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24 July 2019
21 Tammuz 5779
21 Dhul Qadah 1440
TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Israel Launches Cybersecurity Program for Students with Communications Disorders
1.2 Tel Aviv Residents Appeal to Municipality to Require Permits for Airbnb Operators
1.3 Verkhovna Rada Ratifies Free Trade Agreement Between Ukraine and Israel
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Israeli Defense Companies Team with Lockheed Martin to Enter the US Market
2.2 YL Ventures Closes Fourth Fund with $120M of Committed Capital
2.3 enSilo Raises $23 Million in Series B Funding
2.4 Juganu Raises $23 Million led by Viola Growth
2.5 Eyesight Partnering With Leading Tier 1 to Continue Leadership in Chinese Market
2.6 Israel Enters Top 10 Most Innovative Nations in UN’s WIPO Index
2.7 UVeye Raises $31 Million from Volvo Cars, Toyota Tsusho and W.R. Berkley
2.8 The Trendlines Group Receives an $8 Million Investment
2.9 NYU Tandon Future Labs Launches International Partnership with Arieli Capital
2.10 Personetics Opens New R&D Center in Nazareth to Support Continued Growth
2.11 vCita Raises $15 Million
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Jordan- Oasis500 Launches Second Investment Fund to Support Young Entrepreneurs
3.2 Royal Jordanian & Private Hospitals Association Sign Agreement for Medical Tourism
3.3 CODED Raises $1.3 Million Pre-Series A Funding to Teach the Arab World Coding
3.4 Rimini Street Announces Dubai Office to Support Growing Client Base
3.5 AlgoDriven Raises $625,000 in Pre-Series A Funding from a Consortium of VC Firms
3.6 Techstars Announces Accelerator in Abu Dhabi, Second Accelerator in UAE
3.7 China’s Didi Chuxing Partners with Middle Eastern Investment Institutions to Expand in MENA
3.8 Buffalo Wings & Rings Opens Its Third Restaurant in Jeddah
3.9 Cairo Angels Announce Investment in Egyptian Mobile Gaming Company Cryptyd
3.10 COLNN Closes a Seed Round of $100,000 from EdVentures
3.11 Morocco’s Platinum Power and China’s CFHEC to Build $300 Million Hydropower Project
3.12 HSEVEN Accelerate World-Class African Startups
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Eco Wave Power Raises $13.6 Million in Stockholm IPO
4.2 Negev Ecology to Boost Waste Recycling in Southern Israel
4.3 Morocco’s ONEE to Invest MAD 51.6 Billion by 2023 Towards Water and Electricity Projects
5: ARAB STATE DEVELOPMENTS
5.1 State of the Lebanese Economy at the First Half of 2019
5.2 Lebanon’s Fiscal Deficit Falls to $73 Million in January 2019
5.3 Tourist Entries Into Lebanon Rise by 8.3% in First Half of 2019
5.4 Jordan’s Tourism Revenue Stood at $2.6 Billion for First Half of 2019
5.5 USAID Committed to Jordan’s Water Sector Amid Increases in Floods & Droughts
5.6 Baghdad Approves Iraq-Jordan Pipeline and Offshore Oil Exporting Facilities
5.7 Jordan Moves Up in the Global Cybersecurity Index Ranking
5.8 Jordanian Exports to US Worth $1.76 Billion in 2018
5.9 World Bank to Lend Iraq $200 Million for Electricity Improvement
5.10 Iran, Iraq & Syria to Create Transport Corridor
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Arabian Gulf
5.11 Bahrain’s GFH Acquires $100 Million US Tech Office Portfolio
5.12 UAE & China Sign Agreements to Promote New Trade Opportunities
5.13 UAE Fund Signs $100 Million Deal to Boost Ethiopian Innovation & Entrepreneurs
5.14 Oman’s Latest Budget Update Reveals Deficit Narrowing
5.15 IMF Urges Oman to Introduce VAT as Soon as Possible
5.16 Saudi Arabia Raises Price of Petrol
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North Africa
5.17 Egypt’s Inflation Rate Drops for the First Time in 2019
5.18 Egypt’s Trade Balance Deficit Hits $3.87 Billion in April 2019
5.19 Initial Surplus in Egypt’s Budget is EGP 58.2 Billion Over 11 Months
5.20 World Bank Says Egypt’s Economic Reforms are Improving Business Climate
5.21 Egypt to Hold First Exhibition for Traffic & Transport Solutions in November
5.22 World Bank Grants Loans Worth $175 Million to Tunisia for Digital Transformation
5.23 Morocco Launches MAD 1.65 Billion Home-Appliance Ecosystem
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 Turkey Calls on US to Reverse Decision on F-35 Exclusion
6.2 Turkey to See Over 10% Growth in Tourists & Income in 2019
6.3 EU Imposes Sanctions on Turkey over Illegal Drilling in Cypriot Territorial Waters
6.4 Turkey’s Unemployment Rate Falls to 13% in April
6.5 Turkey’s Net International Investment Position Improved in May
6.6 Cyprus Has Low Labor Costs, But Low Productivity
6.7 Mitsotakis’ Top Priorities Are to Ease the Tax Burden and Create Jobs
6.8 Greek Corporate Tax Set to Drop by Almost a Third
6.9 Greece’s Growth Expected to Recover in the Second Half of the Year
7: GENERAL NEWS AND INTEREST
7.1 Obesity in Jordan Rose by 300,000 in Four Years
7.2 Egypt’s Population Reaches 99 Million
7.3 Egypt’s Cabinet Expects National Population Growth Rate to Halve Before 2052
7.4 Turkish Private University Tuition Fees Increased by 20% Annually
7.5 Greece’s Eternal Students Will Have to Graduate or Drop Out
8: ISRAEL LIFE SCIENCE NEWS
8.1 Lavie Bio Positive 2nd Year Field Results in its Bio-Stimulant Program for Wheat
8.2 Healthy.io’s Smartphone-Based Easy-to-Use Urinalysis for Women in Prenatal Care
8.3 Teva Announces FDA Approval of AirDuo Digihaler Inhalation Powder
8.4 Filterlex Medical Raised $3 Million in Series A Financing
8.5 Evogene Amends Agreement with Bayer to Include Genome Editing Targets
8.6 Equinom Cultivation Upscales Non-GMO Soy
8.7 Chardan Healthcare Acquisition Corp. Announces Merger Agreement with BiomX
8.8 Eybna Technologies Unlock the Medicinal Wonders of Cannabis
8.9 Ben-Gurion University Forensic Blood Detection Test Using Luminescence-Based Detection
8.10 StePac Takes Broccoli Packaging Out of the Ice Age
8.11 RSIP Vision’s AI Technology Provides Unmatched Precision for Lung Procedures
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 SayVU Pinpoints People in Buildings with No Cellular Signal for Emergency Rescue
9.2 Arilou Automotive Cyber-Security Earns 2019 Best Practices Award by Frost & Sullivan
9.3 Get SAT Introduces Nano SAT-H for Military On-the-Move Applications
9.4 Friendly Technologies Launches WiFi Optimization & WiFi Mesh Management System
9.5 Unveiling Version 4.0 of the enSilo Endpoint Security Platform
9.6 Karamba & Alpine Electronics’ Self-Protected In-vehicle Infotainment Systems
9.7 Celeno Announces New Innovation: Wi-Fi Doppler Imaging
9.8 MSV Life Selects Sapiens’ Solutions for Its Digital Transformation Project
9.9 Credorax Partners With Cisco to Boost Payments Gateway to the Next Level
9.10 IXDen IoT Security Protection Solution for Smart Home Devices
9.11 National Utility Provider Selects Safe-T’s Innovative SDP Solution
9.12 Foresight Receives Order of QuadSight Prototype from Japan
9.13 SecuredTouch Granted Patent for Continuous User Authentication
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s Inflation Rate Falls by 0.6% in June
10.2 Israel’s First Quarter Growth Rate is Revised Upwards
10.3 Composite State of the Economy Index for June Increases by 0.2%
11: IN DEPTH
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising – Q2/19
11.2 ISRAEL: Israel’s Foreign Trade in Goods, by Country, as of June 2019
11.3 ARAB MIDDLE EAST: Local Startup Ecosystem is on the Rise!
11.4 IRAQ: Iraq Plans to Launch Pipelines to Export Oil Via Jordan & Syria
11.5 IRAQ: Iraqi Kurdistan’s New Government
11.6 UAE: China Deepens Ties with UAE with Industrial Investment
11.7 UAE: Moody’s Changes Sharjah’s Rating Outlook to Negative, Affirms A3 Rating
11.8 OMAN: Fiscal & Security Pressures Highlight Oman’s Unique Position in the Region
11.9 OMAN: Fitch Affirms Oman at ‘BB+’; Outlook Stable
11.10 SAUDI ARABIA: IMF Executive Board Concludes 2019 Article IV Consultation
11.11 EGYPT: Egypt Weighs Pros and Cons of IMF Loan
11.12 EGYPT: Settlement Agreement Ends Egypt’s Long-Simmering Gas Dispute with Israel
11.13 TUNISIA: IMF Staff Concludes Visit to Tunisia
11.14 MOROCCO: IMF Executive Board Concludes 2019 Article IV Consultation with Morocco
11.15 TURKEY: Fitch Downgrades Turkey to ‘BB-‘; Outlook Negative
11.16 TURKEY: EU Cuts Diplomatic Ties and Funding with Turkey Over Gas Drilling Near Cyprus
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Israel Launches Cybersecurity Program for Students with Communications Disorders
On 21 July, Israel launched the first cohort of a new cybersecurity training program for students with special needs. Instructed and funded by the National Cyber Security Authority and the Ministry of Labor and Social Affairs, the 250-hour program centers around the field of information security operations center (SOC). Students will receive mentorship from employees at companies including IBM and Facebook. The first cohort is made up of 16 students, all of which have varying degrees of autism and are aged 21 and older. (Calcalist 23.07)
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1.2 Tel Aviv Residents Appeal to Municipality to Require Permits for Airbnb Operators
Twelve Tel Aviv residents have filed a petition to a Tel Aviv district court against the city and its mayor, Ron Huldai. In the petition, the plaintiffs demanded that the court compel the city to require all professional Airbnb operators to get a business license, as well as a nonconforming use permit. The plaintiffs also asked that Mayor Huldai and the city take legal action against anyone who runs a short-term apartment renting business without these two licenses.
According to the petition, the plaintiffs all own apartments and live in buildings where apartments are being used permanently as short-term rentals. Around 9,600 apartments in Tel Aviv are currently being rented out via Airbnb, the plaintiffs stated, most of them in the city’s most central neighborhoods. Though designated as residential spaces, they are being operated as a permanent business without the required permits, inconveniencing city residents and damaging the atmosphere in the neighborhoods, they added. Among the disturbances the plaintiffs named are noise nuisance in unreasonable hours due to parties; sanitation problems due to short-term tenants throwing trash in common areas, clogging the sewage systems, and causing damage to communal property; and excessive use of alcohol or illegal drugs. Such businesses also negatively affect the valuation of apartments located in the same buildings, they said.
As a result of the steep increase in the number of apartments being converted into short-term rental businesses and the damage subsequently caused to the quality of life of residents, as well as the prices being driven up in the local real estate market, the city has decided to raise the municipal tax for all such apartments. While the city has already approved the new rate for 2019 and 2020, it has yet to be approved by the Minister of Finance and the Ministry of Interior. As the Tel Aviv municipality only received the petition on 22 July, it has yet to study the claims and will respond to them in court. (Calcalist 23.07)
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1.3 Verkhovna Rada Ratifies Free Trade Agreement Between Ukraine and Israel
The Verkhovna Rada, the Ukrainian unicameral parliament, has ratified the international agreement on free trade between the Cabinet of Ministers of Ukraine and the Government of the State of Israel. Some 230 lawmakers voted for corresponding bill No. 0223 at a plenary session of parliament on 11 July. At least 226 votes were required to pass the bill. The ratified agreement will liberalize trade in goods between Ukraine and the State of Israel. Its adoption will contribute to the further development of bilateral trade and economic cooperation between the countries, allow Ukrainian producers to benefit from the liberalization of Israel’s goods market, open up opportunities for Ukrainian businessmen to expand markets and to develop and modernize their own production. (Interfax 11.07)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Israeli Defense Companies Team with Lockheed Martin to Enter the US Market
Israeli defense firms have teamed up with US defense giant Lockheed Martin to market advanced military technology to the American military market. The partnerships give the Israeli companies access to US military tenders. Israel’s Rafael Advanced Defense Systems recently announced that it had signed a teaming agreement with Lockheed Martin to jointly develop, market, manufacture and support the company’s SPICE guidance kits for air-to-ground bombs.
Rafael has struck previous agreements with Raytheon for the joint marketing of its famous Iron Dome air-defense system, which has intercepted over 2,000 incoming rockets fired at Israeli population centers from the Gaza Strip since its rollout in 2011. The US Army is purchasing Iron Dome batteries.
Elta Systems, a subsidiary of Israel Aerospace Industries, has successfully completed a demonstration together with Lockheed Martin of a radar solution for the US Army’s Patriot missile-defense system. The demonstration was held as part of the US Army’s Lower Tier Air and Missile Defense Sensor program and has seen companies compete for a contract to provide radars. The demonstration, held at White Sands Missile Range in New Mexico, used a well-known Elta radar, which is also used by Rafael’s Iron Dome.
The sources said the demonstrations in New Mexico, dubbed by some local media as the “radar Olympics,” took place over a two-week period. Elta and Lockheed are competing jointly against Raytheon and Northrop Grumman for the contract. Both Elta and Lockheed Martin have produced several new-generation radars in recent years and that both bring “mature technology” to the US Army’s requirements. (IH 11.07)
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2.2 YL Ventures Closes Fourth Fund with $120M of Committed Capital
YL Ventures has closed its fourth fund with $120 million of committed capital. YLV IV was significantly oversubscribed, and closed with a combination of current YLV investors and select new ones. Fund IV brings the total capital under YLV management to $260 million.
The YLV IV strategy will be consistent with that of previous funds, aiming to build a concentrated portfolio of top-tier seed stage cybersecurity companies out of Israel. Generally investing in only 2-3 teams each year, YLV IV will target a total of 10 companies, allowing the firm to maintain its dedication to true value-add investing. YL Ventures leads seed investment rounds with multimillion checks, while continuing to invest throughout follow-on rounds, which are typically led by top U.S. investors, including Bessemer Venture Partners, U.S. Venture Partners, ICONIQ Capital and TenEleven Ventures.
YL Ventures’ focus on cybersecurity allows it to conduct a rapidly efficient evaluation process, while supporting each of its companies, both strategically and tactically, across a number of functions post-investment. The firm is uniquely focused on supporting early stage companies’ U.S. go-to-market by leveraging its vast network of industry experts, hundreds of Chief Information Security Officers (CISOs) and U.S.-based technology companies which are prospective customers and acquirers of its portfolio businesses.
YL Ventures funds and supports brilliant Israeli tech entrepreneurs from seed to lead. With headquarters in Silicon Valley and Tel Aviv, YL Ventures manages $260 million and specializes in cybersecurity. YL Ventures accelerates the evolution of portfolio companies via strategic advice and U.S.-based operational execution, leveraging a powerful network of CISOs and global industry leaders. (YL Ventures 10.07)
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2.3 enSilo Raises $23 Million in Series B Funding
enSilo announced a $23 million Series B funding round and significant revenue growth. The company’s latest funding round, which brings the total raised to date to over $57 million, was led by Rembrandt Ventures. The money will be used to enhance its product, drive sales and marketing initiatives, and accelerate hiring and growth across the US, Israel and other locations. enSilo also announced that it has experienced over 250% year-over-year revenue growth.
Herzliya’s enSilo‘s platform is designed to help organizations protect their endpoints and prevent data breaches. It includes next-generation antivirus, application communication control, threat hunting, detection and response, and virtual patching capabilities. (enSilo 11.07)
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2.4 Juganu Raises $23 Million led by Viola Growth
Juganu announced the completion of a financing round, led by Viola Growth, totaling about $23 million. Additional investors participating in this financing round include OurCrowd and a Mexican investment fund.
Based on an innovative LED lighting technology capable of changing light composition and featuring an advanced infrastructure for AI technology, Juganu has developed its patented, proprietary “Digital World” technology in cooperation with software and hardware technology market leaders. One of Juganu’s closest strategic collaborations over the past five years has been with Qualcomm. This cooperation, using unique hardware developed by Juganu, allows for the “Digital World” solution to be embedded in cities and public spaces, transforming any space into an IT enterprise infrastructure with full IoT connectivity. As a result, it can serve apps and applications, such as AI, urban support for smart cars, traffic control, advanced security and rescue applications, modern municipal services, and full real-time monitoring of infrastructure
Through novel technology and smart engineering, Rosh HaAyin’s Juganu has brought to market the JLED lighting products, proving unmatched energy efficiency and long lasting lighting quality, at a competitive price. Juganu’s products are deployed worldwide for a variety of professional JLED lighting implementations such as streets and roads, gas stations, retail, office space and industrial plants. JLED cutting edge lighting systems are highly adaptable to unique and complex lighting environments, and provide unmatched energy savings and reduced maintenance costs. Juganu’s JLED lighting systems create bright and delightful experiences, improve quality of life, and build a sustainable future for people and cities around the world. (Juganu 16.07)
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2.5 Eyesight Partnering With Leading Tier 1 to Continue Leadership in Chinese Market
Eyesight Technologies announced a partnership with a well known, publicly-traded Chinese Tier 1 to bring DriverSense, Eyesight’s Driver Monitoring System, to Automakers in the Chinese market. China is the largest auto manufacturer in the world with nearly 28 million vehicles rolling off their assembly lines last year, and with that, intelligent vehicle technologies have become a main focus. With offices in China and strong local presence, Eyesight is already providing an Aftermarket DMS solution for fleets and is now strengthening its hold on the OEM, Tier 1 market.
Based in Herzliya Pituah, Eyesight creates advanced edge-based Computer Vision and AI solutions that improve daily life experiences in the car, home, and with other consumer electronics. The company’s technology uses proprietary algorithms to deliver a range of applications, from user recognition and gaze tracking to active interactions using touch-free gesture control. With Eyesight’s technology devices both “see” and “understand” their users, unlocking a world of enhanced user experiences. (Eyesight Technologies 16.07)
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2.6 Israel Enters Top 10 Most Innovative Nations in UN’s WIPO Index
For the first time, Israel has been ranked in the top 10 on the UN World Intellectual Property Organization’s Global Innovation Index for 2019.
