied transfascial sutures – Via Surgical has developed its FasTouch system to provide deployable suture fixation that is strong and consistent, yet easily and rapidly deployed for hernia repair. (Via Surgical 06.03)

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8.7 RadiAction Medical Raises $5.7 Million

RadiAction Medical has completed a $5.7 million Series A financing round led by HighGround Tairun Investment LLPs, an investment fund co-managed by HighGround Capital and Boya Capital from China. The company has developed an innovative radiation shielding device for fluoroscopic systems in interventional suites. The technology was developed by RadiAction, which was founded in 2014 in the RAD Biomed incubator in Israel. The technology involves a device that transfers the radiation shielding from the personnel to the fluoroscopy system itself, while seamlessly integrating with the physician’s work flow and featuring zero-impact on the X-ray image quality.

Trials using a non-commercial prototype have shown that RadiAction’s technology has the potential to reduce scattered radiation levels in the catheterization room by 97% or higher, with no need for personal shielding garments. RadiAction’s technology is protected by several patents in the US and globally. The company intends to use the proceeds of the current round for accelerating the R&D activity, complete required tests, obtaining regulatory clearances and to get to market with a commercial product.

Tel Aviv’s RadiAction Medical is developing an innovative radiation shielding system that enables profound radiation protection to all personnel in the interventional suite, with higher protection levels than current gold standard of lead aprons and shields. The unique concept is to transfer the radiation shielding from the personnel to the fluoroscopy system itself and block the scattered radiation from its origin. (RadiAction Medical 07.03)

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8.8 Medial EarlySign’s System Helps Identify Individuals at High Risk for Colorectal Cancer

Medial EarlySign announced new research with one of Israel’s leading integrated delivery networks, Maccabi Health Services (MHS), that found the company’s MeScore (hereafter ‘ColonFlag’) tool can potentially be used to identify individuals who are at 10 to 20 times increased risk of harboring an occult colorectal cancer (CRC). The peer-reviewed study, published by PLOS ONE, sought to determine if information contained in complete blood count (CBC) reports could be processed automatically and used to predict the presence of occult CRC in the setting of a large health services plan. The researchers reviewed Maccabi’s CBC reports for 112,584 study subjects, of whom 133 were diagnosed with CRC in 2008, and analyzed these with Medial EarlySign’s tool.

This is the first time that ColonFlag has been evaluated on previously collected prospective data. Reviewing the charts of patients diagnosed with colorectal cancer, the researchers found that for the majority of individuals with cancer, CRC was not suspected at the time of the blood draw. The study also indicated that frequent use of anticoagulants, presence of other GI pathologies, and non-GI malignancies were associated with false positive ColonFlags. ColonFlag is not yet cleared by the FDA for commercial use in the USA.

Kfar Malal’s Medial EarlySign‘s advanced algorithm platform accurately detects the likelihood of disease for subpopulations using basic medical information, such as blood test results, and other EMR data. The company’s predictive tools provide physicians with actionable insight, while providing insurers with effective models to flag and focus on patients at risk, helping to prioritize resources, save money and improve care. Medial EarlySign’s platform addresses numerous potential clinical outcomes, including cancers, diabetes and other life-threatening illnesses. (EarlySign 07.03)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Giraffic and Byond Join Forces to Create Mobile VR Magic

Tel Aviv’s Giraffic, together with Byond, a groundbreaking cloud-based VR development platform, introducing the first mobile VR video experience that delivers flawless and uninterrupted HD and 4K streaming in real time. The mainstream adoption of VR significantly relies on mobile platforms and wireless networks, while streaming will be the most compelling option to view dynamic and live content. In order to accomplish that, VR must provide users with high-quality uninterrupted experience. The video delivery infrastructure is constrained by network congestions and its unstable behavior, flawing the viewing experience with low resolution and buffering pauses, thus preventing users from fully utilizing their amazing mobile displays and immersive content. As VR video generates 3 to 10 times higher bitrates, its streaming in hi-res and in real-time remains a big challenge. Giraffic and Byond come together to solve this specific problem, turning the troublesome task of high-quality 360 degree video and VR streaming into a thing of a past.

Giraffic Adaptive Video Acceleration, the leading client-side video experience technology, enabling consumer electronics devices and streaming service providers’ apps to deliver HD, UHD 4K video and VR, without re-buffering pauses or streaming resolution reduction. AVA technology was adopted by leading manufacturers, powering over 80 million devices, and now is making its way into VR and apps. Giraffic was featured in Deloitte’s 2016 Technology Fast 50, a list of the fastest growing technology companies in Israel, as one of the Top 10 Rising Stars. (Giraffic 27.02)

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9.2 Mellanox Introduces World-Leading 6WIND-Based Router and IPsec Indigo Platform

Mellanox Technologies announced the IDG4400 6WIND Network Routing and IPsec platform based on the combination of Indigo, Mellanox’s newest network processor, and France’s 6WIND’s 6WINDGate packet processing software, which includes routing and security features such as IPsec VPNs.

The IDG4400 6WIND 1U platform supports 10, 40 and 100GbE network connectivity and is capable of sustaining record rates of up to 180Gb/s of encryption/decryption while providing IPv4/IPv6 Routing functions at rates up to 400Gb/s. As the result of the strong partnership between the two companies, Mellanox’s IDG4400 6WIND delivers a price/performance advantage in a turnkey solution designed for carrier, data center, cloud and Web 2.0 applications requiring high-performance cryptographic capabilities along with IP routing capabilities. The IDG4400 6WIND complements Mellanox’s Spectrum-based Ethernet switches to provide a full solution for the datacenter.

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9.3 RADWIN Fulfills the Promise of 5G, Today

RADWIN demonstrated its carrier-grade solutions in Barcelona. Deployed by tier-1 carriers worldwide, RADWIN’s JET solutions set a new standard in the broadband wireless access market, providing unmatched fiber-like quality at speeds of up to 3 Gbps per cell. JET portfolio encompasses the JET PRO 750 Mbps series geared for enterprises requiring SLAs and JET Air 250 Mbps series designed for the residential market. JET base stations are powered by Bi-Beam – the industry’s first bi-directional beamforming antenna which assures the lowest interference rate in the industry. RADWIN’s solutions incorporate a suite of network planning and design tools that significantly simplify and reduce deployment times. Built to last, JET carrier-grade equipment operate in the toughest environments for wireless, including non-line-of-sight, severe interference and harsh weather.

Tel Aviv’s RADWIN is a leading provider of Point-to-Multipoint and Point-to-Point broadband wireless solutions. Incorporating the most advanced technologies such as a Beam-forming antenna and an innovative Air Interface, RADWIN’s systems deliver optimal performance in the toughest conditions including high interference and obstructed line-of-sight. Deployed in over 170 countries, RADWIN’s solutions power applications including backhaul, broadband access, private network connectivity, video surveillance transmission as well as delivering broadband for trains and metros. (RADWIN 23.02)

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9.4 Shaw Selects NICE Sales Performance Management to Manage Complex Incentive Plans

NICE announced that Shaw Industries Group, a subsidiary of Berkshire Hathaway, has selected NICE cloud-based Sales Performance Management (SPM) to handle incentives for retailers and retail sales associates. As part of the retailer incentive project, NICE SPM will manage incentive planning, calculations, rebates, retailers’ statements, reports, inquiries and disputes. Shaw Industries chose NICE SPM over several competitors due to its flexibility to adapt to its business needs, and ability to address the complexity of its retailer incentive requirements. Particularly, the Sales Support team at Shaw was looking for better control and visibility over its complex rebate programs.

NICE Sales Performance Management (SPM) helps large organizations manage sales compensation to improve sales performance. NICE SPM handles complex incentive compensation management (ICM) needs, automates sales operation processes, manages territories and quotas, and delivers sales performance analytics.

Ra’anana’s NICE is the worldwide leading provider of both cloud and on-premises enterprise software solutions that empower organizations to make smarter decisions based on advanced analytics of structured and unstructured data. NICE helps organizations of all sizes deliver better customer service, ensure compliance, combat fraud and safeguard citizens. (NICE 27.02)

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9.5 Altair’s CAT-1 IoT Chipset Certified For Operation on T-Mobile’s 4G LTE Network

Altair Semiconductor announced that its ALT1160 CAT-1 LTE for IoT chipset has been certified to run over T-Mobile’s 4G LTE network, and has been added as an option for T-Mobile’s IoT access packs, which combine simple IoT pricing with industry-leading CAT-1 chips. Altair’s ALT1160 CAT-1 LTE chipset certification on the T-Mobile network will improve product makers’ time-to-market and reduce the cost associated with the introduction of new LTE devices on the network.

Altair’s ALT1160 CAT-1 chipset features downlink speeds of up to 10Mbps and extremely low power consumption. The IoT-optimized chipset is highly integrated and incorporates elements such as an advanced on-chip power management unit, integrated DDR memory and a low-power MCU subsystem with a secure application execution environment. The chipset will now be included in T-Mobile’s IoT Access packs, which give new and existing customers a simplified wireless solution for launching IoT devices.

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9.6 Altair and Geotab Team up to Develop LTE-enabled Automotive Telematics Devices

Altair Semiconductor announced that it is teaming up with Geotab, a global provider of open IoT fleet management solutions, to power the next generation of GPS vehicle tracking devices operating on AT&T’s 4G LTE network. Designed to meet the needs of telematics applications, Altair’s CAT-1 chipset, will usher in the new era of Geotab’s LTE-connected products. Customers can look forward to the advanced connectivity and longevity provided by LTE-enabled telematics. Geotab’s end-to-end telematics solutions provide fast GPS acquisition time and highly accurate engine diagnostics. Key features include high quality recording capabilities, in-vehicle driver coaching, and accident detection and notification.

Designed specifically for IoT and M2M applications, Altair’s chipset employs advanced idle and sleep mode power management. It offers a combination of low cost, reduced power and small size that is unmatched in the market.

Hod HaSharon’s Altair Semiconductor is a leading provider of LTE chipsets. Altair’s portfolio covers the complete spectrum of cellular 4G market needs, from supercharged video-centric applications all the way to ultra-low power, low cost IoT and M2M. Altair has shipped millions of LTE chipsets to date, commercially deployed on the world’s most advanced LTE networks including Verizon Wireless, AT&T, Softbank and KT (Korea Telecom). The company’s customer roster includes some of the world’s leading OEMs and ODMs, such as Telit, Sierra Wireless, WNC and Gemtek, as well as the majority of Asian ODMs developing LTE products for global markets. (Altair Semiconductor 28.02)

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9.7 ASOCS Unveils In-building vRAN Solution Pre-Integrated with HPE Open NFV Platform

ASOCS unveiled its in-building virtual Radio Access Networks (vRAN) solution. The solution delivers on the promise of the Network Function Virtualization (NFV) initiative carried out by carriers around the globe aiming to virtualize network services currently being carried out by proprietary, dedicated hardware. Virtualizing baseband processing in the Radio Access Network (RAN) is one of the hardest elements to virtualize due to its real-time nature. ASOCS’ virtual base station (vBS) runs software performing real-time baseband processing on Commercial Off-The-Shelf (COTS) servers using a cloud-architecture. This fully virtualized solution allows for dynamic and automated allocation of baseband resources based on actual data traffic, eliminating the need to over provision base stations to meet peak demand. The vBS is designed for networks at any scale, from nationwide outdoor networks to campus and in-building networks.

Rosh HaAyin’s ASOCS is a pioneer in virtual Radio Access Networks (vRAN) and a provider of fully virtualized, NFV-compatible virtual Base Station (vBS) solutions. Transitioning LTE baseband processing from proprietary, bundled hardware, to a software-rich application that runs on Commercial Off -The-Shelf (COTS) servers significantly improves spectrum efficiency, and enables Open Mobile Edge Clouds (OMEC) at any scale, from in-building and campus deployments to outdoor Macro networks. (ASOCS 28.02)

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9.8 Assa Abloy Implements Industry 4.0 Solution Powered by Magic xpi Integration Platform

Magic Software Enterprises announced that Assa Abloy AG, the Swiss global leader in locking systems and security technology, has put the Magic xpi Integration Platform at the heart of the company’s new fully automated manufacturing system for its KESO keys. The Industry 4.0 solution enables faster and more efficient production. To digitize the manufacturing process, Assa Abloy replaced 20 separate drilling machines previously used on the production line with two new digital drilling machines. While the old system required machine operators to manually enter data using job boards, the new automatically feeds the machine the relevant data based on the bar code. The Magic xpi Integration Platform merges relevant information from the company’s Infor ERP, custom-made Production Information System based on MS Dynamics CRM, and proprietary Lock Management System into an XML file, which is read by the digital machines. The digital manufacturing process has dramatically shortened turnaround time from job placement to delivery, enabling Assa Abloy to deliver customized products faster and more reliably.

Or Yehuda’s Magic Software Enterprises empowers customers and partners around the globe with smarter technology that provides a multichannel user experience of enterprise logic and data. (Magic Software Enterprises 07.03)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Ministry of Finance Warns Growth Rests on New Car Sales

Car purchases accounted for much of the increase in both private consumption and investments in 2016, the Finance Ministry announced. The initial growth estimate for 2016 published this month by the Central Bureau of Statistics surprised many people in the economy. The figures indicated a 4% growth rate last year, much higher than in the preceding years, and also high in comparison with many development countries, where growth rates have been much lower. In his analysis of the main economic trends that contributed to the high growth rate, the Ministry of Finance chief economist concluded that two substantial, but temporary, factors affected the growth rate in 2016: increased purchases of new cars and the upgrading of the Intel fab.

As in the preceding years, private consumption (mainly of durable goods) accounted for 3.7% of GDP in 2016, while investments accounted for 2.7%. The Ministry of Finance explains that these two factors were influenced to a great extent by one main cause – increased purchases of vehicles. Consumption of vehicles for private use affects private consumption in the economy, while purchases of vehicles by leasing companies affects the amount of the economy’s investments, according to the Ministry of Finance.

The Ministry of Finance says that the massive buying of vehicles is not confined to Israel; it is taking place in many developed countries. At the same time, the chief economist warns that this will not last forever, explaining that the effects of increase vehicle purchases on GDP growth are only temporary. While increased purchases of vehicles in other Western countries (in Portugal and Ireland, for example) are following an economic crisis, the Ministry of Finance notes that this is not the case in Israel. “Part of the explanation for the relatively rapid rise in in Israel many be the fact that the motorization rate in Israel is lower than in most developed countries, and even in comparison with countries having a similar per capita GDP as Israel. In Israel, the number of vehicles per 1,000 people is 300, compared with an average of 500 in the developed countries. At the same time, given the global trend towards a rapid increase in purchases of vehicles, it is unreasonable to assume that this trend will continue for long in Israel, and the same is true for its effect on growth,” the review stated. (Globes 26.02)

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10.2 Israeli Women Are More Educated and Live Longer, But Earn Less

Women in Israel live longer and are better educated than their male counterparts – but earn much less – according to a report on the socioeconomic status of Israeli women released by the Central Bureau of Statistics on 6 March. At the end of 2015 there were 3,102,500 women aged 15 and above living in Israel, according to the report. Their average life expectancy stood at 84.1 years, compared to 80.1 years for men.

The report found those women are getting married at a later age and, in turn, having children at a later age. In 2014, 50,797 women got married. The average age for a newly married woman that year was 25 – an increase from 2004’s average of 24.5 years. By sector, the findings indicated the average age for marriage among Jewish and Christian brides stood at 25.9 and 25.8 years, respectively. The average age of Muslim and Druze brides was significantly lower, at 22.2 and 24.1 years, respectively.

Some 173,800 women gave birth in 2015, with the mothers at an average age of 27.6 years, up from 26.5 years a decade ago. The average number of children per woman in the country stood at 3.09 – the highest in the OECD, which has an average of 1.7 children per woman, the report said.

The CBS reported major salary gaps between men and women in the labor market. The findings indicated that 59.4% of women aged 15 and older had entered the workforce, compared to 69.1% of men. In 2016, the average monthly salary for a woman was NIS 7,666, while the number was significantly higher, NIS 11,219, for a man. The average monthly income for a self-employed woman stood at NIS 7,065, compared to NIS 12,399 for men. One of the main reasons behind the salary gap cited by the report was the number of hours men and women worked, with male employees working an average of 44.9 hours per week and female employees working an average of 36.7 hours. Taking this into account, the salary gap between employed men and women was reported at 15.1%.

The data further revealed that, of women who are employed, 68% worked fulltime jobs and 32% worked part-time, compared to 86.6% of men with full-time jobs and 13.1% working part-time. The report found that 75.4% of married mothers were in the workforce: 78.3% of mothers with one child; 79.5% of mothers with two children; and 63.7% of mothers with four or more children. In 2016, only 34.1% of executives were female.

Gaps between men and women in the field of education were also included in the report. In 2015, 69% of 12th grade girls were eligible for a matriculation certificate compared to only 56% of boys. In the 2015/16 academic year there were some 314,400 students in Israel, of which 183,700 were women, accounting for 58.4% of the total. This is a significant increase from the 1969/70 academic year, in which women comprised only 43.3% of the total student body. (CBS 06.03)

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11: IN DEPTH

11.1 ISRAEL: Israeli PM’s Visit to the Two Sides of the Caspian Sea

On 6 February 2017, Avinoam Idan observed in the CACI Analyst that Israel’s Prime Minister Binjamin Netanyahu made a landmark visit to Azerbaijan and Kazakhstan in December 2016. The Israeli Prime Minister’s visit reflects Israel’s growing interest in Central Asia and the Caucasus, a region that is part of Israel’s greater strategic environment. Israel’s interest in Kazakhstan focuses on its trade potential, its regional and international status, and its position as a vital link in the Chinese Belt and Road Initiative. Azerbaijan’s geographical location, its role as a significant energy exporter, and its security approach have been foci of the close relations that have developed between Baku and Jerusalem over the years. The Prime Minister’s visit reflects the continued deepening of ties with Azerbaijan.

Background: In December, Israeli Prime Minister Netanyahu conducted a three-day visit to Azerbaijan and Kazakhstan from 13-15 December 2016. This was the first visit by an Israeli Prime Minister to Kazakhstan and the second visit to Azerbaijan. The visit to these two countries is a direct continuation of an ongoing Israeli process to strengthen relations with Astana and Baku since their establishment as independent states. With the large bulk of Jewish immigration into Israel behind it towards the end of the 1990s, and especially after the construction of infrastructure for energy exports from the Caspian Sea in the mid-2000s, Israeli policymakers began to understand the importance of the countries bordering the Caspian Sea, while creating a distinction between Azerbaijan and Kazakhstan.

Interest in Kazakhstan focused on trade and economic interests, as well as its role in convening international political fora. As for Azerbaijan, its geostrategic location, which includes a common border with Iran, as well as the existence of a large ethnic Azerbaijani community in Iran (a third of the population) made Azerbaijan especially attractive for developing relations. A heritage of coexistence and tolerance for the Jewish minority in Azerbaijan and the existence of an active community of Azerbaijani Jews in Israel facilitated strong ties between the countries, especially trade.

During Netanyahu’s visit to Kazakhstan, a series of agreements were signed in the fields of research and development, as well as aviation and travel. An agreement was also made to exchange teams focused on high-tech, technology and security development.

The leaders of Azerbaijan viewed Israel as a successful model for a small state located in a hostile environment which manages to deal with security challenges while still thriving in all aspects of development. Israel, for its part, viewed the strengthening of ties with Azerbaijan as an opportunity to foster strong ties with a Muslim-majority country. In addition, Azerbaijan became a major exporter of oil to Israel by way of the BTC pipeline transferring oil from the Caspian Sea to the Mediterranean Sea became operational in 2005. Approximately 40% of Israel’s total oil imports come from Azerbaijan.

Azerbaijan’s desire to create a military option to regain control over its territories occupied by Armenia during the war in and around Nagorno-Karabakh has also contributed to the strengthening of relations between Azerbaijan and Israel, especially in the field of arms trade. During the PM’s visit, a cooperation agreement in the field of agriculture was signed. The sides also agreed on the establishment of a joint commission to promote economic cooperation in the fields of science, technology, health, agriculture and trade.

Implications: Prime Minister Netanyahu’s visit to Azerbaijan and Kazakhstan is an expression of Israel’s growing political momentum in Central Asia and the Caucasus region. Netanyahu’s visit is designed to promote Israel’s relations with Kazakhstan in several aspects. Kazakhstan took the lead among the Central Asian states in both the political and economic spheres. Kazakhstan took a role in establishing CICA (Conference on Interaction and Confidence-building in Asia) as well as positions within the Shanghai Cooperation Organization and OSCE, and is since the beginning of this year also a member of the UN Security Council. Israel’s interest to strengthen ties with Kazakhstan in the political sphere should therefore be viewed against the backdrop of its regional and international status. Kazakhstan has use for the technology and knowledge that Israel can offer it, and the two countries have a mutual interest in developing trade relations between them.

Kazakhstan is also a major link in Central Asia for China’s vision of a Belt and Road Initiative. Israel has an interest in integrating with the project in its Central Asian section as part of its deepening of relations with China in recent years. Kazakhstan is an appropriate arena for such Israeli-Chinese cooperation to occur. Together with the security challenges and the need to combat terrorism in the region, such cooperation and use of Israeli knowledge and experience is of mutual interest to both China and Kazakhstan, and the strengthening of ties between Israel and Kazakhstan can be used to promote that trilateral cooperation.

The Israeli Prime Minister’s visit to Baku marks an important milestone in the relations between Israel and Azerbaijan. The Azerbaijani President was especially forthcoming in discussing the scope of the defense export contracts signed between the two countries which come close to five billion dollars, an unprecedented statement of acknowledgment. This demonstrative show of friendship on the part of the Azerbaijani President was very different from the nature of the bilateral relations that existed before.

Since the April 2016 battles between Azerbaijan and Armenia (commonly referred to as the Four Day War) and the contribution of Israeli origin arms, Israel has become extremely popular in Azerbaijan. The establishment of the Southern Gas Corridor, which provides a route for gas export from the Shah Deniz offshore field in Azerbaijan to Europe, potentially may be used by Israel to export its own gas to Turkey and potentially European markets, adds to the mutual interests of the countries. Azerbaijan’s historical heritage of tolerance towards the Jewish community in Azerbaijan forms another significant contribution to the close relations between the two countries, as openly expressed during PM Netanyahu’s current visit.

Conclusions: Israel is intensifying its activity in its expanded strategic circle which includes Central Asia and the Caucasus, and Netanyahu’s visit is an expression of this trend. The visit helped consolidate and strengthen the close relationship it enjoys with Azerbaijan, and promoted economic and political ties with Kazakhstan – all the while increasing its presence in an area where China has a special interest, and creating conditions for future cooperation with China in Central Asia.

Close relations with Azerbaijan and Kazakhstan, two Muslim-majority countries with no hostility toward Israel and that manage their foreign policy based on bilateral interests and a legacy of coexistence and tolerance between Islam and Judaism, helps Israel break the cycle of hostility it has with the Muslim world in the international system. This visit of the Israeli Prime Minister promoted both Israel’s presence in a vital region as well as common interests shared by Israel and the two host countries, and has the potential to promote Israel’s relations with other countries in the region.

Dr. Avinoam Idan is a political geographer and a Senior Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program, based in Washington DC. Prior to his academic career, he served in the Israeli Embassy in Moscow during the break-up of the Soviet Union. (CACI 06.02)

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11.2 LEBANON: Republic of Lebanon ‘B-/B’ Ratings Affirmed; Outlook Stable

On 3 March 2017, S&P Global Ratings affirmed its ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on the Republic of Lebanon. The outlook remains stable.

Rationale

In our analysis, the Lebanese government’s debt-servicing capacity depends largely on the domestic financial sector’s willingness and ability to add to its holdings of government debt, which in turn relies on bank deposit inflows, particularly from nonresidents. This structural weakness constrains the ratings, as do Lebanon’s divisive political environment and regional tensions. These factors have, in turn, hindered economic outcomes and public finances, to which consistently large fiscal deficits, as well as high, and rising, public debt attest. Lebanon’s general government debt, at an estimated 147% of GDP in 2017, is the third highest among all sovereigns rated by S&P Global Ratings, after Japan and Greece.

Spillovers from the war in Syria (which is about to enter its seventh year) have weighed on Lebanon’s economic growth through their impact on the country’s traditional growth drivers – tourism, real estate and construction – and also via the influx of refugees (now estimated at nearly one-third of Lebanon’s population). The ratings are supported by Lebanon’s external profile; the country’s liquid external assets (that is, foreign exchange reserves and financial sector assets held abroad) exceed total external debt. We anticipate, however, a gradually worsening profile as nonresident deposit inflows (largely from the Lebanese diaspora) continue to finance the country’s large twin deficits.

We anticipate a period of relative political stability, following the presidential election held in October 2016. This should bode well for confidence and support economic growth, in our view. The Lebanese parliament elected former general Michel Aoun as the country’s president, breaking the political deadlock that lasted more than two years. The appointment was shortly followed by the nomination of former Prime Minister Saad Al-Hariri as the new prime minister. Discussions regarding changes to the electoral law are ongoing. These could prove controversial and could delay the parliamentary elections scheduled for spring 2017.

We also expect that growth will be supported by the authorities’ efforts to normalize relations with the Gulf Cooperation Council (GCC; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates) states, an important source of visitors to the country (including Lebanese expatriates based there). We project that the economy will grow on average by about 3% in real terms over 2017-2020, supported by a gradual rebound in domestic consumption and services’ exports. The government recently approved two decrees needed for the organization of the country’s first offshore oil and gas exploration and production licensing; however, we do not incorporate the effects of any potential discoveries into our economic or fiscal forecasts at this time.

Although we project that on a headline basis, real GDP will continue to grow, we estimate that trend growth in real GDP per capita (which we proxy by using 10-year weighted-average growth) will remain around negative 2% in 2011-2020, which is below that of peers that have similar GDPs per capita. This partly reflects the heavy burden imposed on Lebanon by the influx of refugees from the Syrian civil war. Registered refugees number about 1 million, according to the U.N. High Commission for Refugees, and are included in Lebanon’s population data. Unofficial estimates range up to about 2 million, representing about one-third of the total population.

We expect that the current account deficit will remain large and average about 17% of GDP over 2017-2020. The end of the political paralysis and the firmer oil price will likely boost remittance inflows and tourism from the large Lebanese diaspora, particularly from those expatriates residing in the GCC. However, we still expect the current account deficit will widen gradually as a result of a higher import bill, arising from both the rebound in oil prices and improving domestic demand.

We anticipate that nonresident deposit inflows will remain an important source of financing for Lebanon’s large current account deficit, followed by foreign direct investment (FDI) and capital account receipts, including donor inflows in response to the refugee crisis. The financial system is instrumental in intermediating the country’s external financing requirement. Nearly one-fourth of Lebanese bank deposits are externally sourced, mostly from the country’s diaspora. The banking system is highly dollarized, with about 60% of system deposits and nearly 70% of bank loans to the resident private sector denominated in foreign currency.

Nonresident deposits into Lebanon are sensitive to swings in confidence. However, we note that in past episodes of volatility, such as the 2005 assassination of Prime Minister Rafic Hariri and the 2006 war with Israel, withdrawals lasted only a few weeks. In addition, they were in the low-single-digit percentages of total bank deposits and were more than compensated by returning inflows.

We have observed a general deceleration in nonresident deposit growth since the start of the war in Syria in 2011. Nonresident deposit growth further slowed to a low of 1.5% annually in April 2016, compared with an average of 11% in the first half of 2015. We believe that the political vacuum and, to a lesser extent, the economic slowdown in the GCC region explained this slowdown. The Central Bank of Lebanon (BdL) has successfully encouraged foreign inflows back to the economy and increased central bank reserves, closing a large balance-of-payments gap, through a financial engineering operation conducted between May and August 2016. However, the need for such an operation highlights the risks related to Lebanon’s structural weakness stemming from its dependence on external funding.

Under the operation, the BdL swapped Lebanese pound-denominated government bonds ($2 billion equivalent) for Lebanese government Eurobonds held by the Ministry of Finance. It then sold the foreign currency-denominated bonds plus other securities it held, totaling $13 billion, to domestic banks, employing incentives to make the transaction attractive to the banks. Domestic banks bought the dollar assets, attracting foreign currency financing from abroad for this purpose. As a result of the operation, annual growth in nonresident deposits rebounded to about 7% by the end of 2016. At the same time, BdL bought $13 billion equivalent in Lebanese pound-denominated treasury bills and certificates of deposit from the domestic banks, increasing Lebanese pound liquidity in the banking system.

Domestic banks support government debt-servicing in two ways. First, they buy Lebanese government debt directly. Banking system claims on the public sector account for about 17% of total banking system assets or about one-half of total government debt. Second, Lebanese banks buy certificates of deposit issued by the BdL, which in turn buys government debt. As of year-end 2016, the BdL held 44% of the government’s outstanding treasury bills, which amounted to about 27% of total government debt. Although we view the concentration of government financing from these sources as a structural weakness, at the current rating level these flows are an essential support.

We expect the general government will post a modest primary fiscal surplus and the broader deficit will stabilize at 8.5% of GDP through 2020. On the one hand, the end of the political vacuum and slightly better economic activity should improve the government’s revenues. On the other, Lebanon’s public finances and fiscal flexibility will remain constrained by structural expenditure pressures, including transfers to the electricity company, Electricite du Liban. Interest payments account for close to 50% of general government revenues. This is the highest ratio among all sovereigns rated by S&P Global Ratings. We expect net general government debt will stabilize at around 130% of GDP from 2018. At about 40% of total government debt, we consider the proportion of foreign currency-denominated debt in the government’s overall funding structure as high and as posing a risk, particularly in the context of the relatively short average maturity of sovereign debt and the country’s stabilized exchange-rate arrangement against the U.S. dollar.

We note that there are substantial shortcomings and material gaps in the dissemination of macroeconomic data, as well as reporting delays. Official national accounts data for 2013 are the latest available and were published in December 2014. The availability and quality of official external data are also limited, in our opinion.

Outlook

The stable outlook on Lebanon reflects our expectation that continued deposit inflows to the financial system will remain sufficient to support the government’s borrowing requirement and the country’s external deficit over the next 12 months.

We could lower our ratings on Lebanon if the political and economic situation deteriorated, leading to significant declines in deposit growth rates or foreign-exchange reserves.

We could raise our ratings if Lebanon’s policymaking framework became more predictable and effective, boosting economic activity significantly more than we current forecast and improving the sustainability of public finances. (S&P 03.03)

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11.3 IRAQ: Republic of Iraq Ratings Affirmed At ‘B-/B’; Outlook Stable

On 24 February 2017, S&P Global Ratings affirmed its ‘B-‘ long-term and ‘B’ short-term foreign and local currency sovereign credit ratings on the Republic of Iraq. The outlook is stable.

Rationale

Our ratings on Iraq are constrained by the government’s war against the militant group IS, the early stage of development of its political institutions, as well as the divisions between the Sunni, Shia and Kurdish ethnic and sectarian groups. In addition, our ratings are underpinned by the assumption that Iraq’s oil output remains in areas firmly under the control of the federal government. Crucially, over 85% of Iraq’s oil fields and oil output are located in the south of the country, close to Basra, the main port for crude exports. These fields are at some distance from the conflict in IS-controlled areas. We assume that the Iraqi government will remain in control of these assets.

Iraq has the world’s fifth-largest proven crude oil reserves and is the second-largest oil exporter in the Organization of the Petroleum Exporting Countries. Oil dominates the Iraqi economy, contributing over 50% of GDP, 90% of government revenues, and more than 95% of exports.

The militant group IS previously controlled large areas in Iraq along the Tigris and Euphrates Rivers north of Baghdad. Since our August 2016 review, IS’ territorial control of northwest Iraq has shrunk significantly. Iraqi forces and their allies have retaken some territories from IS, such as Ramadi (west of Baghdad), Baiji (the site of Iraq’s largest oil refinery) and Fallujah. The Iraqi army, in coalition with Kurdish Peshmerga forces, has recently recaptured the eastern side of Mosul – Iraq’s second largest city – and is preparing the ground to retake the western side of the city. Future governance of the Sunni-dominated territories liberated from IS remains a key political and security challenge for the Iraqi government.

The fragmentation of political power across different parties and regions makes it difficult to carry out critical political or economic reforms in Iraq. Prime Minister Al-Abadi, who has been in office since 2014, announced reform measures, including cuts in the size of government in response to social protests. That said, many Iraqis believed that the announced reforms were not implemented and in early 2016, protesters entered the parliament in Baghdad.

The political paralysis has meant that the government has been unable to deliver reforms, further fueling the already tense and unstable political and security situation in Iraq. In 2016, Iraq’s Prime Minister attempted to reshuffle his cabinet. His attempt to appoint more technocrats to ministerial roles was blocked by the parliament. Over the last few months, the Iraqi parliament, through a series of no-confidence votes, has impeached key ministers in the government, namely the ministers of defense, interior and finance. On Jan. 30, 2017, parliament approved the appointment of the new interior and defense ministers.

Iraq faces significant corruption challenges, in our view. The country scores among the worst countries in the world on corruption perceptions and governance indicators. Corruption in Iraq is exacerbated by the ethnic-sectarian divide, lack of experience in public administration and its weak capacity to manage the influx of aid money. We believe that fighting corruption and IS represent Iraq’s major political and security challenges in the near term. Combating corruption by strengthening governance, accountability, and transparency and repelling IS could help unlock Iraq’s economic potential.

We expect Iraq to report strong real GDP growth of about 5% in 2016, driven by the increase in oil production and exports. However, we project real GDP growth will fall below 1% on average in 2017-2020 owing to the headwinds from fiscal consolidation and weak non-oil growth. Iraq’s oil production in 2016 was estimated at 4.5 million barrels per day (bpd), compared with 3.5 million bpd in 2015. We expect oil production to remain close to these levels in 2017-2020, as increasing oil output to more than 4.5 million bpd would require significant investment contrary to the authorities’ fiscal consolidation plans. Nevertheless, Iraqi oil exports are projected to reach 3.8 million bpd by 2020, substantially up from 3.0 million bpd in 2015 and 2.5 million bpd in 2014.

The non-oil economy contracted sharply in 2016 because of the disruption of trade between the regions, destruction of infrastructure, reduced access to electricity, the general security situation and political uncertainty. We project non-oil growth will remain below 1% for at least the next two years. Also, our updated economic projection points to weakening trend growth in real per capita GDP estimated at -0.8% during 2011-2020 (10-year weighted average). This growth rate is below that peers that have similar GDP per capita.

The internal and external shocks – the sharply lower oil revenues and the IS conflict – that Iraq has faced since 2014 have weakened public finances. The double-digit fiscal deficits since 2014 resulted largely from falling oil revenues, which have reduced to 32% of GDP in 2016 from 39% in 2014. Moreover, increased fiscal spending including high military and humanitarian expenditures has climbed to 37% of GDP in 2016 from 27% in 2014. We project the general government fiscal deficit at 12.7% of GDP in 2017, down from 13.6% of GDP in 2015 and 13.2% in 2016. We assume the government will continue implementing the fiscal consolidation measures supported by the International Monetary Fund (IMF). The fiscal deficit is projected to decrease to 2.6% of GDP in 2020, largely stemming from the improvement in oil revenues and a broadening of the tax base. Customs revenues and tax collection are expected to increase as the government regains control of some areas currently under IS control. On the expenditure side, containment of non-oil primary spending will mostly be achieved through reduction of the wage bill through natural attrition, controls over pension beneficiaries, and continued postponement of lower priority non-oil investment.

We think that the IMF’s Staff-Monitored Program, approved in December 2015, helped restore some order to public finances and paved the way to the current $5.4 billion IMF financing agreed in July 2016. In December 2016, the IMF disbursed about $618 million following the completion of the first review of Iraq’s reform program. Additional external financing of the budget is expected from the World Bank ($3 billion) and other bilateral creditors over 2017-2020.

Nevertheless, domestic issuance remains the main funding source for the 2017 government financing requirement. We expect most of the debt will be taken up by Iraq’s commercial banks, led by the two largest state-owned banks Rafidain Bank and Rasheed Bank. We anticipate that the banks will fund these purchases by incremental deposit growth and by repurchase operations with the Central Bank of Iraq (CBI). In addition, the Iraqi government issued a $1 billion international bond with a 100% U.S. government guarantee in January 2017 and has indicated it could issue a $1 billion Eurobond in 2017.

We project government net debt will peak at 68% of GDP in 2019. Our government liquid assets estimate of about 20% of GDP largely comprises government deposits with domestic commercial banks. Iraq’s debt stock has benefited from an 80% haircut that the government negotiated with its Paris Club creditors in 2003-2004.

The liabilities and guarantees of the domestic banks appear high compared with the fair value of their assets, and we view the risk stemming from the financial sector as a moderate contingent liability for the government. In addition, the Iraqi nonfinancial public sector includes a large number of state-owned entities (SOEs), which present a burden for the government budget. The potential fiscal cost of the contingent liabilities of state-owned banks and entities is, however, hard to estimate due to their poor reporting.

As a result of the drop in oil prices, the current account turned into a deficit of about 4% of GDP in 2016 down from a surplus of 11% of GDP in 2014. The deficit is projected to range between 1% and 1.5% of GDP in 2017-2020, supported by rising export revenues and will continue to be partly financed by the draw on the reserves. Iraq’s foreign exchange reserves have declined from about $66 billion at end-2014 to about $46 billion at end-2016. We estimate reserve coverage of current account payments at more than seven months over 2017-2020. We forecast external debt, net of public and financial sector external assets, at about 27% of current account receipts (CARs) in 2017, and we estimate gross external financing needs as a percentage of CARs and usable reserves at about 66% over the same period. We note that there are only limited balance of payments and international investment position data available for Iraq which, in our view, reduces the visibility of external risks. We also assess the concentrated nature of Iraq’s exports as exposing the country to significant volatility in terms of trade movements.

The security situation and the drop in oil revenues have led to sharp deceleration in public spending and low private sector consumption resulting in subdued inflation. We expect inflation to remain about 2% in 2017-2020. We expect that the CBI will maintain the dinar’s peg to the U.S. dollar, albeit with minor fluctuations, unless financing conditions are more difficult than we currently expect. While the peg has helped control inflation, it is limiting the CBI’s monetary flexibility, in our view. Gross international reserves have fallen to an estimated 86% of the monetary base at year-end 2016 from 124% in 2013, and are projected to reach 77% at year-end 2017.

Outlook

The stable outlook reflects our expectation that fiscal consolidation will continue over the next few years, while economic growth prospects remain subdued because of the consolidation measures and domestic political tensions.

We could lower the rating if the government’s net debt or debt servicing costs were to rise sharply. This could occur if oil revenues were to disappoint, or if the government were to deviate substantially from its fiscal consolidation path.

We could raise the rating if Iraq’s political and security situation improves and its public finances improve substantially. (S&P 24.02)

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11.4 EGYPT: Fitch Reviews Egypt’s Rebalancing Continues Ahead of Challenging Year

Fitch Ratings said on 1 March that rising foreign exchange reserves, a return of private capital inflows and currency appreciation point to further progress in Egypt’s gradual external rebalancing in early 2017. Further fiscal consolidation alongside external rebalancing would lay the groundwork for a broader-based improvement in sovereign credit metrics in 2018.

However, challenges, including the risk of social unrest, are substantial. Even if the envisaged reforms progress smoothly, it would take several years to reduce gross general government debt to more sustainable levels.

FX reserves have continued to rise, with net international reserves reaching $26b at the end-January – up from $24b at end-December and more than $10b above their July 2016 low. The Egyptian pound has strengthened 20% against the US dollar since late December, reversing some of its losses following November’s flotation. A return of foreign inflows into Egyptian treasuries prompted a partial retracement of government debt yields, with 91-day T-bill yields down by around 200bp in the month to mid-February (although yields ticked up in subsequent auctions, pointing to potential volatility). Anecdotal evidence suggests progress clearing the backlog of FX demand in the economy.

These positive developments largely reflect inflows from multilateral and bilateral institutions – notably the IMF and World Bank – and a resumption of foreign portfolio inflows and remittances after the authorities floated the pound, as well as import compression and improving export activity. As such, they are in line with our general expectations when we affirmed Egypt’s ‘B/Stable’ sovereign rating in December following the flotation and IMF board approval of a $12b extended fund facility, of which $2.7b was disbursed. The rebound in FX reserves has been slightly stronger than anticipated, partly due to a larger-than-expected $4b international bond issue in January.

Completion of the first review of the IMF program before end-June would release another $1.25b, further boosting reserves and economic and investor confidence. We think this is likely, as the Egyptian authorities appear to have met monetary targets and the introduction of VAT in September and control of civil service wage growth, alongside other measures including fuel and electricity tariff adjustments, suggests that the budget targets will also be broadly met.

Beyond the first review, we believe the detailed program targets will act as a policy anchor, but there are implementation risks, especially on the fiscal side. For example, despite recent appreciation, the Egyptian pound is still around 44% weaker than before flotation, which may make more extensive near-term subsidy reforms necessary to achieve 2017 deficit targets (the IMF may allow some leeway given the unforeseen extent of EGP depreciation). These would add to inflationary pressure (headline inflation hit 28.1% in January, although we think it will drop later this year) and would be politically sensitive, adding to the risk that social unrest will prompt the government to row back from some reforms.

The Egyptian government’s ability to balance fiscal, monetary and economic reforms with the risks of a social backlash therefore remains an important sovereign rating consideration. The government is attempting to address this in its economic program, with some increases in social spending and other measures, such as improving electricity provision. If the authorities can maintain recent progress, the next fiscal year starting in July (FY18) would see stronger growth (we forecast 4.5%, up from 3.3% for FY17) as inflation falls and economic adjustment bears fruit; further reduction of the primary deficit; and debt-to-GDP start to decline from a forecast 96% of GDP at end-FY17. (Fitch 01.03)

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11.5 EGYPT: Egypt’s First-Ever Female Governor Marches to a Different Drummer

Menna A. Farouk posted in Al-Monitor on 21 February that recently Egypt appointed the country’s first-ever female governor — a post traditionally given to retired military or police officers.

In a move that broke with a long-standing tradition of appointing retired military or police officers as governors, Nadia Abdu was named governor of Egypt’s Beheira governorate.

With the 16 February reshuffle of governors, engineer Nadia Abdu, 73, became the first woman in Egypt’s history to hold such a leading post. Abdu was named governor for the Nile Delta governorate of Beheira. “The appointment is an affirmation of the state’s belief that women are capable of taking over leading positions in the country as well as an appreciation of their role in contributing to Egypt’s progress,” Abdu told Al-Monitor. Abdu is the first woman to hold the post of deputy governor and the first woman to hold the post of chairperson of the national water company in Alexandria.

For religious and cultural reasons, it is difficult to have female civil servants in high-ranking positions in Egypt, especially in the Cabinet and the judiciary. Hikmat Abu Zeid was the first woman to become a Cabinet minister in Egypt in September 1962.

The first woman to hold a judicial position in Egyptian history was Tahani al-Gebali, who was appointed in 2003. She held the position of vice president of the Supreme Constitutional Court, the highest court in Egypt, until 2007.

Abdu said that the integration of women into the political and leadership scene in Egypt is gradually evolving and her appointment is the “best proof.” “It is changing over the years, and Egypt is moving toward fulfilling gender equality in all fields,” she added.

During her tenure in office, Abdu said that she would focus on accomplishing all underway projects that are expected to “lead to real development in the governorate.” Abdu noted, “The completion of the industrial zones, suspended projects, sewage projects and development of the poorest villages are on the top of my priorities.” Abdu explained that such projects would woo foreign businesspeople to pump investments into the governorate and start new ventures that would provide job opportunities for the city’s young people. “Turning the governorate into an investor-attractive city is my target,” Abdu said.

The new governor said that she would fight tooth and nail to eliminate the problem of water shortages and sewage treatment in her city this year.

Abdu received her bachelor’s degree in engineering in the chemistry department at Alexandria University in 1968, and then she received a master’s degree in sanitary engineering from the same university. She has two sons who also graduated from the same faculty. She was appointed as the deputy governor of Beheira in 2013 and supervised national projects in the governorate, including water and sewage projects. She founded the Arab Countries Water Utilities Association and is a member of the general assembly of the World Water Council. She also headed the Egyptian Holding Company for Water and Wastewater for 10 years from 2002 until 2012 and is a member of the National Council for Women and the Businessmen Association in Alexandria. Abdu’s political career began in 2010 when she won a seat in parliament with the now-defunct National Democratic Party.

On 16 February, Egyptian Prime Minister Sherif Ismail announced a reshuffle of the top posts in five of 27 governorates: New Valley, El-Qalubiya, El-Daqahliya, Alexandria and Beheira. Shortly after the announcement of Abdu’s appointment, some ultraconservative Salafi groups have denounced the move, saying that a woman does not have leadership skills. Salafi preacher Sameh Abdel Hamid said that women are not eligible to take up leading positions. “Men are the only people capable of leading others, and scholars have agreed on this,” Abdel Hamid said.

However, the appointment has drawn the applause and praise of several women’s rights groups and nongovernmental organizations. Mona Ezzat, an official at the New Women Foundation, said that the appointment is a very positive move in the direction of breaking gender stereotypes, empowering women and giving them leading posts. Ezzat noted that the move affirms the state’s rejection of calls by some people not to appoint women as governors for security reasons. “The appointment came to prove that the government believes women have leadership capabilities and can make a change in society,” she told Al-Monitor. Ezzat added that the move coincides with President Abdel Fattah al-Sisi’s labeling of 2017 as the year for women, “which reflects the state’s willingness to support and empower women in all aspects of life.”

Ezzat also said that the new female governor should be assessed just like any other governor with no regard to her gender. “If she did good things, we would praise her efforts. And if she did not, she would be criticized — just like any other previous governor,” Ezzat added. Abdu said that people can assess her performance after just one month of her appointment. “I will also conduct a regular monthly assessment of my performance in order to know the mistakes and flaws and avoid or correct them,” she added. Abdu also said that she would work on empowering women and girls in her governorate and give them leading posts. “I will give women who have a high level of efficiency and knowledge leading positions in several institutions,” she said. “It is their right to be leaders. It is their right to be on the top.” (Al-Monitor 21.02)

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11.6 EGYPT: Will Families With 2 Children Become the Norm in Egypt?

Walaa Hussein posted in Al Monitor on 28 February that a parliamentary committee is examining draft legislation aimed at curbing Egypt’s population growth by encouraging smaller families.

The country’s total population in January 2016 was 90 million, according to Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS). By the end of February, CAPMAS said the figure has reached 92.5 million.

With its economy in crisis, Egypt had already enacted in June a long-term national population strategic plan, a campaign aimed at cutting Egypt’s projected population in 2030 to 110 million instead of 122 million. The plan consists of five main sections, including campaigns for family planning and for empowering women in the labor market, as well as media campaigns to raise social awareness and stress the need to educate youths and teenagers.

Now parliament is examining a proposal for a draft law to facilitate that aim, according to Tariq Tawfiq, rapporteur of the Ministry of Health’s National Council for Population, who spoke on 19 February with Al-Monitor. Tawfiq said, “We submitted legislative proposals to make it mandatory for the state to ensure education, create jobs and provide social support for families with two children as an incentive to encourage them to have only two children.”

In addition to carrots, however, sticks are also proposed. “We called on the parliament to help us draft laws to reduce the birth rate, mainly by criminalizing early marriages of girls under 18 years of age and setting forth deterring penalties on their guardian and the ‘maazoun’ [a government-authorized cleric who administers marriage and divorce] as well as by providing for fines against parents when their children drop out of school.”

The Egyptian government wants the draft to be finalized by parliament and then presented to the public and media to be discussed by mid-2017 during parliament sessions with political figures and representatives of civil organizations and the government.

Yahya al-Kedwani, undersecretary of parliament’s Committee for Defense and National Security, told Al-Monitor the committee is still deliberating in closed sessions what procedures might be included in the draft. “We will discuss India’s and China’s experiences in battling population surge, which now threatens Egypt’s national security in light of no increase of resources,” he said.

Kedwani explained that the committee is discussing the feasibility of implementing ration card subsidies and cutting taxes on households that commit to the two-child policy. “The subsidized goods would be suitable for small households and would put pressure on families having more than three children,” he said.

However, the Egyptian government already dropped similar disincentive proposals from its long-term plan after examining the experiences of other countries, such as China. China stringently imposed a one-child policy in 1980 when its population reached 1.3 billion. In 2013, the policy was eased to allow two children if one of the parents was an only child. In 2015, it began allowing all families to have two children. Tawfiq said Egyptian officials worried the disincentive measures would not sit well with the public and could violate the constitution, which specifies that all citizens are equal in rights and obligations without discrimination.

Amani Aziz, secretary of parliament’s Religious Committee, also said offering different tax rates and subsidies for families having no more than two children would be unconstitutional and would have a negative impact on society.

The government has been warning that if the population strategy isn’t implemented, the number of unemployed will rise to 20 million people a year, as opposed to 14 million if the strategy is applied. Moreover, Tawfiq said in a 26 January press conference that without the plan, the amount of potable water will decrease significantly and inflation will rise.

Former Health Minister Maha al-Rabat told Al-Monitor that the main challenges facing the population plan include: the prevailing culture that embraces procreation, traditions such as early marriage and families’ lack of reproductive health services and family planning. “There have been many widespread campaigns in Egypt over long years against family planning because it is against the Sharia,” she said. Rabat also called upon the government to focus efforts on engaging both the private and civil sectors in providing family planning services and ensuring they are accessible.

The government’s strategy also encourages Muslim and Christian clerics to take part in awareness campaigns to correct misperceptions about family planning methods and to provide the necessary funding to improve the quality of reproductive health services. “Family planning is not forbidden, according to Al-Azhar scholars,” Ahmad Karima, a professor of comparative jurisprudence at Al-Azhar University, told Al-Monitor. “It is not wrong if a couple wishes to have only two children. Islam does not forbid the organization of society according to [existing] economic and social situations so that people can balance their lives.”

Karima also noted that Salafi groups are behind the campaigns against family planning under the banner of Islam. “These groups espouse radical ideologies and have always been an obstacle in the face of social reform,” he said. “Controlling birth in Egypt should be done through social awareness and education,” Aziz told Al-Monitor.

It seems clear that the next move is in the hands of parliament, which has to live up to the challenge and set forth positive incentives to families so as to reduce the birth rate without discrimination among citizens. (Al Monitor 28.02)

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11.7 TUNISIA: Will Tunisia Finally Amend Harsh Cannabis Law?

Sarah Souli posted in Al-Monitor on 22 February that Tunisians, including government officials, have been in favor of amending a harsh law for possession and use of cannabis, but doing so has not been easy.

Two students in their final year of high school were arrested 12 February under Tunisia’s draconian Law 52, which punishes the consumption or possession of cannabis with prison time and heavy fines. The public outcry reached enough of a fever pitch that the government felt compelled to respond.

“No to the prison sentence!” said Prime Minister Youssef Chahed during a visit to the soon-to-be-reopened El Amal, a drug rehabilitation facility. El Amal was the country’s only drug abuse treatment and prevention center before it was closed several years ago. Its reopening, a move supported by the Health Ministry, along with Chahed’s public statement, perhaps offers a bit of cautious optimism that the government might be willing to reconsider its treatment of drug users and abusers.

“Law 52 is a law from the dictatorship [of Zine El Abidine Ben Ali],” Antonio Manganella, the director of Lawyers Without Borders (ASF), told Al-Monitor during a recent visit to the organization’s Tunis office. “The goal of the law was to terrorize the population and make them shut their mouths.” According to Manganella, the legislation targeted Tunisians who were seen as “against the system.”

Tunisia’s penal code is more than a century old, and until recently, reforms introduced to it were done so “during the darkest days of the Tunisian dictatorship,” said Manganella. Law 52, implemented in 1992, punishes any type of possession of cannabis and its use. Usage is a particularly contentious issue legally, as THC, the active ingredient in cannabis, can be found in a person’s urine as long as 67 days after consumption. In Tunisia, anyone who is randomly stopped and taken into custody by police can be subjected to a urine test, even for non-drug-related incidents.

The punishment for possession or usage is the same: up to a year in prison and a fine of between 1,000 and 1,500 Tunisian dinars ($438 – $657). Repeat offenders face a minimum of five years imprisonment. Unlike other laws under the penal code, judges are forbidden from “considering mitigating circumstances,” creating a system whereby anyone who consumes cannabis is more or less “automatically considered guilty.” The offense cannot be removed from judicial records, thus jeopardizing or prohibiting future educational or employment opportunities.

Despite such harsh punishment, there has been no shortage of arrests, as drug use is widespread. According to a 19 January Human Rights Watch (HRW) report, “Tunisia: Amend Draft Drug Law,” the government recorded more than 6,700 people as being jailed in 2016 under Law 52. Manganella said this means that “between 10,000 and 15,000 people were arrested.” Most of those arrested are young men from lower socio-economic backgrounds. Heroin and cocaine are also used in Tunisia, but hashish, being cheaper, is more popular. A sticky brown brick of “zatla,” Tunisian slang for hashish, can be had for less than 10 dinars ($4) in lower-class neighborhoods.

Although drug usage is still taboo in Tunisia, including for soft substances such as hashish, the Tunisian public is not necessarily in favor of harsh sentences for it. Even members of Ennahda, the leading Islamist party, have publicly stated that people should not be going to prison under Law 52. Manganella frames the issue in terms of human rights, noting that Tunisia is a member of the United Nations and has signed and ratified most human rights treaties. “We need to start talking about the reality,” he said, “not a philosophical idea of what a society is. … This is just pragmatic thinking.”

The reality is that people incarcerated for drug use constitute more than 30% of Tunisia’s prison population, HRW reported in January. This suggests that recreational users, not dealers and couriers, are bearing the brunt of the punishment when drugs are involved. In relative population terms, Manganella said, Tunisia’s incarcerated population is twice that of France. The UN High Commissioner for Human Rights estimates that some prisons are at 150% capacity. Tunisian prisons have come under fire as hotbeds for jihadi recruitment and radicalization, so it seems illogical that the government would want to mix drug-using students with hardened or radicalized criminals.

Law 52 is often presented as a policy of deterrence, but 54% of those jailed under the statute have been found to resume smoking, according to Manganella. Financial gain for the state could be a motive for the law’s continued implementation. With 6,700 arrests in 2016, the related fines could total some 10 million dinars ($4.4 million). It is also possible that given Tunisia’s democratic transition, which is only six years old, the government has focused more on economic reforms and political stability than on judicial reforms and human rights. The Justice Ministry declined to comment for this article.

Tunisian civil society is robust and has been lobbying the government for reforms. In December 2015, the government approved and sent parliament a draft revision of Law 52 that would have abolished jail time for first- and second-time offenders in cases involving possession for personal use. It would also have given judges leeway to prescribe alternative forms of punishment and treatment.

A second draft revision by parliament early last month, however, reinstated prison terms and increased the fine for possession to 5,000 dinars ($2,188). Judges have discretion on whether to hand down prison terms, but this leaves the door open to corruption and misuse. ASF, HRW and the Tunisian League for Human Rights issued a joint statement on 19 January condemning parliament’s revision.

President Beji Caid Essebsi, who in 2014 campaigned on a platform of amending Law 52, said on a 19 February in an interview with Nessma TV, “One year of prison is too much, and I am involved in presenting a new legal project to preserve the lives of our youth.” Essebi reportedly wants to temporarily halt arrests on cannabis charges until the legislature completes work on revising Law 52.

There is reason for Tunisians to be hopeful that Law 52 will be amended, although the effort will more likely stem from local organizations and civil society than newfound benevolence on the government’s part. Manganella remarked, “I’m optimistic that civil society won’t so easily let a [new] law pass that reminds us of Ben Ali’s regime.” (Al Monitor 22.02)

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11.8 ALGERIA: Still Avoiding Austerity

Riccardo Fabiani wrote in Sada on 28 February that while preparing the population for austerity measures, the Algerian government is still scrambling for alternatives to avoid them.

