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7 February 2018
22 Shevat 5778
21 Jumada Al-Awwal 1439
TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Expanded Canada-Israel Air Transport Agreement Allows More Flights & New Travel Options
1.2 Prime Minister Netanyahu & SAP CEO Launch NIS 1 Billion Healthcare Project
2: ISRAEL MARKET & BUSINESS NEWS
2.1 WEF Says Israel is the 25th Strongest Economy in the World
2.2 Hysolate Launches out of Stealth Status and Raises $8 Million to Re-invent the Endpoint
2.3 Carolina Lemke to Open US Branches
2.4 Ormat Signs Definitive Agreement to Acquire U.S. Geothermal
2.5 SCD Acquires US-Based Quantum Imaging (QI)
2.6 Israel First in Middle East to Accept Chinese Tourist Payments via Alipay
2.7 Nexar Raises $30 Million in Series B Funding
2.8 Magal Awarded $20 Million in Contracts for Integrated Security Solutions
2.9 Amdocs to Acquire Vubiquity to Further Expand into the Media & Entertainment Business
2.10 Pcysys Raises $4.5 Million
2.11 BigID Closes $14 Million Series A Funding to Transform Protection of Personal Data
2.12 IBM Sets Up Cybersecurity Lab in Beer Sheva
2.13 Telrad Networks and WAV Sign Partnership Agreement
2.14 Alcide Wins 2017-18 Cloud Award
2.15 Air India to Launch Tel Aviv – New Delhi Flights in March
2.16 Asian Ministry of Defense Orders Orbit Aeronautical Telemetry Systems for $5 Million
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Freddy’s Frozen Custard & Steakburgers Signs First International Agreement
3.2 Innovative Systems Accelerates Growth with New Middle East Office
3.3 Spar International to Open 40 Stores in Saudi by 2020
3.4 Cairo Angels and EG Bank Launch Mint Incubator
3.5 SDX Energy Makes Fourth Gas Discovery in Morocco
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Morocco and Finland to Work Together in Developing Green Economy
5: ARAB STATE DEVELOPMENTS
5.1 Moody’s and S&P 2018: Lebanon’s Economic Risks “Extremely High”
5.2 Lebanon’s Average Annual Inflation Rate Rises by 4.44% in 2017
5.3 Lebanon’s Trade Deficit Widened by an Annual 1.83% by November 2017
5.4 The Lebanese Car Market in 2017: Low-Cost Trend Still Dominant
5.5 Lebanese Tourism Ends 2017 on a 7 Year High
5.6 Jordan’s PM Presents King with Government Achievements Report
5.7 $7.3 Billion Jordan Response Plan Endorsed
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Arabian Gulf
5.8 Some 2.5 Million Chinese Tourists Set to Visit the Arabian Gulf by 2021
5.9 Kuwait Projects $17 Billion Deficit in 2018 – 19 Budget
5.10 Qatar Reportedly Planning to Procure S-400 SAM Missiles from Russia
5.11 Dubai on Track to Attract 500,000 Health Tourists by 2020
5.12 Surge in Russian & Chinese Tourists Boosts Dubai Hotel Openings
5.13 S&P Says Saudi Arabia’s Economy Depends More on Policy Than Oil
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North Africa
5.14 Morocco’s Clogged Engine: Human Capital Deficiency Impedes Economic Growth
5.15 Morocco and EU Agree to Reinforce Agricultural Partnership
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 Tourists in Turkey Spent Nearly $6 Billion on Food & Beverages in 2017
6.2 Fitch Ratings Announces Closure of its Istanbul Office
6.3 Greek Debt Rises in Third Quarter of 2017
6.4 Overdue Debts to Greek State Rise by €13 Billion Despite Confiscations of €5 Billion
6.5 Private Deposits Boost Greek Banks
6.6 Greece Scores High on ‘2018 Best Countries’ List
7: GENERAL NEWS AND INTEREST
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ISRAEL
7.1 Number of Arab Students in Israeli Universities Grows by 78% in 7 years
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REGIONAL
7.2 American University in the UAE (AURAK) and Wayne State University (WSU) Sign Student Transfer Program
7.3 Rochester Institute of Technology Unveils $136 Million Dubai Campus Plan
8: ISRAEL LIFE SCIENCE NEWS
8.1 Merck Opens Jerusalem Innovation Lab
8.2 Tyto Care Raises $25 Million Led by Ping An Global Voyager Fund
8.3 Puma Biotech & Medison Pharma Sign Licensing Agreement to Commercialize NERLYNX in Israel
8.4 Farm Dog & John Deere Joint Project to Develop Variable Rate Spray Technology
8.5 BiomX Licenses Novel Bacterial Targets for Inflammatory Bowel Disease Treatment
8.6 Cellect Biotechnology Announces $4 Million Registered Direct Offering
8.7 MedyMatch Receives Expedited Access Pathway from the FDA
8.8 Additional Strategic Funding for CartiHeal’s Ongoing AGILI-C IDE Clinical Study
8.9 St. Louis’ WashU Joins With MDClone to Enable Data-Driven Healthcare Innovation
8.10 Medial EarlySign Predicts Which Diabetic Patients Will Suffer Kidney Damage Within One Year
8.11 MDClone Announces $15 Million Funding for a New Healthcare Data Paradigm
8.12 EarlySense Increases Installed Base by 400% in 2017
8.13 German National Health Insurance Adds ReWalk 6.0 System to Medical Device Directory
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Storage Magazine Names Reduxio 2017 Product of the Year Award Finalist
9.2 Anodot’s Analytics Ensure Customer Satisfaction & Superior Uptime for LivePerson
9.3 Cyberbit to Protect the Bank of Jerusalem from Advanced Cyberattacks
9.4 Waterfall Security & HCNC Provide Secure OSIsoft PI Offerings to the Korean Market
9.5 hoopo Launches to Provide Low-Power Geolocation Solutions for IoT
9.6 Camtek Launches a New Eagle Model for Post Dicing Inspection
9.7 AudioCodes SmartTAP Adds Support for Video and MiFID II Compliance
9.8 NBN & Speedcast Select Gilat for Business and Enterprise Satellite Service in Australia
9.9 Inception to Bring 360 Video from AP to Global Audience in New Collaboration
9.10 SAM Launches Out of Stealth Status and Raises $3.5 Million to Make IoT Secure
9.11 Credium’s New Platform Bridges Blockchain to the Traditional Credit Industry
10: ISRAEL ECONOMIC STATISTICS
10.1 Tourism to Israel Booms
10.2 Overseas Tourism to Eilat Up 69% This Winter
10.3 Employment Among Israeli Ultra-Orthodox Men Declining
11: IN DEPTH
11.1 ISRAEL: Israel ‘A+/A-1’ Ratings Affirmed; Outlook Remains Positive
11.2 ISRAEL: Israeli Cybersecurity – Coming of Age?
11.3 LEBANON: Fitch Affirms Lebanon at ‘B-‘; Outlook Stable
11.4 ARABIAN GULF: The Looming E-Battle in the Arabian Gulf
11.5 KUWAIT: IMF Executive Board Concludes 2017 Article IV Consultation with Kuwait
11.6 EGYPT: IMF Approval in Second Review of Economic Reform Program
11.7 EGYPT: What Tunisia and Sudan Can Learn From Egypt on Subsidy Reform
11.8 EGYPT: Upholding Car Import Customs Does Not Benefit Egypt’s Local Industry
11.9 MOROCCO: Fitch Says Wider Moroccan Dirham Band a Step towards FX Flexibility
11.10 MOROCCO: Morocco’s Deficit Reduction to Decelerate in 2018
11.11 TURKEY: What Lurks Behind Turkey’s Unending Emergency Rule?
11.12 MALTA: IMF Executive Board Concludes 2017 Article IV Consultation with Malta
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Expanded Canada-Israel Air Transport Agreement Allows More Flights & New Travel Options
On 25 January, Canada’s Minister of Transport Garneau and Israel’s Minister of Transport Katz announced the recent conclusion of an expanded air transport agreement between Canada and Israel. The expanded agreement allows designated airlines to operate up to 19 passenger flights per week (up from 12). The new rights under the expanded agreement are available for use by airlines immediately. Minister Garneau made the announcement while in Israel, where he also held key bilateral meetings with Minister Katz and senior Canadian business leaders established in Israel, to advance bilateral cooperation in transport, as well as discuss policy approaches.
The original Canada-Israel Air Transport Agreement was signed in 2015. This expanded agreement was reached under Canada’s Blue Sky policy, which encourages long-term, sustainable competition and the development of international air services. Under the Blue Sky Policy, the Government of Canada has concluded new or expanded air transport agreements covering more than 100 countries. (Transport Canada 25.01)
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1.2 Prime Minister Netanyahu & SAP CEO Launch NIS 1 Billion Healthcare Project
On 25 January, Prime Minister Netanyahu met in Davos with William McDermott, CEO of SAP. The two agreed on a five year NIS 1 billion digital healthcare project. According to PM Netanyahu, the project will take place exclusively in Israel. The project, which is designed to develop personalized and preventative medicine, is regarded as a revolution in the health sector. PM Netanyahu will bring the initiative to the cabinet for approval, because its aspects require access to highly sensitive digital health databases. (Globes 25.01)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 WEF Says Israel is the 25th-Strongest Economy in the World
A new World Economic Forum index that rates economies around the world ranks Israel in 25th place, right after the U.S. and Japan. The new index takes into account a number of variables to rank the overall economic development of various countries: average per capita income; unemployment vs. participation in the workforce; fertility; public debt; poverty rate; equality; air quality; the availability of vital natural resources; foreign investments and more. Norway topped the list, followed by Iceland, Luxembourg, Switzerland, Denmark, Sweden, the Netherlands, Ireland, Australia and Austria.
In addition to being ranked the 25th-strongest economy in the world, Israel’s ratio of government debt-to-gross domestic product has dropped to 59.4%, the first time it has come in at below 60%. In the three years in which Kahlon has served as finance minister, the ratio of government debt-to-GDP has dropped by a total 3%, or some 40 billion shekels ($12 billion). Total sovereign debt has dropped to 61% of the GDP, a decline of 2.9% since 2015, according to data published by Israel’s Accountant General. Meanwhile, the Bank of Israel has published its integrated index on the Israeli economy, which showed that the economy gained 0.32% in December 2017 and grew by a total of 4% over the course of 2017.
The good news on the state of the country’s coffers comes at an opportune moment, as the celebrations for Israel’s 70th Independence Day this spring are projected to cost NIS 100 million ($30 million). (IH 24.01)
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2.2 Hysolate Launches out of Stealth Status and Raises $8 Million to Re-invent the Endpoint
Team8 portfolio company Hysolate, inventor of a disruptive hybrid endpoint architecture, announced today its launch out of stealth status along with the public launch of its first product and the raising of $8 million, led by cybersecurity foundry Team8 and Eric Schmidt’s Innovation Endeavors.
Hysolate built its platform upon an alternative “hybrid” architecture that allows enterprises to run multiple side-by-side operating systems on a single workstation, providing a seamless experience for end-users while maintaining the highest level of security. As opposed to other approaches that rely on the security of the underlying vulnerable operating system, Hysolate’s patented virtual air gap technology enhances virtualization to seamlessly split an endpoint into two isolated operating systems: an unlocked operating system that provides users with full freedom, and another locked-down operating system that is only used to access enterprise resources. This protects sensitive assets regardless of the type of attack vector used by attackers: whether they trick the user into installing malware or infect via the latest Windows zero-day vulnerability, attackers are trapped in one operating system and can’t reach the other.
Hysolate is the fourth company to be launched out of Team8, joining an impressive group of companies, including Illusive Networks, Claroty and the recently launched Sygnia. Hysolate is currently working with some of the largest enterprises in the world, including several of the world’s biggest banks, technology vendors, financial services providers and other enterprise organizations.
Tel Aviv’s Hysolate was founded with the goal of solving the challenge faced by most enterprises considering how to best protect their endpoints: security or functionality. With roots in 8200 and other elite cyber units as well as world-class enterprise software companies like VMware and CyberArk, the Hysolate team has deep experience across the entirety of the cyber economy, enabling them to build a platform that can defend against the most malicious attacks, while simultaneously providing end users with unmatched ease-of-use. (Hysolate 24.01)
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2.3 Carolina Lemke to Open US Branches
The Israeli eyeglass chain Carolina Lemke is expanding its international business to include countries outside Europe. After opening branches in Spain and the UK during the past two years, the group is planning on also launching branches in the US.
Carolina Lemke is part of the Hoodies group of four companies: Hoodies, TopTen, Carolina Lemke and Accessories London. It was acquired over a decade ago by Castro Model. At this stage, the company plans to focus its website only on eyeglasses, which are relatively easy to market online. The very low cost of trying the product for the consumer removes an important entry barrier, and logistical management is simpler. Opening branches in the US will also help provide logistical solutions for operating the ecommerce website.
Israel’s Carolina Lemke Berlin is a fast growing company, specializing in design, production and retail of sunglasses and optic eyewear. They are primarily a fashion company, believing that glasses are a fashion accessory as well as a health product. They manufacture high-end designer eyewear enjoyed by the masses. In order to achieve their goal, Carolina Lemke Berlin controls all the aspects of design and production, to assure that their products comply with the highest quality standards and their designs are updated according to the latest fashion trends. (Globes 25.01)
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2.4 Ormat Signs Definitive Agreement to Acquire U.S. Geothermal
Ormat Technologies has entered into a definitive agreement to acquire Boise, Idaho’s U.S. Geothermal, a renewable energy company focused on the development, production and sale of electricity from geothermal energy. Under terms of the merger agreement, holders of U.S. Geothermal common stock will receive $5.45 per share in cash. On fully diluted basis, including payment to U.S. Geothermal’s option holders, Ormat will pay a total consideration of approximately $109.9 million. The closing of the merger is subject to customary conditions, including receipt of regulatory approvals and approval by persons holding a majority of the outstanding shares of US Geothermal common stock. The transaction is expected to close in the second quarter of 2018.
U.S. Geothermal is currently operating geothermal power projects at Neal Hot Springs, Oregon, San Emidio, Nevada and Raft River, Idaho for a total designed net output of 45MW that currently generate approximately 38MW net. In addition, U.S. Geothermal is developing additional projects at the Geysers, California; a second phase project at San Emidio, Nevada; at Crescent Valley, Nevada; and the El Ceibillo project located near Guatemala City, Guatemala.
With over five decades of experience, Yavne’s Ormat Technologies is a leading geothermal company and the only vertically integrated company engaged in geothermal and recovered energy generation (REG), with the objective of becoming a leading global provider of renewable energy. The company owns, operates, designs, manufactures and sells geothermal and REG power plants primarily based on the Ormat Energy Converter – a power generation unit that converts low-, medium- and high-temperature heat into electricity. Ormat is the largest US-based geothermal operator with its current 800MW generating portfolio spread globally in the U.S., Guatemala, Guadeloupe, Honduras, Indonesia and Kenya. Ormat also intends to expand its operations and provide energy management and energy storage solutions, by leveraging its core capabilities and global presence. (Ormat Technologies 24.01)
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2.5 SCD Acquires US-Based Quantum Imaging (QI)
SCD completed the acquisition of the US-based imaging solutions company, Quantum Imaging (QI) [located in Colorado Springs, Colorado]. SCD is a global leader in the development and manufacturing of a wide range of cooled and uncooled infrared detectors and high power laser diodes. Quantum Imaging is a US company specializing in design, development and production of high-performance visible SWIR (Short Wave Infrared) cameras for a range of military, industrial and scientific applications. The acquisition is intended to strengthen and expand SCD’s SWIR related activities in the US defense and homeland security markets and will enhance its positioning towards numerous US programs that require SWIR technology, including dismounted soldiers systems, Armored Fighting Vehicles (AFVs), unmanned systems, long-range observation solutions and others.
Misgav’s Semi Conductor Devices (SCD), is a leading worldwide supplier of high-end Infrared Detectors and Laser Diodes. Backed by more than 30 years of accumulated experience in development and manufacturing, SCD’s products have been chosen by leading companies all over the world, to become the core of their high-end electro-optical systems. SCD has a vertical integration production structure that allows keeping a close control of the products, along the various processes, from the crystal growth to the device packaging and testing. SCD is owned equally by RAFAEL and ELBIT SYSTEMS, and runs as an independent commercial entity. (SCD 24.01)
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2.6 Israel First in Middle East to Accept Chinese Tourist Payments via Alipay
Israel Credit Card (ICC, CAL) and OneBill have announced they will be cooperating with Chinese payment market leader Alipay to facilitate payments for Chinese visitors to Israel. The availability of Alipay means Israel becomes the first country in the Middle East in which it can be used for instore payments. This follows Alipay’s extensive international expansion in recent years. The service is available for Chinese tourists and business travelers visiting Israel.
Israeli businesses are showing great interest in the economic benefits of Chinese tourism and many have already announced they will enable payments through Alipay. El-Al and James Richardson Duty Free chain stores will soon accept Alipay, with Diamond Mines launching Alipay powered payments recently.
According to information received from the Ministry of Tourism and the Israel-Chinese Chamber of Commerce, the volume of Chinese arrivals to Israel increased 45% year-on-year in 2017. Last year, over 123,000 Chinese tourists visited Israel. The typical Chinese tourist visits Israel for an average period of 9 days, during which each tourist spends approximately $300 daily. (24.01)
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2.7 Nexar Raises $30 Million in Series B Funding
Nexar closed a $30 million round of financing led by Ibex Investors, with participation from Alibaba Innovation Ventures, US-based Nationwide and previous investors Aleph, Mosaic Ventures, Slow Ventures, True Ventures and Tusk Ventures. Nexar will use the funding to further its mission of eliminating car crashes and expand its vehicle-to-vehicle (V2V) network by working with insurers, cities and automakers. The company offers a free dashcam app connected to a V2V communication network that marries its deep learning and sensor fusion technology with off-the-shelf hardware to provide advanced driver-assistance systems (ADAS) and collision prevention alerts to drivers. Nexar also provides next-generation data products and telematics to insurance carriers, such as collision reconstruction and first notice of loss reports, which help expedite claims and prevent fraudulent claims. In the near future, Nexar products will also help municipalities and states better manage infrastructure and traffic, and make roads safer through its data-powered insights.
Tel Aviv’s Nexar connects cars in the world’s largest open vehicle-to-vehicle network. Leveraging connected smartphones, car cameras and sensors, Nexar provides real-time alerts to prevent vehicle, cyclist, and pedestrian collisions. Leveraging millions of crowd-sourced road miles jointed with sensor-fusion, deep-learning and map-layering technologies, Nexar provides products and services for the Insurance, Automotive, and Mapping industries. (Nexar 24.01)
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2.8 Magal Awarded $20 Million in Contracts for Integrated Security Solutions
Magal Security Systems announced that since the beginning of 2018, it has been awarded approximately $20 million in contracts for integrated security solutions, including a $16 million order for the protection of critical energy infrastructures in the Americas. The vast majority of the orders are expected to be delivered during 2018.
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 offers comprehensive integrated solutions for critical sites, managed by Fortis4G – our 4th generation, cutting-edge physical security information management system (PSIM). The solutions leverage our broad portfolio of home-grown PIDS (Perimeter Intrusion Detection Systems), Symphony – our advanced VMS (Video Management Software) with native IVA (Intelligent Video Analytics) security solutions. (Magal 24.01)
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2.9 Amdocs to Acquire Vubiquity to Further Expand into the Media & Entertainment Business
Amdocs has entered into a definitive agreement to acquire Los Angeles’ Vubiquity, a leading provider of premium content services and technology solutions, subject to customary closing conditions. The two companies are excited about the acquisition with the increased capacity to now deliver enhanced digital content capabilities for network operators, video distributors, OTT companies, content owners and content producers. The combination of Vubiquity’s expertise across the content ecosystem and Amdocs’ proven, scalable solutions enables customers to quickly improve entertainment offerings and maximize revenues while gaining increased customer insights from content consumption. The company is now uniquely positioned to deliver a set of comprehensive content offerings so customers can redirect operations, enable large libraries for global distribution, and efficiently monetize their content offerings. With Vubiquity, Amdocs will enhance its capabilities to deliver an enriched customer experience, including end-to-end solutions, for rapid deployment of new communications and media services worldwide.