For the past few years, Israel has been climbing on the UN index. In 2016, it was ranked 21st in innovation. In 2017, it jumped to 17th. In 2018, Israel placed just outside the top 10 and was ranked 11th. Israel’s precise place in the top 10 on the 2019 Global Innovation Index will be unveiled on 24 July at a special event the WIPO will be hosting in New Delhi.
The Global Innovation Index uses 80 indicators to rank the state of innovation in 129 countries. The indicators examine, among other things, the creative and supportive environment for innovation in different countries in terms of education, investment in infrastructure, investment in research, the level of business sophistication, and the political climate. The GII has become a tool used by decision-makers and business people in creating ties between the public and private sectors. The index was developed by the WIPO, Cornell University and INSEAD, one of the world’s leading business schools. (Israel Hayom 19.07)
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2.7 UVeye Raises $31 Million from Volvo Cars, Toyota Tsusho and W.R. Berkley
UVeye announced that it has raised an additional $31M in funding, led by Toyota Tsusho, Volvo Cars and W. R. Berkley Corporation with participation of other partners like F.I.T. ventures.
UVeye’s technology enables vehicle manufacturers, logistic operators, retailers and rental car companies to carry out automatic vehicle inspection leveraging first-of-its-kind artificial intelligence, purpose-built for vehicles. Importantly, UVeye’s system has proven it can drive higher accuracy and improve efficiency, all with minimal human intervention. UVeye’s drive-through systems can detect external and mechanical flaws and identify anomalies, modifications or foreign objects – both along the undercarriage and around the exterior of the vehicle. The scanning process completes within a matter of seconds and can be used throughout the entire lifecycle of the vehicle. The technology is being actively deployed today across many use cases, from the vehicle manufacturing line – the moment components are placed on the conveyor belt through end-of-line inspection – to logistics, maintenance and beyond. Since inception UVeye has generated millions of vehicle scans across dozens of countries globally. UVeye’s Anomaly detection accuracy rate has exceeded client threshold in all case studies to date.
Volvo Cars and Toyota Tsusho intend to use UVEYE’s inspection systems at various sites internationally, including Volvo Cars’ factories dealerships and in the after-market. For Toyota Tusho, UVEYE will also support distribution to used car centers, and throughout the company’s footprint within the Japanese auto market. UVEYE welcomes these new relationships, adding to existing partnerships with Skoda and Daimler.
Tel Aviv’s UVEYE’s technology was initially developed for and deployed within the security industry, in order to detect dangerous conditions like weapons, explosives, or other threats. Upon successful deployment within some of the highest-security locations globally, UVEYE saw the opportunity to use its technology to solve challenges within the automotive industry to detect potentially hazardous mechanical issues. Today UVEYE’s suite of products includes its original undercarriage application (Helios), its revolutionary 360 solution (Atlas), and its targeted tire application (Artemis). (UVeye 22.07)
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2.8 The Trendlines Group Receives an $8 Million Investment
The Trendlines Group has signed a Subscription Agreement with Librae Holdings Limited for a SGD10.88 million ($8 million) investment. Trendlines’ history of developing early-stage companies, combined with its hands-on investment policy and the potential of its 53 portfolio companies, makes it an attractive investment with significant potential. LH believes in Trendlines’ business model and are convinced that this represents a great opportunity. LH has been looking at Singapore as a target for a long time and views Trendlines as an avenue into that important market.
LH will purchase 103.6 million new ordinary shares in the capital of Trendlines, representing about 14.55% of the enlarged share capital of Trendlines following the placement. LH will purchase the shares at a price of SGD0.105 per share and for total consideration of SGD10.88 million ($8 million at the exchange rate of $1.00 = SGD1.360).
Misgav’s Trendlines is an innovation commercialization company that invents, discovers, invests in, and incubates innovation-based medical and agricultural technologies to fulfill its mission to improve the human condition. As intensely hands-on investors, Trendlines is involved in all aspects of its portfolio companies from technology development to business building. (The Trendlines Group 22.07)
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2.9 NYU Tandon Future Labs Launches International Partnership with Arieli Capital
The NYU Tandon School of Engineering Future Labs — the first network of startup business hubs launched with New York City support – and Arieli Capital, a US holding company, announced a partnership to provide opportunities for investment, guidance, and networking to the Future Labs’ portfolio companies and Israeli entrepreneurs. New York City and Israel have thriving startup communities; this partnership will leverage the respective strengths to support further innovation.
The collaboration will identify promising early-stage startups through Future Labs Flash Pitch events, in which startups from New York and Israel will compete to receive an investment from Arieli Capital and its associated partners.
Ten Israeli startups will also be selected to join the Future Labs’ incubation programs. These startups will relocate to NYC and get access to the Future Labs’ full spectrum of support services, mentorship opportunities, and other resources. In the spirit of building business bridges, Arieli Capital will offer the Future Labs’ New York-based startups and program graduates a pathway to enter the Tel Aviv market through its Israel-based programs and/or associated programs.
The Arieli-Tandon partnership was initiated by Cliff Friedman, an alumnus of NYU, Chairman and CEO of ShareNett, a members-only, global network of Family Offices and professional investors who collaborate on curated, high quality alternative investment opportunities across multiple asset classes. (NYU 22.07)
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2.10 Personetics Opens New R&D Center in Nazareth to Support Continued Growth
Personetics announced the opening of a new Research and Development (R&D) center in Nazareth, Israel. The new R&D center will support Personetics’ continued rapid growth. While the company’s R&D team has more than doubled in size in the last two years, further growth is required to support the company’s expanding customer base, which now includes more than 30 of the world’s leading banks, as well as new solutions the company is bringing to the market including the recently announced small business and banker enablement solutions.
While the shortage of skilled programmers is a global phenomenon, increasing the diversity of the R&D pool both geographically and demographically is critical to the future growth of advanced technology companies. Establishing a center in Nazareth allows the company to tap into a hotbed of highly skilled professionals, enabling expansion of R&D capabilities while maintaining proximity to facilitate close collaboration. Being in the same time zone and less than a two-hour drive away is a big advantage for their teams in Tel Aviv and Nazareth.
The opening of Personetics’ Nazareth office was aided by the Tsofen organization, which works to integrate skilled Arab workers into the Israeli high-tech industry and bring high-tech companies to Arab cities. Since Tsofen’s establishment, the number of high-tech companies operating in Nazareth has jumped from one to forty.
Tel Aviv’s Personetics is the leading provider of customer-facing AI solution for financial services and the company behind the industry’s first Self-Driving Finance![™]()
platform. Harnessing the power of AI, Personetics’ Self-Driving Finance solutions are used by the world’s largest financial institutions to transform digital banking into the center of the customer’s financial life – providing real-time personalized insight and advice, automating financial decisions, and simplifying day-to-day money management. (Personetics 22.07)
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2.11 vCita Raises $15 Million
vCita announced that it completed a $15 million financing round led by Forestay Capital. The Herzliya-based startup previously raised $15 million from private Israeli investors. With 90 employees, most of them in Israel, the company was founded in 2010. The financing will be used to increase the rate of growth and invest mainly in technology and marketing, and to invest in creating strategic partnerships. The company is planning to double its number of employees within 12 to 18 months and that revenue has doubled over the past year to several tens of millions of dollars annually. vCita has about 100,000 paying customers.
Tel Aviv’s vCita is the #1 business management and client engagement app, designed to help small businesses grow. Tailored specifically for service providers, vCita redefines the way businesses interact with their clients, driving more opportunities from the web, mobile, email and social while empowering clients to self-serve. vCita includes an online CRM to manage all client communications together with online scheduling, online payments, email & SMS campaigns, lead generating website widgets, and everything a small business needs to drive more business and provide great client service. (vCita 22.07)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Jordan- Oasis500 Launches Second Investment Fund to Support Young Entrepreneurs
Oasis500 announced the launch of a second fund with support from the King Abdullah Fund for Development (KAFD), the Innovative Start-ups and SMEs Fund (ISSF) and the Arab Bank. The second Oasis fund aims to drive social and economic change by investing up to $100,000 in effective entrepreneurs to establish ICT and innovative industrial companies. The investment includes a six-month business acceleration program, and a program offering technical supervision and guidance services from ‘high-level’ councilors, among other services. The program will conclude with entrepreneurs showing their projects to investors and partners in order to receive post finance and help their companies grow, the statement said.
Amman’s Oasis500 is a pre-seed and seed fund manager and accelerator that catalyzed the development of an entrepreneurial ecosystem in the region, continues to create opportunities for aspiring entrepreneurs and enables them to build their own companies that subsequently contribute to the local economy. Since inception in 2010 by direction from King Abdullah II, Oasis500 has invested $8.65 Million in 154 technology and creative startups, that were able to raise over $60 Million from third party investors. (Oasis500 15.07)
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3.2 Royal Jordanian & Private Hospitals Association Sign Agreement for Medical Tourism
On 16 July, Royal Jordanian and the Private Hospitals Association (PHA) signed a cooperation agreement aimed at supporting and promoting medical tourism to the Hashemite Kingdom and strengthening Jordan’s position as a destination for treatment and hospitalization for citizens from various countries in the region. Under the accord, RJ will provide discounted tickets on business and economy classes to Arab and international patients, and their companions, who come to Jordan to receive medical treatment at medical centers and hospitals that are members in the association.
The PHA will cooperate with Royal Jordanian toward bringing a greater number of incoming patients from abroad to be treated in Jordan. RJ, Jordan’s national carrier, took the initiative to facilitate air travel for Arab and foreign patients on its route network through discounts such as those involved in this agreement. The agreement is viewed as an investment opportunity that will both serve the private hospitals and stimulate travel on RJ aircraft, supporting, in turn, the national economy. (Petra 16.07)
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3.3 CODED Raises $1.3 Million Pre-Series A Funding to Teach the Arab World Coding
CODED, the Kuwait based coding academy, has secured a Pre-Series A funding of $1.3 million led by KISP. Other participants in the funding round included 500 startups, Sijam Ventures, Sirdab Lab, Sharq Capital and Abdullah Al-Zabin. CODED started in 2015, aiming to teach coding in Arabic to the enthusiastic Arab youth, both online and offline. In 2017, the Kuwaiti startup launched Barmej Online Boot Camps, with an objective to reach out to every Arab who wants to learn coding. With the online platform, the boot camp participants can get hands on experience in coding with practical learning projects that are reviewed by expert trainers. With a flexible learning experience and top notch educational material, the boot camps help the participants prepare for high quality job placements.
CODED hopes to add more Barmej Boot Camps with its newly-secured investment. By developing the platform even further, the educational platform wants to place its graduates in different jobs in various fields of coding technology.
CODED previously raised an undisclosed SEED round in early 2017, which helped them develop Barmej at early stage. Currently Barmej learning has over 200,000 users on 8 different free learning tracks spanning different programming languages and technologies. With their large pool of students, the CODED has become a partner of the 1 Million Arab Coders Program. It has also been selected as one of the top 100 startups in the Arab World by the World Economic Forum. So far the offline boot camps of Barmej has seen over 250 graduated coders. (CODED 23.07)
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3.4 Rimini Street Announces Dubai Office to Support Growing Client Base
Las Vegas, Nevada’s Rimini Street, a global provider of enterprise software products and services, announced it is significantly strengthening its investment in and commitment to the Middle East by establishing Rimini Street FZ–LLC, opening a new office in Dubai and hiring local staff. The Company’s increased investment is in response to its growing client base with operations in the Middle East and accelerating local demand for its portfolio of award-winning, ultra-responsive enterprise software support services.
Rimini Street has been present in the Middle East for over five years supporting nearly 100 organizations with operations in the region, including clients in the Arabian Gulf and Saudi Arabia. Rimini Street plans to add staff to market, sell and service clients in local language. The new Dubai office will provide clients with more comprehensive support services compared to standard vendor maintenance including support for customizations, interoperability and performance tuning. (Rimini Street 10.07)
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3.5 AlgoDriven Raises $625,000 in Pre-Series A Funding from a Consortium of VC Firms
Dubai’s AlgoDriven has successfully raised $625,000 in fundraising from a consortium of both domestic and international venture capital firms. Joining the round are regional investors, Oman Technology Fund and DTEC Ventures. International venture capital firms include 500 Startups through their MENA based 500 Falcon’s Fund, as well as Silicon Valley based Social Capital. This new investment will enable AlgoDriven to further capitalize on its position as a market leader in automotive data and software field, in the Middle East, and internationally in Australia and New Zealand. New product innovation is a key focus of AlgoDriven, which will help car dealers, banks and insurance companies evaluate used cars more accurately. International expansion is also a key focus over the coming months, as AlgoDriven pushes into the wider MENA market and beyond. (MAGNiTT 14.07)
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3.6 Techstars Announces Accelerator in Abu Dhabi, Second Accelerator in UAE
Boulder, Colorado’s Techstars announced the launch of the Techstars Hub71 Accelerator. In partnership with Hub71, an Abu Dhabi-based global technology hub led by Mubadala Investment Company, the new 13-week mentorship-driven accelerator will provide hands-on mentorship and guidance as well as access to Techstars’ worldwide network, to help startups gain traction and accelerate their businesses for global success. The Techstars Hub71 Accelerator will be based at Hub71 in Abu Dhabi. The Techstars Hub71 Accelerator will accept 10 startups on an annual basis and is open to startups addressing technology innovations across a variety of business verticals.
Techstars is the worldwide network that helps entrepreneurs succeed. Techstars founders connect with other entrepreneurs, experts, mentors, alumni, investors, community leaders, and corporations to grow their companies. Techstars operates three divisions: Techstars Startup Programs, Techstars Mentorship-Driven Accelerator Programs and Techstars Corporate Innovation Partnerships.
Hub71 is a global ecosystem in Abu Dhabi offering an interconnected network to enable innovation and growth opportunities for transformational tech companies and startups, creating an environment where entrepreneurs can thrive. It is a flagship initiative of the ‘Ghadan 21’ program working to accelerate Abu Dhabi’s economy. Alongside strategic partners Microsoft, SoftBank Vision Fund, Abu Dhabi Global Market and Mubadala, Hub71’s mission is to create an optimal environment for outstanding innovation making economic and social impact. (Techstars 23.07)
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3.7 China’s Didi Chuxing Partners with Middle Eastern Investment Institutions to Expand in MENA
Chinese unicorn Didi Chuxing has signed a strategic agreement with Symphony Investment and some other investment institutions in the Middle East. The agreement will enhance the partnership between the MENA region and China. The parties that signed the agreement will set up an Abu Dhabi based joint venture, aiming to promote internet consumer services and sharing economy in the region. Mubadala Investment Company is considering joining the consortium as well.
Symphony Investment has renowned funders such as Emaar Properties, Aramex, Americana Group and Noon. The agreement was signed at the UAE-China Economic Forum, organized by the UAE Ministry of Economy. China currently ranks second among the trading partners of the MENA region and the bilateral cooperation between the two includes finance, manufacturing, technology and commerce. (Various 23.07)
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3.8 Buffalo Wings & Rings Opens Its Third Restaurant in Jeddah
Cincinnati’s Buffalo Wings & Rings, one of the leading American food restaurants in the region, announced the opening of its third branch in Jeddah, Saudi Arabia. The new club-level sports restaurant experience means everyone is a VIP, worthy of the ultimate sports dining experience. With bright, inviting dining rooms, 50+ TVs, elevated fan experiences, chef-inspired recipes and of course signature wings, Buffalo Wings & Rings is the ideal experience for socializing with friends & family over sports.
The Emaar square branch is conveniently located at a close proximity to malls and university in the heart of Jeddah and can accommodate over 100 guests at their indoor and outdoor seating areas. The outdoor area is conveniently facing the famous Emaar fountain and features live entertainment on weekends. In addition to the brand’s promise of maintaining the fresh flavors at a great value, this branch is decorated with a new modern and sleek look that provide customers with ambiance. (Buffalo Wings & Rings 21.07)
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3.9 Cairo Angels Announce Investment in Egyptian Mobile Gaming Company Cryptyd
The Cairo Angels, a global network of angel investors focused on supporting startup opportunities in the MENA region, announced its most recent investment in Cryptyd. Alexandria’s Cryptyd, a mobile game development company established in 2016. The company has developed five mobile games to date; and is seeking to launch two games in the upcoming months. The new investors are affiliated with Cairo Angels and the Alexandria Angels. This is the second investment round for the company, with its seed investment raised in 2015 from The Cairo Angels.
The Cairo Angels continues to see exponential growth in the gaming industry, having invested in two gaming companies to date. The Cairo Angels is aligned with the Cryptyd team on their prospects for the market, believing that mobile gaming is currently experiencing monumental growth. The game development industry is becoming less of a niche arena, and is catering to a larger audience due to high smartphone penetration within the region. This is increasing overall industry revenue, while simultaneously increasing competition of game development companies exponentially. The industry is gaining momentum, and investment in such companies leads to higher levels of innovation, clustering of talent, and display of pure artistic abilities. (Cairo Angels 16.07)
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3.10 COLNN Closes a Seed Round of $100,000 from EdVentures
Egypt’s EdVentures, a leading Arab world corporate venture capital fund specializing in education, culture and innovative learning solutions, has just added a new startup to its portfolio of companies. The company will invest in Giza’s COLNN, a school SaaS provider. COLNN’s services include web cloud-based solutions to schools and an integrated mobile app connecting teachers, parents, and students.
COLNN helps schools manage their internal processes, departments and activities in addition to optimizing the usage of their available resources through school management system (SMS). Upon analyzing the needs and requirements of each school, COLLN customizes their solutions/software to perfectly fit the nature and requirements of each school. Their services don’t end at the development phase; they also provide continuous training and follow-up to the schools’ staff, students and parents helping them to get maximum benefits of the newly updated learning process/system.
EdVentures invests in startups specializing in education, culture and innovative learning solutions in SEED and Pre-Series A rounds focusing on Egypt, Africa, and the Arab World. The corporate VC was launched in 2017 by Nahdet Misr Publishing House. It provides technical and financial support to startups in order to ensure success and continuity in the market by providing investment according to the needs and maturity level of each company. (MAGNiTT 14.07)
3.11 Morocco’s Platinum Power and China’s CFHEC to Build $300 Million Hydropower Project
Morocco’s Platinum Power and China’s CFHEC are set to build a $300 Million hydropower project in Morocco. Platinum Power and CFHEC will also partner on renewable energy projects elsewhere in Africa, albeit this will be the first time the companies have partnered on a project.