The protracted decline in oil prices has been a major source of concern for the Algerian authorities for some time. For almost fifteen years, high oil and gas revenues have maintained the stability and prosperity that President Abdelaziz Bouteflika’s ascent to power brought. The drop in oil prices has widened budget deficits in recent years (the IMF recorded an estimated deficit of 16.2% of GDP in 2015, expected to widen to 17.9% in 2016) and depleted currency reserves, potentially triggering a balance of payments crisis if they run out by 2018 as expected.

However, with a delicate presidential succession looming in the background, the ruling factions are fearful of implementing tax raises or spending cuts that could cause social unrest and elite fracture. Fearful of triggering a wave of unrest, the authorities originally prioritized two approaches. The first was to use pedagogic discourse in the media to prepare the population for inevitable, yet unspecified, austerity measures. The second was to borrow domestically outside of the banking sector to tap savings generated by the informal economy. While the former is unlikely to have a considerable impact on a population that blames politicians for corruption and inefficiencies, the latter is key to understanding how the regime is trying to avoid any short-term fiscal adjustment.

In April 2016, the government launched a six-month domestic funding scheme by selling bonds to businessmen that have amassed enormous fortunes outside the formal economy. The thinking behind this initiative was that tapping this money would be sufficient to finance the government’s short-term spending plans while avoiding mopping up private savings in the financial sector. For this reason, the authorities issued both registered security and anonymous bearer bonds interest rates of between 5 and 5.75%. The option of anonymous bonds, which are securities for which no records of the owner or transaction are kept, provides a key guarantee to businessmen operating in the informal economy. However, this financing initiative failed to attract enough of their capital and instead crowded out private investors and banks and exacerbated the liquidity shortage by diverting investments from the strained formal financial sector. After all, why would Algerian businessmen operating in the informal economy pour their savings into bonds that yield little more than 5% when there are more profitable transactions to make? For example, they could exploit the arbitrage opportunity by borrowing money at the official exchange rates and selling this foreign currency on the black market for profit.

Faced with this failure, the authorities sought a different approach. In November 2016, they broke the long-held taboo on external borrowing, securing a €900 million loan from the African Development Bank. More significantly, Minister of Industry Abdeslam Bouchouareb has been spearheading a series of initiatives to boost investment and business activity in the non-hydrocarbon sectors. His strategy has essentially relied on two pillars: removing obstacles to investment and facilitating and protecting the development of a local manufacturing industry to replace imports. The government believes their foreign currency reserves buffer gives them a few years to see the results of this approach before they have to resort to austerity measures.

To achieve these goals, in July 2016 Bouchouareb started introducing more flexibility in the investment code, which used to put burdensome requirements on the private sector. The new code shortens the time it takes to obtain building permits, removes foreign companies’ obligation to borrow domestically and maintain a permanent foreign currency surplus, and limits the scope of the government’s right to bid first on the sale of foreign-owned businesses. While these measures fall short of making Algeria a business-friendly economy due to persisting obstacles in registering property, getting credit, conducting trade, and enforcing contracts, it still represents a major turning point in the authorities’ approach to economic policy.

The second pillar of this strategy has been more in tune with the country’s socialist past. Bouchouareb envisages a quick transition from a hydrocarbon-dependent to a manufacturing economy, but his strategy relies on state intervention through an import-substitution strategy to artificially create an industrial base. Foreign investment is welcome only as joint ventures with local companies, thus making sure that ownership remains firmly in Algerian hands. Only at a later stage should Algeria’s manufacturing sector start targeting export markets.

Indeed, in the past months the government has introduced quotas and other restrictions on importers, particularly in the automotive and cement sectors, while giving car dealers three years to invest in the car manufacturing industry if they want to keep their import licenses. Moreover, the Ministry of Industry announced a series of joint ventures between local and foreign investors in the automotive, cement, steel, and phosphate sectors. In addition, Bouchouareb aims to create a vast network of Algerian subcontractors, particularly in the automotive industry. The most high-profile example of this strategy has been the announcement of a joint venture between Volkswagen and Algerian car importer Sovac to build a factory that should produce over 100,000 cars per year for the domestic market by 2022. Once the local manufacturing industry can stand on its own and allow Algerians to replace certain imports, the authorities believe that exports will naturally follow. In a statement on 5 January, Bouchouareb said that Algeria will start exporting cement and phosphates in 2017 and that by 2019 Algeria will become an emerging market.

This strategy marks the first comprehensive approach to the problem of economic development and industrialization in a country that for a long time has relied almost exclusively on recycling oil money into the economy. Nevertheless, it continues to ignore a series of issues that have undermined development in Algeria for decades. Beyond the emphasis on joint ventures and attracting foreign investment, there is no plan to support small- and medium-sized enterprises, which crony capitalists close to Algeria’s decision makers will continue to discriminate against. In addition, the uncertain political transition ahead means there is no guarantee that the regulatory framework will remain intact and Algeria has seen many unpredictable changes in the past. Finally, the authorities have no plan to tackle the many long-standing problems that still hamper growth, such as low levels of human capital, poor economic governance, a lack of competition in almost all sectors, and an extremely challenging business climate.

Riccardo Fabiani is a Senior North Africa Analyst at Eurasia Group. (Sada 28.02)

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11.9 MOROCCO: Reducing Gender Inequality Can Boost Growth

The IMF observed on 1 March that policies that better integrate women into the economy could help increase overall income and significantly improve Morocco’s growth prospects.

Jamila is a 12-year-old girl living in rural Morocco. She is still in school when most girls her age are not—about 78% of girls between the ages of 12 and 14 are no longer in formal schooling in the country’s rural areas. Her dream is to become a doctor, and if she stays on track with her education she should be able to accomplish this goal.

But significant challenges stand in Jamila’s way—a slowing economy over the past five years, limited job opportunities (22% youth unemployment), and fewer women in the workplace as compared to men (25% participation rate compared to over 66%). The government has started to implement policies that better integrate women into the economy, but more still needs to be done to help young girls like Jamila achieve their dreams.

Women and the Economy

As part of the assessment of Morocco’s economy, we looked at the relationship between gender inequality and growth and found that policies that better integrate women into the economy could significantly improve the country’s growth. For instance, if there were as many women working as men currently are in Morocco, income per capita could be almost 50% higher than it is now.

Furthermore, Morocco’s population growth is slowing, and the United Nations projects that the dependency ratio—the age population ratio of those out and in the labor force—will rise by 2040. This means that there is a potential for more people to be out of work over the next few decades. Continuing to implement policies that eliminate gender gaps—such as increasing access to education and improving public transportation (making it safer and easier to get to work) for women, vocational training and literacy programs for rural areas—could offset these negative effects.

Improving Women’s Rights

The government has already initiated the following steps:

* The family code was revised to expand the rights of women in marriage, guardianship, child custody, and access to divorce in 2004.

* A constitutional guarantee for equality was enacted in 2011.

* Maternity leave of 14 weeks at full salary was introduced in 2004.

* The first and most advanced gender budgeting initiative in the Middle East and Central Asia region was launched in Morocco in 2002. Gender budgeting uses fiscal policies and administration, at the national, state, or local level, to address gender inequality and women’s advancement.

More Reforms Needed

Even with these improvements, our research points out that stronger and better targeted measures are needed to increase female labor force participation and employment, and to address gender gaps in education in Morocco.

For instance, the study found that:

* Investing in public childcare facilities could free women’s time, enabling them to undertake more educational and training activities, and join the labor market.

* Tax deductions or credits are currently only available to men, who as taxpayers are able to claim a dependent deduction for both spouse and children. A female taxpayer may not claim similar tax advantages unless she proves that she is a legal guardian.

* Conditional transfer programs for education, as recommended in the recently-adopted national employment strategy, can promote better access to secondary education for girls. The transfer programs could also support literacy programs for women in rural areas, female entrepreneurship, and vocational training programs for all women.

If all these actions are implemented, there is no doubt that the barriers to Jamila’s economic participation would be greatly reduced, and she would have more opportunities to contribute to a more prosperous and inclusive Moroccan society. (IMF 01.03)

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11.10 GREECE: The Threat of Grexit Returns

Yannos Papantoniou posted in Carnegie Europe on 9 February that the specter of a Greek exit from the Eurozone, or Grexit, is gradually returning to haunt European politics. Fears stem in part from the international security environment, as an isolationist United States and an assertive Russia raise fears of a return to great-power rivalries. If Europe wishes to survive as a global player, it should stand on its own feet by developing a security policy based on higher defense spending and an active international presence. This, however, is conditioned by a strong European economy, which is currently far from guaranteed.

The EU should prioritize the completion of the half-finished construction of monetary union, by reinforcing its fiscal and financial structures and improving its system of governance. As the notion of more Europe is no longer popular, far-reaching changes cannot be envisaged for the foreseeable future. However, France and Germany have no other option than to set the train moving after their elections later in 2017, because monetary integration, once started, only goes in one direction.

In the midst of this turmoil, Greece is continuing to make a mess of its handling of the economy. Over the last decade, successive Greek governments have committed fatal policy errors that, coupled with selfish policies by Athens’s euro area partners, have led to the present impasse.

The conservative New Democracy party, which took over the government in the mid-2000s, allowed Greece’s fiscal deficit to reach a staggering 15.2% of GDP in 2009, bringing the country close to default. PASOK, the Socialist party, returned to power in that year with a new leader, George Papandreou, who promised further fiscal handouts while claiming—incredibly—that “the money exists.” Confidence soon collapsed, and in April 2010 the government was forced to accept a bailout loan from the euro area and the International Monetary Fund (IMF). German and French banks were protected against default procedures, while Greece was penalized with an extremely harsh program of fiscal adjustment with no compensatory measures to sustain demand.

A succession of short-lived governments failed to meet the challenges of the bailout process. The present coalition of the radical Left and extreme Right has managed to worsen Greece’s prospects because of its erratic negotiating tactics and refusal to own reforms that have been agreed to. Greece has lost one-quarter of its GDP, unemployment stands at 23% and public debt represents 176.9% of GDP—much higher than at the start of the crisis in 2009, when the figure was 126.7%.

Crucially, reforms are being implemented inefficiently, so they do not produce the expected beneficial outcomes—either for the competitiveness of the Greek economy or for the investment environment. Privatization is proceeding very slowly. Deregulation is stumbling. The state of the administration and of the health, education, and justice systems is worse than at any time in the recent past.

Germany continues to insist on an irrationally tight fiscal policy while refusing to grant substantial debt relief. The IMF maintains that German-inspired fiscal targets are unattainable without either debt relief, which Berlin rejects, or new fiscal measures, which Athens does not accept.

A possible compromise could involve a mild version of labor-market reform, which Greece’s lenders demand, and a commitment to take fiscal measures when the need arises. If, however, negotiations drag on and the next tranche of the bailout loan is withheld, Greece may require further assistance by summer 2017. The lenders may choose to refuse such help and propose instead to start talks on Greece’s withdrawal from the Eurozone. Alternatively, the government may opt for an early parliamentary election, which would likely be overshadowed by the question of whether Greece should keep the euro or revert to the drachma.

The Grexit option appears increasingly attractive in conservative European circles. Patience for Greece is gradually being exhausted, while the idea is gaining ground that a more restricted monetary union, freed from its weakest members, could make it easier to move to further fiscal integration without the risk of a transfer union—a German nightmare.

However, Grexit carries risks. It would inflict a further shock to the Greek economy, induced by skyrocketing inflation resulting from the expected large devaluation of the new currency, a corresponding explosion of public debt as a proportion of GDP, and irreparable damage to Greeks’ confidence. Social discontent and political instability would follow, raising serious geopolitical risks at a time when Russia and Turkey are challenging European security and the refugee problem has not passed its peak. Stabilizing Greece outside the euro area would require semi-permanent surveillance and substantial injections of financial assistance from the country’s lenders.

It is therefore hoped that sense prevails among all interested parties so that agreement is achieved. Failing that, a fresh election should be held as soon as possible to allow a new government to assume power before the situation gets out of hand.

Yannos Papantoniou is president of the Center for Progressive Policy Research, an independent think tank. (Carnegie 09.02)

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11.11 GREECE: Fitch Affirms Greece at ‘CCC’

On 24 February 2017, Fitch Ratings has affirmed Greece’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘CCC’. The issue ratings on Greece’s long-term senior unsecured foreign- and local-currency bonds are also affirmed at ‘CCC. The Short-term Foreign and Local Currency IDRs and the rating on Greece’s short-term debt have all been affirmed at ‘C’ and the Country Ceiling at ‘B-‘.

Key Rating Drivers

Greece’s ‘CCC’ IDRs reflect the following key rating drivers:

The Greek government is broadly complying with the terms of the €86b European Stability Mechanism (ESM) program. The second review of the program remains incomplete and there are disagreements among the country’s European creditors and the IMF around the long-term sustainability of Greek public debt. The delay in the completion of the second review increases the risk that the recent economic recovery will be undermined by a hit to confidence or by the Greek government building up arrears with the private sector to preserve liquidity.

The Greek government agrees with the IMF that further debt relief is needed, but has objected to the fund’s position that the government should pre-legislate for specific automatic fiscal correction measures in case it misses future primary surplus targets. Even so, the current stand-off appears to be driven more by the inter-creditor disagreement. Relations between the Greek government and official creditors have stayed on a fairly firm footing since the current ESM program was agreed.

The government’s compliance with the ESM program conditions is one reason that Fitch believes Greece’s European creditors would be prepared to proceed and disburse funds without IMF involvement. Another reason is the desire to avoid a Greek political crisis during an already congested European election year. However, downside risks remain and a negative shock with respect to the completion of the second review and the payment of the next bailout tranche cannot be excluded.

Fitch’s baseline is that an agreement will be reached. This implies that the Greek government may have to adopt additional fiscal measures, which increases the risk of early elections as Syriza’s slim parliamentary majority (153 out of 300 seats) makes it harder for the government to maintain sufficient support for unpopular measures. The extent to which Prime Minister Alexis Tsipras will continue to be able to rely on votes from centrist parties is unclear.

Early elections are not our baseline. In our view, Prime Minister Tsipras will try to avoid elections: based on recent polls, Syriza trails by more than 10% to the center-right New Democracy party, which has less ideological opposition to a number of the program measures but has been arguing for its renegotiation in particular on the fiscal targets. Early elections would provide an additional source of uncertainty that would likely undermine the recent economic recovery.

Real GDP grew 0.3% in 2016 amid improved business and consumer confidence and progress in clearing government arrears with the private sector. Fitch has revised upwards its real GDP growth forecasts to 2.5% and 3% in 2017 and 2018, from 1.8% and 2.2% respectively. Pent-up investment demand, a declining unemployment rate and continued clearance of government arrears are set to support domestic demand. Resilient Eurozone growth recovery should support export performance.

Fitch estimates that Greece recorded a primary surplus of 2.5% of GDP in 2016, well above the ESM program target of 0.5%, owing to higher-than-budgeted revenues. Revenue outperformance stems mainly from stronger growth in indirect and corporate income tax receipts. The 2016 outturn should make the 2017 target of 1.75% easier to achieve. However, the 2018 target of 3.5% in 2018 remains challenging. The European creditors estimate the 2018 fiscal gap at €700m (0.4% of GDP).

The government has already legislated “prior actions” measures, which are projected to yield 3% of GDP through 2018, of which just above two-thirds come from pension and income tax reform. Fairly weak domestic ownership of program measures makes full implementation of these measures more difficult and the 2018 target harder to achieve. There is, however, a contingent fiscal mechanism to retrospectively trigger further measures if a target is missed, and tax efficiency reform on which the follow-through is more uncertain.

Confidence in the banking sector remains fragile. The customer deposit base is prone to volatility. After falling by 27% between September 2014 and July 2015, private sector deposits have barely recovered. Since the relaxation of capital controls in July 2016, the inflow of deposits has been weak. Delays to the program review are likely to put additional pressure on investor confidence, although capital controls should limit deterioration in banks’ liquidity position.

A key challenge for the banking sector is tackling non-performing exposures (NPEs), which remain stubbornly high at 45.2% of gross loans. Improvement has been made to the legal and institutional framework for resolving loans and banks have stepped up their restructuring efforts but with limited effect on the stock of NPEs so far.

Rating Sensitivities

Future developments that could, individually or collectively, result in positive rating action include:

-Evidence that the recent economic recovery is sustained and a track record of achieving primary surpluses. Official sector debt relief would also provide upward momentum for the ratings over the medium-term;

-Further track record of successful implementation of the ESM program, underpinned by an orderly working relationship between Greece and its official sector creditors and a fairly stable political environment.

Future developments that could, individually or collectively, result in negative rating action include:

– A breakdown in relations between Greece and its creditors or domestic political instability disrupting economic and fiscal policies and out-turns;

-Non-payment, redenomination or distressed debt exchange of government debt securities issued in the market or a government-declared moratorium on all debt service.

Key Assumptions

-Our base case assumes the second program review is completed ahead of the July debt maturities.

-Any debt relief given to Greece under the ESM program will apply to official sector debt only, and would not therefore constitute an event or default under the agency’s criteria. (Fitch 24.02)

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Fortnightly, 22 March 2017

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22 March 2017
24 Adar 5777
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TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Netanyahu & Kahlon to Formulate Tax Cut Plan
1.2  Israel to Invest NIS 100 Million for Small Gas Fields
1.3  Israel & China Sign Building Workers Agreement
1.4  With New Law, Israelis Over 80 No Longer Have to Wait in Line

2: ISRAEL MARKET & BUSINESS NEWS

2.1  Intel to Acquire Mobileye
2.2  BC’s Health & Technology District Signs MOU with Israel’s Center for Digital Innovation Negev
2.3  Foresight Raises an Additional NIS 14.7 Million
2.4  Bringg Raises Additional $10 Million as Enterprise Demand Grows
2.5  Dyadic Security Raises $12 Million to Help Enterprises Virtualize Crypto
2.6  New Global Post-Seed VC Fund to Raise $50 Million
2.7  Karmiel – Akko Railway Line Completed
2.8  Endor Raises $5 Million

3: REGIONAL PRIVATE SECTOR NEWS

3.1  Mississippi Trade Mission to the UAE & Jordan
3.2  UAE Leads Middle East Wellness Tourism Market, Valued at $2.7 Billion
3.3  DataPath Expands International Presence with New Office in Dubai
3.4  UAE Theme Park Spending Forecast to Reach $637 Million by 2020
3.5  French Firm Delivers First Train for Riyadh Metro

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  ET Energy Starts Construction of a 60.9MW Solar Power Project in Jordan
4.2  Dubai Solar Park to Power 50,000 Homes Unveiled
4.3  ECOSLOPS Signs a Letter of Intent with the Egyptian Authorities for the Suez Canal Region

5: ARAB STATE DEVELOPMENTS

5.1  Lebanon Approves First Batch of Controversial Tax Hikes
5.2  Number of Registered Cars in Lebanon Down by 4.82% by February 2017
5.3  Jordan & Kenya to Sign FTA Before Year-End
5.4  Jordan & France Sign €10 Million Water Resilience Agreement

♦♦Arabian Gulf

5.5  UAE Opens Its First Banknote Printing Facility
5.6  Dubai’s Non-Oil Foreign Trade Dips to $350 Billion in 2016
5.7  Saudi Arabia’s Budget Deficit Forecast to Fall to $86 Billion in 2017
5.8  Saudi Arabia to Tighten Restriction on Foreign Workers

♦♦North Africa

5.9  Egypt’s Annual Core Inflation Accelerates to 33% in February
5.10  Egypt Targets Less Than 10% Deficit in Draft Budget 2017/18
5.11  Egyptian Parliamentary Committee Approves $12 Billion IMF Loan
5.12  World Bank Disburses Another $1 Billion Loan to Egypt
5.13  China Grants Egypt $71 Million for Satellite Project at Suez Canal Economic Zone
5.14  Morocco & the ‘Floating Dirham’
5.15  World Bank Approves $150 Million Loan to Support Entrepreneurship in Morocco
5.16  US News & World Report Names Morocco Among 50 Best Countries
5.17  Moroccan King Concludes Five-Country Africa Tour on Heels of African Union Decision

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  Moody’s Revises Outlook of 14 Turkish Banks to Negative
6.2  Greek Exports Start Year on a High, Rising by 24%
6.3  Greece’s Jobless Rate Rises to 23.6% in Fourth Quarter

7: GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1  Summer Time in Israel Begins on Friday, 24 March
7.2  Kinneret Levels Lowest in a Century
7.3  Israel Ranked as Best Country for Women in Middle East
7.4  Israel Ranked 11th Happiest Country for Fourth Year in a Row
7.5  Tel Aviv 100-Story Tower Planned to be Israel’s Tallest Building

♦♦REGIONAL

7.6 Morocco World’s 84th Happiest Country
7.7 Elderly Population in Turkey Increases by 17% Over Five Years

8: ISRAEL LIFE SCIENCE NEWS

8.1  CincyTech Announces Investment in Xact Medical
8.2  Teva Announces Launch of Authorized Generic of Minastrin 24 Fe in the United States
8.3  Intermountain Healthcare Chooses Zebra Medical Vision to Deploy Enterprise Imaging Analytics

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Zadara Storage and Trio Announce New Storage-as-a-Service (STaaS) Offering in Israel
9.2  Mellanox OCP-Based ConnectX-5 Adapters for Qualcomm Platforms
9.3  Barkid Helps Parents Track Children
9.4  Netkom Leverages Stratoscale’s Cloud Infrastructure to Onboard New Customers within Hours
9.5  Sodyo Enables TV Broadcasters to Capture Leads in Real-Time
9.6  OriginGPS Launches World’s Smallest GNSS Module
9.7  Insert Integrates With Adobe to Bring the Power of Marketing Cloud to Mobile Apps
9.8  Secret Double Octopus Introduces Multi-shield User Authentication for Enterprises
9.9  IAI Unveils Radar That Detects Targets in Dense Forests
9.10  SodaStream Unveils New Brand Dedicated To Creating Sparkling Water At Home
9.11  Magal-S3 RoboGuard System First Serial Order from Israeli Governmental Customer
9.12  Breakthrough Success for Silicom: Major New Design Win With $17 Million in Orders

10: ISRAEL ECONOMIC STATISTICS

10.1  Israel’s CPI Unchanged in February as Home Prices Resume Rise
10.2  Israel’s Economy Grew by 4% in 2016
10.3  Number of Israeli Jobseekers Hits 10 Year Low
10.4  Finance Minister Says 2016 was One of Israeli Economy’s Best Years

11: IN DEPTH

11.1  ISRAEL: Israeli Startups Raise $800 Million This Year
11.2  ISRAEL: The Quiet Advance of Eastern Mediterranean Gas
11.3  ISRAEL: Israel and China – Toward a Comprehensive Innovative Partnership
11.4  JORDAN: IMF Staff Concludes Visit to Jordan
11.5  IRAQ: Statement at the End of an IMF Mission on Iraq
11.6  GCC: Economic Nationalism at the Expense of GCC Integration
11.7  OMAN: The Middle East’s Most Surprising Country
11.8  EGYPT: Egypt Economic Report – 2017
11.9  TUNISIA: Bond Bolsters Tunisia Liquidity as IMF Delay Shows Risks
11.10  ALGERIA: IMF Staff Completes 2017 Article IV Mission to Algeria
11.11  TURKEY: What Does Double-Digit Inflation Mean for Turkey?

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu & Kahlon to Formulate Tax Cut Plan

Following a substantial rise in tax revenues and repeated promises by Minister of Finance Kahlon, on 13 March Prime Minister Netanyahu and Kahlon agreed that in view of Israel’s economic achievements over the past year and their wish to continue encouraging economic activity for the benefit of Israelis, they would devise a joint plan for cutting taxes. The announcement of the tax cut plan following the release of figures published by the Ministry of Finance showing that state tax revenues jumped 10% in February, compared with February 2016. State tax revenues totaled NIS 51.8 billion in January-February, 6.4% more than in the corresponding period last year.

Minister of Finance Kahlon promised at the beginning of the year that he would lower taxes again if tax revenue figures continue to exceed the forecasts. Ministry of Finance sources predicted that Kahlon will decide the matter according to the figures for the first quarter (as he did last year), and it therefore only remains to wait for the March figures. Kahlon plans to tackle income tax and VAT this time, after having cut VAT by 1% two years ago. (Globes 13.03)

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1.2 Israel to Invest NIS 100 Million for Small Gas Fields

Two months after the announcement by Greek company Energean of its plans for development of the Karish and Tanin natural gas reservoirs, Minister of National Infrastructure, Energy and Water Resources Dr. Steinitz is unveiling his plan to encourage the development of small and medium-sized gas reservoirs. The plan will be brought to the cabinet for approval towards the end of March. The Ministry of National Infrastructure, Energy, and Water Resources, Ministry of Justice, Antitrust Authority, Israel Tax Authority, and Ministry of Internal Affairs Planning Administration prepared the plans.

Under the plan, the government will invest NIS 100 million in infrastructure for connecting the gas pipeline of the small and medium-sized reservoirs to the national gas transportation system, including aid in the necessary planning processes. This involves laying an undersea pipeline 10 kilometers off the Hadera shore to the area in which the National Outline Plan for building gas handling platforms has been approved. In addition, the Public Utilities Authority (electricity) will recognize 50% of the costs of the gas purchased by private electricity producers from the small and medium-sized gas reservoirs, compared with 25% of the costs of gas purchased from Tamar and Leviathan. The Public Utilities Authority (electricity) thereby hopes to encourage the electricity producers to buy gas from Tanin and Karish.

Another part of the plan is NIS 10 million in subsidies for the purchase of gas-powered trucks and buses. The Ministry of National Infrastructure, Energy, and Water Resources says that the subsidy is likely to be provided for dozens of vehicles. Assuming that the prices of gas-powered buses and trucks are around NIS 500,000, and given the fact that the cost of gas-powered vehicles is 10-15% higher than that of gasoline-powered vehicles, an average subsidy of NIS 100,000 is likely to cover the excess cost and assist the purchase of 100 buses and trucks. (Globes 14.03)

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1.3 Israel & China Sign Building Workers Agreement

After months of discussions, an Israel-China bilateral agreement has been officially signed. One result is that thousands of Chinese construction workers can now come to work in Israel. Ministry of Finance Housing Committee chairman Yitzhaki negotiated the completion of the agreement with the Chinese government. On 21 March, during Prime Minister Netanyahu’s visit to China, which included Minister of Economy and Industry Cohen, the official agreement was signed. Under the agreement, 6,000 construction workers from China will come to Israel in the first stage during the first six months of the agreement. Thousands more will follow later, bringing the total to 20,000 workers.

Various bilateral agreements have been promoted in recent years, following the government decision taken in 2011, which stated that employment of workers under control and supervision would make it possible to preserve their rights. This decision stated that workers would be brought to Israel only in the framework of a bilateral agreement that could eliminate the mediation fees and human trafficking that had previously prevailed in this area, both in Israel and overseas. Because of this decision, no new visas were issued for construction workers from China until the agreement was signed. Meanwhile, demand from Israeli contractors for the few Chinese workers remaining in Israel has increased, and the price of employing them has risen accordingly.

The real estate sector now hopes that following the signing of the agreement, the number of Chinese workers on projects will increase. Both the contractors and the Ministry of Finance and its housing committee agree that these workers can help increase the construction industry’s output and reduce prices. (Globes 20.03)

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1.4 With New Law, Israelis Over 80 No Longer Have to Wait in Line

Israelis aged 80 and older will no longer have to wait in line in stores and for most services. The Knesset passed a bill on 14 march that will allow the elderly to receive public services without waiting in line at places such as the post office, bank, supermarket, movie theaters and cultural events. The measure passed on its second and third reading by a vote of 37-0. Disabled individuals will still get priority over the elderly. (Various 15.03)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Intel to Acquire Mobileye

Intel Corporation and Mobileye announced a definitive agreement under which Intel would acquire Mobileye, a global leader in the development of computer vision and machine learning, data analysis, localization and mapping for advanced driver assistance systems and autonomous driving. Pursuant to the agreement, a subsidiary of Intel will commence a tender offer to acquire all of the issued and outstanding ordinary shares of Mobileye for $63.54 per share in cash, representing an equity value of approximately $15.3 billion and an enterprise value of $14.7 billion.

The acquisition shatters the previous Israeli record of $6 billion paid by Berkshire Hathaway for Iscar. Iscar was purchased in two stages – 80% for $4 billion in 2006, and the remaining 20% for $2 billion in 2013. The next biggest deal was the $5 billion Cisco paid for NDS in 2012. In 2000, the Israeli company Chromatis Networks was sold to Lucent Technologies for $4.8 billion.

The combination is expected to accelerate innovation for the automotive industry and position Intel as a leading technology provider in the fast-growing market for highly and fully autonomous vehicles. Intel estimates the vehicle systems, data and services market opportunity to be up to $70 billion by 2030. This transaction extends Intel’s strategy to invest in data-intensive market opportunities that build on the company’s strengths in computing and connectivity from the cloud, through the network, to the device.

This acquisition will combine the best-in-class technologies from both companies, spanning connectivity, computer vision, data center, sensor fusion, high-performance computing, localization and mapping, machine learning and artificial intelligence. Together with partners and customers, Intel and Mobileye expect to deliver driving solutions that will transform the automotive industry. The combined global autonomous driving organization, which will consist of Mobileye and Intel’s Automated Driving Group, will be headquartered in Israel. The organization will support both companies’ existing production programs and build upon relationships with automotive OEMs, Tier-1 suppliers and semiconductor partners to develop advanced driving assist, highly autonomous and fully autonomous driving programs.

The transaction is expected to close within the next nine months. It has been approved by the Intel and Mobileye Boards of Directors and is subject to the receipt of certain regulatory approvals and other closing conditions. The offer is not subject to any financing conditions.

Jerusalem’s Mobileye is the global leader in the development of computer vision and machine learning, data analysis, localization and mapping for Advanced Driver Assistance Systems and autonomous driving. The Company’s technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving. The Company’s products are or will be integrated into car models from more than 25 global automakers and are also available in the aftermarket. (Intel 13.03)

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2.2 BC’s Health & Technology District Signs MOU with Israel’s Center for Digital Innovation Negev

The Health and Technology District in Surrey, British Columbia announced an international partnership with the Center for Digital Innovation in Israel, to formalize a number of action oriented collaborations on health related technologies, creating an international network between partners to support health-tech innovations in Israel and across North America.

The Memorandum of Understanding (MOU) between the Health and Technology District and CDI will co-create and share respective solutions to global healthcare challenges by expediting the implementation of innovations in critical healthcare improvements for both countries.

The Center for Digital Innovation (CDI) is located in the Advanced Technology Park in Beer Sheba (Israel), the growing ‘Silicon Valley’ of the Middle East. CDI is a leading-edge, non-profit innovation center created through the collaborative efforts of some of Israel’s most outstanding entrepreneurs and Ben-Gurion University of the Negev. CDI operate in the areas of digital healthcare, healthy aging, education and smart cities and converges experienced entrepreneurs, start-up companies, innovators, researchers, industry leaders, academics, the public sector and investors to generate a high Return on Innovation (ROI), for the mega challenges of the 21st century, such as the cost of healthcare and chronic diseases to provide solutions.

The partnership was finalized during a recent trade mission organized by the Conference Board of Canada where participants studied the culture and key success factors that have led to Israel’s groundbreaking developments in innovation and commercialization, helping to secure Israel’s position as the global high-tech pioneer. (Health & Technology District 21.03)

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2.3 Foresight Raises an Additional NIS 14.7 Million

Foresight announced that it had raised NIS 14.7 million in private capital, in addition to the NIS 23.5 million it raised two weeks ago through an offering of 17% of its shares, making a total of NIS 38.5 million in two weeks. The current round was at a price of NIS 2.10 per share, 20% below yesterday’s closing price. The preceding round was conducted at NIS 1.90 per share. The company said that the money raised would enable it to continue development of its advanced systems for preventing traffic accidents.

Participants in the current financing round included investors from the auto industry, including the Dayan family, co-owners of the Trade Mobile company; Hamizrach Holding, a controlling shareholder in Universal Motors Israel (UMI) and Dan Vehicle and Transportation (Avis Israel) and the Alpha Value Investment fund. The Shrem Zilberman Group led the round. Investors in the offering also received an option to buy an additional share at a $0.80 (NIS 2.90) strike price. Foresight launched an alpha version of its flagship product in January 2017.

Ness Ziona’s Foresight is a technology company engaged in the design, development and commercialization of 3D multi-camera-based Advanced Driver Assistance Systems (ADAS). Their mission is to revolutionize ADAS by providing an automotive grade, cost-effective platform, enabling highly accurate and reliable detection while ensuring the lowest rates of false alerts. (Globes 15.03)

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2.4 Bringg Raises Additional $10 Million as Enterprise Demand Grows

Bringg has raised a $10 million funding round led by Aleph VC and joined by Coca-Cola and previous investor Pereg Ventures. This follows earlier investments from Ituran and Cambridge Capital. Bringg’s products are used by retail, ecommerce, CPG, food and 3PL/4PL (third/fourth-party logistics providers) customers in more than 50 countries, including some of the world’s leading brands.

Every company that delivers goods and services is facing a set of serious logistical challenges these days. On the one hand, customer expectations are higher than ever in terms of speed and convenience, which means they must restructure their last-mile models in order to create the seamless experience their customers expect. On the other hand, to preserve their cost structure they must establish a leaner supply chain that is elastic enough to accommodate a variety of delivery models and providers, in order to cost-effectively and rapidly scale their fleet across in-house resources, outsourced drivers and third-party providers. The Bringg platform offers companies a powerful yet flexible solution that enables them to streamline their entire delivery ecosystem – from the headquarters to the field and all the way to the customer. Bringg’s solution solves their dual challenge – how to create the optimal customer experience on the front end while ramping up operational efficiencies on the backend through real-time visibility, elastic logistics and integrated processes.

Bringg is the leading customer-centric logistics platform for enterprises. With offices in NYC, Chicago and Tel Aviv, the company has customers in more than 50 countries including some of the world’s best-known brands. Bringg’s solution enables companies to quickly streamline the way they deliver goods and services, creating both operational efficiencies and optimal experiences for their entire ecosystem – from the headquarters to the field and all the way to the customer. (Bringg 14.03)

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2.5 Dyadic Security Raises $12 Million to Help Enterprises Virtualize Crypto

Dyadic Security (Dyadic) announced the completion of a $12 million Series B funding round led by Goldman Sachs Principal Strategic Investments, Citi Ventures and Eric Schmidt’s Innovation Endeavors. The funding round will be used to expand Dyadic’s sales and marketing operations in North America. As part of the investment, Innovation Endeavors’ Yuval Shachar has been named Chairman of the Dyadic Board of Directors. Dyadic provides enterprise customers and financial institutions both security and usability in managing their cryptographic keys, rather than the traditional tradeoff. Founded by world-renowned cryptography experts and a strong team of applied crypto software engineers, Dyadic has created the world’s first SDC technology, called Dyadic vHSM (virtual Hardware Security Module).

Dyadic vHSM enables enterprises to shift away from their reliance on dedicated secure hardware such as Hardware Security Modules (HSM), smartcards and hardware tokens, which are physical devices in which digital keys are stored, to virtual modules that allow them to securely store, manage and use their cryptographic keys on any platform, from servers and laptops to smartphones and IoT devices – on premises or in the cloud. Today, Dyadic’s products are deployed around the world in several leading Fortune 500 companies.

Petah Tikva’s Dyadic Security, the world leader in software defined cryptography, delivers a pure-software platform that is reinventing identity and data protection for the digital age. Merging seamlessly with existing environments and applications, Dyadic provides a solid, yet flexible platform that creates a secure foundation for enterprises to innovate and grow digital. Dyadic is a funding recipient of the European Union’s Horizon 2020 research and innovation program. (Dyadic 14.03)

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2.6 New Global Post-Seed VC Fund to Raise $50 Million

Follow (the) Seed, a new Chinese-Israeli-US-Australian global venture capital fund, has been formed and is planning to raise $50 million for funding companies between their seed and A financing rounds. The fund has already obtained commitments for $30 million, 60% of this amount, and will invest from $500,000 to $2 million per company. The fund, which calls itself global, will invest mainly in Israeli, Chinese, US and Australian startups. Globes reported that the fund has already made eight investments, two of them in Israeli companies. Follow (the) Seed has already raised money for its first Australian fund (which invested in US company WorkSpot and Australian company ClassCover), and is now raising money for its global fund.

How will the fund attempt to find the next Facebook or Waze? It has developed an algorithm named RavingFans that analyzes the usage patterns of people using a product and searches for usage patterns that indicate out of the ordinary usage. The fund calls this irrational use, meaning that the user has really fallen in love with the product and uses it every day, such as a game app, instant messaging, ecommerce, fintech and so forth. According to the company, this could be any product that can be categorized as habit forming. Most companies checked by the fund will therefore be those developing consumer web and cellular apps that provide a service that is part of every user’s daily experience. According to a study by the L2 company, over the past five years, most of the companies that came out well ahead of the S&P 500 Index, based on their revenue growth rate, were ‘algorithm companies’ – companies whose product becomes better the more it is used, such as Facebook, Google, Amazon and Netflix. (Globes 16.03)

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2.7 Karmiel – Akko Railway Line Completed

The Karmiel – Akko railway line has been completed, the Ministry of Transportation has announced. From 26 March, there will be trial runs on the line with services to the public scheduled to commence in the summer. The project, which was built by the Netivei Israel National Transport Infrastructure Co., cost NIS 2.8 billion and involves a double track along 23 kilometers with stations at Karmiel and Ahihud. For the most part running parallel to Road 85, the new line includes the 4.6 kilometer Gillon Tunnels. The line links up with the Haifa – Nahariya line, south of Akko station and north of Kiryat Motzkin station. Israel Railways plans services direct from Karmiel to Tel Aviv. Two more stations are planned along the new line at the towns of Jadeidi-Makr and Majd al-Krum. In the future the Karmiel line will be extended northeast to Kiryat Shmona.

The Karmiel line is part of the massive expansion of Israel Railways. In recent years, new lines have been built to the Negev development towns of Sderot, Netivot and Ofakim as well as between Haifa, Afula and Beit Shean in the north. Next year, the Tel Aviv – Jerusalem fast rail link is scheduled to open. (Globes 16.03)

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2.8 Endor Raises $5 Million

Endor has closed a $5 million seed financing round led by Eric Schmidt’s Innovation Endeavors and Marker LLC. Endor has developed a predictive software platform that lets business users ask any predictive question and get high-quality results in minutes. It requires no coding, data cleaning, knowledge of machine learning, or PhDs, and far less data history than standard machine learning methods. Endor’s predictive platform is based on Social Physics: A new science that uses big data to build a predictive, computational theory of human behavior. Social Science originated in MIT through years of groundbreaking research by Prof. Pentland, creator of the MIT Media Lab and one of the world’s most cited scientists, and Dr. Altshuler. Endor extended Social Physics using proprietary technology into a powerful engine that is able to explain and predict any human behavior.

Endor is a new spin off company from MIT Media Lab that uses the groundbreaking new science of Social Physics to predict human behavior with unmatched accuracy and speed, in any domain – finance, healthcare, communication, security and retail. Headquartered in New York and Tel Aviv, Endor is backed by Innovation Endeavors. (Globes 10.03)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Mississippi Trade Mission to the UAE & Jordan

On 25 March, the Mississippi Development Authority will commence its week long trade mission to the UAE and Jordan. The multi-sector trade delegation will spend several days in Dubai, UAE, followed by an additional period in Amman, Jordan. Companies span from a manufacturer of pre-fab concrete housing and a logistics firm to a manufacturer of industrial compressors. The meetings were arranged by Middle East trade consultant Atid, EDI, who previously arranged several visits by Mississippi trade delegations, led by Governor Bryant, to Israel.

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3.2 UAE Leads Middle East Wellness Tourism Market, Valued at $2.7 Billion

The UAE leads the Middle Eastern wellness tourism market, with an average of 1.7 million wellness trips generating $2.7 billion annually, according to new research. Colliers Experiential Travel Series said the UAE accounts for 14% of the MENA spa market. The report added that Morocco, Tunisia and Jordan were also prominent players in the regional market. It said wellness trips in the UAE have grown by 17.9% over the past five years, while overall tourism has grown 8.1%. The Dubai hotel spa market experienced a 9% increase in the average number of treatments sold per day in the first half of 2016 compared to the same period in 2015 and 25 new hotel spas are expected to open this year, making a total of over 200 spas. (AB 10.03)

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3.3 DataPath Expands International Presence with New Office in Dubai

Duluth, Georgia’s DataPath, a leading provider of remote field communications and information technology solutions to the aerospace, broadcast, government and infrastructure markets announced that it has opened an office in Dubai. The company already serves customers in the area but identified greater interest and requirements for DataPath’s critical communications solutions than previously supported. The Dubai office opening is part of an extended DataPath initiative to invest in infrastructure expansion. To enhance customer and partner relationships, the company has also recently opened offices in New Delhi, India; Washington, D.C.; and Singapore.

DataPath solutions include a range of both custom and commercial off-the-shelf field communications and information technology products, including satellite communication systems, network management software, and cybersecurity services. (DataPath 20.03)

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3.4 UAE Theme Park Spending Forecast to Reach $637 Million by 2020

UAE theme park visitor spending is set to grow six-fold from $105 million in 2016 to $637 million by 2020 as the country opens several new parks as it chases ambitious tourism targets, according to a new report. The International Association of Amusement Parks and Attractions said the UAE is the dominant market in the Middle East and North Africa, the world’s fastest growing region for theme park visitor spending. Market research firm PwC predicts that the UAE’s theme park visitors could provide nearly two-thirds of the UAE’s projected total visitors by 2021. The figures comes ahead of the Dubai Entertainment, Amusement, and Leisure Show and industry experts says UAE theme parks are dialing up the “smart” visitor experience to ensure the country remains one of the world’s fastest-growing markets. Experts agree the UAE’s theme parks are serving as ideal test cases for the advanced technology that will fuel the premier mega-event of as Expo 2020 Dubai.

The UAE has embarked on a major theme park building program, with two parks recently opened in Dubai and more planned across the country including Al Ahli Holding Group’s Fox-branded complex which will be based on various Fox-owned creations like Rio, Predator and The Simpsons and is slated to open in 2020. Abu Dhabi is also getting in on the theme park act with plans including Warner Bros and Seaworld. (AB 11.03)

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3.5 French Firm Delivers First Train for Riyadh Metro

Alstom has announced that it has delivered the first train which will operate on the $23 billion Riyadh Metro rail project. The trains, which have been built at the company’s Katowice plant in Poland, will circulate on lines 4, 5 and 6 and are part of a 69 train package. As part of the contract awarded in 2013 by Arriyadh Development Authority (ADA) to the FAST consortium, which includes Alstom, the production of the rest of the metro trains are “well on track” to be delivered by the end of 2018. All six lines and 85 stations are scheduled to be operational in 2019 and will be served by electric, driverless trains in what officials describe as the world’s largest public transport system currently under development. Alstom, as part of the Fast consortium, is in charge of supplying a full integrated metro system for lines 4, 5 and 6 (or Yellow, Green, and Purple lines).

The trains are designed to run on standard-gauge track at a top speed of 90 km/h and have been designed with the region’s climate in mind. One such feature is a more powerful air conditioning system, capable of delivering sufficient cooling capacity even in extreme heat. (AB 11.

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 ET Energy Starts Construction of a 60.9MW Solar Power Project in Jordan

ET Solutions AG, a subsidiary of ET Energy, a global leading energy solutions provider, announced that it has started the construction of a 60.9 MW solar power project in Jordan for ACWA Power, a Saudi-based independent power producer. The project will become one of the largest 1500VDC PV plants in Europe, the Middle East and Africa after completion.

The project is situated in Mafraq, Jordan, 50 km north-east of Amman. ACWA Power is the developer and the owner of this project. After the project is completed, it will deliver power to National Electric Power Company (NEPCO) at a tariff of 0.043 JD per kWh (equal to 6.13 $c/kWh). This project was awarded in the Round II of the Photovoltaic Procurement program of the Ministry of Energy and Mineral Resources of Jordan. Acting as the full turn-key EPC provider, ET Solutions, along with its consortium partner, Northwest Power Design Institute (NWPDI) of China Power Engineering Consulting Group, started construction at the beginning of this month. The construction is expected to be completed within 10 months. (ET Solutions 15.03)

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4.2 Dubai Solar Park to Power 50,000 Homes Unveiled

The second phase of the Mohammad Bin Rashid Al Maktoum Solar Park that will generate 200megawatts of clean energy — enough to power 50,000 homes annually — was opened on 20 March. Shaikh Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, inaugurated the world’s largest single-site solar park off Al Qudra in Dubai. The solar park is one of the major projects of the Dubai Electricity and Water Authority (Dewa).

With more 2.3 million thin-film photovoltaic panels, the second phase can save annual carbon emissions of up to 214,000 tonnes. The second phase was implemented in partnership with the consortium led by the main developer, ACWA Power from Saudi Arabia and the main contractor, Spain’s TSK, with an investment of Dh1.2 billion. The solar park is a multi-phase project that’s expected to generate 1,000MW by 2020 and 5,000MW by 2030 for a total investment of Dh50 billion. Once completed, the solar park will produce clean energy that could reduce carbon emissions by more than 6.5 million tonnes annually. (AB 20.03)

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4.3 ECOSLOPS Signs a Letter of Intent with the Egyptian Authorities for the Suez Canal Region

France’s Ecoslops, an innovative technology company that upgrades ship-generated hydrocarbon residues, or “slops”, into valuable new fuels and light bitumen, has signed a Letter of Intent with EGPC (Egyptian General Petroleum Corporation), through one of its subsidiaries, SSCO, in order to explore the feasibility of creating an oil residue collection and recycling plant in the Suez Canal region. The objective of the agreement is to identify the slops collection and recovery services that could be installed and then used by ships passing through the Suez Canal. This falls within the framework laid out by the Egyptian authorities, whose aim is to improve the services provided to ships during their passage through the Suez Canal. Given that the handling and sustainable disposal of oily residues is a recurring need for ships, ECOSLOPS and EGPC/SSCO have decided to join forces to conduct this feasibility study.

Following the feasibility study, it has been agreed that the two partners will invest together in the joint venture that would be eventually created, with ECOSLOPS as a major shareholder, and overseeing the management of the project. (Ecoslops 15.03)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon Approves First Batch of Controversial Tax Hikes

As Lebanon continues to grapple over ways to balance country’s ballooning budget deficit, the parliament approved a 1% increase (from 10 to 11%) in VAT on 15 March, along with five other taxes, including levies on financial transactions, along with a 6,000 Lebanese pounds ($4) tax on the production of each ton of cement. Proponents of the tax hikes say these steps are necessary to fund a long-stalled new pay scales for government employees which include judges, teachers and military personnel. The hikes in taxes were opposed by the Phalange and Future parties, which belong to the anti-Syrian March 14 coalition bloc.

While Lebanese have decried the new financial burden being put on their shoulders, they also understand the urgency and importance of increasing the government employees’ wages. There are 22 other tax hikes being considered by the parliament including levies on company profits from 15 to 17%, a 15% duty on profits from real estate transactions and a 4% fee on the import of kerosene. The most exuberant tariff, however, is a 500% tax on alcohol, on top of existing rates, which will translate into an increase from 200 Lebanese pounds ($0.13) to 1,000 Lebanese pounds ($0.66) for a liter of wine and champagne, and from 400 Lebanese pounds ($0.26) to 2,000 Lebanese pounds ($1.32) on a liter of hard liquors. Cigarettes and shisha have not included in this tax raise proposal.

Liberals worry that taxes on alcohol could infringe on the country’s liberal policies, which they feel have come under increasing attack. The biggest worry, however, comes from contemplated hikes on bank deposit fees, which could dissuade investors and Lebanese expatriate workers from sending roughly $7-8 billion in remittances to Lebanon each year. These tax proposals have been severely criticized by economists, bankers and businesses, all of whom warned that such measures would slow the already-struggling economy that is heavily dependent on the tourism and entertainment industries. (GN 16.03)

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5.2 Number of Registered Cars in Lebanon Down by 4.82% by February 2017

According to the Association of Lebanese Car Importers (AIA), the number of newly registered commercial and passenger cars deteriorated during the first 2 months of 2017 by 4.82% year-on-year (y-o-y) to 5,317 cars. This was triggered by the 4.27% yearly drop in the number of newly registered passenger cars to 4,982 and the 12.30% fall in newly registered commercial vehicles to 335. In terms of brands, Kia kept on holding the largest share of the total newly registered cars (18.97%), followed by a 13.25% stake for Toyota. Hyundai came next in the ranking, as it grasped 12.77% of newly registered cars and was followed by Nissan that took 7.93% of the total. (AIA 15.03)

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5.3 Jordan & Kenya to Sign FTA Before Year-End

Jordan and Kenya are expected to sign a free trade agreement (FTA) before the end of the year, Minister of Industry, Trade and Supply Qudah said on 11 March. At a ceremony marking the launch of the Jordanian-African Business Association, Qudah said that both countries are scheduled to start negotiations over the FTA next month. The agreement would facilitate the penetration of Jordanian products into the Kenyan market. The deal would also provide incentives to help Jordanian items compete in Kenya’s market. The difficult regional circumstances, such as the Syrian and Iraqi crises, affected the national products’ traditional markets, making it necessary to search for new export markets, Qudah said, adding that the “promising” African market was one of the choices. During the King’s visit, Jordan inaugurated an embassy in Nairobi to help boost bilateral ties. (JT 11.03)

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5.4 Jordan & France Sign €10 Million Water Resilience Agreement

On 20 March, Jordan and France signed a €10 million project agreement to boost the water sector’s resilience in northern Jordan. Jordanian Water Minister Nasser and French Minister of State for Development and Francophonie Le Guen signed the agreement detailing the project to be implemented by non-governmental organization Action Against Hunger. The project will be implemented as part of the European funding program in partnership with the EU through the Neighbourhood Investment Facility, the German government’s KfW Development Bank and the French Development Agency (AFD) at a total value of €152 million to support the Jordan Response Plan to the Syrian crisis.

The water sector’s resilience project began with support from the French Crisis Centre, affiliated with France’s foreign ministry. The project aims to support 10,000 families over the next three years. The Jordanian water minister commended the French government’s support to the Kingdom, noting that, in the past few years, the support had reached more than €400 million. He added that the total of French investments in the water sector during the past 15 years equaled more than $1 billion. (JT 21.03)

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►►Arabian Gulf

5.5 UAE Opens Its First Banknote Printing Facility

The UAE opened its first banknote printing company, with Dubai Ruler Sheikh Mohammed receiving the first AED1,000 note printed by the company, bearing the “number 1”. The “Oumolat Security Printing” company, which is located in Khalifa Industrial Zone Abu Dhabi (KIZAD). The Dubai ruler was briefed by the UAE Central Bank governor, Mubarak Rashed Al Mansoori, about the facility’s production machinery featuring the latest technology and fully integrated state-of-the-art security and protection systems. Currently, the dirham is printed overseas in countries such as the UK and France. (AB 12.03)

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5.6 Dubai’s Non-Oil Foreign Trade Dips to $350 Billion in 2016

Dubai’s non-oil foreign trade fell marginally to AED1.276 trillion ($350 billion) in 2016. Dubai Crown Prince Sheikh Hamdan revealed the figure in a tweet which was down from AED1.283 trillion in 2015. Sheikh Hamdan said fluctuations in global markets has not impacted the emirate’s performance “since we were able to transform challenges into opportunities”. He added in another tweet: “Trade is not only important for economic diversification; it is also an important part of our heritage.” The data showed that telecommunications, gold and diamonds were the three most traded commodities last year.

The official trade figures follow a report last week that showed Dubai’s private sector companies continued to remain optimistic in February although growth momentum. The seasonally adjusted Dubai economy tracker index for incoming new work category rose to a 24-month high as companies reported a rise in new job orders. Wholesale and retail was the best performing category for the first time in six months, followed by travel and tourism. However, construction companies recorded a slowdown in growth momentum. (AB 15.03)

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5.7 Saudi Arabia’s Budget Deficit Forecast to Fall to $86 Billion in 2017

The Bank of America Merrill Lynch announced that Saudi Arabia’s deficit is set to narrow during 2017 on the back of higher oil prices, discipline in spending and non-oil revenue measures. BofA Merrill Lynch said it sees the 2017 budget deficit at SR316 billion ($85 billion), about 12% of the Gulf kingdom’s GDP, compared to a deficit of SR402 billion in 2016, which represented 16.9% of GDP. The research note said underlying spending discipline kept the 2016 fiscal deficit in line with budget targets. However, the repayment of contractor arrears (SR80 billion) and spending related to surplus projects (SR25 billion) drove the 2016 fiscal deficit wider. BofA Merrill Lynch also noted that the Saudi US dollar peg will hold in 2017 given sizeable foreign assets and the experience with implementing multi-year fiscal adjustments.

The research note said the country’s budget statement and medium-term program imply three Saudi policy priorities this year – easing near-term austerity, supporting higher oil prices and introducing non-oil revenue reforms. The 2017 budget suggests flattish real spending, along with further repayment of government arrears in the first quarter of 2017. BofA Merrill Lynch said it sees the budget being consistent with oil prices of $55 per barrel and a fiscal breakeven of $98 per barrel. (AB 10.03)

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5.8 Saudi Arabia to Tighten Restriction on Foreign Workers

Saudi Arabia plans to tighten restrictions on foreign workers to pressure companies into hiring more Saudi citizens and reduce unemployment among Saudis. The new policy could help the conservative kingdom achieve one goal of economic reforms launched last year to ease joblessness among Saudis from the current 12.1% to 9% by 2020. But by making it harder for firms to employ low-paid foreign workers, thereby raising costs, the policy may complicate other aspects of the reform drive such as developing private sector businesses and diversifying the economy beyond oil.

The new rules could potentially affect large numbers of people since about 12 million foreigners work in Saudi Arabia, doing many of the strenuous, dangerous and lower-paid jobs shunned by 20 million Saudi citizens. About two-thirds of Saudi workers are employed by the public sector.

Under a program launched in 2011 and known as Nitaqat, the Labor Ministry grades firms according to the ratios of Saudis in their workforces. Companies with higher ratios get preferential treatment when obtaining visas for foreign workers or licenses; those in lower categories face penalties. Under the new policy, construction firms with between 500 and 2,999 workers would have to employ 100% Saudis to be in the top “platinum” category; if they employ 10%, they are rated “lower green”. This compares to current levels of 16% for platinum and 6% for lower green. In the retail sector, a large company’s current percentages are 35% for platinum and 24% for lower green. This would rise to 100% for platinum and 35% for lower green. The policy will also tighten in many other sectors, according to the document, which lists more than 60 industries in which restrictions will be applied. (Reuters 21.03)

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►►North Africa

5.9 Egypt’s Annual Core Inflation Accelerates to 33% in February

Egypt’s annual core inflation jumped to 33.10% in February from 30.86% in January, the central bank (CBE) said on 11 March. On a monthly basis, core inflation eased to register 2.61%, down from 5% the month before. The rising inflation rate follows the government’s decision to devalue the Egyptian pound and reduce fuel subsidies as part of an austerity program implemented alongside the three year $12 billion IMF loan deal signed last November.

The monthly national inflation rate decreased from 4.3% in January to 2.7% in February, but food prices increased by 4.1% during this time. Prices rose by 5.5% for meat and poultry, 4.5% for vegetables, 6.3% for dairy, 8.3% fish and seafood and 6.6% for fruits. The price of ready meals rose by 1.4%, furniture by 1.9% and healthcare by 1.9%.

The core consumer price index that the CBE uses to measure the level of prices – which excludes essential commodities such as fruits and vegetables – started to hit double digits in May 2016, when it reached a seven-year-high of 12.2%. Egypt’s annual headline inflation hit a record high of 31.7% in February, up from 29.6% in January, state statistics body CAPMAS announced. (CAPMAS 09.03)

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5.10 Egypt Targets Less Than 10% Deficit in Draft Budget 2017/18

Egypt’s Minister of Finance Amr El-Garhy has said the deficit in the draft budget for the coming fiscal year 2017/18 is expected to be lower than 10% of GDP, citing tax revenues from both income and real estate in addition to planned investments as sources of funding. The minister said on 15 March that subsidy allocations for petroleum products in the draft budget would depend on foreign currency rates and international prices, pointing out that indicators are moving toward a range of $50 to $55 per barrel.