Ra’anana’s Amdocs is a leading software and services provider to the world’s most successful communications and media companies. As their customers reinvent themselves, Amdocs enables their digital and network transformation through innovative solutions, delivery expertise and intelligent operations. Amdocs and its 25,000 employees serve customers in over 85 countries. (Amdocs 30.01)
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2.10 Pcysys Raises $4.5 Million
Pcysys has raised $4.5 million in a financing round led by AWZ Homeland Security I, a Canadian venture capital fund that invests exclusively in Israeli cybersecurity, intelligence and physical security technology. AWZ is investing $2.75 million in this financing round and will invest a further $1.5 million in the future.
This is AWZ’s fourth investment in an Israeli cybersecurity startup in recent months. The fund has already invested $4.5 million in NanoLock Security, $3.5 million in Siga Data Security and $5.25 million in Octopus Systems.
Israel’s Pcysys develops a fully automated, self-learning penetration tests solution, while mimicking the hackers mindset. Pcysys is effectively modeling the hackers’ thoughts and actions into a machine language, creating the most effective virtual-hacker opponent, which is constantly attacking the organization’s ecosystem. Pcysys’ vision is to build the most sophisticated and effective virtual hacker to make the act of penetration testing automatic and continuous to let you have your own cyber watch dog. Using Pcysys’s products, large and small organizations including banks, insurance companies, investment houses, infrastructure installations, high-tech companies, retail chains and government bodies can benefit from 24/7 protection in their core systems. (Globes 30.01)
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2.11 BigID Closes $14 Million Series A Funding to Transform Protection of Personal Data
BigID has raised $14 million in Series A funding. New investors in the round include ClearSky Security, Comcast Ventures and the SAP.iO Fund, among others. Previous investors, including BOLDstart Ventures, also participated in the Series A round. The round brings total funding to date to $16.1 million. BigID will use the funding to grow its engineering team in Israel and expand global sales and marketing to accelerate the adoption of the company’s data-driven personal information (PI) protection, privacy and governance platform.
BigID was founded by veterans of the identity, data protection and big data markets to transform how enterprises protect and manage the privacy of personal data. The company’s platform uniquely combines machine learning with identity intelligence to find, track and de-risk identity data at petabyte scale.
Based in New York and Tel Aviv, BigID uses advanced machine learning and identity intelligence to help enterprises better protect their customer and employee data at petabyte scale. Using BigID, enterprises can better safeguard and assure the privacy of their most sensitive data, reducing breach risk and enabling compliance with emerging data protection regulations like the EU General Data Protection Regulation. (BigID 29.01)
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2.12 IBM Sets Up Cybersecurity Lab in Beer Sheva
On 31 January, IBM’s global security division announced the expansion of activity by its Cyber Center of Excellence (CCOE) and the launching of a new laboratory in the Bayside Land Corp. park in Beer Sheva, in cooperation with the company’s research division. IBM’s CCOE has already been operating for four years on the campus of Ben Gurion University of the Negev as part of activity by IBM’s research center in Haifa. The Haifa research center is IBM’s largest research center outside the US. The laboratory in the Negev began as a limited pilot with a few researchers from IBM and the university. Over the years of its activity, the laboratory grew to dozens of researchers, and is now expanding again.
IBM’s security division is active in 130 countries and has 8,000 employees worldwide. The security division’s sales turnover totals $2 billion a year, and it is IBM’s youngest division – it has been operating for only six years. (Globes 31.01)
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2.13 Telrad Networks and WAV Sign Partnership Agreement
Telrad Networks announced the signing of a partnership agreement with Aurora, Illinois’ WAV, a leading distributor of LTE and wireless broadband solutions. This move will further reinforce their leadership positions in the wireless broadband industry and make carrier-class, fixed LTE solutions more widely available to operators and ISPs across the United States, who will, in turn, offer reliable, high-speed Internet connectivity to rural and remote area residents and businesses. The partnership is a strong strategic fit, leveraging the two leading companies’ respective strengths.
Lod’s Telrad Networks is a global provider of innovative LTE telecom solutions, boasting over 300 4G deployments in 100 countries. Telrad stands at the forefront of the technology evolution of next-generation TD-LTE solutions in the sub-6 GHz market. Since 1951, the company has been a recognized pioneer in the telecom industry, facilitating the connectivity needs of millions of end-users through operators, ISPs and enterprises around the world. (Telrad 01.02)
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2.14 Alcide Wins 2017-18 Cloud Award
Alcide is a winner in the 2017-18 Cloud Awards Program in the category Most Promising Start-Up. Now entering its eighth year, the cloud computing awards program celebrates excellence and innovation in the rapid-growth cloud computing market. The awards program accepts entries from organizations of any size, across the globe.
Alcide provides enterprises with a data center security platform that is designed to meet the complex needs of the modern data center, including hybrid, multi-compute and multi-cloud data environments. From service-mesh and infrastructure visibility to advanced threat protection capabilities, Alcide secures the cloud-native infrastructure of the organization.
Tel Aviv’s Alcide delivers a cloud workload protection platform designed for any combination of container, VM and bare metal data centers operated by multiple orchestration systems. Alcide empowers DevOps, Security and Engineering teams with simplified and autonomous control to manage and secure the evolving data center and hybrid cloud, at any scale. Offering real-time, aerial visibility and granular perspectives of both infrastructure and applications, Alcide secures the data center against cyber-attacks, including malicious internal activity and data exfiltration. (Alcide 01.02)
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2.15 Air India to Launch Tel Aviv – New Delhi Flights in March
Air India will launch flights between Tel Aviv and New Delhi next month. The Indian national carrier will operate thrice weekly flights from 20 March on Tuesdays, Thursdays and Sundays. Air India had been planning to launch the route last year but abandoned the idea as uneconomical after Saudi Arabia refused to allow the flights to go over its territory, making a five hour flight into an eight hour flight. However, the plan was revived after Prime Minister Netanyahu’s visit to India last month. Air India will receive a $750,000 grants from Israel’s Ministry of Tourism for opening the route. At present, the only direct route operate between Israel and India is by El Al Israel Airlines, which flies from Tel Aviv to Mumbai. (Globes 05.02)
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2.16 Asian Ministry of Defense Orders Orbit Aeronautical Telemetry Systems for $5 Million
Orbit Communications Systems announced that an Asian Ministry of Defense ordered an aeronautical telemetry system for approximately $5 million. The turnkey solution – including a 5-meter S-band antenna and full ground station with total data chain capabilities – will be used for test range applications. Delivery of the high-precision system is expected in 2019. Orbit’s aeronautical telemetry solutions are used in defense and civilian applications, such as flight testing, space exploration and rocketry, to enable real-time monitoring of environmental conditions in flying objects.
Netanya’s Orbit Communications Systems is wholly-focused on precision tracking-based communications – in the areas of satcom, telemetry and remote sensing – and provides an innovative solution for airborne audio management. With certification by defense, government and commercial agencies, we deliver tailor-made, turnkey solutions on land, at sea and in the air. (Orbit 05.02)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Freddy’s Frozen Custard & Steakburgers Signs First International Agreement
Fast-casual restaurant concept, Wichita, Kansas’ Freddy’s Frozen Custard & Steakburgers signed a development and master franchise agreement with Younata Investment Limited to bring its concept to the Middle East, with plans to develop in the United Arab Emirates, Saudi Arabia, Bahrain, Jordan, Kuwait, Lebanon, Oman and Qatar. The first restaurant will be located in Dubai and is slated to open this fall.
Younata Investment Limited, headquartered in Dubai, is a family-owned company with over 25 years of regional business experience within the Gulf Cooperation Council and Levant area. The company has a diverse portfolio of businesses and partnerships in the MENA region including Real Estate, Healthcare, Food & Beverage, Software Solutions and Retail. (Freddy’s 30.01)
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3.2 Innovative Systems Accelerates Growth with New Middle East Office
Pittsburgh, Pennsylvania’s Innovative Systems, a global leader in the development and delivery of high-performance enterprise data management and risk management solutions, announced the expansion of its international presence with the opening of a new office in Dubai to accommodate the company’s rapid growth in the Middle East. The Dubai location will enable the company to better support demand from existing customers and partners in the region and will facilitate deeper insight to business demands and trends to further propel the company’s long-term growth strategy in the Middle East market. (Innovative Systems 24.01)
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3.3 Spar International to Open 40 Stores in Saudi by 2020
Foot retail chain Spar International has unveiled plans to open 40 stores in Saudi Arabia by 2020, as part of a partnership with Riyadh-based Al Sadhan Group to bring the brand to the kingdom. The firm opened three Spar stores in Riyadh recently, with five more scheduled this year, bringing the total number of stores in the country to eight. The stores are aimed at a mid-to premium customer base, with competitive pricing offered for global and local products. Spar International said a growing young population and rising GDP has resulted in steady growth in Saudi Arabia’s retail market.
Spar is one of the world’s largest food retail chains, with over 12,500 stores worldwide and global retail sales of €33.1 billion (2016). The Netherlands-based group has existing stores across the region in the UAE and Oman. As for Al Sadhan Group, it is a family owned business that operates in sectors ranging from real estate to facilities management and retail. (AB 28.01)
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3.4 Cairo Angels and EG Bank Launch Mint Incubator
Cairo Angels launched its MINT Incubator in partnership with EG Bank. MINT Incubator is an intensive, highly competitive, 3-month incubation program designed to accelerate growth of product-ready startups who want to take their business to the next level. MINT Incubator is designed to support startups with no strings attached; it will not take equity and will not provide debt to the startups enrolled in the program. Selected startups that join the program will benefit from various perks and tools to power their businesses as well as office space at EG Bank’s co-working space in the heart of downtown Cairo. MINT Incubator will also facilitate various networking sessions with key ecosystem stakeholders, including a demo day at the end of the incubation period where entrepreneurs can pitch their startups to the very best regional investors. (ArabNet 23.01)
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3.5 SDX Energy Makes Fourth Gas Discovery in Morocco
The British gas company SDX Energy announced a new gas discovery in the Gharb basin of Morocco, three weeks after abandoning the ELQ-1 well located in its permit in Kenitra. The well, ONZ-7, is the fourth discovered by the company and one of five wells drilled as part of its nine-well campaign. According to the company, the well will be tested before being connected to the existing infrastructure. An update on the results of the tests will be announced in early February.
SDX is an international oil and gas exploration, production and development company, headquartered in London with a principal focus on North Africa. The exploration company entered the Moroccan market in January after acquiring Circle Oil’s shares in Morocco for $30 million. The British company is now endowed with an eight-year permit to drill for gas in the Gharb basin. In addition, the company successfully renewed their permits for the Gueddari North-West, Gueddari South, Sidi Al Harati South-West, and Ksiri Center sites. These permits will expire in 2019, 2020, 2023 and 2023 respectively. In total, SDX Energy obtained licenses for seven drilling sites from the National Office of Hydrocarbons and Mines. The latter holds 25% of working interests of SDX Energy’s activity in Morocco. (MWN 25.01)
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Morocco and Finland to Work Together in Developing Green Economy
Finnish Minister of Environment, Energy and Housing Tiilikainen met Moroccan Minister of Energy, Mining and Sustainable Development Rabbah on 25 January. Tiilikainen, who led a delegation of 19 representatives of companies operating in the sectors of water, waste management, energy and the bio-economy, said that Finland ranks among the greenest countries in the world and shares with Morocco the desire to increase in the very near future the use of energy from renewable sources. The Finish minister said that his country is committed to sorting, waste recovery and waste water treatment, which are at the heart of Finland’s environmental policy. Morocco’s progress in the transition to a green and ecological society could be enhanced through cooperation with Finland.
Rabbah said his willing to strengthen cooperation with his Finish counterpart in the energy field, highlighting the major reforms undertaken by Morocco in the field of environmental and energy strategy. (MWN 25.01)
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5: ARAB STATE DEVELOPMENTS
5.1 Moody’s and S&P 2018: Lebanon’s Economic Risks “Extremely High”
In the past two weeks of January 2018, S&P and Moody’s have renewed their respective assessments and warnings on Lebanon’s economy. Specifically, on 22 January Moody’s lowered its Macro Profile for Lebanon’s banking system to “Very Weak +” from “Weak –“, to reflect the increased political risk and a weaker institutional strength. However, the agency affirmed the B3 long-term deposit ratings and the b3 standalone baseline credit assessments (BCAs) of both: BLOM Bank and Byblos Bank, which basically reflects the limited impact of Lebanon’s deteriorated Macro Profile on these banks’ financial profiles. As for S&P Global Ratings, it maintained Lebanon’s Banking Industry Country Risk Assessment at “group 8,” and classified the banking sector of Lebanon (B-/Stable/B) in “group 9” under its Banking Industry Country Risk Assessment (BICRA), which assigns scores to banking systems on a scale from 1 to 10, with “group 1” including the least-risky banking sectors. Nonetheless, the report explains that Lebanese banks can withstand the deteriorating quality of private-sector loans. The agency also notes that, “the trend for economic risk in Lebanon is stable”. Overall though, S&P and Moody’s both did not foresee further economic deterioration in Lebanon’s economy in 2018; yet, they reiterated the dangers of the Lebanese banks’ high exposure to the government and how the continued political bickering is the main hurdle to any reforms. (BLOM 26.01)
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5.2 Lebanon’s Average Annual Inflation Rate Rises by 4.44% in 2017
According to the Central Administration of Statistics (CAS), average inflation increased by a yearly 4.44% by December 2017, compared to an average deflation rate of 0.78% recorded by December 2016. All sub sections of the Consumer price index (CPI) recorded yearly upticks in 2017. Average prices of food and non-alcoholic beverages (20% of CPI) rose by an annual 3.67% by Dec. 2017. The average costs of Housing and utilities (including: water, electricity, gas and other fuels), which grasped a combined 28.4% of the CPI, rose by 5.18% year-on-year (y-o-y) by the end of 2017. Specifically, Owner-occupied rental costs constituted 13.6% of this category and increased by 3.84% y-o-y, and the average prices of Water, electricity, gas, and other fuels constituting 11.8% of the same category rose by an annual 10.84% over the same period. Also, the average price of transportation made up 13.1% of the CPI, gained an annual 5.54%, which can be attributed to the continuing recovery in the average international price of oil which attained $54.74/barrel by December 2017, up from $45.13/barrel by the end of 2016.
In their turn, the average costs of Health (7.7% of the CPI) and Education (6.6% of the CPI) respectively climbed by 0.55% and 2.75% y-o-y by December 2017. In the month of December 2017, the monthly inflation rate stood at 5.01% compared to 3.14% in Dec. 2016. The increase this year was driven by the upticks of 4.09% and 3.69% registered in the two largest CPI components Housing and utilities and Food and non-alcoholic, respectively. (CAS 22.01)
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5.3 Lebanon’s Trade Deficit Widened by an Annual 1.83% by November 2017
According to the Lebanese Customs, Lebanon’s trade deficit rose by 1.83% year-on-year (y-o-y) to stand at $14.71B by Nov. 2017, as exports shrank by an annual 4.82% to stand at $2.6B, while imports marginally grew by 0.77% y-o-y to reach $17.31B. In terms of imports, and despite the recovering oil prices, the value of total imported mineral products (constituting 26.85% of the total value of imports by Nov. 2017) fell by an annual 3.14% to stand at $3.38B, on the back of a decline in volume from 8.2M tons by Nov. 2016 to 8.01M tons in the same period of 2017. Moreover, products of the chemical or allied industries (15.39% of total imports’ value), rose by a yearly 3.96% to $1.94B. As for machinery and electrical instruments, they grasped a share of 14.06% of the total value of imports and increased by 3.01% y-o-y to $1.77B by November 2017.
By November 2017, Lebanon had mainly imported from China, Italy and Greece with respective shares of 9.93%, 9.39%, and 7.26% of the total value of imported goods, followed by: Germany and the USA, which grasped a share of 6.49% and 6.06%, respectively. As for exports, pearls, precious stones and metals products, grasping the largest share of exported goods (20.6%), plunged by 31.51% by November 2017, to $534.6M. As for prepared foodstuffs, beverages and tobacco, they constituted 16.09% of the exported goods’ value and grew by 3.14% y-o-y, totaling $417.6M by November 2017. Moreover, Base metals and articles of base metal, which take up to 11.74% of the total exports, rose from $224.7M by Nov. 2016 to $304.7M by Nov. 2017. The top export destinations over the same period were South Africa, United Arab Emirates, and Saudi Arabia, with respective shares of 11.28%, and 8.82% and 8.38%. (LC28.01)
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5.4 The Lebanese Car Market in 2017: Low-Cost Trend Still Dominant
The Lebanese car market is moving slowly. Back in 2008, the number of registered new passenger and commercial cars rose by 15,845 to reach 34,543. Modest 0.61% and 3.91% increases followed in 2009 and 2010 only to be followed by a 4.4% drop in 2011, a year where most sectors of the Lebanese economy suffered a downturn. From that point on, car registrations were recording modest increases which the Association of Car Importers in Lebanon (AIA) qualifies as “not proportional to the marketing and promotional offers of car importers”. 2016 marked the culmination of a prolonged period of economic gloom in the country combined with the effects of tighter car loan regulations imposed by the Central Bank of Lebanon; in 2016 the number of registered passenger and commercial vehicles fell by 2,780, the most in 8 years.
Given the context detailed above, it is understandable for the AIA to qualify the 2.54% rise in car registration in 2017 as a “very slight increase”. The total number of new registered passenger and commercial vehicles reached 39,863; in detail, the number of registered passenger cars increased by a yearly 2.47% to 37,222 while the number of new registered commercial cars rose by 3.65% to 2,641. In that light, 2017’s uptick is most adequately regarded as an upward correction; the total number of new car registrations dropped by an annual 2,780 in 2016 but the increase was only of 989 in 2017. (Blom 27.01)
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5.5 Lebanese Tourism Ends 2017 on a 7 Year High
According to the Lebanese Ministry of Tourism, the number of tourist arrivals increased by an annual 10% to end the year at 1.86 million by December 2017, driven by larger numbers of tourists coming from Europe, the Arab countries and the Americas. Moreover, the rise in the number of tourists in Lebanon contributed to the 5.5% annual increase recorded in tourist spending by December 2017. European tourists who constituted 34.45% of total tourists, climbed by a yearly 13.31% to 639,624 travelers by the end of 2017. In fact, the number of French and German visitors increased by an annual 16.57% and 12.96%, to 169,787 and 98,914 tourists, respectively. Travelers from the UK and Sweden also registered annual upticks of 12.99% and 15.14% to reach 70,045 and 39,864, respectively, by December 2017. In addition, the number of visitors from Arab countries, representing 30.23% of the total, rose by an annual 7.33% to 561,273. In fact, the effect of the travel ban lift on Saudi and Kuwaiti tourists continued to improve the number of visitors from both countries, which rose from 40,391 and 25,653 by Dec. 2016, to reach 63,422 and 41,046, respectively, by the end of 2017. It is important to mention that Saudis and Kuwaitis are Lebanon’s biggest spenders; therefore, the increase in their advent to Lebanon has indeed pushed tourist spending to rise by a yearly 15.37% and 28.46%, respectively, compared to Dec. 2016.
In contrast, the number of Iraqi and Emirati tourists slipped by a yearly 2.74% and 9.13% to stand at 229,542 and 1,921, respectively. Meanwhile, the number of Jordanians and Egyptians recorded upticks of 5% and a marginal 0.08% to 91,064 and 83,405, respectively, by Dec. 2017. As for American tourists who composed 17.6% of total tourist arrivals, their number rose by an annual 10.34% to 327,536 by the end of 2017. This rise is mainly attributed to the yearly growth recorded in the number of visitors from the US and Canada, which increased by 14.32% and 11.26% to 176,156 and 111,346, respectively, over the same period. Interestingly, tourist spending by Americans also rose by a yearly 10.6% by December 2017. (MoT 25.01)
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5.6 Jordan’s PM Presents King with Government Achievements Report
Jordan’s King Abdullah received the government achievements report for 2017 from Prime Minister Mulki, the Royal Court announced on 4 February. Among the highlights were a 15% reduction in the budget deficit compared to 2016 and healthier government revenues, which were 7.7% higher than 2016. The country also witnessed an improved financial self-reliance ratio (local revenues’ coverage of current expenditure), which amounted to 95% in 2017, compared with 90% in 2016.