Platinum Power is a Morocco-based company, majority-owned by US investment fund Brookstone Partners. It specializes in the development, financing, and construction of renewable energy projects. It is a key player in the hydropower industry in Morocco. Last October, the company received authorization from the Moroccan Ministry of Energy to build eight new hydropower projects across the country. Platinum Power is also currently developing projects in Cameroon and Ivory Coast. (MWN 11.07)
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3.12 HSEVEN Accelerate World-Class African Startups
Casablanca’s HSEVEN, Africa’s largest accelerator, is launching “HSEVEN DISRUPT AFRICA”, an ambitious startup acceleration program designed for entrepreneurs of the Moroccan and African diaspora. The 6-month program will provide a seed investment of €150,000 plus an eventual investment of €500,000 to €1.5 million. HSEVEN DISRUPT AFRICA is designed to support exceptional entrepreneurs building high-impact startups, and targets seed and early stage startups with 2 to 5 founders that are eager to impact Africa through innovative services, products and business models.
The program will start with a global call for applications, followed by an international selection roadshow in New York, Montréal, San Francisco, Shanghai, Dubai, London, Amsterdam, Paris and Casablanca. The selected startups will benefit from a seed investment of €150,000 at the beginning of the program for 5 to 7% equity, then an eventual investment of €500,000 to €1.5 million at the end of the program. These investments will be granted through a partnership with the venture capital firm Azur Partners. The program will also benefit from funding of the Dutch Good Growth Fund (DGGF) and the Innov-Invest program of the Caisse Centrale de Garantie (CCG) with the support of the World Bank. The startups will be located at HSEVEN’s 12,000 ft² campus in the heart of the Marina of Casablanca. (HSEVEN 16.07)
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Eco Wave Power Raises $13.6 Million in Stockholm IPO
Israeli-Swedish wave energy company Eco Wave Power has raised $13.6 million at a company value of $58 million in its IPO on the Nasdaq First North stock exchange, an exchange for growth companies that is a secondary market of the Scandinavian stock exchanges, which are owned by Nasdaq. The share price in the IPO was 19 Swedish krona. The share price dropped to 17.7 krona in the first days of trading in the share, reflecting a $54 million market cap. Some 5,900 investors participated in the offering, including investment institutions AP4 and Skania Fonder, which became the largest shareholders in Eco Wave Power following the offering.
Eco Wave Power, a renewable energy company that has developed technology for turning sea waves into electricity, has 13 employees. The company’s Israeli subsidiary was founded in 2011 in Tel Aviv. Eco Wave Power says that it is the only company in world operating a system for producing energy from waves that is connected and selling electricity to a network under a commercial agreement for purchasing electricity. The company says that the purpose of the IPO is to construct an initial commercial farm for producing energy from sea waves, and for expanding its projects and marketing and sales activity. The company reported that it currently had two energy production farms, one in Jaffa and one in Gibraltar, and that there were plans for expanding both of them. Eco Wave Power’s projects total 190 megawatts in a number of countries. (Eco Wave Power 21.07)
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4.2 Negev Ecology to Boost Waste Recycling in Southern Israel
Recycling and waste treatment company Negev Ecology has acquired a 49% stake in the Dudaim Recycling and Environmental Education Park in southern Israel from the Bnei Shimon Regional Council Economic Corporation for NIS 47 million. Negev Ecology, headquartered in Kibbutz Mishmar HaNegev, is a leader in waste recycling and treatment. It operates 10 waste recycling facilities of various kinds all over Israel. Negev Ecology already operated the Dudaim facility, and will continue operating after acquiring 49% of it through a joint team.
Dudaim Park sorts and treats waste collected from all of southern Israel. An innovative plant will be built there at a cost of NIS 70 million that will sort and recycle half of the waste brought to the site. The new venture will substantially reduce the need to bury waste. The first sorting and recycling plant in the south will soon be built there, and will make it possible to significantly increase waste recycling in all the local authorities sending their waste to Dudaim Park. (Globes 22.07)
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4.3 Morocco’s ONEE to Invest MAD 51.6 Billion by 2023 Towards Water and Electricity Projects
Morocco’s National Office for Electricity and Drinking Water (ONEE) presented its 2019-2023 ambitions at its board of directors meeting in Rabat. The ONEE’s strategy is designed to improve access to electricity and drinking water across Morocco. MAD 8.6 billion will go towards electricity production projects generating up to 4.262 MW. In accordance with Morocco’s renewable energy goals, 4.240 MW of this power will be generated from solar, hydroelectric and wind power. Morocco intends to produce 52% renewable energy by 2050.
In addition to the renewable projects, ONEE announced its intention to oversee the completion of the Dakhla diesel power station projects (22MW) and the Abdelmoumen pumped-storage hydroelectricity station (350 MW) by 2023. French construction company Vinci won the tender for the MAD 3 billion Abdelmoumen station in January 2018. Construction work for the project began in October last year. Finnish corporation Wartsila won the tender for the Dakhla power station project in August 2017, but construction on the project has to this date not yet commenced.
By 2023, ONEE also intends to invest MAD 8.7 billion in regional integration projects. ONEE is evaluating the feasibility of infrastructure connection projects with Mauritania and Portugal. ONEE will also invest MAD 5.2 billion towards reinforcing access to electricity in rural areas, and extend distribution of electricity to 30,900 households across Morocco.
ONEE is responsible for the delivery of drinking water across Morocco, and has pledged to invest MAD 25.5 billion to this end. MAD 15.2 million will go towards improving access to water in urban areas, including the construction of 3400 km of new water pipes. MAD 4.6 billion will go towards reinforcing water treatment, through the construction of 64 new treatment plants by 2023. ONEE will also invest MAD 5.7 billion towards improving access to drinking water in rural areas to 99.3%. The latest ONEE figures show 96.6% of households had access to safe drinking water in 2017. (MWN 22.07)
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5: ARAB STATE DEVELOPMENTS
5.1 State of the Lebanese Economy at the First Half of 2019
BLOM Bank observed the state of the Lebanese economy at the close of the first half of 2019. The bank found that Beirut now has an opportunity to implement reforms and turn the tide. In June 2019, an IMF panel visited Lebanon and released a concluding statement assessing the overall environment. The main parameters attesting to the authorities’ path towards fiscal consolidation are: the 2019 pledge to reduce the national fiscal deficit to 7.6% of GDP (instead of 2018’s 10.9%) via a new tax-driven budget inclusive of multifaceted national reforms, as well as the endorsement of the Electricity Reform Plan by parliament in April 2019.
The authorities in 2019 took a number of eminent steps forward which earns it some points. Even though the pledged deficit figure (7.6% of GDP) is considered too ambitious and the more reasonable target stands at approx. 9% of GDP, the authorities have taken a number of steps forward (revealing a stronger commitment to fiscal adjustment) which seem to speak louder than the pledged deficit. For instance, the government froze public sector hiring for the next 3 years, set a ceiling on the allowances of public sector employees for a first in the history of the country, and approved a modernized version of the outdated law of commerce.
Nonetheless, growth was subdued in H1/19, as Lebanon’s private sector refrained from investing in future business. Lebanon’s economic growth stood at an estimated 0% in H1/19. Economic growth was capped due to sectorial slowdowns as well as persisting crowding out of the private sector in the first half of the year due to high interest rates. In fact, the BLOM Purchasing Managers’ Index (PMI), a predictive power for economic growth, stalled at an average of 46.5 in H1/19, compared to 46.6 and 47.1 in H1/18 and 2017, respectively. The average PMI score in H1/19 was underpinned by persisting pressures on private sector companies who adopted a wait-and-see approach as they monitor the political and economic reform plan to gradually materialize, stabilize the operating environment, and kick start their investment. (BLOM 13.07)
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5.2 Lebanon’s Fiscal Deficit Falls to $73 Million in January 2019
Lebanon’s fiscal deficit (cash basis) narrowed from $378.91M in January 2018 to $72.83M in January 2019. This was attributed to a 16.1% yearly decrease in government expenditures to hit $1.10B, while the fiscal revenues recorded a yearly increase by 8.45% to stand at $1.08B. The primary balance which excludes debt service posted a surplus of $231.74M, compared to a deficit of $106.34M in January 2018. Tax revenues (constituting 83.4% of total revenues) declined by an annual 1.13% to $902.5 million in January 2019. Revenues from VAT (33.8% of total tax receipts) dropped by 16% y-o-y to $305.4 million.
Although the new VAT rate of 11% was applied in the beginning of January 2018, increasing from 10%, the decrease in the VAT revenues can be linked to the stagnating economy and recession in many sectors. In the automotive sector, the VAT payment is done after car registration. However, according to the Association of Lebanese Car Importers, the total number of newly registered commercial and passenger cars fell by 26.1% year- on- year (y-o-y) to 1,948 cars in January 2019. Meanwhile, customs’ revenues (11.79% of tax receipts) dropped by 6.49% year-on-year (y-o-y) to $106.38M. As for non-tax revenues (16.6% of total revenues), they witnessed a significant increase from 84.92M in January 2018 to $179.57M in January 2019. This can be linked to the yearly rise in telecom revenues (constituting 46.31% of total non-tax revenues) to reach $83.17M in January 2019.
On the expenditures’ side, total government spending retreated by a yearly 16.1% to hit $1.10B in January 2019. Transfers to Electricity du Liban (EDL) alone dropped by 26.17% to reach $65.85M, which followed the 12.78% annual decline in average oil prices to $60.24/barrel over the period. Moreover, total debt servicing (including the interest payments and principal repayment) reached $304.57M in January 2019, up by a yearly 11.74% such that interest payments alone rose by 12.77% y-o-y to $287.34M. Interest payments on domestic debt grew by 14.27% y-o-y to $245.51 following the increase in interest rates on treasury bills in November 2018. Meanwhile, interest payments on foreign debt rose by an annual 4.69% to $41.83M. For its part, the treasury transactions posted (includes revenues and spending that are of temporary nature) a deficit of $50.10M, compared to $59.96M in January 2018. Treasury expenses of which municipalities dropped from $274.60M to $20.08M over the same period noting that the government released overdue funding to municipalities in the following months. (MoF 11.07)
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5.3 Tourist Entries Into Lebanon Rise by 8.3% in First Half of 2019
The recently released Ministry of Tourism report revealed an increase in the number of tourists from 853,087 by June 2018 to 923,820 by June 2019. The composition of total tourists by June 2019 showed that tourists from Europe grasped the lion’s share at 35.82%, with Arab countries coming in second with a share of 32.16%, North America with 17.75% and finally Asia with 7.47% of total tourists. The remainder share of 6.8% is split between African, Oceanic and other countries.
The number of European tourists increased by a significant 10.3% YoY amounting to 330,928, the highest historical figure for Lebanese tourism by H1/19. Most notably, visitors from Arab countries surged by 21.4% YoY, totaling 297,112 by June 2019. The number of tourists from Iraq and Egypt increased significantly by 11.00% YoY to 101,637 and 5.35% YoY to 49,462, respectively. This surge is also the result of the lifting of the Saudi travel ban on Lebanon, which explains the 90.8% rise in the number of tourists from the country which hit 44,736 tourists from the KSA alone by June 2019.
The number of African tourists declined 44.1% year-on-year to reach a figure of 29,480 visitors by June. This was compensated by the inflow of new tourists from America, Asia, Europe and Arab countries. The number of tourists from North America and Asia increased by 5.5% YoY to 163,949 and 6.4% YoY to 69,036, respectively. (Ministry of Tourism 19.07)
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5.4 Jordan’s Tourism Revenue Stood at $2.6 Billion for First Half of 2019
Jordan’s tourism sector delivered a six-month revenue of $2.6 billion with over 2.438 million visitors arriving in the Kingdom since the beginning of the current year continuing a strong rebound that started in late 2016. The Central Bank of Jordan (CBJ) said tourism income surged by 8.3% during the January-June period of the current year at $2.6 billion against $2.4 billion for the same period of 2018. Breaking down the figures, the CBJ said June saw a major increase in both tourist revenue and arrivals soaring by 26.9 and 26.5% respectively. (Petra 15.07)
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5.5 USAID Committed to Jordan’s Water Sector Amid Increases in Floods & Droughts
USAID’s current allocation to support Jordan’s water sector stands at around $80 million per year, according to a senior USAID official, who said that the agency is now working with the Kingdom in two main areas: source water and non-revenue water. A major priority of the agency is helping its partner countries better cope with future shocks and stresses and to build resilience.
The Jordanian Water Ministry announced in May that it had begun implementing the first government-proposed effort to minimize water waste via the non-revenue water (NRW) project. The project, first proposed during the London initiative, will cost $50 million, according to the ministry. The ministry also said at the time that preparations were under way for a project to desalinate water in the Hasban wells outside Amman, indicating that the project, in addition to a third expansion project for Al Samra Wastewater Treatment Plant, were all proposed at the London initiative 2019, which was held in February to enhance economic growth and reform in Jordan. As part of the initiative, a number of countries and institutions have pledged funds to support Jordan as it tackles the aforementioned challenges.
Jordan, categorized as the world’s second water-poorest nation, faces a set of intricate challenges which include the implementation of water and sanitation projects, the search for water sources to compensate for NRW and upgrading water infrastructure, according to experts in the field. USAID recognizes that water is a cross-cutting issue in foreign assistance and that it touches many of the development outcomes in areas including human health and dignity, environmental management, economic growth and the empowerment of women and girls. USAID Office of Water’s annual appropriation has been increasing for the past several years. In 2013 for example, it was at $315 million a year, and it has steadily increased every single year since then up to $435 million today. (JT 21.07)
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5.6 Baghdad Approves Iraq-Jordan Pipeline and Offshore Oil Exporting Facilities
On 9 July, the Iraqi Cabinet met in Baghdad under the chairmanship of Prime Minister, Adil Abd Al-Mahdi, at which it discussed a series of recommendations by the Ministerial Committee for Energy regarding a number of strategic projects aimed at increasing Iraq’s oil production and exporting capacities. The Cabinet approved the proposed Iraq-Jordan oil pipeline, and the construction of offshore oil exporting facilities in Iraq’s territorial waters in the Arabian Gulf.
The Cabinet also approved several measures to encourage Iraqi, Arab and international investment in Iraq, including further action to cut red tape and streamline procedures. The Cabinet approved a draft law on the accession by the Republic of Iraq to the 1997 Protocol to amend the International Convention for the Prevention of Pollution from Ships (1973) as modified by the 1978 Protocol. (GoI 11.07)
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5.7 Jordan Moves Up in the Global Cybersecurity Index Ranking
According to the Global Cybersecurity Index (GCI) for 2018, Jordan has moved up 18 spots on the global ranking and two spots on the regional ranking. Globally, Jordan moved up from 92nd place to 74th and from 10th place to 8th place among Arab countries, according to the report, which was conducted by the UN’s International Telecommunication Union (ITU) to review the cybersecurity commitment of each UN member state.
The Kingdom has witnessed remarkable improvement in cybersecurity development according to the GCI, almost doubling its score from 2017 to 2018. The Ministry of Digital Economy and Entrepreneurship has said that the improvement in the Kingdom’s performance was achieved by the joint efforts of the ministry, the Jordan Armed Forces-Arab Army, security bodies, the Central Bank of Jordan and the private sector.
The report, which was released earlier this month, aims at raising awareness of cyber-related issues and sharing best security practices by measuring each participating country’s preparedness to prevent cyber threats and manage and control cyber incidents. The GCI evaluates each country’s cybersecurity on the basis of five pillars: legal, technical, organizational, capacity building and cooperation.
Jordan’s cyber environment is mature, the report indicated, as a result of the Kingdom’s National Cybersecurity Strategy and National Computer Emergency Response Team (JO-CERT), along with its operating fiber-optic network. The government has conducted several technical activities related to protecting citizens’ cybersecurity, including providing the National Broadband Network (optical fiber connection between all government entities) with an additional layer of security, according to the ITU website.
In addition, to manage and harmonize approaches to cyber risks and threats among all government entities, the government established JO-CERT. Jordan has also conducted national electronic authentication projects by adopting a public key infrastructure solution, the report added — a project that includes a smart ID project to replace traditional IDs with smart identification cards. (JT 19.07)
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5.8 Jordanian Exports to US Worth $1.76 Billion in 2018
The 8th session of the Joint Jordanian-American Committee concluded on 15 July, during which the committee discussed bilateral economic cooperation in various fields and means of enhancing trade exchange between the two countries. The committee, chaired by the Secretary-General of the Ministry of Industry, Trade and Supply, Yousef Al Shamali and the US representative Daniel Melani, also reviewed mechanisms of joint cooperation that reflected positively on trade between the two countries in light of the Free Trade Agreement signed between them in 2001.
The volume of Jordanian exports to the US, which reached $1.76 billion in 2018, focused mainly on knitted and manufactured garment, while imports amounted to $1.77 billion. Machinery, fuel derivatives, electrical appliances, wheat and pharmaceuticals are the main goods imported by the Jordanian market from the US. The Jordanian government thanked the American side for its continuous support for the Kingdom in a number of sectors, namely the support provided by the US Agency for International Development (USAID) in its programs targeting the commercial and economic sectors. (Roya 15.07)
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5.9 World Bank to Lend Iraq $200 Million for Electricity Improvement
The World Bank will reportedly lend a total of $200 million to Iraq for upgrades to its electricity grid. The agreement was signed by Iraqi Finance Minister Fuad Hussein and Yara Salim, a representative to the World Bank. Iraq is expected to implement the projects within five years, and repay the debts in ten to 15 years. (Basnews 10.07)
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5.10 Iran, Iraq & Syria to Create Transport Corridor
High-ranking officials from Iran, Syria, and Iraq have agreed to create “a multimodal transport corridor” a part of efforts to boost trade relations between the three nations. The railroad project connecting Iran’s Shalamcheh to Iraq’s Basra will be accelerated so that the two countries’ rail networks are connected to each other and then connected to Syria.