Egypt’s budget deficit registered 5.1% in the first half of this fiscal year relative to GDP, down from 6.2% in the first half of the last fiscal year. The government is targeting a budget deficit of 10.1% by the end of the current fiscal year 2016/17. Egypt freely floated its currency against the dollar in November, as part of a fiscal reform program implemented in mid-2014 to curb a growing state budget deficit, which amounted to 12.2% in 2015/16, and revive the flagging economy. The reform program also included cutting subsidies and implementing new taxes including a value added tax. (Al Ahram 16.03)

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5.11 Egyptian Parliamentary Committee Approves $12 Billion IMF Loan

An Egyptian parliamentary committee on 15 March approved the country’s three-year $12 billion loan agreement with the International Monetary Fund, which will next be voted on by the whole legislature. The constitutional and legal affairs committee approved the agreement after 31 members voted in favor, five against and one abstained. The Central Bank of Egypt received an initial $2.75 billion tranche of the loan in November, following the IMF board’s approval of the agreement.

During the 15 March parliamentary session, Minister of Finance Amr El-Garhy said that all the documents related to the agreement are available for review by MPs. El-Garhy said that a delegation from the IMF will visit Egypt from 28 April to 8 May. The IMF said last month it planned to complete its first review of Egypt’s economic reform program around June this year. Parliamentary speaker Ali Abdel-Aal described the agreement as a part of a comprehensive economic reform program, highlighting Egypt’s right to borrow from international monetary organizations like any other country in the world.

In mid-August 2016, Egypt reached a staff-level agreement with the IMF over the $12 billion loan to endorse the country’s fiscal reform program, which the government embarked on in 2014 in an attempt to curb the growing state budget deficit, estimated at 12.2% of GDP in 2015/16. The fiscal reform program included the floatation of the Egyptian pound. The government hopes the loan will jumpstart the Egyptian economy, which has been battered by years of turmoil that have driven away investors and tourists. Egypt’s foreign reserves reached $26.54 billion by the end of February 2017, up from around $26.36 billion in January, the CBE said. (Reuters 15.03)

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5.12 World Bank Disburses Another $1 Billion Loan to Egypt

The World Bank (WB) has disbursed another $1 billion in financial assistance to Egypt out of its $3 billion loan program with the country. Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy hit by political upheaval since a 2011 revolt, and to ease a dollar shortage that has crippled imports and hampered its recovery.

The World Bank issued the first $1 billion tranche of the loan in 2015, with two more instalments of the same size to follow, linked to additional reforms that the government planned. Faced with a gaping budget deficit, Egypt began a series of painful economic reforms and has taken steps to lower fuel subsidies, introduced a new value-added tax and let its currency float freely in the foreign exchange market in November to attract foreign inflows. Hafez Ghanem, the World Bank’s vice president for the Middle East and North Africa, said that Cairo’s next set of economic reforms should focus on making its bureaucracy more transparent for investors. Egypt expects to receive the second tranche of a $12 billion International Monetary Fund loan in May or June, Finance Minister El Garhy said. (Reuters 20.03)

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5.13 China Grants Egypt $71 Million for Satellite Project at Suez Canal Economic Zone

On 20 March, Egypt and China agreed on a $71 million Chinese grant to Cairo for a feasibility study for the Egyptian satellite SATII project, as well as the establishing of a vocational training center at the Suez Canal Economic Zone. Some $64 million will be dedicated to the feasibility studies for the second phase of the Second Egyptian Satellite for Remote Sensing (Egypt SATII) and $7 million for the Suez Canal vocational center. The grant is the latest in Chinese grants provided to Egypt over the last five years totaling $267 million.

In January 2016, Egyptian President El-Sisi and Chinese President Xi Jinping signed a number of cooperation deals worth around $15 billion, including China’s participation in the construction of Egypt’s new administrative capital as well as the development of an industrial and commercial hub around Egypt’s Suez Canal. China is also involved in power generation projects in Egypt. However, the Egyptian government said in early February that it could not reach a final deal with the China Construction Company, which was to be tasked with building parts of the administrative capital. Egyptian construction companies were given the contract instead. (Ahram Online 21.03)

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5.14 Morocco & the ‘Floating Dirham’

Morocco’s central bank governor, Abdellatif Jouahri, announced in 2016 that Morocco is aiming to introduce a flexible exchange rate system in the midst of 2017. Indeed, the International Monetary Fund (IMF) had identified the reform of the exchange rate regime as an important milestone to increase the resilience of the Moroccan economy. The IMF’s de facto classification of Morocco’s current exchange rate regime is referred to as “Conventional fixed peg arrangements”. Indeed, Morocco pegs its currency within margins of ±0.3% or less vis-à-vis a basket of currencies: The dirham’s exchange rate is currently fixed via a peg that is 60% weighted to the euro and 40% to the dollar (prior to April 2015, it was fixed via a peg that was 80% weighted to the euro and 20% to the dollar).

In case of a shock, under the current exchange rate regime, significant pressure is put on foreign exchange reserves. Furthermore, a shock could also lead to a forced transition to a floating regime. These weaknesses could be significantly mitigated by a floating exchange-rate regime.

Unlike Egypt who was unprepared to take the dramatic step of allowing its currency to trade freely, Morocco’s reform will be gradual allowing for a smooth transition. Indeed, Morocco’s foreign exchange reserves currently cover more than seven months of imports; and the central bank has said it expects that to rise to eight months by the end of 2017. Moreover, the macroeconomic environment is overall very favorable to this reform thanks the country’s efforts to curb its deficits and to decrease its public debt. According to the IMF, because Morocco has the proper prerequisites for the intended reform, the scenario under which the Moroccan dirham will plummet after gradual floating can be safely discarded.

The reform implies that the exchange rate will not be used as the nominal anchor of the system anymore. Instead, Morocco will operate an inflation targeting regime. Also, the prices of other currencies vis-à-vis the Moroccan dirham will be fully determined by the market’s supply and demand; and the only interventions in the foreign exchange market will be undertaken to ensure proper liquidity. (MWN 10.03)

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5.15 World Bank Approves $150 Million Loan to Support Entrepreneurship in Morocco

The World Bank’s Board of Executive Directors approved a total of $150 million in funding on 10 March to support the Moroccan authorities’ plan to modernize the national identification system and support innovative start-ups and job creation. The two operations, aimed at strengthening social and economic inclusion, will improve social programs through a better personal identification system and, on the other hand, remove barriers which prevent start-ups and small businesses from accessing financing, says the World Bank.

According to the World Bank, “almost 5.3 million Moroccans, of which two-thirds from rural areas, live under the threat of falling back into poverty due to their socio-economic conditions.” With an envelope of $100 million, the Identity and Targeting for Social Protection Project is designed to help the most vulnerable by developing systems to ensure that social programs are better targeted and reach the most vulnerable Moroccans. The development objective of this project is to expand coverage of a unique identifying number for the Moroccan population and foreign residents, and to improve targeting of social safety nets in the Project Area.

The other project approved is a $50 million operation to improve financing opportunities for start-ups and innovative SMEs. The Financing Innovative Startups and small and medium enterprises (SMEs) project is to facilitate the increase of private equity and quasi-equity finance for innovative startups and small and medium enterprises. The project will support a financing program that will invest, along with private funders, in innovative start-ups and SMEs, as well as a selection of promising investments constituting “the highest contribution to net job creation in the Mena region,” according to the bank. (WB 11.03)

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5.16 US News & World Report Names Morocco Among 50 Best Countries

For the second year in a row Morocco was ranked among the top 50 best countries by US News & World Report’s Best Countries listing. Produced in partnership with Y&R’s BAV Consulting group and the Wharton School of Pennsylvania, the listing evaluates 80 countries based on a survey of more than 21,000 respondents worldwide in nine sub-categories: Adventure, Citizenship, Cultural Influence, Entrepreneurship, Heritage, Movers, Open for Business, Power and Quality of Life.

Ranking at 48th overall, Morocco showed especially strong performances in the Movers sub-category, which identifies “up-and-coming economies,” coming in at 14th; the Heritage sub-category, which identifies those countries “most readily associated with a unique identity,” ranking 16th; and the Adventure sub-category, signaling destinations most likely “to fulfill your wanderlust,” ranking 24th. Of the remaining nine sub-categories, Morocco also placed in the top 50 in the categories of Open for Business (“market-oriented” countries that are “a haven for capitalists and corporations”), ranking 40th; and Cultural Influence (countries that serve as “cutting-edge centers of art, entertainment and fashion”), ranking 41st.

In many categories, Morocco emerged as a leader in Africa and the Middle East. Morocco was number one in the Open for Business and Best Countries for a Comfortable Retirement categories among African and Middle Eastern countries; number one in North Africa for Forward-Looking Countries; and second in Africa in the Movers category. (MACP 11.03)

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5.17 Moroccan King Concludes Five-Country Africa Tour on Heels of African Union Decision

Morocco’s King Mohammed VI has concluded a five-country tour of Africa that took him to South Sudan, Ghana, Zambia, Guinea, and Côte d’Ivoire. The tour immediately followed the African Union’s (AU) decision to readmit Morocco to the continental bloc after a 33-year hiatus. Since ascending the throne in 1999, the King has made Africa a foreign policy priority, making over 50 visits to nearly 30 African countries and signing approximately one thousand bilateral agreements on economic, political, security, religious, and educational issues.

From 1-2 February, the King visited South Sudan, overseeing the signing of nine bilateral agreements with President Mayardit in the areas of urban development, investment promotion, agriculture, industrial cooperation, mines, and vocational training. The King also committed funds to a feasibility study for the building of a new capital city in Ramciel; as well as to a field hospital in Juba operated by Morocco’s Royal Armed Forces.

From 16-19 February, the King visited Ghana, where he and President of Ghana Akufo-Addo oversaw the signing of 25 governmental and public-private partnership agreements. The agreements center on investment, industrial cooperation, electricity, insurance, banking, agriculture, renewable energy, mining, tourism, and partnerships to promote business and engage the private sector in favor of climate action.

From 19-23 February, the King visited Zambia, where he and Zambian President Chagwa Lungu chaired a signing ceremony for 19 political and economic partnership agreements covering air services, investment promotion and protection, finance and banking, insurance, education, tourism, agriculture, technology, industry, and mining and renewable energy.

Morocco is the second largest African investor in the continent, and its trade with the rest of Africa increased by 12% annually between 2003 and 2013. In late 2013, the King established a program to train imams from across the continent in Morocco’s open, moderate form of Islam; and in June 2016, he inaugurated the Mohammed VI Foundation for African Oulema, with a mission of strengthening age-old historical and religious ties between Morocco and its African neighbors. With Morocco serving as the host country, the King also ensured that Africa’s interests on climate change policy were represented at the 22nd Conference of the Parties to the United Nations Framework Convention on Climate Change summit in Marrakesh in November 2016, hosting a special meeting for African leaders at the event. (MACP 14.03)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Moody’s Revises Outlook of 14 Turkish Banks to Negative

On 17 March, Moody’s changed Turkey’s rating outlook from stable to negative. Moody’s also affirmed Turkey’s government debt and issuer ratings at Ba1. Moody’s said its decision to affirm and change the outlook from stable to negative on the long-term deposit and debt ratings of 14 banks reflects Moody’s expectation that these banks’ ratings would come under pressure from a combination of the weakening capacity of the government of Turkey to provide support in case of need, as implied by the negative outlook on the sovereign rating; and the increasingly adverse macroeconomic environment in Turkey.

The affected institutions include Akbank, Alternatifbank, HSBC Turkey, ING Turkey, Finansbank, Ziraat Bank, Halk Bank, Vakiflar Bank, Turk Ekonomi Bankasi, Garanti Bank, Yapi Kredi Bank, IS Bank, TSKB and the GRI Export Credit Bank of Turkey. Moody’s also downgraded Sekerbank long-term deposit ratings from B1 to B2 and standalone Baseline Credit Assessment (BCA) from b1 to b2 and assigned a negative outlook to the long-term deposit ratings. The action captures Moody’s expectations that the financial fundamentals of the bank will deteriorate more in the adverse operating environment than other rated Turkish peers.

Moody’s affirmed Burgan Bank’s local and foreign currency deposit ratings at Ba3 and its BCA at b2. The outlook on the long-term deposit ratings remains stable, given the expected resilience of the bank’s financial fundamentals despite the challenging environment. Moody’s also affirmed Denizbank’s local and foreign currency deposit ratings at Ba2 and its BCA at ba3. The long-term deposit ratings continue to have a negative outlook. The outlook reflects Moody’s expectation that while the bank’s fundamentals remain compatible with the current rating level, Denizbank shows some vulnerability to further deterioration amid the current operating environment. (HDN 21.03)

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6.2 Greek Exports Start Year on a High, Rising by 24%

Greece’s external trade has started the year with a rise, and the balance remains positive even when certain factors that distort the real picture of exports and imports are excluded. The total value of exports in January 2017 came to €2.12 billion, against €1.71 billion in January 2016, posting an increase of 23.9%. According to the Panhellenic Exporters Association, most of that massive increase was due to the delivery of new ships from Asian shipyards, while the valuations of fuel imports and exports at considerably higher rates in the first month of the year also played a role. Excluding fuel products, the increase amounted to 6.3%, while excluding the ships it came to 4.4%.

The impact of the ship transactions was even greater on imports. This sent the total value of imports soaring 52.1% year-on-year to €4.46 billion, from €2.93 billion in January 2016. Excluding fuel, the rise reached 44.4%, while when ships are taken out of the equation the increase came to 11.4%. It therefore appears the omens are good for 2017, although no one can predict what will happen in the coming months. (eKathimerini 12.03)

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6.3 Greece’s Jobless Rate Rises to 23.6% in Fourth Quarter

The Hellenic Statistical Authority (ELSTAT) announced on 16 March that Greece’s jobless rate rose to 23.6% in October-to-December from 22.6% in the third quarter. About 71.8% of Greece’s 1.12 million jobless are long-term unemployed, meaning they have been out of work for at least 12 months. Young people aged 15 to 24 faced a jobless rate of 45.2% in the fourth quarter compared to 48.6% in the same quarter a year ago. The highest unemployment rate was recorded in Q1/14, when joblessness hit 27.8%.

Greece’s economy contracted at an annual 1.1% pace in the fourth quarter due to weak public consumption and net exports. The European Commission and Greece’s central bank project the economy will recover this year with GDP seen growing by 2.5-2.7%. (Reuters 16.03)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Summer Time in Israel Begins on Friday, 24 March

Daylight savings time in Israel for 2017 will begin at 02:00 on Friday, 24 March and ends at 2:00 on Sunday, 29 October. In 2013, the Knesset passed legislation extending daylight savings time from the last Sunday in March to the last Sunday in October. Before that, daylight savings would end the Saturday night before Yom Kippur, so that the day’s fast, which is pegged to nightfall, would seem to end an hour earlier.

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7.2 Kinneret Levels Lowest in a Century

After registering a drought for the fourth consecutive year in the north, the Water Authority is reporting a record low for precipitation in the month of February since measurements began in the 1920s. Water levels in the Kinneret rose only 22 cm last month, which is decidedly lower than the multi-year average of 60 cm. As of the beginning of March, current water levels in the Kinneret are standing at 16cm below the red line. These measurements, which are recorded now at the end of the rainy season, present a dire picture that has not been seen in a decade. The upper red line, the line marking the Kinneret water level as full, is down 4.36 meters.

Due to low levels of precipitation in the western Galilee over the last four years, the lack of available water volume in the Kinneret is the largest it has been in 100 years. The available water volume in the Kinneret last month amounted to 35 cubic meters, compared to the multi-year average of 86 cubic meters in the month of February. These worrying data were still recorded despite Water Authority policy that stopped Kinneret pumping nearly entirely. Exacerbating matters, the water shortage in the north is expected to worsen this summer.

The Water Authority is working to complete a desalination system to stabilize the water market in Israel, half of which is already made up of 50% recycled water. According to the Water Authority, a desalination plant was planned in the western Galilee, but ultimately did not materialize due to objections from local residents. (Ynet 20.03)

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7.3 Israel Ranked as Best Country for Women in Middle East

Israel is the best country in the Middle East for women’s rights and freedoms, the World Economic Forum’s Global Gender Gap survey recently concluded. The survey, which has been conducted since 2006, ranks 110 countries in terms of gender equality and inequality, using a variety of factors including demographic data, socioeconomic figures, and a close look at women in the legal system.

In 2013, Israel ranked #53 for women’s rights worldwide – up two places since 2012 – but top for the Middle East overall. Middle Eastern and Muslim countries ranked lower on the list, possibly due to their lower human rights records overall. Thomson-Reuters noted recently that several Middle Eastern countries – Egypt, Iraq, Saudi Arabia, and others – have a poor track record for violence against women, reproductive rights, as well as the treatment and role of women. Egypt bottomed out the list.

The report noted that the Comoros Islands have the best track record for treatment of women in the Arab world; while the tiny nation did not appear on the WEF list, Oman – which ranked second for the Arab world in the Reuters poll – ranked 122nd in this survey. Kuwait, which ranked third on the Reuters list, stands at just 118. The survey’s results were published in honor of International Women’s Day, which was on March 8, and surfaces within days of reports that the Saudi Arabian royal family has been holding princesses captive against their will for several years. Israel received the Reducing the Gender Gap prize in 2013 from the European Parliament for its efforts in championing women’s rights. (Arutz7 14.03)

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7.4 Israel Ranked 11th Happiest Country for Fourth Year in a Row

According to this year’s World Happiness Report, prepared by the Sustainable Development Solutions Network (SDSN) for the United Nations, Israel is the 11th happiest country in the world – for the fourth year in a row. Although Israel ranks behind countries like Norway (1st), Denmark (2nd), Iceland (3rd), Switzerland (4th) and Canada (7th) on the list, it placed ahead of the US (14th), Germany (16th) and the UK (19th). When the report first launched in 2012, Israel was ranked at number 14 out of the countries surveyed, but has held firm on 11th place since then. According to the survey, people in Tanzania (153), Syria (152) and Rwanda (151) are unhappiest with their lives.

The report is based on an annual survey of 1,000 people in more than 150 countries that simply asks them to rank, on a scale of 0 to 10, whether they are living their best life. Researchers then use six measures to try to understand the results: gross domestic product per capita, social support, healthy life expectancy, freedom to make life choices, generosity/charitable giving, and perceived levels of government and corporate corruption. (Various 21.03)

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7.5 Tel Aviv 100-Story Tower Planned to be Israel’s Tallest Building

Plans for a 100-story tower to be constructed on the border between Tel Aviv and Ramat Gan have been submitted to the Tel Aviv Regional Planning and Building Committee. If approved and built, the so-called “Tower Between Cities” will be Israel’s tallest building, reaching a height of 400 meters (1,300 feet). The plans, by Guy Miloslavsky and Amnon Shwartz from Miloslavsky Architects, call for the tower to be built between Shefa Tal and Jabotinsky streets next to Tel Aviv’s Savidor Central Railway Station and a light rail station currently under construction. It is designed to contain private apartments as well as offices, shops, and a hotel. The adjacent lot will be able to accommodate two additional six-story buildings. The plans will have to overcome a number of hurdles before being approved.

Since 2001, the 235 meter (771-foot) Moshe Aviv Tower in Ramat Gan has been the tallest building in Israel. It was recently overtaken by the Azrieli Sarona Tower in Tel Aviv, which is still under construction and currently reaches 238.5 meters (782.5 feet). Construction also recently ended on the 57-story “low” Shachar Tower in Givatayim, east of where the new project would go up, which topped out at 195 meters (640 feet). (Various 21.03)

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*REGIONAL:

7.6 Morocco World’s 84th Happiest Country

Morocco was ranked the 84th happiest country out of 155 total, according to World Happiness Report released by the Sustainable Development Solutions Network (SDSN). Despite the relative rise in Morocco’s rate of happiness from last year’s ranking of 90th happiest country, the kingdom is still below the average of the overall international standings. At the level of North Africa, Algeria landed at the 53th position, making it the happiest country in North Africa, followed by Libya at 68th place, Morocco at 84th, Tunisia at 102th, Egypt at 104th, and lastly Sudan at 147th place.

The report noted that key factors that lead to misery are not solely economic variables (such as income and employment), but also social factors (education and family life), as well as mental and physical health. Though African countries dominated the list of unhappiest countries, researcher explained that Africans demonstrate “ingenuity that makes life bearable even under less than perfect circumstances.” (MWN 21.03)

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7.7 Elderly Population in Turkey Increases by 17% Over Five Years

Turkey’s elderly population has risen by 17.1% over the past five years, according to statistics released by the Turkish Statistical Institute (TUIK) on 16 March. TUIK stated that the population of people over 65 years old in Turkey had risen to 6,651,503 in 2016, up from 5,682,003 in 2012. The proportion of the elderly population in terms of the total population was 8.3% in 2016, up from 7.5% in 2012. Some 43.9% of the elderly population was made up of men and 56.1% was made up of women. The elderly dependency ratio, made up of the number of elderly people per hundred people of working age, was 12.3% in 2016, up from 11.1% in 2012. Meanwhile, in 2016 there were 5,232 centenarians in Turkey.

On average, for people aged 65 years old in Turkey, the average remaining life span is 17.8 years, 16.1 years for men and 19.4 years for women. In other words, women are expected to live 3.3 years longer than men on average. (TUIK 16.03)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 CincyTech Announces Investment in Xact Medical

CincyTech announced its investment in Xact Medical. The company’s Fast Intelligent Needle Delivery (FIND) system would give clinicians a device to more precisely, quickly and conveniently place an object such as a needle tip in the body, reducing uncomfortable and time consuming trial and error. Based on technology from Cincinnati Children’s and Ben Gurion University in Israel, the FIND system uses robotics and ultrasound to guide a needle. Xact Medical will initially focus on central line placements in pediatric and adult populations, with plans to expand into additional markets such as biopsy. The company is currently testing its prototype and working toward FDA approval.

Xact Medical is developing the FIND system to enhance clinician capabilities to quickly and precisely place an object, such as a needle tip, into the body. Based on technology from Cincinnati Children’s Hospital Medical Center and Ben Gurion University in Israel, FIND is bringing practical, affordable, point of care robotics to the patient bedside. (CincyTech 08.03)

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8.2 Teva Announces Launch of Authorized Generic of Minastrin 24 Fe in the United States

Teva Pharmaceutical Industries announced the launch of the Authorized Generic of Minastrin 24 Fe1 (norethindrone acetate and ethinyl estradiol tablets and ferrous fumarate tablets) 1 mg/20 mcg in the U.S. The Authorized Generic of Minastrin 24 Fe is an estrogen/progestin combined oral contraceptive indicated for use by women to prevent pregnancy. It adds to Teva’s existing portfolio of more than 50 oral contraceptives. In the U.S., one of every two oral contraceptive prescriptions is filled with a product marketed by Teva.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by approximately 200 million patients in 100 markets every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has the world-leading innovative treatment for multiple sclerosis as well as late-stage development programs for other disorders of the central nervous system, including movement disorders, migraine, pain and neurodegenerative conditions, as well as a broad portfolio of respiratory products. (Teva 16.03)

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8.3 Intermountain Healthcare Chooses Zebra Medical Vision to Deploy Enterprise Imaging Analytics

Salt Lake City, Utah’s Intermountain Healthcare, one of the premier healthcare providers in the U.S., and Zebra Medical Vision are announcing that for the first time ever, machine learning will be integrated into the medical imaging analysis of a premier healthcare provider, in order to enhance patient care. Zebra-Med’s Analytics Engine receives imaging data and analyzes it for findings indicative of cardiovascular, pulmonary, metabolic and bone health. Those findings will be used by Intermountain to identify patients at risk and optimize care. As Zebra-Med’s Engine grows with new insights it will be able to provide increasingly comprehensive reports that will allow more accurate, cost effective patient treatment.

In addition to empowering physicians with clinical insights, Zebra-Med’s analytics engine can scan across large imaging archives past and present, to assist at-risk organizations in understanding the underlying risk profile of their patients. These population-level insights on long term, chronic diseases can then be translated to early detection and intervention, with significant positive effects on the quality and cost of patient care.

Ranked #5 by FastCompany for Global AI \ Machine Learning, Kibbutz Shefayim’s med.com/”>Zebra Medical Vision uses machine and deep learning to create and provide next generation products and services to the healthcare industry. Its Imaging Analytics Platform allows healthcare institutions to identify patients at risk of disease, and offer improved, preventative treatment pathways to improve patient care. (ZMV 19.03)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Zadara Storage and Trio Announce New Storage-as-a-Service (STaaS) Offering in Israel

Zadara Storage and Trio announced that Zadara’s VPSA Storage Array platform is now being offered by Trio as part of their new storage-as-a-service portfolio. The new offering is intended for Israeli-based companies who are interested in migrating their existing CapEx storage to an OpEx-based cloud environment and International companies who are interested in hosting or replicating their data in Israel. The new Trio service will provide local Israeli businesses a full-service offering, including Storage-as-a-Service (STaaS), Disaster Recovery-as-a-Service (DRaaS), Backup as-a-Service (BaaS), as well as server and virtualization services. Customers will have the option to replicate their data to remote Zadara Storage locations worldwide.

Yokneam’s Zadara Storage offers enterprise Storage-as-a-Service (STaaS) through the award-winning Zadara Storage Cloud. It can be deployed at any location (cloud, on-premise or hybrid), supporting any data type (block, file and object) and connecting to any protocol (FC, iSCSI, iSER, NFS, CIFS, S3, Swift). The VPSA Storage Array service provides enterprise SAN and NAS while the ZIOS service delivers private object storage. Zadara provides resource isolation, exceptional data security, and management control.

Azor’s Trio specializes in cloud-based business computer services. For over a decade, the company has provided cloud services based on private servers hosted in Tier 3 and Tier 4 data centers. The company provides a variety of advanced services including online backup and disaster recovery (DR), virtual servers for any use and cloud-based development environments for high tech companies. (Zadara 07.03)

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9.2 Mellanox OCP-Based ConnectX-5 Adapters for Qualcomm Platforms

Mellanox Technologies announced availability of industry leading OCP-based 10, 25, 40, 50, and 100Gb/s ConnectX-5 network adapters for the Qualcomm Centriq 2400 processor-based platforms. ConnectX-5’s advanced performance and efficiency paired with the Qualcomm Centriq 2400, the world’s first 10-nanometer server processor, offer a complete ARM-based infrastructure for hyperscale and cloud data centers. ConnectX-5 is the world’s leading 10, 25, 40, 50, 56 and 100Gb/s InfiniBand and Ethernet intelligent adapter. Delivering message rates of up to 200 million messages per second, and latency as low as 0.7us, ConnectX-5 supports the most advanced offloads to accelerate high-performance computing and machine learning algorithms, virtualized infrastructures, and storage workloads. Together with native RDMA and RDMA over Converged Ethernet (RoCE), ConnectX-5 dramatically improves storage and compute platform efficiency.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage and hyper-converged infrastructure. Mellanox intelligent interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance. Mellanox offers a choice of high performance solutions: network and multicore processors, network adapters, switches, cables, software and silicon, that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage, network security, telecom and financial services. (Mellanox 07.03)

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9.3 Barkid Helps Parents Track Children

Globes reported that Barkid, a startup based in Beer Sheva, where the high-tech scene is gaining momentum, has launched a smart bracelet that enables parents to supervise their children. The company’s product is composed of a physical bracelet worn by the child and an app installed in the cellphone of the adult keeping track of the child. Barkid’s product is not GPS-based and therefore emits little radiation – the company says the radiation is negligible. In addition, the bracelet does not require the use of a SIM card, which should make it cheaper. The bracelet can help parents when they forget their children in the car, because it beeps when the parent moves away from the child. The company has raised NIS 1 million to date from Maimon Spices CEO Avraham Maimon. He says that the product has already been launched in Israel, the US, and Mexico, and is also ready for launching in Australia. (Globes 15.03)

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9.4 Netkom Leverages Stratoscale’s Cloud Infrastructure to Onboard New Customers within Hours

Stratoscale announced that Netkom, a Switzerland-based IT service provider, has implemented Symphony 3 as its cloud infrastructure solution, transforming Netkom’s datacenter into an AWS-compatible cloud region. Driven by its ongoing cloud discussions with customers, Netkom’s focus has shifted toward offering cloud services as a seamless extension of their customers’ existing enterprise datacenter, combining SaaS, IaaS and PaaS solutions. Netkom wanted to build a robust and highly available cluster that would ensure the scalability and performance required to offer public cloud services, while reducing the complexity associated with optimizing and scaling infrastructure.

Stratoscale enables enterprises and MSPs to deploy an AWS region on top of existing hardware by transforming any x86 server into an elastic, highly utilized and consumable cloud that is AWS compatible. Deployed in minutes, Stratoscale enables service providers to align with an AWS-cloud-first strategy. Stratoscale offers sought-after flexibility and simplicity in managing all workloads and resources via a single pane control, decoupled from any hardware vendor constraints. Netkom leveraged existing hardware to deploy Stratoscale. The flexibility in using any server and storage solution was very attractive to Netkom because it eliminated vendor lock-in constraints. Netkom was also able to reduce customer onboarding from a week to just a few hours.

Herzliya’s Stratoscale is the cloud infrastructure company, allowing anyone to deploy an AWS compatible region in the datacenter. Stratoscale Symphony, can be deployed in minutes on commodity x86 servers, creating an AWS region supporting EC2, S3, EBS, VPC RDS and Kubernetes. Stratoscale has raised more than $70M from leading investors, including Battery Ventures, Bessemer Venture Partners, Cisco, Intel, Qualcomm Ventures, SanDisk and Leslie Ventures. (Stratoscale 15.03)

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9.5 Sodyo Enables TV Broadcasters to Capture Leads in Real-Time

Binyamina’s Sodyo released a new groundbreaking O2O – offline to online – solution for broadcasters that is poised to forever change the TV advertising business model. Sodyo’s disruptive technology allows viewers to point their smartphone at the TV screen and “scan” a colorful marker that broadcasters place within the content or commercials. Until now, TV relied on “Dial 1-800” and “Visit our website” for lead capturing. TV leads are worth a lot more than web leads – TV will always be the biggest screen in the house, with the highest quality content and commercials. With Sodyo, broadcasters are sitting on an untapped gold mine.” Sodyo is the first technology that enables O2O – offline to online – interaction at any distance. (Sodyo 13.03)

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9.6 OriginGPS Launches World’s Smallest GNSS Module

OriginGPS released its new ORG 4500 series, a cutting edge, fully-integrated product that supports ultra-compact applications for both GPS and GLONASS. This newest GNSS product perfects the industry’s most comprehensive GNSS/GPS family of solutions. The ORG 4500, kin to the lean and mean ORG 4400 series introduced last year, addresses the ever-increasing demand for high precision with the smallest possible footprint, and takes the company’s ground-breaking ultra-small form factor to a new level.

OriginGPS offers a range of fully-integrated GNSS/GPS and antenna solutions, encompassing a wide gamut of standard and essential tools for navigation. The small form factor and high sensitivity of OriginGPS’s modules enable new business models like ‘machine as a service’, and are ideally suited for a variety of applications – wearables, like smart watches and pet tracking, and also smart cities and drones. OriginGPS modules are deployed around the globe in key sectors, such as transportation, civil engineering, precision agriculture and time reference.

Airport City’s OriginGPS is a world-leading company for miniaturized GNSS/GPS and antenna solutions. OriginGPS introduces unparalleled sensitivity and noise immunity by incorporating its proprietary Noise Free Zone technology for faster position fix and navigation stability even under challenging satellite signal conditions. (OriginGPS 15.03)

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9.7 Insert Integrates With Adobe to Bring the Power of Marketing Cloud to Mobile Apps

Insert announced its integration with Adobe Marketing Cloud. The integration allows marketers to leverage their existing Adobe audiences, digital assets, and analytics to deliver a personalized and seamless experience for every app user. At the same time, the in-app data which Insert feeds to Adobe’s Analytics Dashboard delivers crucial insight into the customer journey, and can be utilized across all marketing channels. Insert helps enterprises and mobile-first brands drive retention, loyalty and lifetime value for their mobile apps. They offer a robust engagement platform that can deliver a wide variety of campaigns into any live app within minutes, without relying on development resources.

Adobe Marketing Cloud offers marketers eight tightly-integrated solutions to effectively reach and engage customers and prospects with personalized marketing content across devices and digital touch points. With Insert, marketers can add native mobile apps to their stack by targeting audiences that have already been segmented in Adobe Marketing Cloud. The Adobe asset library, including images and videos, can be used in campaigns to create a unified brand experience across all channels.

Yakum’s Insert is the world’s first in-app marketing platform that enables businesses to respond quickly to the ever-changing lives of customers. Their unique technology is the only one that allows mobile app owners to independently create and publish in-app campaigns within minutes, without relying on development resources. They offer the widest range of campaign options in the market, and allow full control of campaign design, audiences and triggering. (Insert 15.03)

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9.8 Secret Double Octopus Introduces Multi-shield User Authentication for Enterprises

Secret Double Octopus announced the launch of its authenticator app for enterprises, increasing enterprise-level security while eliminating the friction of standard authentication processes. Authentication systems have traditionally relied on a single layer of protection, including SMS, tokens, push notifications and biometrics, resulting in increased instances of hacking. Secret Double Octopus’ app helps enterprises struggling to scale their network security shift away from key-based authenticators to a keyless solution. With one tap, the authenticator app initiates a multi-shield authentication process for users in order to verify or reject the login attempt, payment or transaction.

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9.9 IAI Unveils Radar That Detects Targets in Dense Forests

On 14 March, Israel Aerospace Industries revealed a new radar capable of identifying targets traveling through heavily wooded areas. The radar, known as the ELM-2112FP persistent surveillance foliage penetration radar, was developed by IAI subsidiary ELTA Systems, and will be displayed at the upcoming LAAD Defense & Security conference in Brazil.

The ELM-2112FP is being marketed as a border security solution with all-weather infrastructure protection applications on land and sea. According to IAI, the system provides previously unavailable capabilities, and has already been successfully deployed. This radar is a technological breakthrough that takes the family of persistent radars a step further by providing a viable solution for securing borders and facilities. This unique and proven capability offers a real and immediate operational solution to the full area persistent surveillance, and we are confident that there will be a strong demand for such a system.

The ELM-2112FP’s forest-penetrating abilities are supported by Frequency Modulated Continuous Wave technology, or FMCW, which allows operators to track personnel and vehicle movements in congested regions of interest in real-time regardless of a clear line-of-sight. IAI maintains the technology will help eliminate “intelligence gaps” in compromised areas. (IAI 14.03)

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9.10 SodaStream Unveils New Brand Dedicated To Creating Sparkling Water At Home

SodaStream International announced the launch of the Aqua Fizz Sparkling Water Maker at the 2017 International Home + Housewares Show in Chicago. The new brand is a US initiative and will be available at retail starting June 2017. Aqua Fizz provides consumers with a brand that is purely focused on a premium sparkling water experience in a glass carafe. The brand Aqua Fizz is designed to attract water seekers while the SodaStream brand is designed to attract soda users who seek a smart alternative to ready-to-drink soda beverages. In distinction, the SodaStream brand provides a full range of flavor offerings in addition to sparkling water in a reusable plastic bottle. The launch of Aqua Fizz complements the SodaStream brand to create a more complete brand portfolio, which better represents consumer needs in the United States. That’s because, as recently reported, American’s now consume nearly equal amounts of sugary sodas and water.

Aqua Fizz was designed and developed to be a world leader in premium sparkling water, seamlessly combining elegance and functionality. Great for those who love to host, the machine allows you to effortlessly carbonate and serve up fresh sparkling water in a stylish glass carafe. The glass carafe system has already proven to be among the most popular of all kitchen appliances sold in Europe where SodaStream sold nearly one million glass carafe machines in 2016. The Aqua Fizz is an upgrade to the Crystal machine currently sold in Europe.

Airport City’s SodaStream is the No. 1 sparkling water brand in volume in the world and the leading manufacturer and distributor of Sparkling Water Makers. They enable consumers to easily transform ordinary tap water into sparkling water and flavored sparkling water in seconds. By making ordinary water fun and exciting to drink, SodaStream helps consumers drink more water. (SodaStream International 17.03)

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9.11 Magal-S3 RoboGuard System First Serial Order from Israeli Governmental Customer

Magal Security Systems received its first serial order for its revolutionary RoboGuard system. The customer, which is an Israeli governmental customer, recently announced the RoboGuard system to be operational. The announcement followed a series of rigorous in-the-field tests and ongoing inspections, conducted by the customer. The RoboGuard system is also being evaluated by other governmental agencies for the perimeter security of various critical sites.

RoboGuard is Magal’s revolutionary agile scout robot, which runs along secured fences, ensuring perimeter integrity and is capable of responding promptly to intrusion alerts. It has already been successfully tested for border security. It consists of an autonomous unit, traveling on a monorail and carrying several sensors. RoboGuard has two operating modes: routine patrol mode, in which it travels autonomously scanning and searching for perimeter anomalies or nearby suspected objects and response mode, in which RoboGuard rushes promptly to home in on a suspected intrusion, acting as a first responder. The RoboGuard provides customers with operational efficiencies by reducing manpower, patrol vehicles and related equipment.

Yehud’s Magal is a leading international provider of solutions and products for physical and video security solutions, as well as site management. Over the past 45 years, Magal has delivered its products as well as tailor-made security solutions and turnkey projects to hundreds of satisfied customers in over 80 countries – under some of the most challenging conditions. Magal-S3 offers comprehensive integrated solutions for critical sites, managed by Fortis4G – our 4th generation, cutting-edge PSIM (Physical Security Information Management system). (MagalS3 21.03)

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9.12 Breakthrough Success for Silicom: Major New Design Win With $17 Million in Orders

Silicom has achieved the most significant design win in its history. This design win, from a top-10 Cloud player, is for a highly customized version of Silicom’s 100-Gigabit high bandwidth switch fabric on a NIC cloud solution. Based on this design win, Silicom has received initial purchase orders (POs) in the aggregate amount of $17 million to cover a small-volume Alpha phase, an intensive Beta program and the product’s first commercial deployment. Having completed deliveries for the Alpha phase, Silicom is now in the process of delivering the Beta-program products while completing two additional activities: 1) finalizing the product configuration and validating the solution’s performance within the servers in which the Silicom products will be deployed, in cooperation with a Tier-1 server manufacturer; and 2) ramping up product manufacturing to a full mass-production level. Based on the customer’s guidance, Silicom forecasts that revenues related to the design win will build to more than $30 million per year.

Kfar Sava’s Silicom is an industry-leading provider of high-performance networking and data infrastructure solutions. Designed primarily to increase data center efficiency, Silicom’s solutions dramatically improve the performance and availability of networking appliances and other server-based systems. Silicom’s products are used by a large and growing base of OEM customers, many of whom are market leaders, as performance-boosting solutions for their offerings in the Cyber Security, Network Monitoring and Analytics, Traffic Management, Application Delivery, WAN Optimization, High Frequency Trading and other mission-critical segments within the fast-growing data center, enterprise networking, virtualization, cloud computing and big data markets. (Silicom 21.03)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s CPI Unchanged in February as Home Prices Resume Rise

On 15 March, the Central Bureau of Statistics announced that Israel’s apartment prices rose 0.5% in December and January. This reverses the trend it reported last month when it found that home prices in November and December were 1.2% lower than in the preceding two months – the first such fall in years. The Central Bureau of Statistics has now revised that decline further to 1.5%. However, overall home prices rose by 6.3% over the past 12 months. The price falls in November and December were influenced by the government fixed price buyers program. The Central Bureau of Statistics also published the Consumer Price Index (CPI) for February. The CPI was unchanged and has risen just 0.4% over the past 12 months. (CBS 15.03)

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10.2 Israel’s Economy Grew by 4% in 2016

Israel’s economy grew 4% in 2016, according to the second revision of GDP figures published today by the Central Bureau of Statistics. For the sake of comparison, GDP grew 3.2% in 2014 and 2.5% in 2015. Per capita GDP was up 2% in 2016, compared with 1.2% in 2014 and 0.5% in 2015. According to the data, during 2016, the current revision shows that private consumption, which rose 6.3% in 2016, was the main engine in GDP growth. Per capital private consumption was up 4.2% in 2016, after rising 2.3% in the two preceding years. The figures show a clear improvement in investments in fixed assets, which grew 11.3% in 2016, after stagnating in the two preceding years. Exports of goods and services also improved, with 3% growth, primarily as a result of 6% growth in exports of services (excluding exports of startups and tourism). The Central Bureau of Statistics upwardly revised its fourth quarter growth figure to 6.5%, compared with the 6.2% estimate it published in February. (CBS 09.03)

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10.3 Number of Israeli Jobseekers Hits 10 Year Low

The Israel National Employment Service (INES) announced that February 2017 recorded the lowest unemployment level in the past 10 years. The seasonally adjusted number of jobseekers fell from 170,000 in January to 168,800 in February, marking a 0.8% decrease. The drop in unemployment is continuing, despite the already low unemployment levels in the economy. The number of jobseekers is unprecedentedly low, both relative to the number of people employed and in absolute figures – the number is extremely low, despite population growth. In comparison with previous years, the average number of jobseekers over the past three months averaged 169,700, down 9.4%, compared with the corresponding period in 2015-2016, when the average was 187,400, and down 18.3%, compared with the corresponding period in 2014-2015. (INES 15.03)

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10.4 Finance Minister Says 2016 was One of Israeli Economy’s Best Years

On 9 March, the Central Bureau of Statistics said Israel’s economy grew by 4% annually in 2016, exceeding the growth rate of other Organization for Economic Cooperation and Development member states, which averaged 1.7%. Israel’s gross national product stood at 2.5% in 2015 and 3.2% in 2014. The business sector also performed well in 2016, marking 4.2% annual growth, compared to 2.3% in 2015, the report said. The data further indicated that GDP per capita has also grown: Private consumption of fixed-price goods and services increased by 6.3% in 2016, having grown by 4.3% in both 2015 and 2014. Overall, 2016 saw a 2% rise in fixed prices, which are unaffected by inflation rates, compared to a 0.5% growth the previous year.

Economic growth was also indicated by import and export figures: The import of goods and services in 2016 climbed 9.5%, following a 0.5% drop in 2015; and exports grew by 3%, after a 4.3% slump the previous year. Imports in the diamond industry noted a 21.8% spike in 2016, the report noted. The data also showed that in 2016, the government sector’s deficit came to NIS 13.8 billion ($3.75 billion), or 1.1% of the GDP. (IH 12.03)

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11: IN DEPTH

11.1 ISRAEL: Israeli Startups Raise $800 Million This Year

Israeli startups have raised $800 million in 2017 so far, according to IVC and Globes. With three weeks left in March, this is keeping pace with last year when Israeli startups raised $1.09 billion in the first quarter. Thus Israeli startups continue to raise the record amounts seen over the past two years. Israeli startups raised nearly $700 million in January and February and this blistering pace was maintained in the first weeks of March.

Cyber security company Zimperium confirmed that it had raised $15 million from Japan’s Softbank and app building company ScyllaDB raised $16 million from, among others, Samsung and Qualcomm. Among the smaller financing rounds closed since the start of March, contract review company LawGeex raised $7 million, online bra measuring company Brayola raised $5 million, predictive analytics company Endor raised $5 million and cyber security company Cymulate raised $3 million.

However, the medical arena has been strongest since the start of March with non-invasive blood testing company Cnoga leading the way, raising $50 million from China’s BOE. Medication management company Medisafe raised $14.5 million, needle steering company XACT Robotics raised $5 million, and radiation shielding company RadiAction Medical raised $5.7 million.

February had ended with a flurry of financing rounds, the largest of which was drug development company Pharma Two B, which raised $30 million for a Parkinson’s treatment trial. The first major financing closing of 2017 by an Israeli startup was also in the medical sector with smart shirt company Healthwatch raising $20 million.

The trend of Israeli startups closing large financing rounds continues, especially in January when nearly $450 million was raised. Flash storage company Kaminario raised $75 million and mobile ad analytics company Appsflyer raised $56 million. Cyber security, as in 2016, remains the hottest sector with SentinelOne raising $70 million, Transmit Security raising $40 millionDemisto raising $20 million and Intsights Cyber Intelligence raising $15 million, among others.

Other major financing rounds were closed by Valens Semiconductor (raising $20 million), Aquarius Engines (raising $20 million), eCommerce company FeedAdvisor ($20 million), SaaS company Samanage ($20 million), enterprise software company Trax Image Recognition ($19.5 million), artificial intelligence company Chorus.ai ($16 million), co-working space company Mindspace ($15 million), smartphone camera company Corephotonics ($15 million), sports publishing company MinuteMedia ($15 million) and power electronics company visIC ($11.6 million). In fintech, VAT recovery company VATBox raised $20 million, Earnix raised $13.5 million and Credifi raised $13 million. (Globes 10.03)

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11.2 ISRAEL: The Quiet Advance of Eastern Mediterranean Gas

Simon Henderson and David Schenker posted on TWI on 8 March that news that Israel has begun exporting gas to Jordan indicates that commercial logic can prevail despite adverse political rhetoric.

In January, without fanfare, natural gas from Israel’s offshore Tamar field began flowing across the border near the southern end of the Dead Sea, where it will provide power for a bromine plant and potash factory in Jordan. Although the quantities of gas involved are relatively small, the development was significant because it came at a time when King Abdullah was profoundly concerned that the new Trump administration intended to move the U.S. embassy in Israel from Tel Aviv to Jerusalem. The palace had ample reason to play down Jordan’s ties with its western neighbor, but carrying out the gas deal was apparently deemed more important. While the king’s sensitivity probably explains why Amman has not publicly agreed to buy gas from Israel’s much larger Leviathan field, the same under-the-table approach to hydrocarbon development seems to be playing out in that case as well.

More Deals Afoot?

The prospect of a major deal with Jordan’s main electricity generator, the National Electric Power Company (NEPCO), is considered a key element in Leviathan’s viability, and observers had expected the go-ahead for that project to be announced at the end of 2016. As the new year came and went, the absence of news seemed to augur badly for the deal, as did Jordan’s tense domestic opposition to buying Israeli gas (though such sentiment should be tempered by the population’s dependence on Israeli drinking water).

On 23 February, however, Houston-based Noble Energy — which leads the consortia for Tamar and Leviathan — suddenly announced that it would move forward with developing the latter. The company made no direct reference to Jordanian involvement, instead obliquely mentioning that the project would provide “affordable energy resources to Israeli citizens and neighboring countries,” and that the gas would reach “regional markets via onshore export pipelines.” Yet the company’s clear insinuation is that King Abdullah has privately agreed to buy Leviathan gas. In Noble’s view, even an unannounced Jordanian commitment is apparently bankable, enabling it to secure financing for the project.

Complex Regional Context

Supplying Israeli gas to Jordan’s Dead Sea factories also confronts a wider Middle Eastern taboo. While Amman and Egypt have peace treaties with Israel allowing for commercial trade, most other Arab countries have continued their perpetual boycott. Indeed, a Saudi bank divested from one of the factories – the Arab Potash Company – at the first sign that Israeli gas would be flowing there. Yet according to APC’s website, the company’s board of directors still appears to include representatives from its Emirati, Iraqi, Libyan and Kuwaiti quasi-governmental shareholders. APC is also a partial owner of the other factory receiving Tamar gas, the Jordan Bromine Company.

Putting Israel’s gas progress with Jordan in a broader commercial and regulatory context is instructive as well. Last month, apparently disappointed by the lack of interest from foreign companies, Energy Minister Steinitz announced a new timeframe for bids to explore in Israel’s exclusive economic zone (EEZ). Bid submission will now start at the end of May and end on 10 July and financial guarantees must be valid until March 2018. This suggests that licenses may not actually be awarded until next year.

One factor in this decision was no doubt the continuing reluctance of international oil and gas companies to risk their commercial interests and future prospects with Arab countries and Iran by doing business with Israel. For instance, despite concerns about Tehran’s troublemaking role in the region, the Islamic Republic is a particularly attractive prospect for energy companies because it has the largest proven gas reserves in the world, some 180 times the size of Israel’s.

Moreover, Israel arguably shot itself in the foot by changing its taxation framework for gas production. Whatever the domestic rationale behind that move, such changes can have consequences when exploration companies are deciding whether to risk their own capital in a search for hydrocarbon reserves that lie far below the seabed, in challenging waters more than a mile deep.

The Nile & Levant Basins

The quantities of hydrocarbons in the region known geologically as the Nile and Levant Basins represent but a fraction of those found in the Arabian Gulf countries. Even so, the current and future prospects in the Eastern Mediterranean (mainly gas but also some oil) could substantially improve the economies of Egypt, Cyprus and Lebanon along with Israel and Jordan. Recent developments in the area support such optimism.

First, Egypt is moving rapidly to bring its Zohr offshore gas field online. Cairo claims that the field is larger than Leviathan, though it suffers from high levels of hydrogen sulfide that needs to be removed at an onshore facility currently under construction. Britain’s BP and Russia’s Rosneft have bought into the field, and Italy’s Eni will develop it. Yet while Egypt hopes to regain its status as a gas exporter, high domestic demand could make this an elusive dream. Currently, all domestic production is directed toward generating electricity, and extra liquefied natural gas must be shipped in weekly from Qatar for this purpose. Egypt’s industrial plants are still suffering shortages, however, and its two LNG export terminals on the Nile Delta are almost idle. Against this backdrop, imports of Israeli gas would seem to be commercially attractive, at least in the interim.

Second, Cyprus – whose own EEZ is tantalizingly close to the Zohr field – is hoping for new discoveries by international companies previously disappointed by local prospects. Its only discovered field, Aphrodite, is yet to be exploited. Given the island’s small population, most if not all of its eventual gas production would be for export, but this would only be achievable through cooperation with Israel and/or Egypt. Turkey’s acquiescence may be required as well.

Third, after years of delay, Lebanon ratified decrees in January that divided its offshore EEZ into ten exploration blocs and established a commercial process for awarding licenses. Yet three of these blocs are located along Lebanon’s self-declared southern maritime border, beyond which lie Israeli waters. Beirut still does not officially recognize Israel and the Lebanese tender document did not incorporate any of the U.S.-brokered proposals for dividing the contentious maritime zone, so the licensing process could run into problems. According to industry experts, one of the three blocks in question is the most likely to contain gas in commercial quantities, but it is difficult to imagine any international exploration company wanting a license in an area that could be legally and even militarily contested. Other potential obstacles include deciding which areas of Lebanon would initially benefit from any new gas flows, and how any eventual export revenues would be divided between the country’s various armed factions.

Fourth, the Hamas-controlled Gaza Strip has an unexploited offshore field known as Gaza Marine, which could be used to generate electricity both there and in the West Bank. Technically, however, the field is owned by the Ramallah-based Palestinian Authority, which is reluctant to invest in a project that could economically and politically bolster its Hamas rivals.

Other Export Options

The Eastern Mediterranean’s most tantalizing gas export option is a proposed undersea pipeline from Israel’s Leviathan field to Turkey, either across Cyprus or skirting the island to the east. The former route could be problematic given the lack of a peace settlement in the divided country, where Turkish troops have occupied the north since a crisis with Greece in 1974. Israel’s relations with Turkey have improved recently, but perhaps not enough to sign a twenty-year gas supply deal with associated heavy investment in an expensive pipeline.

A further possibility (though one that strains credulity) is an undersea pipeline that stretches from Aphrodite and/or Leviathan to Cyprus, the Greek island of Crete, and the Greek mainland. A variation of this would be installing an undersea cable known as a “connector” to link the Israeli, Cypriot, and Greek electric grids.

Economic vs. Political Realities

To be sure, all of these low-key advances are overshadowed somewhat by the region’s latest troubles. Jordan is burdened by Syrian refugees, and Lebanon’s future shape is probably linked to the incumbency of President Bashar al-Assad in Damascus. Meanwhile, Iran is affecting the Eastern Mediterranean situation from afar by supplying hostile actors with cruise missiles capable of hitting offshore drilling rigs and production platforms, among other destabilizing actions.

Yet the February go-ahead on Leviathan means that Israel can now bring gas ashore in the center of the country rather than at Ashkelon, where facilities are within rocket range of Gaza. Similarly, a steady supply of Israeli gas would reduce Jordan’s near-total reliance on supplies arriving by sea at Aqaba, and perhaps end its schemes to import Iraqi gas overland or build Russian nuclear reactors.

Energy security is as much about having alternatives as it is about any notion of energy independence. U.S. diplomacy has played a low-key and not always effective role in encouraging the commercial exploitation of Eastern Mediterranean natural gas. But it is a necessary role that needs to be continued, even if commercial interests remain the main driver of multilateral deal making.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute. David Schenker is the Institute’s Aufzien Fellow and director of its Program on Arab Politics. (TWI 08.03)

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11.3 ISRAEL: Israel and China – Toward a Comprehensive Innovative Partnership

Matan Vilnai, Assaf Orion and Galia Lavi wrote in INSS Insight No. 906, on 19 March that on 20-21 March, 25 years after the establishment of diplomatic relations, Prime Minister Netanyahu visited China, his second visit there during Xi Jinping’s presidency. The visit took place against the backdrop of the growing economic relations between Israel and China; China’s heightened interest in the Middle East and the dynamic developing among the three world powers at the outset of Donald Trump’s presidency. The upcoming visit, therefore, is a good time to examine the growth of Israel-China relations since Netanyahu’s previous visit in 2013 and the direction they may be taking.

This analysis is best made as part of a broader look at China’s interests in the Middle East and its Middle East policy. Given China’s declared policy of non-intervention in the internal matters of other states and its cautious risk-aversion, most Chinese activity in the Middle East is economic in nature: China’s political involvement in the region is minor and its small military presence is limited to peacekeeping missions. More than half of China’s oil imports come from the Middle East, and as part of its One Belt One Road (OBOR) initiative, is investing heavily in transportation infrastructures, such as roads, railroads, and sea ports. The initiative is meant to connect China to European and African markets, and is financed in part by the establishment of the Asian Infrastructure Investment Bank (AIIB), which Israel joined as soon as it was founded. In 2015 alone, China invested close to $5.7 billion in infrastructures in the Middle East and Africa, and in 2016 this sum jumped to $21.5 billion. China is also involved in building infrastructures in Israel, such as digging the Carmel tunnels in Haifa, laying the light rail in Tel Aviv and expanding the Ashdod and Haifa seaports. China is likewise entering the residential construction industry.

Alongside these investments, China’s main declared interest in Israel is in the field of innovation. In China’s view, Israel, despite its small size, stands out for its scientific achievements, its number of startups, and the number of its Nobel Prize laureates. Given China’s critical need for advanced technologies and innovative solutions for its large and aging population, China is investing in Israel’s hi-tech, agriculture, food, water, med-tech and bio-tech industries. According to Economy Ministry estimates, China’s total investment in Israel in 2015 reached more than half a billion dollars. China is also encouraging the establishment of Israeli innovative enterprises in China, such as Shouguang’s Water City, which incorporates Israeli water technologies. The establishment of a technological academic institute in Guangdong by the Technion, financed with a $130 million donation by billionaire Li Ka-shing, is an example of the role Chinese businesspeople are playing in promoting bilateral relations. Indeed, since 2013, Israel has seen a heavy stream of delegations from the Chinese business community interested in innovation in fields prioritized by the Chinese government as of particular interest, and in 2016 alone the Israeli Embassy in Beijing issued more than ten thousand visas to Chinese businesspeople.

China’s focus on the economy is convenient for Israel, whose strategic relationship with the United States forms a cornerstone of its national security policy. Israel’s prior relations with China in the field of security were a source of tension and even crisis with the United States, and thus since the previous decade, Israel has been careful to focus its ties with China on the economic level. Accordingly, with Netanyahu’s previous visit to China, it was decided that the government would make a concerted effort to strengthen economic ties between Israel and China to realize the economic potential inherent in the bilateral relations, and trade in fact rose from $8 billion in 2013 to $11 billion in 2016. As with China’s many trade partners around the globe, Israel trades with China at a deficit: in 2015, Israel’s trade deficit with China’s stood at $3.386 billion, a 12% increase since 2010.