Although economic performance was described as “modest”, real GDP grew a regionally comparable by 2% during the first three quarters of 2017, while national exports increased by 1.5%. This was offset by a trade deficit that increased by 9.7% during the first 11 months of 2017. Among the sectors that looked the most positive was the all-important tourism sector, which has suffered as regional crises made the country less attractive to international visitors. Tourism income increased by 12.5% to $4.6 billion in 2017 on the back of an 8.7 per increase in visitors to the Kingdom, which totaled 5.2 million in the year.
Jordan also ranked among the top 50 countries in the World Security and Safety Index, attracting tourism, moving up two spots on the global tourism scale. Foreign direct investment increased by 19.1% during the first three quarters of 2017. The Kingdom has been listed as one of the top 2018 tourism destinations by many international travel magazines such as National Geographic, Vogue (USA), Sunday Times (UK), Conde Nast (UK) and The Guardian. (AB 05.01)
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5.7 $7.3 Billion Jordan Response Plan Endorsed
The government of Jordan and the international community endorsed the Jordan Response Platform (JRP) for the Syria Crisis for the next three years, worth $7.3 billion. The announcement was made during the 10th meeting of the JRP 2018-2020 for the Syrian Crisis held at Al Hussein Youth City chaired by Jordanian Prime Minister Mulki. The JRP, which was prepared by governmental agencies and international donors agencies, seeks to compensate Jordan for the burden it has borne due to regional crises. It aims at securing sufficient grants and concessional financing to address the general budget needs over the next three years.
Access to education has been improved and over 130,000 Syrian refugee boys and girls are currently enrolled in public schools across the country. Furthermore, more than 211,000 primary healthcare assistance services and 91,930 maternal and child health assistance services have been provided to Syrian refugees and vulnerable Jordanians. The cash assistance program has reached an average of 143,000 Syrian refugees and 5,800 Jordanians per month, while 18,225 Syrian households received non-food item kits. (JT 02.02)
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►►Arabian Gulf
5.8 Some 2.5 Million Chinese Tourists Set to Visit the Arabian Gulf by 2021
Chinese arrivals to the GCC will increase 21% to 2021, rising to 2.5 million visitors annually, according to data released ahead of Arabian Travel Market 2018. Published by Colliers International, the data predicts Saudi Arabia will experience the highest proportionate increase in arrivals from China, up 35% on 2016 figures. The UAE will follow at 20%, with Oman at 12% and Bahrain and Kuwait at 7%. GCC countries currently attract 1.9% of China’s total outbound market, up from 1.3% in 2012, and positive trends are expected to continue as 154 million Chinese tourists prepare to go abroad in 2018 and a predicted 244 million follow in 2022.
Keen to capitalize on the potential, figures from ATM 2017 show the number of delegates, exhibitors and attendees interested in doing business with China had increased 63% on the previous year, with the number of delegates arriving from China, up 28%. Every year, almost 15,000 Chinese Muslims visit the two holy cities of Saudi Arabia, and that number will increase as China’s Muslim population grows to account for 2.1% of the total population by 2030, the report said. Strengthening these ties in 2017, Saudi Arabia loaned Arab artefacts from the pre-historic, pre-Islamic and Islamic periods to Chinese museums, further enhancing Chinese awareness of Arab culture.
In 2016 Emirates added to its China network with two new routes to Yinchuan and Zhengzhou, in addition to regular flights to Beijing, Shanghai and Guangzhou. Emirates was the first airline in the Middle East to establish non-stop passenger flights to mainland china in 2004. Etihad pioneered a codeshare agreement with China Southern Airlines in 2017 with a reciprocal loyalty program due over the coming months. (AB 26.01)
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5.9 Kuwait Projects $17 Billion Deficit in 2018 – 19 Budget
Kuwait on 29 January announced a state budget for the year ending on 31 March 2019 that projects spending at 20 billion dinars ($66.7 billion) and revenues at 15 billion dinars. The Kuwaiti Finance Minister Nayef al-Hajraf said the budget would be based on an average oil price of $50 per barrel, and that the deficit would be financed by borrowing and using reserves. The 5 billion-dinar deficit would be before the transfer of 10% of revenues to Kuwait’s sovereign wealth fund. The budget deficit for the current fiscal year, which ends on March 31, 2018, was estimated at 6.556 billon dinars before the 10% deposit into the sovereign wealth fund. Hajraf said that subsidies are projected at 3.432 billion dinars of the budget. The budget for the current fiscal year was estimated based on an oil price of $45. Oil revenues are expected to reach 13.3 billion dinars, up from 11.7 billion dinars a year ago. Non-oil income is projected to remain almost flat at 1.6 billion dinars. (AB 29.01)
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5.10 Qatar Reportedly Planning to Procure S-400 SAM Missiles from Russia
The Russian news agency TASS reports that Qatar is in talks with Russia for the purchase of Almaz-Antey S-400 Triumf long-range surface-to-air missile (SAM) systems. In an interview with TASS, Qatar’s Ambassador to Russia Fahad bin Mohammed Al-Attiyah stated that the two countries were in “advanced negotiations” regarding the S-400. This news follows a memorandum-of-understanding (MoU) signed by Qatar and Russia in October 2017, in which a provision was made to discuss air defense systems (without specific details).
Qatar is the third country in the Arab Gulf region expressing interest in the S-400, following Saudi Arabia and Bahrain. The S-400 is emerging as Russia’s entryway into markets traditionally dominated by U.S. and European suppliers, with Turkey being the first to formally ink a contract. The S-400 comprises of the 40N6 (400 km), 48N6 (250 km), 9M96E2 (120 km) and 9M96E (60 km) SAMs, which collectively enable the S-400 to operate as a multi-layer air defense system. Following China, which has begun receiving its order, Turkey signed on as the second firm buyer of the S-400.
Doha’s defense modernization roadmap is involving both the replacement of old equipment as well as an expansion – both quantitatively and qualitatively – of its capabilities. This is most pronounced in the Qatar Emiri Air Force’s (QEAF) fighter procurement plans, which include 36 Dassault Rafale, 36 Boeing F-15QA and 24 Eurofighter Typhoon twin-engine multi-role fighters. Besides multiplying its present fighter fleet eight-fold (from 12 Dassault Mirage 2000-5), the QEAF is constructing a fleet of clearly longer-range, higher-endurance, heavier-payload and technology more capable fighters.
Seeing the probable logistics and maintenance challenge, analysts point to Doha’s push to award lucrative deals to various industry leading vendors in major countries, such the U.S., U.K., France, Germany, Italy, Turkey and – should the S-400 deal come to fruition – Russia. To what extent Qatar yields foreign relations cache from these countries is unclear, but at least in the case of the Typhoon (i.e. U.K.), the Royal Air Force would form a ‘Joint Operation Squadron’ with the QEAF. In other words, the RAF will be present in Qatar. Nonetheless, the induction of these weapon systems will amount to a sizable boost for the Qatar Armed Forces. Granted, Doha will have to overcome supply challenges, not least the number of trained personnel necessary to effectively operate its equipment. (Quwa 25.01)
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5.11 Dubai on Track to Attract 500,000 Health Tourists by 2020
Dubai is on track to attract more than 500,000 medical tourists by 2020 after attracting over 326,000 patients in 2016, generating AED1 billion in 2016, said Humaid Al Qutami, chairman and director-general of the Dubai Health Authority. In 2016, Dubai witnessed an overall growth of 9-10% in the number of medical and health tourists in Dubai. Dubai’s strategy for health tourism includes a charter of patient’s rights and responsibilities with which medical tourists can understand their rights before arriving in Dubai for healthcare. Additionally, DHA has created a medical complaints procedure for anyone with a medical related complain about health facilities in Dubai. The process has been designed to address issues based on the level of severity, and provide families with a clean timetable for resolution. (AB 26.01)
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5.12 Surge in Russian & Chinese Tourists Boosts Dubai Hotel Openings
A total of 6,800 branded hotel keys were added to the UAE’s hotel market in 2017 as key source markets, particularly Russia, saw a 98% increase in visitors, according to a newly released market review from Colliers International. According to the data, 78% of the new branded hotel keys were located in Dubai and 10% in Abu Dhabi. While the UAE ended 2017 with 77,700 branded hotel keys, the number is expected to increase to 90,600 over the course of 2018 and to 119,000 in 2020. Notably, 2017 saw an upswing in visitors from a number of key source markets. Arrival from Russia, for example, rose an estimated 98% in 2017 as opposed to 2016, while Chinese arrivals grew by double digits in 2017 following the introduction of visa-on-arrival in November 2016. Colliers predicts that occupancy rates are expected to increase due to strong growth in demand while increased competition from new hotels will result in a slight rate compressing effect.
In Saudi Arabia, hotel room supply rose 13% in 2017, with 3,800 keys – 73% – of Saudi Arabia’s new room supply came from Mecca. The total number of branded hotel keys in Saudi Arabia in Q4/17 was 44,200, compared to 39,000 in Q4/16. The number is expected to rise to 55,800 throughout the 2018 fiscal year, then to 72,000 and 85,200 in 2019 and 2020, respectively. Notably, Medina was the only city to experience an increase in occupancy levels in 2017, partly due to a lack of hotel openings during the course of the year. Because of increased visa quotas, the number of Hajj pilgrims in the Kingdom rose from 1.9 million in 2016 to 2.4 million in 2017. (AB 28.01)
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5.13 S&P Says Saudi Arabia’s Economy Depends More on Policy Than Oil
In a wide-ranging interview with Saudi’s Arab News, S&P’s global chief rating officer Moritz Kraemer said that political reform will determine the future of the country – not the price of oil. “If oil went to $100 per barrel again there would be a risk of undermining the reform momentum, and helping those campaigning to maintain the previous status quo,” he told the paper. “So, we don’t think the oil price will determine the fate of the country. The policies that are chosen will determine future economic stability.”
Kraemer added that Saudi’s prospects depend the degree to which the reforms now being introduced become “irreversible”. “Although the price of oil has been enjoying a recent surge, due to continued supply constraints and an uptick in demand from China, S&P feels it will be short-lived – even dipping back to $50 by 2019. It is, therefore, essential that the country continues to diversify its economy and bring in more private capital. “Whether that happens slower or faster is less important than the irreversibility of the process,” he said.
The fact that Saudi debt is attractive on the international bond market, as evidenced by the number and value of bonds being issued, demonstrates the appeal of the country to foreign investors. S&P’s generally positive outlook, as articulated in its country report at the end of 2017, is predicated on the continuing drive to consolidate public finances. According to the World Bank, Saudi Arabia’s growth is forecast to accelerate to 1.2% in 2018 from 0.3% in 2017. (AB 28.01)
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►►North Africa
5.14 Morocco’s Clogged Engine: Human Capital Deficiency Impedes Economic Growth
The gap in wealth between Morocco and other MENA countries with similar levels of economic development is primarily the result of lower levels of human capital per capita, the World Bank reports in a 2018 study on global wealth, entitled “The Challenging Wealth of Nations.”
Morocco’s economic advancement is not to be ignored. Between 2005 and 2014, the country achieved strong growth in per capita wealth, totaling a rise of 45%. But if the change in real wealth per capita is added to this data, the authors of the study find Morocco’s economic growth sluggish and inconsistent. During the same time span, per capita wealth fell from roughly $ 400 to less than $ 100. In 2014, 41% of Morocco’s total wealth was human capital, compared with 59% in Egypt and 65% in Lebanon. The human capital gap, compared with these countries “fully explains why total wealth per capita in Morocco is well below the average.”
Nevertheless, the rate of convergence with high-income countries, including Mediterranean peers, “was too low to meet the aspirations of Moroccan citizens, particularly its youth,” the World Bank writes. The World Bank states that the country is still seeking convergence with higher-income countries. To achieve this goal, the country’s development agenda consists of macroeconomic reforms, increased trade and competitiveness, and institutional reforms.
To build human capital, Morocco requires reforms in the education sector and labor market, plus a greater emphasis on early childhood development. From 2005 to 2014, women have accounted for only one-fifth of total human capital in Morocco, states the World Bank, explaining that if gender parity in human capital wealth were achieved, levels of human capital wealth in Morocco could increase by more than a third. Furthermore, the country should invest in early childhood development, as well as its educational system; though investments in education have led to universal primary enrollment and higher enrollment rates in secondary and postsecondary education, quality remains low.
Finally, the report states that equally important changes include institutional reforms to create a modern administration, improvements in public investment and financial management, and increased accountability and access to information. (MWN 01.02)
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5.15 Morocco and EU Agree to Reinforce Agricultural Partnership
On 31 January, Morocco and the European Union signed in Brussels a document reinforcing their bonds on the basis of the agricultural agreement signed between the two parties. The partnership linking the two parties is underpinned by numerous economic and political agreements. The partnership around agriculture was reinforced by the launch of the European Neighbourhood Policy (ENP) in 2003. Additionally, the European Union is Morocco’s leading trade partner, according to the EU. In 2012 the EU imported goods from Morocco worth just over €9 billion and exported €7 billion worth to Morocco. In 2016, the EU imported more than €3 billion worth of agricultural products from Morocco.
EU data also indicated that 61% of all Moroccan exports go to the EU and 52% of all Morocco’s imports come from the EU. Data also showed that Morocco’s trade with the EU is rapidly growing across several important non-agricultural sectors. (MWN 31.01)
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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 Tourists in Turkey Spent Nearly $6 Billion on Food & Beverages in 2017
According to the TurkStat data, tourism revenues, which had reached a record high at $34.3 billion in 2014, dropped to $31.5 billion in 2015 due to terrorist attacks, and to $22.1 billion in 2016 because of the so-called coup attempt. The tourism industry, which started to recover thanks to diplomatic initiatives and measures, increased its revenues last year by about 19% to about $26.3 billion. The tourists who vacationed in Turkey last year spent $21.461 billion on personal expenditures and $4.822 billion on package tours. While the highest personal expenditures among tourists was on eating and drinking at $5.86 billion, international transportation followed at $3.701 billion.
Tourists spent $3.084 billion on accommodations, $1.967 billion on transportation within Turkey, $827 million on health, $291 million on sports, education and culture and $105 million on tour services. Tourists also showed increased interest in clothing and footwear in Turkey, spending $3.156 billion, as well as $1.266 billion on souvenirs. Tourists also purchased $102 million worth of carpets. Spending on marina services was $47 million and spending in other categories was $949 million. Tourist spending by citizens living in the country and visiting other countries amounted to $5.137 billion in 2017. Turkish tourists who vacationed abroad last year spent $4.095 billion on personal expenses, $1.42 billion on package tours, $1.094 billion on food and beverages, $1.04 billion on accommodations and $401 million on souvenirs. The average spending made by 8,886,916 people going abroad last year was $578 per trip. (AA 01.02)
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6.2 Fitch Ratings Announces Closure of its Istanbul Office
On 19 January Fitch Ratings decided, after careful consideration, to close its Istanbul office and liquidate Fitch Ratings Finansal Derecelendirme Hizmetleri. The decision reflects Fitch’s desire to maintain an optimal office network structure and sufficient level of resource in each geographic location in which it operates. Fitch remains highly committed to Turkey and to all users of its ratings in the Turkish market. Fitch’s business in, and coverage of Turkey is unchanged and Fitch will maintain coverage of Turkish entities and transactions from its existing office network as it does currently. Fitch has a ratings portfolio of more than 75 issuers across various sectors in Turkey. (Fitch 19.01)
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6.3 Greek Debt Rises in Third Quarter of 2017
Eurostat announced that Greece’s public debt totaled 177.4% of GDP in the third quarter of 2017, up 1.3% compared with the second quarter of the year, but down 0.5% in comparison with the third quarter of 2016. In a new report, the EU executive’s statistics agency said loans accounted for 143.5% of the country’s total debt.
In absolute numbers, Greek debt rose to €313.5 billion ($386.8 billion) in the third quarter from €309.1 billion in the second quarter and €311.3 billion in the third quarter of 2016. Greece recorded the highest public debt in the EU, followed by Italy (134.1% of GDP) and Portugal (130.8%), while Estonia (8.9%), Luxembourg (23.4%) and Bulgaria (25.6%) recorded the lowest debt ratios.
Recently, an EU Commission report showed that the projected trajectory of Greek debt is worse than originally calculated. According to the commission’s baseline scenario, Greece’s debt-to-GDP ratio is expected to reach 181.1% in 2017, 165% in 2020, 127.2% in 2030 and 96.4% in 2060, forecasts that are slightly higher than what was projected at the end of the last review in June. (Eurostat 24.01)
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6.4 Overdue Debts to Greek State Rise by €13 Billion Despite Confiscations of €5 Billion
Overdue debts to the Greek State went up to a record high of €13 billion in December, despite confiscations of €5 billion. As of the end of December 2017, arrears to the Greek State reached €101.85 billion, despite the continuing increase in the number of Greek taxpayers, who have seen their wealth confiscated for arrears to the State. In December, 14,781 more Greeks had their assets confiscated, raising the total number to 1,050,077.
According to data released by the Independent Authority for Public Revenue, in 2017 €12.931 billion were added to the total outstanding debts to the State. Almost all of the new debt comes from tax liabilities that were not served by taxpayers (ENFIA, VAT, etc.). The number of taxpayers who have overdue debts has reached 4,068,857. At the same time, confiscations and debt settlements brought €5.069 billion in state coffers, of which €2.687 billion were for old debts and €2,391 billion in fresh debts. (Kathimerini 01.02)
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6.5 Private Deposits Boost Greek Banks
An increase in private deposits in Greek banks in December 2017 is credit positive, Moody’s said on 1 February. The credit rating agency, in a credit outlook report, said Greek banks’ deposits from the private sector grew by €5.9 billion ($7.3 billion) in the second half of 2017, mainly due to a €2.6 billion increase in deposits of households and non-profit organizations in December. This increase was much larger than a decline in enterprises’ deposits by €105 million in December. Deposits grew to €126.3 billion at the end of 2017, the highest level since the imposition of capital controls in June 2015.
Following the latest recapitalization exercise of the Greek banking system in December 2015, banks took a number of measures to reduce their borrowing from the central bank to 13% of total assets in December from 22% a year earlier, while borrowing from the ELA mechanism fell from 14% to 8.0%. Moody’s noted that the “vulnerable financing profile of Greek banks remained a main challenge, along with a reserve of around €100.5 billion of non-performing exposures (NPEs) in September 2017. “The huge amount of NPEs consumes funds and reduces profitability and the capital of banks, limiting their ability to offer loans to the real economy this year, when we expect Greece to record a gradual economic recovery”. (AMNA 01.02)
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6.6 Greece Scores High on ‘2018 Best Countries’ List
Despite the financial crisis and a bad name for too many protests, Greece remains a very attractive country, not just tourism-wise, as a new report conducted by a U.S. university and a consumers’ rights firm shows. These rankings are part of an analysis project called the 2018 Best Countries Report, conducted for three years by the Wharton School of the University of Pennsylvania and global consumer insights firm Y&R’s BAV Group.
Greece ranked 28th in the world among countries considered to be the best for 2018, with the criteria ranging from overall qualities, impressions that contribute to the development of trade, investment and tourism, to their impact on the international economy. The country scored particularly high in Cultural Heritage (3rd), Adventure (5th) and its Influence on Culture (15th). More than 21,000 respondents were asked to evaluate 80 countries by ranking them according to 65 different attributes.