During Iranian President Hassan Rouhani’s visit to Iraq in March, the two countries signed five deals to promote cooperation in various fields. The documents entail cooperation between Iran and Iraq concerning the Basra-Shalamcheh railroad project, visa facilitation for investors, cooperation in the health sector, and agreements between the Ministry of Industry, Mines and Trade of Iran and Ministry of Trade of Iraq, and another one in the field of oil between the petroleum ministries of the two countries. Iran’s Minister of Industry, Mine and Trade Reza Rahmani has said that Tehran and Baghdad have agreed to reach the target of raising the value of annual trade exchange to $20 billion within two years. (Tasnim 07.07)
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►►Arabian Gulf
5.11 Bahrain’s GFH Acquires $100 Million US Tech Office Portfolio
GFH Capital Limited, a subsidiary of Bahrain-based GFH Financial Group, announced that it has acquired a tech offices portfolio in the United States in a deal valued at over $100 million. The acquired portfolio consists of five income yielding buildings located in Research Triangle Park, North Carolina. The portfolio was purchased in partnership with Global Mutual, one of the fastest growing real estate investment management company in US, UK and Europe operating over £1.5 billion of assets under management. The portfolio is situated on nearly 60 acres within the Research Triangle Park, which is the largest dedicated scientific research park in the US, featuring more than 250 companies and 50,000 professionals within 22.5 million square feet of built-out space. GFH Financial Group, along with its investors, acquired about 95% of the portfolio with the remainder to be held by Global Mutual and its affiliates.
With the completion of this deal, total US and UK real estate transactions executed by GFH over the last few years has crossed $1 billion mark, the company said in a statement. (AB 16.07)
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5.12 UAE & China Sign Agreements to Promote New Trade Opportunities
On 22 July, Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, and Xi Jinping, President of the People’s Republic of China witnessed the signing of a number of agreements between the two countries, spanning a range of sectors. The signing of the agreements seek to further advance strategic ties between the UAE and China, opening up new partnership horizons across various fields. They cover such sectors as defense, trade and investment, environment and sustainability, education, ports & customs and energy.
They include an agreement on defense and military cooperation between the two countries, a memorandum of understanding (MoU) on environment protection and conservation and an MoU on scientific and technological cooperation, with a focus on artificial intelligence technologies. The agreements also include a deal between the UAE Office for Future Food Security and China’s Ministry of Agriculture and Rural Affairs in the Inner Mongolia Autonomous Region on two projects to ensure food security advancement, and integrated farming systems.
The two countries signed an MoU on peaceful use of nuclear energy, another to introduce the Chinese language in UAE education curricula while the Department of Culture and Tourism – Abu Dhabi signed an agreement with the National Museum of China. Abu Dhabi National Oil Company signed an agreement with China National Offshore Oil Corporation while the Abu Dhabi Global Development Market and China’s National Development and Reform Commission signed a MoU to encourage Chinese and UAE enterprises’ trade and investment opportunities. The signing ceremony also saw a MoU between Abu Dhabi Ports, Jiangsu Provincial Overseas Cooperation and Investment Company, and the Industrial and Commercial Bank of China and another between the Emirates Nuclear Energy Corporation and the China National Nuclear Corporation. A joint research cooperation agreement was also inked between Khalifa University of Science and Technology and Tsinghua University. (AB 22.07)
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5.13 UAE Fund Signs $100 Million Deal to Boost Ethiopian Innovation & Entrepreneurs
The Abu Dhabi-based Khalifa Fund for Enterprise Development (KFED) has signed a partnership agreement with the Ethiopian Ministry of Finance aimed at providing over $100 million to help promote a culture of innovation and entrepreneurship in the African country. The new agreement will help pave the way in enhancing innovation and supporting entrepreneurs in Ethiopia. The UAE has maintained strong ties with the Federal Democratic Republic of Ethiopia after Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed Al Nahyan’s visit to Addis Ababa last year.
The funding to be received as part of the agreement will enable the implementation of a series of projects that are aimed at consolidating the Ethiopian government’s efforts to create a stable and balanced economy while also driving in other benefits like the creation of employment opportunities for the youth, women empowerment and enhanced capacity building for entrepreneurs and local institutions. The allotted $100 million will be supervised and maintained by the Ministry of Innovation and Technology, in cooperation with KFED.
The Khalifa Fund for Enterprise Development, which was established 12 years ago in Abu Dhabi, supports small and medium enterprises (SMEs) in the UAE and has funded more than 1,600 projects within the UAE and across 20 countries in Asia, Africa and Europe. (AB 16.07)
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5.14 Oman’s Latest Budget Update Reveals Deficit Narrowing
Downgraded by all three major rating companies and facing speculation whether a bailout might be needed, the sultanate stopped providing data on its budget performance this year. A monthly bulletin published by the central bank a week ago, which includes a breakdown of government revenue and expenditure, only covers a period through November 2018.
However, in a report dated 18 July, the National Centre for Statistics and Information said the deficit narrowed in the first five months of the year to 358.4 million rials ($931 million), down from 1.1 billion rials a year earlier.
In a region where investors have already expressed concern about the lack of economic statistics, Oman’s delay risked testing the market’s nerves. Its budget has been slow to heal after the oil rout five years ago, as the government lagged behind on fiscal reforms and ran an average deficit of 17% in 2015-2017. Although a rebound in crude prices brought some relief, S&P Global Ratings estimates last year’s shortfall at 8.9% of gross domestic product, more than 1% higher than it initially projected, a result of spending increases and underperformance in non-hydrocarbon revenue.
The International Monetary Fund sees the shortfall narrowing over the next several years before it begins to climb back up from 2022, according to a July report. Oman’s state budget plan envisaged a deficit of 9% for this year, or 2.8 billion rials, slightly more than last year’s actual deficit of 2.65 billion rials. Budget revenue in January-May 2019 rose more than 15% from a year earlier, while spending dropped 4.3%, according to the statistics service.
Oman, which S&P estimates relies on hydrocarbons for 70% of its fiscal receipts, has started to make some headway, imposing an excise tax that could generate close to 100 million rials in annual revenue. But even as the sultanate succeeded last year in bringing down its current-account deficit by over 10% of GDP, its government debt continued to increase, according to the IMF, which also cut its estimate for Oman’s economic growth in 2019 to near zero. (AB 22.07)
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5.15 IMF Urges Oman to Introduce VAT as Soon as Possible
The International Monetary Fund has urged Oman to introduce VAT as soon as possible as the sultanate’s economic recovery from the 2014 oil price shock remains subdued. The UAE and Saudi Arabia were the first countries in the GCC to introduce a 5% VAT on 1 January 2018 while Bahrain made the move a year later, but Oman, Kuwait and Qatar have not yet implemented the tax. While welcoming the Oman’s plans to continue with fiscal consolidation, IMF directors called for an expeditious introduction of VAT and measures to adjust government spending. They also encouraged Omani authorities to implement an ambitious medium-term fiscal adjustment plan, based on reforms to tackle current spending rigidities, streamline public investment and raise non-hydrocarbon revenue. The recommendations were made by the executive board of the IMF following the conclusion of an Article IV consultation with Oman.
The IMF said since the 2014 oil price shock, Oman’s policy efforts have aimed at strengthening the fiscal position, enhancing private sector-led growth and employment, and encouraging diversification. It added that economic activity started to recover last year, and the overall fiscal and current account deficits improved somewhat, reflecting mainly higher oil prices. However, macroeconomic vulnerabilities continued to rise, with government and external debt increasing further, while some fiscal reforms were delayed. Higher vulnerabilities have led to new sovereign credit rating downgrades and increases in sovereign risk premiums.
The IMF said economic activity is gradually recovering in Oman with estimates that, after reaching a low of 0.5% in 2017, real non-hydrocarbon GDP growth has increased to about 1.5% last year, reflecting higher confidence driven by the rebound in oil prices. Furthermore, oil and gas production increases boosted hydrocarbon GDP growth in 2018 to an estimated 3.1%, the IMF said, adding that these developments brought overall real GDP growth to 2.2%. Non-hydrocarbon growth is projected to increase gradually over the medium term, reaching about 4%, assuming efforts to diversify the economy continue. Preliminary budget execution data indicates an improvement in the overall fiscal balance last year with a fiscal deficit estimated to have declined to about 9% of GDP from 13.9% of GDP in 2017.
IMF executive directors welcomed steps taken over the past few years to enhance private sector growth, reduce spending growth, diversify government revenue, and improve the business environment but called for a deeper fiscal adjustment to maintain confidence and ensure fiscal and external sustainability. Directors concurred that the exchange rate peg to the US dollar had delivered low and stable inflation and remained appropriate. (AB 12.07)
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5.16 Saudi Arabia Raises Price of Petrol
Saudi state oil company Saudi Aramco on 14 July announced a 3.8% increase in prices for Octane 95 gasoline from SR 2.10 last quarter to SR2.18 and for Octane 91 from SR1.44 to SR1.53 per liter. The world’s largest exporter of crude oil said domestic gasoline prices are subject to fluctuations due to changes in export prices to global markets. Despite OPEC partners restricting oil production, the kingdom recently awarded $18 billion in 34 contracts (half of them going to Saudi firms) to boost output capacity at two offshore deposits. The company will add a total 550,000 barrels a day of capacity at its Marjan and Berri oil fields. It did not, however, identify the 16 companies that won the contracts or specify when the projects would be completed. Saudi Aramco regularly produces 10 million barrels a day, but aims to produce 12 million daily in a bid to maintain spare capacity available for quick use in case of shortages. (AB 15.07)
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►►North Africa
5.17 Egypt’s Inflation Rate Drops for the First Time in 2019
Egypt’s annual urban consumer price inflation fell sharply to 9.4% in June from 14.1% in May, CAPMAS announced on 10 July, a significantly bigger drop than analysts had expected. CAPMAS revealed also that the inflation rate, on an annual basis, declined during the past June to reach 8.9% compared to the same time in 2018 which had recorded 13.8%. It added that the inflation rate recorded 12.4% during the first half of 2019. Pundits said the deceleration was partly due to last year’s high base effect and lower vegetable prices, which are often a key contributor to high inflation.
Urban inflation fell month-on-month in June by 0.8% after rising by 1.1% in May, the statistics showed. Vegetable prices rose 17.6% year-on-year in June, but fell 10% compared to May. Egypt raised fuel prices last week by between 16% and 30% as part of an IMF-backed economic reform program that saw inflation rise to a high of 33% in 2017. While economists had predicted a softer deceleration in inflation in June, most continued to predict the bank would hold rates until the fuel price hikes’ impact is tested. (CAPMAS 10.07)
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5.18 Egypt’s Trade Balance Deficit Hits $3.87 Billion in April 2019
Egypt’s trade balance deficit rose to $3.87 billion in April 2019 compared to $3.63 billion in April 2018, marking an increase of 6.8%, said the Central Agency for Public Mobilization and Statistics (CAPMAS). Egypt’s exports increased by 0.5% in April 2019, recording $2.58 billion compared to $2.57 billion in the same period the previous year. The agency attributed the boost to the increase in exports of some products like petroleum products by 2.3%, crude oil by 35%, garments by 4.8% and plastics by 8.8%. The report showed that Egypt’s imports witnessed an increase of 4.2% to reach $6.46 billion during April 2019. Iron and steel, wheat, plastics and pharmaceutical drugs accounted for most of Egypt’s imports during April. (CAPMAS 11.07)
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5.19 Initial Surplus in Egypt’s Budget is EGP 58.2 Billion Over 11 Months
Egypt achieved an initial surplus of EGP 58.2 billion during the first 11 months of the last fiscal year (FY) 2018/19 on an annual basis, the Ministry of Finance (MoF) announced in its monthly report on budget performance. Meanwhile, Egypt achieved an initial surplus of only EGP 1.9 billion during the period from July 2017 to the end of May 2018.
The report revealed that the initial surplus that was achieved in the period from the beginning of July 2018 to the end of May 2019 accounted for 1.1% of the GDP, compared with only 0.4% of the GDP for the same period of FY 2017/18.
Notably, the initial surplus is estimated to be the difference between total income for the period minus expenses (excluding interest on debt). Meanwhile, the total revenues during the period from the beginning of July 2018 to the end of May 2019 amounted to about EGP 764.6 billion, compared to actual expenses of EGP 706.4 billion. Government spending during the period from the beginning of July 2018 to the end of May, in addition to the interest and premium payments, stood at EGP 1.09 trillion.
Unfortunately, Egypt’s expenses on debt interest during the same aforementioned period amounted to EGP 384.5 billion. According to the report, the real GDP for the year 2017/18 reached EGP 4.437 trillion, compared to estimates of EGP 5.251 trillion expected for FY 2018/19. (MoF 11.07)
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5.20 World Bank Says Egypt’s Economic Reforms are Improving Business Climate
The World Bank released an economic monitoring report on Egypt on 16 July that said that the country’s economic reforms, especially the legislative ones, have led to an improvement in the business climate and are attracting private investments. The report also noted that the pillars of the upcoming phase of the economic reforms are achieving macro-economic stability, offering more private sector partnership in the economy, creating more job vacancies, and improving living standards.
The economic reform program has made investments and exports the essential engines for economic growth instead of consumption. As a result, Egypt’s economy has grown by 5.3% in FY 2017/18 compared to 4.2% in FY 2016/17, with an average growth rate of 3.5% from 2013 to 2016. The private sector has become, for the first time since FY 2008/09, contributed to GDP growth by 1.3%, while overall investments contributed to GDP growth by 2.4% of a total GDP growth of 5.3%. The report projected GDP growth to continue to rise gradually to reach 6% by FY 2021 and private investments to increase with the continued application of reforms improving the business climate.
The report predicts that exports will increase along with the recovery of the tourism sector and Suez Canal revenues, in addition to a significant increase in oil exports. Foreign direct investment (FDI) is also expected to go up to 3% of FDI flows from the total of GDP by 2021 compared to 2018. There are also untapped growth opportunities for Egypt’s economy, especially in the exporting sector. Trade agreements and creating a suitable business atmosphere will contribute to export growth and, consequently, the growth of Egypt’s economy. (WB 16.07)
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5.21 Egypt to Hold First Exhibition for Traffic & Transport Solutions in November
Egypt will hold its first specialized exhibition for roads, transport and energy projects from 4 to 6 November in Cairo. EgyTraffic will show the latest technologies in the field of transportation, roads, bridges and energy and electricity projects and offer solutions to reduce frequent traffic accidents in Egypt.
Egypt has been pursuing a multi-million-pound plan to develop and expand the country’s road networks in recent years. The event will bring together numerous local and global firms to presents their projects in road construction and maintenance, systems and equipment for parking lots and tunnels, road safety, emergency equipment systems, and water and environment technologies.
Around 8,500 road accidents took place in Egypt in 2018, down 23.6% from 11,098 in 2017, according to data provided by CAPMAS. (Ahram Online 16.07)
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5.22 World Bank Grants Loans Worth $175 Million to Tunisia for Digital Transformation
The World Bank has granted two loans to Tunisia worth a total of $175 million to be used in two projects aiming towards digital transformation and economy of the country.
The first project investment, worth $75 million, is going to be used for improving access to financing for small and medium enterprises and startups. The Tunisian government has taken an initiative called “Startup Tunisia” to foster the growth and creation of startups in the digital sector, and the funding perfectly aligns with this program. The ultimate target is to boost economic growth with more employment opportunities for the country’s youth.
The second project, worth $100 million, will be applied to transform user centered services digitally. The public administration technology, GovTech will receive support from the loan to improve social protection and education systems. With this project, the government aims to provide more access to important services for vulnerable communities like women, disabled, illiterates and low-income groups. With the new improvements in welfare services, the projects will be able to broaden pension and health insurance coverage and digital education management services. (WB 10.07)
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5.23 Morocco Launches MAD 1.65 Billion Home-Appliance Ecosystem
Bosch-Siemens will not be setting up a factory in Morocco but has agreed to source parts from the kingdom for its factories in Europe. Under the agreement, around 15 Moroccan suppliers will deliver metal, plastic and electronic parts to the home-appliance giant. Two companies have already signed an agreement to join the ecosystem: Virmousil, which builds electrical parts, and Sigit, which supplies plastic parts to the automobile industry.
Spanish company Gravalos Construcciones will also invest MAD 40 million into an induction plate factory in Morocco. This arrangement will form Morocco’s first home-appliance commercial ecosystem.
Ultimately, the sector aims to create 2,000 new jobs and an export value of MAD 1.65 billion by 2023. The launch of this ecosystem of suppliers is a prelude to setting up home-appliance factories. This sector is one of Morocco’s target sectors. Bosch-Siemens is one of the world’s largest home-appliance companies, with 42 production sites across the world. The company opened an office in Casablanca in 2016. (MWN 17.07)
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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 Turkey Calls on US to Reverse Decision on F-35 Exclusion
In a major break with Ankara, the Trump administration announced on 17 July that Turkey is being removed from the F-35 program because it is buying the Russian S-400 air defense system. The US government is concerned that the S-400 could be used to gather data on the capabilities of the F-35, and that the information could end up in Russian hands. Turkey’s Foreign Ministry rejected that assertion, saying the claim that the S-400 will weaken the F-35 is invalid. Turkey has called for the establishment of a committee that would include NATO officials to study the risks.
For his part, President Erdogan has said his government hopes to co-produce high-tech weaponry systems with Russia in the future, further defying the US and other NATO allies. As well, the head of Russia’s state-controlled Rostech corporation said Moscow would be willing to sell Turkey its Su-35 fighter jets if Ankara “expresses interest.” The head of Turkey’s defense industry body, Ismail Demir, said meanwhile that Turkey would look into possible “alternatives” and would also speed up efforts to develop Turkey’s own fighter jet project. He also said Turkey has fulfilled all of its obligations concerning the F-35 program and that Washington could lose $8 million per aircraft following Turkey’s exclusion.
Turkey is both a producer and a customer of the F-35s. It makes more than 900 components for the stealth aircraft, which is sold internationally. The process of fully removing Turkey is underway and should be completed by 31 March. (Various 18.07)
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6.2 Turkey to See Over 10% Growth in Tourists & Income in 2019
Amid greater-than-expected mobility so far this year, tourism professionals expect Turkey to end 2019 with an over 10% rise in both the number of tourists and income. The number of foreign arrivals in Turkey surged 11.3% year-on-year in the January-May period, the Culture and Tourism Ministry announced in late June. Nearly 12.8 million foreigners visited the country in the first five months, compared to 11.5 million in the same period in 2018. The country’s two most popular tourist spots Istanbul and Antalya have particularly come to the fore as they have so far enjoyed a buoyant season and have seen a significant surge in the number of foreign arrivals. The country’s most populous city, Istanbul, attracted a record number of tourists in the January-May period. The city welcomed 5.4 million foreigners, an 11% increase compared to the same period of last year, posting a five-year high. Last year, Istanbul hosted 13.4 million foreign visitors from 199 countries.