Given the impressive growth of economic relations between the two states, Israel’s relative weakness in academic and applied research about modern China as a knowledge base critical to sound decision making processes is a glaring lapse. To support actual, responsible continued growth based on the formulation of a policy and the development of broad, productive business relationships that have long term potential, the Israeli government and the Israeli market need more experts on modern China in a range of topics, such as the economy and business administration, law, foreign relations and more. The dearth of experts on these issues in government ministries and academia hinders the accelerated development of economic relations.

Ties between Israel and China embody significant growth potential for the Israeli economy that must be maximized while taking every precaution to preserve Israel’s strategic relationship with the United States. The intention during Netanyahu’s upcoming visit is to define the relations between Israel and China as a “comprehensive innovative partnership,” a definition expressing both sides’ understanding of the center of gravity of their relations. The two have clearly agreed to avoid calling the partnership “strategic,” as in the background are Israel’s relationship with the United States and China’s relationship with other Middle East states.

In this context, what follows are recommended goals for the Prime Minister’s upcoming visit to China. On the bilateral level:

To continue promoting optimal conditions for expanding cooperation in the fields important to China where Israel has a relative advantage, such as hi-tech and innovation, agriculture and food, water technologies, med-tech, and bio-tech.
To include Israel in OBOR: encourage further Chinese investments in infrastructure projects in Israel, and propose Israeli solutions and involvement in leading areas that are relevant for promoting the initiative, such as security, fighting terrorism, and communications.
To stress the importance of a senior Chinese leader’s visit to Israel (e.g., the President himself or the Prime Minister), in light of the blatant gap between the level of representatives in China’s state visits to Israel compared with visits to other regional states.
To expand exchanges of delegations of senior businesspeople and to encourage visits by senior members of the Chinese business community to Israel.
To promote mutual knowledge and learning to accelerate the development of relations (China studies in Israel, Israel studies in China, expanding the dialogue between research institutes and think tanks) with government encouragement (a joint fund? incentives, budgeting, investments).

On the regional level:

While China has the proven capacity and surplus supply in building economic and transportation infrastructures, and in development, and the Middle East has tremendous demand for precisely these capabilities, the region’s fundamental instability and insecurity are hindrances to Chinese involvement. Israel is an island of stability and security in this region, and as such it is recommended:

To encourage China to help promote Israeli-Palestinian relations by means of investing and promoting infrastructures in the PA and the Gaza Strip with Israel’s blessing and its guarantee for security, and establishing “economic peace” with the Palestinians. Inter alia, it is possible to build infrastructures that would provide services to Gaza (also on Israeli territory, which could possibly be included in future land swaps), such as renewable energy, naval transportation infrastructures and desalination plants, and – in the West Bank – infrastructures for overland transportation, industrial and business zones (including hi-tech), and so on.
China’s policy in the Middle East has a proven ability to conduct fruitful ties with a range of players in the region, and even maintain parallel relations with bitter enemies (Iran and Saudi Arabia; Israel). Based on this potential, it would be appropriate to promote joint initiatives for China, Israel and the pragmatic states, so as to maximize existing and developing potential and highlight China as a significant player in advancing regional stability by means of an economic strategy that incurs limited risks.
To express concern over China’s relations with Iran in the defense field (visits by senior officials, military cooperation, especially Chinese assistance to Iran’s defense industries), when Tehran remains committed to the destruction of Israel, supports terrorism, and still strives to acquire nuclear arms. It should be stressed that Iranian models of Chinese weapon systems, such as the anti-ship C802 missile, find their way to terrorist organizations like Hezbollah and the Houthi rebels in Yemen, and end up harming naval vessels of China’s other partners in the region, including Israel itself, Saudi Arabia, and the UAE.

Finally, China has undoubtedly noticed Prime Minister Netanyahu’s closeness to President Trump and his access to President Putin. While China gropes for channels to the new White House, and while the trio of world powers are engaged in tension-filled processes of re-design, it would be appropriate for Israel to test, delicately, the possibility of making a humble contribution in the transmission of messages and discreet mediation among the powers. (INSS 19.03)

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11.4 JORDAN: IMF Staff Concludes Visit to Jordan

A team from the International Monetary Fund (IMF) visited Amman from 5 – 9 March to take stock of recent economic developments and discuss with the authorities their planned economic policies for 2017 and beyond. At the end of the visit, Mr. Cerisola issued the following statement:

“Jordan continues to face a difficult external environment. The conflicts in Syria and Iraq continue to weigh on its economy, with growth expected at around 2.0% in 2016 and unemployment increasing to 15.3%. Inflation has accelerated to 2.5% (year-on- year (y/y) in January and to 4.6% (y/y) in February, reflecting higher global food prices and the one-off impact of the fiscal measures. The overall fiscal deficit is estimated at 3.6% of GDP in 2016 and is projected to decline to less than 3% in 2017 in light of fiscal measures underpinning the 2017 budget.

“The current account deficit is expected to reach 9.5% of GDP in 2016 compared to 9.1% in 2015. Recent data suggest a recovery in remittances and tourism, which could contribute to reduce the current account deficit in 2017. Credit to the private sector accelerated further, increasing by around 10% y-o-y in December 2016. The recent steps by the Central Bank of Jordan in raising key monetary policy rates has helped to preserve the attractiveness of the Jordanian dinar and keeping international reserves at adequate levels. Due to challenging external environment, growth is expected to pick up modestly in 2017, driven by some rebound in exports, tourism, and remittances.

“Against this backdrop, the authorities have reiterated their commitment to sound policies that reduce vulnerabilities and support growth. Discussions with the Jordanian authorities were constructive and focused on taking stock of recent developments and exploring changes to the macroeconomic framework. The discussions also focused on the authorities’ plans for policies and reforms to preserve Jordan’s macroeconomic stability and to enhance growth and employment prospects in a difficult environment, where the pressure from refugees on the economy merits the continued support from the international community. It was agreed that discussions will continue during the Spring Meetings in Washington, DC, with a view to complete the review of the Extended Fund Facility. The IMF is committed to maintaining its dialogue with the authorities and supporting Jordan’s national program of economic reforms.” (IMF 15.03)

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11.5 IRAQ: Statement at the End of an IMF Mission on Iraq

The Iraqi authorities and the staff of the International Monetary Fund (IMF) held discussions in Amman from March 5–17, 2017 on the 2017 Article IV Consultation and the second review of Iraq’s 36-month Stand-By Arrangement (SBA) approved by the IMF Executive Board on July 7, 2016 (See Press Release No. 16/321). The SBA aims to restore fiscal and external balance and to improve public financial management while protecting social spending. The first review under the SBA was completed on December 5, 2016.

-In 2016, real GDP growth was sustained at 11% supported by a large increase in oil output that benefitted from past oil investments.

-In 2017, economic activity is expected to remain muted due to a 1.5% contraction in oil production and only a tepid recovery of the non-oil sector.

-Further reforms to create fiscal space for inclusive growth, strengthen the business environment, reduce corruption and repair the banking sector are needed to support private sector-led growth and diversification of the economy.

Mr. Christian Josz, Mission Chief for Iraq, issued the following statement:

“Iraq has been hard hit by the conflict with ISIS and the plunge in global oil prices since 2014. The government has responded to the fiscal and balance of payments crisis with a large but necessary fiscal adjustment supported by financial assistance from the international community. In 2016, real GDP growth was sustained at 11% supported by a large increase in oil output that benefitted from past oil investments. Nevertheless, the non-oil economy experienced an 8% contraction due to the conflict and the fiscal consolidation. In 2017, economic activity is expected to remain muted due to a 1.5% contraction in oil production under the agreement reached by the Organization for Petroleum Exporting Countries, and only a tepid recovery of the non-oil sector.

“The plunge in oil prices has driven the decline of Iraq’s gross international reserves from $53.7 billion at end 2015 to the still comfortable level of $46.5 billion at the end of December, 2016. Fiscal pressures remain significant with the government deficit remaining at 12% of GDP in 2016, due to continuing weak oil prices and rising humanitarian and security spending. Total public debt increased from 32 to 64% of GDP during 2014-16. Credit growth decelerated and non-performing loans in state-owned and private banks increased significantly in 2016.

“The authorities have maintained the exchange rate peg which remains a key nominal anchor. Medium term growth prospects remain modest driven by projected flat oil production and investments in the face of the revenue constraint and modest pickup in non-oil growth supported by the expected improvement in security and implementation of structural reform. Further reforms to create fiscal space for inclusive growth, strengthen the business environment, reduce corruption and repair the banking sector are needed to support private sector-led growth and diversification of the economy once post- ISIS reconstruction is underway. Risks remain high, arising primarily from uncertainty in the oil price outlook, security and political uncertainties, and administrative weaknesses.

“The Iraqi authorities and IMF staff started discussions on the second review of the SBA. These discussions will continue during the upcoming IMF and World Bank Spring Meetings from April 21–23, 2017 in Washington, DC.

“During the visit, the team met with the Acting Minister of Finance Prof. Abdulrazzaq A. Jaleel Essa, Acting Governor of the Central Bank of Iraq (CBI), Dr. Ali Mohsen Ismail Al-Allaq, the Financial Adviser to the Prime Minister Dr. Mudher Saleh, and officials from the ministries of finance, oil, planning, the State Oil Marketing Organization, the Central Statistical Office, the Central Bank of Iraq, and representatives from the Kurdistan Regional Government, and the Board of Supreme Audit. (IMF 17.03)

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11.6 GCC: Economic Nationalism at the Expense of GCC Integration

Karen E. Young posted on 13 March at the Arab Gulf States Institute in Washington that there are a number of new tax initiatives unfolding across the Gulf Cooperation Council, the most publicized and cohesive of which is the value-added tax to be introduced collectively in 2018. There are also individual country initiatives that aim to increase government revenue through taxes, but also to better institutionalize and streamline private sector regulation. These initiatives include increasing corporate tax and, in the case of Oman, implementing new taxes on smaller businesses and rules on registering existing businesses. There are also changes underway on border tax regimes, including raising tariffs on imported goods.

Source: International Monetary Fund

As a burgeoning global trend, especially evident in the economic ideology of the administration of U.S. President Donald J. Trump, economic nationalism is also surging in the Gulf. Each GCC state is competing with its neighbors to create a more attractive business environment for foreign investment and squeeze as much revenue as possible from new and existing fee and tax structures. A casualty of these tax reforms could be a weakening of GCC economic integration, especially on agreed upon common tariffs. The GCC secretariat, meanwhile, is interested in ways to streamline the bedrock of foreign investment rules in the region, the agent structure, which each GCC state uses to regulate how foreign businesses must partner with local citizens or entities to create domestic businesses such as retail and restaurant franchises and distributors of consumer products. One complication of the agent structure is the disincentive for intra-GCC trade, as each state seeks to award a franchise or distributor role to its citizens. Finding common ground on tax and tariff policies that directly impact job creation, citizen income, and state revenue is becoming more complex. In effect, while the great economic reform momentum sweeping across the GCC is necessary for shared diversification goals, it also pits states against each other in putting their domestic economic agenda before integration efforts.

The GCC Unified Customs Law is designed to assess equal duties or tax on items entering any member state, and then eliminate any further tax if a good is exported from its first GCC entry point to a second member state. The general rule is a 5% tariff rate, though each GCC state has been able to exclude goods from the rule. The GCC Free Trade Agreement allows duty free transfer of goods produced inside the GCC (as long as the factory is at least 50% owned by a GCC national or entity). The Unified Customs Law came into effect in January 2003, and there have been some benefits for intraregional trade, with a four-fold increase to $100 billion by 2014. The GCC common market, in which citizens (and services) have free movement to travel without visas or tax, came into effect in January 2008. Oil exports continue to dominate GCC trade patterns, dwarfing intraregional trade at $1.6 trillion in 2014, at the height of the last oil price boom.

For Gulf governments, after the hard won negotiations over the customs law and common market over the last decade, there is again temptation to increase tariffs on imports, as a means of revenue generation and to encourage domestic production. Saudi Arabia has struggled with this aspect of GCC economic integration, with import tariffs of as much as 20% in place as late as 2012 on hundreds of items, including matches, plastic bags, textiles and tents, all designed to protect local manufacturing. Those tariffs were lowered as part of a series of GCC negotiations, but as of 1 January, many are back in effect. Some of the new tariff increases are part of expiring government subsidy programs, in which the government subsidized its own import duties, in effect charging the importer but then “covering” the extra cost to consumers on a number of food and beverage products, chemicals, and consumer products. Now, consumers (citizens and foreign residents) will see and pay these costs. Perhaps more importantly, Saudi Arabia is more directly contradicting the GCC Unified Customs Law in its efforts to reduce government spending.

Another area of potential conflict in economic integration efforts will be coordination on monetary and fiscal policy. The monetary union of the GCC is off schedule, but included in past deliberations were terms on fiscal policy to which the GCC states may now find difficult to adhere, or broach again. These included:

-National debt should not exceed 60% of a given state’s gross domestic product.

-The national budget deficit should not exceed 3% of a state’s GDP.

-National inflation should not exceed 1.5% of the average inflation of all member states combined.

-Long-term interest rates should not exceed 2% of the average interest rates of all the GCC member states combined.

The current economic reform agenda, and fiscal crisis affecting the GCC states, will not permit states to meet these shared goals, which a few years ago seemed reasonable as debt to GDP levels were very low and inflation not a very real concern. Now debt issuance is the method of choice for financing deficits and continued government spending. The impact of this debt cycle will vary across the GCC, as some states will be better positioned than others to service the debt and find alternative means of revenue streams through diversification efforts that stimulate private sector growth, sell-offs of state assets, and a willingness to tax. How domestic economies respond, especially to rising costs of utilities, consumer products, and even construction and manufacturing materials, will create different levels and kinds of inflation, or rises in cost of living. Inflation has also varied considerably between 2014 and 2016, as countries have adjusted to changes in government revenue and spending patterns.

For citizens and smaller businesses, there are some important changes underway across the Gulf. There is some misperception that the so-called rentier states of the Gulf are tax free. They are not; and in the current fiscal environment they are on a course (with the full support of the International Monetary Fund) to implement tax and business regulation that will affect every worker and employer. Corporate taxes across the GCC are heavy on oil and gas companies. New corporate taxes in Oman at 15% for large (non-oil) businesses are in line with existing tax rates in Qatar and Kuwait. New municipal taxes on rental properties in Abu Dhabi are evidence of the preference to tax noncitizens first. There are also some potential challenges in the shared collection of tax and dispersal of tax revenue within the United Arab Emirate’s federal structure. The Omani rules to also register small businesses with a tax identification card indicate an improved effort at regulation, which could make additional tax collection easier down the road should the relatively low rate of 3% increase.

The prioritization of fiscal policy that can generate new sources of revenue is understandable and commendable for the breadth of changes moving forward across the GCC. What may be lost is the decade of efforts in economic integration and negotiations to make the GCC work as a common market, with complementary assets. The tradition of competition among the Gulf states in their free zones, as well as port and airline hubs, speak to shared diversification strategies. Strategies of cost saving now are equally competitive and similar in nature, but they may also create missed opportunities in intraregional trade. For most of the GCC states, and most notably Saudi Arabia, the economic reform and diversification agenda takes precedence over regional integration. Meaningful regional integration could be on hold until domestic economies are on a more stable non-oil growth trajectory.

Market Watch is a blog conceived by AGSIW Senior Resident Scholar Karen E. Young seeking to provide insights from the crossroads of Gulf politics and finance. (AGSIW 13.03)

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11.7 OMAN: The Middle East’s Most Surprising Country

Daniel Pipes posted in the Washington Times on 15 March about Oman.

Islam has three main branches: Sunni (about 90% of all Muslims), Shiite (about 9%) and Ibadi (about 0.2%). Oman has the only Ibadi-majority population in the world. Being a tiny minority in the larger Muslim context, rulers of Oman have historically kept away from Middle Eastern issues. Part of the country was isolated mountainous desert terrain, part was focused on the seas, especially on India and on East Africa. For two centuries, the Omani empire competed with the Europeans for control of the Indian Ocean; indeed, Oman ruled the African island of Zanzibar until 1964, making it the only non-European state to control African territory.

This unique remoteness from Middle Eastern problems, whether it be the Arab-Israeli conflict or Iranian expansionism, remains in place. At present, with a civil war raging in next-door Yemen and Iran making trouble right by Oman’s Musandam Peninsula, which juts out into the super-strategic Straits of Hormuz, Oman is an oasis of calm. Jihadism has so far been non-existent, with no acts of violence in Oman and no Omanis joining ISIS.

The bifurcated desert-sea nature of Oman has induced a tension between cosmopolitan worldliness and insularity. The ruler from 1932 to 1970, Said bin Taimur, went to school in India and Iraq, then visited Franklin D. Roosevelt in Washington; he also educated his son Qaboos bin Said abroad. Despite this, Said kept Omanis isolated from the outside world, squirreled away oil revenues and perversely thought isolation and backwardness would assure his continued rule. Symbolic of Oman’s standing in 1970, it had a grand total of 2 electricity generators, 2 hospitals, 3 private schools and 6 miles of paved roads. Slavery was legal; smoking in the streets was not. Not a single newspaper or movie house existed. As one visitor put it, “the clock of history was stopped somewhere in the Middle Ages.”

It turns out that poverty and ignorance did not assure his continued rule. In July 1970, the 30-year-old Qaboos overthrew his father in a palace coup d’état; 47 years later, Qaboos remains Oman’s absolute ruler. He turned out to be a relentless modernizer who personally oversaw the building of the country, from oil refineries to an opera house. About a million barrels a day of petroleum sustains the economy without overwhelming it; two and half million Omanis employ about two million expatriates, largely from South Asia.

A once-closed country is now easy of access; $13 buys a visa at the airport and Oman’s natural beauty has made it a destination for high-end Western sun-lovers and eco-tourists. It’s become so chic, Lonely Planet in 2012 listed the capital Muscat as the second “best in travel” city in the world.

As a result, the country has largely caught up, boasting electricity in the most remote villages, an extensive network of excellent highways, 91% literacy, a network of colleges, and the Royal Oman Symphony Orchestra.

A benevolent dictator, Qaboos dominates the country in ways alien to a Westerner. He serves simultaneously as prime minister, minister of defense, foreign affairs and finance, as well as supreme commander of the armed forces and police. Nor is that all: as the Economist has noted, on an average day a resident of Muscat “is likely to drive down Sultan Qaboos road, pass Sultan Qaboos Grand Mosque and perhaps Sultan Qaboos port, too. He or she may be a graduate of Sultan Qaboos University and watch a football match at the Sultan Qaboos sports complex before heading home to a house in Madinat Sultan Qaboos, a neighborhood of the city.”

The Arab insurgency that began in 2011 reached Oman but, as in the case of most of the monarchies, was easily handled with some extra spending.

March 3 saw the country’s biggest news in decades: the 76-year-old Qaboos, sick, frail, and childless, appointed a cousin, Asaad bin Tariq, as deputy prime minister, a step widely interpreted as indicating his choice for successor. After years of speculation, this designation; with luck, will stave off lurking instability.

As a democrat, I rue absolute monarchies. As a Middle East analyst, however, I acknowledge that monarchies govern far better than the region’s alternatives, mainly ideologues and military officers. I therefore join many Omanis in hoping for a smooth transition that keeps the country deftly out of harm’s way.

Mr. Pipes (@DanielPipes) is president of the Middle East Forum. (Daniel Pipes 15.03)

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11.8 EGYPT: Egypt Economic Report – 2017

Bank Audi’s just issued Egypt Economic Report – 2017 stated that amid the spillover effects of wide macroeconomic pressures and the prospects of an ambitious adjustment program, it has been a mixed year for the overall Egyptian economy, which is facing both opportunities and challenges. The country is going through large structural reforms which are set to secure sound growth in the economy in the medium term. However, such reforms carry intermediate costs, mainly at the level of monetary and exchange pressures that add to geopolitical and security threats with considerable burden on the real sectors of the economy. The Egyptian economy reported a real GDP growth of 3.8% in 2016, slightly lower than the 4.2% registered in the previous year, but still outpacing overall population growth. The real sector slowdown comes within the context of shrinking foreign demand amid lower touristic receipts and financial inflows, while domestic demand continues to grow satisfactorily.

Widening current account deficit despite contracting trade deficit: Although the pressures on Egypt’s trade deficit lessened last year, the current account deficit widened by 30.3% during the first nine months of 2016 relative to the same period of 2015. The rise in current account deficit was mainly attributed to a significant drop in services balance by 48.3%, on the back of a decline in tourism receipts by 64.2% due to an overall decelerated tourism activity. In addition, current transfers declined by 16.1% as a result of a 15.7% drop in remittances from Egyptian workers abroad to their homeland. As a percentage of GDP, the current account deficit widened from 3.6% in FY 2015 to 5.9% in FY 2016.

Fiscal reforms to materialize into declining public finance deficit: There are signs that the government will consolidate its austerity drive in the current fiscal year. As such, the FY 2017 budget registers ambitious target, the government targeting to collect LE 670 billion of revenues, mainly driven by the impact of higher real GDP growth rates on tax revenue. Public expenditures are expected to reach LE 975 billion in FY 2017, on the back of an expected further rise in interest payments. Accordingly, the fiscal deficit is expected to decrease both in absolute terms and as a percentage of GDP in FY 2017, as it is expected to reach LE 319.5 billion (a decline of 6.0%), and consequently to narrow from 12.3% of GDP in FY 2016 to 9.8% of GDP in FY 2017.

Shift to floating exchange rate regime dictates further monetary policy tightening: The fiscal year 2017 witnessed the historical shift from a fixed exchange rate regime to a flexible one, in a move aimed at removing the significant overvaluation of the Egyptian Pound and rebuilding international reserves, while pursuing an extended monetary tightening policy in order to anchor inflation expectations and contain domestic and external demand pressures. The CBE’s gross official reserves grew by a significant 38.1% during the first half of FY 2017 to reach $24.3 billion at end-December 2016, and extended their upward trajectory to reach $26.4 billion at end-January 2017, their highest level since the eruption of Egypt’s first revolution in January 2011.

Steady banking activity growth along with improving asset quality: The banking sector has weathered well the repercussions of the political and security situation the country witnessed in the last few years. A 26.1% growth in bank assets was recorded in the first ten months of 2016 (+11.1% in US dollar terms) to reach the equivalent of $352 billion at end-October. Total deposits rose by 16.2% in the same period to reach the equivalent of around $250 billion at end-October. Credit facilities surged by 24.0% between December 2015 and October 2016 to reach the equivalent of $110 billion. Banks’ asset quality has improved as well, with the stock of non-performing loans declining to reach 5.9% of total loans as at end-September 2016 (6.8% at end-2015), somewhat in line with international averages.

Adjustment program real opportunity for Egypt looking ahead: The adjustment program followed by Egypt is attempting to tackle three interlinked problems, namely an urgent balance of payments problem, rising public debt and the long term issue of low growth and high unemployment. While domestic and external risks do exist, the program is an opportunity in the meaning that Egypt is apt to move in a new economic direction that will put an end to the economic turbulence of the post-revolution period within the context of the targeted restoration of macroeconomic stability at large. (Bank Audi 08.03)

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11.9 TUNISIA: Bond Bolsters Tunisia Liquidity as IMF Delay Shows Risks

The postponed disbursement following an IMF program review highlights reform implementation challenges faced by Tunisia’s government, Fitch Ratings said on 10 March. Near term financing risks have been mitigated by the €850 million bond market issuance in February, further reform delays could increase uncertainty around Tunisia’s financing outlook.

A disbursement under Tunisia’s May 2016 IMF program, equivalent to around $320 million, was due following a program review in November. But the Tunisian authorities have confirmed that the payment was postponed because of delays in a number of areas, including civil service and tax reform. Political opposition in 2016 resulted in the withdrawal of a freeze on public sector wages in the proposed 2017 budget. We now expect the wage bill to be near 15% of GDP by year-end.

The Tunisian authorities have since committed to a voluntary redundancy scheme for civil servants, which the government hopes will remove at least 10,000 employees from the public payroll by 2020. The government is also considering share sales, including in the state-owned banks. A successful review following the IMF’s next visit, expected by the government by the end of March, would result in a disbursement before end-H1/17.

We project a deficit of around 6% for this year, following a 2016 general government deficit we estimate at 6.4% of GDP. We think Tunisia needs to borrow the equivalent of 7% of GDP in foreign currency to meet its 2017 budget and amortization needs. Domestically, we estimate Tunisia will borrow the equivalent of 2.8% of GDP.

The €850 million market issuance last month eases foreign financing needs in the short term. The seven-year Eurobond was priced to yield 5.75%, and represented Tunisia’s first standalone market issuance in over two years. We estimate that net proceeds of €842 million would cover around 60% of 2017 foreign-currency principal amortization and interest payments. This estimate assumes a loan extension from Qatar on $500 million due in April, in line with an agreement with the Qatari authorities.

Tunisia is mainly relying on multilateral funding to cover the remaining financing gap, including from the IMF (around $640 million), World Bank (around $500 million), African Development Bank (around $300 million), and European Union (€500 million). Fitch expects multilateral lenders to remain committed to Tunisia’s ongoing transition. But as the IMF delay shows, financing risks related to disbursement delays (due to non-compliance) cannot be ruled out. This would leave Tunisia reliant on less predictable or more expensive market financing.

Fitch downgraded Tunisia to ‘B+’ from ‘BB-‘ in February due to weaker economic growth performance and prospects in the context of heightened security risks, and the spill-overs to external and public finances. Improvements to the country’s security apparatus could contribute to a normalization of economic conditions. GDP grew by 1.2% in 2016, with Fitch projecting an acceleration to around 2.5% over the next two years, reflecting higher private consumption and a projected pick-up in investments that will be aided by the adoption of a new investment law in September 2016, and the positive momentum generated in last year’s “Tunisia 2020” conference. (Fitch 10.03)

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11.10 ALGERIA: IMF Staff Completes 2017 Article IV Mission to Algeria

An International Monetary Fund (IMF) staff team visited Algiers from 7 to 20 March to hold discussions for the 2017 Article IV consultation. Discussions focused on the appropriate mix of policies to adjust to lower oil prices. At the conclusion of the mission, the IMF made the following statement:

“Algeria continues to face important challenges posed by lower oil prices. Overall economic activity was resilient, but growth in the nonhydrocarbon sector slowed under the effects of spending cuts and is estimated at 3.4% in 2016. Inflation increased from 4.8% in 2015 to 6.4% in 2016 and stood at 8.1% year-on-year in January 2017. Unemployment increased to 10.5% in September 2016 and remains particularly high among the youth (26.7%) and women (20.1%). Despite some fiscal consolidation in 2016, the fiscal and current account deficits remained large, and public debt increased. International reserves, while still ample, fell by $30 billion to $113 billion (excluding SDRs).

“Efforts to adjust to the oil price shock are underway. The authorities achieved a notable reduction in the fiscal deficit in 2016 and have adopted an ambitious fiscal consolidation plan for 2017-19. They made progress improving the business environment and are working on a long-term strategy to reshape the country’s growth model to foster greater private sector activity and economic diversification. The central bank is adapting its monetary policy instruments to a tighter liquidity environment. This growing reform momentum is welcome.

“A key challenge at this juncture is choosing a policy mix that will help the economy adjust to the oil price shock in a way that is sustainable and the least costly in terms of growth and employment.

“Fiscal consolidation will need to be sustained as oil prices are expected to remain low and hydrocarbon reserves are exhaustible. At this stage, the consolidation should rely primarily on broadening the tax base, including through better tax enforcement and the rationalization of tax exemptions; containing current spending; gradually replacing costly energy subsidies, which mostly benefit the well-off, by direct support to the population most in need; and improving the efficiency of capital spending and reducing its cost. Investment in health, education, and well-targeted social safety nets should be preserved. These efforts should be supported by further strengthening the budget framework and closely monitoring growing fiscal risks.

“Too abrupt a fiscal deficit reduction, however, should be avoided to reduce the risk of a sharp slowdown in growth. In the mission’s view, given the relatively low level of public debt, Algeria could afford a somewhat more gradual fiscal consolidation than entailed in the current medium-term budget framework if it were to consider a broader range of financing options, including external borrowing and the sale of state assets.

“The mission strongly supports the authorities’ objective to decrease the economy’s dependence on hydrocarbons and unleash the potential of the private sector. This is not only needed to adjust to lower oil prices but also to ensure a sustainable source of job creation even beyond the horizon for proven oil and gas reserves. Achieving this goal will require wide-ranging structural reforms. Measures are needed to improve the business environment and access to finance, strengthen governance and transparency, make the labor market more effective, ensure that skills produced by the education system and sought by students match the needs of employers, foster greater female participation in the labor market, and further open the economy to foreign investment. The overall strategy should be designed and sequenced so that reforms reinforce each other and the burden of economic adjustment is shared equitably. Action should be timely as structural reforms take time to bear fruit.

“Exchange rate, monetary, and financial policies should support the adjustment. Further efforts to bring the dinar in line with fundamentals, combined with steps toward the elimination of the parallel foreign exchange market, would support fiscal and external adjustment. The Bank of Algeria is appropriately introducing open market operations, which should become its main monetary policy tool. The Bank of Algeria will need to stand ready to tighten monetary policy in light of growing inflationary pressures. Based on preliminary data, the banking sector as a whole remains adequately capitalized and profitable, but the oil price shock has increased liquidity, interest rate, and credit risks. It is therefore important to accelerate the transition to a risk-based supervisory framework, enhance the role of macro-prudential policy, strengthen the governance of public banks, and develop a crisis resolution framework.

“The IMF team met with Finance Minister Hadji Baba Ammi; Industry and Mines Minister Abdessalem Bouchouareb; Acting Trade Minister and Housing and Urban Development Minister Abdelmadjid Tebboune; Education Minister Nouria Benghebrit; Labor, Employment, and Social Security Minister Mohamed El Ghazi and the Governor of the Bank of Algeria, Mohamed Loukal. The mission also held discussions with other senior government and central bank officials as well as with representatives of the economic and financial sectors and civil society. (IMF 20.03)

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11.11 TURKEY: What Does Double-Digit Inflation Mean for Turkey?

Mustafa Sonmez posted on 13 March in Al-Monitor that the accelerating pace of Turkey’s inflation threatens significant erosion in most forms of income on which the country’s population lives.

Turkish consumer inflation has exceeded 10%, climbing back to double digits after 58 months. The factors pushing prices up are unlikely to subside in the coming months, meaning that a double-digit overall inflation at the end of the year is now a strong prospect for the country.

The Consumer Price Index, which denotes the change in the prices of goods and services that consumers buy, was up 10.1% year on year in February. The increase was higher in some categories and lower in others. In food and housing, which account for 24% and 15% of the consumer basket, respectively, the increase stood at 8.7% and 7.4%. Meanwhile, in the transport and tobacco-alcohol categories, which make up 14% and about 6% of household budgets, respectively, inflation stood at 18% and nearly 22%.

When it comes to the Domestic Produce Price Index, which covers the industrial, mining and energy products that producers sell, the year-on-year price increase exceeded 15%. This is, in fact, the main indicator that consumer inflation is unlikely to climb down from double-digit figures throughout 2017. With producers having hiked their prices 15%, the impact on consumers in the coming months is simply inevitable.

The inflation in certain goods in the producer basket is even more striking. In the textile category, which accounts for about 9% of the basket, the year-on-year price increase was close to 18%. In iron, steel and other metals, it stood at a staggering 44%. Here, the global rise in the prices of ore, scrap iron and coke was, no doubt, influential. On top of it came the Turkish lira’s dramatic depreciation, which meant that importing those goods became much more expensive for Turkish producers, leading to a fast increase in their prices. Electricity and natural gas prices, meanwhile, were kept in check, and even lowered some 6%. In categories such as domestic appliances, electronic goods, chemicals and machinery, which rely the most on imported inputs, the year-on-year price hikes ranged between 16% and 21%. The government had introduced tax cuts for the domestic appliances and furniture sectors, singling them out as the most hard-pressed, but even those measures failed to keep the price increases at single-digit figures.

The fast appreciation of the dollar is the main factor pushing up inflation to double-digit figures for both producers and consumers in Turkey. The renewed uptrend in the global prices of oil and other commodities is another important contributor. In a 6 March assessment of consumer inflation, the Central Bank said, “Annual food inflation maintained its uptrend, and the effects of the exchange rate spilled over into the whole, particularly the core goods and energy groups. Despite temporary tax reductions, the core goods inflation that soared amid the cumulative effects of the depreciation in the Turkish lira pushed both the annual inflation and the underlying trend of core indicators upward.”

With respect to the 15% increase in producer prices, the Central Bank emphasized external factors, namely the exchange rate and international commodity prices. “Annual inflation reached 17.18% in the manufacturing industry and 11.92% in the manufacturing industry excluding petroleum and base metals,” it said. “The seasonally adjusted underlying trend of manufacturing industry prices excluding petroleum and base metals maintained its high level.”

The period from September 2016 to February 2017 is particularly telling in terms of how hard currency prices and inflation grew. The dollar rose 24% against the Turkish lira in said period, outstripping the increases in domestic producer and consumer prices, which stood at 11.5% and 7%, respectively.

It is a widely held view that the Turkish lira will continue to depreciate under the impact of rate hikes by the US Federal Reserve, expected throughout the year, and Turkey’s high-risk premium, which is unlikely to ease. This alone is a strong harbinger of a sustained double-digit inflation throughout the year, fueled by continuing cost inflation.

How do the price increases affect profits, interest rates and wages? Or, put differently, are the increases in these categories able to match the inflation? Who are the winners and the losers?

More than 20% of Turkey’s population lives on agriculture. The annual increase in agricultural prices stood at 7.5%, well below both the producer and consumer inflation. This means that the agricultural sector was on the losing side overall. Price increases were higher than the average in certain industrial crops such as pulses, sunflower and cotton, as well as meat and milk. In some categories, however, the prices rose less than the average and even decreased. Vegetable producers, who saw their exports to Russia shrink, took the heaviest blow. The price increases in wheat, olives and hazelnuts were less than 10%, meaning that their producers, too, ended up with less income in real terms.

In the financial sector, the yields on bank deposits and government bonds barely matched the consumer inflation, while those who kept their savings in dollars and euros profited 14% and 11.5%, respectively, at the end of 2016. Similarly, those who put their money in gold profited 24% in real terms.

When it comes to wage earners, they represent 70% of working people in Turkey, numbering 16 million. Some 60% of them are minimum wage earners. The annual hike for the minimum wage was planned at 8% in the beginning of the year, following a 30% hike last year, a promise made in the 2015 elections. This means the increase in the minimum wage — 1,404 Turkish lira ($375) at present — will fall behind the double-digit inflation expected at the end of the year.

Public servants, meanwhile, number about 3 million and earn TL 2,700 ($720) on average. The government decides pay raises twice a year in line with its inflation target. The hike for the first half of the year has been set at 3%. Unless the second-half hike in July is a double-digit one, public servants, too, will be on the losing side against inflation. Things stand more or less the same for more than 10 million retirees, whose pensions range between $400 and $500. (Al-Monitor 13.03)

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Fortnightly, 5 April 2017

April 5, 2017, 4:31 am

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TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Israel Finalizes Deal for Major Subsea Gas Pipeline to Europe
1.2  Bank of Israel Hails 2016 as Best Year for Israeli Economy in Past Four Years
1.3  Netanyahu & Kahlon Reach Coalition-Saving Deal on Broadcasting

2: ISRAEL MARKET & BUSINESS NEWS

2.1  Bank Leumi & China’s Ping An to Cooperate in Promoting Israeli High-Tech in China
2.2  CyberArk Expands C3 Alliance to Drive Greater Cyber Security Innovation & Collaboration
2.3  ControlUp Raises $10 Million Series B
2.4  Bank of America Offers Robust Forecast on Israeli Economy
2.5  Freightos Raises $25 Million
2.6  Andersen Global Expands Presence in Israel with Yaron-Eldar

3: REGIONAL PRIVATE SECTOR NEWS

3.1  Amazon Agrees to Buy Middle East Online Retailer Souq.Com
3.2  neXgen Group Launches Vidsys CSIM platform for Smart Cities
3.3  Grimaldi’s Pizzeria International Inks Development Agreement for Expansion into UAE
3.4  Goldman Sachs in Talks for Equities License in KSA
3.5  Vioguard Signs Representation Agreement with Channels Business Group of Saudi Arabia
3.6  Bureau Veritas and Cotton Egypt Association Partner to Verify ‘Egyptian Cotton’
3.7  Sound Energy Announces New Gas Discovery in Morocco
3.8  Papa John’s Announces Opening in Casablanca, Morocco

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  Israel Turning Garbage Dump into Energy Resource
4.2  Lebanon Ranks 125th on the 2017 Energy Architecture Performance Index
4.3  Jordan & Germany Sign €44 Million Solar Energy Grant
4.4  UAE Says Green Energy Shift to Save $192 Billion
4.5  UAE’s Sheikh Maktoum Inaugurates 200MW Second Phase of the Al Maktoum Solar Park
4.6  Morocco’s King Mohammed VI Launches Final Stage of World’s Largest Solar Energy Complex

5: ARAB STATE DEVELOPMENTS

5.1  Lebanese Average Inflation Rose 4.6% Y-o-Y by February, Lifted by Oil Prices Recovery
5.2  Lebanon’s Tourism Sector Posted a 12.25% Improvement by February
5.3  Egypt & Jordan Sign Gas Supply Deals
5.4  Jordan & UNICEF Sign JD1.1 Million Protocol

♦♦Arabian Gulf

5.5  Qatar’s Foreign Trade Surplus Soars 74% in February
5.6  UAE Health Care Market to Grow to Dh103 Billion by 2021
5.7  Saudi Arabia’s GDP Growth Rises in Fourth Quarter

♦♦North Africa

5.8  Egypt to Allocate 1% of GDP for Social Protection Programs in 2017/18
5.9  Egyptian ICT Minister Heads Mission to US Seeking Strategic Partnerships
5.10  Egypt’s Foreign Currency Records its Highest Level Since 2011

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  Turkey’s Annual Inflation Rises To 11.3% In March – Highest Since 2008
6.2  Food Prices Key in Turkey’s Skyrocketing Annual Inflation
6.3  Cyprus’ Hydrocarbon Exploration Negotiations Successfully Concluded
6.4  Greece & EU/IMF Lenders Said to Agree on Key Labor Reforms and Pension Cuts

7: GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1  Passover Will Be Celebrated Starting 10 April
7.2  Bank of Israel Prepares to Issue New Banknotes Featuring Women
7.3  Nicaragua Restores Diplomatic Ties to Israel After 2010 Break

♦♦REGIONAL

7.4 Rising Sea Level to Swamp Land in Three UAE Emirates

8: ISRAEL LIFE SCIENCE NEWS

8.1  Israel Looks to Leverage Tech in $50 Billion Medical Marijuana Market
8.2  Marrone Bio Innovations & Evogene Advance Novel Bacteria into Insecticidal Phase
8.3  Teva Receives FDA Approval of AUSTEDO Tablets for the Treatment of Huntington’s Disease Chorea
8.4  Emosis, BioRap & Rambam MedTech Collaborate on Novel Hypercoagulation Diagnostics Kit

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Variscite’s DART-6UL Product Line Enhanced with 696MHz Processor & Low-Power i.MX 6ULL
9.2  FST to Reveal New Generation of Biometrics-Based Visual Identification
9.3  Sodyo Introduces FarQR – The Next Generation QR Code
9.4  PointGrab Partners with Serraview, Taking Aim at $43 Billion Smart Office Market

10: ISRAEL ECONOMIC STATISTICS

10.1  Israel’s Defense Exports Increase by 14% in 2016
10.2  Israel’s Building Starts Slightly Down in 2016
10.3  Bank of Israel Announces Growth Adds NIS 4.5 Billion to Tax Revenues

11: IN DEPTH

11.1  MIDDLE EAST: OPEC’s Rebalancing Act
11.2  ISRAEL: IMF Executive Board Concludes 2017 Article IV Consultation with Israel
11.3  SRAEL: MIXiii BIOMED 2017 – the Numbers Behind the Digital Health Industry in Israel
11.4  GCC: New Generation Royals and Succession Dynamics in the Gulf States
11.5  GCC: GCC Food & Beverage Market Stays Resilient
11.6  OMAN: The Omani Succession Envelope, Please
11.7  EGYPT: Why Egypt is Moving Forward on Free Trade
11.8  EGYPT: IMF Program to Support Fiscal & External Position; Reform Pace May Slip
11.9  EGYPT: Cairo Metro Drowns in Debt and Risks Shutdown
11.10  TUNISIA: Bond Bolsters Tunisia Liquidity as IMF Delay Shows Risks
11.11  CYPRUS: IMF Staff Completes Mission for the First Post-Program Monitoring to Cyprus

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Israel Finalizes Deal for Major Subsea Gas Pipeline to Europe

Israel’s National Infrastructure, Energy & Water Minister Steinitz hosted a summit of European energy ministers on 3 April, where an agreement to build the longest underwater natural gas pipeline in the world was announced. In attendance were energy ministers from Cyprus, Greece and Italy, along with the European Union’s envoy for energy and climate affairs. Following the official signing, Steinitz took his colleagues on a flight tour of Israel’s offshore gas fields. According to Steinitz, the project, which is currently in advanced stages of analysis and has already demonstrated initial technical and commercial feasibility, can be finished by 2025; or in other world within eight years. The overall cost of the project, estimated at around 20 billion shekels ($5.5 billion), will be covered entirely by the private sector. When asked if the pipeline agreement — expected to be some 2,000 kilometers (around 1,200 miles) long — poses a threat to a parallel joint-pipeline agreement with Turkey, Steinitz said the current deal does not reduce the importance of additional potential projects with other countries. (Various 03.04)

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1.2 Bank of Israel Hails 2016 as Best Year for Israeli Economy in Past Four Years

On 29 March, the Bank of Israel announced that the Israeli economy grew by 4% in 2016, exceeding projections by 1.2% and marking the most solid economic performance for the country since 2012. Israel’s economy grew by 2.5% in 2015 and 3.2% in 2014.

In its 2016 annual report, the bank noted that the GDP hit a record $337 billion; Israel had a record $12.4 billion surplus in its current account balance of payments; unemployment dropped to 4.8% in 2016; public debt dropped to an all-time low of 62.8% of GDP; the number of employed Israelis hit a record high of 3.74 million people; the GDP per capita reached a historic high of $36,800; private consumption climbed by 6%; and Israelis overall standard of living increased by 5%.

At 4%, Israel’s economic growth was double of the United States’ economic growth in the past year; 2.3 times higher than the average growth among Organization for Economic Cooperation and Development members and 2.5 times higher than average growth in the Eurozone. According to the data, since 2011, the Israeli economy grew by a cumulative 21.6%, exceeding all OECD member states.

The report further noted that since 2011, per capita growth has increased by a cumulative 14.2%, and private consumption has risen by a total of 25.2%, meaning Israelis’ standard of living improved by an astonishing 17.8% since 2011. Per capita growth in Israel increased by an average of 1.9% during this period of time, compared with an average growth of 0.8% in the U.S., 1.1% among OECD nations and 1.3% in the European Union. The data indicates that Prime Minister Netanyahu and Finance Minister Kahlon’s goals of improving Israel’s ranking among OECD nations is succeeding. (BoI 29.03)

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1.3 Netanyahu & Kahlon Reach Coalition-Saving Deal on Broadcasting

The crisis over the new Israel Broadcasting Corporation, which at least on the surface had threatened to lead to early elections in Israel, apparently ended on 30 March, at least as far as relations between Minister of Finance Kahlon and Prime Minister Netanyahu are concerned. The journalists in the new corporation, on the other hand, have already announced the beginning of a public campaign, and have threatened a petition to the High Court of Justice.

Under the compromise hammered out between Kahlon and Netanyahu, with the active mediation of Attorney General Mandelblit, the new corporation will not deal with news and current affairs, even though it has already recruited journalists and managers for precisely that purpose. A new news and current affairs broadcasting company will be established within the corporation, referred to in the agreement as “the News Corporation,” with a separate management and council, similar to the news companies of commercial channels Channel 2 and Channel 10.

Under the agreement, only employees of the old Israel Broadcasting Authority (IBA), which is supposed to be dismantled to give way to the new corporation, will be allowed to work in the new news company. This includes those already hired by the corporation. Until permanent managers are appointed, the managers of Reshet Bet (radio) and Channel 1 (television) will manage the new company. The manager of Reshet Bet will be the editor-in-chief of news. The supervisory council of the new news company will be selected according to the existing format set forth in the Public Broadcasting Law, which constituted the basis for the establishment of the corporation, i.e. a selection committee with no ostensible political involvement.

The changes involved require legislation and a two-week postponement in the operation of the new corporation has therefore been agreed. It appears that Netanyahu’s supporters have deliberately made sure that the new news company will be defined as a news and current affairs company, which rules out any possibility that the heads of the existing corporation will engaged in core current affairs activity, including, among other things, production of an investigatory program. According to an announcement by the Prime Minister’s Office, a “Supervision Bill” designed to make all broadcasting agencies, both public and commercial, subject to a single supervisory council whose members will be chosen by the government, will be suspended or held back “at this stage.” (Globes 30.03)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Bank Leumi & China’s Ping An to Cooperate in Promoting Israeli High-Tech in China

Israel’s Bank Leumi and Ping An, China’s largest insurance group, signed a strategic cooperation agreement to promote the entry and integration of Israeli high-tech companies into the Chinese market. The agreement was signed as part of Israeli Prime Minister Netanyahu’s visit to China, marking the 25th anniversary of diplomatic relations between the two countries.

As part of the agreement, Leumi-Tech, Leumi Group’s high-tech banking arm, will constitute a bridge between Leumi Group customers and the Ping An Group. Israeli technology companies with potential and interest in the Chinese market will be introduced to Ping An, which will assist these companies either through establishing relationships with Ping An subsidiaries, integrating suitable companies in high-tech complexes built by Ping An’s real estate company, or by getting them acquainted with relevant Chinese entities. Ping An will also aid in the process of obtaining financial and tax benefits allocated by the Chinese government for the benefit of technology companies in general and startups in particular. This international agreement stems from the Leumi Group’s desire to leverage Leumi-Tech’s capabilities in assisting Israeli high-tech companies that wish to penetrate the Chinese market, through cooperation with a major Chinese entity. This cooperation will constitute a foundation for these companies and is necessary for them to succeed in China.

Leumi-Tech, the high-tech banking arm of the Leumi Group, one of the leading and largest banking corporations in Israel, was founded in 2014 with the main goal of promoting financing and development of the Israeli high-tech industry. Leumi-Tech provides companies operating in Israel and abroad with a comprehensive package of services, including: credit and financing, investments and partnerships, unique products and services tailored to the specific needs of the industry, and an innovative global platform for managing their international financial operations. (Bank Leumi 22.03)

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2.2 CyberArk Expands C3 Alliance to Drive Greater Cyber Security Innovation & Collaboration

CyberArk announced the expansion of the C3 Alliance, CyberArk’s global technology partner program. Extending the power of privileged account security through new partners and technology integrations, customers can better protect against advanced threats through a deeper set of innovative cyber security solutions. New C3 Alliance partners and integrations include Atos, Datablink, DB Networks, DBmaestro, EZMCOM, Flexera Software, Gemalto, Hexadite, Illusive Networks, Omada, OneLogin, Palo Alto Networks, Phantom, Proofpoint, Qualys, Radiant Logic, RSA, STEALTHbits Technologies, SyferLock, Thales, Utimaco, Vistara and Yubico.

Launched in April 2016, the C3 Alliance was established to bring enterprise software, IT security and services providers together in order to deliver proactive protection, detection and response to customers by putting privileged account security at the core of their cyber security strategies. The program now has 45 partners and features 63 product integrations to increase the value of existing IT investments and improve security across enterprise priorities associated with cloud, identity security, application security and endpoint.

Petah Tikva’s CyberArk is the only security company focused on eliminating the most advanced cyber threats; those that use insider privileges to attack the heart of the enterprise. Dedicated to stopping attacks before they stop business, CyberArk proactively secures against cyber threats before attacks can escalate and do irreparable damage. The company is trusted by the world’s leading companies – including more than 45% of the Fortune 100 – to protect their highest value information assets, infrastructure and applications. (CyberArk 22.03)

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2.3 ControlUp Raises $10 Million Series B

ControlUp, the leading provider of an ITOps analytics and management platform, announced that it raised $10 million in a Series B funding round. The round was led by K1 Investment Management and Jerusalem Venture Partners, and brings the company’s total funding to $13.3 million. With thousands of customers worldwide, ControlUp spearheads the Collective IT Analytics revolution. By harnessing the power of big data to analyze operational IT data from a global customer base to find patterns, detect problems, establish dynamic baselines and generate actionable targeted insights, ControlUp reshapes ITOps to open the door for smarter IT.

The announcement comes on the heels of a hot year for ControlUp. In September 2016, the company announced the launch of ControlUp 6, which provides unsurpassed troubleshooting and issues remediation capabilities in enterprise grade hybrid-cloud datacenters. In August, ControlUp joined the Microsoft Enterprise Cloud Alliance, extending its tools to support Microsoft Hyper-V and Microsoft Azure-based workloads that reside in the datacenter or in hybrid clouds. The company also launched ControlUp Insights in April, a new platform that empowers IT administrators to deliver interactive reports with unprecedented visibility and control of hybrid cloud workloads.

ControlUp is the leading provider of a powerful, yet easy-to-use ITOps analytics and management platform. Used by thousands of companies worldwide, ControlUp helps ITOps teams to monitor, analyze and directly remediate problems in their on-premise, hybrid cloud and cloud infrastructures. ControlUp is headquartered in Silicon Valley with R&D in Israel, and is backed by Jerusalem Venture Partners and K1 Investment Management. (ControlUp 28.03)

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2.4 Bank of America Offers Robust Forecast on Israeli Economy

A new Bank of America Merrill Lynch report on Israel from March said the country’s economy “is on a robust recovery path with growth rates running at 3 to 4% levels.” Bank of America Merrill Lynch, which is the investment and banking division of Bank of America, predicts that the Israeli currency will continue to appreciate against the dollar in the coming months. According to the report, the dollar-shekel exchange rate “could dip to 3.55 by mid-year 2017 but we target 3.65 by year-end.”

In 2018, the shekel is expected to weaken even further, and the exchange rate could climb to 3.70. The report further said the Bank of Israel was “defying gravity” by checking the appreciation of the shekel against the dollar. The report said the Israeli currency is expected to strengthen in part because of the “potential future inflows from natural gas,” which would offset some of Israel’s expenditures on foreign energy and open up more export opportunities. The likely inclusion of Israel in Citigroup’s World Government Bond Index this year is expected to have a positive effect that could strengthen the shekel as well, the report said. Merrill Lynch economists concluded that “on the financing side, Israel remains an attractive destination for foreign direct investment.” (IH 29.03)

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2.5 Freightos Raises $25 Million

Israeli online logistics technology company Freightos announced the completion of a $25 million Series B extension round, led by GE Ventures, with participation by additional investors. This brings the company’s total funding to $50 million since it was founded in 2011. The funds will be used to scale the Freightos Marketplace globally while continuing development of Freightos’ software suite of global freight pricing, routing, and sales automation. Since its July 2016 launch, the Freightos Marketplace has grown exponentially, with a 600% increase in orders in the first six months, a 100% growth in the first quarter of 2017 orders compared with Q4/16, over 10,000 registered users, and dozens of sellers, including top twenty global freight forwarders.

Freightos technology already digitizes freight operations for over 1,000 logistics providers and global supply chain companies, including Nippon Express, CEVA Logistics, Hellmann Worldwide Logistics and Sysco Foods. Continuing the company’s mission of transparency, the Freightos International Freight Index provides free global freight rates insights, a service that otherwise costs thousands of dollars.

Jerusalem’s Freightos operates the world’s online marketplace for shipping. Freightos also provides Freightos AcceleRate software as a service to automate pricing and routing for leading carriers, freight forwarders and shippers. At the heart of the Freightos marketplace and AcceleRate SaaS are a unique patent-pending freight pricing and routing engine, and a database of millions of ocean, air and land freight price rates, updated daily. The Freightos group now includes WebCargoNet, based in Barcelona, Spain, the world’s leading network for distributing air cargo rates from airlines to freight forwarders and from forwarders to importers and exporters. (Globes 29.03)

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2.6 Andersen Global Expands Presence in Israel with Yaron-Eldar

San Francisco’s Andersen Global announced an enhanced presence in Israel by way of a collaboration agreement with Yaron-Eldar, Paller, Schwartz & Co., a law firm with locations in Tel Aviv and Haifa specializing in all aspects of taxation law, both in Israel and internationally. The addition of Yaron-Eldar as a Collaborating Firm of Andersen Global is a part of a larger expansion strategy in Israel and the Middle East. Yaron-Eldar provides tax law, international tax, real estate tax, and indirect tax services for both large and small public and private companies as well as individuals. With the addition of Yaron-Eldar, Andersen Global now has a presence in 61 locations worldwide. (Andersen Tax 03.04)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Amazon Agrees to Buy Middle East Online Retailer Souq.Com

Amazon.com has agreed in principle to buy 100% of Dubai-based online retailer Souq.com from its shareholders. Goldman Sachs acted as adviser for Souq.com and helped to arrange the deal. Souq.com, which sells consumer electronics, fashion, household items and other goods, is one of the most high-profile names in the Middle East’s online shopping market. The sources didn’t disclose the price Amazon and Souq.com have agreed on for the deal.

The Middle East’s technology sector, including e-commerce, is expanding quickly due to the region’s young and tech-savvy population. Kuwait, Saudi Arabia and the UAE are in the top seven worldwide for mobile phone penetration. Last year Souq.com raised $275 million from a funding round with investors to support its future growth. Investors participating in that funding round included Tiger Global Management, Naspers, Standard Chartered Private Equity, International Finance Corporation and Baillie Gifford. (Reuters 22.03)

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3.2 neXgen Group Launches Vidsys CSIM platform for Smart Cities

Vienna, Virginia’s Vidsys, the leading global software technology manufacturer of Physical Security Information Management (PSIM) and Converged Security and Information Management (CSIM) software, announced that the UAE’s neXgen Group, a leading smart city advisory and managed services provider, will be offering Smart Safety & Security as a service leveraging Vidsys’ CSIM multi-tenant cloud-based solution. neXgen Group specializes in extending smart city technology solutions as a service to governments, real estate and enterprise customers across the region and has been actively involved in flagship projects such as Smart Dubai and Smart Riyadh, contributing its regional consulting expertise and in-country Smart City managed services. Through the new solution offering, neXgen customers will have access to Smart Safety & Security as a managed service with customization based on individual business needs.

The platform is part of a broader Smart City initiative across neXgen’s Middle East network. The Middle East North Africa (MENA) digital transformation market is projected to expand at a CAGR of 15.1% from 2014 to 2020. Countries, including the UAE, are increasingly introducing e-Government and smart city initiatives, with the objective to transform themselves into digitally-enabled countries. (Vidsys 27.03)

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3.3 Grimaldi’s Pizzeria International Inks Development Agreement for Expansion into UAE

Scottsdale, Arizona’s Grimaldi’s Pizzeria plans to expand internationally by opening five of its world-famous, coal-fired, brick-oven pizzerias in the UAE over the next five years. Partnering with Tablez Food Company to ensure a seamless expansion, this international franchise agreement represents Grimaldi’s first brand expansion beyond North America. Tablez Food Company, an entity specializing in the development of unique food and beverage concepts, was the premiere partner of choice for Grimaldi’s due to its vast experience in international expansion efforts in the region with other notable franchise ventures. Grimaldi’s Pizzeria, one of the most awarded pizzerias in the United States and the only upscale pizzeria to be bestowed the coveted Five Star Diamond Award, represents the first and only pizza concept in Tablez’s renowned portfolio. Beyond the Middle East, Grimaldi’s Pizzeria has engaged other investment groups in key growth markets around the globe in an effort to secure multi-unit franchise partners to introduce and develop the brand in regions including Southeast Asia, South America, Central America, Europe, Mexico, Canada and Australia. (Grimaldi’s Pizzeria 29.03)

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3.4 Goldman Sachs in Talks for Equities License in KSA

Goldman Sachs Group is in preliminary talks for an equities license in Saudi Arabia as the US lender seeks to take advantage of the country’s economic reforms, according to people familiar with the matter. The bank has yet to file a formal application, sources say, but while talks are ongoing, no final decisions have been made. The bank may also decide against going ahead with the submission.