Switzerland was in first place in the overall ranking of the best countries for 2018 followed by Canada, Germany and the U.K. The top 10 was completed by Japan in fifth, followed by Sweden, Australia, the U.S, France and the Netherlands. (Various 25.01)
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Number of Arab Students in Israeli Universities Grows by 78% in 7 years
The number of Arab students in Israeli universities grew by 78.5% over the past seven years, according to new research by Israel’s Council for Higher Education (CHE). According to the survey, Arab students accounted for 16.1% of undergraduate students in Israeli universities, up from 10.2 % in 2010. This increase has carried over to graduate programs, where the percentage of Arab students since 2010 has doubled from 6.2% to 13%. In postgraduate programs, the proportion of Arab students rose 60% from 3.9% to 6.3%. The survey was tracking the success of a CHE program aimed at better integrating the Arab Israeli community into higher education. The government spent NIS 300 million ($88 million) on the program in 2012-2016. The success of the program has led the government to extend it to 2022, with a total budget of NIS 1 billion ($294 million).
In total, the number of Arab students in Israeli universities grew from 26,000 in 2010 to 47,000 in 2017. The program concentrates on preparing Arab students in high school for study in Israeli universities, where Hebrew is the primary language, and for matriculation exams. The program also aims to prevent Arab students from dropping out during the difficult first years of undergraduate studies.
According to the survey, there has been an increase of Arab students in subjects in which their representation has been low in the past. This includes increases of enrollment in engineering (66%), mathematics and hard sciences (44%), humanities (66%) and business administration (87%). (ToI 25.01)
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*REGIONAL:
7.2 American University in the UAE (AURAK) and Wayne State University (WSU) Sign Student Transfer Program
The American University of Ras Al Khaimah (AURAK) has signed a cooperation agreement with Wayne State University (WSU) of Detroit, Michigan, establishing the U.S.-based university in its latest international partner. The agreement, which was initiated by AURAK’s School of Engineering and the School of Engineering, is centered on a Transfer Student Program in which students can earn college degrees from AURAK and WSU simultaneously.
The Transfer Student program is divided into two phases. In the first phase AURAK students must complete three years of a four-year, pre-approved engineering program with a 3.0 grade point average and/or be in the top quartile during their first three years of studies, as well as meet the language proficiency level required by WSU. These students will be allowed to transfer to WSU for phase two to fulfill two years of a pre-approved curriculum. During the first year at WSU, the students will complete sixteen hours of coursework and an undergraduate senior research project. During the second year the students will either complete sixteen hours of coursework or eight hours of course work and eight hours of a Master’s Thesis Research project. Upon completion of the program, each student will receive both a Bachelor’s Degree in Engineering from AURAK and a Master’s Degree in Engineering from WSU.
At present AURAK has a range of international partners across Africa, Asia, Europe, and North America, opening a wide spectrum of possibilities to students including exchange and study abroad programs for up to one year, as well as shorter summer sessions. (AURAK 27.01)
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7.3 Rochester Institute of Technology Unveils $136 Million Dubai Campus Plan
The Rochester Institute of Technology is embarking on a major expansion plan in Dubai with a new campus project costing about AED500 million ($136 million). Sheikh Ahmed bin Saeed Al Maktoum, chairman of Dubai Silicon Oasis Authority (DSOA), the regulatory body for Dubai Silicon Oasis (DSO), announced the launch of the new Dubai campus of Rochester Institute of Technology (RIT Dubai). To meet the increasing number of applications received annually, the new premises will span a total area of 129,000 square meters with the capacity to accommodate up to 4,000 students. It added that the mega-development will be completed in two phases with an investment of approximately AED500 million. The first phase with an estimated cost of AED200 million is slated for handover in 2019, while the second phase will be implemented by 2023 at an estimated cost of AED300 million.
Featuring a centrally located interactive learning courtyard that includes an innovation and entrepreneurship center, and a student housing area separated from the facilities buildings by a landscaped green belt, the grounds will comprise a shared academic space. The new campus is set to house the School of Electrical Engineering and Computing, the School of Mechanical and Industrial Engineering, the School of Science and Liberal Arts, and the School of Business and Management, as well as administration, facilities and operations, library commons, and auditorium. (AB 31.01)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Merck Opens Jerusalem Innovation Lab
On 6 February, Merck Group, the German pharmaceutical and life sciences company, inaugurated a technology innovation laboratory at its subsidiary Qlight Nanotech in Jerusalem, hosted on the Hebrew University of Jerusalem’s Edmund J. Safra Campus. The laboratory is part of Merck’s commitment to Israel, collaboration with the Hebrew University, and development efforts in nanotechnologies and materials. Qlight Nanotech was established through Yissum, the technology transfer company of The Hebrew University of Jerusalem, and supported by the Israel Innovation Authority. It was fully acquired by Merck in mid-2015 to support Merck’s development in liquid crystal display materials and its growing presence in OLED materials.
Qlight, recognized in 2014 as “Nanotechnology Company of the Year” by the Chief Scientist of Israel, focuses its Research and Development on cadmium-free quantum materials for use in display applications. Quantum materials are nano-sized particles which enable displays with a substantially extended color gamut. Qlight’s work is tightly integrated into global projects, working closely with Merck teams in Germany and Japan. (Globes 06.02)
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8.2 Tyto Care Raises $25 Million Led by Ping An Global Voyager Fund
Tyto Care has raised $25 million in its most recent round led by Ping An Global Voyager Fund and including both new and existing investors. Ping An joins a large list of strategic investors already backing the company, including Cambia Health Solutions, Walgreens, Orbimed, Fosun Pharma and LionBird. The growth round also includes new participants like Qure, Israel’s first exclusively-focused digital health fund, established with Johns Hopkins University. As part of the oversubscribed round, Tyto Care has the option to expand funding to $28 million in the next few months.
Following its FDA clearance in late 2016, and the launch of its products in the United States in early 2017, Tyto Care has gained significant traction with major US health systems, telehealth companies, large private practices and employers. Tyto Care will use the additional funding to continue its expansion in the US market and enhance its product offerings and smart data analytics to empower both clinicians and consumers doing telehealth. The funds will also help Tyto Care fulfill the demand for its products outside the US and penetrate both the European and Asian markets. As part of this funding, Ping An and Tyto Care will form a strategic partnership to implement Tyto into Ping An’s offerings in the Chinese market.
Netanya’s Tyto Care is transforming primary care by putting health in the hands of consumers. The company seamlessly connects people to clinicians to provide the best remote home examination and diagnosis solutions. Tyto Care has three telehealth products: TytoHome for consumers, TytoPro for professionals, and TytoClinic for remote point-of-care locations. All solutions are designed to replicate a face-to-face clinician visit and include a hand-held modular examination tool for examining the heart, lungs, skin, throat, ears and body temperature; a complete telehealth platform for sharing exam data, conducting live video exams and scheduling visits; a cloud-based data repository with analytics; and built-in guidance technology and machine learning algorithms to ensure accuracy and ease of use. The Tyto platform also allows for simple integration with EHR systems and other telehealth platforms. (Tyto Care 29.01)
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8.3 Puma Biotech & Medison Pharma Sign Licensing Agreement to Commercialize NERLYNX in Israel
Los Angeles’ Puma Biotechnology, a biopharmaceutical company, and Medison Pharma have entered into an exclusive agreement under which Medison will commercialize NERLYNX (neratinib) in Israel. NERLYNX is not approved currently for commercialization outside of the United States. Medison will be responsible for seeking the requisite regulatory approval and, once approved, for commercializing NERLYNX in Israel. Puma will receive upfront and milestone payments throughout the term of this agreement, as well as significant double digit royalties on NERLYNX sales in Israel.
Neratinib was approved by the U.S. Food and Drug Administration (FDA) in July 2017 for the extended adjuvant treatment of adult patients with early stage HER2-positive breast cancer following adjuvant trastuzumab-based therapy, and is marketed in the United States as NERLYNX (neratinib) tablets.
Medison, Israel’s leading innovative pharmaceutical partner, is an exclusive Israeli partner for global healthcare companies such as Amgen®, Biogen®, Ipsen®, Servier®, Array Biopharma® and more. Backed by three generations of experience in the healthcare industry since 1937, Medison has built and maintained long-standing relations with HMOs, local medical centers and physicians. Medison is uniquely qualified to provide the complete spectrum of integrated services for international companies looking to enter or expand their presence in the Israeli market. (Puma Biotechnology 30.01)
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8.4 Farm Dog & John Deere Joint Project to Develop Variable Rate Spray Technology
Farm Dog and John Deere have launched a joint development project to develop variable rate spray technology for pest and disease management. The project is supported in part by a $900 thousand grant from the Binational Industrial Research and Development Foundation (BIRD Foundation) and delivers the next stage in the companies’ collaboration to reduce pesticide use, increase yields, and promote environmental sustainability.
The companies have been working together since 2016. Building on prior integration of the Farm Dog platform with John Deere Operations Center, this next phase extends data sharing and leverages John Deere’s ExactApply spray equipment capabilities. In this next phase, both companies will work jointly to design and test variable rate spraying solutions. Development will occur simultaneously in Israel and Iowa over the next 18 months.
Tel Aviv’s Farm Dog is a precision agriculture solution for pest and disease management to help growers optimize treatments, increase yields, and promote sustainability. Leading growers and top scouting groups worldwide rely on Farm Dog in their day-to-day operations to make more informed decisions. (Farm Dog 30.01)
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8.5 BiomX Licenses Novel Bacterial Targets for Inflammatory Bowel Disease Treatment
BiomX has exclusively sub-licensed from JSR Corporation a set of bacterial targets for the development and commercialization of phage therapies that eradicate these targets, as a treatment for inflammatory bowel disease (IBD). These targets were shown to be pro-inflammatory and may have a role in the onset and aggravation of IBD. The findings were recently published in Science magazine. Using its advanced discovery and development capabilities in phage therapy, BiomX is advancing BX002, a phage composition customized to specifically target and eradicate these IBD associated pro-inflammatory gut bacteria. BiomX plans to file an investigational new drug (IND) application with the U.S. FDA in 2019. BX002 offers a groundbreaking approach for treating IBD as it targets a possible underlying cause for the disease, whereas existing medications offer only symptomatic relief to this chronic, lifelong condition.
Ness Ziona’s BiomX is a microbiome drug discovery company developing customized phage therapies that target and destroy harmful bacteria in chronic diseases such as inflammatory bowel disease (IBD) and cancer. They discover and validate proprietary bacterial targets and customize our natural and engineered phage compositions against these targets. The Company’s platforms use computational and synthetic biology and cutting-edge research from the Weizmann Institute of Science. (BiomX 30.01)
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8.6 Cellect Biotechnology Announces $4 Million Registered Direct Offering
Cellect Biotechnology has entered into securities purchase agreements with certain institutional investors for gross proceeds of approximately $4 million. In connection with the offering, the Company will issue 484,848 registered American Depository Shares (ADSs) at a purchase price of $8.25 per ADS in a registered direct offering. Additionally, for each ADS purchased, the investors will receive an unregistered warrant to purchase 55% of an ADS. The warrants have an exercise price of $12.00 per ADS, shall be exercisable immediately following the issuance date and will expire twelve months from the earlier of the effectiveness date of a registration statement registering the shares underlying the warrants and 6 months from the issuance date of the warrants. H.C. Wainwright & Co. is acting as the exclusive placement agent in connection with this offering.
Kfar Saba’s Cellect Biotechnology has developed a breakthrough technology for the selection of stem cells from any given tissue that aims to improve a variety of stem cell applications. The Company’s technology is expected to provide research, hospitals and pharma companies with the tools to rapidly isolate stem cells in quantity and quality allowing stem cell-based treatments and procedures in a wide variety of applications in regenerative medicine. The current clinical trial is aimed at bone marrow transplantations in cancer treatment. (Cellect 29.01)
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8.7 MedyMatch Receives Expedited Access Pathway from the FDA
MedyMatch Technology has been granted Expedited Access Pathway (EAP) designation by the United States Food and Drug Administration (FDA) for intracranial hemorrhage detection. This software medical device, based on deep learning technologies, automatically analyzes non-contrast head CT images. It is designed to be highly sensitive to the presence of intracranial hemorrhage (ICH) in these scans and to alert the treating physician when ICH is detected. Non-contrast head CT is the standard for initial assessment of potential ICH in emergency medicine settings.
MedyMatch has developed a broad machine vision and deep learning platform to support the assessment of multiple clinical indications. MedyMatch’s team of AI, deep learning and machine vision experts is working with world-class clinical and industry partners to yield unprecedented insights into medical data. The first of these applications will be the detection of intracranial hemorrhage. Accurate and timely detection of ICH is a critical step in clinical decision making for stroke assessment and head trauma. Working with its development and distribution partners, MedyMatch is on a mission to make all caregivers confident, life-saving experts every time and in all locations through AI-enabled clinical decision support at the point of care.
Based in Tel Aviv, MedyMatch is a leading medical A.I. company delivering a clinical decision support platform to improve patient outcomes in acute medical scenarios. The platform can be natively integrated into PACS systems, medical imaging hardware or healthcare clouds. (MedyMatch 29.01)
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8.8 Additional Strategic Funding for CartiHeal’s Ongoing AGILI-C IDE Clinical Study
CartiHeal, developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints, has secured a $2.5 million investment from North Carolina’s Bioventus, a global leader in orthobiologics – reflecting the growing interest in CartiHeal’s technology. Bioventus’s $2.5m boost complements CartiHeal’s latest financing round, led by aMoon, together with Johnson & Johnson Innovation (JJDC Inc.), Peregrine Ventures, and Elron, bringing the total round to $21m. The funding will focus on CartiHeal’s ongoing Agili-C IDE clinical study. Further to the trial’s initiation 3 months ago, over thirty patients were already enrolled, according to enrollment rate forecasts.
Kfar Saba’s CartiHeal, a privately-held medical device company, develops proprietary implants for the treatment of cartilage and osteochondral defects in traumatic and osteoarthritic joints. (CartiHeal 31.01)
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8.9 St. Louis’ WashU Joins With MDClone to Enable Data-Driven Healthcare Innovation
MDClone signed a strategic partnership agreement with the Institute for Informatics (I2) at Washington University School of Medicine in St. Louis, which will introduce a new approach to healthcare data access, privacy, analytics and research. MDClone addresses one of the greatest challenges – and opportunities – in healthcare today: a vast and ever-expanding amount of data, but a limited ability to derive meaningful insights, which can lead to more effective patient care and streamlined hospital operations. MDClone’s solution dramatically enhances the utility of data and offers the first solution on the market to eliminate the risk of releasing identifiable patient information when conducting healthcare analysis and research.
The agreement represents the first expansion for MDClone outside of Israel, where in less than two years, it has already captured more than 80% of the market. Following the GlobalSTL visit to Israel, MDClone’s team was in St. Louis to launch the partnership on 29 January 2018. MDClone will install its Healthcare Data Platform at I2, connecting data from across the BJC Healthcare System. Once live, the platform will enable clinicians and researchers at Washington University to extract data and insights in real-time with either original or unidentifiable synthetic data for even the most complex healthcare questions. GlobalSTL connects potential high-growth companies like MDClone with the right strategic partners in St. Louis.
Beer Sheva’s MDClone launched in 2016 with a mission to allow any user across the healthcare ecosystem to ask any question without programming skills and in familiar terminologies, with zero-time to data and insights and with zero-risk to patient privacy. MDClone developed a comprehensive big-data solution designed for healthcare, featuring proprietary technology for longitudinal data representation and synthetic data generation with never-before possible approaches to healthcare data management, sharing and analysis. In less than two years from inception, MDClone has partnered with the vast majority of the Israeli healthcare market, streamlining healthcare operations, empowering researchers and creating new opportunities for technology development. (MDClone 01.02)
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8.10 Medial EarlySign Predicts Which Diabetic Patients Will Suffer Kidney Damage Within One Year
Medial EarlySign announced the results of an additional clinical data study in the domain of diabetes – identifying diabetic patients who are at highest risk for having renal dysfunction within one year. Medial EarlySign’s machine-learning based model analyzed dozens of factors residing in Electronic Health Records (EHRs), including laboratory tests results, demographics, medication, diagnostic codes and others, to predict who might be at high risk for having renal dysfunction within one year. By isolating less than 5% of the 400,000 diabetic population selected among the company’s database of 15 million patients, the algorithm was able to identify 45% of patients who would progress to significant kidney damage within a year, prior to becoming symptomatic. This represents 25% more patients than would have been identified by commonly used clinical tools and judgement.
This model joins a suite of predictive models and algorithmic calculators developed and researched by Medial EarlySign, with the goal of providing healthcare organizations a comprehensive set of predictive tools to address the challenge of engaging with the right patients and offering effective interventions to reduce morbidity and mortality from diabetes. In addition to renal dysfunction, the company’s research and development work also includes models for prediabetes to diabetes progression, diabetes-related cardiovascular disease, and additional collaborations focused on identifying successful interventions and optimizing engagement with diabetic and pre-diabetic individuals.
Kfar Malal’s Medial EarlySign‘s advanced AI-based algorithm platform helps healthcare organizations accurately predict and stratify individuals at high risk for developing serious health conditions, by leveraging routine blood test results and EHR data. The company creates actionable opportunities for early intervention to delay progression of illness, improve patient outcomes, focus financial resources, and reduce overall costs. Medial EarlySign is developing a number of clinically supported AlgoMarker risk predictors to identify patients with a high probability for harboring or developing specific illnesses, including cancers, diabetes and other life-threatening conditions. The company’s platform has been supported by peer-reviewed research published by internationally recognized health organizations and hospitals. (Medial EarlySign 05.02)
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8.11 MDClone Announces $15 Million Funding for a New Healthcare Data Paradigm
MDClone announced on 5 February it has raised $15 million from OrbiMed Israel Partners, who led the initial investment in 2016, and Lightspeed Venture Partners, who led the 2017 financing. MDClone introduces a new approach to healthcare data access, privacy, analytics, and research. The company addresses one of the greatest challenges – and opportunities – in healthcare today: a vast and ever-expanding amount of data, but a limited ability to derive meaningful insights, which can lead to more effective patient care and streamlined hospital operations. MDClone’s Platform dramatically enhances the utility of data and its Synthetic Data Engine offers the first solution on the market to eliminate the risk of releasing identifiable patient information when conducting healthcare analysis and research.
Beer Sheva’s MDClone launched in 2016 with a mission to allow any user across the healthcare ecosystem to ask any question without programming skills and in familiar terminologies, with zero-time to data and insights and with zero-risk to patient privacy. MDClone developed a comprehensive big-data solution designed for healthcare, featuring proprietary technology for longitudinal data representation and synthetic data generation with never-before possible approaches to healthcare data management, sharing and analysis. In less than two years from inception, MDClone has partnered with the vast majority of the Israeli healthcare market, streamlining healthcare operations, empowering researchers and creating new opportunities for technology development. (MDClone 05.02)
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8.12 EarlySense Increases Installed Base by 400% in 2017
EarlySense announced that new orders for the company’s medical systems grew more than 400% in 2017 compared to 2016. Additionally, EarlySense almost tripled the number of beds being monitored at the end of 2017 compared to the total combined number of beds in the previous 12 years since the company’s founding. EarlySense estimates that its installed systems helped global medical institutions collectively save more than $100 million in 2017 alone. Based on clinical data, these cost savings may be attributed to EarlySense helping clinicians reduce adverse events.
In addition to the success of its medical device solutions, EarlySense home digital health solutions tracked more than 200,000 nights for home users in 2017. These products, which leverage EarlySense’s hospital-proven technology, include Live for the aging population and the newly launched Percept for women who are trying to conceive. EarlySense is the first company ever to bring contact-free clinically-validated technology to the women’s fertility market.
Placed under a bed mattress, EarlySense’s patented sensor utilizes artificial intelligence and big data analysis to accurately monitor heart rate, respiratory rate, motion and sleep. The medical technology is FDA cleared, CE-marked and approved in Canada and South Korea. The home solutions are available for consumer purchase via the EarlySense website and Amazon.