Turkey welcomed 39.5 million foreign visitors last year, a 21.84% increase year-on-year, according to the Culture and Tourism Ministry, while the country’s tourism income surged 12.3% to $29.5 billion, according to Turkish Statistical Institute (TurkStat).
According to Culture and Tourism Ministry data, Russians made up 13.1% of foreign visitors (or 1.8 million), followed by German citizens at 9.5% (1.2 million) and Bulgarians at 7.7% (more than 980,000) of the foreign tourists arriving in the country in the January-May period of this year. Poland, Czechia, Slovakia, Hungary, Romania and other countries in Balkans have started becoming important markets for the country. The Scandinavian market has also started to become lively and a return to Turkey was being experienced. (DS 23.07)
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6.3 EU Imposes Sanctions on Turkey over Illegal Drilling in Cypriot Territorial Waters
On 15 July, European Union’s foreign ministers decided to impose sanctions on Turkey over its illegal drilling activities within the territorial waters of member state Cyprus. According to reports, the EU postponed the announcement of the sanctions for a few hours at the request of Turkish Foreign Minister Cavusoglu so as not to spoil the third anniversary of the failed coup against Turkish President Erdogan.
The decision to impose sanctions was lauded by Greek Foreign Minister Dendias, who attended his first meeting of EU foreign ministers in Brussels. The sanctions decided by the EU foreign ministers include, as was expected, a freeze of pre-accession assistance worth €146 million, the suspension of negotiations on the Comprehensive Air Transport Agreement and a halting of high-level dialogues in the fields of economy, energy, transport and agriculture – as well as the suspension of lending activities of the European Investment Bank. EU foreign ministers also warned that they will prepare measures targeting individuals and companies involved in Turkey’s illegal drilling activities in Cyprus’ exclusive economic zone (EEZ).
However, this warning, which was issued at the recent EU leaders’ summit, has yet to materialize because several EU members want to pursue a more cautious stance with regard to Turkey given its efforts to stem migrant flows into Europe. (Various 15.07)
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6.4 Turkey’s Unemployment Rate Falls to 13% in April
Turkey’s unemployment rate dropped to 13% in April, down 1.1% compared to the previous month, the Turkish Statistical Institute (TurkStat) announced on 16 July. TurkStat said the unemployment rate rose by 3.3% on a yearly basis. Official figures revealed that the number of unemployed people aged 15 or older rose 1.1 million year-on-year to 4.2 million as of April. Official data also showed that non-agricultural unemployment increased 3.6%age points to 15% during the same period. The youth unemployment rate, including persons aged 15-24, was 23.2%, up 6.3% on a yearly basis in May. TurkStat said unemployment for the 15-64 age group was also up 3.5% to 13.3% in the same period.
In March, the country’s unemployment rate stood at 14.1%, with 4.54 million unemployed people aged 15 or above. The number of employed people in Turkey amounted to 28.2 million, with an annual loss of 810,000. According to the distribution of employment by sector, 17.6% were employed in agriculture, 19.7% in industry, 5.7% in construction and 56.9% in services.
Turkey’s labor force climbed 306,000 year-on-year to 32.4 million people as of April. The country’s labor force participation rate was 52.9% in the same month, 71.8% for men and 34.5% for women. The rate of unregistered employment – people working without social security related to their principal occupation – was 34.2% in April, going up 0.9% on a yearly basis.
Last year, Turkey’s unemployment rate hovered between 9.6% and 13.5%. Since 2014, the highest figures were seen in January and February this year with 14.7%, while the lowest was in May 2014 with 8.8%. (TurkStat 16.07)
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6.5 Turkey’s Net International Investment Position Improved in May
Turkey’s net international investment position (NIIP) posted better performance in May, up 12.2% versus the end of 2018, the Central Bank announced on 19 July. As of the end of May, the NIIP- the difference between a country’s external assets and liabilities- was minus $323.1 billion, while it was minus $367.9 billion at the end of 2018, the bank reported. Bank data showed that Turkey’s external assets were $239.1 billion, up 4.4% in the same period. Meanwhile, the country’s liabilities against non-residents was around $562.2 billion in May, down 5.8% from the end of last year.
The NIIP – which can be either positive or negative – is the value of overseas assets owned by a nation, minus the value of domestic assets owned by foreigners, including overseas assets and liabilities held by a nation’s government, the private sector and its citizens.
Turkey’s reserve assets rose 2.8% to reach $95.6 billion, and other investments in the same period soared 6.7% to reach $94.7 billion. The other investments, currency and bank deposits amounted to $49.4 billion, up 10.6% compared to the end of 2018. (AA 19.07)
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6.6 Cyprus Has Low Labor Costs, But Low Productivity
Cyprus may have one of the lowest labor costs in the European Union, but it also ranks at the bottom when it comes to productivity and take-home pay, the national advisory body on the economy said in its first report. The Cyprus Economy and Competitiveness Council, an independent advisory body set up in June 2018 to carry on the functions of the national productivity board, said in its report that net wages in Cyprus are lower than all reference countries in the EU, as well as the average wage in European Union. This is due not only to low wages but also to low non-wage costs. The tax burden on labor cost is also significantly lower than all reference countries.
Labor productivity in Cyprus is below the EU average and is significantly lagging behind northern European economies, such as the Netherlands and Finland, while it is higher than other Mediterranean economies. The Council noted that while labor costs are relatively low, businesses face higher operating costs, such as electricity bills and other utilities, and experience issues with broadband internet access. The Council comprises of nine members, eight of whom are from the business community and academia, and one member is a Ministry of Finance official. (FM 22.07)
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6.7 Mitsotakis’ Top Priorities Are to Ease the Tax Burden and Create Jobs
For Greece’s new Prime Minister Kyriakos Mitsotakis, his first priorities are to ease the tax burden, promote growth and bring jobs. In opening the 3-day parliamentary debate on the new conservative government’s policy statement, Mitsotakis announced he would bring forward a cut in the property tax by an average of 22%. He called this “a different kind of somersault,” a jibe at his predecessor’s reneging on many of his policy promises that brought international recognition to the Greek word “kolotoumba” (somersault). Mitsotakis, by and large, avoided attacking his predecessor, taking the high road and defending his stance.
The bill to cut the property tax will be voted on soon, impacting 6.4 million owners straight away, in their current tax returns, instead of next year’s. Mitsotakis also said that the draft 2020 budget, which will be submitted to Parliament in September, will stick to the previous government’s fiscal commitments agreed with Greece’s creditors, including the “excessive” primary budget surplus (i.e. excluding servicing on the country’s debt) equal to 3.5% of the country’s gross domestic product. Mitsotakis said that next year he would negotiate a more “realistic” surplus target. (Various 20.07)
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6.8 Greek Corporate Tax Set to Drop by Almost a Third
Greek businesses will feel some of the tax burden lifted off their shoulders very soon, after Prime Minister Mitsotakis announced on 21 July that corporate tax will be reduced from 28% to 24% for this year and to 20% in 2020, but also that the dividend tax will be halved from 10 to 5% next year.
Over the past few years, Greece’s businesses had to pay 55% of their profits to the state in the form of taxes and social security contributions, and were desperate for measures that would enhance their competitiveness and sustainability. The changes to corporate taxation this year will not affect the revenues of the current budget but those of the next one, as businesses will pay the reduced tax in 2020, while the further cuts planned for next year will concern the revenues of the 2021 budget. The cost of the corporate tax cut for next year’s budget is therefore calculated at 250 million euros, plus another 250 million for 2021 revenues. Based on this, the average corporate tax (income and dividend taxation) will drop from 35.2% for 2018 incomes to 27.8% for this year and to 24% for 2020. (eKathimerini 22.07)
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6.9 Greece’s Growth Expected to Recover in the Second Half of the Year
The Greek economy is expected to regain its growth momentum in the second half of the year, after a slowdown in the previous quarters, as a result of increased confidence and favorable monetary conditions, a report by the financial analysis department of the National Bank of Greece argues. The report projects that after a drop in the growth rate in late 2018 and at the start of 2019, economic activity is set to rebound in July-December, with the main indexes reflecting a trend for strengthening consumption and for increased investments. Nevertheless, the NBG report adds that increased exports are making the economy more vulnerable to the slowdown of the European economy. This, it says, is also reflected in the stagnation of international tourism arrivals over the first four months of the year, on a year-on-year basis. The bank’s baseline scenario provides for a zero increase to tourism revenues in 2019 from the record year of 2018. (NBG 11.07)
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7: GENERAL NEWS AND INTEREST
7.1 Obesity in Jordan Rose by 300,000 in Four Years
Around 1.6 million adults in Jordan aged 18 years and older were overweight in 2016, which is an increase of 300,000 people since 2012, according to the UN’s State of Food Security and Nutrition in the World 2019 report. The prevalence of obesity in Jordanian adults increased from 30.3% to 33.4% between 2012 and 2016, according to the report.
The report is part of a series of studies produced by the UN’s Food and Agriculture Organization (FAO), and shows that while an estimated 820 million people did not have enough to eat in 2018, obesity is continuing to rise in all regions of the world, according to a FAO statement.
Whereas Saudi Arabia, Syria, the UAE and Yemen all had obesity numbers higher than Jordan in 2016, Kuwait, Lebanon, Oman and Qatar had fewer people struggling with obesity at that period. The report also showed that the prevalence of anemia among women of reproductive age increased from 30.8% in 2012 to 34.7% in 2016, while the prevalence of exclusive breastfeeding for Jordanian infants zero to five months old increased from 22.7% in 2012 to 25.5% in 2018, according to the report. (Petra 16.07)
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7.2 Egypt’s Population Reaches 99 Million
Egypt’s Central Agency for Public Mobilization and Statistics’ population clock showed Egypt’s population reaching 99 million on 21 July. Cairo Governorate recorded the highest number of people reaching 9.8 million, followed by Giza with a population of 8.9 million, then Sharqiya at 7.4 million and Qaliyubia 5.8 million, as shown by the population clock. South Sinai registered the lowest number of inhabitants, 107,460, while North Sinai recorded 450,520, Matrouh 467,340 and Port Said 768,750. (MENA 21.07)
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7.3 Egypt’s Cabinet Expects National Population Growth Rate to Halve Before 2052
Egypt’s cabinet expects the country’s population growth rate to almost halve in the five years leading up to 2052, when the population is projected to reach over 153 million. Population growth is forecasted to ease into 0.85% in 2047-2052 from 1.99% in 2017-2022, a drop of around 43%, the cabinet said in a statement marking World Population Day. The cabinet said that the birthrate in Egypt, the Arab world’s most populous country, would drop by 2052 to 13.5 births per 1,000 people from 24.5 births last year.
As Egypt’s population closes on 100 million, the government is pursuing efforts to curb the rapid growth. It is undertaking a broad urban development strategy, dubbed Egypt 2052, to carry out major infrastructure development and build 14 new cities to tackle the rapid rise in population and alleviate pressure in densely-populated areas.
In March, Egypt launched the National Population Strategy, a project funded by a €27-million grant from the European Union to promote family planning. Late last year, the social solidarity ministry launched the “Two Is Enough” program, a major government family-planning campaign that aims to challenge traditions of large families in Egyptian rural areas. (Ahram 22.07)
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7.4 Turkish Private University Tuition Fees Increased by 20% Annually
The tuition fees for universities run by private foundations increased 20% annually, a handbook released by the public authority in charge of university placements has revealed. The average annual fee at a medical faculty of a private university has reached about TL 80,000 ($14,000), according to the handbook of higher education programs and quotas released by the Student Selection and Placement Center. Thus, a medicine student has to pay about TL 500,000 ($87,500) during the course of at least six years, considering the probable tuition fee increases in the upcoming years.
Students who wish to study medicine are also obliged to be ranked in the first 50,000 among more than 2 million entrants of the university admission test. The 73 foundation universities have planned to enroll 2,411 medicine students combined in 2019. The lowest tuition fee for a law school is TL 35,000 ($6,115) for every one of the four years of the undergraduate study, whereas the highest one is around 2.7 times higher than that. There are 6,802 available places for law students at the foundation universities.
For an undergraduate degree at an engineering or architecture department within a foundation university, a student should pay an annual tuition fee between TL 25,000 ($4,370) and TL 96,500 ($16,870). The annual tuition fees for psychology, educational sciences, communications and business administration programs range between TL 30,000 ($5,245) and TL 60,000 ($10,500).
This year, 130 public universities across Turkey have offered 835,066 places, including 15,050 at the medicine faculties, for the new entrants. Unlike foundation universities, students enrolled at public universities can study on state-provided loans without paying a yearly tuition fee. (HD 16.07)
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7.5 Greece’s Eternal Students Will Have to Graduate or Drop Out
Greek Education Minister Kerameus announced on 22 July that she is putting an end to a system in universities that allowed graduate students to drag their studies on indefinitely. Speaking in Parliament before the confidence vote in the government, Kerameus said that an upper limit will be introduced for the completion of graduate studies. The decision is being taken in the context of trying to cut back on waste. However, there will be exceptions on health grounds and a transition phase before the new measure is implemented. The phenomenon of students who never seem to graduate led to the coining of the phrase eternal students. (eKathimerini 22.07)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Lavie Bio Positive 2nd Year Field Results in its Bio-Stimulant Program for Wheat
Lavie Bio announced achieving yield improvement following second year field trials in its bio-stimulant program for wheat. The positive results were achieved across multiple locations, wheat varieties and conditions, indicating consistent yield improvement through the application of Lavie’s spring wheat bio-stimulant product candidates – LAV211, LAV212 and LAV213. The field trials of LAV211, LAV212 and LAV213 product candidates demonstrate consistent improvement of wheat yield per acre, across multiple locations, varieties and conditions spanning over two consecutive years with a ‘win rate’ in over 80% of the locations, with up to 20% yield benefit in top performing locations and an average improvement of 6-7% (p-value <0.05). These results indicate that Lavie wheat bio-stimulant products could potentially gain the farmer an additional $20-$50 profit per acre.
In parallel, Lavie has also focused on formulation technology and fermentation protocols that have significantly improved product shelf life as well as the establishment of the treatment in the crop’s roots. Formulation and fermentation are known to be a critical challenge in the product development phase in order to reach commercialization. LAV211, LAV212 and LAV213 are being developed as a seed treatment with additional application methodologies to follow.
Rehovot’s Lavie, a fully owned subsidiary of Evogene, aims to improve food quality, sustainability and agriculture productivity through the introduction of microbiome based ag-biological products. Lavie utilizes a proprietary computational predictive platform, harnessing the power of big data and advanced informatics, for the discovery, optimization and development of bio-stimulants and bio-pesticides products. (Evogene 10.07)
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8.2 Healthy.io’s Smartphone-Based Easy-to-Use Urinalysis for Women in Prenatal Care
Healthy.io released a joint study with researchers from the Johns Hopkins University School of Medicine measuring the feasibility and acceptability of Dip.io, the smartphone-based, at-home urinalysis test, among pregnant women receiving prenatal care. Published in the American Journal of Obstetrics and Gynecology (AJOG), the study found that the Healthy.io test was feasible, acceptable, and largely preferred by participants.
The pilot study assessed the feasibility, via test completion rate, and acceptability, based on participant survey results, of Dip.io among a sample of 179 pregnant women receiving care at two clinics affiliated with Johns Hopkins in Baltimore, Md. Results showed that 87% of participants attempted the test, with 96% of those women successfully completing the test. A further 96% of women who completed the survey found Dip.io easy or very easy to use. Additionally, two-thirds of the women said they preferred at-home self-testing as compared to just 10% who preferred conventional testing at a medical clinic.
Healthy.io’s Dip.io is the only smartphone-powered urinalysis cleared by the FDA and European regulators as equivalent to lab-based testing. It uses an iOS and Android compatible app combined with a prepackaged testing kit, including a specimen cup, FDA-approved dipstick, and color-board to evaluate results. The results indicated that women were able to quickly, easily use Dip.io, as the majority who completed the test did so within 24 hours and without further prompting.
Tel Aviv’s Healthy.io is the global leader in turning the smartphone camera into a clinical grade medical device. By combining AI and machine learning for colorimetric analysis, best-in-class UX design, and rigorous science, Healthy.io is expanding access to health care. The company’s first offering — the only smartphone-powered urinalysis cleared by the FDA and European regulators as equivalent to lab-based testing — has been used by tens of thousands of patients using a range of smartphones. By giving people the same test in any location without a compromise in quality, Healthy.io is able to increase patient adherence and satisfaction, improve health outcomes, close gaps in care, and reduce total costs for payers and at-risk providers. (Healthy.io 11.07)
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8.3 Teva Announces FDA Approval of AirDuo Digihaler Inhalation Powder
Teva Pharmaceutical Industries announced that the U.S. FDA has approved AirDuo Digihaler (fluticasone propionate 113 mcg and salmeterol 14 mcg) Inhalation Powder, a combination therapy digital inhaler with built-in sensors that connects to a companion mobile application to provide information on inhaler use to people with asthma. AirDuo Digihaler is indicated for the treatment of asthma in patients aged 12 years and older. AirDuo Digihaler is not used to relieve sudden breathing problems and won’t replace a rescue inhaler.
Like ProAir Digihaler (albuterol sulfate 117 mcg) inhalation powder, indicated for the treatment or prevention of bronchospasm in patients aged four years and older with reversible obstructive airway disease, and for prevention of exercise-induced bronchospasm (EIB) in patients four years and older, AirDuo® Digihaler contains built-in sensors that detect when the inhaler is used and measure inspiratory flow rates. This data is then sent to a companion mobile app using Bluetooth Wireless Technology so that patients can review their data over time, and if desired, share it with their healthcare providers. Patients can also schedule reminders on their smartphone to take their AirDuo Digihaler as prescribed.