Goldman is following banks including HSBC Holdings Plc, Citigroup and Ashmore Group Plc, which already acquired equities licenses in the kingdom after the country opened to foreign investment in 2015. Saudi Arabia is emerging as an attractive opportunity for international banks as the kingdom takes steps to overhaul its economy, including plans for what could be the largest initial public offering with the listing of Saudi Arabian Oil Co. Goldman Sachs set up a dedicated Saudi Arabian business in 2008 after securing a license from the Capital Markets Authority. The bank is currently eligible to offer asset management services to institutions and companies as well as advise on corporate finance transactions in the country. The new license would allow them to buy and sell Saudi Arabian equities as well.

Saudi Arabia’s stock exchange is the Arab world’s largest with a total market capitalization of about 1.61 trillion riyals ($429 billion). (Reuters 26.03)

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3.5 Vioguard Signs Representation Agreement with Channels Business Group of Saudi Arabia

Bothell, Washington’s Vioguard and Channels Business Group-Channels Medical Solutions (CMS) announced an agreement for CMS to act as an Authorized Representative in Saudi Arabia. This means that CMS will partner with Vioguard to get the American company’s patented self-sanitizing keyboards approved by the Saudi Food and Drug Authority and to represent Vioguard in the Middle East. The two companies signed the deal at this year’s Arab Health Convention in Dubai. Vioguard’s flagship product is a self-sanitizing automated keyboard and mouse system that uses high-powered germicidal ultraviolet light, known as UV-C. The timing of the agreement is critical, especially because of the Middle East Respiratory Syndrome (MERS) coronavirus, a severe respiratory illness that was first reported in Saudi Arabia in 2012 and has since spread to several other countries in the Middle East the last few years. (Vioguard 03.04)

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3.6 Bureau Veritas and Cotton Egypt Association Partner to Verify ‘Egyptian Cotton’

Hong Kong’s Bureau Veritas Consumer Products Services (Bureau Veritas), leaders in testing, inspection/audit, advisory and certification services, have announced an exclusive partnership for the next 5-years with the Cotton Egypt Association (CEA) to provide conformity assessment services to verify that the materials are traceable to confirmed lots of true Egyptian Cotton at any stage of production. The Egyptian Cotton Logo is a mark that helps restore faith as to the authenticity of products bearing the claim, Egyptian Cotton. It demonstrates that the CEA has certified that the product is true Egyptian Cotton by conforming to the requirements in the Factory Audits and Testing services and is ready for retail. The exclusive agreement with Bureau Veritas brings global scale and reach to the scheme thanks to Bureau Veritas’ leadership position within the retail / consumer goods marketplace with test labs and auditors worldwide. Bureau Veritas’ Consumer Products Services division is a leading global quality assurance and sustainability provider for the global consumer product and retail markets. (Bureau Veritas 29.03)

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3.7 Sound Energy Announces New Gas Discovery in Morocco

The latest findings of Sound Energy’s TE-8 drill in the Westphalian and TAGI reservoir sands have confirmed the existence of a “very significant” gas column across Tendrara. After announcing that it had completed drilling of the TE-8 well last week, reaching its target depth of 3,120 meters, Sound Energy has now completed the logging phase, making use of the Saturn 3D Radial Probe MDT. The British-based upstream gas company has thus confirmed the gas shows previously observed during the drilling stage.

The confirmation bodes well for Morocco. Sound Energy’s Chief Executive explained that the “TE-8 has now established that the primary hydrocarbon system proven in Algeria extends into the more favorable Moroccan license and fiscal regime.” The company has also confirmed the identification of a full sequence of thick TAGI reservoir sands. The reservoir is thought to extend 12 kilometers to the northeast of the company’s two previous wells at Tendrara.

The company did note that the gas found in the reservoirs is of lower quality and would require additional mechanical stimulation. TE-8 is the third well Sound Energy has drilled on the license after the TE-6 and TE-7 wells, whose production tests concluded with successful results. Sound Energy intended for TE-8 to prove the volume of additional gas in the TAGI (Trias Argilo-Greseux Inferieur) reservoir through deeper drilling in the Paleozoic formation. The Tendrara License covers an area of 14,500 km2 in the Eastern Region, in the northeast of Morocco; 55% of the region’s drilling is operated by Sound Energy, with the rest run by ONHYM (25%) and OGIF (20%). (SE 29.03)

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3.8 Papa John’s Announces Opening in Casablanca, Morocco

Louisville, Kentucky’s Papa John’s International continues its global growth with the opening of a new restaurant in Morocco. Papa John’s is known worldwide for its BETTER INGREDIENTS. BETTER PIZZA. brand promise and will now bring Better Pizza to Casablanca, Morocco. Following Egypt & Tunisia, Morocco will be only the third country in Africa to boast a Papa John’s franchise.

Moroccan-based Planet Pizza Inc. has the exclusive development rights for the Papa John’s brand in the country and plans to build 20 stores in Morocco. The Morocco development is part of Papa John’s strategy of continued global expansion. In 2016, Papa John’s International opened restaurants in 6 new countries, Iraq, Israel, France, Spain, The Netherlands and Tunisia and is currently looking for potential franchisees. (Papa John’s 27.03)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Israel Turning Garbage Dump into Energy Resource

Israeli officials launched a refuse derived fuel (RDF) plant at the Hiriya Recycling Park – a waste sorting and recycling plant that sits at the foot of the region’s towering former garbage dump. The largest such project to date in Israel, the facility will be producing alternative fuel to provide a source of energy for cement production at the nearby Nesher plant. The RDF plant is an innovative, flexible and modular plant, which serves as successful model for a collaboration between industry that needs raw materials for energy and an urban sector that needs a solution to the waste problem and a technological body that is ready to take a risk despite the challenge.

The NIS 400 million RDF plant will be absorbing about 1,500 tons of household waste every day, or approximately half the garbage from the residents of the Gush Dan region – amounting to a total of half a million tons of trash each year, according to the project. Behind the facility’s launch was a team of partners, including the Hiriya Recycling Park, the Dan Municipal Sanitation Association, Nesher Israel Cement Enterprises and the Veridis environmental service corporation.

Using industrial and municipal waste as a combustion material, RDF has become recognized globally as an environmentally friendly fuel source and is commonly used to power the cement industry, a statement from the partners said. The household waste is sorted using advanced technological methods, and those materials appropriate for burning – such as plastic bags, other plastics, textiles, tree trimmings, cardboard and paper – are used as an alternative fuel source at the Nesher plant. The new RDF facility is expected to produce about 500 tons of RDF fuel substitute daily, serving as a combustion material that will provide 20% of the thermal energy necessary to operate the Nesher factory. (Various 27.03)

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4.2 Lebanon Ranks 125th on the 2017 Energy Architecture Performance Index

According to the World Economic Forum, Lebanon ranked 125th out of 127 countries on the 2017 edition of the global Energy Architecture Performance Index (EAPI) issued by the World Economic Forum. The index assesses the selected countries energy systems based on three dimensions: economic growth and development, environmental sustainability, energy access and security. Lebanon’s performance on the index has been stagnant. Lebanon ranked 99th on the dimension of economic growth and development, 117th on the dimension of environmental sustainability and 105th on the dimension of energy access and security. Lebanon’s weak positioning is partly linked to the weak level of diversity of its energy sources, the weak quality of electricity supply and the relatively high CO2 emissions from electricity production. Globally, the top five spots were earned by advanced economies: Switzerland, Norway, Sweden, Denmark and France. In the MENAP region (including Pakistan), Morocco was the best performer, ranking at 57th, followed by Pakistan in 65th place, Algeria in 81th place, Egypt in 90th place and Sudan in 93rd place. (Blom 29.03)

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4.3 Jordan & Germany Sign €44 Million Solar Energy Grant

On 28 March, Jordan and Germany signed a €44 million grant agreement to fund the Energy Supply for Host Communities and Syrian Refugees project’s second phase, according to the Planning and International Cooperation Ministry. Planning and International Cooperation Minister Fakhoury signed the grant agreement, provided by the German government’s KfW Development Bank. The project aims to reduce electricity costs by generating electricity from solar energy at a 30-35 MW capacity. Fakhoury said the grant is a step in the implementation process of the commitments Germany made during the London donor conference to support Syrian refugees and the region, held in February 2016. The planning minister highlighted the importance of having the international community continue to support Jordan, especially by increasing grants for the implementation of projects aimed to boost the resilience of host communities under the Jordan Response Plan 2017-2019. Fakhoury said the grant money will be used to implement the project, including the funding of the solar energy system, connecting the network, consultation services and additional measures. (JT 29.03)

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4.4 UAE Says Green Energy Shift to Save $192 Billion

The United Arab Emirates forecasts that savings generated by switching half its power needs to clean energy by mid-century will outstrip the investment costs. The Gulf state plans to invest $150 billion in renewable power to 2050, weening the country from dependency on subsidized natural gas power in stages, Minister of Energy Al-Mazrouei said at a conference in Berlin. Clean energy sources will help it save $192 billion, he said. The UAE leadership is “bullish” about achieving the goal after realizing that the nation can forgo subsidies in the switch to clean power from LNG, Al-Mazrouei said. Sticking to the strategy will “save the environment and at the same time save us lots of money,” he said.

As the costs for solar power fall rapidly, Gulf and Middle East states are reevaluating their power strategies, which currently rely subsidiaries for electricity generated with liquid natural gas. The UAE has set an “incredibly ambitious” clean power target, starting from scratch just a few years ago. In September, Chinese panel maker JinkoSolar Holding Co. and Japanese developer Marubeni Corp. won a tender for a solar plant in Abu Dhabi with a record bid of 2.42 US cents a kilowatt-hour. About $1 billion has been invested in utility-scale solar in the UAE since 2007. (Bloomberg 27.03)

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4.5 UAE’s Sheikh Maktoum Inaugurates 200MW Second Phase of the Al Maktoum Solar Park

Sheikh Mohammed Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai, has inaugurated the 200 MW second phase of the Mohammed bin Rashid Al Maktoum Solar Park. The project reflects a new era in the excellence and leadership of the UAE, as it increases the share of clean and renewable energy. The inauguration coincided with the International Day of Happiness.

The 200MW second phase 2 of the solar park is the largest and first project of its kind in the region’s solar energy sector, based on the IPP model. The project was implemented through a partnership with the consortium led by ACWA Power from Saudi Arabia and Spain’s TSK, with an investment of AED 1.2 billion. The project will provide clean energy to 50,000 residences in the Emirate, reducing 214,000 tonnes of carbon emissions annually. This phase installed 2.3 million photovoltaic (PV) solar panels over an area of 4.5 square kilometers. The efforts of Shuaa Energy 1, which was established by DEWA and the consortium led by ACWA Power and TSK, have been vital in completing the work efficiently and professionally, with 1.5 million Safe Man Hours without Lost Time Injury. (DEWA 26.03)

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4.6 Morocco’s King Mohammed VI Launches Final Stage of World’s Largest Solar Energy Complex

King Mohammed VI launched (in Ouarzazate province) Noor Ouarzazate IV power station, the final stage of the world’s largest solar energy complex with a total capacity of 582 MW. This new project, which will be developed on an area of 137 ha using photovoltaic (PV) technology, shows King Mohammed VI’s determination to optimize the exploitation of Morocco’s natural resources, preserve its environment, promote its economic and social development and to ensure the future of upcoming generations. It reflects the special interest given by the King to energy projects, a real lever for development, and his desire to further promote Morocco’s expertise in a sector at the cutting edge of technology benefiting both Morocco and the African continent as a whole.

The construction of Noor Ouarzazate IV power station is in line with Morocco’s international commitments to reduce greenhouse gas emissions and its major goal of increasing the share of renewable energies in the national electricity mix to 52% by 2030. Worth over MAD 750 million, Noor Ouarzazate IV has a capacity of 72 MW. It uses photovoltaic technology which makes it possible to produce electrical energy directly from the solar radiation captured by semi-conductor cells.

Noor Ouarzazate IV power station, scheduled to start operating in Q1/18, will be developed as part of a partnership involving the National Agency for Solar Energy (Masen), a central player in renewable energies in Morocco, and a consortium of private operators led by the group ACWA POWER. German Development Bank KfW Bankengruppe, contributed MAD 659 million to the financing of the project. The second and third power stations of Noor solar complex (Noor II and Noor III) were launched by the Sovereign on 4 February 2016. Their completion rate reached 76% and 74% respectively. With a capacity of 200 MW, Noor II plant is developed on a maximum area of 680 ha, based on solar thermal technology, with cylindrical parabolic trough. Noor III plant is built on an area of 750 ha using a solar power tower (150 MW).

Noor Ouarzazate II, III and IV, combined with Noor Ouarzazate I (160 MW) that started operating in February 2016, make Noor Ouarzazate the largest multi-technology solar production site in the world, with a total investment of MAD 24 billion. (MWN 01.04)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanese Average Inflation Rose 4.6% Y-o-Y by February, Lifted by Oil Prices Recovery

Lebanon’s average consumer price index (CPI) rose 4.6% y-o-y to reach 98.73 by February 2016 as 12 out of its 13 components posted yearly upturns. Inflation during the first two months of the year was mostly driven by utilities and transportation sub-indices that climbed by respectively 8.4% and 8.1%. In fact, the recovery of global oil prices led to the increasing prices of transportation, which constitutes 13.10% of the CPI, and the utilities sub-index which encompasses water, electricity, gas and other fuels (grasping a weight of 28.4% of the CPI). In addition, Food and non-alcoholic beverages added a marginal 0.6% y-o-y over the first two months of 2017, while clothing and footwear substantially rose by an average of 10.3% over the same period. On a different note, the health sub-index was the only component to show contracting prices after recording a 1.2% yearly slip by February 2017.

On a monthly basis, the consumer price index inched 0.6% up in February 2017 from the previous month. In details, the 4.5% increase of the clothing and footwear sub index was the most highlighted in February compared to minimal upticks or stagnating prices in other CPI components. In the coming period, consumer prices may witness further increases following the introduction of new taxes to fund the awaited new salary hike for civil servants and public and private teachers. (CAS 21.03)

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5.2 Lebanon’s Tourism Sector Posted a 12.25% Improvement by February

According to the Ministry of Tourism, the number of tourists visiting Lebanon during the first two months of 2017 rose by 12.25% year-on-year (y-o-y), where the total number of tourists went up from 191,808 to 215,309. Arab tourists, representing 40.21% of all tourists, showed a 26.96% increase to 86,565 by February. This increase is heavily influenced by the number of Iraqi incomers, which surged 36.49%, to 37,237. Moreover, the number of tourists from Jordan and Egypt increased 20.11% and 5.33%, respectively. In contrast, the number of incomers from the United Arab Emirates dropped from 948 to 329. As for the number of European tourists that constituted 37.59% of the total, it rose 33.91% y-o-y to 80,930 by February 2017. This can be attributed mainly to the numbers of French, British and German tourists which respectively grew by 40%, 33% and 39% to reach 22,307, 9,464 and 9,627. The numbers of American and Asian travelers rose by 5.3% and 7.5% respectively y-o-y to 28,710 and 14,013. In February alone, tourist numbers reflected a healthy 13.1% progress compared to the same period in 2016. (MoT 03.04)

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5.3 Egypt & Jordan Sign Gas Supply Deals

Egypt’s Minister of Petroleum El-Molla has signed four gas deals with Jordanian officials on the sidelines of the third Jordan International Energy Summit held on 3 April in Amman. The deals included a memo to import and export natural and liquefied gas, in addition to other deals brokered by the Jordanian-Egyptian Fajr Company for Natural Gas Transmission and Supply. During the summit, El-Molla highlighted the latest gas deals signed by Cairo with Iraq and Cyprus, as well as Egypt’s recently discovered Zohr natural gas field, the largest ever found in the Mediterranean. The field was discovered in August 2015 by Italian oil company Eni, with an estimated 850 billion cubic meters of gas. The first production from the gas field is scheduled by the end of 2017. Egypt’s production of natural gas is currently estimated at around 4.4 billion cubic feet per day (bcfd), and is expected to increase by 1.5 bcfd by the end of 2017. (Ahram 04.04)

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5.4 Jordan & UNICEF Sign JD1.1 Million Protocol

Jordanian Minister of Planning and International Cooperation Fakhouri signed an agreement on 28 March with the United Nations Children’s Fund (UNICEF) Representative in Jordan Robert Jenkins under which the UN body will extend JOD1.1 million to support the National Aid Fund (NAF). The protocol aims to fund studies, build the capacities of the NAF and also establish a program for direct grants to the most vulnerable Jordanian children. The project would provide NAF with JOD722.000 in direct support to 2,000 marginalized Jordanian children on a monthly basis for 12 months. Moreover, it will fund activities to boost the capabilities of the NAF and its infrastructure as well as update its IT and archiving systems. The protocol is part of the ministry’s efforts to achieve comprehensive and sustainable development around the Kingdom and improve economic, social and service conditions, in addition to contributing to national efforts to find solutions to the problems of poverty and unemployment. (Petra 28.03)

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►►Arabian Gulf

5.5 Qatar’s Foreign Trade Surplus Soars 74% in February

Qatar’s February trade surplus increased by 74% from a year earlier, according to data released by the country’s Ministry of Development, Planning and Statistics. The country’s surplus rose to QR12.3 billion ($3.38 billion) in January from QR10.8 billion in December and up from QR7 billion in January 2016. Exports of petroleum gases and other gaseous hydrocarbons climbed 18.9% to QR12.20 billion.

Pressure on Qatar’s state finances is easing because of higher oil prices and the government may not need to issue an international bond this year, but it is still seeking ways to save money, finance minister Ali Sherif al-Emadi said last month. Qatar’s 2017 budget, announced in mid-December, projected its deficit would shrink to QR28.3 billion riyals from QR46.5 billion planned for 2016. Since the 2017 budget assumed an average oil price of about $45, the deficit is now close to disappearing. The International Monetary Fund (IMF) has forecast that Qatar’s real GDP growth is expected to reach 3.4% in 2017 from about 2.7% in 2016 as the country effectively adjusts to the new reality of sustained lower energy prices. (AB 27.03)

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5.6 UAE Health Care Market to Grow to Dh103 Billion by 2021

A new study by research company Mena Research Partners (MRP) has suggested that the UAE’s health care sector will grow by 60% in the next five years.

The move towards quality healthcare, increase in demand for preventive care and digital health will contribute to a massive 60% growth of the healthcare sector in the UAE in five years. The current AED 64 billion ($17 billion) market will surge to over AED 103 billion ($28 billion) in 2021, driven by a shift in demand for preventive care, a rise in specialist medical services, more efficiently integrated healthcare solutions, as well as the high growth potential within specific medical device and pharmaceutical sub-sectors. Medical tourism and mandatory insurance will also contribute to the sector’s growth.

The country aims to achieve a world-class healthcare system and become among the leading countries, not only regionally, but in the world in terms of quality of healthcare, according to the UAE Vision 2021 National Agenda. To achieve that, the National Agenda emphasizes the importance of preventive medicine and seeks to reduce lifestyle-related diseases to ensure a longer, healthier life for citizens. In fact, the healthcare sector in the UAE is witnessing structural shifts and, as a result, is changing fast to adapt to the demands of a younger, more health-conscious population asking for preventive care rather than curative care and, along the way, is more engaged in its own well-being. Being itself a digitally savvy population that enjoys one of the highest digital connectivity in the world, the new generation is redrawing the blueprints of the future of healthcare in the UAE. It is looking for a more personalized and specialist healthcare. While doing this, it is moving more towards interaction and self-management which is aided by the ever-growing digital technology in the sector.

The findings of the report also reveal that, while the healthcare market has been growing at over 10% year on year since 2015 and is expected to continue in this trajectory, there will be an upsurge of 15 to 25% in some subsectors across the three pillars of the market: a) healthcare providers-currently accounting for at 76% of the total market, b) medical devices-estimated at 6%) and c) pharmaceuticals and life sciences- estimated at 18%. In its report, MRP sized in excess of 20 sub-segments and identified a number of niche areas that health providers need to cater over the next few years. The research also identifies key mega trends shaping demand for and delivery of healthcare as well as niche trends influencing medical provider models. (MRP 28.03)

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5.7 Saudi Arabia’s GDP Growth Rises in Fourth Quarter

Saudi Arabia’s GDP, adjusted for inflation, grew 1.2% from a year earlier in the fourth quarter of 2016. The rate of growth increased compared with 0.9% in the third quarter, which was the slowest rate in over three years, according to preliminary data from the country’s Central Department of Statistics showed. They also showed that the Q4 GDP growth was well below the 4.3% growth registered in Q4/15. The kingdom’s oil sector grew by 4% in the final quarter of last year compared to non-oil sector growth of just 0.4%.

Saudi Arabia has seen its first deflation for more than a decade early this year, although the negative growth eased in February compared to January and is expected to be short-lived. Earlier this month, credit rating agency Moody’s Investors Service raised its outlook for Saudi Arabia’s banking system to “stable” from “negative”, in a fresh sign that global investor confidence in the kingdom is recovering after plunging due to low oil prices. (AB 01.04)

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►►North Africa

5.8 Egypt to Allocate 1% of GDP for Social Protection Programs in 2017/18

Egypt’s finance ministry plans to allocate a part of the savings made from the government’s ongoing economic reform plan to support social protection programs, Minister of Finance Amr El-Garhy announced. El-Garhy said that the allocations would represent 1% of Gross Domestic Product (GDP). Egypt’s GDP stood at EGP 2.7 trillion in the fiscal year 2015/16. The country started a fiscal reform program in July 2014 in an attempt to curb a growing state budget deficit, which registered 12.2% of GDP in fiscal year 2015/16, through cutting subsidies and introducing new taxes.

El-Garhy said the reforms that would be implemented in the coming fiscal year 2017/18 would include more spending on social security pensions as well as healthcare, medication, low-cost housing, milk for infants and technical training for youth. Egypt’s total subsidy bill in the coming fiscal year (2017/18) is estimated at EGP 385 billion, up from EGP 285 billion in the current fiscal year. El-Garhy said that the bill includes food subsidies and social safety network initiatives Takaful and Karama. The Takaful and Karama program, established by the government in early 2015, is a national social safety net program aimed at protecting the poor through income support. (Ahram Online 26.03)

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5.9 Egyptian ICT Minister Heads Mission to US Seeking Strategic Partnerships

Egyptian Minister of Communications and Information Technology Yasser ElKady traveled to the United States on an official mission (13-23 March) to the West Coast and New York. The visit aimed to promote investments in the ICT sector and develop Egypt-US strategic partnerships in advanced industries and technologies. The mission was in line with Egypt’s President’s key assignments to the sector, which includes establishing a promising industry in the electronics field within three years; creating a base of specialists—with 16,000 trainees initially—in advanced technological areas; and creating knowledge environments across Egypt through technology parks that will, in turn, promote the ICT Egyptian industry and create purely Egyptian knowledge and high-quality products competing globally.

The mission agenda encompasses holding a number of meetings with executive officials of global multinationals in the technology development and information systems including Oracle, SAP, General Electric, Dell, Cisco, HP, Synopsys, Mentor Graphics, Honeywell and Infor. This is in addition to companies specialized in the field of big data management such as Cloudera; e-payments services companies such as Visa International and MasterCard; and major international companies in the field of call centers and outsourcing such as Teleperformance and Sutherland. The meetings also embrace other companies including research and advisory firms such as IDC and A.T. Kearney. The agenda comprises visits to some academic institutions, aiming to discuss cooperation in the field of technological innovation, entrepreneurship and incubation of startups.

The Egyptian ICT sector attracts international technology companies, where many of them selects Egypt as a destination for developing products and establishing international technical support centers. Providing investment advantages and incentives, and competent human calibers capable of competing globally are among the factors for which Egypt is selected as a favored destination. (MCIT 10.03)

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5.10 Egypt’s Foreign Currency Records its Highest Level Since 2011

Egypt’s balance of foreign currency reserves recorded its highest level since March 2011 reaching about $28.5 billion, while the volume of cash inflows reached more than $17 billion since that date, which improved the ability of banks to meet all customer and government requests for foreign exchange and its ability to repayment some debts, as well as the provision of about $23 billion to finance foreign trade deals, said CBE Governor Tareq Amer.

Prime Minister Ismail visited the Central Bank of Egypt (CBE) headquarters and held a meeting with Amer and the Bank’s officials. Amer and other Bank officials gave a presentation to Ismail about the most important developments in the foreign exchange market since the flotation of the pound on 3 November 2016. The success of the flotation measures was reflected in the improvement in the stock market’s performance, which reached its highest level ever after a six-year suspension — a clear indication of foreign investors’ increased confidence in the integrity of the banking reform program and in the ability of Egypt’s economy to achieve high and sustainable growth rates, Amer added.

The CBE will soon issue its first report on monetary policy, including the general and basic inflation rate, said Amer. The CBE is keen to promote transparency, enhance communication with all institutions and citizens and address internal and external public opinion, the CBE governor said. (Al-Masry Al-Youm 03.04)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkey’s Annual Inflation Rises To 11.3% In March – Highest Since 2008

Turkey’s annual inflation hit its highest in more than nine years in March, surging 11.29%, as the prices of food, transportation and alcohol all showed double-digit increases, TUIK showed on 3 April. Consumer prices rose 1.02% since the previous month.

Annual inflation was at its highest since October 2008. The highest annual increase was 21.71% in alcoholic beverages and tobacco, according to TUIK data. It was followed by transportation with 17.69% of increase, health with 13.28%, food and non-alcoholic beverages with 12.53% and miscellaneous goods and services with 12.51%. The highest monthly increase was 1.99% in clothing and footwear. In March 2017, the indices rose for food and non-alcoholic beverages by 1.93%, for health by 1.88%, for recreation and culture by 1.55% and for housing by 1%.

Turkey’s annual consumer price inflation hit double digits in February for the first time since April 2012. Inflation has been stoked by chronic weakness in Turkey’s lira currency, which has been hit by political concerns and worries about the direction of monetary policy, according to analysts. The Central Bank has resorted to using unorthodox methods to tighten, fueling investor concern it is wary of an outright rate hike. After its last monetary policy committee meeting, the bank said in a statement that it would continue to use all available instruments in pursuit of the price stability objective. Producer prices rose 16.09% year-on-year and 1.04% month-on-month, the data also showed. (TUIK 03.04)

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6.2 Food Prices Key in Turkey’s Skyrocketing Annual Inflation

The Turkish Central Bank has stated that the rise in food prices was the main factor behind the historic rise in annual inflation in March, adding that some increases were seen in furniture and home appliance prices despite “temporary tax cuts.” Turkey’s annual inflation hit its highest in more than nine years in March, surging to 11.29% as the prices of food, transportation and alcohol all showed double-digit increases, official data showed on 3 April.

In its latest price developments note on 4 April, the Central Bank said annual food inflation was the main driver behind the rise in Turkey’s consumer price index, partly due to last year’s base effect. The delayed effect of the Turkish Lira’s depreciation also played a key role in rising main goods prices. While the highest monthly increase was 1.99% in clothing and footwear, the indices rose for food and non-alcoholic beverages by 1.93%. Annual inflation in the latter group rose to 12.5% with a 3.8% year-on-year increase, said the Central Bank report.

The Central Bank said cost-push pressures and the volatility in food prices in recent months led to a sharp increase in inflation. The sharp rise in inflation is expected to continue in the short term due to lagged pass-through and the base effect in unprocessed food prices.

Meanwhile, there continues to be a significant difference between food producer and consumer prices. According to the latest price report by Turkish Industrialists Association (TZOB), there was a difference of up to 485.24% in the producer and consumer prices of apples in March. The difference was 451.11% in dried onions and 398.33% in dried apricots. The TZOB and government officials have repeatedly accused speculative middlemen of hiking consumer prices in this group.

The highest annual increase was 21.71% in alcoholic beverages and tobacco through March, according to TUIK data. It was followed by transportation with a 17.69% increase, health with a 13.28% increase, food and non-alcoholic beverages with a 12.53% increase and miscellaneous goods and services with a 12.51% increase. Turkey also saw a rise in furniture and home appliances prices in March despite tax cuts in these sectors, according to Central Bank data. (TDN 04.04)

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6.3 Cyprus’ Hydrocarbon Exploration Negotiations Successfully Concluded

Cyprus has successfully completed negotiations with the selected bidders for the offshore hydrocarbon exploration licenses in the island’s exclusive economic zone, Energy Minister Lakkotrypis said on 26 March. The applicants selected were a consortium of ENI and Total for Block 6, Eni for Block 8, and a consortium consisting of ExxonMobil and Qatar Petroleum for Block 10. Lakkotrypis said this was a very important development for Cyprus and the Eastern Mediterranean in general because it reinforced the prospect of hydrocarbons in the area, especially if one looked at the research projects that have been proposed and agreed. The contracts agreed reflect this expectation and show that companies believe there are prospects, he said. He said the companies were quite optimistic as to the prospects of the Eastern Mediterranean, and more specifically the Cyprus EEZ. (CNA 07.03)

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6.4 Greece & EU/IMF Lenders Said to Agree on Key Labor Reforms and Pension Cuts

Greece has agreed with its lenders on key labor reforms, spending cuts and energy issues, moving closer to clinching a deal before a meeting of Eurozone finance ministers on 7 April. Negotiations between Athens, the European Union and the IMF – which has yet to decide if it will participate in Greece’s current bailout – have dragged on for months, rekindling fears of a new crisis in Europe. The latest progress is expected to help allow the return of EU and IMF mission chiefs to Athens in the coming days to finalize details with Greek finance and labor ministers before the Eurogroup meeting in Malta. Talks are now held through teleconferences.

The main focus of the talks has been pension cuts, energy and labor reforms. Athens agreed last month to adopt more measures, worth 2% of GDP, to help convince the IMF to participate in the bailout, which is sought by EU countries including Germany. Greece will cut pensions by up to 1% of GDP in 2019, two officials told Reuters on condition of anonymity. Lowering the tax-free threshold to save roughly another 1% of GDP has also been agreed, an EU official said. Greece is likely to start legislating for the reforms agreed once the deal is sealed.

Greece hopes that wrapping up the second review of bailout progress will pave the way for crucial talks on post-bailout debt relief. Finance Minister Tsakalotos has said debt restructuring would help the country return to markets before its bailout expires. Earlier, a spokesman for the European Stability Mechanism, the Eurozone’s bailout fund, said that possible additional debt relief measures for Greece could be decided only at the end of the bailout program. (Reuters 29.03)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Passover Will Be Celebrated Starting 10 April

On Monday night, 10 April, Israel and world Jewry will begin the week-long celebration of the Passover (Pesach) holiday. Passover celebrates the liberation of the Jewish People from slavery in Egypt by the hand of G-d. It is central to Jewish identity and Jewish practice, since the Exodus and life in the wilderness led to the true birth of the Jews as a distinct entity. Jacob and Josef came to Egypt numbering 70 souls and Moses led 600,000 out after the defeat of Pharaoh. Probably the most significant observance related to Pesach involves the removal of chametz (or leaven) from Jewish homes and businesses. This commemorates the fact that the Jews leaving Egypt were in a hurry and did not have time to let their bread rise. Even converts to Judaism relate to the Exodus as their own ancestors as having left Egypt. It is also a symbolic way of removing the “puffiness” (arrogance, pride) from our souls. Instead, special non-leavened bread called matzah is consumed, among a myriad of other special holiday dishes.

On the first night of Pesach (first two nights for Jews outside of Israel), there is a special family meal filled with ritual to remind Jews of the significance of the holiday. This meal is called a seder, from a Hebrew root word meaning “order,” because there is a specific set of information that must be discussed in a specific order. The seder is full of symbolism, all pointing to one salient point: that Jews all remember that G-d took us out of slavery in Egypt to freedom to observe his Torah. Pesach lasts for seven days (eight days outside of Israel). The first and last days of the holiday (first two and last two outside of Israel) are days on which no work is permitted. Work is permitted on the intermediate days. These intermediate days on which work is permitted are referred to as Chol Ha-Mo’ed, as are the intermediate days of Sukkot. Though work is permitted, many take vacations and a full work environment returns only after the holiday. Passover ends on 17 April in Israel, 18 April in the Diaspora.

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7.2 Bank of Israel Prepares to Issue New Banknotes Featuring Women

On 28 March, the Bank of Israel revealed that the new 20 and 100 shekel bills, which feature the portraits of prominent Hebrew-language female poets, have reached the final design stages. The NIS 20 bill is red and will be imprinted with the image of Rachel Bluwstein Sela — commonly known as Rachel the Poetess — and the NIS 100 bill is orange and will feature the portrait of Leah Goldberg, one of Israel’s most beloved poets and writers. Originally planned to begin circulation in 2016, the new bank notes will join the redesigned NIS 50 and NIS 200 bills, released in 2014 and 2015, which feature the images of poets Shaul Tchernichovsky and Nathan Alterman. Like the 50 and 200, the new notes will incorporate advanced technology. The images imprinted on all the new bills were decided in 2012 by former governor of the Bank of Israel Stanley Fischer.

Each bill is to be distinctive in color and length to aid the blind and those with impaired vision in identifying the banknote values better. Though the portrait of former prime minister Golda Meir, Israel’s first and only female prime minister, was featured on the NIS 10 bill, which was issued in 1985 and circulated until the 1990s, there have been no images of women featured on Israeli currency since. Additional details regarding the launch date of the two remaining denominations, the security features embedded in them, and timetables for the replacement of existing banknotes with the new banknotes will be provided by the Bank of Israel in the near future. The printing work of the new denominations will cost the state NIS 716 million (about $198 million). (Various 29.03)

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7.3 Nicaragua Restores Diplomatic Ties to Israel After 2010 Break

Nicaragua and Israel have decided to reestablish diplomatic relations, effective immediately, after they were suspended in 2010. Nicaragua’s Foreign Ministry said that the two governments place great importance on the renewal of relations with the aim of promoting joint activity for the welfare of both peoples and to contribute to the fight for peace in the world. Nicaraguan President Ortega suspended diplomatic ties with Israel in 2010 in protest after Israeli commandos stopped a flotilla trying to infiltrate into Gaza. In 2012, Ortega, a leftist Cold War antagonist of the United States, urged Israel to destroy its nuclear weapons as he hosted then-Iranian President Mahmoud Ahmadinejad in Managua. (Various 28.03)

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*REGIONAL:

7.4 Rising Sea Level to Swamp Land in Three UAE Emirates

A one meter or more increase in sea level is likely to inundate some parts of Ajman, Sharjah and Umm Al Quwain by end of the century, according to a new report. In its “UAE Climate Change Risks & Resilience” report, Emirates Wildlife Society in association with World Wide Fund (EWS-WWF) said coastal cities are likely to be at increasing risk from sea level rise, storm surges and associated flooding. Coastal areas house nearly 85% of the population of the UAE as well as many prestigious properties including hotels and resorts. Fujairah and the East coast will be more vulnerable to cyclones, storm surge than the West coast (where most industrial facilities are) and locations inside the Gulf, it added.

According to the report, Dubai’s urban area has almost tripled in less than two decades (1984-2003), with an artificial expansion of the city surface thanks to the Palm Islands and the World archipelago projects, making the share of built environment potentially exposed to inundation significant. Similarly, Abu Dhabi is considered vulnerable to SLR as the city’s major developments and industrial infrastructure are built along the emirate’s islands. There is also a risk that further urban development could occur close to natural flood plains and wadis, which are areas of natural water collection, as it is happening in many countries in the region, EWS-WWF said. (AB 28.03)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Israel Looks to Leverage Tech in $50 Billion Medical Marijuana Market

Israel, a leader in marijuana research and health technology, is attracting international investment as it tries to position itself as a cutting-edge exporter in the rapidly-growing market for medical-grade cannabis. With estimates that the global market for medical marijuana could reach $50 billion by 2025, the Israeli government is set to allow the local industry to start exporting and projects annual revenues in the hundreds of millions of dollars. The strategy is to create medical-grade cannabis with quality and efficacy ensured along the entire supply chain from cultivation to manufacture and distribution.

In contrast to the United States, which is currently the biggest legal marijuana market, authorities in Israel are liberal in their support of research and development. Licensed marijuana growers work with scientific institutions in clinical trials towards the development of cannabis strains that treat a variety of illnesses and disorders. There are about 120 studies ongoing in Israel, including clinical trials looking at the effects of cannabis on autism, epilepsy, psoriasis and tinnitus. The health ministry wants to share its acquired knowledge and train doctors from abroad. Talks are underway with Australia, Germany, Brazil and others.

Jerusalem gave the go-ahead in February to legislation that would allow export. More than 500 Israeli companies have applied for licenses to grow, manufacture and export cannabis products, according to government officials, and some are already capitalizing on the booming US market. In the past year, American and other firms have invested about $100 million to license Israeli medical marijuana patents, cannabis agro-tech startups and firms developing delivery devices such as inhalers. Tikun Olam, Israel’s largest grower, has partnered with US companies to cultivate marijuana in four US states. (Reuters 23.03)

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8.2 Marrone Bio Innovations & Evogene Advance Novel Bacteria into Insecticidal Phase

Davis, California’s Marrone Bio Innovations, a leading global provider of bio-based pest management and plant health products, and Evogene announced today that MBI will advance certain novel bacteria and Evogene-identified related proteins into MBI’s bio-insecticide product development pipeline under their previously announced multi-year collaboration for the discovery and development of novel insect control solutions. The collaboration, initiated in July 2014, and supported by funding from the Binational Industrial Research and Development (BIRD) Foundation, aims to bring to market new insect control solutions – both seed traits and bio-insecticides – through leveraging the expertise and distinct assets and capabilities of each party. The parties have agreed to share revenues from any products that may result from this collaboration.

Utilizing its proprietary computational platform BiomeMiner and other predictive discovery capabilities, Evogene identified candidate proteins from tens of thousands of proteins within selected insecticidal strains from MBI’s extensive and proprietary bacterial collection. The proteins’ bioactivity for pest control was then validated in insect assays, with the result that a subset of the candidate proteins demonstrated positive insecticidal results. The advancement represents the completion of the collaboration’s discovery phase and a shift by the companies towards product development. The bacteria that were selected to advance into MBI’s pipeline contain candidate proteins with positive insecticidal properties, while in parallel Evogene continues its product development efforts to develop seed trait solutions based on such proteins.

Rehovot’s Evogene is a leading biotechnology company for the improvement of crop productivity. The Company has developed a proprietary innovative technology platform, leveraging scientific understanding & computational technologies to harness Ag ‘Big Data’ for developing improved seed traits (via: GM and non-GM approaches), as well as innovative ag-chemical and novel ag-biological products. Evogene has strategic collaborations with world-leading agricultural companies like: BASF, Bayer, DuPont, Monsanto and Syngenta, focusing on innovative crop enhancement and crop protection solutions. (Evogene 28.03)

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8.3 Teva Receives FDA Approval of AUSTEDO Tablets for the Treatment of Huntington’s Disease Chorea

Teva Pharmaceutical Industries announced that the U.S. Food and Drug Administration (FDA) has approved AUSTEDO (deutetrabenazine) tablets for the treatment of chorea associated with Huntington’s disease (HD). Previously referred to by the developmental name SD-809, AUSTEDOTM is the first deuterated product approved by the FDA and only the second product approved in HD. The product was previously granted Orphan Drug Designation by the FDA.

A rare and fatal neurodegenerative disorder, HD affects more than 35,000 people in the United States. Chorea – involuntary, random and sudden, twisting and/or writhing movements – is one of the most striking physical manifestations of this disease and occurs in approximately 90% of patients. The FDA approval was based on results from a Phase III randomized, placebo-controlled study to assess the safety and efficacy of AUSTEDO in reducing chorea in patients with HD (First-HD).

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8.4 Emosis, BioRap & Rambam MedTech Collaborate on Novel Hypercoagulation Diagnostics Kit

French diagnostics company Emosis, BioRap Technologies and Rambam MedTech, the technology transfer companies of the Rappaport Institute at the Technion – Israel Institute of Technology and Rambam Healthcare Campus, have entered into an exclusive license agreement to develop and commercialize hypercoagulation kit. Prof. Benjamin Brenner and Prof. Anat Aharon from the Rappaport Institute and Rambam Healthcare Campus developed a proprietary technology enabling measurement of micro-particles based biomarker for identifying and monitoring high risk patients who should be treated for coagulation complications. Emosis will use its know-how and IP to develop the biomarker as a commercial kit while BioRap Technologies and Rambam MedTech will perform some of the supporting research.

Haifa’s Rambam MedTech is the technology transfer company for Rambam Healthcare Campus, and serves as the industrial liaison to bring medical innovations to market. Haifa’s BioRap is the Rappaport Institute’s technology transfer company. The company provides the legal framework for the inventions and innovations of RI researchers, protecting discoveries and innovations with patents, and working with industry to bring scientific discovery to the market. (Emosis, BioRap and Rambam MedTech 04.04)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Variscite’s DART-6UL Product Line Enhanced with 696MHz Processor & Low-Power i.MX 6ULL

Globally recognized SoM design and manufacture company, Variscite, announces extensions to its popular DART-6UL platform this month. New configurations will support 696MHz Cortex-A7 speed grade and the low-power i.MX 6ULL variants. Measuring only 25 mm x 50 mm, this highly optimized cost and power platform is commonly used in fast emerging applications, such as the Internet-of-Things. The DART-6UL accommodates the rapidly growing network of connected objects from smart homes, to wearables and white goods, as well as many other portable and battery operated embedded systems. Introducing the enhanced 696MHz processor speed grade and the 6ULL variants enables Variscite to further optimize its SoM offering to customers in various embedded segments. A wide range of interfaces, fully certified WiFi/BT connectivity, low size and low power can all be satisfied within a very attractive price range – starting from only $24.

Lod’s Variscite is a leading System on Modules (SoM) and Single-Board-Computer (SBC) design and manufacture company. A trusted provider of development and production services for a variety of embedded platforms, Variscite transforms clients’ visions into successful products. (Variscite 28.03)

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9.2 FST to Reveal New Generation of Biometrics-Based Visual Identification

FST Biometrics, the leading visual identification solutions provider, revealed strategic elements of IMID Access 4.0, a new generation of biometric visual identification solutions, incorporating deep learning to enhance flexibility, accuracy, fraud prevention and user experience. IMID Access 4.0, commercially available this month, uses a fusion of biometrics-based technologies for a robust list of identification-oriented applications, including access control, employee time-and-attendance and retail consumer experience. Utilizing FST’s visual identification technology, IMID Access can be implemented in low light environments, is equipped to overcome fraud attempts and employs long-term enrollment.

Rishon LeTzion’s FST Biometrics is the leading visual identification solutions provider. FST’s proprietary algorithm is at the core of the company’s In-Motion Identification (IMID) solutions, which offer speed and accuracy for a highly convenient user experience. IMID’s adaptability makes it the ideal solution for a diverse range of applications, and its flexibility ensures lower TCO for customers. IMID solutions are a fusion of technologies that include facial recognition and behavioral biometrics. (FST Biometrics 28.03)

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9.3 Sodyo Introduces FarQR – The Next Generation QR Code

Binyamina’s Sodyo announced the release of a new groundbreaking QR Code – FarQR – solution for broadcasters that is poised to forever change the TV advertising business model. Sodyo’s disruptive technology allows viewers to point their smartphone at the TV screen and scan a FarQR Code that broadcasters place within the content or commercials.

FarQR Codes resolve the distance issue by allowing a detection range of 100 times the size of the code. QR Codes currently have a detection range of 10 times the size of the code. FarQR Codes are a perfect fit for television and outdoor digital. Their current focus is television, because of the obvious need and benefit for TV broadcasters. Broadcasters place a FarQR Code on a commercial. The viewer points their phone to the screen and interactive content from the broadcaster instantly appears on the phone from any viewing distance. FarQR Codes allow interaction between the two most important screens in our lives – TV and smartphone. Thanks to FarQR Codes, broadcasters can enrich content, engage and captivate the audience in ways they never imagined possible. (Sodyo 28.03)

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9.4 PointGrab Partners with Serraview, Taking Aim at $43 Billion Smart Office Market

PointGrab, developer of the CogniPoint edge-analytics smart sensing solution, announced a partnership with New York’s Serraview, a leading provider of workplace management and optimization software. By integrating CogniPoint with Serraview’s cloud-based space planning software, the companies will help organizations transform their workplaces by delivering real-time space utilization intelligence, resulting in less wasted space, increased employee productivity and better talent attraction. The integration of CogniPoint into Serraview’s smart office environments solution allows organizations to collect data crucial to tracking and understanding how their employees work best, such as occupants’ presence, count and position in the workspace. By utilizing advanced deep-learning neural networks technology, CogniPoint delivers the actionable analytics necessary to optimize space management, energy savings and business intelligence.

Serraview’s smart office environment solution fosters a collaborative environment in a connected workplace. Timely and accurate utilization analysis aggregated from multiple data sources helps organizations make the best use of smart office environments and their entire workplace portfolio. Serraview’s intelligent wayfinding services remove the anxiety around non-assigned seating, helping employees easily find the right workspace and each other.

Hod HaSharon’s PointGrab is a leading machine learning and computer vision company that provides smart sensing solution to the building automation industry. The company applies its superior deep-learning technology to the building automation ecosystem, where opportunities to gather data are abundant, but efficient, real-time analytics are lacking. The company is fast growing and supported by world leading engineering company ABB, the global leader in lighting, Philips Lighting, and sector expert EcoMachines Ventures of London, and applies a joint development and market approach with global leading lighting and engineering companies. (PointGrab 30.03)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Defense Exports Increase by 14% in 2016

On 29 March, figures published by the Ministry of Defense International Defense Cooperation Authority (SIBAT) showed that exports of weapons systems and technologies amounted $6.5 billion in 2016, an $800 million increase (+14%) compared with $5.7 billion in 2015. The Ministry of Defense figures show that 20% of defense exports in 2016 came from companies upgrading airplanes and avionics systems, the leading subsector, followed by observation and optronics, missiles, rockets, and air defense systems.

A breakdown of 2016 defense exports by countries shows clearly that Asian Pacific countries continue to be the main export target for Israeli companies. Exports to these countries totaled $2.6 billion in 2016, $300 more than in 2015. Exports also rose to the European market, North American countries, Latin American countries, and African countries.

Conversely, together with the growing competition in the target markets of Israeli companies, the Ministry of Defense noted the financing difficulties in defense deals in developing countries as one of the challenges facing the local industry. These countries, most of which are in Africa, want to buy weapons systems from Israel, but are having difficulty paying for them. In an attempt to accommodate them, Israeli companies are offering special financing and credit plans to governments making it possible to spread the payments for defense deals over many years. The Ministry of Defense figures show that Israeli defense exports to Africa totaled only $163 million in 2015, but leaped to $275 million in 2016, similar to the export figures for Africa from three years ago.

Some 8% of 2016 defense exports consisted of cyber systems and intelligence and information systems. Defense sources believe that the cyber systems involved were for defense against cyber-attacks, not attack systems. (SIBAT 29.03)

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10.2 Israel’s Building Starts Slightly Down in 2016

According to a release by the Central Bureau of Statistics’, construction starts numbered 52,432 new housing units in 2016, about the same as the 52,790 housing starts in 2015. The figures are preliminary, and may be revised later.

The Bank of Israel recently published a study asserting that Central Bureau of Statistics housing starts figures were inaccurate and that the revision of the initial figures in the ensuing months gave a different picture. The Bank of Israel added that that where publications in recent years were concerned, the figures had been upwardly revised later by 10%. For example, 2015 housing start figures published in early 2016 indicated that there were fewer than 50,000 housing starts. Several months later, however, the figure was upwardly revised to over 52,000. If the bias pointed out by the Bank of Israel Research Department also applies to the current figures, it is possible that housing starts in 2016 were higher than reported by the Central Bureau of Statistics. (Globes 23.03)

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10.3 Bank of Israel Announces Growth Adds NIS 4.5 Billion to Tax Revenues

According to the Bank of Israel Research Department, growth during 2016 contributed some NIS 4.5 billion in surplus tax revenues. The 2016 tax revenue surplus totaled NIS 7.5 billion. The unexpected growth in tax revenues is attributable mostly to imports of consumer goods, mainly cars, which contributed NIS 5 billion to the gap between the original revenue forecast and actual tax revenues. NIS 4.5 billion is attributable to faster than expected growth in nominal GDP. The Bank of Israel believes that revenues from taxes on imported cars and real estate together amounted to 0.5-0.7% of GDP in recent years.

In its report, the Bank of Israel predicts that the 2017 budget deficit will be, lower than the 2.9% of GDP target set in the budget, and will be 2.5% of GDP in 2018, also slightly less than the 2.9% of GDP target for that year. The Bank also warned that the transfer of IDF bases to the Negev is liable to be delayed if no revenue is found to pay for the cost, which will amount to NIS 2.8 billion in 2017 and NIS 2.1 billion in 2018. This project is contingent on revenues from the sale of land by the Israel Land Authority (ILA). (BoI 23.03)

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11: IN DEPTH

11.1 MIDDLE EAST: OPEC’s Rebalancing Act

On 15 March Rabah Arezki and Akito Matsumoto posted in the IMF that in November 2014, the Organization of Petroleum Exporting Countries (OPEC) decided to maintain output despite a perceived global glut of oil. The result was a steep decline in price.

Two years later, on November 30, 2016, the organization took a different tack and committed to a six-month, 1.2 million barrel a day (3.5%) reduction in OPEC crude oil output to 32.5 million barrels per day, effective in January 2017. The result was a small price increase and some price stability.

But the respite may be temporary, because the price increase is likely to stimulate other oil production that can come on line quickly. A recent sharp decline in prices because of higher than expected oil inventories in the United States underlines the temporary nature of the respite the OPEC agreement provides.

The OPEC Agreement

Saudi Arabia, Iraq, the United Arab Emirates and Kuwait are bearing the brunt of the OPEC cuts, which could be extended another six months, while some member countries such as Nigeria and Libya have been exempted. Moreover, non-OPEC producers joined in and agreed to cut about 600,000 barrels a day. Russia committed to cut 300,000 barrels, and 10 other non-OPEC oil producing countries agreed to cut the remaining 300,000 barrels a day.

These agreements appear to have brought supply and demand into balance at a price just above $50 a barrel – largely because of the high degree of compliance by OPEC members with the level of production agreed to last November. OPEC reported that compliance was close to 90% in January—a level that would be in sharp contrast with the typically low adherence by OPEC members to those set in earlier production agreements. There are some reports that compliance is lower, but Saudi Arabia has signaled it will do whatever it takes to enhance the credibility of the agreement and has cut its production more than required.

That said, there are several threats to the effectiveness of the agreement, even in the short term. Some OPEC members (Iraq, Libya and Nigeria) have increased their production since October. Furthermore, not only did non-OPEC producers make smaller reductions than OPEC, they also do not have to reach their production targets as soon. For example, Russia has so far cut only 120,000 of the 300,000 barrels a day it promised. And some analysts believe that some of the targeted reductions are phantom, reflecting a natural decline from historically high production levels rather than active cuts.

Shale Oil Threat

But perhaps the biggest threat to the attempt to achieve price stability comes from shale oil producers. The $6-a-barrel increase in spot oil prices that followed the hints last September of an OPEC production agreement is expected to stimulate investment in oil production in 2017, after significant declines in the previous two years. An increase in shale oil output in the United States could quickly offset much or all of the OPEC and non-OPEC production cuts, because shale wells can begin production within a year of the initial investment, unlike conventional oil investments, which take a number of years to come to fruition.

The shale effect has happened before. In early 2014, even though excess supply was building up, oil prices remained at around $100 a barrel because market participants expected OPEC to cut production to support prices—creating a floor price that stimulated non-OPEC production of not only shale oil, but oil from relatively high-cost sources as well. The floor price did not last long because oversupply built up—and oil prices began to fall, precipitously after the OPEC meeting in November 2014.

Despite OPEC’s greater ability to sustain the recent production agreement, a somewhat similar sequence of events is likely to occur now because of shale oil’s fast responsiveness to price changes. US shale oil investment declined very sharply following the drop in oil prices that started in 2014 and within a few months, production declined. The oil price rebound in 2016 helped boost investment, which was further enhanced by the announcement in September 2016 in Algeria that OPEC intended to cut production levels. By February 2017, US oil investment, as measured by the number of drilling rigs in operation, reached its highest level since November 2015.

Moreover, the shale oil threat is greater because producers in the United States have become more efficient thanks to improved operations and increased selectivity in the wells they exploit. Although the ultimate capacity of shale oil production is uncertain, its behavior is now a central feature of the new oil market and will help lead to more limited and shorter production and price cycles.

Bottom Line

The OPEC agreement has hastened the rebalancing of the oil market—that is, when the supply of oil is in line with demand and accompanied by stable prices. The OPEC production agreement should reduce excess supply—at least temporarily. But the futures market in oil prices suggests that expectations are firmly anchored at around $50 a barrel. The forces unleashed by the OPEC agreement will limit its effectiveness over the next few years. (IMF 15.03)

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11.2 ISRAEL: IMF Executive Board Concludes 2017 Article IV Consultation with Israel

On March 24, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Israel.

Israel is enjoying strong economic growth, estimated at 4% in 2016, supported by strong domestic demand—partly due to high vehicle sales ahead of a tax increase—and an export rebound. Unemployment declined to 4.4% in Q4/16 and wage increases have picked up. Nonetheless, inflation remained below the 1–3% target range of the Bank of Israel (BOI), reflecting external factors and government measures to reduce the cost of living. The BOI has held the policy rate at 0.1% since February 2015 and stated that monetary policy in Israel will remain accommodative for a considerable time. Strong revenues contained the fiscal deficit to 2.1% of GDP in 2016 and the public debt ratio declined to 62% of GDP.

Housing prices rose at an average pace of 7.5% y/y in 2016, even after nearly doubling in real terms since 2007. Housing loans grew at a similar pace, bringing household debt to a still modest 74% of disposable income. Residential investment has risen but completions remain below estimated household formation. Some softening in the housing market emerged recently, with mortgage volumes and housing sales slowing and price declines recorded in late 2016, which may reflect a rise in mortgage interest rates driven by earlier macroprudential measures together with changes in real estate taxes. Israel’s banking system is sound and the authorities are taking a range of measures to promote efficiency and competition in the banking sector, including the separation of credit card companies from the two largest banks.

Israel’s near-term economic outlook is positive. Growth is expected to settle around 3% and inflation is likely to rise gradually, although with significant uncertainty around the timing of such a rise. In the longer term, however, the rising share of Haredi (ultra-orthodox Jews) and the Israeli-Arabs in the working-age population could slow potential growth and raise poverty given the lower labor force participation and average productivity of these groups.

Executive Board Assessment

Executive Directors commended Israel’s sound policies, which have resulted in strong macroeconomic performance. While noting that the near-term outlook remains favorable, Directors also recognized that the country faces important structural challenges from elevated housing prices, high incidence of poverty and inequality, low labor productivity, and low labor force participation in some groups of the population. Against this backdrop, Directors called for continued sound policies that safeguard macroeconomic and financial stability and for deeper structural reforms that help improve potential growth, while reducing poverty and inequality.

Directors noted that the Bank of Israel (BOI) has maintained an appropriately accommodative monetary policy given that inflation remains below target. Most Directors concurred that monetary policy tightening should await clearer evidence of inflation returning toward the target in a lasting manner so as to avoid a premature policy tightening, although a few Directors considered that an earlier tightening might be warranted.

Directors called for reforms that expand housing supply in order to improve affordability—particularly for young and low-income households—and thereby also limit macro-financial risks from this sector. They welcomed recent progress in expediting land planning, and encouraged steps to improve municipal incentives for residential development, increase land privatization and urban renewal, and reduce construction times and costs. Directors considered macroprudential policies to be appropriately tight, and welcomed the BOI’s continued vigilance in relation to macro-financial risks.