Ramat Gan’s EarlySense provides contact-free, continuous monitoring solutions for the medical and consumer digital health markets. EarlySense’s integrated sensor utilizes Artificial Intelligence (AI) and big data analytics to provide actionable health insights and improve clinical outcomes. Used worldwide in hospitals, rehab and skilled nursing facilities, EarlySense assists clinicians in early detection of patient deterioration, helping to prevent adverse events, including code blues which are a result of cardiac or respiratory arrest, preventable ICU transfers, patient falls and pressure ulcers. (EarlySense 24.01)
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8.13 German National Health Insurance Adds ReWalk 6.0 System to Medical Device Directory
GKV-Spitzenverband, the head office of German statutory health insurance (SHI), confirmed their decision to list the ReWalk Personal 6.0 Exoskeleton System in the German Medical Device Directory (MDD, Hilfsmittelverzeichnis), according to §139 SGB V. The MDD is a comprehensive list of all medical devices which are principally and regularly reimbursed by German SHI providers. This decision means that ReWalk will be listed among all medical devices for compensation, which SHI providers can procure for any approved beneficiary on a case-by-case basis. The ReWalk Personal will be classified as “an innovative device for the immediate compensation of a handicap” in the MDD, and will be listed under a new subcategory for product group 23. The official publication of the MDD, which is issued annually, is expected within the next three months.
Addition to the MDD is a significant policy milestone, allowing for any eligible German SHI beneficiary in the country to seek procurement of a ReWalk system to stand and walk again. If their assessment is approved by physical exam, the SHI will then reimburse for purchase of a system. 90% of the German population are beneficiaries under SHI coverage, which creates the potential for thousands of individuals with spinal cord injury (SCI) in Germany to have access to exoskeleton devices for the first time.
Yokneam’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 02.02)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Storage Magazine Names Reduxio 2017 Product of the Year Award Finalist
Reduxio Systems has been selected as a finalist in the Storage magazine and SearchStorage 2017 Products of the Year awards. The latest generation of Reduxio, Reduxio HX550 with TimeOS v3, was selected by the publication in the Enterprise Storage Arrays category.
The Storage magazine and SearchStorage.com 2017 Products of the Year competition, now in its 16th year, recognizes the best data management and storage offering companies across various storage categories including backup and disaster recovery software and services, backup and disaster recovery hardware, software-defined storage, storage arrays and storage management tools.
Reduxio’s flagship product, the HX550 flash storage system, effectively unifies primary and secondary storage silos. Based on the patented TimeOS storage operating system, Reduxio provides breakthrough storage efficiency and performance, and the unique ability to recover data to any second, far exceeding anything available on the market today. Reduxio’s unified storage platform is designed to deliver near-zero RPO and RTO as a feature of its storage system, while significantly simplifying the data protection process and providing built-in data replication for disaster recovery. The features in the TimeOS v3 released in June 2017 enabled a single platform for the end-to-end management of the life cycle of an application’s data.
Petah Tikva’s Reduxio is redefining data management and protection with the world’s first unified primary and secondary storage platform. Based on the patented TimeOS storage operating system, Reduxio provides breakthrough storage efficiency and performance, and the unique ability to recover data to any second, far exceeding anything available on the market today. (Reduxio 24.01)
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9.2 Anodot’s Analytics Ensure Customer Satisfaction & Superior Uptime for LivePerson
LivePerson, the leading provider of mobile and online messaging business solutions, is leveraging Anodot’s AI-powered analytics solution to track massive amounts of business-critical data and metrics in real time. By catching hidden issues and uncovering glitches, Anodot enables LivePerson to avoid downtime so the 18,000 businesses relying on conversational interfaces, such as messaging, can connect with consumers continuously and smoothly. LivePerson generates nearly 2 million metrics every 30 seconds in a global array of data centers. Adding to the complexity, many of LivePerson’s metrics are seasonal, meaning they increase and decrease over the course of a day or week. Anodot detects anomalies in this vast amount of streaming data, turning them into valuable business insights and alerting LivePerson to technical issues that correlate with customer data. Since Anodot is agnostic to data origin or type of data, it tracks metrics coming from a variety of sources, such as bare metal servers, application data, virtual machines and customer behavior.
Ra’anana’s Anodot illuminates business blind spots with AI-powered analytics, so you will never miss another revenue leak or brand-damaging incident. Its automated machine learning algorithms continuously analyze all your business data, detect the business incidents that matter, and identify why they are happening by correlating across multiple data sources. Anodot customers in fintech, ad-tech, web & mobile apps, and other data-heavy industries use Anodot to drive real business benefits like significant cost savings, increased revenue and upturn in customer satisfaction. (Anodot 25.01)
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9.3 Cyberbit to Protect the Bank of Jerusalem from Advanced Cyberattacks
Cyberbit announced it will supply the Bank of Jerusalem with Cyberbit Endpoint Detection and Response (EDR) in order to protect the organization’s endpoints from advanced threats. The selection criteria focused on detecting unknown, targeted, and file-less attacks and on ransomware prevention capabilities.
Cyberbit’s Endpoint Detection and Response detects unknown threats, including ransomware, in seconds, and provides advanced forensics and threat hunting. By combining machine learning, graph-based malware analysis, behavioral analytics and big-data, Cyberbit EDR is faster to detect threats that outsmart conventional systems and automates the threat hunt saving days to weeks of analyst time.
Created to protect the most high-risk organizations in the world, Ra’anana’s Cyberbit secures enterprises and critical infrastructure against advanced cyber threats. The company’s battle-hardened cybersecurity solutions detect, analyze and respond to the most advanced, complex and targeted threats across IT and OT (operational technology) networks. Cyberbit is a subsidiary of Elbit Systems. (Cyberbit 29.01)
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9.4 Waterfall Security & HCNC Provide Secure OSIsoft PI Offerings to the Korean Market
Waterfall Security Solutions announced an official partnership together with HCNC Co., a leading systems integrator based in Korea, to further extend Waterfall’s and HCNC’s OSIsoft product offering within the region. HCNC specializes in integrating OSIsoft PI solutions throughout a wide spectrum of industries including power, oil and gas, utilities and transportation. HCNC’s combination of strong, local support coupled with extensive knowledge of and services for the OSIsoft PI System suite make HCNC the perfect complement to the Waterfall Security product offering. Having already established joint mutual projects in Korea, the Waterfall and HCNC partnership will lead to dramatically improved security for OSIsoft® PI deployments in the country.
Waterfall Unidirectional Security Gateways replace firewalls in industrial network environments, providing absolute protection to industrial control system and operations networks from attacks originating on external networks. Upon deploying Unidirectional Gateways, critical infrastructure and industrial sites enjoy safe and reliable IT/OT integration, vendor and cloud services access, and remote monitoring.
Rosh HaAyin’s Waterfall Security Solutions is the global leader in industrial cybersecurity technology. Waterfall products, based on its innovative unidirectional security gateway technology, represent an evolutionary alternative to firewalls. The company’s growing list of customers includes national infrastructures, power plants, nuclear plants, off and on shore oil and gas facilities, refineries, manufacturing plants, utility companies, and many more. (Waterfall Security Solutions 29.01)
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9.5 hoopo Launches to Provide Low-Power Geolocation Solutions for IoT
In an effort to radically improve precision for low-power Internet of Things (IoT) tracking, hoopo announced the launch of the company and its innovative, accurate geolocation solution for low-power wide area (LPWA) networks. The company also announced it has received $1.5 million in funding to further grow its business from a group of investors, including the initial investors in Mobileye; noted Israeli investor Zohar Gilon; and Ben Marcus, CEO of AirMap.
The need to understand and quantify asset location is quickly becoming a requirement for the enterprise and industrial IoT. However, the accuracy of today’s low-power geolocation isn’t precise enough to deliver on the full promise of the IoT. hoopo’s geolocation solution enables companies to locate their valuable assets, without the significant cost or battery consumption that can be associated with GPS. hoopo’s IoT solutions help companies precisely track specific assets in areas such as ports, vehicle dealer yards, parking lots, cattle ranches and other asset-dense areas.
hoopo’s solutions are based on a patent-pending, triangulation method that uses LPWA data transmissions to generate a precise location. The solutions suite includes low-cost LPWA gateways and devices, as well as a platform for management and real-time notifications. Companies can receive on-demand geolocation, establish geofences, receive movement alerts and more, ensuring the protection of their valuable assets.
Ra’anana’s hoopo is redefining geolocation technology, delivering high-accuracy yet low-power location capabilities to the Internet of Things (IoT). Based in Israel, hoopo is working with companies worldwide to enable new applications that require more advanced geolocation technologies. hoopo is designed for LPWA networks and sensors, delivering high-accuracy geolocation, combined with long battery life, and the backing of a rich partner ecosystem. (hoopo 29.01)
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9.6 Camtek Launches a New Eagle Model for Post Dicing Inspection
Camtek announced the introduction of a new Eagle model utilizing a revolutionary technology to detect inner cracks occurring during the dicing process. These side wall cracks are not visible to standard inspection and testing techniques, and can ultimately cause failure in end-products or mission critical systems such as in the automotive industry, resulting in significant losses to the manufacturers of the end user devices. Camtek’s new Inner Crack Imaging (ICI) technology provides fast detection of inner cracks during wafer level inspection immediately after dicing in a high volume production environment.
Migdal HaEmek’s Camtek is a leading manufacturer of metrology and inspection equipment and a provider of software solutions serving the Advanced Packaging, Memory, CMOS Image Sensors, MEMS, RF and other segments in the Semiconductors industry. Camtek provides dedicated solutions and crucial yield-enhancement data, enabling manufacturers to improve yield and drive down their production costs. Camtek has best-in-class sales and customer support organization, providing tailor-made solutions in line with customers’ requirements. (Camtek 30.01)
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9.7 AudioCodes SmartTAP Adds Support for Video and MiFID II Compliance
AudioCodes announced the launch of its SmartTAP call recording solution release 4.1. SmartTAP is an intelligent, fully certified and secure enterprise interaction recording solution for voice, video and instant messages (IM) that can seamlessly capture and index virtually any customer or organizational interaction across external and internal communication channels. In the latest release, SmartTAP includes full video interaction capturing functionality which, like the existing voice and IM capturing capabilities, is capable of recording both one-on-one and conference video calls. In addition, SmartTAP can now record a broad range of organizational interaction types, including internal, external and mobile interactions, as well as interactions with remote and federated users. With these capabilities, enterprises are able to start driving artificial intelligence based business analytics in order to enhance productivity and deliver actionable insights from business interactions.
Lod’s AudioCodes is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. AudioCodes enables enterprises and service providers to build and operate all-IP voice networks for unified communications, contact centers, and hosted business services. AudioCodes offers a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world. (AudioCodes 30.01)
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9.8 NBN & Speedcast Select Gilat for Business and Enterprise Satellite Service in Australia
Gilat Satellite Networks announces that NBN Co and Speedcast have selected Gilat’s satellite platform for its Business and Enterprise Satellite Service (BESS) for businesses in Australia. The BESS network solution will utilize the nbn Sky Muster Ka-band multi-beam satellites. Gilat technology is a major element in Speedcast’s managed service offering to NBN Co. Gilat is responsible for the supply, configuration and specialist operational support of the satellite network platform and is responsible for meeting Speedcast’s strict service levels for this project. The expected revenue for this project is tens of millions of dollars over a period of several years.
Gilat’s satellite solution will support the vision of extending business grade services to regional Australia. NBN Co’s BESS project will assist Australia’s regional and rural businesses growth through broadband connectivity to e-commerce and the global economy. This project will meet the demand for broadband bandwidth services for businesses and government customers, throughout regional and rural Australia.
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, our 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 05.02)
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9.9 Inception to Bring 360 Video from AP to Global Audience in New Collaboration
Inception announced the launch of a new channel featuring a selection of top 360 video projects from The Associated Press. Inception’s AP channel, available on the Inception app, will offer 360 videos across a broad spectrum of historical, cultural and social topics, aimed at connecting audiences to global issues on a deeper level.
Inception, a top VR creator and distributor recently funded by RTL Group, has a cross-platform app and works with talents and publications including Pitchfork and Time Out. You can find the Associated Press channel on the Inception app, available for download across platforms: Oculus Rift, HTC Vive, Microsoft MR, Samsung Gear, Google Daydream, iOS and Android.
Tel Aviv’s Inception is a leading next-generation immersive (VR/AR) content network, combining unique proprietary technology, a best-in-class creative studio, and a cross-platform destination app. Inception has received a strategic investment from RTL Group and is the VR/AR arm of the Group. Inception launched in October 2016, and has apps for Oculus Rift, Samsung Gear, iOS, Android, Google Daydream, HTC Vive, and Microsoft MR, with Sony PS coming soon. It has over 1 million downloads and a vibrant community of active daily users. (Inception 06.02)
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9.10 SAM Launches Out of Stealth Status and Raises $3.5 Million to Make IoT Secure
SAM announced its launch out of stealth as well as the completion of a $3.5 million seed round, led by Blumberg Capital. SAM’s cybersecurity software seamlessly integrates into any router, providing homeowners with a simple, easy-to-use solution for protecting home networks and all connected devices.
SAM’s solution fingerprints and uniquely identifies every connected device on the network. Then, using its AI-powered cloud, the technology applies the appropriate security policy for each device and detects any occurrence of anomalies. Its virtual patching allows ISPs to deploy security fixes within days of their detection. For example, a fix for the recent Krack attack was deployed within 48 hours to hundreds of thousands of routers running on 15 different platforms. SAM’s business model uniquely combines benefits for telecommunication and service providers as well as hardware manufacturer of routers and chipsets.
While operating in stealth mode, SAM officially partnered with Bezeq, Israel’s largest telecom provider with over 2.5 million home subscribers. SAM’s technology was packaged both as a comprehensive cyber protection platform as well as a premium interactive mobile application to control the home network with advanced features such as device fingerprinting, parental control, etc. Since partnering with Bezeq in May 2017, SAM’s technology has been installed on over 200,000 routers running on dozens of hardware/firmware configurations including routers already installed in homes.
SAM provides home network and IoT security solutions that integrate seamlessly with any platform. Installed remotely on existing gateways, SAM doesn’t require additional hardware or a technician to provide extensive network security. SAM’s architecture allows it to virtually patch vulnerabilities such as KRACK within days of initial detection, and now secures over 3M devices from such attacks through its partnership with Israel’s largest telecom company, Bezeq. SAM is also working with leading chipset manufacturers such as Intel to provide network security from the source. Founded in 2016 and based in Tel Aviv, SAM has raised $3.5 million from Blumberg Capital with the vision of becoming the security hub in every network. (SAM 06.02)
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9.11 Credium’s New Platform Bridges Blockchain to the Traditional Credit Industry
Credium’s innovative solution will allow any credit entity holding and buying non securitized debt to accurately price and exchange their credit assets in a Blockchain based marketplace. This will revolutionize the way assets move within the credit industry, making it more efficient and transparent. Credium’s solution will be the fuel for this extremely important financial engine, driving liquidity to the credit markets. By tokenizing credit assets and making them tradable, based on a shared transparent and immutable ledger, Credium allows credit issuers to gain broader investor trust.
Credium was founded in 2016, it has offices in Tel Aviv, New York and San Francisco and is being led by a team of serial entrepreneurs from the Blockchain and Fintech industry and exports in Finance and Marketing. The Credium Initiative will soon announce the first partners to be joining the company. These include some of “heavy-weight” advisors that are joining the team and TGE date. (Credium 05.02)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Tourism to Israel Booms
Foreign tourist hotel overnights in Israel totaled 10.6 million in 2017, 23% more than in 2016 and ahead of the 10.2 million overnights posted in 2008. Total hotel overnights in Israel amounted to 24.2 million, 10% more than in 2016. Hotel overnights by Israelis totaled 13.6 million, the same number as in 2016; the increase in vacations by Israelis consisted mainly of overseas trips, a trend supported by the 16% rise in passenger traffic at Ben Gurion Airport in 2017 recently reported by the Israel Airports Authority. The forecasts for next year are for a continuation of the rise in passenger traffic from 20 million to 23 million, again at the expense of vacations by Israelis in Israel. According to figures from the Israel Hotel Association, 2017 was the first year since 2008 in which the number of overnights by Israelis did not rise.
By region, Israeli tourists remain loyal to Eilat (46%), while most of the foreign tourist overnights were in Jerusalem (33%), Tel Aviv (24%), and Tiberias and Lake Kinneret (the Sea of Galilee) (11%). The nationwide number of hotel rooms rose 2,000 to 54,000, 4% more than in 2016. The construction momentum is projected to continue in the coming years, with announcements about construction of hotels in Eilat, Ashkelon, and even in Modi’in. The nationwide hotel occupancy rate in 2017 was 67%, compared with 62% in 2016. The highest rates were in Tel Aviv (74%), Eilat (73%) and the Dead Sea (71%). The occupancy rate in Jerusalem improved substantially, reaching 65%, compared with 53% in 2016, and occupancy rates in Tiberias, around Lake Kinneret, and in Nazareth also rose, among other things because of Christmas vacations, a practice that many Israelis have also adopted. (Globes 25.01)
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10.2 Overseas Tourism to Eilat Up 69% This Winter
The Ministry of Tourism believes that the number of tourists visiting Eilat in the framework of its winter campaign this year, which will continue officially until Passover, will reach 130,000, compared with 77,000 in the preceding year. The Ministry of Tourism will also allow airlines to continue operating flights and receiving grants in April – June. These grants triggered an increase in the number of winter weekly flights to Eilat from four to 40 – 50 over the past three years. The airlines operating direct flights to Eilat include SAS Airlines, Finnair, Ryanair, Wizz Air, Ural Airlines, and Transavia Airlines. Seventeen of the flights are from Russia, 10 from Germany, and 12 from Poland.
The option of offering a vacation to Europeans in a city in which winter is mild or non-existent is a logical trigger, but there is no doubt that the increase in the number of flights is primarily due to the estimated NIS 40 million in annual monetary incentives and grants that Israel is giving to the airlines. This budget is expected to continue growing in direct proportion to the number of passengers. The grant received by the airlines is €0.60 per passenger, of which the Ministry of Tourism provides €0.45 and the Eilat Hotel Association €0.15, regardless of the price at which the airlines sell tickets to passengers. The result has been that from the beginning of current campaign until 20 January, more than 76,000 tourists reached Eilat on direct flights. The Ministry of Tourism estimates that Eilat’s winter tourists have put over NIS 400 million into the Israeli economy since September. (Globes 23.01)
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10.3 Employment Among Israeli Ultra-Orthodox Men Declining
New statistics indicate that after years of growth the number of ultra-Orthodox Jewish men in Israel’s workforce has begun to decline. The Israel Democracy Institute, citing official figures, said that ultra-Orthodox male employment dropped from 51.7% in 2016 to 50.3% in 2017, halting a steady rise. The main cause is attributed to renewed subsidies to seminary students provided by a government that relies on the support of ultra-Orthodox parties.
For decades, the ultra-Orthodox have leveraged their significant political power into maintaining a segregated lifestyle. They run a separate network of schools, enjoy sweeping military draft exemptions and raise large families on taxpayer-funded handouts. But previous government programs and a push from within have led to increased integration. Previous studies have recommended that Israel change its priorities by investing in infrastructure, strengthening the education system to promote its efforts on this issue.
In the 1980s, 63% of ultra-Orthodox Israeli men worked. According to the Haredi Institute for Public Affairs, which studies ultra-Orthodox society, the government will not achieve its 2020 target of getting the proportion of working men back to 63%, as the community is content with the status quo. (Israel Hayom 06.02)
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11: IN DEPTH
11.1 ISRAEL: Israel ‘A+/A-1’ Ratings Affirmed; Outlook Remains Positive
On 2 February 2018, S&P Global Ratings affirmed its ‘A+/A-1’ long and short term foreign and local currency sovereign credit ratings on Israel. The outlook remains positive.
Outlook
The positive outlook on Israel reflects our opinion that, despite government spending pressures, there is a potential for stronger-than-anticipated budgetary performance. We also expect that Israel’s economic and balance-of-payments dynamics will stay strong while security risks remain contained.
We could raise our ratings during the next 18 months if the government’s fiscal performance strengthens, resulting in a discernible decline in net government debt as a percentage of GDP.
We could revise the outlook to stable if the government’s budgetary performance were significantly weaker than in 2015-2017, economic growth or balance-of-payments performance were weaker than our forecast, or if domestic or external security risks increased substantially.
Rationale
The ratings are supported by Israel’s prosperous and diverse economy, strong external balance sheet, and flexible monetary framework. The ratings are constrained by Israel’s relatively moderate debt burden and, in our view, significant security and geopolitical risks.