Israel’s Teva Pharmaceutical Industries has been developing and producing medicines to improve people’s lives for more than a century. They are a global leader in generic and specialty medicines with a portfolio consisting of over 3,500 different products in nearly every therapeutic area. Around 200 million people around the world take a Teva medicine every day and are served by one of the largest and most complex supply chains in the pharmaceutical industry. (Teva 15.07)
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8.4 Filterlex Medical Raised $3 Million in Series A Financing
Filterlex Medical recently completed a series A round of financing, raising a total of $3 million. CAPTIS, which provides an exciting breakthrough for TAVR patients, won best innovation award at the prestigious PCR 2019 innovation competition in Paris and was awarded a grant of $200,000 by the Jon DeHaan foundation. During catheter-based, left-heart procedures such as TAVI, embolic particles are often released to the blood flow. Particles migration to the brain may cause a spectrum of neurological deficiencies, from cognitive impairment to debilitating stroke. Emboli released to distal organs may result in acute kidney injury and ischemia. The CAPTIS device is a next-generation full-body embolic protection device, easily and intuitively deployed and retrieved. The device is securely positioned in the aorta, protects its surface while facilitating a seamless TAVI procedure. Its distinctive, triple action design provides a full-body embolic protection by deflecting, capturing and removing embolic particles. Uniquely, it requires no additional arterial access and does not interfere with the procedure workflow.
Yokneam’s Filterlex Medical began operations in June 2016 at the Alon MedTech Ventures incubator. Since August 2018 the company has operated independently. (Filterlex 15.07)
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8.5 Evogene Amends Agreement with Bayer to Include Genome Editing Targets
Evogene announced that after achieving positive results, its corn disease resistance research collaboration with the Crop Science Division of Bayer is being refocused on the identification of genome editing targets for evaluation against a broad range of corn diseases. Evogene will use its CPB (Computational Predictive Biology) platform to identify the required edits to improve disease resistance in corn. The edits will be based on Evogene-discovered genes and the accumulated knowledge achieved through this collaboration, focusing on altering gene expression or function. Any promising targets would be pursued by Bayer’s in-house team for validation.
The collaboration, pursued through Evogene’s Ag-Seeds division, is focused on the discovery and development of candidate genes predicted to provide resistance to multiple fungal diseases in corn. Evogene previously announced that genes it discovered under the collaboration had successfully demonstrated stalk rot resistance in model plants and had been advanced to Bayer’s corn pipeline, where they are being tested against additional diseases. Following positive results in greenhouse testing conducted by Bayer, a subset of these genes will be tested in corn field trials.
Rehovot’s Evogene is a leading biotechnology company developing novel products for major life science markets through the use of a unique computational predictive biology (CPB) platform incorporating deep scientific understandings and advanced computational technologies. Today, this platform is utilized by the Company to discover and develop innovative products in the following areas (via subsidiaries or divisions): ag-chemicals, ag-biologicals, seed traits, integrated castor oil ag-solutions, human microbiome based therapeutics and medical cannabis. (Evogene 16.07)
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8.6 Equinom Cultivation Upscales Non-GMO Soy
Kibbutz Givat Brenner’s Equinom is transforming the soy industry from an idling commodity to a value-added “breed-for-purpose” market. The company’s agro-science expertise and creative business model are revolutionizing soy cultivation and commercialization to deliver a portfolio of tastier, non-GMO soy with a higher nutritional profile.
Equinom’s computerized breeding technology is a game changer for food companies, driving market momentum with high-protein, tasty, plant-based products. The company’s proprietary algorithm and breeding techniques map out precise genomic crop characteristics to be rendered into highly desirable attributes. The system breeds for protein load, taste, texture and nutritional composition targeted to priority soy applications, including soymilk, tofu, fermented natto, miso and soy protein isolates. Crops are produced within a strictly non-GMO environment, with no gene editing or manipulation.
Equinom’s progressive business model bridges food ingredient companies and farmers – to boost cultivation of better for-you, non-GMO soy. Equinom communicates closely with grain handlers, providing them direct access to its breed-for-purpose seed collection for sowing optimal seeds from its germplasm. This limitless seed bank meets food companies’ specific demands, while ensuring complete transparency throughout the soy supply chain. The Equinom platform also cultivates distinct, value-added specialty crops that can fetch higher prices than commodities. (Equinom 16.07)
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8.7 Chardan Healthcare Acquisition Corp. Announces Merger Agreement with BiomX
New York’s Chardan Healthcare Acquisition Corp., a special purpose acquisition company sponsored by affiliates of Chardan Capital Markets LLC (“Chardan”), entered into a definitive agreement for a business combination with BiomX. Assuming no redemption of CHAC shareholders, the combined company will have an initial market capitalization of approximately $254 million. Upon closing of the transaction, it is expected that CHAC will be renamed BiomX and remain on the NYSE American Stock Exchange, listed under a new ticker symbol.
Proceeds from the transaction will provide BiomX with substantial growth capital and the flexibility of a public listing to further accelerate BiomX’s expansion as a leading microbiome product discovery company. BiomX is developing customized phage-based products designed to improve the appearance of acne-prone skin and eradicate harmful bacteria in chronic diseases. The company’s pipeline includes preclinical candidates for acne-prone skin, inflammatory bowel disease (IBD), primary sclerosing cholangitis (PSC), and colorectal cancer (CRC). BiomX’s product for acne-prone skin is anticipated to begin clinical testing by the end of 2019.
Ness Ziona’s BiomX is a preclinical stage microbiome company developing both natural and engineered phage cocktails designed to target and destroy bacteria that affect the appearance of skin, as well as harmful bacteria in chronic diseases, such as IBD, PSC, and cancer. BiomX discovers and validates proprietary bacterial targets and customizes phage compositions against these targets. Chardan 17.07)
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8.8 Eybna Technologies Unlock the Medicinal Wonders of Cannabis
Eybna, the world’s leading company researching terpene properties and producing advanced terpene products for sale is in the forefront of this exploding cannabis industry. While terpenes represent only 1-3% of the net weight of the cannabis plant they punch above their weight in value. THC and CBD are now becoming commodities while terpenes can be understood as the brains that unleash the true power of the cannabis plant. As cannabis increases its market share, so too will terpenes.
Not content to just sell, Eybna scientists are conducting advanced terpene research in Israel, the capital of cannabis R&D, a country where progressive laws toward medical cannabis research have transformed it into a haven for innovation. Eybna’s vision is to use its discoveries to improve the medicinal benefits of cannabis for a range of indications, many of which the industry has not even contemplated.
Eybna is collaborating with some of Israel’s scientific institutions including The Hebrew University of Jerusalem, Bar Ilan University and CannaSoul Analytics, where they are currently analyzing, mapping and cataloguing hundreds of cannabinoids and terpenes.
Givat Hen’s Eybna was founded as a forward-thinking R&D company in Israel. Their expertise lies in connecting interdisciplinary fields, following our vision of enhancing the lives and health of people through researching nature. Eybna believes in constantly involving advanced research in the process of product development, transforming valuable scientific knowledge into easily applicable products, for the immediate benefit of the consumer market. (Eybna 18.07)
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8.9 Ben-Gurion University Forensic Blood Detection Test Using Luminescence-Based Detection
BGN Technologies introduced a new chip device that offers superior identification of miniscule blood residues for forensic applications. The new device combines the use of luminol, a chemical that exhibits chemiluminescence, with gold or silver nanospheres, positioned in a specially designed serpentine-shaped microfluidic device, and functioning as nano-antennas that significantly increase the detection limit through amplifying emission of chemiluminescence light and facilitating the imaging due to the integration with a microfluidic chip. The technology was invented by Prof. Alina Karabchevsky, Electro-Optics and Photonics Engineering Department, School of Electrical and Computer Engineering and Ilse Katz Institute for Nanoscale Science & Technology, at BGU.
Criminologists use luminol to identify microscopic blood drops, as well as low concentrations of hydrogen peroxide, proteins and DNA which are all invisible to the naked eye. The use of lumino-based chemiluminescence to detect these biological residues is advantageous since the detected signal does not depend on an external light source, and it is cost-effective. The microfluidic chip invented by Prof. Karabchevsky and her team, not only increases the chemiluminescence intensity several fold, but also prolongs the glow time of luminol, enabling the detection of much smaller blood samples in a forensic scene.
Beer Sheva’s BGN Technologies is the technology company of Ben-Gurion University of the Negev, Israel. The company brings technological innovations from the lab to the market and fosters research collaborations and entrepreneurship among researchers and students. To date, BGN Technologies has established over 100 startup companies in the fields of biotech, high-tech, and cleantech as well as initiating leading technology hubs, incubators, and accelerators. (BGN Technologies 18.07)
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8.10 StePac Takes Broccoli Packaging Out of the Ice Age
Based in Tefen, StePac‘s innovative MA/MH (Modified Atmosphere/Modified Humidity Packaging) technology is changing the paradigm of cold-chain supply and integrating sustainability into the long-haul transport of fresh broccoli and other vegetables traditionally shipped in ice. The technology effectively eliminates the need for ice and non-recyclable wax cartons while enhancing food safety.
Stakeholders along the supply channel are realizing the multiple benefits of Xtend Iceless MA/MH bulk packaging for maintaining the freshness of broccoli in transit. Most notable is its positive environmental impact through driving substantial reductions in carbon emissions and food waste – two of the greatest ecological challenges facing the fresh produce industry. An added advantage is that of considerable cost savings in packaging (up to 40%) and transport expenses.
One of the biggest challenges the company faced when developing the product was how to integrate modified atmosphere packaging into a field-packed process. Much of the broccoli in the US is field-packed in cartons, palletized, and then ice is added upon arrival at the packing house. Field-packing represents an obstacle for implementation of MA/MH technology. Research has demonstrated the ability of Xtend Iceless packaging to significantly slow down the growth of microorganisms on broccoli, effectively abating produce deterioration and – more importantly – reducing the risk of foodborne illness associated with human pathogens such as E. coli.
In a study carried out at the Agricultural Research Organization in Israel, Xtend Iceless packaging was shown to be a superior alternative to ice for preserving all around quality, as well as for mitigating bacterial growth on produce during prolonged storage. The shift to iceless packaging is already gaining momentum among distributers of fresh produce globally. Transport of broccoli from Salinas, California, to New York City in Xtend Iceless packaging allows 33% more broccoli to be packed in the same container space, yet results in a 30% reduction in gross weight. This translates into 40% lower logistical costs as well as a reduction in carbon footprint. (StePac 22.07)
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8.11 RSIP Vision’s AI Technology Provides Unmatched Precision for Lung Procedures
RSIP Vision announced the release of an advanced AI lung segmentation module that reduces the threat of false positives in biopsies. The new solution helps refine a common yet intricate procedure in which mistakes are easily made by delivering superior mapping of even the smallest airways, ensuring that surgeons navigate to precise locations and biopsy the correct area. By optimizing navigation and providing the clearest possible view of the lungs, the AI module enables more accurate results with minimal intervention, while avoiding damage to the border of the lungs as well.
RSIP Vision’s AI module uses sophisticated segmentation algorithms and computer vision to divide scanned images into clusters of pixels according to their characteristics. Precise segmentation makes it easier to extract reliable data and pinpoint specific points and boundaries in images—which helps surgeons navigate through lung procedures with greater accuracy. Using bronchoscopy, surgeons can approach lesions through the trachea and perform biopsies with minimal intervention.
Jerusalem’s RSIP Vision is a global leader in artificial intelligence, computer vision, and image processing technology. The company draws on a depth of knowledge and experience to provide customized services, sophisticated algorithms, and deep learning technology to businesses of all kinds, most notably medical devices, pharmaceuticals and autonomous driving. RSIP Vision develops practical AI modules that ensure precision, reduce time to market, cut costs, and free the core R&D team staff for other endeavors, saving significant time and money and giving businesses a real edge over the competition. (RSIP Vision 23.07)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 SayVU Pinpoints People in Buildings with No Cellular Signal for Emergency Rescue
SayVU Technologies and the Weizmann Institute of Science have signed an agreement to deploy an advanced command and control system to identify and report distress situations of employees, researchers and students in an environment without GPS positioning or cellular networks. SayVU has developed a platform based on innovative technology with remote control for personal and public safety when an emergency situation occurs, and GPS and cellular systems are unavailable.
The Institute’s staff, researchers and students are equipped with smartwatches that help identify a fall or shock – either automatically triggered or reported by the protected individual in a distress situation. When either signal is triggered, the system immediately alerts SayVU’s advanced command and control system installed at the Institute’s center. The Institute’s security center immediately sends security staff to the exact location in order to provide a quick and life-saving response as the system is capable of specifying the exact location of the person inside the building, including areas with no mobile communications and/or GPS signal.
The need for a solution at the Weizmann Institute emerged to meet the requirements of the prestigious international standard AAALAC (Assessment and Accreditation of Laboratory Animal Care). The system, streamlines and simplifies processes, while improving the response to the Institute’s employees in the laboratories in times of distress, and will enable considerable financial savings. Unlike other solutions, the system does not require the deployment of dedicated hardware such as beacons.
Ramat Gan’s SayVU Technologies was founded in 2015. It received a grant from the BIRD foundation for the development of an innovative technological product in partnership with the American Optoknowledge, designed for first responders, firefighters, police and rescue forces. In addition, SayVu believes the technology will shortly encompass civilian non-emergency situations. (SayVU 04.06)
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9.2 Arilou Automotive Cyber-Security Earns 2019 Best Practices Award by Frost & Sullivan
Arilou Automotive Cyber-Security Technologies has been awarded Frost & Sullivan’s 2019 Best Practices Award for Technology Innovation. Receipt of the award builds upon Arilou’s exceptional performance in independent tests from OEM’s and the University of Michigan Transportation Research Institute (UMTRI). Receiving perfect results, in months of tests conducted by UMTRI, Arilou’s are the only solutions to consistently demonstrate best-in-class performance – overcoming millions of analyzed malicious messages to provide 100% detection and prevention with zero false positives.
This accompanies Arilou’s continued development of strategic partnerships with automotive manufacturers and other industry leaders like STMicroelectronics and Alpine Electronics, Inc., and its collaboration with security providers of complementary solutions, including Upstream Security and Green Hills Software.
Ramat Gan’s Arilou, part of NNG Group, is the leading provider of pioneering cyber-security solutions for the automotive industry, and first to introduce CAN and Ethernet in-vehicle network security. Independently tested by UMTRI, with perfect results, its software Intrusion Detection and Prevention System (IDPS) offers supreme detection and prevention rates with zero false alarms. With its holistic approach and low-cost multi-layered solutions, Arilou is making full protection for vehicles a reality. (Arilou 11.07)
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9.3 Get SAT Introduces Nano SAT-H for Military On-the-Move Applications
Get SAT introduced its Nano SAT-H: a very small and lightweight KA-band satcom terminal with an integrated BUC. The new satcom terminal meets the requirements of military, defense and security markets that are in need of full broadband communications – voice, video and data – in a minimum sized package to empower decision making on the constantly changing battlefield. Nano SAT-H, the result of Get SAT’s development of micronized technologies, is an ultra-portable lightweight, low-profile terminal optimized ‘on-the-move’ solution. Replacing a truck load of equipment, the terminal, weighing only 3.6 kg., including an integrated BUC, LNB and ACU, provides autonomous operation for transmission and reception of high bandwidth data-rates with any LBand satellite modem.
A privately held company located in Rehovot, Israel, Get SAT Communications provides portable and extremely efficient antenna and terminals that offer high-data-rate communications for ground, air, and maritime applications. Get SAT provides services for government and military use, enterprises, first responders, non-governmental organizations (NGOs) and humanitarian groups. (GetSAT 11.07)
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9.4 Friendly Technologies Launches WiFi Optimization & WiFi Mesh Management System
Friendly Technologies announced the launch of its new WiFi management module, including WiFi optimization and problem resolution as well as support of WiFi Mesh. The Friendly solution enables carriers and CSPs to offer strong and reliable wireless connectivity for all connected devices in the end users environment. The WiFi Optimization package is a comprehensive and advanced set of tools for the diagnostics, QoE monitoring, prevention, and resolution of Wi-Fi problems including the support for standard WiFi devices and WiFi Mesh devices.
This Wi-Fi advanced features joins Friendly tech’s standard solution line of products for device management, resulting in the most comprehensive solution for carriers and service providers. Friendly’s WiFi toolset includes new features for the companies Call Center Portal – for speedy diagnostics and the resolution of Wi-Fi related issues; and Friendly Connect, the end-user mobile app for Wi-Fi optimization – a self-help application that helps users follow simple steps for WiFi diagnostics and repair
The Friendly mesh management platform incorporates automated installation and configuration, a topological map of the WiFi Mesh devices installed at home, problem diagnostics and repair, call center tools and self-healing tools.
Ramat Gan’s Friendly Technologies is a leading provider of carrier-class platforms for IoT, Smart Home, and TR-069 device management. Friendly has been providing TR-069 device management solutions to carriers and service providers since 2007. When IoT and the Smart Home first emerged, Friendly leveraged its experience and extended its offering to the IoT and Smart Home markets. Today, Friendly provides a unified IoT platform for management of LWM2M, MQTT, OMA-DM, and TR-069 devices – and a full solution for the Smart Home. Friendly’s platforms enable its customers to generate new revenue streams in the Smart Home and IoT markets, such as Utilities, Transportation, Smart cities and more. (Friendly Technologies 11.07)
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9.5 Unveiling Version 4.0 of the enSilo Endpoint Security Platform
enSilo announced version 4.0 of its Endpoint Security Platform. Version 4.0 is a key part of our mission to protect businesses around the world from data breaches and disruption caused by cyber-attacks. It squarely addresses the challenge faced by security and operations teams of combating the growth in the attack surface created by rising numbers of vulnerabilities and devices. They added predictive and manageable attack surface policy control in addition to several powerful, new capabilities that prevent, detect, contain, and respond to threats. Version 4.0 of the enSilo Endpoint Security Platform provides two critical capabilities that proactively and automatically reduce the attack surface.
The first is the automatic reduction of the attack surface using CVE and application rating data to visualize risk and design policy-based actions within their Communication Control feature. This enhancement helps security and operations teams quickly prioritize which applications with critical vulnerabilities or low ratings are in use, determine impacted endpoints, and assess the risk. In one-click, users can reduce the attack surface with pre-built policies based on severity using the Common Vulnerability Scoring System (CVSS) and application rating enrichment that block communications by potentially unwanted or vulnerable applications and accelerate remediation processes.