Directors agreed that the banking system is sound. They welcomed the authorities’ plans to promote competition and efficiency in the sector, but underscored the importance of safeguarding financial stability when implementing these reforms. Directors noted that the separation of two credit card companies from banks should be supervised closely. They agreed that steps to facilitate new entry into the banking sector should be complemented with a strengthening of the bank resolution and deposit insurance frameworks. Directors also supported the establishment of the Financial Stability Committee to improve regulatory coordination.

Directors noted that the 2017–18 budget allows for higher fiscal deficits, which could reverse the declining trend in the public debt ratio. Against this backdrop, most Directors agreed that currently favorable macroeconomic conditions provide an opportunity to protect fiscal buffers by reducing the central government deficit to around 2% of GDP in coming years, including by saving any revenue over-performance in 2017. A number of Directors considered that the increases in the fiscal deficit and debt ratio could be accommodated without jeopardizing debt sustainability, especially given the need to implement structural reforms and raise essential public investments. More generally, Directors supported additional spending on education, training, and infrastructure, financed by increased central government efficiency, procurement savings and lower tax benefits. Directors welcomed the improvements in the medium-term fiscal framework, especially the recent strengthening of expenditure commitment controls, and emphasized that political ownership of fiscal targets is key to their effectiveness.

Directors stressed that inclusiveness is central to sustaining strong growth and reducing poverty. They recommended expanding well-performing active labor market programs and promoting job creation for communities with lower participation, including through better transport connections and financing access for business development. To more immediately reduce poverty while reinforcing work incentives, Directors generally favored increasing the Earned Income Tax Credit. They also encouraged product market reforms, especially lowering trade barriers and regulatory burdens, so as to increase competition, boost productivity and reduce living costs. (IMF 28.03)

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11.3 ISRAEL: MIXiii BIOMED 2017 – the Numbers Behind the Digital Health Industry in Israel

Start-Up Nation Central released a report highlighting Israel’s digital health industry towards MIXiii BIOMED 2017, Israel’s premier international life science conference and exhibition, 23-25 May 2017, Tel Aviv. The detailed report describes the current status of the digital health industry in Israel, including its subsectors (Health Analytics, Telemedicine, Clinical Workflow, Wearables & Sensors and Personal Health Tools), the number of companies and investments in each subsector, the active incubators and accelerator in the field and more.

The digital health sector worldwide, as well as in Israel, is rapidly transforming passive patients into active healthcare consumers. This global trend of patient empowerment resulted in Personal Health Tools becoming the largest subsector in recent years. Israel’s unique capabilities in information, communication, mobile, and cyber technologies, together with more than 25 years of expertise in implementing health IT, electronic medical records, and business analytics, offers Israel the opportunity to become a truly influential player in the global digital health arena.

According to the report, the Israeli digital health sector grew significantly in 2016, in both funding and number of companies. The total investment in 2016 was $183 million, an increase of almost 30% compared to 2015 ($144 million). Personal Health Tools and Health Analytics accounted for over 70% of deal volume in 2015 and 2016. The Health Analytics subsector, pertaining to companies that collect and analyze data to solve medical problems for businesses and consumers, received the most funding in the past two years: $84 million in 2015 (59% of total investments), and $58 million in 2016 (32% of total investments). Another subsector that received considerable funding in 2016 is Clinical Workflow: $55 million (30% of total investments). This subsector includes companies that enable hospitals, clinics, labs, and other healthcare stakeholders to work more efficiently. Also the Wearables & Sensors subsector received considerable funding in 2016: $46 million (25% of total investments).

According to the report, the number of digital health companies in Israel has risen substantially in recent years, reaching a total of approximately 385 companies. The Personal Health Tools subsector has skyrocketed, becoming the most prominent subsector, with 174 companies (45% of the sector). This subsector includes companies that provide end-users with software-based tools to track, manage, and even treat their own health conditions. The second largest subsector is Health Analytics with 85 companies. These companies play an important role in the ability to predict, prevent, diagnose and treat medical conditions.

As the Israeli digital health sector concentrates on patient empowerment, the borders between subsectors begin to blur, converging under Personal Health Tools. Wearables, sensors, big-data analytics and telemedicine platforms integrate to form powerful B2C and B2B2C healthcare products. The data collected from wearables and sensors is being leveraged more and more by the rapidly-growing market of Health Analytics and Personal Health Tools software. The user is not only tracked and monitored passively, but receives real-time feedback, turning him/her into an active participant in the process. In sum, the various subsectors are becoming more interconnected, centering on individuals and empowering them.

Guy Hilton, Chief Marketing Officer, Start-Up Nation Central, stated, “With one of the most advanced healthcare systems in the world, coupled with extensive experience in the areas of information, communications and cyber, Israel has become in recent years a promising center for technologies that analyze and process medical information. These technologies enable institutions and health consumers to effectively and creatively address substantial challenges, and as such, play a significant role in shaping digital health. Most of the investments in Israel in the past two years have focused on these technologies, while the global industries have focused on other areas. Furthermore, since many of the solutions developed in Israel are based on software and target the end-user, they can be widely implemented. Taking advantage of these trends can position Israel as a meaningful player in the global healthcare industry.”

Ruti Alon, MIXiii BIOMED Co-Chairperson and CEO and Founder, Medstrada, said, “The positive trend of growth in the digital health industry in Israel, as evident from the report, is indeed encouraging. In order to fully realize the potential of the technologies in this field, there is a need to understand global healthcare systems and markets. To this end, the Biomed conference offers a perfect platform for meetings and networking between researchers, physicians, senior executives in hospitals and life science companies, academia and industry from Israel and around the world. Among the co-organizers of the conference are the Cleveland Clinic and the Mayo Clinic, both among the leading medical centers in the US and worldwide. In addition, we are expecting delegations from East Asia and Europe. One of the main subjects this year is aging and age related diseases. Today, healthcare systems focus especially on the area of trauma and sicknesses relating to the elderly. Most of the companies presenting at the conference in general, and specifically in the digital health track, will try to address the needs and solves problems relating to the treatment of this group.”

About MIXiii BIOMED

MIXiii BIOMED is Israel’s leading international life science conference and exhibition, to take place on 23-25 May 2017 at the David InterContinental Hotel in Tel Aviv. For the 16th consecutive year, MIXiii BIOMED is the largest meeting place for healthcare professionals from Israel with international colleagues and partners. As such, this world-class event presents an opportunity for global participants to experience Israel’s life science innovation and vibrant biomedical industry at its best. Previous successful conferences hosted over 6,000 industry players, scientists, engineers and investors including more than 1,000 attendees from over 45 countries. Hundreds of Israeli life science companies will present and exhibit their products, services and technologies allowing for hands-on experience.

In addition to offering a unique opportunity to learn about the latest innovations and technologies of the Israeli life science industry, one of the conference’s main subjects this year is aging and age related diseases. Some of the topics that will be presented are: The impact of aging on population health and world economy; Longevity: genetics and epigenetics; Precision diagnostics and medicine; Regenerative and cell therapy; Robotics and aging; Age related diseases: cancer, neurodegenerative diseases, diabetes, CHF, hypertension and more; Health IT, digital health and cybersecurity; Continuum of care for the elderly patient; From Academia to Industry as related to aging and age related issues.

This year the conference’s group of organizers has been expanded to include various leading international healthcare institutions such as the Cleveland Clinic and the Mayo Clinic, with the objective of enhancing the exposure of the Israeli industry to key global opinion leaders and experts, and allowing local and international attendees to mix and exchange knowledge and ideas. Israel’s leading medical centers, including Tel Aviv Sourasky Medical Center, Sheba Medical Center at Tel HaShomer, Hadassah Medical Center and Rambam Health Care Campus, have also joined the effort. In addition to IATI and Kenes Exhibitions, and with the aim of continuing to increase the flow of investors in the Israeli biomed industry, OurCrowd, the world’s largest crowd funding organization, has been added as a co-organizer. Finally, Start-Up Nation Central, which connects between global entities and companies and Israeli innovation, has also joined the team. (Start-Up Nation Central 27.03)

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11.4 GCC: New Generation Royals and Succession Dynamics in the Gulf States

On 21 March, Kristin Smith Diwan wrote in the Arab Gulf States Institute in Washington that as Arabian Gulf monarchies face a generational transition in leadership, new challenges are emerging. The intensified royal competition comes amid dramatically transformed information environments; societies that are better educated and more engaged in public affairs; and an unstable regional environment that invites intervention. These forces are disrupting the continuity of long-standing norms that regulate ruling family interaction, and testing the assumption that royal competition supports political stability.

This paper examines these contemporary dynamics – new generation competition, the populist temptation, foreign patrons, and the new information environment – illustrating their impact on the ruling houses of the Gulf Arab countries. While drawing upon examples from across the Gulf Cooperation Council states, this study focuses on the two countries where the competition for leadership of the next generation is most intense: Saudi Arabia and Kuwait.

After presenting the formal laws and informal rules that have regulated ruling family interaction and succession, the paper looks at how the transition away from the founders’ generation of royals is unleashing new antagonisms and ambitions. The three countries that made that transition in the 1990s – the United Arab Emirates, Qatar and Bahrain – experienced significant changes in direction, as young royals sought to leave their marks on the direction of both government and foreign policy. The two dynastic monarchies that have not yet made this transition are experiencing intensified competition over the leadership of the next generation. The passage from brothers and cousins in Saudi Arabia and Kuwait to their sons and nephews means a natural culling of ruling lines: a decisive contraction of the ruling elite with stark implications for future material and power prospects. The resulting rivalries are pushing royal contenders to look beyond family coalitions, to social constituencies and external allies, to buttress their claims to the throne.

The alignment of rival princes with social constituencies can provide an avenue for greater public engagement in monarchies. But it can also exacerbate social divisions: sectarianism in Bahrain and Kuwait; urban and tribal divisions in Kuwait; and liberal-Islamist divisions in Saudi Arabia. Royal alignments across the Gulf may also strengthen state ties, such as the close relations between Saudi Arabia and the UAE, and Saudi Arabia and Bahrain, but may backfire if allies are perceived to be choosing sides in a factional battle. Saudi-Qatari relations suffered in the past, and Saudi-Emirati relations could suffer under a Saudi Arabia led by Mohammed bin Nayef al-Saud, the crown prince.

The danger for ruling families reaching beyond the royal house is magnified in an information environment where leaks, intentional or not, can be shared widely. Saudi Arabia and Kuwait have seen royal dissidents bring charges against rivals to public light through traditional and social media. Princes further removed from power – a more common occurrence as royal houses multiply in size – may also be tempted to use publicity to sue for a better position within the ruling family. All of these actions challenge the projection of royal unity and, if taken too far, can diminish the deference shown by the public to the royal family.

Thus far, royal competition has not led to violent struggles for power or permanent dangerous rifts, suggesting that the traditional model of “band-wagoning” with the winner still holds. Nonetheless, the struggle for next generation leadership, even if ultimately resolved, may breed instability in the interim. Kuwait’s parliamentary dysfunction, Bahrain’s failed strategies toward the Shia opposition, Saudi Arabia’s assertive intervention in Yemen and aggressive efforts to reform the kingdom’s economy have at least some roots in factional competition. Increasingly, both Gulf citizens and Gulf allies may need to adjust their expectations and calculations as competing strategies and sometimes ideologies weaken the notion of a unitary leadership. (AGSIW 21.03)

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11.5 GCC: GCC Food & Beverage Market Stays Resilient

The food and beverage (F&B) industry in the GCC region has been flourishing for decades thanks to a significant inflow of tourists, booming young population, large number of expatriate residents, high per capita income, etc. All of these have contributed to the market’s buoyancy and diversification. The region’s hospitality industry, which contributes significantly to the F&B market’s growth, is itself anticipated to grow at a compound annual growth rate (CAGR) of 7.6% from around $25.4 billion in 2015 to $36.7b in 2020, while the annual average growth rate of tourist arrivals is expected to reach 7.8% by 2024.

According to a UN forecast of the projected demographics of the region, by 2020 GCC cities will be hosting 85% of the population. Urban populations in the UAE and Qatar are expected to grow the fastest. A report by Orient Planet Research of the Orient Planet Group, titled “Feeding the Growing Appetite of the GCC F&B Market,” released at the end of last year, forecast that food consumption in the GCC would reach 51.9mn metric tons (MT) by 2019. It is expected to rise at a CAGR of 3.5% between 2014 and 2019.

The per capita food consumption in the region averaged 851.9 kg in 2012 and it is expected to grow at an annual average of 1% to reach 900.1 kg in 2019, with Kuwait recording the highest levels, followed by Saudi Arabia and the UAE, an industry report by UAE’s Al Masah Capital Limited reveals.

Qatar is Outperforming

People in the Gulf like to eat out, F&B advisory firm KPMG research said. Focusing on the UAE alone, the firm said that as much as 67% of survey respondents dined out every weekend, 44% ate lunch outside or relied on takeaways, 66% of the respondents had brunch outside, at least, once a month, while three out four survey respondents ordered a takeaway or had food delivered to them, at least once a week. The statistics for the other GCC member states was pretty much the same.

In terms of food consumption, Qatar is expected to grow the fastest between 2016 to 2019, with a CAGR of 5.5%, followed by the UAE. In its “GCC Food Industry Report 2015,” Alpen Capital forecast that food consumption in Qatar was expected to reach 2.2mn MT in 2019. Business Monitor International (BMI) forecast that up to 2020 food sales in Qatar would grow at a CAGR of 14.4%, especially through premiumization (the move towards more expensive premium products).

For the F&B companies, this is a logical move, especially in Qatar, where 79.2% households have annual net incomes above $25,000, and consumers have a strong propensity for premium branded, innovative food and drink products. That is backed by another survey conducted by American Express Middle East, last year, which found that residents in Qatar spent around $4,074 of their monthly income on high-end products and services.

Additionally, mega events, like FIFA World Cup 2022, are expected to boost an already thriving F&B industry in Qatar, as nearly $40b worth of investments will be mobilized to build tourism infrastructure before 2022. As a result, the hospitality industry in Qatar and the UAE, where the World Expo will take place in 2020, are expected to demonstrate an extremely fast annualized growth of over 10% up to 2020.

Qatar tourism and hotel market overview by Tri Consulting and Hostas hospitality intelligence stated that food and beverage sales generated about 46% of Qatari hospitality industry’s total revenues in 2015, although profits shrank to 42.4% due to lower revenues and higher operating expenses.

The ripple effect of declining hydrocarbon revenues has affected the local F&B industry, with consumers in Qatar becoming more cautious with their money, resulting in a decline in spending. According to official statistical data, spending in restaurants and hotels was down by 3.2% in August last year compared to August 2015. Nevertheless, Qatar is the world’s largest exporter of liquefied natural gas, and therefore it is less exposed to the effects of weaker oil prices than other GCC member states, says BMI, adding that the country will continue to outperform the rest of the region in the coming years.

Also, Qatar’s Ministry of Development Planning and Statistics (MDPS) expects that despite lower oil prices, real GDP growth this year will remain healthy at 3.8%, while BMI forecasts that private consumption will expand by 5% in real terms in 2017. BMI, however, warns that the small consumer base will limit Qatari market’s attractiveness for food and drink manufacturers, as well as mass grocery retailers.

Innovation is the Key

The UAE is one of the world’s leading F&B markets. By lavishing establishments and star chefs, with a huge variety of food and drinks in the market, the UAE, especially Dubai, has found a place on the world map. In the UAE, consumer food services alone reached $14.266mn in 2015, growing at a CAGR of 9.3% since 2010, when they were estimated at $9.13m.

The London-based research Euromonitor International stated that the UAE’s F&B market will be worth $22.3b by 2020 (in 2015 it was measured at $14.2b, placing the UAE among the top 20 countries in the world). KPMG, on the other hand, in its UAE-focused F&B report “Hungry for more?” emphasizes on innovation as a key factor for success in a highly diverse F&B market. “The wide array of formats, concepts and cuisines offered in the UAE mirror its varied demographics. We understand the attraction of bringing something completely new to the market,” KPMG’s report stated. The UAE is expected to add more than 1,000 F&B outlets to its portfolio by next year.

Industry experts warn that the UAE’s F&B market growth, poses a threat of oversupply, adding that despite F&B sector resilience, nearly 15% of the outlets will not survive factors like stiff competition, increasing rents, and frequent staff turnover and rising food prices.

Residents of the UAE, where 66.8% of households have a net annual income higher than $25,000, are the third biggest spenders on food and beverages in the world, with food consumption in the UAE projected to reach 10.4m MT in 2019. For example, as many as 60% of consumers visit a mall just to eat or drink, reported property advisor CBRE, adding that F&B accounted for 20% of the retail mix in Dubai and it is expected to grow to around 25 to 30% by 2020.

Saudi Arabia’s total food service sales are estimated at $8.8b, accounting for nearly half of the GCC market. Industry reports add that there are 1,200 full-service chain restaurants in the kingdom, which includes casual dining (which is expected to grow 3% annually) and fine dining outlets. Last year, overall food consumption in Saudi Arabia grew by 7.3% to $59.8b, and it is expected to reach $69.1b in 2018.

The UAE and Saudi Arabia are the largest food consumption centers in the Gulf, whose overall food service market is dominated by Fast Food or Quick Service Restaurants (QSR), which in 2015 had a 58.2% market share valued at $11.7b, according to Al Masah Capital.

The fast food segment is followed by Full Service Restaurant (FSR) with a 31.5% market share ($6.3b), and the Café & Bakery segment with a 10.3% share ($2.1b). The consultancy is expecting that the GCC food service market will grow annually by 6.8%, reaching $28b in 2020. (BQ Magazine 02.04)

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11.6 OMAN: The Omani Succession Envelope, Please

Simon Henderson wrote on 3 April in The Washington Institute that Sultan Qaboos is ailing, and no one knows who will take over his role as the last word on all aspects of Oman’s regional policy.

The name of the next ruler of Oman is written on a piece of paper in a sealed envelope kept in the royal palace in the capital of Muscat. It sounds like a bizarre Arab variation of an American television game show, but it isn’t. There is also a second envelope, held in a different royal palace in the southern city of Salalah. Apparently, it contains the same name, in case the first envelope cannot be found when the ruling incumbent, the ailing 76-year-old Sultan Qaboos bin Said, dies.

At this point, the question of how succession in this Arab Gulf sultanate will unfold becomes more than a little uncertain. The most common version is that each envelope contains two names, the first and second choices of Sultan Qaboos on who should replace him. But another version suggests that the Muscat envelope contains one name and the Salalah envelope contains another. According to the generally accepted wisdom, when Qaboos dies – and he has been suffering from colon cancer since at least 2014 – a council made up of his relatives will meet to choose his successor. Only if they can’t agree on a choice after three days do the envelopes come into play. Wags suggest that members of the ruling family will be so concerned about the post-mortem legitimacy bestowed by the late sultan that they will ask to see the envelopes before making their selection.

The Al Bu Saidi dynasty in Oman has ruled for 14 generations. Surprisingly for such a long-lived dynasty, the succession mechanism is not well-established. Qaboos himself came to power in 1970 when the British backed a coup against his clinically paranoid father, Sultan Said bin Taimur. According to the obituary of one of the plotters, when told he had to go, the sultan angrily tried to pull a gun from under his robes, accidentally shooting himself in the leg. He was flown to London to live in luxury at the Dorchester hotel, where he died two years later. Sultan Qaboos, briefly married to a cousin in the 1970s, has no heirs. Hence the envelopes.

Oman has relished a quirky policy independence under Qaboos. The sultanate is clearly not a major player by virtue of size or wealth, but its ruler has endeavored to make Oman relevant. Although a member of both the Arab League and the Gulf Cooperation Council, Oman positioned itself as a mediator between Iran and the United States, first brokering hostage releases and then becoming the venue for the initial talks that led to the 2015 nuclear deal. According to some accounts, it was the peripatetic Omani minister in charge of foreign affairs, Yusuf bin Alawi, who unintentionally tipped off the Israelis that the contacts were occurring, not realizing that Israel wasn’t at that time in the loop.

How much of Oman’s diplomatic straddling is attributable to the character of Qaboos rather than his country’s broader national interests is debatable. Qaboos and many Omanis are Ibadi Muslims, which puts distance into the relationships with Sunni Arab Gulf states. However, especially if expatriates are included, the majority of Oman’s population is Sunni. Shiites are a small but commercially successful minority.

This month may have seen the emergence of a front-runner in the race to succeed Qaboos. On 2 March, it was announced that the sultan’s cousin Asad bin Tariq, whose name is widely assumed to appear in the envelopes, had been appointed deputy prime minister for international relations and cooperation affairs. Further indication of Asad’s rising stature came when Qaboos sent him as the Omani representative to the Arab League summit in Jordan. Once commander of the Omani army’s tanks and already the sultan’s “special representative,” Asad’s new position as deputy prime minister has no obvious responsibilities – but it may put him ahead in the succession stakes.

Asad’s rivals are judged to be his half-brothers, Haitham bin Tariq, the heritage and culture minister, and Shihab bin Tariq, a former commander of the Omani navy. All three men are in their 60s, and it was their sister who was once married to Qaboos.

Reading the mind of Sultan Qaboos is complicated. When he came to power, there were just three schools and a few miles of paved road in the country. Now his nation of around 3.3 million people, with modest oil and gas reserves, is widely judged one of the better places to live in the Persian Gulf region. Provided you don’t want political power, it is good to be an Omani: The country provides strong education and social services and some favored Omanis have become fabulously rich while developing the economy.

Qaboos is no democrat. Even within the cabinet, he concentrates power in his hands, serving as prime minister, defense minister, foreign minister, finance minister and governor of the central bank. He decides on every shift in policy. In his absence – last year he went to Germany for two months of medical treatment and then became a recluse in one of his palaces in Oman for another three months – no decisions of significance are made.

His closest advisors are security and intelligence professionals in the so-called Royal Office, headed by Gen. Sultan bin Mohammed al-Numani. According to the envelope theory, the general will lead the army council that will rule for three days while the family council works out who is going to be the next leader.

Sultan Qaboos has taken a strategic view of the region and Oman’s role in it and hasn’t neglected his ties with foreign intelligence officials, either. At one point, he used to send his personal jet to London to collect a retired Middle East director of the British foreign intelligence service, MI6, whose analysis he particularly valued. When Prince Charles, the British heir apparent, visited Muscat last November, he brought the current head of MI6 to his four-hour meeting with Qaboos. Washington’s contacts are also good but lack that sort of intimacy.

Yet the sultan’s worldview can appear eccentric and often infuriates Oman’s notional allies in the Gulf and the West. When homicide bombers attacked the law courts in the Syrian capital of Damascus recently, leaving scores of dead and injured, Muscat sent a message of condolence to the regime of President Bashar al-Assad – a step that many in Washington and other capitals saw as an unnecessary normalization of relations with a despot they would like to see overthrown. Muscat has also been irritated by the Saudi and Emirati war in Yemen and has provided some diplomatic, and perhaps material, support to Iranian-backed Houthi rebels. A late arriving member of the anti-Islamic State coalition, Oman is actually much more concerned about the safe havens for al Qaeda in the Arabian Peninsula in parts of southern Yemen.

The sultan was probably hoping for a payoff for enabling the Barack Obama-era U.S. diplomacy with Iran to secure a nuclear deal. But nothing significant has come from Tehran other than a visit in February from President Hassan Rouhani. Not even a telephone conversation between President Donald Trump and the sultan has yet to be reported.

There is a sense that Sultan Qaboos judges all his potential successors as much lesser men and is said to fear meddling in the process by outsiders. He is particularly suspicious of the United Arab Emirates, which, despite its reputation in Washington as being the regional adult, has been accused by Muscat of running spy networks in the Omani military.

If Sultan Qaboos is not impressed by the possible successors within his family, could he perhaps cast a wider net? He could potentially look to one of the three pillars of Oman’s political infrastructure – the tribal sheikhs, the security establishment, or the business community – for a candidate. Even if he doesn’t, these groups will seek to exert influence on the family council by backing one of the current contenders or suggesting another person entirely, possibly a next-generation member of the Al Bu Saidi family. A 2007 U.S. diplomatic cable, released by WikiLeaks, pondered the strengths of Asad’s 37-year-old son, Taimur, describing him as “personable, affable…[and] markedly overweight but apparently vigorous.”

Such a choice would imitate events in Qatar, where the 36-year-old Sheikh Tamim bin Hamad is emir, and Saudi Arabia, where Deputy Crown Prince Mohammed bin Salman, 31, seems likely to be the next king. Having often regarded his neighboring Arab states with near disdain, it would be suitably ironic if Sultan Qaboos judged their systems worthy of trying at home.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute, and coauthor of its 2017 Transition Paper “Rebuilding Alliances and Countering Threats in the Gulf.” (TWI 03.04)

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11.7 EGYPT: Why Egypt is Moving Forward on Free Trade

Amr Mostafa posted on 22 March in Al-Monitor that experts consider Egypt’s recent actions supporting the Agadir Agreement significant, as Egypt has the largest market among the free-trade agreement’s member countries, which will enjoy greater trade and investment opportunities with the help of Egyptian labor and investment opportunities.

Work is underway to revive the Agadir Agreement on free trade, which has struggled to produce significant results for its members in recent years. The original pact members — Egypt, Tunisia, Jordan and Morocco — also welcomed Lebanon and the Palestinian Authority to the group in April 2016. The agreement is designed to expedite trade among the members and improve their connections with European markets. Other Arab League countries also are welcome to join.

Fakhri al-Hazaimeh is executive president of the Agadir Technical Unit (ATU), which is tasked with following up on the agreement’s implementation and providing technical and research support. Hazaimeh met 5 March in Jordan with an EU delegation to update them on plans for the agreement. On 8 March, the ATU released a guide for members on anti-dumping measures that also contains reference materials to support the agreement. On 12 March, the unit released an export and import measures guide for members.

Farag Abdel Fattah, an economics professor at Cairo University who spoke with Al-Monitor, noted the ATU’s flurry of activity came immediately after Egypt finally ratified its accession to the agreement. Egypt is the largest market among the Agadir member states.

In its 28 February, Egypt’s parliament approved decree No. 555, issued a year ago by President Abdel Fattah al-Sisi to recognize the Agadir authorized economic operator (AEO). The AEO, which was signed on 4 March 2016, by the trade ministers of the four member countries at that time, designates the free-trade area among the members, sets a list of products traded, and defines the companies and individuals involved.

The Agadir Agreement’s lengthy journey began in 2001 with negotiations in the city of Agadir, Morocco. When the original members signed the pact in 2004, they took a step toward establishing the Euro-Mediterranean Partnership EUROMED.

The Agadir Agreement’s initial timetable stipulated that as of 1 January 2005, member countries would be fully exempt from customs on industrial goods traded among themselves. Chief among those goods were cars, provided that components from the member companies made up at least 40% of the cars. Also, the members agreed to exempt manufactured agricultural and farming products under a program to be devised later to establish a major Arab free-trade zone, whereby the service sector would also be exempt from customs.

The ATU was supposed to study a project to connect member states through a transport network to increase trade. However, that project lost momentum when member countries failed to actually execute the Agadir Agreement until 2007.

Beginning in 2007, the agreement increased Egypt’s exports to member states by 115%, Jordan’s by 86%, Tunisia’s by 19% and Morocco’s by 6%. However, in 2010 the member states’ trade ministers stopped meeting and implementing agreed-upon projects, and the customs exemption timeline also fell by the wayside. It still isn’t clear why all the member countries neglected the agreement, although the Arab Spring revolutions in 2011 might have been at least partly responsible. Now, it’s no surprise Egypt is looking to reactivate the agreement, given the tension between Egypt and some Gulf states, particularly Saudi Arabia since October 2016, according to Abdel Fattah.

“Tension is not the only reason, however, as the economic situation in the Gulf states has been deteriorating due to declining oil prices and the costly war in Yemen, which made the chances of any economic alliance with Egypt weaker. Consequently, Egypt and many other Arab countries are looking for new regional partners through the Agadir Agreement,” he said.

“The Agadir Agreement has a promising future, and the evidence is that it led to an increase in exports in 2007. Also, it sets the stage for a free and open market with Europe. This increases Egyptian exports and attracts European investors to Egypt, as these would want to take advantage of raw material [prices]. Also, such a free-trade zone reduces the price of European imports, which increases citizens’ purchasing power,” Abdel Fattah added.

Not everyone has been a fan of the pact, however. Azzam Mahjoub, a University of Tunis economics professor, pointed out during a 2008 symposium titled “Agadir Agreement: Outcome and Prospects” that he did not expect the Agadir Agreement to have positive results. He said trade exchange between member states was very weak and did not exceed 3% of their trade with Europe. He also criticized the lack of diversified traded goods.

Also, when member state trade ministers met in Cairo a year ago, Egyptian Trade and Industry Minister Tarek Kabil noted the 2015 trade exchange between Egypt and other Agadir members had amounted to only $500 million. He pointed out that trade among the states is not commensurate with the level of available resources.

On the other hand, Cairo University economics professor Ahmed Ghoneim told Al-Monitor the Agadir Agreement should not focus solely on increasing trade, but rather serve as a prelude to reciprocity that increases member states’ industrial exports to Europe. Hisham Ibrahim, another economics professor at Cairo University, told Al-Monitor, “Industrial complementarity will be a prelude to attracting many investments to the region because foreign investors will be able to take advantage of cheap labor in Egypt, with raw materials available at a reasonable price, to establish large factories. However, Arab regimes must be aware of how important economic complementarity is for the recovery.”

Amr Mostafa is an Egyptian journalist who has worked for several newspapers, including Youm7, and focuses on diplomatic and legal issues. (Al-Monitor 22.03)

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11.8 EGYPT: IMF Program to Support Fiscal & External Position; Reform Pace May Slip

On 29 March 2017, Moody’s Investors Service said in a report that while Egypt’s IMF program will support gradual improvements to the country’s fiscal and external position, its social and economic costs risk slowing the pace of fiscal reform momentum. The report, “Government of Egypt – IMF Program Supports Gradual Fiscal, External Improvements”, is now available on www.moodys.com. The research is an update to the markets and does not constitute a rating action.

“The implementation of the IMF program’s targets, including reductions in fiscal deficits and government debt levels, as well as improvements in Egypt’s external liquidity position, will help address Egypt’s key credit challenges,” said Steffen Dyck, a Moody’s Senior Credit Officer and co-author of the report. “However, ambitious fiscal consolidation targets will be challenging to achieve and could face implementation risks in a scenario of mounting public discontent.”

Moody’s projects that Egypt’s fiscal deficit will decrease to 11.0% of GDP in fiscal year 2017 and 8.5% in 2019, from 12.6% in 2016. Moody’s forecasts are more conservative than the IMF program projections of 10.0% of GDP in fiscal 2017, reducing to 6.1% in fiscal 2019, driven by Moody’s somewhat lower growth assumptions and potential fiscal slippage, both in the near- and medium-term.

Although Moody’s expects Egypt’s fiscal challenges to remain high, the country’s monetary, fiscal and structural reforms will likely lead to slow but steady improvements for the sovereign credit profile beyond the timeframe of the IMF program.

The liberalization of Egypt’s foreign exchange regime and the depreciation of the Egyptian pound will initially keep the current account deficit high due to the pent-up demand for imports and the lower sensitivity of exports to the exchange rate. Moody’s anticipates that the current account deficit as a percentage of GDP will increase in the 2017 fiscal year and fall only from 2018 onwards due to the weaker exchange rate.

Nonetheless, higher incoming portfolio and foreign direct investment flows, along with additional external funding from the IMF, multilateral and bilateral partners, will support Egypt’s balance of payments and international reserves position. (Moody’s 29.03)

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11.9 EGYPT: Cairo Metro Drowns in Debt and Risks Shutdown

Amira Sayed Ahmed posted on 26 March 2017 in Al-Monitor that the Cairo metro system owes vast sums to electrical, water and maintenance companies, and a recent move to double the price of a ticket to about $0.11 a ride isn’t enough to solve the debt problem.

Hit by a severe cash crunch, the state-run Egyptian Company for Metro Management and Operation failed to pay huge water and electricity bills worth about EGP 300 million ($16.6 million) for the past 18 months. Compounding the problem is that water and power companies have warned that they will halt their services if these bills are not paid. Between the hammer of these outstanding debts and the anvil of hefty annual losses, the three-line metro network is struggling to curb its budget deficit.

Metro spokesman Ahmed Abdel Hadi said the company owes EGP260 million in electricity bills and EGP40 million in water bills. He said the utilities have warned that they will undertake legal procedures against the metro company if the bills are not paid. The metro company also owes money to maintenance, cleaning, security and spare parts companies. Abdel Hadi said ThyssenKrupp, a leading German industrial group in charge of maintaining the metro stations’ elevators and escalators, has refused to renew its contract with the metro company until it receives payment. He said some elevators and escalators might become nonoperational under these circumstances. He noted the metro is also plagued by continued losses due to the vast difference between what a ticket costs the customer and what each trip actually costs the company.

The issue of increasing metro ticket prices has sparked a heated debate in recent years. The metro ticket is subsidized by nearly 96% and until this month, its price had not changed since 2002, despite the pound’s major decline against the US dollar. The transportation minister in 2014, Hani Dahi, said the metro company’s annual loss was EGP 180 million; since that time, the pound has lost half its value against the dollar. Recent Transportation Ministry statistics show the metro’s annual loss is around EGP250 million.

The transportation minister in 2016, Galal el-Saeed, said ticket prices should be raised to ensure the continuation of this vital service. Prime Minister Sherif Ismail also said last year that the price of metro tickets is too low to cover operational costs. On 23 March, the Cabinet approved doubling the ticket price. Transportation Minister Hisham Arafat said the ticket price will increase to EGP 2 (about $0.11) to help offset the metro’s annual losses.

Some economic experts said increasing ticket prices is not a magic wand that will solve the problem, pointing out that bad management is another key reason for the miserable economic situation of the Cairo metro. Economic expert Rashad Abdo told Al-Monitor, “Administrative failure is one of the main reasons the Cairo metro company is in the doldrums. The whole administrative system should be updated. The company should rely on [outside] experts to reach creative and sound solutions. Merely talking about increasing prices whenever faced by any economic hurdle is an indicator of bad management and a lack of future vision.”

Abdo said halting metro service is not an option, as it would paralyze the whole country. He said increasing ticket prices is just a partial solution. “This issue mainly stems from the socialist economic approach adopted by former President Gamal Abdel Nasser [in office from 1956-1970]. Socialism gives the social aspect a top priority at the expense of the economic one. Therefore, many public services are heavily subsidized by the state. But this does not mean that such subsidies should be completely lifted to cope with economic challenges. There should be detailed studies about the country’s and citizens’ economic conditions to reach a compromise,” Abdo noted.

Metro tickets are subsidized in many countries worldwide, the expert said, and the subsidy percentage often can be amended without severely harming citizens’ pockets. The Cairo metro went into operation in 1987 and was the first of its kind in Africa and the Arab world. The metro has a daily ridership of more than 3.5 million. The fourth line is scheduled to be inaugurated by 2019-20. The lack of financial resources is considered the main obstacle hampering the progress of the metro system. Adding to its debt problems, the metro company reportedly got a loan of EGP10 million from the Egyptian Railway Authority to pay workers’ salaries.

Trying to find a way out of this predicament, member of parliament Mohamed Fouad submitted a parliamentary motion calling on the transportation minister to immediately provide the company with EGP 30 million as a temporary solution to ensure the normal operation of the metro system.

Saad Teima, the head of parliament’s Transportation Committee, told Al-Monitor that the panel is planning to hold an urgent session with the transport minister to discuss possible solutions. “We will also meet with many officials at the metro company and the railway authority to listen to their problems. These sessions will help the committee determine the root causes of these accumulated debts,” Teima said.

Amira Sayed Ahmed is a Cairo-based freelance journalist and full-time editor of local news at The Egyptian Gazette, Cairo’s oldest English-language daily. She has been involved in writing about political, social, and cultural issues in Egypt since 2013. (Al-Monitor 28.03)

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11.10 TUNISIA: Bond Bolsters Tunisia Liquidity as IMF Delay Shows Risks

Fitch Ratings said on 10 March that the postponed disbursement following an IMF program review highlights reform implementation challenges faced by Tunisia’s government. Near term financing risks have been mitigated by the €850 million bond market issuance in February, further reform delays could increase uncertainty around Tunisia’s financing outlook.

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11.11 CYPRUS: IMF Staff Completes Mission for the First Post-Program Monitoring to Cyprus

An International Monetary Fund (IMF) mission visited Nicosia during 27 – 31 March 2017, for the first post-program monitoring (PPM) discussions since Cyprus exited the Extended Arrangement under the Extended Fund Facility. PPM is part of the IMF’s regular monitoring of countries with significant outstanding IMF credit, with a focus on capacity to repay the Fund. The IMF mission coordinated with the post-program surveillance activities of the European Commission and the European Central Bank, and the early warning system of the European Stability Mechanism. At the conclusion of the visit, the IMF mission issued the following statement:

“Since exiting the IMF program one year ago, Cyprus’s economic recovery has gathered momentum, banks’ liquidity positions have improved, the restructuring of nonperforming loans (NPLs) has accelerated and the fiscal primary surplus has increased. These developments served to strengthen Cyprus’s repayment capacity. Nonetheless, continued very high levels of private sector indebtedness, nonperforming loans and general government debt remain vulnerabilities. Decisive progress on repairing private balance sheets, while upholding fiscal prudence and completing pending structural reforms are essential to build resilience, reduce the risk of adverse shocks to balance sheets and raise potential growth.

“Over the medium term, growth is expected to remain brisk, although moderating gradually from the rapid pace of last year. For 2017, GDP growth is forecast at around 2.5% on continued support from foreign demand and external financing. Thereafter, growth is expected to ease marginally as repayment of private sector debt picks up, stabilizing at just above 2% from 2020. Under these conditions, capacity to repay the Fund is expected to be satisfactory, supported by sizable fiscal primary surpluses, the back-loaded maturity profile of official debt and possible further operations to smooth redemptions of market-based debt. However, repayment capacity would be weakened in the event of a new boom-bust growth cycle, if fiscal discipline is eroded or if risks in banks’ balance sheets materialize.

“A decisive upfront reduction in public and private debt is needed to rebuild policy buffers, cement confidence in macroeconomic fundamentals and policy commitments, deliver balanced, sustainable growth, and support balance sheet repair. This requires effort in three main areas:

Accelerating NPL Workouts & Reducing Excessive Debt Burdens: Restructuring has gained momentum over the past year, but NPLs remain very high and a portion of previously restructured loans tend to re-default. High NPLs also weaken banks’ profits. Restructuring progress across banks has been uneven, reflecting differences in the structure of their loan portfolios, the intensity with which various legal and other tools have been used, as well as in banks’ capacities to manage NPLs. Banks should be further encouraged not to defer restructuring in the expectation that future increases in output and property prices would autonomously improve recovery rates. Instead, they should focus on durable and sustainable loan work-outs, including through solutions that reduce a borrower’s debt to affordable levels. Operational barriers to NPL resolution, such as regulatory incentives encouraging banks to delay recognition of losses or disposal of collateral, remaining impediments in the legal framework and capacity constraints in the courts, should be addressed. It is important that newly-issued bank lending, which is providing welcome support to the economy, is underpinned by robust lending policies, strong business plans from borrowers and close monitoring of credit risk.

Frontloading Public Debt Reduction: Accelerating public debt reduction would help to create a prudent buffer and safeguard the downward trajectory of debt in the event of adverse shocks. Recent fiscal outturns have been buoyed by cyclical developments, despite a sizable weakening of the underlying structural position since 2015. Targeting a primary surplus of 3% of GDP (on a cash basis) for the next several years while saving any over-performance and directing additional resources to growth-enhancing investment would accelerate debt reduction and bolster potential output without materially lowering GDP growth. Guarding against fiscal slippages, including from the envisaged national health service as well as from wage and social benefit spending, will also be essential. Restarting the privatization program would also contribute to lowering public debt. Completing pending reforms in the areas of revenue administration and public financial management, and adopting the package of civil service reform bills would also help safeguard public finances over the medium term.

Reinvigorating Structural Reforms: Progress with macro-critical reforms has largely stalled. Advancing the reform agenda would increase capacity to cope with external shocks and create sustainable employment opportunities by improving the business environment. Focus should be on expediting judicial reform to strengthen legal enforcement of commercial claims and speed up court procedures, restarting the privatization program to increase economic efficiency and competition, and streamlining business procedures to attract new service sectors. (IMF 03.04)

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ISRAEL’S AMAZING WORLD RANKINGS

April 16, 2017, 6:28 am

≫ Next: Fortnightly, 19 April 2017

≪ Previous: Fortnightly, 5 April 2017

It is nothing short of amazing that a small, young country with just over 8 million people in existence for only 69 years can rank so high on so many international comparative indices. Talk about punching above one’s weight, Israel is a prime example.

For example, the World Economic Forum’s 2016-2017 Global Competitiveness Report ranked Israel as the 2nd best place for innovation in the world after Switzerland.

A recent ranking of universities worldwide by MIT, found that Israel’s Technion-Israel Institute of Technology is #1 in the world among universities that support innovation.

Last week, the New York-based data firm CB Insights, issued a report that shows that Israel has the second highest concentration of cyber-defense companies in the world after the United States.

Cyber-defense companies in the report covered a range of subsectors including quantum, encryption, deception security, automobile security, Internet of Things security, cyber insurance, mobile security, autonomous systems, critical infrastructure security and predictive intelligence. The CB report identified the top 30 companies worldwide which included three Israeli firms, Argus (automobile security), Illusive Networks (cyber protection using deception technology) and Indegy (protection of critical infrastructure from cyber-attacks). Between them they have raised $78 million from investors, including Microsoft Ventures and Bessemer Ventures.

Israel also holds a worldwide leadership position in the digital health sector. The sector in Israel grew significantly in 2016, both in terms of funding and the number of companies, with investments jumping almost 30% to $183 million in 2016 over 2015, according to a report released by the nonprofit organization Start-Up Nation Central.

Personal health tools and health analytics accounted for over 70% of deal volume in 2015 and 2016 within the overall digital health sector. The health analytics subsector, focused on companies that collect and analyze data to solve medical problems for businesses and consumers, received the most funding in the past two years: $84 million in 2015, 59% of total investments, and $58 million in 2016, 32% of total investments.

Considerable funding in 2016 also reached the clinical workflow subsector, which includes companies that enable hospitals, clinics, labs, and other healthcare stakeholders to work more efficiently. This sector received investments of $55 million, or 30% of total investments. The wearables & sensors subsector also received $46 million, or 25% of total investments, in 2016.

The report went on to state: “Israel’s unique capabilities in information, communication, mobile, and cyber technologies, together with more than 25 years of expertise in implementing health IT, electronic medical records, and business analytics, offers Israel the opportunity to become a truly influential player in the global digital health arena.”

Indeed, Israel has made great strides as a small, young country, not to mention the fact that it operates in one of the most politically volatile regions in the world with a host of nearby countries sworn to its destruction. Israel’s accomplishments to date prove that size, age, location and other classification criteria do not determine a country’s level of success or advancement. They also highlight the fact that Israel has developed innovative and entrepreneurial strengths with the capability of greatly impacting the global economy.

For those companies who have not yet realized the business opportunities present in Israel, the time is now and our firm, Atid EDI Ltd., with 25 years of business development experience in the country, is uniquely positioned to assist.

Sherwin Pomerantz

President

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Fortnightly, 19 April 2017

April 19, 2017, 4:57 am

≫ Next: What’s New at EDI – May 2017

≪ Previous: ISRAEL’S AMAZING WORLD RANKINGS

19 April 2017
23 Nissan 5777
22 Rajab 1438

TOP STORIES

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Netanyahu Government Performance Report Shows Revenue Rising & Deficit Falling
1.2  Minister of Finance Unveils Tax Cut Plan
1.3  Historic Plan Unveiled to Link Arab States to Israeli Ports

2: ISRAEL MARKET & BUSINESS NEWS

2.1  Israeli Economy Ranked 3rd Most Stable in the World for 2016
2.2  IAI Signs $2 Billion Indian Missile Deal
2.3  83North Announces New $250 Million Venture Fund
2.4  Valens Raises $60 Million to Boost Growth, Innovation in Automotive Industry
2.5  otonomo Raises $25 Million
2.6  dapulse Raises $25 Million to Continue Rapid Growth of Workplace Management Tool

3: REGIONAL PRIVATE SECTOR NEWS

3.1  Arab Countries Order Husky Mine-Detection Vehicles
3.2  Axalta Coating Systems Opens Regional Auto Refinish Training Centre in Dubai
3.3  REV Group’s Fire Division’s E-ONE Provides Saudi Aramco Two Custom Municipal Pumpers
3.4  Four Seasons Hotels & Mabrouk Group to Open New Luxury Hotel in Tunisia in 2017
3.5  Innovus Pharmaceuticals Receives Patent for Its Sensum+ Product in Morocco

4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  Some 150 Kilometers of Bike Lanes to Connect Israel’s Central Cities
4.2  Jordan’s Environment Ministry to Install Tracking Devices on Septic Tankers
4.3  Jordan Launches $930 Million Water Strategy for Amman and Zarqa
4.4  Dubai Considers Plan to Turn Organic Waste Into Energy
4.5  Saudi Arabia Seeks 10% Renewable Energy in Six Years

5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Balance of Payments Registered a $508.5 Million Surplus in February 2017
5.2 Lebanon’s Tourism Sector Posted a 12.25% Improvement in February

♦♦Arabian Gulf

5.3 Qatar’s Consumer Price Index for March Increases By 0.2%
5.4 Saudi to Shelve & Restructure Billions of Dollars of Unfinished Projects

♦♦North Africa

5.5  Egypt’s Annual Core Inflation Falls to 32.25% in March
5.6  Egypt’s Trade Deficit Declines by 37% Year-On-Year in January
5.7  Moroccan Rain Saves Economic Growth in the First Quarter of 2017
5.8  Moroccan Automotive Industry Attracting Investors Worldwide

6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  One in Four Turkish Youth Unemployed As Unemployment Rate Rises to 13%
6.2  Turkey Runs Nearly $4 Billion Budget Deficit Amid Tax Cuts & Economic Measures
6.3  US & Qatar Firms Sign Deal to Explore for Cypriot Oil & Gas
6.4  IMF Says Greek Economy to Grow 2.2% in 2017 and 2.7% in 2018

7: GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1  Yom HaShoah – Holocaust Martyrs’ & Heroes’ Remembrance Day 2017
7.2  Israel Commemorates Those Who Fell in Service to the Nation
7.3  Israel’s Independence Day – 69 Years After Sovereignty was Regained

♦♦REGIONAL

7.4  Israel Appoints its First Female Muslim Diplomat
7.5  UAE Public & Private Sector Isra and Mi’raj Holiday Announced
7.6  Egypt’s Parliament Approves Three-Month State of Emergency
7.7  Erdogan Celebrates Referendum Win As Rivals Urge Recount

8: ISRAEL LIFE SCIENCE NEWS

8.1  Veterans Affairs Purchases 28 Additional ReWalk Exoskeleton Systems
8.2  DarioHealth Corp. Completes $4.5 Million Public Offering of Common Stock
8.3  Mazor Robotics Receives FDA Clearance for Spinal Deformity Correction Planning Software

9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Inception Fights “Lagging,” VR’s Worst Enemy – Unveils Interactive Multi-Track Technology
9.2  IRI Forms Strategic Alliance with Freshub
9.3  Chooze Officially Launches IOS App That Uses Psychology to Help With Baby Naming
9.4  Apriva & OTI Announce Semi-Integrated Solution for Unattended Markets
9.5  Safe-T and Check Point Secure the Digital Enterprise
9.6  Mellanox 25Gb/s Ethernet Adapters Chosen By Major ODMs for Next Generation Data Centers
9.7  MySize Engaged by Israeli Postal Service to Provide New Measuring Solutions
9.8  Altair Powers Latest Verizon-Certified Vehicle Telematics Offering from Queclink
9.9  Beamr Announces First of Kind HEVC Content-Adaptive Software Encoder

10: ISRAEL ECONOMIC STATISTICS

10.1  Israel’s Inflation Rate in March Increases by 0.3%
10.2  Number of Israeli Jobseekers Falls to a New 10 Year Low
10.3  Israel Welcomes Record Incoming Tourism During First Quarter

11: IN DEPTH

11.1  LEBANON: The Economy Has Slowed
11.2  IRAQ: Kurdish Flag Fans Controversy in Iraq’s Kirkuk
11.3  BAHRAIN: IMF Staff Completes 2017 Article IV Mission to Bahrain
11.4  QATAR: IMF Executive Board Concludes 2016 Article IV Consultation with Qatar
11.5  UAE: The UAE’s Evolving National Security Strategy
11.6  SAUDI ARABIA: Fitch Downgrades Saudi Arabia to ‘A+’; Outlook Stable
11.7  MOROCCO: Fitch Affirms Morocco at ‘BBB-‘; Outlook Stable
11.8  MOROCCO: Morocco Finally Gets New Government, But At What Cost?
11.9  TURKEY: Why Turkey’s Growth Data Has Economists Scratching Their Heads
11.10  TURKEY: Where Does Erdogan’s Referendum Win Leave Turkey?

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu Government Performance Report Shows Revenue Rising & Deficit Falling

Israel brought in more revenue and built fewer homes than it had planned to in 2016, according to the first figures ever released on how close the Netanyahu government came to meeting its goals on a number of important economic and social issues. Since 2011, the government has announced its goals for the economy, housing, healthcare, and other key areas, but 6 April marked the first time the public received a report on how the various government ministries were actually measuring up. The numbers presented refer to 2016.

The Finance Ministry set itself a deficit goal for 2016 of 2.9%, but came in at a deficit of 2.1%. The state’s revenues for 2016 totaled NIS 321.1 billion ($88.02 billion), higher than the 2016 target revenue of NIS 312.3 billion ($85.61 billion). In 2015, the state took in revenue in the amount of NIS 297.5 billion ($81.55 billion).

While 60,000 building starts had been planned for 2016, only 54,000 got underway. But the Israel Land Authority had set a goal of selling land for the construction of 55,000 new housing units and wound up selling enough land to build 71,400.

The Health Ministry published the results of a poll measuring the public’s satisfaction with hospital care. The general rate of patients’ satisfaction rose in 2016, reaching 78% and meeting the goal the ministry set for itself in this area. Patient satisfaction with emergency room care was lower, remaining at the same 60% satisfaction rate recorded in 2015 and falling short of the ministry’s goal of 63% patient satisfaction. The average wait time for an MRI dropped to 20 days in 2016, down from 53 days in 2015, but still longer than the Health Ministry’s target wait time of 14 days. (IH 06.04)

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1.2 Minister of Finance Unveils Tax Cut Plan

At an 18 April press conference, Israeli Minister of Finance Kahlon unveiled his tax cut plan through which he plans to give back NIS 4 billion in surplus tax collection to taxpayers. He calls the plan “the family net,” which is aimed at helping “working Israeli families,” and thus cutting the cost of living and reducing gaps between rich and poor. The main elements of the plan include subsidies for afternoon education programs, more tax points for working parents, incentives and grants for people to go out to work, cancelling excise and purchase taxes on baby clothes, footwear, mobile phones and more. (Globes 18.04)

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1.3 Historic Plan Unveiled to Link Arab States to Israeli Ports

On 5 April, Israel’s Transportation Minister Katz unveiled an ambitious plan to give Jordan, Saudi Arabia and even Iraq access to the Mediterranean through Israel’s ports in Haifa and Ashdod, in a plan called “Tracks for Peace.” Under the plan, the Haifa to Beit She’an train link would be extended eastward to the border crossing with Jordan and southward to the Jenin area where the Palestinian Authority could connect to it. Rail lines would be laid in Jordan to Irbid, and from there it would link with existing and planned lines extending north-south through Jordan, into Saudi Arabia and further east to the Arabian Gulf. The idea of turning Israel into a land bridge stems, Katz said, from the geographic fact that Israel is located at the meeting of three continents.

Turkey, Katz said, is already using Israel as a land bridge, with 5,000 Turkish trucks landing by ferry at Haifa Port each year, and making their way to Jordan, Saudi Arabia and the Arabian Gulf overland from Haifa to the Jordan River Crossing/ Sheikh Hussein Bridge, and from there further east. (Various 05.04)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Israeli Economy Ranked 3rd Most Stable in the World for 2016

Bloomberg financial news agency has ranked Israel as the world’s third most stable and promising economies for 2016. Near-nonexistent inflation and a low unemployment rate of 4.8% have helped propel Israel to that position. The Bloomberg list named Hong Kong as the most stable economy in 2016, followed by South Korea. Denmark, Taiwan, Iceland, Japan, Switzerland, Singapore and Thailand followed Israel to round out the top 10 in the rankings.

Israel’s economy continues to perform well by international parameters. In January, Israel cracked the top 10 on the 2017 Bloomberg Innovation Index, which rates the level of innovation in a nation’s economy by scoring its spending on research and development and its number of publicly traded high-tech companies. Earlier this month, a report by Bank of America Merrill Lynch assessed the Israeli economy as “on a robust recovery path with growth rates running at 3 to 4% levels” and noted that the Bank of Israel was “defying gravity” by checking the appreciation of the shekel against the dollar. (IH 18.04)

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2.2 IAI Signs $2 Billion Indian Missile Deal

On 6 April, Israel Aerospace Industries announced that it been awarded contracts in India totaling almost $2 billion. The deal includes a huge contract worth over $1.6 billion – the largest defense contract in Israel’s defense industries’ history, to deliver an advanced MRSAM air and missile defense system to the Indian Army. The company will also supply additional LRSAM air and missile defense systems to be built in India for Indian aircraft carriers.

MRSAM is an advanced ground breaking air and missile defense system that provides the ultimate protection against a variety of aerial threats. In its current version, MRSAM is operational with the Indian Air Force, Indian Navy and Israel Defense Forces. The system includes an advanced phased-array radar, command and control, mobile launchers and missiles with advanced RF seekers. MRSAM was developed jointly for the Indian Army by IAI and India’s Defense Research and Development Organization (DRDO) in collaboration with Rafael Advanced Defense Systems and IAI’s ELTA unit, as well as Indian companies including BEL, L&T, BDL and other private vendors. (IAI 06.04)

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2.3 83North Announces New $250 Million Venture Fund

83North, the international venture capital firm, announced that it has closed an oversubscribed new fund at $250 million. The fourth raised in eleven years, 83North IV brings total capital under management to $800 million. Building upon the successes of its existing funds, the new fund will be deployed in the best and brightest consumer and enterprise technology companies led by aspiring European and Israeli entrepreneurs. 83North now boasts a five-strong team of proven investing partners who have worked with the region’s most ambitious founders to create market-leading technology businesses. The new fund, 83North’s largest to date, demonstrates the on-going appeal of the firm’s unique model; providing a breadth of expertise and on-the-ground support in three strategic regions – Europe, Israel and the United States. 83North has an unrivalled ability to help founders successfully scale their businesses across the three markets.

Herzliya’s 83North started life as Greylock IL, an affiliate fund of Greylock Partners. Today, 83North is an independent firm investing in European and Israeli entrepreneurs. 83North is committed to help build global leading companies, with more than half of its portfolio companies having operations in the US. (83North 05.04)

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2.4 Valens Raises $60 Million to Boost Growth, Innovation in Automotive Industry

Valens has secured an additional $60 million in capital, to fuel the company’s inroads into the automotive industry with its ground-breaking HDBaseT technology. The round was led by Israel Growth Partners (IGP), and includes Delphi, Samsung Catalyst Fund, Goldman Sachs and MediaTek as new investors, in addition to Valens’ existing investors. This latest funding round will allow Valens to speed up time to market, develop additional products per market demands and support customers with design and development projects. Valens introduced its HDBaseT Automotive technology in 2016 to address the challenges of the connected car, including the increasing amount of bandwidth and wiring necessary to cater to infotainment and Advanced Driver Assistance Systems (“ADAS”) needs.