Institutional and Economic Profile: A wealthy economy and effective institutions support fiscal adjustment
-A prosperous, modern, and diversified economy, benefitting from relatively high growth rates.
-Strong and accountable institutions despite fragmented domestic politics.
-High exposure to external and domestic security risks.
Israel’s economy remains prosperous and diverse, with a high-value-added manufacturing and services sectors, especially in the field of information technology. The information and communication sector contributes almost 10% of the gross value added, and scientific and technical activities about 3%. This is underpinned by high expenditure on research and development, exceeding 4% of GDP on average, the highest among member countries of the Organization for Economic Co-operation and Development.
We assume Israel’s economy will expand by about 3.1% on average in 2018-2021. Growth will stem from private consumption, continued corporate investment activity, and strong performance of services exports, supported by easing monetary policy. In per capita terms, this equates to around 1.2% per year, reflecting continued population growth.
We note that the projected growth comes on top of Israel’s already remarkable economic performance since the global financial crisis started in 2008. For example, GDP in U.S. dollar terms has increased by 50% compared with that in 2010, and the unemployment rate is at historical lows.
Overall, we view institutional and governance structures in Israel to be generally effective. Despite the highly fragmented political situation in the parliament, the ruling coalition passed the budget for 2017-2018, and we expect the 2019 budget will be passed smoothly. Moreover, over the past few years, we’ve observed increased commitment to fiscal prudence, with the government meeting its budgetary objectives.
Yet, in our view, the coalition’s diverse composition could constrain the government’s capacity to address longer-term structural issues of the economy and society. These issues include excessive red tape, infrastructure gaps, weak labor market participation, poor skills of some social groups (mainly Haredi men and Arab-Israeli women), and housing-related issues.
We also see persistent geopolitical risks. Major outbreaks of violence toward the Palestinians could not only inflict social and economic costs, but also lead to a backlash from the international community. On the northern border, the conflict in Syria and Iraq, as well as potential tensions with Hezbollah, pose a medium-term security threat. The new U.S. administration seems committed to supporting Israel in case security risks escalate. Yet we anticipate continued divergence between the U.S. and other stakeholders (notably the EU) with regards to the peace process with Palestinian authorities, especially after the U.S. took a decision to move its embassy to Jerusalem. Any significant armed conflict could have a negative impact on the ratings, since it would likely deter investment, weaken the economy’s growth potential, or result in budgetary pressures.
Flexibility and Performance Profile: Improved budgetary performance and strong external finances
-Budgetary consolidation could continue if accompanied by strong economic growth and spending controls.
-External position remains strong on a flow and stock basis.
-Monetary policy effectiveness is high, with real estate price dynamics posing a key challenge.
Exceptionally favorable macroeconomic conditions have supported Israel’s public finance in recent years. The general government’s fiscal deficit shrank to about 1.7% of GDP on average in 2015-2017 from an average of 2.5% in 2010-2014, while central government deficits averaged 2.1% and 3.3% for the same periods, respectively. Fiscal results were again strong in 2017, with the deficit at an estimated 2% of GDP against the government’s target of 2.9%. Although tax-rich consumption growth, one-time non-tax revenues and low interest rates have been key factors behind fiscal consolidation, cost-containment measures have also played a role, in our view. Over the past few years, a multi-year spending agreement has been reached with the defense ministry – the source of previous fiscal slippages. The government has also instituted and generally complied with fiscal rules, and tightened control over spending commitments for line ministries.
We see the potential for Israel to outperform our current fiscal forecasts. There is a likelihood that solid economic growth, especially if stronger than anticipated, could support the government’s efforts to reduce the budget deficit further. This could, in particular, result from continued cost-containment measures to compensate for recent pro-cyclical tax cuts (including on personal and corporate income taxes) and public spending hikes. Additional revenues from ongoing efforts to downsize tax benefits and tax evasion could also benefit Israel’s performance. Under this scenario, headline general government deficits will likely be contained to about 2% of GDP. As a result, general government debt could be put on a noticeably declining path.
However, in our base-case scenario, we assume central government budget deficits will expand moderately to the legislated maximum of 2.9% of GDP as a result of expenditure pressure from health care, education and infrastructure – aggravated by potential early elections in 2018 – and less generous non-tax revenues compared with the last few years. The recently proposed draft budget for 2019, in which the government revised its fiscal deficit targets upward compared with the projections in the medium-term fiscal framework, supports this scenario, in our view. As a result, over 2018-2021, average general government deficits will likely stay at around 3% of GDP in 2018-2021 and net general government debt (that is, gross debt net of liquid government assets, mainly in the form of deposits at the central bank) at just under 60% of GDP.
We estimate that lower headline budget deficits, high nominal GDP growth rates, and low inflation (over 50% of Israel’s general government debt is linked to the consumer price index) pushed Israel’s net general government debt down to58.4% of GDP in 2017 from 61.4% in 2015.
Strong export performance, in particular, booming high-value-added services exports, and the ongoing development of Israel’s offshore natural gas fields with its significant export capacity, support the country’s strong external profile. This will enhance Israel’s position as a net creditor versus the rest of the world, with liquid external assets exceeding gross external debt by over 50% of current account payments over our entire forecast horizon. These dynamics also contain the country’s gross external financing needs (payments to nonresidents), indicating low dependence 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 in foreign exchange markets, over and above its commitment to purchase foreign currency to offset the impact of domestic natural gas production on the balance of payments. We view the exchange rate regime as a managed float, which somewhat hampers monetary policy flexibility, in our view.
Additionally, the BOI is sticking to accommodative monetary policy, countering the strength of the shekel to maintain the competitiveness of Israel’s exports. It has maintained the historical low of 0.1% as its key policy rate since March 2015. Yet, since then, the shekel has continued to appreciate against the currencies of key trading partners, owing to Israel’s strong fundamentals, namely its current account surpluses, strong net foreign direct investment, and high GDP growth rates. Currency appreciation was one of the factors for negative consumer price inflation in 2015-2016 and only modestly positive inflation in 2017. Last year, the shekel appreciated by over 10% in terms of the nominal effective exchange rate versus the U.S. dollar, and we expect the moderate appreciation will continue this year. The exchange rate poses pricing risk, adding to the need for continued innovation and reduction of regulatory pressures for local businesses to remain competitive in external markets, in our view.
One of the key challenges to monetary policy continues to be rising house prices. Real house prices have increased by over 100% since the end of 2007.
The BOI’s past attempts to dampen the housing market by raising interest rates delivered limited results and pushed up the foreign exchange rate. Thereafter, the BOI shifted focus to a series of macro-prudential measures targeted at the mortgage market. More recently, the government has implemented comprehensive measures to cut speculative demand and increase the housing supply, including freeing up more land for development, changing the tendering criteria, allowing foreign presence in the construction market, and speeding up processes for construction permissions. Given capacity constraints, relatively low productivity in the construction industry, and continued growth in demand, addressing the supply shortage might take time, however.
Israeli banks’ exposure to the local real estate sector, mainly to residential mortgage loans, has increased in recent years. The banking system’s exposure to loans for construction, commercial real estate, and mortgages now accounts for about 45% of total bank loans compared with 32% 10 years ago. Even though the tightening of macro-prudential measures has reduced systemic risks to Israel’s banking industry, and the housing market seems to have cooled in 2017 (real housing price growth slowed down to just 2.4% from an average of 6% in 2012 – 2016), any abrupt correction in house prices could still weigh on the economy. (S&P 02.02)
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11.2 ISRAEL: Israeli Cybersecurity – Coming of Age?
Nir Falevich wrote in Start-Up Nation Central‘s blog on 30 January 2018 that if 2017 showed us anything regarding the Israeli cybersecurity sector, it is that time has been good. In other words, as an industry and as a sector, Israeli cybersecurity is coming into its own and showing the maturity that literally comes with age.
Maturation
Israeli cybersecurity companies are gaining more opportunities to grow, become profitable- and position themselves as industry leaders. As a result, the nature of the investments in these companies appears to be happening at a later stage, on a more frequent basis- once they are as more substantially established.
There are also further indicators of the increase in maturity of the local industry. Three of the five largest investment deals over the past few years happened within the cybersecurity industry (SentinelOne, Cybereason and Skybox). There has also been a notable increase in the average size of investment deals raised by early and late-stage start-ups, and the aforementioned increase in late-stage investments.
2017 also saw more funding deals in which international investors participated than those in which Israeli investors played a part, proving yet further the growing recognition of Israel as a global leader in cybersecurity.
Globally Speaking
Over the year, cybersecurity incidents continued to dominate world headlines, demonstrating a steadily escalating trend of cyber and ransomware attacks, with high profile breaches including WannaCry, NotPetya, the Equifax data breach and the CIA leak, which collectively indicate very clearly that regardless of claims to the contrary, no organization is immune to cyber-attacks.
As previously mentioned, the Israeli Cybersecurity sector continued to grow and mature over the course of 2017. Several events occurred during the year, which not only solidified Israel’s position as a source of innovation for cyber defenders all over the world, but also demonstrated, in terms of funding, development and revenue, that the Israeli industry has reached a new level of experience and wisdom.
Measuring Growth
In terms of “population” growth, seventy new companies were founded within the cybersecurity sector during 2017, bringing the total number of active cybersecurity companies in Israel to a whopping 420. In terms of funding growth, Israeli cybersecurity companies raised a total investment sum of $814.5 million in 2017, both in venture capital money and private equity. This is the third year in a row that the amount exceeded the amount raised by investments in a previous year – this time, an amazing 28% more than in 2016.
Geographically Speaking
The cybersecurity industry most invested in was the US, however, running an impressive second place was Israeli cybersecurity, with 18% of global investment landing on its sunny shores.
IoT is Where It’s At
From both a global and a local perspective, 2017 will be noted as the year in which the cybersecurity sector began to devote highly significant efforts into the defense of IoT and Connected Devices; particularly in specific IoT segments, including medical devices, automotive systems, and industrial control systems.
Analysis, Facts, Figures, Conclusions
Start-Up Nation Central’s Annual Cybersecurity Report offers a comprehensive and up-to-date analysis of the state of the Israeli cybersecurity ecosystem, its trends and how they reflect the global challenges that the corporate world and states deal with.
Something else covered by the report is the attractiveness of the Israeli cybersecurity industry for multinational companies. There are now 30 multinational companies from various industries with cybersecurity-related R&D centers in Israel. Furthermore, several new international players entered the local industry, and opened R&D and cyber innovation centers in 2017, including Symantec, TD Bank, Renault, Daimler AG and Harman. (StartUpNationCentral 30.01)
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11.3 LEBANON: Fitch Affirms Lebanon at ‘B-‘; Outlook Stable
On 1 February, Fitch Ratings affirmed Lebanon’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook.
Key Rating Drivers
Lebanon’s ratings reflect very weak public finances, high political and security risks and anemic economic performance. The ratings also capture the country’s resilient banking system and external liquidity and other structural strengths such as high GDP per capita and human development indicators and an unblemished track record of public debt repayment.
Political and security risk is high because of spillover effects from regional conflicts including the war in neighboring Syria, the delicate sectarian balance in Lebanese society and politics and other geopolitical risks, for example, of renewed conflict between Hezbollah and Israel. The Syrian war continues to cast a shadow over Lebanon, with the ongoing presence of a large number of refugees (1 – 1.5 million, relative to a previous total population of 4.5 million), hindrance to trade and extra military spending.
The surprise resignation on 4 November of Lebanon’s Prime Minister Saad Hariri illustrated these risks, as well as a measure of resilience. The resignation, announced from Riyadh, reflected Saudi Arabia’s assertive foreign policy and displeasure at Mr. Hariri’s handling of government since becoming Prime Minister again in December 2016, as well as the regional rivalry between Saudi Arabia and Iran. However, the crisis was contained, with Mr. Hariri withdrawing his resignation at the start of December. European and US influence urging for stability in Lebanon played a role in containing the crisis.
We do not expect a fundamental change in the balance of power in parliament following the parliamentary election scheduled for May. However, this will be the first parliamentary election since 2009 and will be held under a new electoral law, which introduces an element of proportional representation and could generate some unexpected outcomes. Government formation after the election may be a drawn-out process.
Public finances remain weaker than ‘B’ peers. General government debt is the fourth-highest among Fitch-rated sovereigns at an estimated 149.2% of GDP in 2017. High debt levels have contributed to an exceptionally high interest bill, equating to 48% of government revenues in 2016. We estimate that the 2017 budget deficit narrowed to 7.7% of GDP, from 9.8% of GDP in 2016, owing largely to one-off effects as well as some broader improvement in tax revenue and spending restraint. In the first three quarters of 2017 the budget deficit was 36% smaller year on year, as one-off outlays in 2016 dropped out of the comparison and because of a boost to revenue from bank profit taxes relating to the financial engineering operation in 2016.
For 2018 we expect a slightly larger deficit, at 8.2% of GDP, as the increase in the corporate tax rate (to 17% from 15%) will only have a full-year impact in the 2019 collection and outsized taxes from bank profits will not be repeated. We expect a smaller deficit to emerge in 2019, provided the full raft of tax measures is implemented. However, our forecasts remain cautious given uncertainty over the net fiscal impact of the salary scale adjustment and tax measures introduced in 4Q17 and the start of 2018. Headline numbers from the Ministry of Finance imply a consolidation of LBP1.280 trillion in a full year (1.5% of forecast 2018 GDP), other things being equal. However, details on the calculation of the estimate for additional revenue are not available and the salary scale adjustment could overshoot its estimated cost.
The government has continued to meet its high financing needs (forecast to be 30% of GDP in 2018), although funding costs might start to rise. Growth in deposits (a large part of which stems from the diaspora), which are channeled into government financing by domestic banks, is the cornerstone of Lebanon’s public debt sustainability. If there was a sustained slowdown in deposit growth, for example, due to renewed political paralysis and/or loss of confidence in the financial system or a shock triggering large outflows, it would place debt sustainability under greater stress.
The uncertainty in November over the position of the Prime Minister stimulated some deposit outflows, conversion of LBP deposits into FX deposits, and a decline in FX reserves. Private sector deposits in commercial banks fell by $2.6 billion in November, a decline of 1.5% mom, the fastest monthly decline since 2006. The Banque Du Liban’s (BDL) stock of FX reserves declined by $1.1 billion, or 2.9% mom. The shock was a significant event, but was contained in duration and, overall, had a milder economic impact than other landmark political crises, such as the assassination of Rafik Hariri in 2005 and the war between Hezbollah and Israel in 2006.
BDL maintains high gross foreign reserves to support confidence in Lebanon’s currency peg against the US$, despite persistently large current account deficits (19.4% of estimated GDP in 2016). Foreign reserves stood at $35.7 billion (excluding gold worth $11.9 billion) at end-November and accounted for 68% of LBP deposits. BDL has increasingly supported the economy and financial system since 2011, including via unorthodox financial operations and stimulus programs. The extent of financial operations in 2016-17 by the BDL reflects the pressure the Lebanese economy has been under, with weak growth, political headwinds, persistent twin deficits and very limited fiscal policy.
Growth prospects remain modest without improvements in the external environment, a stronger reform program or a boost to investment stimulated, for example, by international support. Growth has averaged less than 2% in 2011-16 since the outbreak of the Syrian war, an extremely weak performance relative to the historical trend. Between 2000 – 2010 real GDP growth averaged 5.3%.
GDP per capita and broader human development indicators are well above ‘B’ category peers and more in line with the ‘BBB’ median, although governance indicators are weaker than peers. The government also has an unblemished track record of public debt repayment.
Rating Sensitivities
The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the ratings are currently balanced. The main factors that could, individually or collectively, lead to positive rating action are:
-An improvement in public debt dynamics, whether through fiscal tightening or improved economic performance.
-Greater confidence in the sustainability of the domestic political environment and a sustained de-escalation of the war in Syria.
The main factors that could, individually or collectively, lead to negative rating action are:
-Diminished ability of the domestic banking sector to continue to attract sufficient deposits to keep funding the government.
-A major destabilization of Lebanon, for example, induced by geopolitical shocks or a severe intensification of sectarian tensions.
Key Assumptions: Fitch assumes that international oil prices will average of $52.5/b in 2018 and $55/b in 2019. (Fitch 01.02)
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11.4 ARABIAN GULF: The Looming E-Battle in the Arabian Gulf
Robert Mogielnicki wrote in the Arab Gulf States Institute in Washington that discussions between Amazon Web Services and Saudi Arabia to establish a direct presence in the country forecast a broader commercial struggle for control over the e-commerce market in Gulf Cooperation Council countries. While Amazon’s cloud-computing division initially aims to open new data centers in Saudi Arabia, an agreement would likely accelerate the expansion of Amazon warehouses and its third-party marketplace. These commercial developments reveal a dynamic and competitive e-commerce sector shaping state-business relations in the Gulf.
Large disposable incomes and strong telecom penetration in the GCC states will help fuel an e-commerce market estimated to reach $20 billion by 2020, according to A.T. Kearney. Bullish estimates offered by PayFort predict that e-commerce markets in the United Arab Emirates and Saudi Arabia will grow to $27 billion and $22 billion respectively. The market has room to expand: E-commerce contributes less than 0.5% to the economy in the UAE compared with 2 – 3% in mature markets.
Regional governments, multinational firms, and elite business actors desire a piece of the economic pie. This demand reflects a broader trend of new partner investments in technology and infrastructure across GCC countries. The UAE and Saudi Arabia will remain the key state players shaping new partner investments in the e-commerce sector, while the remaining GCC countries are likely to assume either supporting or backseat roles on the market’s periphery. Moreover, opening GCC economies to e-commerce firms and developing the requisite digital infrastructure promise disruptions to the retail sector, heightening the likelihood of negative political repercussions for regional governments.
The Contenders
The Emirate of Dubai represents a natural hub for e-commerce firms. Marketed by government officials as a leader in innovation, Dubai possesses an advanced free zone infrastructure, expertise in logistics, and a global reputation as a commercial center. The emirate recently spent over $735 million on CommerCity, an e-commerce-focused free zone located near Dubai International Airport. The new free zone is a joint venture between the Dubai Airport Freezone Authority and wasl Asset Management Group, a real estate management company created by the Dubai Real Estate Corporation. Maktoum bin Mohammed al-Maktoum, deputy ruler of Dubai and son of the current ruler, serves as chairman of wasl.
The region’s most promising e-commerce startups, Souq.com and Noon, both launched in Dubai. Amazon purchased Souq.com for $579 million in 2017; the acquisition allowed Amazon to access Arabic-speaking consumers paying in local currencies. Dubai billionaire Mohamed Alabbar, owner of one of the world’s largest real estate development companies, Emaar Properties, plans to rival Amazon’s Souq.com with his e-commerce firm, Noon. Saudi Arabia’s Public Investment Fund invested $1 billion in Noon, adding a layer of complexity to Amazon’s ongoing negotiations to operate directly within Saudi Arabia rather than through third-party providers.
Saudi Arabia’s geography and demography serve as inherent advantages for attracting e-commerce firms. It is the only member state that possesses overland linkages – either land or bridge – with all other GCC countries. In terms of demographics, Saudi Arabia contains approximately 60% of the GCC countries’ residents and nearly 80% of GCC national citizens.
Yet, Crown Prince Mohammed bin Salman is keen for Saudi Arabia to become a de facto tech hub rather than simply serving as a consumer market. During 2016, the crown prince courted tech firm CEOs in the United States and agreed to provide $45 billion in funding to Japan’s SoftBank over the next five years. The planned $500 billion megacity on the Red Sea coast, Neom, announced by the crown prince in late 2017, promises a futuristic, robot-dominated playground for e-commerce firms. SoftBank plans to invest $15 billion in Neom and an additional $10 billion in other Saudi projects, anticipating a recycling of Saudi investments back into the domestic economy. Moreover, the country’s Vision 2030 aims to “increase the contribution of modern trade and e-commerce to 80% of the retail sector by 2020.”