The second is the automatic discovery, classification, and assessment of IoT devices to determine if they are running vulnerable applications with known CVEs. This data is also visualized in our Communication Control feature with policy actions that enable security and operations teams to restrict IoT device communications through integrations with security gateways. By automatically eliminating the threat posed by an expanding number IoT devices potentially running software with critical vulnerabilities, security and operations teams can protect endpoints and the business from attacks launched via compromised IoT devices and accelerate remediation efforts.
Herzliya’s enSilo‘s platform is designed to help organizations protect their endpoints and prevent data breaches. It includes next-generation antivirus, application communication control, threat hunting, detection and response, and virtual patching capabilities. (enSilo 11.07)
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9.6 Karamba & Alpine Electronics’ Self-Protected In-vehicle Infotainment Systems
Karamba Security announced the signing of a production agreement of its leading Carwall runtime integrity software, in Alpine infotainment systems. The platform provides an ECU self-protection against remote code execution (RCE), helping to protect vehicles from cyberattacks. Protection against cyberattacks is critical in order to safeguard customer safety in the connected and autonomous vehicle era. Such exploits of in-memory vulnerabilities can jeopardize customer safety by controlling a vehicle’s speed and direction. Karamba’s runtime integrity technology provides self-protection against remote code execution, using Control Flow Integrity (CFI).
The partnership with Alpine’s product team allowed Karamba to overcome production hurdles (such as automated implementation without delaying time to market) and implement the same security software on Alpine’s various systems. Karamba’s patented Embedded Runtime Integrity is a state-of-the-art attack detection and prevention software that leverages Control Flow Integrity (CFI) and continuously maintains vendor settings. With Karamba’s technology installed, the infotainment software system detects, prevents, and reports attempted cyberattacks.
Hod HaSharon’s Karamba Security provides industry-leading embedded cybersecurity solutions for connected systems. Product manufacturers in automotive, Industry 4.0, IoT, and enterprise edge rely on Karamba’s automated runtime integrity software to self-protect their products against remote code execution (RCE) cyberattacks with negligible performance impact. After 32 successful engagements with 17 automotive OEMs and tier 1s, product providers trust Karamba’s award-winning solutions to increase their brand competitiveness and protect their customers against cyberthreats. (Karamba Security 15.07)
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9.7 Celeno Announces New Innovation: Wi-Fi Doppler Imaging
Celeno announced a new technology: Wi-Fi Doppler Imaging. Celeno’s Wi-Fi Doppler Imaging is a Wi-Fi based, high-resolution imaging technology, that employs the Doppler effect and standard Wi-Fi packets to accurately characterize and represent complex motions and movements of people, pets and objects.
The technology can track an objects’ location using a single Wi-Fi device, not requiring the aid of multiple devices or additional clients. It captures moving objects’ Doppler and Micro Doppler signatures and uses advanced signal processing and machine learning algorithms to accurately classify human postures and gestures. It can even monitor minute and slow motions such as breathing. Leveraging on Wi-Fi standard 5GHz (and in the future 6GHz) bands, it can “see” through walls, not requiring line of sight and not dependent on lighting conditions. In addition, it is not dependent on any Wi-Fi clients, wearables of any kind and does not invade privacy.
Ra’anana’s Celeno offers advanced Wi-Fi chipsets, edge software and cloud technology to deliver smart, innovative Wi-Fi connectivity and Wi-Fi Doppler Imaging technology into the realm of high-performance home networks, smart buildings, enterprise and industrial solutions. Celeno’s field-proven chips and software technologies have been successfully integrated into numerous OEM Wi-Fi devices and been deployed in tens of millions of homes around the world. (Celeno 15.07)
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9.8 MSV Life Selects Sapiens’ Solutions for Its Digital Transformation Project
Sapiens International Corporation announced that MAPFRE MSV Life – the leading provider of life insurance protection, long term savings and retirement planning in Malta – has selected Sapiens’ life & pension core suite and digital solutions for a core and digital transformation project. The project includes the implementation and integration of Sapiens CoreSuite for Life & Pension (previously referred to as Sapiens ALIS) and Sapiens Intelligence for Life & Pension, as well as the deployment over the cloud of Sapiens AgentConnect for Life & Pension (which was known as Sapiens PORTAL).
Sapiens CoreSuite for Life & Pension is a flagship solution designed to enable insurance providers to quickly and efficiently address the challenges of a highly regulated and increasingly competitive marketplace. The end-to-end, core solution suite supports the complete policy lifecycle across a wide variety of products in the life & pension market. This insurance software uniquely combines functional maturity and robustness gained through decades of global success, with cutting-edge innovation and modern technology.
Sapiens AgentConnect for Life & Pension empowers agents with full lifecycle enablement, including the ability to manage their pipeline, sell policies to their consumers and provide top-level customer service in real-time. Agents also possess a holistic view of their business performance overall and benefit from full access to all their remunerations, payments, commission transactions and statements.
Holon’s Sapiens International Corporation empowers insurers to succeed in an evolving industry. The company offers digital software platforms, solutions and services for the property and casualty, life, pension and annuity, reinsurance, financial and compliance, workers’ compensation and financial markets. With more than 35 years of experience delivering to over 450 organizations globally, Sapiens has a proven ability to satisfy customers’ core, data and digital requirements. (Sapiens 15.07)
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9.9 Credorax Partners With Cisco to Boost Payments Gateway to the Next Level
Credorax has partnered with Cisco to upgrade its data-center network’s capabilities, capacity and latency. The agreement enables Credorax to adopt Cisco’s advanced data-center networking technology, including an automation, visibility and management system. Credorax has also agreed to beta-test Cisco’s advanced and future monitoring and management products.
Credorax’s system is already considered one of the fastest in the world with its cutting-edge high throughput, low latency, and multi-continent redundancy, and Cisco’s technology will allow Credorax to push the envelope even further in terms of decreasing transaction latency and increasing throughput. Cisco’s software solution for centralized management and monitoring of network components will play a significant role in Credorax’s solutions, simplify their roll-out of new products and reduce ongoing cost of ownership.
As a licensed merchant acquiring bank, Credorax helps merchants accept payments easily with its recently launched Source gateway. The platform offers telecom-grade (99.999%) availability for processing payments as well as a host of payments products and services, including cards and alternative payment methods, hosted payment pages, advanced KYC screening, smart fraud solutions, and sophisticated business intelligence and data tools.
Herzliya’s Credorax is a licensed NextGen merchant acquiring bank providing cross-border processing for e-commerce and omni channel payments. Their core gateway technology, Source![™]()
, has been developed in-house to provide a streamlined payments experience so smart, that merchants can reach their full business potential simply by better managing their payments. Credorax merchants process in over 120 currencies, accept a wide range of alternative payment methods, and get paid in their currency of choice. (Credorax 16.07)
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9.10 IXDen IoT Security Protection Solution for Smart Home Devices
IXDen announced their new ‘IXDen Smart Homes’, a product which will protect billions of Internet of Things (IoT) devices against cyberattacks, tampering, and data manipulation. The fully automated solution will for the first time utilize behavioral biometrics on endpoint devices and will include multifactor authentication driven by Artificial Intelligence and Machine Learning. The wide range of protected devices will include cameras, smart thermostats, smart routers, and baby sensors among many others.
The new software comes in response to recent reports in July of a massive data breach of a smart home device platform in which more than two billion records were exposed. The breach at a Chinese based company, stands to have compromised not only account details and personal information of consumers around the world, but also millions of cameras and listening devices in private homes.
Givatayim’s IXDen was founded in 2017. IXDen’s IoT software solution introduces patent pending, security technology to protect businesses and organizations from IoT information tampering. IXDen creates a dynamic ‘biometric’ identity for any IoT device and performs multifactor authentication driven by proprietary topological mathematical models, statistics, Artificial Intelligence and Machine Learning. IXDen is a Labs/02 portfolio company, a seed stage fund backed by OurCrowd, Motorola Solutions International, Reliance Industries, as well as by Six Thirty VC, private investors and the Israeli Innovation Authority. (IXDen 18.07)
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9.11 National Utility Provider Selects Safe-T’s Innovative SDP Solution
Safe-T Group received a significant order in a gross amount of approximately $144,000 for its innovative Software Defined Perimeter (SDP) solution from one of Israel’s national utility providers. Safe-T’s SDP, recently named as one of ten Representative Vendors of Stand-Alone Zero Trust Network Access (ZTNA – which we also refer to as SDP), leverages the Zero Trust principle of ‘never trust, always verify’, offering a more flexible alternative to VPNs, thus enabling the organizations’ migration from traditional security architecture, while maintaining control over deployment and management of all elements of the product.
Safe-T’s innovative SDP provides a pragmatic solution in order to scale up an organization’s security challenges, realizing that threats are invariably going to come from every direction – external and internal. The solution provides the organization’s employees, partners, subcontractors, field workers and other parties, with secured remote access to the organization’s sensitive data, as well as internal services and applications. Safe-T’s SDP solution utilizes unique technological advantages, such as Safe-T’s patented Reverse Access technology, ease of implementation and compatibility with a wide range of remote access options.
Herzliya’s Safe-T Group is a provider of Zero Trust Access solutions which mitigate attacks on enterprises’ business-critical services and sensitive data, while ensuring uninterrupted business continuity. Safe-T’s cloud and on-premises solutions ensure that an organization’s access use cases, whether into the organization or from the organization out to the internet, are secured according to the “validate first, access later” philosophy of Zero Trust. This means that no one is trusted by default from inside or outside the network, and verification is required from everyone trying to gain access to resources on the network or in the cloud. (Safe-T 18.07)
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9.12 Foresight Receives Order of QuadSight Prototype from Japan
Foresight Autonomous Holdings announced an additional sale of a prototype of its QuadSight four-camera vision system, targeted for the semi-autonomous and autonomous vehicle market to a leading Japanese Tier One automotive supplier. Revenue from the prototype system sale is expected to total tens of thousands of dollars.
Cornes Technologies, Foresight’s distributor in Japan, facilitated the prototype system sale, the first from a Japanese customer. The Japanese Tier One automotive supplier participated in a technological roadshow that took place earlier this year. The roadshow consisted of live, real-time demonstrations of the QuadSight system to interested parties. Different scenarios were tested, simulating obstacle detection in challenging weather and lighting conditions. Customer satisfaction following initial installation may lead to orders of QuadSight systems by the leading Japanese supplier for mass production.
By selling additional prototypes, Foresight intends to increase awareness of its unique solutions, address potential customers, and expand its presence with vehicle manufacturers and Tier One automotive suppliers. Foresight believes that closer evaluation of the technology by potential customers may lead to future collaborations in research and development, integration, production and other areas.
Ness Ziona’s Foresight Autonomous Holdings, founded in 2015, is a technology company engaged in the design, development and commercialization of sensors systems for the automotive industry. Through the company’s wholly owned subsidiaries, Foresight Automotive and Eye-Net Mobile, Foresight develops both “in-line-of-sight” vision systems and “beyond-line-of-sight” cellular-based applications. Foresight’s vision sensor is a four-camera system based on 3D video analysis, advanced algorithms for image processing, and sensor fusion. Eye-Net Mobile’s cellular-based application is a V2X (vehicle-to-everything) accident prevention solution based on real-time spatial analysis of clients’ movement. (Foresight 19.07)
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9.13 SecuredTouch Granted Patent for Continuous User Authentication
SecuredTouch announced that the United States Patent & Trademark Office (USPTO), has granted the company a patent US 10366217, entitled “Continuous User Authentication”. SecuredTouch Behavioral Biometrics technology learns and identifies patterns of human interactions with physical devices to identify the user, differentiate the human from the bot and set apart the device from an emulator.
The patent has been granted in proximity to the European Banking Authority (EBA) announcement that validates behavioral biometrics as an inherence element for Strong Customer Authentication (SCA) for PSD2 compliance.
Tel Aviv’s SecuredTouch solution uses machine learning to detect sophisticated fraud attacks that bypass other detection tools while offering an advanced, seamless user experience across all digital channels. Patented Behavioral Biometrics technology identifies trusted users first before any transaction can take place, creating a fast track to checkout. Customers benefit from reduced fraud rates and related costs as well as boosted transaction rates. SecuredTouch award-winning solutions are used by clients around the world, including major financial institutions and eCommerce companies. (SecuredTouch 22.07)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s Inflation Rate Falls by 0.6% in June
The Central Bureau of Statistics announced that Israel’s Consumer Price Index (CPI) unexpectedly fell 0.6% in June. It added that the inflation rate was only 0.8% over the past 12 months, below the Bank of Israel’s annual target range for inflation between 1% and 3%. This follows a 0.7% rise in the CPI in May. Notable price falls in June included fresh fruit and vegetables (11%), clothing and footwear (6.2%) and furniture and household equipment (0.6%).
The Central Bureau of Statistics also published the Housing Price Index for April – May. The Index showed the price of the average deal rising 0.5% in April-May compared with March-April. Housing prices have risen 1.6% over the past 12 months. (CBS 15.07)
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10.2 Israel’s First Quarter Growth Rate is Revised Upwards
On 16 July, the Central Bureau of Statistics published a third estimate for economic growth in Israel in the first quarter of 2019. The new estimate for annualized growth is 5%, higher than the 4.8% second estimate, but below the 5.2% first estimate. The growth rate was the highest quarterly growth rate since the third quarter of 2017. The latest estimate for the increase in GDP, excluding net taxes on imports, means that it was not affected by the increase in revenue from import taxes.
Business product rose 4.2% in the first quarter, following rises of 2.3% and 2.7% in the fourth and third quarter of 2018, respectively. The latest figure is higher than the 3.9% first quarter increase in business product in the previous estimate, but below the first estimate of 5.8%.
The latest estimate for the annualized first quarter increase in exports is 4.9%, compared with 3.9% in the earlier estimate, while private consumption was up 7% (6.6% in the preceding estimate), amounting to a 5.1% per capita increase, following rises of 5.2% and 1.4% in the fourth and third quarter of 2018, respectively. The latest estimate for the annualized rise in imports is 8.2%, down from a 14.6% increase in the previous estimate, but higher than the 7.6% increase in the first estimate.
Per capita spending on current consumption (food, services, housing, fuel, home maintenance, overseas travel, etc.) was down by annualized 0.4% in the first quarter, compared with a 4.2% increase in the fourth quarter of last year. Spending on vehicle purchases for private use skyrocketed by an annualized 598.7% (62.6% calculated quarterly) in the first quarter of this year, following a 40.4% annualized in increase (8.9% calculated quarterly) in the preceding quarter. (CBS 16.07)
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10.3 Composite State of the Economy Index for June Increases by 0.2%
The Bank of Israel’s Composite State of the Economy Index for June increased by 0.23%. The Index’s rate of increase reflects growth at the long-term pace, and it appears that the moderation in May reflected fluctuations in data. The Index was positively impacted by increases in consumer goods imports, imports of manufacturing inputs, and goods exports in June. In contrast, slight declines in the industrial production index and in retail trade and services revenue indices for May moderated the Composite Index’s rate of growth. There were essentially no changes in the Index for recent months. (BoI 23.07)
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11: IN DEPTH
11.1 ISRAEL: Summary of Israeli High-Tech Company Capital Raising – Q2/19
IVC-ZAG announced on 17 July that Israeli high-tech companies raised $2.32 billion in the second quarter of 2019, the highest quarterly amount since 2013. The figure was boosted by 10 mega deals (each over $50 million), that totaled $1.26 billion and accounted for 54% of the total capital raised in Q2/19. The large transactions included two exceptional deals: a PIPE (Private Investment in Public Equity) round of $186 million raised by Elbit Systems and $110 million raised by Cellebrite Mobile, post-acquisition by Sun Corp. The median deal amount for Q2 was $5.5 million, compared with $5 million in the same period last year and $6 million in Q1/19.
The three largest Q2 deals totaled $670 million:
-Lemonade raised $300 million
-Monday raised $250 million
-Sentinel Labs raised $120 million
During the first half of this year, Israeli high-tech companies raised $3.9 billion in 254 deals. The amount raised marked an all-time record. The number of deals was only slightly above the 242 deals recorded in H1/18.
Chart 1: Israeli High-Tech Capital Raising Q1/2013–Q2/19
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According to IVC’s findings, in Q2/19, VC-backed deals notched a record of $1.81 billion in 73 deals. VC-backed deals accounted for 78% of the total amount raised in Q2/19 and an even higher percentage of the $1.34 billion raised in 75 deals in Q1/19. Analyzing the distribution of VC-backed deals, IVC found that the amount raised by revenue growth companies in VC-backed deals grew dramatically to $1.12 billion. In H1/19, VC-backed deals accounted for $3.16 billion in 148 deals, and almost doubled the amount raised in H1/2018—$1.86 billion in 142 deals.
Adv. Shmulik Zysman, Managing Partner & high-tech industry leader at ZAG-S&W (Zysman, Aharoni, Gayer & Co). , said: “Just when we thought the investment growth in the first quarter of 2019 had broken every record, along comes the second quarter and registers the most significant leap in the total amount raised in the last six years. Indeed, the second quarter of this year recorded the most significant leap ever in the total amount raised—$757 million, compared to the previous quarter, indicating a quarterly record and in accordance record high in H1/2019, unprecedented in recent years.”
According to Zysman: “Late-stage companies raised record amounts in this quarter, and there was a degree of stability among early stage investments. On the other hand, the situation of mid-stage companies seems less favorable: funding in this quarter was lower than in recent years.”
Capital Raising by Stage and Round
Israeli high-tech growth stage companies (companies in initial revenue and revenue growth stages) were exceptionally active in Q2/19. These companies raised $2.02 billion in 70 deals—the highest total amount since 2013. IVC noted that late financing rounds accounted for $1.12 billion in 23 deals in Q2/19— nearly three times the $414 million raised in Q2/18.
In Q2/19, deals larger than $20 million dominated the capital raising activity, with $1.79 billion in 29 deals compared to $932 million in 18 deals in the same period the year before. This marks the highest sum and number of deals for this category since 2013. Deals exceeding $20 million totaled $2.78 billion in 53 transactions in H1/19. Deals exceeding $50 million during this period accounted for $1.7 billion in 15 deals, compared to $920 million in nine deals in the same period last year.
Chart 2: Israeli High-Tech Capital Raising by Deal Size and Number:
Highlighting transactions under $5M, $20M-$50M, and above $50M
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Capital Raising by Sector
IT & software companies excelled in Q2/19, raising $1.02 billion in 49 deals—the highest quarterly amount since 2013. In Q2/19, Israeli life sciences companies raised $263 million in 27 deals. Both the number of deals and the amount raised were slightly higher compared with the quarterly average since 2013.