Established in 2006, Hod HaSharon’s Valens provides semiconductor products for the distribution of ultra-high-definition (HD) multimedia content. The company’s HDBaseT technology enables long-reach connectivity of devices over a single cable and is a global standard for advanced digital media distribution. (Valens 06.04)

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2.5 otonomo Raises $25 Million

otonomo has closed a $25m series B financing round led by Delphi Automotive with participation from Bessemer Venture Partners, StageOne Ventures and Maniv Mobility. The company plans using the funds to continue developing its automotive industry data exchange platform, and to expand globally into the US, Asian, and European markets. otonomo has raised $40 million to date including a $12 million Series A financing round just five months ago in November 2016. The company has also opened offices in Menlo Park, California. otonomo’s technology offers a cloud-based solution that seamlessly and reliably connects millions of cars to hundreds of services and applications, enabling a new exchange of car data, as well as new business opportunities.

Founded in 2015, Herzliya’s otonomo is a cloud-based platform enabling car manufacturers, drivers and service providers to be a part of a connected ecosystem. otonomo aims to give OEM’s and drivers a way of making use of the massive amount of data generated by cars by creating a marketplace that car ecosystem service providers can tap into. Lead by a founding team of serial entrepreneurs, the company disrupts the connected/autonomous car industry, allowing the integration of new services and a new market and revenues chain around the car ecosystem. (Globes 07.04)

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2.6 dapulse Raises $25 Million to Continue Rapid Growth of Workplace Management Tool

On 6 April, dapulse, a people-centric SaaS tool that improves team management, communication, and productivity, announced it raised $25 million in its Series B round, bringing its total funding to $34.1 million. New York-based private equity and venture capital firm Insight Venture Partners led the round with participation from existing Series A investors Genesis and Entree Capital. The company will use the funding to scale its rapid growth, expand its product offering, and ultimately, impact thousands of new businesses.

Launched in 2014 and headquartered in Israel, dapulse provides a fundamentally different way for teams to work together. The product structure is simple and flexible enough to meet the needs of just two people working together, as well as vastly complex workplace operations of thousands, spanning different departments and time zones. The product can be customized to any team’s work process and has widespread appeal across many business verticals. Active customers include Adidas, AT&T, Discovery Channel, Samsung, Uber, WeWork and Wix among over 10,000 others. The new funding will further dapulse’s ambitious growth strategy, which will scale international operations, develop further product integrations, and continue acceleration of vertical-specific customization.

Tel Aviv’s dapulse is a team management tool designed to improve work processes and create an environment of transparency in business. As a web-based SaaS company, dapulse facilitates a more efficient and intuitive way to manage teams and entire operations. The tool is fully customizable to suit any business vertical and currently has over 10,000 paying teams around the world from over 125 countries. (dapulse 06.04)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Arab Countries Order Husky Mine-Detection Vehicles

The US Department of Defense announced on 30 March that it had awarded a $132 million contract to Critical Solutions International (CSI) to deliver Husky second-generation systems with related equipment and services to Egypt, Jordan and Saudi Arabia. CSI is a US company that has partnered with the South African company DCD Protected Mobility to make its Husky family of mine-detection vehicles a US government program of record. Designed to keep its operator safe and be easy to repair in the field if it triggers an explosion, the Husky uses ground-penetrating radar and other sensors to detect explosive devices. The second-generation Husky 2G can accommodate two operators rather than one, making it more appropriate for long-duration route-clearance missions. (IHS Jane’s Defence Weekly 05.04)

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3.2 Axalta Coating Systems Opens Regional Auto Refinish Training Centre in Dubai

Philadelphia based Axalta Coating Systems, a leading global supplier of liquid and powder coatings, has launched the first of its kind Automotive Refinish Training Centre in Dubai, UAE. The center will provide expert training in the use of Axalta products that are designed for the repainting of vehicles in body shops. The opening of the next generation facility follows the October 2016 opening of Axalta’s regional office in Dubai’s Jebel Ali Free Zone Authority (JAFZA). The Dubai Automotive Refinish Training Centre, Axalta’s 47th such center in the world, will host world class training programs for body shop, repair and refinish technicians to hone their skills and learn to use the latest coating technologies found in Spies Hecker, Standox and Cromax, Axalta’s premium refinish coating brands, and other refinish brands which are available in eighteen countries in the Middle East & North Africa (MENA) region.

During the launch of the Automotive Refinish Training Centre, Axalta agents, customers and regional partners, and members of the media, participated in a series of hand-on activities including spray painting miniature cars, mixing colors and experiencing the differences between waterborne and solvent borne coatings. (Axalta 17.04)

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3.3 REV Group’s Fire Division’sE-ONE Provides Saudi Aramco Two Custom Municipal Pumpers

Ocala, Florida’s REV Group, a +$2 billion manufacturer of industry-leading motor vehicle brands, announced the delivery of two E-ONE Custom Industrial Pumpers to the Saudi Arabian Oil Company (Saudi Aramco) in Dhahran, Saudi Arabia. Each pumper is manufactured on an E-ONE custom chassis with the strongest roll cage cab construction in the industry to provide maximum protection and is NFPA 1901 2016 compliant.

Saudi Establishment for Safety Equipment (SESE), an E-ONE distributor since 1989, facilitated the sale and will deliver and service these vehicles. REV is a leading designer, manufacturer and distributor of specialty vehicles and related aftermarket parts and services. (REV Group 06.04)

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3.4 Four Seasons Hotels & Mabrouk Group to Open New Luxury Hotel in Tunisia in 2017

Toronto based Four Seasons Hotels and Resorts, the world’s leading luxury hospitality company, and the Mabrouk Group, Tunisia’s preeminent investment group, will be introducing a new luxury experience to Tunisia with the opening of Four Seasons Hotel Tunis in late 2017. Perched along the hillside of the exclusive Gammarth neighborhood, Four Seasons Hotel Tunis will offer unrivalled views of the coast, combining Arabic-inspired architecture and Mediterranean influences to create a hotel experience unlike anything else in the city. Set along 500 meters of pristine beachfront, the 200-room Four Seasons Hotel Tunis is conveniently located near Tunis’ central business district and major cultural attractions, including the picturesque town of Sidi Bou Said and the historic ruins of Carthage.

Four Seasons Hotel Tunis will offer the largest accommodations in the city, many with outdoor terraces overlooking the Mediterranean. The Hotel will also feature an expansive Roman-inspired Spa, as well as a series of pools, gardens, and fountains that echo the design of the historic medina, creating a tranquil oasis within the heart of Gammarth. Four Seasons Hotel Tunis will be the first Four Seasons in Tunisia and the seventh in North Africa. Four Seasons currently manages two properties in Morocco and four in Egypt. (Four Seasons Hotels 12.04)

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3.5 Innovus Pharmaceuticals Receives Patent for Its Sensum+ Product in Morocco

San Diego’s Innovus Pharmaceuticals, an emerging over-the-counter (OTC) consumer goods and specialty pharmaceutical company engaged in the commercialization, licensing and development of safe and effective non-prescription medicine and consumer care products to improve men’s and women’s health and vitality and respiratory diseases, has received a patent from the Moroccan Patent Office entitled “Sensitization Composition and Method of Use” for the Company’s Sensum+ product, for reduced penile sensitivity. The Moroccan patent is scheduled to expire in March 2033. (Innovus 12.04)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Some 150 Kilometers of Bike Lanes to Connect Israel’s Central Cities

Two large scale projects to be undertaken by the government and local authorities are expected to add hundreds of kilometers of bike paths in the bustling metropolis of Tel Aviv and central Israel. The projects are being largely supported by the Ministry of Transportation and the Ayalon Highway and are due to begin in the coming months. As part of the project, 150 km of interurban bicycle lanes will be built at an investment of NIS 620 million. The two-lane, 3.5 meter-wide trails will contain electric charging stations and shaded areas for travelers. A total of 10 paths will connect the cities of Ra’anana, Herzliya, Ramat HaSharon, Petah Tikva, Bnei Brak, Ramat Gan, Givat Shmuel, Yehud, Or Yehuda, Rishon LeZion, Yehud, Holon and Bat Yam. The project is expected to be completed by the end of 2019.

There are currently 170 km of urban bike paths in Israel’s central district. Excluding Tel Aviv, where there are 130 km of bike paths, additional paths exist in Bat Yam, Hod HaSharon, Kiryat Ono, Rishon LeZion, Holon, Kfar Saba, Ramat Gan, Ra’anana, Petah Tikva, Herzliya and Ramat HaSharon. Currently, Tel Aviv has a five-year plan for the construction of bicycle paths that is to double the number of existing trails. In 2017 alone, the city allocated NIS 32 million for the paving of 25 kilometers of bicycle paths beyond projects led by the Ministry of Transportation. (Ynet 17.04)

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4.2 Jordan’s Environment Ministry to Install Tracking Devices on Septic Tankers

All of Jordan’s septic tankers will be installed with tracking devices by the start of summer to monitor trucks’ discharge point of sewage. Under an electronic tracking system, smart devices will be installed on an estimated 700 septic tank trucks to prevent the discharge of municipal wastewater in undesignated locations, according to head of the environment protection at the Ministry of Environment, Hussein Shahin. An operations center at the Environment Ministry will be set up to accommodate the electronic tracking system, which will feature the authorized locations for the discharge of municipal wastewater and follow the movement of each septic tanker across the country. The system will send notifications that the septic tanker’s valve has been opened for the disposal of wastewater if it is at an undesignated site. Authorities are recording a growing number of violations involving random disposal of municipal wastewater in different parts of the country, attributing the rise to the booming population in light of the influx of Syrian refugees. (JT 18.04)

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4.3 Jordan Launches $930 Million Water Strategy for Amman and Zarqa

On 8 April, Jordanian Prime Minister Mulki launched a $930 million strategy to increase households’ connectivity to the wastewater network in Amman and Zarqa, raising it from the current 80% to 90% by the year 2025. The strategy entails the implementation of 21 projects including the construction of new wastewater treatment plants, the expansion and refurbishment of existing plants, and the installation of new sewage networks. The Amman and Zarqa wastewater strategy, set to be fully executed in eight years, seeks to increase linkage to the wastewater network, while utilizing wastewater as one of the Kingdom’s strategic water resources for constrained cultivations and industry. Mulki stressed Jordan’s long experience and success in managing water resources due to its water scarcity, noting that the Kingdom now ranks among the world’s best countries in the water management sector.

At the launching ceremony, Minister of Water & Irrigation Nasser said that the goal of reaching a 90-per cent household connectivity to wastewater services is a high rate in global terms. The minister noted that, with the implementation of the projects, the Kingdom will increase the amount of treated wastewater from the current 115 million cubic meters per year to 250 million cubic meters by the year 2025. The strategy, he said, will also help protect surface and underground water resources from pollution, improving the population‘s health and environmental conditions in the two governorates.

A variety of funding mechanisms will help finance the strategy’s 21 projects, according to the ministry, for which funding will come from the Treasury, as well as easy loans and grants from the US, South Korea, Saudi Arabia, the European Bank for Reconstruction and Development, Germany and Britain. Nasser noted that some projects were already under way, expressing the government’s appreciation for donor countries’ and agencies’ financial and technical support. The Jordan Water Company (Miyahuna) provides water services to 150,000 subscribers in Zarqa and 600,000 subscribers in Amman. (JT 08.04)

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4.4 Dubai Considers Plan to Turn Organic Waste Into Energy

Dubai Municipality is studying offers to generate energy from organic waste, as well as producing compost from the waste. Hussain Nasser Lootah, director-general of the authority, said the plan is part of a strategy to send no more than 2% of waste to landfill. He said that so far the municipality has been able to reduce the amount of waste from 11,500 tonnes per day four years ago to the current level of 5,532 tonnes per day. The municipality has also succeeded in reusing around 10% of waste, with plans by 2020 to recycle 75% of waste. There are 11 landfill sites in Dubai, with hygienic dumping currently being carried out in six landfills, WAM said. (AB 11.04)

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4.5 Saudi Arabia Seeks 10% Renewable Energy in Six Years

Saudi Arabia wants 10% of its electricity to come from renewable sources within several years as part of a transformation in its power sector, the energy minister Khaled al-Falih. Saudi Arabia also seeks to sell renewable energy and its technology abroad. At a forum seeking investment in the sector, he announced “30 projects to be implemented” in order to reach a goal of about 10 gigawatts of renewable energy production early next decade. Virtually all of the kingdom’s domestic power currently comes from crude, refined oil or natural gas.

However, as part of an economic reform plan to wean the kingdom off oil, the government has embarked on what Falih called an “ambitious” renewables program featuring solar and wind power. He has said the projects could cost between $30 billion and $50 billion. Falih said the energy sector is being completely restructured to include an autonomous board of regulators, and with privatized generation capacity. He formally opened bids on the first 300 MW solar plant under the renewables plan. The government has shortlisted 51 firms, most of them from abroad, for bidding on that plant and a 400 MW wind farm. Another wind project will be launched in the fourth quarter of this year, followed by more solar projects, he told hundreds of delegates. Government estimates say Saudi peak energy demand is expected to exceed 120 gigawatts by 2032. Falih told the forum that nuclear power will also be part of the kingdom’s energy mix. (AFP 17.04)

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5: ARAB STATE DEVELOPMENTS

5.1 Lebanon’s Balance of Payments Registered a $508.5 Million Surplus in February 2017

According to the Central Bank of Lebanon, Lebanon’s Balance of Payments (BoP) witnessed, for the first time in 3 years, a surplus of $508.5M by February 2017 as compared to the $356.3M deficit recorded during the same period in 2016. In details, the Net Foreign Assets (NFA) of both BDL rose by $605.3M over the period on the back of the Swap operation that took place during the second half of 2016. As for commercial banks NFAs, they slipped by $96.8M by February 2017 compared to a $562.8M drop a year earlier. Moreover, the BoP managed to record a growing monthly surplus of $341.8M in February 2017 alone, up from $166.7M in the previous month. In fact, the NFAs of both BDL and the commercial banks displayed monthly upticks of $306.0M and $35.8M, respectively. (CBL 04.04)

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5.2 Lebanon’s Tourism Sector Posted a 12.25% Improvement in February

According to the Ministry of Tourism, the number of tourists visiting Lebanon during the first two months of 2017, displayed a 12.25% year-on-year (y-o-y) progress, where the total number of tourists went up from 191,808 to 215,309. Arabs, representing 40.21% of all tourists, revealed a 26.96% increase to 86,565 by February. This increase is heavily influenced by the number of Iraqi incomers, which surged 36.49%, to 37,237. Moreover, the number of tourists from Jordan and Egypt increased 20.11% and 5.33%, respectively. In contrast, the number of incomers from the United Arab Emirates dropped from 948 to 329. As for the number of European tourists that constituted 37.59% of the total, it rose 33.91% y-o-y to 80,930 by February 2017. This can be attributed mainly to the numbers of French, British and German tourists which respectively grew by 40%, 33% and 39% to reach 22,307, 9,464 and 9,627. As for the numbers of American and Asian travelers, they respectively rose by 5.3% and 7.5% y-o-y to 28,710 and 14,013 tourists. In February alone, tourist numbers reflected a healthy 13.1% progress compared to the same period in 2016. (MoT 03.04)

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►►Arabian Gulf

5.3 Qatar’s Consumer Price Index for March Increases By 0.2%

Qatar’s consumer price index (CPI) for March reached 108.6, showing an increase of 0.2%, compared to the CPI of February. Compared to the CPI of March, 2016, (y-o-y basis) a 0.9% rise has been recorded, according to the Ministry of Development and Statistics. An analysis of m-o-m basis for March compared with February showed there are four main groups where respective indices in the month increased, namely transport by 1.5%, recreation and culture by 0.7%, clothing and footwear by 0.4% and restaurants and hotels by 0.1%. There was a decrease in prices in food and beverages by 0.6% and housing, water, electricity and other fuel by 0.4%. The other groups: tobacco, furniture and household equipment, health, communication, education and miscellaneous goods and services remained flat.

A comparison of the March CPI with that of March 2016 pointed to a rise in the general index by 0.9%. This y-o-y price surge was primarily due to the increasing prices seen in transport by 8%, education by 3%, furniture and household equipment and miscellaneous goods and services by 1.4% each and clothing and footwear by 0.2 %.

There was a decrease in price levels in restaurants and hotels by 2.8%, recreation and culture by 1.6%, housing, water, electricity and other fuel by 1%, food and beverages by 0.4%, health by 0.2% and communication by 0.1%. The CPI for March, excluding housing, water, electricity and other fuels group stood at 107, an increase of 0.4 %compared to February and 1.5% compared to March 2016. (bq 10.04)

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5.4 Saudi to Shelve & Restructure Billions of Dollars of Unfinished Projects

Saudi Arabia’s government is ordering its ministries and agencies to review billions of dollars’ worth of unfinished infrastructure and economic development projects with a view to shelving or restructuring them, government sources said. Riyadh’s Bureau of Capital and Operational Spending Rationalization, set up last year to make the government more efficient, is compiling a list of projects that are under 25% complete. Many of these projects are relics of a decade-long boom of high oil prices and lavish state spending, which ended when oil began sliding in mid-2014, making it increasingly difficult for Riyadh to find the money needed to complete their construction. Officials will study the feasibility of the projects in light of the government’s reform drive, which aims to diversify the economy beyond oil exports, and decide whether to suspend them indefinitely or try to improve how they are conducted.

Under BOT contracts, private investors finance and build projects and operate them for a period of time to earn a profit before eventually transferring ownership to the government. Riyadh has said it is keen to begin bringing the private sector into projects to ease pressure on state finances. Seeking to close a huge budget deficit caused by low oil prices, the government clamped down on infrastructure spending last year. Finance Minister al-Jadaan said in February this year that the efficiency bureau had so far saved the kingdom $21.33 billion. The plan to review unfinished projects suggests the government is looking for large additional savings this year. In a report at the end of last year, it estimated the cost of completing all capital spending projects currently underway at about 1.4 trillion riyals. (Reuters 17.04)

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►►North Africa

5.5 Egypt’s Annual Core Inflation Falls to 32.25% in March

Egypt’s annual core inflation eased to 32.25% in March down from 33.10% in February, the central bank (CBE) said on 10 April. On a monthly basis, core inflation dropped to 0.97%, down from 2.61% in February. The core consumer price index that the CBE uses to measure the level of prices — which excludes essential commodities such as fruits and vegetables — started to hit double digits in May 2016, when it reached a seven-year-high of 12.2%. Egypt’s annual headline inflation hit 32.5% in March, up from 31.7% the month before, state statistics body CAPMAS also announced on Monday. (Ahram Online 10.04)

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5.6 Egypt’s Trade Deficit Declines by 37% Year-On-Year in January

Egypt’s trade deficit dropped 37.1% in January compared to the same month in 2016, reaching $2.34 billion, the state statistics body CAPMAS announced on 11 April. CAPMAS showed that exports increased by 27.1% year-on-year in January, to reach $1.82 billion, led by crude oil, fertilizers and orange exports. Imports for the same month slowed by 19.3% compared to January 2016, to reach $4.16 billion due to the drop in the imports of wheat, passenger cars, and steel and iron raw materials. However, imports of crude oil, petroleum products and corn rose in January 2017, compared to the same month a year before. (CAPMAS 11.04)

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5.7 Moroccan Rain Saves Economic Growth in the First Quarter of 2017

Despite governmental complications, the Moroccan economy did well in the first quarter of 2017, with a growth rate of 4.3%, according to the High Commission for Planning. This performance is due mainly to the impact of substantial rainfall during the first quarter of 2017. The value added in the agriculture sector, which had declined by 9% in the first quarter of 2016, achieved a growth of 12.9% at the end of March, pulling up the overall growth rate of the national economy. If it weren’t for the remarkable growth in the agricultural economy, the national economy would have increased by only 3%, driven by the activities of the tertiary sectors.

Household consumption has also attracted growth over this period, due to moderate increases in consumer prices and improved incomes in rural areas. The growth of household consumption increased by 4% in the first quarter of 2017, instead of 3.1% in the fourth quarter of 2016. It contributed approximately 2.4% to overall GDP growth, instead of 1.8% in the third quarter of 2016. The second quarter of 2017 is expected to record an increase of 14.8% in agricultural added value and a 3.2% improvement in non-agricultural activities, leading to a growth of 4.6% in the national economy, according to the same source. (HCP 06.04)

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5.8 Moroccan Automotive Industry Attracting Investors Worldwide

Boosted by the Industrial Acceleration Plan (PAI), the automotive industry dynamics continue to attract the highest sector’s investors worldwide. As a result, several renowned OEMs have established themselves in Morocco. Due to the good health of the sector, clearly boosted by the Industrial Acceleration Plan (PAI), Morocco continues to attract the biggest caliber of the automotive industry worldwide, reaping the rewards of a well-managed strategy carefully crafted over several years. The sector is now well-positioned in the world of equipment manufacturers and renowned multinationals. Around 60 factories and projects were initiated in 2016, with some are already operational and others still under construction. Added to this are the capacity expansion projects and other greenfields, which will soon be joined by the two French manufacturers Renault and PSA.

The automotive sector is also experiencing a gradual rise in the range of local companies, attracting Moroccan investors, with local manufacturers, especially in the textile sector, launching themselves into the production of seat caps and other small parts automotive products. For them, the challenge now is to consolidate what has been achieved and capture new investments, and Morocco must not only to provide the builders installed in the kingdom, but above all to develop local integration. Further, it must capitalize on the sector’s achievements in its strategy puts to create a favorable environment for major industrialists, around which is grafted a dense fabric of subcontractors to foster mutual growth and technological collaboration. (MWN 17.04)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 One in Four Turkish Youth Unemployed As Unemployment Rate Rises to 13%

Close to a quarter of Turkey’s youth did not have a job in January, according to data from the Turkish Statistics Institute (TUIK) that was released on 17 April. Youth unemployment jumped 5.3% year on year in January to 24.5% overall.

Overall, Turkey’s unemployment rate jumped to 13% in the month, registering a 1.9 year-on-year increase, the highest since February 2010. The country’s non-agricultural unemployment was also announced at 15.2%, representing a 2.2%age point increase. Turkey’s seasonally adjusted unemployment rate was 11.8% in the January 2017 period – a 0.2%age point decrease. The employment rate came in at 44.8% with a 0.2% decrease. The number of employed persons amounted to 26.7 million following a 397,000-person increase in January 2017 compared with the same period of the previous year.

The number of persons in the labor force was announced as 30.7 million after an increase of more than 1 million people in January 2017 compared to the same period of the previous year. The labor force participation rate (LFPR) was 51.5%, good for a 0.8% increase. The LFPR for men was 71.5% – a 0.7% increase – while the rate for women was 32% – a 1% increase compared to the same period of the previous year. (TUIK 17.04)

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6.2 Turkey Runs Nearly $4 Billion Budget Deficit Amid Tax Cuts & Economic Measures

The Turkish government ran a budget deficit of TL 19.5 billion ($5.32 billion) in March and TL 14.9 billion ($3.7 billion) in the first quarter, mainly due to temporary measures and tax cuts to boost the economy. Turkish government revenues in the first three months stood at TL 144.7 billion ($39.5 billion), marking a 9.9% rise year-on-year, while budget expenditures were TL 159.7 billion ($43.6 billion), with an increase of 21.3% compared with the same period last year. In March, budget revenues reached TL 39.1 billion ($10.7 billion), a 3% fall over the same period last year, while budget expenditures increased by 25%, reaching TL 58.6 billion ($16.01 billion).

According to data from the ministry’s budget directorate general, the budget posted a TL 12.4 billion ($3.4 billion) non-interest rate deficit. In the first three months of the year, the budget gave a TL 3.9 billion ($1.09 billion) surplus when interest rate payments were excluded.

According to the ministry, tax revenues rose by 12% during the first three months to TL 121.6 billion ($33.2 billion). The government’s expenditures for health, pensions, and welfare were up by almost 43% between January and March to TL 38.2 billion ($10.4 billion) over the same period last year, while personnel expenditures increased by 8.4%, reaching almost TL 42 billion ($11.5 billion). The government is aiming for a budget deficit of TL 46.8 billion (nearly $12.8 billion) at the end of the year, according to the Finance Ministry. (HDN 17.04)

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6.3 US & Qatar Firms Sign Deal to Explore for Cypriot Oil & Gas

On 5 April, ExxonMobil and Qatar Petroleum signed a license to explore for oil and gas off the coast of Cyprus, and they expect to start drilling next year. The venture was selected as part of the island’s third licensing round to explore block 10. Cyprus Energy Minister Lakkotrypis described as “immense” the firms’ presence in his country’s exclusive economic zone (EEZ) and, for the first time, in the eastern Mediterranean. The minister said a total of 12 exploration wells would be drilled in the newly licensed blocks: 6, 8 and 10. Exploration and production sharing contracts were signed on 6 April by Italy’s ENI and France’s Total for block 6, and by ENI for block 8. Cyprus would receive a total of €103.5 million ($110.5 million) in signature bonuses from the contracts.

ExxonMobil and Qatar Petroleum said they had begun planning for drilling operations and intend to drill a first exploration well in 2018. The blocks on offer are close to where ENI made a huge find in Egypt’s offshore “Zohr” field that could hold 30 trillion cubic feet of gas. The field sits adjacent to a Cyprus block licensed to Total.

US firm Noble Energy made the first find off the island’s southeast coast in 2011 in the Aphrodite field (block 12), which is estimated to contain around 127.4 billion cubic meters of gas. Israeli firms Delek and Avner have a 30% stake in the venture. Noble has handed over a 35% share to the Britain’s BG International. Block 12 has been declared commercially viable but an action plan on the next steps has yet to be finalized.

Cyprus needs to find more gas reserves to make a planned onshore terminal financially viable as it seeks to become a regional energy player. It had planned to build a liquefied natural gas plant that would allow exports by ship to Asia and Europe, but the reserves confirmed so far are insufficient to make that feasible. Cyprus and energy-starved Egypt are looking into the possibility of transferring gas from the Aphrodite field to Egypt via an undersea pipeline. Cyprus hopes to begin exporting gas, and maybe oil, by 2022. (AFP 05.04)

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6.4 IMF Says Greek Economy to Grow 2.2% in 2017 and 2.7% in 2018

Economic growth in Greece will reach 2.2% in 2017 and increase to 2.7% in 2018, the International Monetary Fund said in its World Economic Outlook report. However, the economy will cool down by 2022 and growth will stumble, achieving an increase of just 1% on the year [2022], the report said. In 2016, the Greek economy will remain unchanged. The Fund said the Greek economy’s capacity to maintain satisfactory economic growth rates in the long-term without high inflation (the so-called potential output) remains very low.

On unemployment, the report forecasts it will fall from 23.8% in 2016 to 21.9% in 2017 and 21% in 2018. The last time unemployment in Greece stood at an average of 21% was in 2011.

Concerning Greece’s external deficit, the IMF says the current account in 2016 showed a deficit of 0.6% of GDP, which will be limited to 0.3% of GDP this year and will achieve a balance in 2018, so that in 2022 it will turn into a surplus of 0.1% of GDP. This performance reflects the Fund’s estimates for an improved competitiveness of the Greek economy, primarily as a result of the ongoing internal devaluation.

On inflation, the report estimates that a 1.1% deflation in 2015 turned to a zero rate in 2016, while in 2017 the country will return to a 1.3% inflation rate for the first time after 2012. For 2018, the report foresees an increase of inflation to 1.4% of GDP which will increase further to 1.7% of GDP in 2022. (ANA 18.04)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Yom HaShoah – Holocaust Martyrs’ & Heroes’ Remembrance Day 2017

Israel will mark Holocaust Martyrs’ & Heroes’ Remembrance Day (Yom HaZikaron HaShoah ve-laGvura in Hebrew) beginning on Sunday evening, 23 April and Monday, 24 April. Holocaust Remembrance Day (Yom HaShoah) is a national day of commemorating the six million Jews murdered in the Holocaust. It is a solemn day, usually beginning at sunset on Hebrew date of 26 Nisan and ending the following evening. The internationally recognized date comes from the Hebrew calendar and corresponds to the 27th day of Nisan on that calendar. It marks the anniversary of the 1943 Warsaw ghetto uprising. This year, the observance begins one day later to prevent the desecration of the Sabbath in preparation for the memorial services.

Places of entertainment are closed and memorial ceremonies are held throughout the country. The central ceremonies, in the evening and the following morning, are held at Yad Vashem and are broadcast nationally on television. Marking the start of the day, in the presence of the President and the Prime Minister, dignitaries, survivors, children of survivors and their families, gather together with the general public to take part in the memorial ceremony at Yad Vashem in which six torches, representing the six million murdered Jews, are lit. The following morning at 10:00, the ceremony at Yad Vashem begins with the sounding of a siren for two minutes throughout the entire country. For the duration of the sounding, work is halted, people walking in the streets stop, cars pull off to the side of the road and everybody stands at silent attention in reverence to the victims of the Holocaust. Afterward, there is a central ceremony at Yad Vashem, while other sites of remembrance in Israel, such as the Ghetto Fighters’ Kibbutz and Kibbutz Yad Mordechai, also host memorial ceremonies, as do schools, military bases, municipalities and places of work. Throughout the day, both the television and radio broadcast programs about the Holocaust.

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7.2 Israel Commemorates Those Who Fell in Service to the Nation

Israel’s Memorial Day for Fallen Soldiers and Victims of Terrorism which will begin at sundown on 30 April, honors the soldiers who have fallen in the line of duty since 1860 (when modern-day Jews first lived outside of Jerusalem’s Old City walls). The Memorial Day begins with a minute-long siren sounded at 20:00h, followed immediately by official events. On the following day, a two-minute siren will be sounded at 11:00 as part of Memorial Day ceremonies across the country. For the duration of the sounding of both sirens, work is halted, people walking in the streets stop, cars pull off to the side of the road and everybody stands at silent attention in reverence to the fallen soldiers and victims of terrorism.

A small flag a black ribbon will be laid on the grave of every soldier who died in the line of duty as an expression of respect and sympathy. More than a million people are expected to visit military cemeteries across the country. Though a regular work day, activity is usually curtailed and many leave their offices early pending the Independence Day celebrations that follow.

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7.3 Israel’s Independence Day – 69 Years After Sovereignty was Regained

Celebrations for the 69th anniversary of Israel’s regaining its independence will begin on Monday evening, 1 May throughout the country, continuing throughout Tuesday, 2 May. The official observance starts when the state flag is raised to full mast at a national ceremony on Mount Herzl in Jerusalem. Israel Independence Day is celebrated annually on 5 Iyar, which corresponded to 14 May 1948, the date the British mandate ended over the Land of Israel. A religious and national holiday, Yom HaAtzmaut – Independence Day is a celebration of the renewal of the Jewish state in the Land of Israel, the birthplace of the Jewish people. In this land, the Jewish people developed its distinctive religion and way of life. In the Land of Israel, the Jews preserved an unbroken physical presence, for centuries as a sovereign state, at other times under foreign domination. Throughout their long history, the yearning to return to the Land has been the focus of Jewish life. With the rebirth of the State of Israel, in 1948, Jewish independence, lost 1,878 years earlier, was restored.

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7.4 Israel Appoints its First Female Muslim Diplomat

On 5 April, Israel’s Foreign Ministry appointed Rasha Atamny, 31, to represent the Jewish state in Ankara, Turkey, making her Israel’s first female Muslim diplomat. Atamny, who is completing the final months of the ministry’s cadet course, will serve as the embassy’s first secretary in Ankara. Atamny hails from the Arab town of Baqa al-Gharbiya in central Israel.

She is not Israel’s first female Arab diplomat. Christian-Arab Rania Jubran, the daughter of Supreme Court Justice Salim Jubran, worked for the ministry from 2006 to 2009, but left shortly before she was due to be sent to Cairo. Israel also has several male Muslim and Christian diplomats. (ToI 06.04)

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*REGIONAL:

7.5 UAE Public & Private Sector Isra and Mi’raj Holiday Announced

The UAE public sector will enjoy a long weekend for the Isra and Mi’raj holiday this month while private sector employees mark the holiday on Saturday, 22 April. The Federal Authority for Government Human Resources said public sector employees would be given Sunday, 23 April off. Ministries and Federal agencies will resume work on Monday.

Known as the Prophet’s Ascension or the Night Journey, Isra and Mi’raj are the two parts of Prophet Mohammed’s journey from Mecca to the farthest mosque during a single night. He is said to have travelled on a winged horse before ascending to heaven to speak to God, who gave him instructions to take back to Muslims regarding the details of prayer. The fruit of this gift is the five daily prayers. According to tradition, God initially commanded the Prophet to tell his followers to pray 50 times every day. But on his way back to Earth, the Prophet met Moses, who advised him to ask God for a reduction in the number of prayers to make worship more realistic for Muslims. Many Muslims will observe the event with prayers at mosques or at home late into the night, and some will fast. (The National 09.04)

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7.6 Egypt’s Parliament Approves Three-Month State of Emergency

On 11 April, Egypt’s parliament unanimously approved a three-month state of emergency, broadening the power of authorities to crack down on what it called enemies of the state days after two church bombings killed at least 45. Two suicide bombings claimed by the IS terror group at churches in Alexandria and Tanta plunged the nation into mourning and sent shockwaves through a Coptic Christian community, which has increasingly been targeted by militants. The countrywide state of emergency was declared by President Abdel Fattah Al Sisi after the attacks but required parliamentary approval according to the constitution.

The end of emergency law was a key demand during the 2011 uprising that ousted former president Hosni Mubarak, who had imposed a 30-year state of emergency to crush opposition. The law was lifted after Mubarak stepped down but re-imposed temporarily in the years that followed. Addressing parliament, Prime Minister Sherif Ismail said the state of emergency was essential to combat what he called terrorist groups bent on undermining the country. The law grants the executive branch sweeping powers, allowing it to close companies, shutter media outlets, halt demonstrations and monitor personal communications without judicial approval. (Reuters 11.04)

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7.7 Erdogan Celebrates Referendum Win As Rivals Urge Recount

On 17 April, Turkish President Erdogan celebrated a narrow win in a referendum giving him sweeping new powers that exposed bitter divisions in Turkey and left incensed rivals demanding a major recount. The referendum was seen as crucial not just for shaping the political system of Turkey but also the future strategic direction of a nation that has been a NATO member since 1952 and an EU hopeful for half a century. The ‘Yes’ camp won 51.41% on the 16 April referendum on a new presidential system and ‘No’ 48.59, according to near-complete results released by the election authorities. But Erdogan’s victory was far narrower than expected, emerging only after several nail-biting hours late Sunday which saw the ‘No’ result dramatically catch up in the later count. Turkey’s three largest cities — Istanbul, Ankara and Izmir — all voted ‘No’ although ‘Yes’ prevailed in Erdogan’s Anatolian heartland. The new system is due to come into effect after elections in November 2019.

Erdogan declared that Turkey’s had made a “historic” decision and appeared standing on top of a bus in front of thousands of cheering supporters outside his Huber Palace Istanbul residence on the shores of the Bosporus. But the opposition were not content to rest on their better-than-expected performance despite a lopsided campaign in which the ‘Yes’ camp enjoyed vastly greater resources and dominated the airwaves. Both the main opposition Republican People’s Party (CHP) and the pro-Kurdish Peoples’ Democratic Party (HDP) said they would appeal the results from most of the ballot boxes due to alleged violations. They were particularly incensed by a decision by the Supreme Election Board (YSK) to allow voting papers without official stamps to be counted, which they said opened the way for fraud.

Throughout the campaign, Erdogan launched bitter attacks on the European Union, accusing member states of behaving like the Third Reich in failing to allow his ministers to campaign among expats. The initial reaction from Turkey’s Western allies was far from ebullient, with top EU officials saying Turkey had to find the “broadest possible” agreement on the changes in view of the closeness of the result. In an indication more strife with Brussels could be in the offing, Erdogan said he would now hold talks on reinstating capital punishment, a move that would automatically end Turkey’s EU bid. If the opposition failed to support such a bill, he said another referendum could be held on reinstating the death penalty.

The new system would dispense with the office of prime minister and centralize the entire executive bureaucracy under the president, giving Erdogan the direct power to appoint ministers. It would also mean that Erdogan, who became president in 2014, could seek two more five-year terms leaving him in power until 2029. (AFP 17.04)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Veterans Affairs Purchases 28 Additional ReWalk Exoskeleton Systems

ReWalk Robotics announced that the U.S. Department of Veterans Affairs (VA) purchased 28 ReWalk Personal Exoskeleton Systems to support an ongoing national multi-center clinical trial. ReWalk confirmed shipment of 20 systems to the VA in Q1/17; the remaining eight systems from this purchase will be shipped in the second quarter of this year. The 28 system purchase follows an initial purchase of 20 systems by the VA in 2016, which helped with the initiation of the multi-year, multi-center study. The clinical trial is the first-ever study conducted in the US to study the impact of exoskeleton use in a personal setting. The study is enrolling 160 randomized patients, half of whom use ReWalk Robotics’ exoskeleton system and half of whom use standard wheelchairs. Currently, there are six VA centers actively enrolling participants in the study, with four more VA centers set to be included by this summer. At the end of the study, all participating patients could qualify for procurement of a ReWalk exoskeleton system.

Founded in 2001, Yokneam Illit’s ReWalk Robotics develops, manufactures and markets wearable robotic exoskeletons for individuals with spinal cord injury. Their mission is to fundamentally change the quality of life for individuals with lower limb disability through the creation and development of market leading robotic technologies. (ReWalk 06.04)

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8.2 DarioHealth Corp. Completes $4.5 Million Public Offering of Common Stock

DarioHealth Corp. announced the closing of its previously announced underwritten public offering of 1,450,000 shares of its common stock at an offering price of $3.10 per share of common stock. Gross proceeds to Dario from this offering are approximately $4,500,000 before deducting underwriting discounts and commissions and other estimated offering expenses payable by Dario. Dario intends to use the net proceeds from this offering for commercialization efforts of its products, including increased marketing and production expenses, and for general working capital purposes. Aegis Capital Corp. acted as the sole book-running manager for the offering. Migdal Investment Banking served as Dario’s Israeli advisor in the offering.

Caesarea’s DarioHealth Corp. is a leading global digital health company serving tens of thousands of users with dynamic mobile health solutions. They believe people deserve the best tools to manage their treatment, and harnessing big data, we have developed a unique way for our users to analyze and personalize their diabetes management. With their smart diabetes solution, users have direct access to track and monitor all facets of diabetes, without having the disease slow them down. The acclaimed Dario Blood Glucose Monitoring System all-in-one blood glucose meter and native smartphone app gives users an unrivaled method for self-diabetes management. (DarioHealth 05.04)

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8.3 Mazor Robotics Receives FDA Clearance for Spinal Deformity Correction Planning Software

Mazor Robotics has received FDA clearance for its Mazor X Align software. Mazor X Align is designed to assist surgeons in planning spinal deformity correction and spinal alignment for procedures performed with the Mazor X Surgical Assurance Platform. Mazor X Align leverages Mazor Robotics’ extensive experience in pre-operative planning, image processing, computerized anatomy recognition, and registration of different imaging modalities. It is the latest module to be added to the Mazor X proprietary Pre-operative Analytics software suite, and enables surgeons to create a patient-specific, three-dimensional spinal alignment plan. The 3D plan simulates an entire spine, allowing pre-operative estimation of the impact of a planned surgical correction on the patient’s posture post-operatively, considering segmental range-of-motion and final alignment parameters. Mazor X Align will be released to a selection of Mazor X customers in early May. This early release will be followed by a widespread release during the second half of 2017.

Caesarea’s Mazor Robotics believes in healing through innovation by developing and introducing revolutionary technologies and products aimed at redefining the gold standard of quality care. Mazor Robotics Guidance Systems enable surgeons to conduct spine and brain procedures in an accurate and secure manner. (Mazor Robotics 12.04)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Inception Fights “Lagging”, VR’s Worst Enemy – Unveils Interactive Multi-Track Technology

Inception unveiled its new layer of innovation that utilizes multi-track real time streaming and spatial audio for a seamless interactive VR experience. This recent development overcomes VR’s major pain – the ability to create more immersive and interactive experiences. Inception’s solution lessens bandwidth issues and allows users to navigate interactive VR experiences by switching between video and audio tracks with minimal lagging.

Until now, VR technology has struggled to deliver a fully immersive virtual experience that can withstand high quality visual and audio effects and navigate through scenes as they unfold without interruptions. Multi-track technology will be implemented across the Inception app, and can be applied to special effects, audio tracks, and video overlays diminishing buffering or lagging to create a more lifelike VR experience. Imagine stepping into a virtual world with one click, where the sound and visual stimulation around you adjusts according to your movement and guides you in a certain direction, so you know where to look when immersed in 360 and fully enjoy it with minimal lag. Inception’s recent technological development helps break down existing immersive VR barriers and supplies users with an engaging interaction that’s user friendly, mimics real-world conditions, and enhances VR.

Tel Aviv’s Inception is fast becoming the leading 360 & VR destination of choice for premium content for millennials. Inception launched in October 2016, and has apps for Oculus Rift, Samsung Gear, iOS, Android, Google Daydream, HTC Vive, with Sony PS coming soon. It has already become one of the top Entertainment VR apps. Inception utilizes a unique combination of proprietary technology, a distribution platform and exclusive content formats and rights, to deliver the most engaging VR experiences via a best-in-class app, cost effectively and to the very highest standards. (Inception 04.04)

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9.2 IRI Forms Strategic Alliance with Freshub

Chicago’s IRI, the global leader in innovative solutions and services for consumer, retail, media and over-the-counter health care companies, entered into a strategic alliance with Freshub, the pioneer of Smart Kitchen Commerce solutions that brings together grocery retailers and appliance manufacturers to make the IoT-driven Smart Kitchen a reality. The new relationship will enable IRI and Freshub to provide retailers with relevant, dynamic and actionable information based on traditional data sources, as well as IoT-based data sources. In connection with this alliance, IRI and Freshub clients will now have the ability to target household-level product recommendations and enjoy direct access to rich “alternative products” suggestions. The relationship also will spur development of a range of additional innovative features, such as product-level health indicators.

Petah Tikva’s Freshub is a leading Smart Kitchen Commerce ecosystem business adviser, technology provider and systems integrator. The company brings grocery retailers and appliance manufacturers together to make the smart kitchen a reality, offering direct access to online supermarkets via such kitchen appliances as connected microwaves, countertop music players and smart bins. Consumers can add products to their digital shopping carts by simply scanning grocery items and packages in front of appliances or naturally issuing voice commands. (IRI 05.04)

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9.3 Chooze Officially Launches IOS App That Uses Psychology to Help With Baby Naming

Israeli startup Chooze announced the official launch of its science-based iOS app that helps expectant parents choose the perfect baby name. Chooze is a revolutionary approach to an age-old challenge that today drives 1 million monthly searches on Google and countless conversations between partners. Chooze uses the latest in cognitive psychology to help parents decipher their subconscious preferences for names, giving expectant parents peace of mind while preventing the regret that hits 1 in 5 parents according to a study conducted by Bounty.com. To celebrate the official launch, Chooze will be offered at a promotional rate of $0.99, normally $1.99.

With Chooze, expectant parents are asked to provide 2 names they dislike and 2 names they’re considering and associate them as quickly as possible to negative and positive topics like hate and love. Tapping into the normal winnowing down process of choosing names, Chooze serves as a much needed tie-breaker when expectant parents are down to the last few options. Chooze measures and tests the speed of association to determine the future parents’ emotional connection to specific baby names. The end result is a scientifically-based calculation of true name preferences.

Tel Aviv’s Chooze is an iOS app developed by a team of entrepreneurs, cognitive psychologists, software engineers & designers to help parents worldwide find the right names for their children. (Chooze 06.04)

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9.4 Apriva & OTI Announce Semi-Integrated Solution for Unattended Markets

Scottsdale, Arizona’s Apriva, a leading provider of omni-channel payment solutions and secure mobile communications, and On Track Innovations announced a partnership to bring a new end-to-end EMV solution to markets supporting unattended payments. This pre-certified payment solution immediately supports magnetic stripe reader (MSR) transactions, and will soon be EMV certified on various processors through Apriva. As a semi-integrated solution, the OTI TRIO reader is securely interfaced with the Apriva gateway, which means a quick integration process for unattended systems. Security includes real-time data encryption, using the industry standard DUKPT (derived unique key per transaction) encryption method, with no cardholder or card data stored.

For over two decades, OTI has provided enterprises worldwide with cashless payment options, including NFC products and solutions. OTI’s TRIO is a modular payment device that can support up to three cashless payment interfaces in one enclosure. The TRIO is specifically designed for installation in unattended environments, such as kiosks and vending machines, to enable cashless payment with magnetic payment cards, as well as mobile (Apple Pay, Android Pay, Samsung Pay), EMV chip and contactless payment cards.

Rosh Pina’s On Track Innovations (OTI) is a global leader in the design, manufacture, and sale of secure cashless payment solutions using contactless NFC technology with an extensive patent and IP portfolio. OTI’s field-proven innovations have been deployed around the world to address cashless payment and management requirements for the Internet of Payment Things (IoPT), wearables, unattended retail and petroleum markets. (OTI 11.04)

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9.5 Safe-T and Check Point Secure the Digital Enterprise

Safe-T Data and Check Point Software Technologies announced a joint partnership designed to help organizations secure all incoming data channels from known and zero-day attacks. With the joint solution, organizations using Check Point SandBlast for scanning files can now seamlessly and automatically scan any file entering the organization from any source to any destination, regardless of network topology, including cloud, remote/local employees, customers, third-party business partners and remote applications. This is achieved by integrating Safe-T HDS into all data storage locations and transfer flows, using Safe-T Connectors and APIs, and combining it with Check Point SandBlast.

Herzliya Pituah’s Safe-T Data is the provider of solutions designed to mitigate attacks on business-critical services and data for a wide range of industries, including: financial, healthcare, government, etc. Safe-T’s High-risk Data Security (HDS) Solution mitigates data threats: un-authorized access to data, services, networks, or APIs; as well as data related threats, including data exfiltration, leakage, malware, ransomware, and fraud. Companies and Governments around the world trust Safe-T to secure their data, services, and networks from insider and external data threats. Focused on providing security solutions for the enterprise market, Safe-T enables organizations to benefit from enhanced productivity, efficiency, heightened security, and improved regulatory compliance. (Safe-T Data 13.04)

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9.6 Mellanox 25Gb/s Ethernet Adapters Chosen By Major ODMs for Next Generation Data Centers

Mellanox Technologies announced that the ConnectX-4 Lx 25Gb/s OCP and PCIe Ethernet adapters have been adopted by major ODMs. The ConnectX-4 Lx 25 gigabit Ethernet adapters provide 2.5 times the data throughput at lowest latency needed for data center applications while utilizing the same infrastructure as 10 gigabit Ethernet, thus maximizing the data center return on investment. The company is currently shipping hundreds of thousands of Ethernet adapters every quarter, reflecting a growing demand for Mellanox Ethernet solutions.

Since 2016, Wiwynn Corporation, a leading cloud infrastructure provider of high quality computing and storage products, has shipped its OCP server SV7221G2 product family with the Mellanox 25GbE ConnectX-4 Lx OCP Mezzanine NICs and PCIe cards to major Internet service providers. Acer, a Taiwanese multinational hardware and electronics corporation specializing in advanced electronics technology has also qualified ConnectX-4 Lx PCIe adapters and will soon offer their servers Altos R380 F3, R360 F3 and AW2000h F3, to the market. Since 2016, Mitac-TYAN has been shipping ConnectX-3 Pro 40GbE OCP mezzanine cards and recently added the ConnectX-4 Lx 25GbE OCP mezzanine cards to its GT86A-B7083 server offering.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage, and hyper-converged infrastructure. Mellanox intelligent interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance. Mellanox offers a choice of high performance solutions: network and multicore processors, network adapters, switches, cables, software and silicon, that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage, network security, telecom and financial services. (Mellanox 18.04)

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9.7 MySize Engaged by Israeli Postal Service to Provide New Measuring Solutions

MySize announced a new cooperation agreement has been signed with the Israeli Post. This agreement calls for MySize to supply the Israeli Postal Service with two new services. MySize solution for the courier market is proprietary to MySize and the company seeks to provide a solution to global Courier market. This application will provide a solution to measure all types of packages using only a smartphone. Based on the package size, the user will be quoted a shipping price and picture of the package dimension. In addition, The Israel Post has developed relationships in the online fashion apparel markets with fashion retailers and contracted with MySize for solutions to ship the correct size with using their “TrueSize” application. These technology solutions are being developed in accordance with the specific specifications provided by the Israel Post. A team from the Israel Post will be selected to work on this project with MySize staff.

Once these solutions are developed MySize will provide The Israel Post with a 3 month trial period. Subsequent to the trial period, the Israeli Post will have the service operational for another 3 months at no charge. At the end of the second 3 months, an agreement shall be finalized by both parties on the commercial terms of this new service for a non-exclusive agreement with the Israeli Post.

Airport City’s MySize is developing unique measurement technologies based on sophisticated algorithms and cutting edge technology with broad applications including apparel industry, e-commerce, shipping and parcel industry measurement. This proprietary technology is driven by several patent-pending algorithms which are able to calculate and record measurements in a variety of novel ways. (MySize 18.04)

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9.8 Altair Powers Latest Verizon-Certified Vehicle Telematics Offering from Queclink

Altair Semiconductor announced that Verizon Wireless has certified a new vehicle telematics device manufactured by leading machine-to-machine (M2M) solution provider Queclink, and powered by Altair’s LTE CAT-1 chipset. Queclink’s tracking products are designed for automotive tracking, fleet management, tracking & tracing, lone worker safety, mobile health care, remote monitoring and control of assets, and wireless alarms to cover most popular applications via the Internet. The newly launched mini vehicle tracking device can remotely immobilize a car if the owner defaults on their lease payments.

Altair’s CAT-1 chipset employs advanced idle and sleep mode power management. Designed specifically for IoT and M2M applications, including vehicle telematics, wearables, smart meters and security systems, the ALT1160 offers a combination of low cost, reduced power and small size that is unmatched in the market.

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9.9 Beamr Announces First of Kind HEVC Content-Adaptive Software Encoder

Beamr Imaging announced the first-of-its-kind commercial implementation of a quality driven content-adaptive HEVC software encoder, Beamr 5x. This innovative product utilizes Beamr’s 29 granted patents and 18 pending patent applications to produce HEVC video encodes that are up to 50% smaller than Beamr’s market-leading HEVC software encoder, Beamr 5.

The consumer expectation for higher video quality is growing, and with HEVC decode capability expanding rapidly across the mobile device, TV and set-top box ecosystem, the industry is approaching an inflection point where services unable to deliver 1080p in under 2Mbps, and 4K HDR under 10Mbps, will struggle to compete in the crowded entertainment services marketplace. Beamr 5x has been shown to deliver amazingly low bitrates while maintaining unusually high video quality. The innovation at the heart of Beamr 5x is the perceptual optimization technology that powers Beamr’s H.264 content-adaptive video optimizer and JPEGmini image optimization solutions which are used by the world’s largest media & entertainment companies. When combined with the best implementation of the most advanced codec in the market (HEVC), content owners and distributors no longer need to sacrifice quality for bitrate.

Tel Aviv’s Beamr is the leading provider of content-adaptive video encoding and optimization solutions for the world’s top MSOs, OTT streaming service providers, Hollywood studios, video distribution platforms, and social media content publishers. Beamr’s high-performance H.264 and H.265/HEVC video processing solutions are fully scalable for use in on-premise and cloud deployments. With 29 patents granted and 18 pending, Beamr’s content-adaptive technology is setting a new standard for quality and bitrate performance. (Beamr 18.04)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Inflation Rate in March Increases by 0.3%

The Central Bureau of Statistics announced that Israel’s Consumer Price Index (CPI) rose by 0.3% in March, reported this afternoon, and has now risen 0.9% over the past 12 months. The March CPI was higher than the analysts’ consensus of a 0.1% rise. Notable price rises during March were: fashion and footwear (4.9%), housing costs (0.8%) and entertainment and culture (0.1%). Notable price falls included public transport (0.5%). The Central Bureau of Statistics also published the Home Prices Index for January-February 2017, which showed a slowdown in price rises. Home prices rose a negligible 0.1% in the first two months of the year and have risen 6% over the past 12 months. After three years of negative inflation, there are signs that inflation may be returning to the Bank of Israel’s desired target range of 1-3%. (CBS 14.04)

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10.2 Number of Israeli Jobseekers Falls to a New 10 Year Low

The Israel National Employment Service (INES) released data that showed some 167,400 jobseekers registered at INES offices in March (the figures are seasonally adjusted), compared with 168,800 in February, marking a 0.8% decrease. The figures indicate a 10 year low in unemployment and an all-time low in comparison with the number of employed, which has risen steeply in recent years, due to both natural population increase and a higher rate of participation in the labor force. The decline is stark in comparison with previous years. The number of those appearing at INES offices averaged 168,800 in Q1/17, down 9.2%, compared with Q1/16, when the number was 185,800 jobseekers. The decline since Q1/15 is 18.3%. (INES 06.04)

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10.3 Israel Welcomes Record Incoming Tourism During First Quarter

Israel’s Ministry of Tourism announced that the number of tourists entering Israel reached an all-time record of 739,000 in the first quarter of 2017, up 24% from the corresponding quarter of 2016. For March alone, 293,000 tourists arrived in Israel from abroad, a 22% increase over March 2016. The sharp rise in tourism comes despite the significant strengthening of the shekel, which makes Israel an expensive destination.

Over the first three months of 2017, incoming tourism earned the Israeli economy an estimated NIS 4 billion, up NIS 730 million from the corresponding period of 2016. The rise in tourism has added some 5,000 new jobs to the Israeli economy. In 2016, nearly 3 million tourists came to Israel, up 3.6% from 2015. Virtually all tourists enter Israel by air; in March, 256,000 tourists arrived by air and only 38,000 by land or sea, including 12,000 day visitors – a decline from the 19,000 in March 2016.

The Ministry of Tourism has taken advantage of the situation to launch a major marketing campaign and is paying carriers bonuses for bringing tourists to Ovda airport in the Negev and for opening new routes to cities previously without direct flights to Israel. (MoT 13.04)

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11: IN DEPTH

11.1 LEBANON: The Economy Has Slowed

According to the Central Administration of Statistics (CAS), Lebanon’s real GDP growth reached its lowest since 2011. Real GDP growth continued its decline reaching 0.8% in 2015, after a real growth of 2.8% in 2012 and 2.6% in 2013 and 2% in 2014. The GDP deflator had reached 6.5% in 2012 and dropped to 2.2% in 2013 and 1.9% in 2014 to later increase to 2.6% in 2015.

The GDP deflator remained positive in 2015 while the average inflation rate measured by the Consumer Price Index (CPI) turned negative that same year standing at -3.76%. In fact, 2015’s negative average inflation rate was due to the decline in oil prices and the depreciation of the euro. The main difference between CPI-measured inflation and the GDP deflator is that the former does include imported goods while the latter measures only domestically produced products.

The Gross National Disposable Income (GNDI) exceeded GDP in 2015. The reason behind this is that the GNDI includes net transfers from abroad (mainly remittances). Net transfers from abroad reached $2.25 billion in 2015 up by 43% from $1.57 billion in 2014. Furthermore, the GNDI, which includes factor income and net transfers, reflects the income available to the total economy for final consumption and gross savings.

Lebanon’s External Position Remains Weak

The deficit in the balance of trade aggravated. Lebanon has chronically suffered from a deficit in its trade balance which reached $15.65B in 2016, up by an annual 3.56%. According to CAS, “Exports of goods had decreased in volume by 10% in 2014 and by 1% in 2015. Export of services had decreased by 9% in 2014 but increased by 11% in 2015. The Net exports balance is negative, equal to -20% of the GDP.” The CAS report adds “Lebanon exports services (19% of GDP) more than goods (8%) while it imports goods (35%) more than services (12%).”

Lebanon’s Trade Deficit, In Thousands of USD

The fragility of a country’s external position is best represented by its balance of payments. The 2015 external position indicators make it easy to predict that the balance of payments would reach its highest deficit in over two decades of $3.35 billion during that year. It also corroborates the Central Bank’s need to boost its foreign currency position by engaging in a swap operation with the commercial banks which allowed the Balance of Payments to return to positive territory in 2016 with a surplus of $1.24 billion and of $508.5 million by the first two months of 2017.