Small consumer bases, underdeveloped infrastructure and strained political relations relegate the remaining GCC countries to a second-tier position in the region’s e-commerce market dynamics. These countries will likely function as part of a broader network of digital support and distribution centers linked to e-commerce clusters in the UAE and Saudi Arabia.
Amazon Web Services intends to construct three data centers in Bahrain by 2019; however, Bahrain’s historical significance as a socially liberal, market-entry point to Saudi Arabia will diminish as more e-commerce firms operate directly within the Saudi market. Oman operates Knowledge Oasis Muscat, a technology free zone, but the low-key hub nevertheless remains on the region’s periphery. Kuwait’s mid-sized domestic market will drive demand for e-commerce, but the country lacks standing as an emerging technology center in the Gulf region. Finally, the economic embargo embroiling the small state of Qatar complicates efforts by e-commerce firms to optimize supply chains across the region.
Political Pushback
Opening the domestic market to e-commerce firms may heighten political tensions surrounding employment issues. For example, Saudi Vision 2030 seeks to add a million jobs in retail for citizens, and the Ministry of Labor and Social Development issued an order in April 2017 requiring positions at shopping malls be staffed only by Saudi men and women. However, the proliferation of major e-commerce firms in Saudi Arabia may complicate government initiatives to generate more roles for Saudis in the retail sector.
Major “disruptions” to labor-intensive industries, especially those reserved for Saudi citizens through government interference in the labor market, could induce negative political consequences within Saudi Arabia. Therefore, e-commerce firms hoping to garner government support for operations within Saudi Arabia must emphasize their in-country value – the total contribution to the social and economic development of the country.
Employment concerns remain less contentious in the UAE, where only 10% of the country’s residents are Emirati and the retail sector does not represent a major employer of its citizens.
A New E-Future
E-commerce firms like Amazon and Noon represent attractive investment opportunities for GCC states – especially those seeking to offer tangible evidence of economic diversification progress. Yet luring established e-commerce firms into GCC markets may both require commercial concessions and initiate longer-term structural changes to GCC labor markets that conflict with government policies to protect privileges for incumbent firms and national citizens. Thus, GCC governments should carefully measure the costs and benefits of promoting the e-commerce sector and realistically assess their ability to control the sector’s steady advance in the region.
Robert Mogielnicki is a PhD candidate at Magdalen College, University of Oxford, where he specializes in the political economy of the GCC region. He also serves as a senior analyst at the Siwa Group, a consultancy based in Washington, DC. (AGSIW 29.01)
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11.5 KUWAIT: IMF Executive Board Concludes 2017 Article IV Consultation with Kuwait
On 12 January 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kuwait. Non-oil growth has picked up modestly over the past two years, and inflation has moderated. After coming to a standstill in 2015, real non-hydrocarbon growth has recovered and is set to reach 2.5% this year, driven by improved confidence. However, a cut in hydrocarbon output by close to 6%, reflecting implementation of the OPEC+ deal, will bring overall real GDP down by about 2.5% in 2017. Notwithstanding the impact of higher energy and water prices, inflation is on track to reach a multiyear low of 1.75% in 2017, due to a decline in housing rents and favorable food price developments.
The government’s underlying fiscal position has improved on the back of spending restraint, but financing needs have remained large. While overall fiscal accounts remained broadly balanced in 2016/17, the fiscal balance which excludes mandatory transfers to the Future Generations Fund (FGF) and investment income posted a large deficit (17.5% of GDP) for a second year in a row. The corresponding financing needs were covered through a drawdown in readily available General Reserve Fund (GRF) assets, domestic borrowing at various maturities, and a successful debut international sovereign bond sale. The external current account recorded its first deficit in many years in 2016.
The banking sector has remained sound, and deposit and credit growth have slowed somewhat. As of Q2/17, banks featured high capitalization (CAR of 18.3%), steady profitability (ROA of 1.1%), low non-performing loans (ratio of 2.4%), and high loan-loss provisioning (over 200% coverage). Moreover, banks have maintained strong liquidity buffers. Private sector deposit growth has declined in recent years, but this has partly been offset by an increase in public sector deposits. While the growth of credit to the private sector has also slowed mildly on a year-on-year basis since July 2016, the underlying trend (i.e. after adjusting for a large one-off loan repayment) has remained above 5.5%.
Executive Board Assessment
Executive Directors concurred that Kuwait is facing “lower-for-longer” oil prices from a position of strength given large financial buffers, low debt, and sound financial sector. Directors noted that non-oil growth is expected to continue to recover gradually over the medium term, with the fiscal and external positions remaining broadly balanced. While acknowledging short-term upside risks from the recent recovery in oil prices, they saw a further drop in oil prices over the medium term, tighter global financial conditions, heightened regional security and geopolitical risks, and delays in project and reform implementation as the main risks to the outlook.
Directors noted that the sharp decline in oil prices had adversely affected fiscal and current account balances. They commended the government’s recent efforts to streamline current spending, diversify revenue, and improve the business climate, and stressed that the new environment calls for deep and sustained reforms.
Directors encouraged the authorities to proceed with the planned introduction of excises and the VAT and to further curtail current expenditure. Highlighting the need for deeper reforms to reduce financing requirements more rapidly, create space for growth-enhancing capital outlays, and achieve intergenerational equity, they recommended further steps to contain the wage bill. They stressed that better aligning public and private sector compensation would enhance nationals’ incentive to consider private sector jobs and support competitiveness, and recommended limiting public sector employment growth as more private sector jobs are created. They saw reducing the large subsidy and transfer bills while protecting the most vulnerable as important.
Directors commended the introduction of medium-term expenditure ceilings and encouraged the authorities to further strengthen the medium-term fiscal framework to help underpin consolidation. They welcomed the government’s balanced financing approach and noted that further strengthening of the related institutional and legal frameworks would make debt management more effective and support the development of capital markets.
Directors welcomed the banking system’s sound position and the authorities’ prudent regulation and supervision. Given the downside risks to asset quality, high loan concentrations, common exposures, and interconnectedness of the financial sector, they welcomed ongoing initiatives to identify and address emerging pressures. To further enhance financial sector resilience, Directors saw scope to strengthen the crisis management and preparedness and the liquidity forecasting frameworks.
Directors stressed that moving from a public sector-led growth model to one driven by the private sector requires creating incentives for risk-taking and entrepreneurship. They emphasized the importance of education reform to equip new graduates with the relevant skills for private sector jobs and saw merit in greater use of privatization and partnerships with the private sector to boost productivity, investment and job creation. They agreed that this should be complemented by further steps to improve the business environment, including reforms to facilitate access to land, reduce the burden of administrative procedures and excessive regulations, and foster competition. Given their potential for job creation, they welcomed the authorities’ focus on SMEs.
Directors concurred that the peg to a basket remains appropriate for the Kuwaiti economy, as it continues to provide an effective nominal anchor. They noted that the recommended fiscal adjustment would largely close the moderate current account gap over the medium term. (IMF 24.01)
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11.6 EGYPT: IMF Approval in Second Review of Economic Reform Program
In late January, the International Monetary Fund (IMF) released its staff report on the second review of Egypt’s economic reform program. Egypt is receiving three-year funding of $12 billion from the IMF’s Extended Fund Facility (EFF). Half that sum has already been disbursed and the EFF ends in FY2018-19. The outlook for the Egyptian economy according to the IMF is largely positive and it commended Cairo for its taking ownership of the reform program and for “their strong track record in policy implementation since the start of the program and political support at the highest level”.
The IMF undertakes a review twice a year to monitor government commitment to reform before disbursing a new tranche of funding. The third review is due in March 2018.
The report is broadly optimistic. It says growth will gain momentum in 2017-18, driven by factors including a recovery in consumption and private investment. It projects growth to strengthen to 4.8% in 2017-18 and to around six% in the medium term. In 2016-17, Egypt’s GDP expanded by 4.2%, above the program projection of 3.5%.
Prior to the agreement with the IMF Egypt had an annual financing gap of around $10 billion. Now, the financing gap for the next 12 months is about $3 billion after fund disbursements and is expected to be met with bilateral, gross reserves, and commercial financing. Meanwhile, the financing gap for the remaining period is “smaller and can be filled from the same sources.
Another positive development is a decline in inflation. Inflation shot up sharply beyond IMF expectations after the government began implementing its reforms in 2016. Inflation is now expected to continue to decline as second-round effects from the depreciation of the pound and fuel-price and VAT-rate hikes appear to be contained, the report says. It forecasts inflation to decline to around 12% by June and to single digits in 2020. Inflation peaked at 35% in July last year after the third round of cuts to energy subsidies since 2014.
The government debt ratio is projected to decline markedly in response to fiscal consolidation and high nominal GDP growth. It says measures taken by the government aim to reduce general government debt from 103% of GDP in 2016-17 to 87% in 2018-19.
While acknowledging these positive developments, the IMF staff report notes that the scope of growth-enhancing reforms needs to be broadened, and the government needs to create the fiscal space for further spending, especially on upgrading infrastructure, health and education and building a sustainable social safety net. It suggests that the needed resources could be achieved by tax-policy reforms and better tax administration. Egypt could raise tax revenue by about 4% of GDP. Egypt’s tax revenue is currently below 13% of GDP, low by international standards. It suggests broadening the VAT base by reducing exemptions, increasing the progressivity of the personal income tax, and strengthening compliance through administrative reforms, especially for professionals such as lawyers, doctors and accountants.
It also recommends several measures to improve corporate income-tax performance, including reviewing tax-incentive schemes for foreign direct investment and free economic zones. It also calls for the modernization of the tax and customs administration to improve the collection process.
On energy subsidies, the report points out that the fuel-subsidies bill has decreased from a peak of 5.9% of GDP in 2013-14 to 3.3% in 2016-17. It is expected to decline further to 2.4% of GDP in 2017-18. The authorities plan to eliminate all fuel subsidies (excluding on gas cylinders) by the end of the program, the report says.
Besides the macroeconomic indicators, the IMF says more needs to be done to attract investment, support exports, and encourage the private sector. Egypt needs to reform regulatory frameworks to address market inefficiencies, enhance competition, remove non-tariff barriers, improve access to finance and land, strengthen governance, transparency, and accountability of state-owned enterprises, and address bottlenecks in the labor market. Strengthening competition and addressing corruption are key to achieving greater economic efficiency.
Despite the general optimism, the staff report warns of significant risks such as the “premature easing of monetary policy, pre-election pressures to increase spending, and a slowdown in the reform momentum that could damage confidence, hurt private investment and growth, undermine fiscal goals and adversely affect inflation expectations”. On the external side, a sustained increase in global oil prices could significantly undermine fiscal consolidation goals and weaken the current account. Furthermore, an unexpected reversal of global financial conditions could dampen the foreign appetite for Egyptian government securities. (IMF 25.01)
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11.7 EGYPT: What Tunisia and Sudan Can Learn From Egypt on Subsidy Reform
Brendan Meighan posted on 30 January in Sada that Egypt’s efforts at subsidy reform provide suggestions for Tunisia and Sudan, both witnessing protests stemming in part from increased prices of staple goods.
In the past year, ministers of finance and central bank chiefs throughout the Middle East have paid close attention to how the Egyptian economy has responded to a substantial depreciation of the pound, interest rate hikes, and a variety of structural reforms the government agreed to ahead of the International Monetary Fund’s (IMF) $12 billion loan. Egypt’s idiosyncratic economy serves as an example of how procrastination and prevarication in addressing economic policy tensions that have built up over decades can exacerbate short-term crises – but also how to earn popular political trust in a high-inflation environment.
At the moment, Tunisia and Sudan have the most to learn from Egypt, where modest efforts at subsidy reform have proven successful. Although each country’s governmental structures and economic philosophies are dramatically different, with Tunisia adopting a more liberal and flexible exchange rate regime and Sudan continuing to rely on a confusing system of continually falling hard pegs, both are in the midst of navigating a rather tumultuous economic and political environment domestically.
Egypt had long subsidized both food and various forms of energy, namely electricity and motor vehicle fuels. With a widening fiscal deficit and a chorus of academic, private-sector, and multilateral economists having for years sounded the call for subsidy reform, Egypt shocked observers by moving to cut energy subsidies in July 2014. The move allowed the government to spend some of its domestic political capital to ease the burden on the budget, while also signaling to the international community it was serious about economic – and potentially political – reform. While the political reform has largely failed to materialize, economic reforms have moved forward, albeit after several false starts.
Arguably more important than the energy subsidy cuts, however, was the decision to leave food subsidies untouched – at least for the time being. Although energy subsidies can benefit the poor through lower costs for mass transit, they disproportionately benefit a country’s wealthiest citizens, who own houses, run air conditioners, and drive their own cars. Meanwhile, distribution of the benefits of food subsidies is more egalitarian. As a result, cuts to food subsidies are more likely to trigger widespread discontent across economic strata.
Tunisia, much like Egypt, has a long and complicated history of subsidizing energy and food. Like Egypt, Tunisia’s subsidies had come to account for an increasing share, year after year, of its government expenditure. Subsidies were raised after the 2011 revolution, increasing from 2.5% of the GDP to 7% by 2013. As with Egypt, Tunisia’s nominal food subsidies have remained largely untouched. Yet unlike Egypt, in the years following the revolution Tunisia’s politicians never felt they had the political capital to make difficult reforms to energy subsidies. Only in July 2017, at the behest of the IMF and with considerable domestic debate, did Tunisia move to make cuts to its generous energy subsidies. Additionally, Tunisia has increased its value-added tax rate, which has raised the prices of food and introduced mandatory social security contributions, which have reduced take-home pay. Much like Egypt, Tunisia’s appetite for additional cuts is limited. The government made it clear in October 2017 that it would only consider additional cuts to the 2018 budget after carefully reviewing who the real beneficiaries of these programs are. Following recent demonstrations, it also announced it would increase support for the poor, but has yet to provide details on what form this support will take.
Sudan is in a substantially more difficult position than Tunisia. With the loss of oil revenues after South Sudan’s secession in 2011, the government had had no choice but to implement draconian subsidy cuts. Cuts to fuel subsidies in 2013 and 2016 ignited widespread popular demonstrations, despite government crackdowns. Even after these cuts, the government’s spending on wheat and fuel still amounted to roughly 5.75% of GDP through the end of 2017 – and following the government’s exchange rate unification in January 2018, which raised the U.S. dollar exchange rate for wheat imports, the cost of these subsidies has increased.
Sudan opted to eliminate wheat subsidies as of 1 January. The government argued that the move will benefit the local market by shifting wheat sourcing from overseas suppliers to the local economy – even suggesting that price of bread will remain the same due to increased local competition. The claim is farcical, given that as of 2015 Sudan produced only 30% of the wheat it consumes. An abrupt shift from the international markets to the domestic sector would encounter countless stumbling blocks involving production capacity, harvesting, transportation, storage and distribution that would take years to work out. Instead of prices remaining stable, bread prices doubled within the first few days after the subsidy cut took effect.
Subsidy cuts ultimately lead to price increases for consumers, regardless of how effective and economically savvy the government’s efforts are. Interest rate increases, such as the kind Egyptians saw after the pound was floated and subsidies were reduced in November 2016, can do little in the short term to tamp down the inflation caused by devaluation, which increases the prices of imported goods. More significantly, inflation is not only an economic problem, but a political problem as well.
At first glance, there often appears to be little correlation between the inflation rate and its political ramifications. In the wake of recent subsidy cuts and currency depreciation, year-on-year inflation rates in both Egypt and Sudan have reached above 30%. However, while Egypt saw limited public demonstrations against the imposed austerity measures and the effects of exchange rate liberalization, due in part to what Human Rights Watch calls a “zero tolerance policy for protests,” Sudan’s 2013 and 2016 subsidy cuts saw widespread public outcry and subsequent government crackdowns, resulting in hundreds of Sudanese citizens killed. In protests against the recent bread price increases, a similar scene has played out, with at least one protester dead. Needless to say, the antagonism between the populace and the ever-oppressive Sudanese government does little to calm the markets.
Conversely, Tunisia has managed to keep inflation rates in the single digits since 2011, reaching only 6.4% in 2017. Though this is a low rate by regional standards, violent protests ensued, with many commentators blaming the IMF. This discrepancy cannot be explained purely in terms of macroeconomic statistics. For example, Egypt’s and Tunisia’s GDP per capita is roughly equivalent despite their varied histories and economic structures.
Significantly, in both Sudan and Tunisia – and in contrast with Egypt – austerity measures and economic reforms have increased the price of bread. Bread prices, both directly or through ingredients such as wheat flour, are sacrosanct and have long been guaranteed by the government. They are far from the only reason that major protests have broken out in both Sudan and Tunisia but not in Egypt, but they are an especially potent cultural symbol of a social compact between the people and the government. In both Egypt and Tunisia, bread was one of the three things protesters demanded in the opening weeks of the Arab Spring protests.
Instead, while exchange rate liberalization and fiscal discipline play a crucial role in breaking the recent economic malaise experienced in Egypt, Tunisia and Sudan, their experiences show that price increases, especially for the goods on which consumers rely, are inherently political issues. The causes for the price increases may stem from macroeconomic factors, but a government’s solutions require popular trust in addition to sound economics. With anger at a boiling point, neither Tunisia nor Sudan has the sociopolitical flexibility at the moment to continue headlong with the various reform measures their respective governments agreed to with the IMF. Only Egypt seems to be able to plow ahead. But even Egypt may be forgetting its past, as the Ministry of Supply and Internal Trade announced plans in July 2017 to liberalize the price of bread and provide in-kind cash subsidies instead of subsidizing bread producers and fixing the price per loaf of bread. While it may be an economically rational decision, its political wisdom is questionable.
Brendan Meighan is a macroeconomic analyst focusing on the Middle East. (Sada 30.01)
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11.8 EGYPT: Upholding Car Import Customs Does Not Benefit Egypt’s Local Industry
Walaa Hussein posted in Al-Monitor on 25 January that with stagnation plaguing Egypt’s domestic car market, Cairo has decided to postpone reducing customs on importing European cars until the completion of a strategy to support the local car industry.
As the Egyptian government prepares to issue a special incentive strategy to boost the local automotive industry in mid-2018, its 28 December decision to suspend the reduction of customs duties on imported European cars — which was due to be implemented at the beginning of 2018 — made the headlines and came as a shock to Egyptians wishing to buy cars.
Egypt had agreed to reduce customs tariffs as per the 2001 Euro-Egyptian Partnership Agreement that has been in force since 2004. The agreement provides for a gradual customs reduction of 10% per annum on European exports to Egypt from 2004 until such duties are eliminated in 2019. However, Cairo only started reducing customs on cars in 2010, and it stopped in 2014 for a year. Customs on European cars have been reduced by 70% so far. Paragraph 6 of Article 9 of the Euro-Egyptian Partnership Agreement allows Egypt to suspend the customs reduction timeline for a period not exceeding one year.
The government’s decision comes despite the fact that car sales in Egypt have stagnated and Egyptians’ purchasing power has dwindled. According to an October 2017 report by the Egyptian Automobile Marketing Information Council, car sales declined by 37% in 2017 compared to 2016. In an official statement issued 28 December, Egyptian Minister of Trade and Industry Tariq Kabil said the decision aims to protect the Egyptian domestic automobile industry. However, several car manufacturers and dealers in Egypt told Al-Monitor that the yearlong postponement of the reduction of customs on imported cars is driven by several economic and political reasons.
Of note, there are 17 factories in Egypt that assemble foreign car parts, producing about 24,000 locally assembled cars. Also, there are locally manufactured cars — part of whose components are locally manufactured — but there are no factories in Egypt that produce cars with 100% Egyptian components.
Effat Abdel-Ati, the director of the Automotive Division at the Cairo Chamber of Commerce, told Al-Monitor that the decision had nothing to do with supporting the national industry and that it was related to the Egyptian government’s need to maintain the financial resources and proceeds generated by such customs. Customs revenues collected by the General Administration of Customs in Alexandria amounted to EGP 7.7 billion ($435.5 million) during fiscal year 2016-17. “Also, the presidential election is drawing near, and the government is committed to completing its planned developmental programs,” Abdel-Ati added.