Lebanon’s Balance of Payments, In Millions of USD

Low Growth Negatively Impacted Private and Public Investment and Consumption

The GDP seen from the expenditure approach reveals the large gap between the capital formation of the public sector and that of the private sector. Public gross fixed capital formation (GFCF) represents only 1% of GDP as opposed to 20% of GDP for the private gross fixed capital formation. With a chronic deficit in the fiscal balance, the government lacks the funds to carry out much needed infrastructure investments. Overall, the capital formation declined both in volume and value terms; in volume terms by 7% in 2014 and 4% in 2015 and in value terms by 2.9% in 2014 and 4.6% in 2015.

The consumption expenditure, by both households and government, which accounts for 99% of GDP, has increased in real terms but at a slower pace. While the consumption expenditure registered a real growth rate of 7% in 2014, it only grew by 3% in 2015. The fact that even the consumption expenditure of both households and government has slowed, indicates how deep the economic slowdown ran in 2014 and 2015. This means that the economic slowdown not only impacted the decisions to venture in large, long-term investments but also has impacted short-term spending and investment rationales.

The slowdown in consumption was reflected by the BLOM Lebanon PMI and new car registrations have reflected. The BLOM Lebanon PMI, which tracks the activity of the private sector economy, has been below the 50-points mark separating economic expansion from recession for almost the entirety of its computation and that is in big part a result of the poor performance of the “New Orders Sub-Index” which indicates the level of local demand. New car registrations have also been subdued, pointing to a weak durable goods demand.

When assessed from a growth perspective, three sectors registered the highest increases in 2015. In terms of volume, the financial services sector registered a 10% upturn in 2015 after growing only by 3% in 2014. The financial services sector in Lebanon is mostly dominated by banks whose assets are around 4 times the country’s GDP. The information and communication sector grew by 7% in 2015, up from a growth of 4% in 2014. The transport sector also grew by 9% in 2015 compared to 6% in 2014.

The information and communication sector, not a traditional strong point for the Lebanese economy, was the second fastest growing sector in 2015. This may very well be due to the growing knowledge economy in Lebanon, fostered by the Central Bank’s 331 circular. The circular allows banks to invest directly in the capital of startups or in Venture Capital funds with the Central Bank guaranteeing 75% of the banks’ investments. The circular, aimed solely for Lebanese startups, has and is still encouraging talented Lebanese expatriates to return to their home country, creating much needed job opportunities for Lebanon’s youth and creating a new channel for economic growth.

On the other hand, the real estate and tourism sectors, which have long been pillars of the Lebanese economy pursued their downtrend in 2015. In volume terms, the real estate sector decreased by 3% in 2015 compared to a 4% decline in 2014. Hotels and Restaurants did increase by 2% in 2015 but that was after having decreased in volume between 2011 and 2014. The manufacturing of food products, water supply, waste management and construction decreased in 2014 and 2015.

Agriculture and forestry, a sector that has fallen behind even before the economy started to slow in 2011 witnessed a 19% decrease in 2015 in volume terms after a 14% growth in 2014. This sector could benefit from the recent Agritech program, funded by Berytech and the Embassy of Kingdom of Netherlands, which aims at bringing much-needed innovation to the Lebanese agriculture sector.

Along with the real estate sector, the sector of commercial trade and motor vehicle repairs holds a sizeable share in GDP. The sector of commercial trade and motor vehicle repairs actually represented the same percentage share in GDP as the real estate; both constituting 14% of GDP in 2015 compared to a share of 15% in 2014. The commercial trade and motor vehicle repairs sector in its majority comprises small to medium businesses and its sizeable share in GDP highlights the importance and weight of small and medium businesses in Lebanon. Their size makes them the most vulnerable to fluctuations in the economic cycle and that’s why they need to be offered buffers by the financial institutions and by the government. According to the Ministry of Economy, over 90% of enterprises currently active in the economy can be categorized as SMEs. Consumption and Investments are subdued but also new channels for growth such as the knowledge economy have the potential of creating jobs and boosting growth. However, the need for structural reforms such as fiscal adjustment and debt sustainability remain inescapable challenges that we need to address in order to see a brighter economic picture. (BlomInvest Bank 07.04)

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11.2 IRAQ: Kurdish Flag Fans Controversy in Iraq’s Kirkuk

On 4 April in Al-Monitor, Mustafa Saadoun posted that the raising the Kurdistan flag atop the governmental buildings in Kirkuk sparked tension in the province and in Baghdad.

Controversy ensued when the flag of the Kurdistan Regional Government (KRG) was raised in Kirkuk on 28 March. The local government in the province insisted on having the Kurdish flag fly alongside the Iraqi federal one, although the federal government in Baghdad disapproved of this decision.

The local government in Kirkuk province, in northern Iraq, voted on raising the KRG flag alongside the Iraqi federal one atop state institution buildings in the province. The voting session, held on 28 March, was boycotted by 16 Arab and Turkmen members; only the 25 Kurdish members attended. Less than 24 hours later, demonstrators took to the streets in Erbil, the KRG capital, to protest the decision. However, no one expected such demonstrations to occur in Erbil, which is controlled by the Kurdistan Democratic Party (KDP) led by Massoud Barzani, one of the most prominent supporters of Kurdish dominance in Kirkuk.

In a session held on 1 April, the Iraqi parliament rejected the Kirkuk council decision and voted in favor of displaying only the Iraqi flag on public buildings in Kirkuk. Kurdish members left the parliament before the vote took place. On the other hand, the KRG presidency supported raising the Kurdish flag over state buildings in Kirkuk, saying, “Raising the KRG flag atop Kirkuk’s buildings and facilities is both natural and legal, just as raising the Iraqi flag is.”

An official position was also expressed by Iraqi Prime Minister Haider al-Abadi, whose spokesman Saad al-Hadithi said that raising the KRG flag in Kirkuk, which is not part of the KRG, is a violation of the Iraqi Constitution and the law governing provinces outside of the KRG.

Hadithi said in a press statement on 28 March, “Kirkuk was not within the areas under the KRG government’s control on 19 April 2003. This is why it follows the federal government instead and it is still receiving the salaries of its employees from the government. So it cannot take such a decision [to raise the Kurdish flag] without first consulting the federal government.”

Meanwhile, member of the KRG parliament Salar Mahmoud supported raising the flag and did not believe such a move violated the constitution because none of its articles stipulate that the KRG flag should not be raised in other provinces. He told al-Sumaria news agency that terrorism in Kirkuk was defeated under the KRG flag.

Both supporting and opposing points of view keep mentioning the constitution, although the Iraqi Constitution includes no mention of this issue and does not specify whether or not the KRG flag is allowed to be raised along with the Iraqi flag. This may imply that this issue can only be resolved by a political consensus over whether to keep the flag or take it down.

It should be noted that the KRG flag has been raised along with the Iraqi flag in provinces affiliated with the KRG and over official institutions in Erbil, Dahuk and Sulaimaniyah. The KRG flag has also been placed in buildings affiliated with Kurdish parties in other provinces, but never on top of buildings for the public to see.

Before Kirkuk’s provincial council voted on the decision to raise the KRG flag over government buildings, the governor of Kirkuk, Najmiddin Karim, called in a press conference on 14 March to raise the KRG flag over government buildings in the province, provoking controversy within Iraqi political circles. “The Iraqi Constitution does not include a text preventing Kirkuk from raising the KRG flag. Raising the flag will deepen the brotherly bond between the province’s components,” Karim noted.

It was somewhat unexpected for Kirkuk to take such a decision, particularly since Karim, who holds the highest executive authority there, is a leader in the Patriotic Union of Kurdistan, led by Jalal Talabani, who has close ties with Iran and is known to be on good terms with the federal government’s policies.

On 22 March, the United Nations expressed “concerns” about raising the KRG flag in Kirkuk and warned against taking steps that threaten the peaceful coexistence in the province. The UN mission in Iraq noted in a press statement, “The Iraqi government has made it clear that according to the constitution, Kirkuk falls under the central government’s jurisdiction, and only the Iraqi flag should be raised in the province.”

For its part, Turkey opposed raising a flag other than the Iraqi one in Kirkuk. Hussein Mufti Oglu, the spokesman for the Turkish Foreign Ministry, said in a press statement on 20 March, “We were shocked by the official letter issued by the Kirkuk province, in which the provincial council called on raising the KRG flag next the Iraqi one over official buildings in the city.” He added, “Any unilateral decision regarding the future of Kirkuk affects the security and stability of Iraq and such an attempt also affects the social and economic aspects.”

Iraqi Vice President Osama al-Nujaifi described raising the Kurdish flag next to the Iraqi flag as a violation of national unity and the spirit of cooperation and understanding between the components of the province. He noted in a statement, “It is unacceptable to impose the will of one component or one party over everyone else.”

For Kirkuk to pose such an issue at this time may be a prelude to a bigger issue, that of determining the fate of this city. The Arab-Kurdish, Kurdish-Turkmen and Arab-Turkmen power struggle there is anxiously waiting for such issues to erupt and ultimately force conflicting parties to show their cards to the public. In a nutshell, the federal government in Baghdad can, along with the Iraqi parliament, summon the governor of Kirkuk and question him about the purpose of raising the Kurdish flag next to the Iraqi one, and since Karim works under the central government, Baghdad is expected to have a say in taking the flag down. (Al-Monitor 04.04)

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11.3 BAHRAIN: IMF Staff Completes 2017 Article IV Mission to Bahrain

An International Monetary Fund (IMF) mission visited Manama from 12 – 23 March 2017 for discussions on the 2017 Article IV consultation. Subject to management approval, the findings of the mission will be presented to the Executive Board for consideration in June 2017. At the conclusion of the visit, the mission issued the following statement:

“During 2016, economic activity was solid and inflation remained subdued. Overall GDP growth is estimated at 3.0%, with strong non-oil growth of 3.7% aided by the implementation of GCC-funded projects. Despite significant fiscal measures that were implemented, lower oil prices led to the overall fiscal deficit and public debt in 2016 near 18% and 82% of GDP, respectively. The external current account deficit is estimated at 4.7% of GDP.

“Overall growth is projected at 2.3% in 2017, continuing to be driven by strong infrastructure spending from GCC funds. Inflation is expected to stay moderate. Owing to the higher expected oil prices and continued implementation of measures to reduce spending and raise non-oil revenues, the fiscal deficit is expected to fall to 12.6% of GDP in 2017 and remain close to that level over the medium term. A substantial increase in debt is projected.

“A sizable fiscal adjustment is urgently needed to restore fiscal sustainability, reduce vulnerabilities, and boost investor and consumer confidence. In this context, fiscal measures in the near term could include the VAT, which is already agreed at the GCC level, and further rationalizing spending on subsidies, which disproportionately benefit the wealthy, and social transfers. The wage bill, which is nearly 12% of GDP and among the highest in the GCC, can be reduced in the near term by streamlining allowances and freezing nominal wages. Over the medium term, sizable further consolidation can be achieved in the context of a civil service review and will help support the goal of boosting private sector employment of Bahrain nationals. Other measures are also needed to raise non-oil revenue to help finance the provision of government services. Reforms to strengthen the fiscal framework would support the process of fiscal consolidation. The adjustment should be designed to minimize the adverse impact on vulnerable groups.

“Bahraini banks’ strong capitalization and liquidity will help them weather a slowing in the pace of economic growth. The Central Bank of Bahrain continues to strengthen its regulation and supervision of the financial sector, which will support the continued development and stability of the financial system. The exchange rate peg to the U.S. dollar continues to serve Bahrain well, and will be supported by fiscal consolidation.

“Measures to reduce the costs of doing business are key to boosting growth prospects and achieving economic diversification in Bahrain. They can help raise productivity and catalyze private investment, thereby contributing to create better paying private sector jobs for nationals and diversify the economy.” (IMF 10.04)

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11.4 QATAR: IMF Executive Board Concludes 2016 Article IV Consultation with Qatar

On March 20, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Qatar. Qatar has been implementing an ambitious diversification strategy, while strengthening its policy framework.

Lower hydrocarbon prices have adversely impacted macroeconomic performance. Growth has slowed despite still resilient non-hydrocarbon activity. Real GDP growth of 2.7% is estimated for 2016. Inflation remained low despite subsidy cuts, averaging about 2.7% in 2016. Fiscal and external balances have deteriorated from large surpluses to deficits due to sustained lower energy prices. The authorities are adjusting by cutting current expenditures in 2016, undertaking energy pricing and labor reforms, and placing stronger emphasis on raising non-hydrocarbon revenues. While banking system liquidity has tightened and credit to the private sector has moderated, banks remain sound and well capitalized.

Macroeconomic performance is expected to remain resilient under the baseline. Real GDP growth is projected at 3.4% for 2017, reflecting still significant expansion in the non-hydrocarbon sector owing to public investment commitments, and supported by the added output from the new Barzan gas project. Growth is expected to slow in the medium term, as public investment growth tapers off and hydrocarbon output continues to slow down. Further subsidy cuts, a moderate recovery in global commodity prices, and the introduction of a VAT are expected to improve the fiscal and external balances gradually over the near to medium term. The main risks relate to the possibility of lower hydrocarbon prices compared to the baseline and to weaker expenditure efficiency and/or inflationary pressures from the large public investment program.

Executive Board Assessment

Executive Directors noted the macroeconomic challenges brought by sustained lower hydrocarbon prices, but agreed that Qatar is well positioned to mitigate them given its substantial financial buffers. Directors welcomed the authorities’ responsiveness to adjust to lower energy prices, and encouraged them to sustain their sound policies, which will help strengthen the fiscal position, maintain financial stability, and promote more diversified and sustainable growth.

Directors agreed that gradual fiscal consolidation over the medium term is key to ensuring the intergenerational equity of Qatar’s exhaustible hydrocarbon wealth. They supported ongoing and envisaged revenue and expenditure measures, including subsidy reforms, containment of public-service benefits, lower spending on goods and services, and the introduction of a VAT and excise taxes. Directors agreed that additional revenue measures, including broadening the base of existing taxes, particularly for the corporate income tax, should be explored over the medium term to mobilize sufficient resources for the implementation of the second national development strategy while supporting further consolidation.

Directors commended the ongoing fiscal-structural reforms, particularly the progress being made in preparing a medium-term fiscal strategy and the introduction of a new tender law and public finance law. They encouraged further efforts to enhance the monitoring of public expenditures to improve efficiency and management of investment spending, as well as further improving transparency to facilitate a more robust assessment of the fiscal position.

Directors concurred that Qatar’s fixed exchange rate regime remains appropriate. They noted that further strengthening the monetary policy framework as well as deepening domestic financial markets, particularly the domestic debt market, will prove helpful as the economy diversifies.

Directors agreed that banks remain sound and well capitalized, but noted that they could face risks from sustained low hydrocarbon prices or increasing interest rates. Noting the impact of government financing on banks, they recommended developing a more active liquidity forecasting framework. Directors welcomed the progress made with the implementation of Basel III and macro-prudential regulations, the elaboration of the new Strategic Plan for Financial Regulation, and the development of an early warning system. They also supported the efforts to enhance the framework for anti-money laundering and combating the financing of terrorism.

Directors supported the authorities’ efforts to enhance economic diversification and promote private sector development. They encouraged additional measures to further improve the business environment, and noted that labor market and education reforms will help raise productivity, increase potential output, and support inclusive growth. Directors welcomed the improvements in economic statistics, and underscored that further efforts are needed to address remaining gaps. (IMF 10.04)

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11.5 UAE: The UAE’s Evolving National Security Strategy

The Arab Gulf States Institute in Washington released a review of the UAE’s evolving national security strategy. Confronted with serious challenges, but also blessed with remarkable assets, the United Arab Emirates has developed a distinctive, and in some ways unprecedented, national security strategy. The UAE is one of the smaller countries in the world, especially demographically, with only about 1.5 million citizens, but is one of the wealthiest per capita. It is the seventh largest international petroleum producer, and possesses about 6% of the world’s proven oil reserves. It is also located in a highly strategic and volatile neighborhood, along the southeastern coast of the Gulf, bordering Saudi Arabia and Oman. Its northernmost point thrusts into the waters near a crucial maritime chokepoint, the Strait of Hormuz, and is separated from Iran by a narrow body of water.

Given its geography, demography, and natural resources, the UAE has had to cope with extraordinarily complex security concerns, and has both limitations and assets that are extremely unusual. From the time of its formation in 1971, the UAE’s national leadership recognized that the country’s biggest challenge was how to overcome its relatively small population. It sought to do this through careful long-term planning, including systematic economic and military development; investing in the country’s human capital, increasingly including women, in all sectors; developing technological solutions and innovations; and importing foreign labor. From its earliest days, the UAE sought to use its financial resources and the soft power of aid and development to build international friendships, promote its perspectives, defend its interests, and enhance its reputation, particularly in Arab and Muslim countries.

The UAE has quietly built its own independent defense capabilities. Over the decades, it has methodically constructed relatively small but sophisticated military assets such as its air force, special forces and high-tech offensive and defensive weaponry. As this military capability has grown, the country has become more willing to use force, usually in conjunction with some set of allies, to secure its vital interests. It has deployed these hard power capacities hand-in-hand with its more traditional soft power approaches. It is also at the beginning stages of developing its own domestic defense industry.

The UAE has carefully nurtured a set of crucial strategic and military alliances, especially with Saudi Arabia and the other Gulf Cooperation Council members, as well as the United States. The country seeks to do what it can for itself, but recognizes that much of what it needs to accomplish to secure its vital interests will have to be conducted in collaboration with others. The formation of the GCC in 1981 was a direct response to the security crisis facing the Gulf Arab countries due to the 1979 Iranian Revolution and the outbreak of the Iran-Iraq War in 1981. The focus of the GCC and its members, including the UAE, at the time of the council’s founding until the present day has been the defense of regional security, and stability in the face of threats emanating from Iran and regional conflicts. In important respects, the UAE has developed into Washington’s most important Gulf Arab ally, with close military and intelligence cooperation reflecting the trust and respect the Emirati military has earned from senior U.S. commanders.

The UAE’s increasing willingness to act militarily to secure its interests is perhaps best reflected in the intervention in Yemen that began in 2015, which is primarily led by Saudi Arabia in the north and the Emirates in the south. To support this campaign, and more broadly acquire greater strategic depth, the UAE has recently established military bases in the Horn of Africa, most notably at Assab in Eritrea. To sustain this strategic expansion, and build on its logic, the UAE will almost certainly have to develop greater blue water naval capabilities in the coming decades.

In addition to its conventional military capabilities, the UAE is deeply committed to counterterrorism and counter radicalization efforts. Much of its military campaign in southern Yemen focuses on counterinsurgency operations against Al-Qaeda in the Arabian Peninsula and other extremist groups, and the UAE was an early and enthusiastic participant in the air war in Syria against the Islamic State in Iraq and the Levant. The UAE takes the hardest line of any Arab government, with the possible exception of Egypt, against Islamists in general, seeing them all as part of a continuum of radicalism. It does not conflate the Muslim Brotherhood with al-Qaeda and ISIL or pro-Iranian Shia militias, but it does regard them all as different iterations of extremism to be categorically opposed.

In addition to counterterrorism and counter radicalization initiatives, the UAE is investing heavily in cybersecurity, using technology to combat both cyber criminals and, at times, domestic political dissidents. Human rights organizations have raised concerns regarding some of these cases.

This study outlines how these ambitious national security strategy pillars developed and are being pursued. In the process, it examines why the UAE is convinced it has few alternatives to playing a disproportionately significant economic, diplomatic, political, and military regional role, and how it is acting on that conclusion. Finally, it assesses the impact this growing Emirati role and influence is having on a range of Middle Eastern dynamics, and where the UAE fits in the strategic landscape of this unsettled but still crucial region. (AGSIW 06.04)

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11.6 SAUDI ARABIA: Fitch Downgrades Saudi Arabia to ‘A+’; Outlook Stable

On 30 March, Fitch Ratings downgraded Saudi Arabia’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to ‘A+’ from ‘AA-‘. The Outlooks are Stable. The issue ratings on Saudi Arabia’s senior unsecured foreign-currency bonds have also been downgraded to ‘A+’ from ‘AA-‘. The Country Ceiling has been downgraded to ‘AA’ from ‘AA+’ and the Short-Term Foreign and Local Currency IDRs have been affirmed at ‘F1+’.

Key Rating Drivers

The downgrade of Saudi Arabia’s Long-Term IDRs reflects the continued deterioration of public and external balance sheets, the significantly wider than expected fiscal deficit in 2016 and continued doubts about the extent to which the government’s ambitious reform program can be implemented.

Government deposits declined by SAR242b to SAR841b (35% of 2016 GDP) between June 2016 and January 2017, only about half the peak level of SAR1,643b in August 2014, although this decline partly reflects transfers between the government and the Public Investment Fund (PIF). General government debt rose to 9.7% of GDP, from 4% in 2015. This included sales of local-currency bonds during the first three quarters of last year and a $17.5b Eurobond issued in October. The government balance sheet remains strong relative to ‘A’ and ‘AA’ category peers but will become less of a support for the rating unless the deterioration in public debt dynamics is arrested.

The deterioration in the government balance sheet reflects the large central government budget deficit of SAR416b or 17.3% of GDP in 2016, up from SAR362b in 2015 and much higher than the budget target of SAR326b. The deterioration was mainly due to the clearance of arrears on capital expenditure of SAR75b. The arrears arose in 2015 because payments for many projects were halted while the government was seeking greater visibility on the entirety of outstanding project commitments.

In its budget for 2017, the government has targeted a central government deficit of SAR198b or 7.7% of GDP for 2017. The main factors behind the improvement will be the rise in crude oil prices, which will more than offset the effect of OPEC production cuts on government oil revenue, and the absence of further arrears payments. According to the budget, oil revenue will rise by SAR151b in 2017 which is in line with our projections. The government projects a decline in expenditure, mainly because it expects no further need for arrears clearance and no further accumulation of arrears. We expect the central government deficit to fall to 9.2% of GDP in 2017 and 7.1% of GDP in 2018. This will again be financed by some further run-down in deposits as well domestic and international issuance. As a result, general government debt will rise to 14.5% of GDP in 2018.

The government has already taken several fiscal consolidation measures, including cuts in civil service allowances and a hike in administered utility prices. Further measures are being implemented under the government’s consolidation plan, the Fiscal Balance Program (FBP), which targets to eliminate the fiscal deficit by 2020. According to the FBP, phased hikes in regulated energy and water prices will bring additional revenue of SAR209b per year in 2020. Gradual implementation of non-oil revenue measures (including a levy on expats to be phased in over several years and a value-added tax to be introduced at the beginning of 2018) will bring SAR152b and operational and capital expenditure control will also be enhanced. To raise the social acceptance of these measures, an allowance for the poorest households with an annual cost of ultimately SAR60b-SAR70b per year in 2020 will be phased in.

These measures will help to contain further balance sheet erosion, but in Fitch’s view it is unlikely that they will all be achieved. The FBP itself is ambitious and comes together with reforms to reduce Saudi Arabia’s oil dependence, including the IPO of Saudi Aramco planned for 2018 and an ambitious privatization agenda (our fiscal forecasts contain no IPO/privatization receipts as these will probably be transferred to the Public Investment Fund) as well as numerous sectoral initiatives. The commitment of the political leadership to the reform program is very strong. However, in Fitch’s view, the scale of the reform agenda risks overwhelming the government’s administrative capacity. In addition, the economy may not be able to absorb rises in administered energy prices, which could severely affect energy-intensive industries, or the planned expat levies, which could undermine large parts of the domestic private sector.

On the external side, partly as a result of the fall in government deposits, the Saudi Arabian Monetary Authority’s (SAMA) net foreign assets fell $46b or 7.2% of GDP between June 2016 and January 2017 to $517b. We estimate the current account deficit at 6.1% for all of 2016, down from 8.7% in 2015, reflecting largely the rise in oil prices. The reduction in government imports of goods and services during the build-up of arrears in the first three quarters, which improved the current account further, was probably reversed in Q4/16 as the arrears were cleared. The deficit in 2017 will fall further to 3% boosted by higher oil prices.

Saudi Arabia’s ratings also reflect the following rating drivers:

GDP grew by 1.4% in 2016 according to preliminary data, with a rise in oil sector GDP of 3.4% and an increase in the non-oil sector by just 0.2%. Weak non-oil growth reflected the liquidity crunch due to the delay of government payments during the first three quarters of last year and the increased uncertainty as a result of the reform efforts, which may have held back investment. In 2017, oil production will be scaled back as a result of the OPEC production cuts, with Saudi Arabia committed to cutting its production by 323b/d. Fitch expects the non-oil sector to grow by 1.4%, supported by arrears payments in late 2016 and early 2017 and a slower pace of fiscal consolidation. After turning negative in January 2017, inflation is likely to be boosted by rises in excise taxes, utility price hikes and the VAT introduction but will remain moderate given limited demand pressures.

Fitch views Saudi Arabia’s banking sector as strong and stable. Fitch’s banking sector indicator for Saudi Arabia remains ‘a’, which is one of the strongest indicators for all Fitch-rated sovereigns and weaker only than Australia, Canada, Singapore and Sweden. The non-performing loan ratio, at 1.4%, and the capital adequacy ratio, at 17.5% in Q4/16, remain very healthy despite the more difficult economic environment. Banking liquidity tightened up to Q3/16, but these pressures eased due to the clearing of government arrears, measures taken by SAMA and increased confidence following the successful Eurobond issuance in October. Nonetheless, private sector credit growth slowed to 1.8% in January 2017, down from 8.1% in June 2016, due to tighter lending conditions by banks and the weak investment environment.

Geopolitical risks remain high relative to ‘A’ category peers. Saudi Arabia and its allies are fighting a war against Houthi rebels in Yemen and an end to the conflict remains elusive. Tensions with Iran, Saudi Arabia’s main regional rival, also persist and could escalate, although direct military conflict remains highly unlikely. The line of succession has been clearly defined, but Fitch believes rivalries within the royal family could become a source of instability. Austerity measures, although very carefully phased in and combined with offsetting citizen account benefits, could raise discontent among the population but major sustained civil unrest remains unlikely.

Income per capita is in line with the ‘A’ category median, but the World Bank governance indicator and the business climate are well below the medians for ‘A’ category peers.

Rating Sensitivities

The following factors, individually or collectively, could trigger negative rating action:

– Continued rapid erosion of the fiscal or external positions, for example as a result of a failure to implement fiscal reforms or due to a renewed fall in oil prices.

– Spill-over from regional conflicts or a domestic political shock that threatens stability or affects key economic activities.

The following factors, individually or collectively, could trigger positive rating action:

– Fiscal consolidation sufficient to stem the depletion of fiscal and external buffers and put the budget on a path to a surplus.

– A sustained period of higher oil prices.

Key Assumptions: Fitch forecasts Brent crude oil prices to average $52.5/b in 2017 and $55/b in 2018. (Fitch 30.03)

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11.7 MOROCCO: Fitch Affirms Morocco at ‘BBB-‘; Outlook Stable

On 7 April, Fitch Ratings affirmed Morocco’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB-‘ with a Stable Outlook. The issue ratings on Morocco’s senior unsecured foreign- and local-currency bonds have also been affirmed at ‘BBB-‘. The Country Ceiling has been affirmed at ‘BBB’ and the Short-Term Foreign- and Local-Currency IDRs at ‘F3’.

Key Rating Drivers

Morocco’s ratings are driven by its economic performance, public finance and external finance metrics in line with ‘BBB’ medians and structural features (as reflected in development and governance indicators) that are weaker than peer medians.

Economic policy focuses on maintaining macroeconomic stability and is unlikely to change much as a result of the parliamentary election in October 2016. The Justice and Development Party (PJD), the main governing party in the previous parliamentary term, remained the biggest party but differences between parties meant it took until March 2017 for a new government to be formed. The main parties in the new government are the same and there is little indication that the addition of one smaller party will change the direction of policy. However, the prolonged negotiation has meant little progress was made on reform projects under the caretaking government and it is likely that the reform momentum will take some time to return.

GDP growth fell to 1.6% in 2016, from 4.5% in 2015, mainly because of the worst drought in 30 years following a bumper harvest in 2015. As a result, cereal production fell by more than 70% and agricultural value added decreased by 9.6%. Confidence effects from the weak agricultural performance and low growth in the euro area as the key export market depressed the non-agricultural economy, which grew 3.1%, after 3.5% in 2015, illustrating the limited effect of the industrial strategy on growth so far. Rainfall for the 2017 agricultural season has been favorable, suggesting that there will be a significant rebound in the agricultural sector and this should help lift growth to 4.3% in 2017. In 2018, base effects will no longer boost GDP growth, leading to a deceleration to 3.2%.

Despite the weakening economy, the central government deficit decreased to 4.1% in 2016, from 4.3% in 2015, although it stayed well above the budget target of 3.5%. Apart from the impact of weaker growth, the underperformance relative to the budget reflected a higher execution of investment projects, an acceleration of VAT refund payments and another fall in disbursements of grants from GCC countries.

The budget for 2017, submitted to parliament in October, foresaw a deficit of 3% of GDP, but due to the lower starting point we expect the deficit will come in at 3.8% of GDP. The improvements will partly reflect the economic recovery, although the tax take from the agricultural sector is quite small. In addition, improved budget administration as a result of the Organic Budget Law (OBL) will also help to contain expenditure. Fitch estimates that the fiscal deficit of the general government, which also includes social security, local governments and special treasury accounts, was 1.7% of GDP in 2016, down from 1.8% in 2015, with a further decline to 1.3% in 2017. In addition to the improved central government, the improvement reflects the impact of pension reforms approved last year.

The delay in forming a new government and in approving the budget for 2017 has had only limited impact on fiscal execution. The OBL has streamlined fiscal management for periods where no approved budget is in place, and under a government decree the draft budget 2017 is being implemented with the exception of civil service recruitment and the implementation of new projects.

Fitch estimates general government debt peaked at 49.6% of GDP in 2016 and is likely to decline gradually in subsequent years. The government faces significant additional contingent liabilities from guarantees mainly for infrastructure projects managed by state-owned enterprises, estimated at 19% of GDP in 2016. The guarantee exposure is expected to continue rising moderately, but the track record suggests a low likelihood that the liabilities will move to the government balance sheet.

The current account deficit deteriorated substantially in 2016 to 3.9% of GDP, from 2.1% in 2015 despite the beneficial effect of lower oil prices. The deterioration primarily reflected a sharp rise in capital goods imports, which rose by 27% in MAD terms. The deficit was also affected by soft prices for phosphates and phosphates-based fertilizers, one of Morocco’s main export commodities (accounting for 18% of exports). We expect the government’s policy of attracting foreign investment to lead to a continued high demand for capital goods, but the deficit should gradually decline as growth in exports will remain solid. This could help net external debt, which at 11.5% of GDP remains higher than the BBB median of 0.6% of GDP end-2016, to decline gradually.

However, significant capital inflows meant that the Bank al-Mahgrib was able to raise international reserves $2.3 billion to $24.4 billion or 6.5 months of current external payments at end-2016. The currency is considered to be broadly aligned with fundamentals and the authorities are still planning to gradually move to a more flexible exchange rate arrangement. Fitch believes this will initially only mean wider fluctuation against the currency basket against which the dirham is pegged. Capital account liberalization, reducing restrictions on Moroccan investments abroad, will be phased in only gradually.

Development and governance indicators are weaker than ‘BBB’ medians. In particular, GDP per capita and the World Bank’s human development indicator are lower than both the ‘BBB’ and the ‘BB’ category medians. Exposure to financial shocks is moderate, due to a developed and broadly sound banking sector.

Rating Sensitivities

The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the rating are currently balanced. The main factors that may, individually or collectively, lead to positive rating action are:

– Continued fiscal consolidation and reduction in public debt-to-GDP

– Structural improvement in the current account balance consistent with declining net external debt to GDP

– Over the medium term, improvement in development indicators illustrating rising debt tolerance

The main factors that may, individually or collectively, lead to negative rating action are:

– A widening of twin deficits, leading to rising public and external debt burdens

– A weakening of medium-term growth prospects

– Political and security developments that affect macroeconomic performance

Key Assumptions

Fitch assumes that Brent crude prices will average $52.5/b in 2017 and $55/b in 2018.

Fitch assumes that the Eurozone economy will grow by 1.7% in 2017 and 1.6% in 2018. (Fitch 07.04)

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11.8 MOROCCO: Morocco Finally Gets New Government, But At What Cost?

Imad Stitou posted on 12 April in Al-Monitor that the announcement of a new Cabinet in Morocco after months of difficulty revealed that the Islamist Justice and Development Party (PJD) may have had to pay a heavy price for compromise.

Now that Morocco has a new Cabinet and prime minister, the dust is finally settling after six months of wrangling over the appointments — though one journalist described the outcome as a “dangerous democratic setback.”

When the leading Islamist Justice and Development Party (PJD) failed in five months to negotiate a new government, King Mohammed VI dismissed Prime Minister Abdelilah Benkirane in March, replacing him with the party’s second in command, Saadeddine El Othmani. The new 39-member Cabinet, which was announced on 5 April, has 13 first-time appointees representing six of the 10 parties that participated in the election.

The PJD, led by Benkirane, had rejected conditions proposed by other parties supported by the king and refused to include the Socialist Union of Popular Forces (USFP) in the governmental coalition. In fact, Benkirane had vowed that, come hell or high water, the socialist party would not be involved in the government as long as he was prime minister. His refusal might have stemmed from the USFP not negotiating with him directly to participate in the government; instead, it joined a bloc of four parties to negotiate.

It seems the PJD had to face reality, as further opposition would have pitted it against the king and violated the party’s political principles — to focus on gradual reform and to avoid radically opposing the king. Consequently, Islamists had to accept the palace’s demand for coexistence, giving the party only a limited role that doesn’t match its public base and electoral weight.

Othmani agreed to involve the USFP in the governmental coalition. The party caved in and made painful concessions that might have tough repercussions in its future. Complaints were leaked from the PJD describing the concessions as “treacherous” and “contradictory to Benkirane’s approach.”

Benkirane, a moderate Islamist, was willing during the negotiations to form the government with National Rally of Independents leader Aziz Akhannouch, as he gave up his condition to include the Istiqlal Party in the government and agreed to the presence of the Constitutional Union. However, he escalated the tone of his rhetoric against the remaining political parties, which he accused of impeding government formation. He repeatedly said attempts to draw a new political map would turn the PJD into a minority within the government despite the single party winning 125 parliamentary seats out of 395 total.

He was right. The four-party bloc led by Akhannouch and backed by the king was given strategic portfolios in the government like economy, finance, agriculture and commerce. The bloc got a total of 17 ministries, compared with the PJD’s 11. Among the new Cabinet are 25 technocrat ministers close to the king.

Abdul Rahim al-Allam, a political science researcher at Cadi Ayyad University in Marrakech, said the king achieved the goals he sought by preventing formation of a Benkirane-led government. He undermined the Islamists, making them a minority in the government they lead and giving them marginal ministries. The king also managed to get rid of the sometimes unruly but widely popular Benkirane who, despite his loyalty to the king, stirred an internal PJD crisis.

“This is undoubtedly the first real internal crisis that the Islamist party has faced since its establishment in 1998,” Allam told Al-Monitor. “The party faces several challenges due to the multiple last-minute concessions and the approval of the appointment of a new leader instead of Benkirane. The members’ agreement to the conditions that Benkirane had previously refused condemn him and verify the story of his adversaries, who blamed him personally for the stalled government formation.”

Allam noted that Othmani’s government probably lacks the wide Islamist popularity that Benkirane’s government enjoyed. “The situation does not look promising for Islamists. It will be hard for them to defend a government in which they play a marginal role. Benkirane’s take on these developments is also influential. He has so far tried to distance himself and refrain from giving negative or positive comments on the concessions. If he openly voices his support for Othmani, any signs of a crisis would vanish. But his silence will not be as reassuring because it might be interpreted as lack of consent,” Allam said. “Othmani would then lose his party’s internal support. Besides, the Islamist public base is closely linked to Benkirane, as he represents demagoguery that goes beyond political conviction.”

Bilal al-Talidi, the former editor-in-chief of the Islamist-affiliated Al-Tajdid newspaper, said that although the PJD is going through tough times, he doesn’t expect internal divisions and he believes the party’s upcoming national conference in September will be decisive in determining political guidelines. “The concessions that Islamists made during the government formation after Othmani’s appointment definitely affected the party, and there is a general state of anger that the 7 October results triggered, amid attempts [by other parties] to weaken the party and increase disagreements within it,” he told Al-Monitor.

“This is a moment of dangerous democratic setback necessitating re-evaluation of the democratic transition,” he said, adding that the upcoming conference will determine how best to face current circumstances. “The suggested options include calling for Benkirane’s return as leader of the party by changing the party’s organizational law. But I think the PJD will remain united because it is a party of institutions. So far, it has only expressed stances that do not attack Othmani as a person, but rather reflect a conviction that overruling Benkirane’s approach would cost the party a high price, and the successive concessions serve as proof.”

Talidi thinks Benkirane stepped aside and did not announce a firm stance after his dismissal because he did not want to clash with the king or burst Othmani’s bubble. This is why he did not participate in Othmani’s deliberations with the other parties or in meetings to choose the party’s ministers.

The PJD’s hopes are hanging on its upcoming conference, which will be decisive. The party is torn between opposing currents. One is led by Benkirane’s supporters, who want him to remain at the helm of the party and are calling for distance from the current government. The other current wants to weaken the PJD and claims it is the party’s duty to support the government despite modest participation in it.

Imad Stitou is a Moroccan writer and journalist who specialized in investigative journalism for al-Aan and Hespress magazines and al-Massae newspaper. He also worked as a correspondent for a number of Arab newspapers in Morocco, notably London’s Al-Quds al-Arabi and the Lebanese News. He is an opinion writer for the Radio Netherlands Worldwide website. He made the short list for the Arab journalism award for youths in 2014 and has published several articles in Arabic cultural, literary and research magazines. (Al-Monitor 12.04)

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11.9 TURKEY: Why Turkey’s Growth Data Has Economists Scratching Their Heads

Mustafa Sonmez observed on 5 April in Al-Monitor that Turkey’s latest growth data, which suggests the economy rebounded strongly in the fourth quarter of 2016, appears out of sync with other key indicators, fueling doubts over Ankara’s new calculation method.

On the data calendar of the Turkish Statistical Institute (TUIK), 31 March was the day to release the country’s fourth-quarter economic growth for 2016 and thus the overall rate for the year. The figures came as a surprise. Following a contraction in the third quarter, the Turkish economy rebounded strongly in the fourth quarter, growing 3.5%. This put the overall growth rate for 2016 at 2.9%. Hungry to showcase some economic success, Ankara was in an upbeat mood, but the figures rekindled questions on just how reliable the data is — a debate that had flared in December, when TUIK announced a retrospective revision of whole data sets, using a new calculation method.

For the majority of Turkish economists, excluding those who curry favor with the government, the credibility of the data is questionable.

The introduction of a new calculation method last year had resulted in a staggering upward revision in the gross domestic product (GDP) for 2015. The revised figure stood at $861 billion, a 20% increase from the original one.

According to TUIK, the Turkish economy grew 2.9% last year, based on local currency and with inflationary adjustments. When the GDP in current prices is divided by 3.04 Turkish lira, the dollar’s average exchange rate last year, the GDP amounts to $857 billion. This places Turkey among the world’s 18 largest economies. The per capita income in dollars is $207 less from 2015, but the $10,807 figure still makes the government happy.

Based on the $857 billion figure, the current account deficit of $32.5 billion is 3.8% of GDP, and the country’s $404 billion foreign debt stock at the end of 2016 amounts to 47.1% of GDP. Hence, despite the nearly 3% growth rate, the Turkish economy retains its “fragile” status amid the Turkish lira’s dramatic depreciation against the dollar, the resulting deficits and a foreign debt burden that has not downsized.

It is important to note that the 2.9% growth rate involves fresh retrospective revisions that TUIK announced 31 March. While the 4.5% growth rate for the first quarter of 2016 remained unchanged, the 4.5% rate for the second one was revised up to 5.3%, and the 1.8% contraction in the third quarter was revised down to 1.3%. Without those “improvements,” the overall growth rate for the year would have been 2.5%.

Government ministers and President Erdogan hailed the figures, quickly adding them to their talking points for the 16 April referendum, which will seal the fate of constitutional changes designed to equip the presidency with sweeping executive powers.

True to style, Erdogan gloated at credit rating agencies, which he has frequently slammed for unfairly cutting Turkey’s grades. “Look, Turkey has grown 2.9%,” he told the crowd at a 2 April rally. “Remember those renowned economic assessment agencies that I use to dress down? [The growth rate] turned up 1 point higher than their forecasts.” He then used soccer terms to make his point: “This means another curve ball. They should keep in mind that this nation is good at scoring penalties [penalty kicks].”

Deputy Prime Minister Mehmet Simsek was happy the economy had come back from the verge of recession despite global financial trends that diverted money from emerging economies, a decline in tourism revenues as a result of the crisis with Russia and a string of terrorist attacks, shrinking agricultural production and the political clamor from the coup attempt last year. “The Turkish economy has continued to grow despite all those shocks. … [It] has rapidly overcome the shock of the treacherous coup attempt and has not technically entered recession,” he said in a 31 March statement, claiming that a “yes” outcome from the referendum would give fresh impetus to the economy.

An important detail that such analyses miss is the contrast between the two halves of 2016. The 15 July putsch attempt and its aftermath aggravated all of Turkey’s risk factors, creating a climate much different from the first half of the year. This led to large outflows of foreign capital and negative assessments by credit rating agencies, which, in turn, caused the Turkish lira to fall much faster against the dollar than other currencies. All this resulted in a blow to economic production, as evidenced by the overall growth rates in the two halves of the year — 4.9% in the first and 1.1% in the second.

What is more, the new GDP data sets appear out of sync with other key economic indicators. The most glaring inconsistency is between the growth and unemployment data. With the jobless rate close to 11% on average in 2016, rising fast especially in the last quarter, a pronounced momentum in growth in the same period remains a mystery to many.

Some Turkish economists such as the prominent Mahfi Egilmez refrained from an outright comment on the latest GDP figures without a lengthy prelude questioning the new calculation method. More radical pundits, who see the new calculation method as unacceptable, argue that the data should be completely rejected and call for alternative growth calculations based on the old method.

In a joint declaration, a group of renowned economists, including Korkut Boratav, Oktar Turel and Tuncer Bulutay, offered a scathing review of the new calculation method. In his column in BirGun daily, Boratav said TUIK had gone “well beyond” revision recommendations by the statistical agencies of the United Nations and the European Union. “With the stated aim of ‘improving statistics,’ the GDP’s level and growth trend after 2002 have been raised excessively, the shares of sectors have been changed significantly and the levels of investment and saving have been increased,” he wrote.

According to Boratav, TUIK had databases in line with international standards that covered production, business and turnover statistics in the industry and service sectors and that were complete with corresponding sets on employment, wages and salaries. The previous GDP calculations relied on those databases, he said.

In the new calculation method, however, the database has shifted to administrative and bureaucratic records by the Finance Ministry, especially the tax authority, the Interior Ministry and the Banking Regulation and Supervision Board, Boratav said. This means the principal data now comes from accounting records such as tax returns instead of production surveys. “Such records could be detached from real economic variables,” Boratav warned. “The concepts are different, resting on administrative and legal definitions rather than economic ones. Different rules, taxes and definitions would produce different results.”

In sum, Turkey’s new GDP data remains a subject of dispute, and the International Monetary Fund (IMF) has not yet started using it. As long as growth figures remain in conflict with key indicators such as unemployment, the question of credibility will linger on. How much the IMF and credit rating agencies will trust the new data is a curious topic to watch in the coming days. (Al-Monitor 05.04)

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11.10 TURKEY: Where Does Erdogan’s Referendum Win Leave Turkey?

Cengiz Candar observed on 17 April in Al-Monitor that the result of Turkey’s referendum was far from the mandate the country’s president was seeking and leaves much of the population — and outside world — questioning the legitimacy of the process.

The outcome of Turkey’s 16 April referendum wasn’t exactly the victory President Recep Tayyip Erdogan was aiming for: clear support for constitutional amendments that would give him more executive power than even republic founder Kemal Ataturk had envisioned for himself. Dissent was strong in the country’s largest cities, and European officials also have registered their disapproval.

Before the results were even announced, Prime Minister Binali Yildirim delivered the first victory speech of the night, not Erdogan himself. But with Erdogan’s pragmatism, which for all practical purposes is necessary for his survival, he was quick to give a speech declaring victory, even as the results of the referendum were being contested with allegations of irregularities and fraud. Given the controversy of the neck-and-neck results blemished with the allegations of rigging, Erdogan couldn’t resist — but he did not look confident or triumphant.

In an unusually brief and uncharacteristically muted speech, with a stony expression on his face, he insisted he had won the contested referendum and called on the outside world for acknowledgment. He once again mentioned enacting capital punishment.

According to official figures, approval for an executive presidency — which many Turks believe will amount to a one-man rule — came out with roughly 51.4% of the vote, while the “no” votes made up 48.6%. Turnout was measured at 83.3%. There were 24,325,985 “yes” votes counted against 23,189,021 “no” votes — a difference of 1,136,964. More than 800,000 votes were invalidated because they weren’t clearly marked or weren’t submitted properly. However, even as the voting was underway, the main opposition Republican People’s Party (CHP) and the pro-Kurdish Peoples’ Democratic Party (HDP) registered a complaint with the Supreme Election Board, alleging 2.5 million ballots were used without official seals on them. Under Turkish election law, those ballots would have to be considered invalid. Yet the Supreme Election Board, known to be close to Erdogan, dismissed the allegations.

Irregularities reported from all around Turkey are abundant. Even if all of them are unfounded, Erdogan’s win can best be defined as a Pyrrhic victory: victory, but at what cost? The most important indicator of such a judgment is his loss of all the big cities. In Istanbul, historically the economic and cultural megalopolis of Turkey, and in the capital city of Ankara, “no” votes exceeded “yes” votes. In the third-largest city, Izmir, the ratio was devastating: 69% rejected the amendments.

All the areas along the Mediterranean and Aegean (southern and western) coastlines of Turkey, all the way to Istanbul, across the Marmara Sea, to the Black Sea coast overwhelmingly voted against the referendum, including the fourth-largest town, Adana and the new touristic metropolis of Antalya. In the latter two, the difference was clear: 60% against; 40% in favor.

Turkey’s mostly Kurdish southeast produced stunning results. Almost 70% of voters in Diyarbakir, the Kurdish spiritual center, rejected the referendum.

The ratio of “no” votes was strikingly high in most militant Kurdish towns where the mayors had been arrested and their administrations turned over to trustees appointed from Ankara. Some of those towns had been reduced to rubble as a result of heavy fighting and have remained under curfew almost for a year. The “no” votes in those towns were as follows: Cizre, 80%; Nusaybin, 79%; Silvan, 77%; Silopi, 75%; Lice, 85%; and Varto, 87%.

Erdogan derived his support mainly from vast agricultural regions of central Anatolia, some central-eastern provinces, and most of the staunchly conservative, nationalistic constituencies along the Black Sea coast.

Erdogan’s motto during the one-sided campaign was “One state, one nation, one flag.” But with the referendum results, it is safe to say Turkey is more polarized and divided than ever. Though it is still considered one state under one flag, it most likely is now three nations pretending to be one: two increasingly irreconcilable Turkish nations and the Kurdish nation.

It should never be forgotten that — even if the election proves to be fraud-free — Erdogan’s Pyrrhic victory was achieved in an unprecedented, unfair campaign. The campaign was conducted under a state of emergency. Anybody against the referendum was dubbed by the president himself a traitor to the nation or a “terrorist” linked to Gulenists, the Kurdistan Workers Party (PKK) and the like. During March and April, Istanbul was plastered with signs supporting the referendum and posters of Erdogan.

The visual and print media controlled by the president engaged in the “yes” campaign almost entirely. For instance, according to a survey covering 1 – 10 March, during primetime, the presidency enjoyed 53½ hours of coverage; the ruling AKP, 83 hours; and the ultranationalist, pro-referendum Nationalist Action Party (MHP), 14 hours. The main opposition — the CHP — received 17 hours of coverage, and the pro-Kurdish HDP (whose chairman and 12 lawmakers are in prison) got only 33 minutes. The “yes” campaign had live coverage for 485 hours compared with 45½ hours for the opposition.

In fact, the Council of Europe’s advisory body on legal issues, the Venice Commission-European Commission for Democracy through Law, issued a report on Turkey in March saying that holding a referendum under the state of emergency conditions must be considered invalid if not illegal.

“In particular, the extremely unfavorable environment for journalism and the increasingly impoverished and one-sided public debate that prevail in Turkey at this point question the very possibility of holding a meaningful, inclusive democratic referendum campaign about the desirability of the amendments,” the report said. “In conclusion, the Venice Commission is of the view that the substance of the proposed constitutional amendments represents a dangerous step backward in the constitutional democratic tradition of Turkey. The Venice Commission wishes to stress the dangers of degeneration of the proposed system toward an authoritarian and personal regime.”

On the night of the referendum, Social-Democrat Kati Piri — the Netherlands’ representative to the European Parliament and rapporteur for Turkey’s accession bid — wrote on her blog: “In an unfair election environment, a narrow majority of the Turkish population has endorsed the constitutional package that will give President Erdogan unchecked powers, which will fit an authoritarian system. This is a sad day for all democrats in Turkey. It is clear that the country cannot join the [European Union] with a constitution that doesn’t respect the separation of powers and has no checks and balances. If the package is implemented unchanged, this will have to lead to the formal suspension of the EU accession talks. Continuing to talk about Turkey’s integration into Europe under the current circumstances has become a farce. … The result of today’s vote is a major shift away from European values. Erdogan’s autocratic behavior has deeply polarized Turkish society and harmed the economy.”

As the first loud European voice on the most recent developments in Turkey, she continued tweeting about the contested results. “In unfair elections, narrow majority for ‘yes.’ Too small margin for such drastic changes,” she wrote. “Almost half of Turkish population voted ‘NO.’ Imagine if it had been a fair electoral campaign!”

Notwithstanding Turkey’s foggy EU prospects, life went on and Turks and Kurds awoke 17 April to a “New Turkey.” After a probably rigged referendum and a Pyrrhic victory, the future is no more certain for its main protagonist, Erdogan and even more uncertain for the almost 80 million citizens of Turkey. (Al-Monitor 17.04)

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What’s New at EDI – May 2017

April 30, 2017, 8:26 am

≫ Next: EUROPE SEEKING TO TAKE HOME THE STARTUP NATION

≪ Previous: Fortnightly, 19 April 2017

Ontario to Exhibit at MIXii Biomed Israel in May

Ontario will bring a trade delegation to Israel in May to exhibit in the province’s pavilion at MIXii Biomed Israel 2017, the country’s premier international annual life science conference and exhibition. The event will be held at the David Intercontinental Hotel in Tel Aviv. EDI represents the trade and investment interests of the province in Israel.

Invest Hong Kong Assistant Director General to Visit Israel in May

Invest Hong Kong’s Associate Director General Charles Ng will visit Israel in mid-May to assist in promoting Hong Kong as an investment destination for Israeli companies seeking a foothold in Asia. During his visit he will meet with prospects interested in the region. EDI represents the investment interests of InvestHK in Israel.

Illinois to Participate in Israel’s ISDEF 2017 Defense Show

The Illinois Department of Commerce & Economic Opportunity (DCEO) has taken booth space at the ISDEF show in Tel Aviv in June. At present four defense suppliers based there will be exhibiting at the event scheduled for the Tel Aviv Convention & Exhibition Center. EDI represents the trade and investment interests of the state throughout the region.

Wallonia to Sponsor Investment Luncheon in Tel Aviv

The Wallonia region of Belgium will sponsor an investment luncheon in Tel Aviv in June at the residence of the Belgian ambassador to Israel. The event is for Israeli companies thinking about locating a facility in Europe and interested in hearing more about this particular area of southeast Belgium. EDI has been engaged to plan, administer and recruit for the event.

Virginia to Participate in Israel’s ISDEF 2017 Defense Show

The Virginia Economic Development Partnership has taken booth space at the ISDEF show in Tel Aviv in June. At present six defense suppliers based there will be exhibiting at the event scheduled for the Tel Aviv Convention & Exhibition Center. EDI represents the trade interest of the state in Turkey, Israel and Jordan.

EDI Participates in Annual Meeting of Ontario Overseas Reps

In mid-April EDI was represented at Ontario’s first ever meeting of their overseas trade representatives held in Toronto, with additional visits to Ottawa and Waterloo. The gathering provided an opportunity to the reps to meet with Canadian companies and discuss export opportunities for those companies in each region. Trade Consultant Sireen Smoom participated in the event on behalf of EDI. EDI represents the trade, investment and innovation interests of the Province of Ontario in Israel.

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EUROPE SEEKING TO TAKE HOME THE STARTUP NATION

May 1, 2017, 2:35 am

≫ Next: Fortnightly, 3 May 2017

≪ Previous: What’s New at EDI – May 2017

Israel’s economic strength, along with the buzz of Israel’s startup nation reputation and hi tech scene, has not eluded some of Israel’s closest neighbors – Europe. Through technological cooperation, innovation ties and solidifying Israeli presence, European locations seek to benefit from and interact with all that Israeli industry has to offer.

For example, the Enterprise Europe Network (EEN) program helps international companies find suitable European partners for technological and commercial collaboration using a strategic approach. The EEN is the largest business network in Europe, featuring thousands of companies affiliated with 600 partner organizations in 50 countries in Europe and beyond.

The EEN in Israel is coordinated by the Israel Innovation Authority (IIA) in partnership with the Manufacturer’s Association of Israel and the Israel Export Institute. IIA has a dedicated EEN team with the sole focus of providing assistance to Israeli companies in their search for suitable European R&D partners and of enhancing Israeli companies’ visibility in the marketplace.

There is also a push by European communities to address Israeli companies looking to open operations in Europe to do so in their regions. Each country, region and city has its own message for incoming investors and many are directing their messages at Israeli companies.

Berlin initiated an exchange program whereby Israeli start-ups swap their home desks for a co-working space in Berlin for several weeks, while German companies are exposed to the Israeli tech ecosystem in Tel Aviv at the same time. It is administered through a partnership of Berlin Partner and Tel Aviv Global, both city-run projects to help start-ups connect with their counterparts around the world. Participating Israeli companies included Pzartech, a provider of 3D printing services for companies; Join VR Technologies LTD 4.0, a streaming service for virtual reality videos on smartphones; Myndlift, a developer of wearables that measure brainwaves and train the ability to concentrate; Quiccargo, an online marketplace to determine logistics capacities; and Shopeat, a recipe portal with integrated ordering of ingredients via the Internet.

Lithuania’s three-month licensing regime for fintech companies is the speediest program of its kind in the EU to attract Israeli fintech firms. The new program also affords direct access to the Single Euro Payment Area (SEPA) through the Bank of Lithuania infrastructure rather than through commercial institutions. The bank will be treating fintech startups that provide payment services as financial bodies, enabling them to generate IBAN account numbers within 24 hours of operation. Through the program, Lithuania has succeeded in attracting companies such as venture capital firm Moneta, fraud-free payment system Simplex and peer-to-peer lending company BLender. In addition, cloud-based web development platform Wix.com has offices in Vilnius.

Besides the creation of special programs or incentives for Israeli, some locations prefer to focus on personal interaction with Israeli companies as a tactic for convincing Israeli companies to consider them when expanding.

For example, the mayor of London visited Israel in recent years to meet with companies and attend events highlighting the city’s availability of a world class talent pool and a booming digital economy. He and other London officials have also been promoting the London Stock Exchange as the ideal venue for Israeli company IPOs.

Coming up on June 7^th, the regional economic development agency representing Wallonia, located southeast of Brussels in Belgium, will be hosting a luncheon at the Tel Aviv home of the Belgian Ambassador to Israel. The purpose of the luncheon is to meet with Israeli companies looking at European locations for their operations and to present to them the various incentives and benefits available for companies who choose the area around Wallonia (see here for more details).

As Israeli companies continue to excel and penetrate international markets, especially nearby European countries, no doubt that Europe will strengthen its efforts to court Israeli companies.

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