A report issued by the Egyptian Customs Authority showed that customs duties increased by 273% during the first quarter of fiscal year 2017-18 compared to the 2016-17 fiscal year. Also, the customs dollar exchange rate has been increased from EGP 8.80 in October of 2016 to EGP 16.25 in October 2017 due to the flotation of the Egyptian pound in 2016.
The head of the Egyptian Automotive Dealers Association, Osama Abu al-Majd, told Al-Monitor, “Since the implementation of the Euro-Egyptian Partnership Agreement eight years ago, there has been a 10% annual reduction in customs on European cars, and although customs were so close to being abolished in 2019, there has been no decline in local or imported car prices in Egypt…The devaluation of the Egyptian pound in the wake of its flotation and the application of a 14% value-added tax [VAT] on cars were two factors that devoured the annual reduction of customs on cars.”
“Add to this that parent companies have been raising their prices by 2-4% a year,” he continued. “To upgrade the local auto industry, the government should reduce the 7% industry development fee imposed on domestic cars, the 14% VAT on locally assembled cars and the customs dollar exchange rate for the imported automotive industry components,” he said.
The Egyptian government imposed the VAT law in September 2016 instead of the sales tax, which was 10%, and the law included cars and set the tax rate at 13%, to be increased to 14% at the beginning of fiscal year 2017-18, which started July 1, 2017. Abu al-Majd pointed out that “the postponement decision aims to allow the state treasury to continue collecting car customs.”
Hussein Mustafa, the executive director of the Egyptian Automotive Manufacturers Association, told Al-Monitor that the government’s decision to suspend the reduction of customs on European cars was the result of the Egyptian parliament’s failure since October 2016 to pass a government draft law on the automotive industry strategy. The draft law has been a subject of controversy for the parliament’s Industry Committee since 2016, and some of its articles have raised the eyebrows of car manufacturers.
This strategy, according to Abu al-Majd, imposes a 30% industry development fee on imported cars. “A 22% incentive would be offered to local car factories in Egypt, while the rest would be channeled to the state treasury,” he added.
According to Mustafa, three main points in the government strategy are raising the eyebrows of large car manufacturers in Egypt. The first relates to the size of the local components that factories need to comply with to get incentives and customs exemptions, as the strategy stipulates that local components shall be increased from 45-65% over the course of eight years starting from the date of adoption of the strategy, despite the fact that many car components are not locally produced. The second objection is that half a% of the sales of car companies will be used for the financing of the car industry support fund, and this will increase car prices for consumers. “The third objection is that the incentives given to manufacturers are linked to the production level, and the strategy aims for the production of 1 million cars by 2020, which is not commensurate with the volume of car sales in Egypt,” Mustafa said.
An official source at the Ministry of Industry and Trade in Egypt told Al-Monitor on condition of anonymity, “The necessary measures have been taken to implement this postponement decision and deepen and develop the local automotive industry.” The source added that “the sector is currently being restructured through the development of a new car manufacturing strategy in cooperation with European partners.” Big challenges lie ahead for Egypt’s local automobile industry, both at the internal and international levels.
Walaa Hussein is the editor-in-chief of the parliamentary news division at Rose al-Yusuf. An expert in African affairs, Hussein has collaborated with the Nile Channel, writing and preparing newscasts. (Al-Monitor 25.01)
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11.9 MOROCCO: Fitch Says Wider Moroccan Dirham Band a Step towards FX Flexibility
Fitch Ratings said on 17 January that the widening of the Moroccan dirham’s floating band is a step towards a more flexible exchange rate regime that will eventually bolster the shock-absorption capacity of the economy and help maintain its competitiveness. The announcement poses little risk for macroeconomic stability, but the economic benefits will be modest in the short term as the trading range is still narrow.
Bank al-Maghrib (BAM) and the Moroccan ministry of finance announced on 14 January that the dirham’s floating band will be broadened from +/-0.3% to +/-2.5% around its reference price, based on an unchanged basket composed of the euro (60%) and the US dollar (40%). The announcement was widely expected at end-June but was postponed due to a rapid fall in foreign exchange reserves. We expected the authorities to proceed with the reform, in line with long-standing IMF recommendations, as reserves have recovered and improved policy communication has better anchored inflation expectations.
The dirham was essentially stable against the basket on its first two days of trading, losing 0.2% against the euro and gaining 0.5% against the US dollar, based on Reuters’ data. Supportive economic fundamentals should limit pressure on the exchange rate. Net international reserves are comfortable, having recovered to $26 billion at 5 January, up 24% from last July. The foreign-currency exposure in the economy is moderate and the IMF’s $3.4 billion Precautionary Liquidity Line (expiring July 2018) would offer a safety net if there were pressure on external financing. Inflation is low, at 1.3% in November 2017 and we expect it to remain close to 2% over the coming two years.
The current account deficit is gradually narrowing, although it remains wider than the ‘BBB’ category median. We forecast it to improve to 3.8% of GDP in 2019 from 4.4% in 2016, reflecting a narrowing structural trade deficit. FDI will cover half the deficit over the coming two years, according to our forecasts.
We expect the authorities to slowly increase the flexibility of the exchange rate regime over the coming years by gradually widening the band for fluctuations. The phasing in of a full float regime is only a long-term prospect in our view. Increased flexibility will bolster shock-absorption capacity and support competitiveness. It would also allow BAM to introduce a new monetary policy framework focusing on targeting inflation.
We affirmed Morocco’s sovereign rating at ‘BBB-‘ with a Stable Outlook on 10 October. The rating balances macro stability, a track record of prudent economic policies and a relatively small budget deficit against weak development and governance indicators, and high general government debt and current account deficits relative to peer medians. (Fitch 17.01)
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11.10 MOROCCO: Morocco’s Deficit Reduction to Decelerate in 2018
According to BMI Research, Morocco’s fiscal deficit will continue to narrow in the years ahead, but at a slower pace than in previous years. In its latest economic analysis report, BMI — a member of the Fitch Group that provides macroeconomic, industry and financial market analysis — expects Morocco’s fiscal deficit “to continue to narrow in 2018, though the pace of consolidation will likely be more gradual than seen in recent years.” According to the research firm, Morocco’s economic growth will boost the country’s tax take through a series of new tax exemptions and elevated capital spending to ensure gradual fiscal consolidation.
The study points out that the government’s budget plans for 2018 focus primarily on new tax exemptions rather than revenue-raising measures, which will lead to a deceleration of total revenue growth and will limit tax revenue growth. The authors of the BMI report remain optimistic, however, regarding revenues that are “set to continue expanding over 2018, though more gradually than in recent years.” They forecast a “robust economic growth” with a real GDP growth of 3.8% in 2018. In fact, following 2016 reforms that broadened the tax base and modernized tax administration, tax revenue grew by an estimated 4.3% in 2017.
Even though Morocco’s spending growth will remain “relatively robust,” BMI researchers expect continued restraint in recurrent spending, with a slow reduction in the size of the public sector workforce and efforts to limit wage growth through revised salary and promotion policies. “Although the government looks poised to restrain the growth of recurrent expenditures, capital spending will remain elevated, in line with the government’s focus on improving infrastructure.” reads the study.
The report shows, however, that recurrent spending cuts will be counterbalanced with significant capital spending growth, predicting an increase of 8% compared to 2017, bringing it up to 25.8% of total expenditure, which is a “relatively high figure by historical standards.”
The report states that three initiatives undertaken by Morocco will consume the majority of the funds, namely the Green Morocco project — which aims to reduce the impact of droughts by providing innovative technology to small-scale farmers — the national energy strategy and regional development projects, including increased phosphate mining and expanding highway systems. Thus, the firm concludes that “this elevated capital spending, coupled with the tax exemptions on the revenue side of the budget suggests the fiscal deficit will narrow only to a limited degree.”
“This underpins our forecast for the fiscal deficit to come in at 3.3% of GDP in 2018. While representing an improvement on the estimated 3.5% shortfall recorded in 2017, this is still 0.3%age points larger than the government’s own target of 3.0%,” indicates the study. (BMI 28.01)
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11.11 TURKEY: What Lurks Behind Turkey’s Unending Emergency Rule?
Sibel Hurtas posted on 28 January in Al-Monitor that alarm grows in Turkey over the government’s intentions after a sixth extension of the state of emergency, declared over the 2016 coup attempt.
Turkey’s government has extended the state of emergency for another three months — the sixth extension since the failed coup attempt on 15 July 2016. The opposition is alarmed that the government plans to stick to emergency rule through crucial presidential polls scheduled for next year and has moved to galvanize the streets. The government justified the extension using the same reason it did for the initial declaration of emergency rule — the threat of terrorism — but the opposition and legal experts are unconvinced.
Senal Sarihan, a lawyer and deputy for the main opposition Republican People’s Party (CHP), believes the government is exploiting the putsch. “Even the initial declaration of the state of emergency rested on a [legal] violation,” she said. “Extraordinary regimes can be declared only in case of widespread violence that cannot be contained. The coup attempt of 15 July 2016 unfolded [only] in Ankara and Istanbul and was thwarted in six hours at most.”
She noted that security forces and the judiciary remained functioning at the time and could launch normal judicial procedures against the putschists. “Yet the government declared a state of emergency the following day, and thus the legal violations began with the declaration itself,” Sarihan said. According to her, the continued emergency rule has created a de facto presidential system and perpetuated President Recep Tayyip Erdogan’s one-man rule.
Another CHP deputy, Necati Yilmaz, believes Erdogan and his Justice and Development Party (AKP) have no intention of lifting the emergency rule, which grants them extraordinary powers that they have routinely used for legislative decrees and restrictions unrelated to the coup attempt or that had nothing to do with security at all. “The emergency rule is no different from the one-man regime that the AKP has envisaged,” Yilmaz told Al-Monitor. “They want to have it through their current term in power. This intention is plain as day.”
According to the opposition, the AKP is planning to stick to the state of emergency up until November 2019, when Turkey is scheduled to go to the polls to elect its first executive president — who will officially assume the sweeping powers approved in a controversial referendum in April 2017. Some believe the government could opt for early elections this year.
Ayhan Bilgen, a lawmaker and spokesperson for the pro-Kurdish Peoples’ Democratic Party (HDP), told Al-Monitor, “They will first decide the election timetable, and then the duration of the emergency rule will become clear. Their practices are typical of a party state. The AKP is after designs to guarantee [the outcome of] the elections by making sure they are held under emergency rule.”
According to Ahmet Faruk Unsal, a former AKP deputy who has fallen out with his party, the AKP needs the state of emergency to prevent the eruption of “great chaos” of governance after its massive violations of the law since the coup attempt. “Lifting the state of emergency will make it impossible for them to govern Turkey. The laws and the constitution have been violated so much that they will face great chaos as soon as all those legislative decrees become invalid once the state of emergency ends,” Unsal told Al-Monitor. “They are at a loss about how to handle that. They would face the legal sanctions of trampling on the constitution and the law, and this would be an unsustainable situation.”
Moreover, the state of emergency enables the government to enact measures affecting the elections. Pointing to one crucial example, Unsal said, “Under the constitution, the members of the Council of State and the Court of Appeals are elected by the Higher Board of Judges and Prosecutors. Yet, using emergency rule powers, they issued a legislative decree to appoint new members to the Council of State and the Court of Appeals. Those members will now make up the Supreme Election Board [YSK]. Hence, the government has effectively shaped the YSK.”
The YSK’s composition is of utmost importance for the government. With its controversial decisions at the April 2017 referendum, the YSK swayed the outcome of the tightly contested vote. But not only that: By using emergency rule powers, the government has routinely banned demonstrations and other activities by the opposition while enacting a provision widely seen as a judicial shield for AKP loyalists. This has further stoked apprehension ahead of the elections.
For Bilgen, the state of emergency is “a very serious threat” to election security. “Reports [by international observers] on the April [2017] referendum, which took place under a state of emergency, describe violations of transparency and equality norms, and there are already signals of serious risks [for the upcoming elections],” Bilgen said. He voiced concern that the government would flout electoral laws — especially during voting and counting — and impede any real monitoring and legal control.
Despite numerous bans and restrictions, opposition parties and civic groups have launched initiatives calling for an end to the state of emergency. Unsal, who is part of the Initiative Against State of Emergency, a platform that brings together prominent politicians and intellectuals, says opposition parties should refuse to run in any elections under emergency rule. “If political parties refuse to contest the elections, the government cannot have those elections recognized by the international community,” he said. “The parties’ refusal to participate will mean a crisis of legitimacy.”
The HDP appears to agree with the idea. “A question of legitimacy will inevitably arise over an election held under a state of emergency,” Bilgen said. “Our position here does not mean an adverseness to elections; on the contrary, it is about the need to start questioning the minimum conditions that proper elections require.”
When it comes to the CHP, the main opposition has not yet made a decision on whether to contest the election, Yilmaz said. “The April [2017] referendum has already demonstrated the dubious nature of elections held under a state of emergency. There is no need to repeat that,” he said. “Both in our parliamentary activities and street actions, ending the state of emergency is our No. 1 demand.”
Bilgen called for a “strong, broad and inclusive” popular movement to pressure Ankara. “Despite all restrictions, society must demonstrate that it cares for its future,” he said. “This, in fact, is a question of deserving democracy.”
A number of civil society groups have already taken to the streets. Most recently, thousands of people attended a 14 January rally in Istanbul, organized by the Confederation of Public Sector Trade Unions (KESK). KESK co-chair Mehmet Bozgeyik vowed the street action would continue. “The Turkish people believe the state of emergency is no longer needed and want an immediate return to democratic politics,” Bozgeyik told Al-Monitor. “As a confederation [of trade unions], we are demanding the restitution of public workers expelled via legislative decrees and the withdrawal of hundreds of legal amendments enacted during this process.”
Such appeals have so far fallen on deaf ears. The government’s rhetoric paints the prospect of an open-ended state of emergency, insisting that ordinary people are not being affected. Yet the CHP’s Sarihan, who has penned a book about the 18-month toll of the emergency rule, offers the following overview: “The number of people expelled from public service is 125,294. They are without salaries, unable to get health services and earn their bread. In legal jargon, we call this ‘civil death.’ Then, 50,510 people have been arrested and 169,000 people have been subject to legal proceedings. Including families, this means ‘civil death’ for more than 1 million people. Six news agencies, 50 newspapers, 18 television channels, 29 publishing houses, 20 magazines, 22 radio stations and 1,528 associations have been banned. One hundred and forty-five journalists have been arrested and 2,500 journalists have been left jobless because of the closure of media outlets. Ten members of parliament have been arrested.”
Sibel Hurtas is an award-winning Turkish journalist who focuses on human rights and judicial and legal affairs. Her career includes 15 years as a reporter for the national newspapers Evrensel, Taraf, Sabah and HaberTurk and the ANKA news agency. She won the Metin Goktepe Journalism Award and the Musa Anter Journalism Award in 2004 and the Turkish Journalists Association’s Merit Award in 2005. In 2013, she published a book on the murders of Christians in Turkey. Her articles on minorities and unresolved killings appear on the Faili Belli human rights blog. (Al-Monitor 31.01)
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11.12 MALTA: IMF Executive Board Concludes 2017 Article IV Consultation with Malta
On 26 January 2018, the Executive Board of the International Monetary Fund (IMF) concluded the 2017 Article IV consultation with Malta, and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
Malta’s economic growth remains one of the strongest in Europe, owing to favorable economic conditions and sound policies, which advanced structural reforms and supported the strengthening of private and public balance sheets. Output is estimated to have expanded by 6.8% in 2017, accompanied by dynamic job creation, which brought unemployment to a record-low. Strong inflows of foreign workers and rising labor force participation kept wage pressures contained in most sectors, thus contributing to low inflation despite a positive output gap. At the same time, the rapid economic expansion and the growing population have put pressure on physical infrastructure and resulted in a continued housing market appreciation. The fiscal balance is estimated to have registered a surplus for the second consecutive year in 2017, thanks to buoyant revenues – including from Individual Investor Program proceeds – and contained capital expenditure growth. The 2017 current account is estimated to have remained in surplus, driven largely by a sizable balance of services.
Domestic banks remain profitable and well-capitalized. High legacy corporate non-performing loans represent a persistent challenge for the banking sector, despite the continued improvement in banks’ asset quality. As bank lending remains focused on mortgages, the concentration of property-related loans continued to grow while the non-financial corporate sector has increased its reliance on nonbank financing, particularly on intercompany lending.
The outlook is favorable, with growth decelerating gradually and converging to about 3% over the medium term. Growth is expected to be driven largely by domestic demand, backed by rising incomes and historically-low unemployment while buoyant services exports will continue to sustain current account surpluses. Inflation is set to pick up gradually, reflecting an increase in import prices and tighter labor market conditions. Headline fiscal surpluses are forecast to continue and contribute to a further moderation of public debt.
Executive Board Assessment
In concluding the 2017 Article IV consultation with Malta, Executive Directors endorsed the staff’s appraisal, as follows:
The Maltese economy remains on a strong growth trajectory. Rapid expansion of export-oriented services, improved balance sheets, and solid job creation contributed to a robust growth in 2017 and kept unemployment at historically-low levels, despite continued inflows of foreign workers. The favorable economic performance is expected to persist in the coming years, albeit at a more moderate pace, with domestic demand as the main driver. Inflation is expected to pick up gradually, reflecting an increase in import prices and tighter labor market conditions, while buoyant services exports are projected to sustain current account surpluses. Risks to the outlook are broadly balanced, and the external position is assessed to be broadly in line with fundamentals.
Reducing the remaining fiscal risks and building larger fiscal buffers would add strength to Malta’s fiscal position. As the economy keeps operating above potential, efforts are needed to ensure that fiscal policy is geared towards addressing the infrastructure challenges while avoiding unwarranted stimulus. The government’s strategy to continue complying with the MTO and building larger fiscal buffers is therefore welcome, though identifying further structural measures to attain the MTO, net of IIP proceeds, would put the fiscal position on a stronger footing. With fiscal risks still elevated, it is important to continue to broaden the tax base and strengthen revenue collection, advance the restructuring of financially-weak SOEs, and address age-related spending pressures. A budget-neutral public investment push would help narrow Malta’s infrastructure gap, thus supporting the population’s well-being and buttressing competitiveness.
Steps to advance balance sheet repair and strengthen the oversight of nonbank lending would enhance financial sector resilience. Continued resolution of legacy corporate NPLs, accompanied with enhanced supervisory oversight, would promote investment and improve the economy’s resilience to shocks. The expected increase in the provision coverage ratio and further improvements of the insolvency process would support these efforts. While the diversification of funding sources has served firms well, efforts are needed to address data gaps and enhance the oversight of nonbank lending. Robust governance and well-designed origination rules of the MDB’s operations will help contain contingent liability risks to public finances. Ensuring that the MFSA has adequate resources is critical to preserve its operational independence and maintain effective supervision.
Sustained efforts are needed to safeguard the financial system’s integrity. Robust implementation and effective enforcement of the Anti-Money Laundering framework is critical given the size of Malta’s financial sector, the fast-growing remote gaming activity and the high demand for the IIP. Continuing strengthening the collaboration between the competent supervisors and regulators, and finalizing the related National Risk Assessment would support these efforts.
The strong momentum in the housing market calls for policy measures. Targeted macro-prudential limits for mortgages would strengthen the resilience of bank and household balance sheets to possible housing price corrections and higher interest rates. Closing data gaps on borrower characteristics would help to calibrate these measures effectively. Aligning the tax rate on rental income with tax rates on other sources of income, and introducing periodic reviews of the scope and parameters of the IIP, including the minimum real estate investment or leasing values, could curb housing demand pressure. Accelerating corporate balance sheet repair in the construction sector would help to improve the response of housing supply to price signals.
Safeguarding the reform momentum is critical to sustain high growth and promote inclusiveness. Policies should focus on reducing the severe congestion by improving road quality and increasing the utilization of alternative means of transport, upskilling and reskilling the labor force to better align education with business needs, and increasing female labor force participation further, particularly among older cohorts. Strengthening innovation by developing research infrastructure, increasing the financial support for research and innovation, and improving links between academia and the private sector would enhance productivity and boost growth prospects.
Staff proposes that the next Article IV consultation with Malta follow the standard 12-month cycle. (IMF 29.01)
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