Investor Activity
In Q2/19, Israeli investors made 174 investments totaling $704 million. According to IVC, this is a quarterly high since 2013. The number of investments by Israeli investors was higher compared to the quarterly average in recent years.
Foreign investors increased activity in Q2/19 compared to previous quarters, making 441 investments totaling $1.57 billion.
Marianna Shapira, Research Director at IVC Research Center: “The second quarter of 2019 continues the same trend from recent quarters. Israeli high-tech companies are gaining access to a larger pool of capital for growth companies, especially from foreign investors. This shows growing appetite for the local market. The trend is driving valuations to new heights, presenting challenges both to the companies seeking capital and to local investors. The Q2 figures show that most early-stage companies are struggling to access investment capital. This discrepancy might be a cause for concern about the future of seed ventures in Israel. If the second half of 2019 continues with the same pace, this year will break previous records for capital volume.”
IVC Research Center is the leading online provider of data and analysis on Israel’s high-tech & venture capital industries. Its information is used by key decision-makers, strategic and financial investors, government agencies, and academic and research institutions in Israel.
ZAG-S&W (Zysman, Aharoni, Gayer & Co.) is an international law firm with offices in Israel, the US, China, and the UK. The firm’s attorneys specialize in all disciplines of commercial law for both publicly held and private companies, with particular expertise in hi-tech, life science, international transactions, and capital markets. (IVC-ZAG 17.07)
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11.2 ISRAEL: Israel’s Foreign Trade in Goods, by Country, as of June 2019
In June 2019, Israel’s imports of goods (gross, excluding diamonds) totaled NIS 21.1 billion. Some 38% were imports from the EU countries, 22% from the Asian countries, 19% from the US and 21% from the Other Countries.
Exports of goods (gross, excluding diamonds) totaled NIS 13.6 billion and the trade deficit of goods (excluding diamonds) totaled NIS 7.5 billion; 35% of the exports were to the EU countries, 24% to the US, 20% to the Asian countries and 21% to the Other Countries.
Diagram 1: Import and Export of Goods (Excl. Diamonds) by Country Groups – June 2019
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Trade balance January – June 2019
The trade deficit of goods (excl. diamonds) with the EU countries totaled NIS 18.5 billion in January – June 2019 compared with NIS 26.0 billion in January – June 2018. The trade deficit of goods (excl. diamonds) with the Asian countries totaled NIS 13.0 billion in January – June 2019 compared with NIS 9.9 billion in January – June 2018. The trade deficit of goods (excl. diamonds) with the Other Countries totaled NIS 10.3 billion in January – June 2019 compared with NIS 4.1 billion in January – June 2018.
The trade deficit of goods (excl. diamonds) with the United States totaled NIS 25.8 million in January – June 2019, compared with a surplus of NIS 2.4 billion January – June 2018.
| Main Trading Country Groups by NIS million |
Import January – June 2019 |
Import January – June 2018 |
Export January – June 2019 |
Export January – June 2018 |
Trade Balance January – June 2019 |
Trade Balance January – June 2018 |
| Total (gross, excluding diamonds) |
129,405.3 |
124,194.9 |
87,579.6 |
86,609.7 |
-41,825.7 |
-37,585.2 |
| European Union |
51,636.5 |
54,673.1 |
33,090.1 |
28,638.8 |
-18,546.4 |
-26,034.3 |
| US |
19,850.4 |
16,344.8 |
19,824.6 |
18,762.6 |
-25.8 |
2,417.8 |
| Asia |
29,376.2 |
29,567.4 |
16,388.5 |
19,652.5 |
-12,987.7 |
-9,914.9 |
| Other Countries |
28,542.2 |
23,609.6 |
18,276.4 |
19,555.8 |
-10,265.8 |
-4,053.8 |
Imports of Goods: April – June 2019
The trend data calculated by the Central Bureau of Statistics show that imports of goods (excluding ships, aircrafts, diamonds and fuels) decreased by 5.4% at an annual rate in April – June 2019, following an increase of 4.1% in January – March 2019.
Trend data indicate that imports (excluding diamonds) from the EU countries decreased by 10.6%, at an annual rate, in April – June 2019, following a decrease of 5.0% in January – March 2019. Since the beginning of 2019, imports (excluding diamonds) from United Kingdom, Slovenia and Cyprus decreased significantly compared with the same period in 2018.
Trend data indicate that imports (excluding diamonds) from the US decreased by 7.6% at an annual rate in April – June 2019, following an increase of 16.5% in January – March 2019.
Trend data indicate that imports (excluding diamonds) from the Asian Countries decreased in the last three months by 19.5% at an annual rate, following a decrease of 8.6% in January – March 2019. Since the beginning of 2019, imports (excluding diamonds) from Indonesia, Japan and Singapore decreased significantly compared with the same period in 2018.
Trend data indicate that imports (excluding diamonds) from the Other Countries decreased by 5.7% at an annual rate in the last three months, following an increase of 10.8% in January – March 2019. Since the beginning of 2019, imports (excluding diamonds) from South Africa, Uruguay, Norway and Mexico decreased significantly compared with the same period in 2018.
Exports of Goods: April – June 2019
The trend data show that exports of goods (excluding ships, aircrafts and diamonds) decreased by 2.2% at an annual rate in April – June 2019, following an increase of 0.3% in January – March 2019.
Trend data indicate that exports (excluding diamonds) to the EU countries decreased by 12.7%, at an annual rate, in April – June 2019, following an increase of 18.2% in January – March 2019. Since the beginning of 2019, exports (excluding diamonds) to Slovenia, Portugal and Czechia decreased significantly compared with the same period in 2018.
Trend data indicate that exports (excluding diamonds) to the USA decreased by 4.6%, at an annual rate in April – June 2019, following a decrease of 1.8% in January – March 2019.
According to trend data, exports (excluding diamonds) to the Asian Countries increased by 14.3% in the last three months, at an annual rate, following an increase of 0.7% in January – March 2019. Since the beginning of 2019 exports (excluding diamonds) to Jordan, Philippines and Taiwan increased significantly compared with the same period in 2018.
According to trend data, exports (excluding diamonds) to the Other Countries decreased by 11.0%, at an annual rate, in April – June 2019, following a decrease of 13.0% in January – March 2019. Since the beginning of the year exports (excluding diamonds) to Nigeria, Canada and Argentina decreased significantly compared with the same period in 2018.
Trade in Goods Between Israel and the United States
Table A. Israel and USA – General Data, 2018
| Data |
Israel |
United States |
| Population |
9.0 million |
327.2 million |
| Territory in thousand sq. km |
22 |
9,832 |
| GDP in billion dollars |
369.3 |
20,494.1 |
| GDP per capita in dollars |
41,584 |
62,641 |
| Unemployment rate |
4.0% |
3.9% |
| Import of goods in billion dollars |
76.6 |
2,611.4 |
| Export of goods in billion dollars |
62.0 |
1,665.3 |
| Balance of trade in goods in billion dollars |
-14.6 |
-946.1 |
The United States – Imports and Exports
The exports of goods from the US in 2018 totaled $1,665.3 billion, an increase of 7.7% compared with 2017. The main groups of exported goods were: petroleum oils and oils from bituminous minerals, not crude and motor cars and other motor vehicles; principally designed for the transport of persons. The main countries to which US exported in 2018 were: Canada, Mexico and China (Diagram 4).
Diagram 4. The Main Export Countries – 2018
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Imports to the United States from the Rest of the World
The imports of goods to the US in 2018 totaled $2,611.4 billion, an increase of 8.6% compared with 2017. The main groups of imported goods were: motor cars and other motor vehicles; principally designed for the transport of persons and petroleum oils and oils from bituminous minerals, crude. The main countries from which the US imported in 2018 were: China, Mexico and Canada (Diagram 5).
Diagram 5. The Main Import Countries – 2018
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Trade in Goods: Israel – United States
Israel’s trade surplus with the US decreased from $10 billion in 2014 to $6.9 billion in 2018. The decrease in the trade surplus was mainly caused by a decrease in Israeli exports to the US from $18.6 billion in 2014 to $16.7 billion in 2018. Additionally, Israeli imports from the US increased in this period from $8.6 billion to $9.8 billion (Diagram 6).
Diagram 6. Trade in Goods between Israel and the United States in Millions of Dollars
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Exports from Israel to the United States by Main Economic Activities
The main economic activities of the Israeli exports to the US in 2018 were: working of diamonds ($5.8 billion) and manufacture of computer, electronic and optical products ($3 billion).
The most significant decreases in Israeli exports to the US between 2014 and 2018 was in the economic activity manufacture of pharmaceutical products which decreased by 31% and the economic activity working of diamonds which decreased by 26%.
Diagram 7. Exports of Goods to the United States by Economic Activities – Divided by Sector
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Imports from the United States to Israel by Main Economic Activities
In Israeli imports from the US by main economic activities were: manufacture of other transport equipment ($1.8 billion), manufacture of computer, electronic and optical products ($1.6 billion) and manufacture of machinery and equipment n.e.c. ($1.3 billion). The most significant increases in Israeli imports from the US between 2014 and 2018 were in the economic activity manufacture of other transport equipment which increased by 120% and the economic activity manufacture of machinery and equipment n.e.c. which increased by 108%.
Diagram 8. Imports of Goods from United States by Economic Activities
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Exports and Imports of Goods from Israel to United States by Exporters and Importers
Between the years 2014 and 2018, the number of exporters from Israel to the US increased by 17%. In 2018 there were 8,803 exporters that exported goods to the US compared with 7,525 in 2014 (Table C). The largest increase in the number of exporters was of the group of exporters whose value of exports totaled less than $100,000.
Table C. Number of Exporters to the US by the Export Value 2014-2018
| Annual export value in dollars |
2014 |
2015 |
2016 |
2017 |
2018 |
Percent change 2018/2014 |
| 100,000-0 |
4,945 |
5,580 |
5,667 |
5,929 |
6,126 |
24% |
| 500,000-100,001 |
1,084 |
1,085 |
1,085 |
1,158 |
1,209 |
12% |
| 1,000,000-500,001 |
368 |
362 |
362 |
378 |
371 |
1% |
| 10,000,000-1,000,001 |
839 |
824 |
824 |
830 |
818 |
-3% |
| 10,000,001+ |
289 |
289 |
289 |
281 |
279 |
-3% |
| Total exporters |
7,525 |
8,140 |
8,227 |
8,576 |
8,803 |
17% |
The number of importers whose value of imports totaled less than 100,000 dollars increased drastically in 2018. This increase was largely caused by a change in the registration methods used by the Custom’s Authority. Between the years 2014 and 2018, there was an increase of 17% in the number of importers from USA to Israel whose value of imports totaled over 10 million dollars (Table D).
Table D. Number of Importers from the US by the Import Value 2014-2018
| Annual import value in dollars |
2014 |
2015 |
2016 |
2017 |
2018 |
Percent change 2018/2014 |
| 100,000-0 |
27,807 |
28,172 |
28,723 |
51,794 |
232,834 |
737% |
| 500,000-100,001 |
1,789 |
1,794 |
1,813 |
1,820 |
1,832 |
2% |
| 1,000,000-500,001 |
516 |
520 |
479 |
475 |
461 |
-11% |
| 10,000,000-1,000,001 |
736 |
703 |
676 |
665 |
708 |
-4% |
| 10,000,001+ |
110 |
100 |
106 |
124 |
129 |
17% |
| Total importers |
30,958 |
31,289 |
31,797 |
54,878 |
235,964 |
662% |
Total Importers
In 2018, 28% of the exports from Israel to the US were exported by the ten largest exporters to the US, compared with 35% in 2014. In 2018, 40% of the total imports to Israel from the US were imported by the ten largest importers from the US compared with 33% in 2014 (Diagram 9).
Diagram 9. Top Ten Exporters and Importers in Israel that Trade with the US (percentage of exports/imports value)
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(CBS 17.07)
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11.3 ARAB MIDDLE EAST: Local Startup Ecosystem is on the Rise!
MAGNiTT released their H1/19 MENA Venture Investment Report, which provides an in-depth analysis of start-up funding and venture capital across the Arab Middle East and North Africa. The report highlights positive news for the continually growing ecosystem with strong growth through a record number of transactions. Total funding across MENA-based start-ups was up 66% from H1/18.
Philip Bahoshy, MAGNiTT’s Founder, shared, that “the MENA region is hitting its inflection point. The acceleration of funding we saw in the latter half of 2018 has continued into 2019.” Bahoshy also notes that “there are many signs of an ever maturing ecosystem. As start-ups grow, we have seen more start-ups raising larger tickets, more exits and a continued interest from International investors in the region, especially from Asia.” He also pointed to “UBER’s acquisition of CAREEM as another example of a large international player acquiring a local company after Amazon’s acquisition of SOUQ. This will further act as a catalyst to spur on the regions entrepreneurial environment”
Total funding in MENA-based start-ups up 66% from H1/18: H1/19 saw 238 investments in MENA-based start-ups, amounting to $471M of total funding. This is an excellent indicator, a 66% increase in investment dollars compared to H1/18, in which $283M was invested. The number of deals remained healthy at a record high, up 28% compared to H1/18, showing continued appetite in start-ups from the region at all stages of investment.
Speaking about the results, Noor Sweid, General Partner of Global Ventures notes “The growth in the start-up and tech ecosystem in the region is phenomenal, and yet, we are just at the beginning of a trajectory that will see technology-driven companies grow significantly and incredibly quickly over the coming years. These numbers illustrate the momentum and successes that the underlying companies and founders are achieving, and the growth in the investment ecosystem and opportunities alongside them.”
The UAE remains the most active startup ecosystem with 26% of all deals and 66% of total funding: Saudi Arabia was one of the fastest growing ecosystems, up 1% from H1/18 recording 26 investments in H1/19. The UAE has maintained its dominance with 26% of all transactions made in to UAE-headquartered start-ups in H1/19, while it also accounted for 66% of total funding.
However, the landscape continues to evolve. Tunisia was the fastest growing ecosystem in H1/19 – receiving the 5t h highest number of deals at 8% of all deals, up 4% from H1/18. While Saudi Arabia recorded 2% increase in number of deals, up to 11% of all transactions across the MENA region.
FinTech retains its position as the most active industry by number of deals: FinTech retained its top spot in H1/19 and accounted for 17% of all deals. Notable investments include the $8M in Yallacompare, $6M in Souqalmal and $4M in Beehive. E-commerce still remains prevalent accounting for 12% of all deals, followed Delivery & Transport, which was the third most popular industry in terms total deals in H1/19, accounting for 8%.
130 institutions invested in MENA-based start-ups in H1/19, of which 30% were from outside the region: 500 Startups remained the most active venture capital firm, especially at early stage investments, while Flat6Labs was the most active accelerator program.
Moreover, H1/19 saw the influx trend of foreign investors continue. The entrance of China’s MSA Capital and Germany’s food conglomerate Henkel, among others, highlighted continued international interest in MENA start-ups. In fact, 30% of all entities that invested in MENA-based start-ups were international investors.
Walid Faza, Partner and Chief Operating Officer of MSA Capital explains, “Chinese models are shaping the consumption habits of emerging market tech consumers and MSA’s deep knowledge in both ecosystems positions us to add a lot of value to companies based in MENA”
EMPG leads the start-up ecosystem with a $100M fundraise, followed by Yellow Door Energy and Swvl. EMPG receives the highest amount of funding by a single start-up, raising $100M in February 2019. Yellow Door Energy ($65M) and Swvl ($42M) complete the top 3. In total, the top 10 deals in H1/19 account for 62% of the total investment amount in H1/19, down 9% from H1/19. In terms of exits, H1/19 has seen 15 start-up exits take place across MENA, an increase of 5 compared to H1/18.
The largest of these was Careem’s landmark exit to Uber. Magnus Olsson, Co Founder, Chief Experience Officer noted “Our $3.1B deal with Uber was a hugely significant moment, not just for Careem, but also for the Greater Middle East. It was the largest tech deal this part of the world has ever seen and puts our region’s emerging technology ecosystem on the map of both regional and foreign investors.” On the impact the deal will have across the ecosystem, Olsson notes “Careem views its colleagues as owners of the business and so we introduced an equity scheme that will now see them financially benefit from the transaction. We hope that the deal will act as a catalyst for the next generation of tech startups in our region.”
MAGNiTT is the Arab Middle East’s most powerful startup platform. Based out of Dubai, UAE, MAGNiTT connects entrepreneurs directly with ecosystem stakeholders including funders, mentors, support services, and talent. Startups can apply for funding directly to VCs and angel networks using their MAGNiTT profile. (MAGNiTT 15.07)
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11.4 IRAQ: Iraq Plans to Launch Pipelines to Export Oil Via Jordan & Syria
Omar Sattar posted in Al-Monitor on 19 July that Iraq plans to diversify its oil exports via new pipelines through Jordan and Syria.
As Iraq exports most of its crude oil production, the Iraqi government is trying to diversify its oil export outlets in a bid to avoid any damage that could result from the tense security situation in the Arabian Gulf region. Iraqi Prime Minister Adel Abdul Mahdi said in a press conference on 9 July said that the government was considering export routes through Syrian and Jordanian territory, adding that Baghdad is “worried about the current events in the Strait of Hormuz and their potential impact on the Iraqi economy.”
Last month, Iraq’s production of crude oil reached 3.52 million barrels per day exported through the port of Basra, situated on the Persian Gulf, and the pipeline extending from Kirkuk to the Turkish port of Ceyhan.
Iraq and Jordan agreed in February to activate the agreement to extend an oil pipeline with a capacity of 2 million barrels per day from Basra to the Jordanian port of Aqaba. Some reports also point to Baghdad’s intention to build a new pipeline to Turkey to replace the current pipeline, which is subject to ongoing acts of vandalism.
Assem Jihad, a spokesman for the Ministry of Oil, told Al-Monitor, “The ministry is considering the extension of an Iraqi oil pipeline through Syrian territory to the Mediterranean Sea, and is in the process of studying the economic feasibility of the project and the appropriate geographical and security conditions.” He said the idea had been proposed in 2004 but delayed due to unstable security conditions in both countries.
As for the oil pipeline to Jordan, Jihad said, “The project was voted upon by the Council of Ministers after its implementation was agreed upon with Oman and 1 million barrels of Iraqi oil will reach the port of Aqaba every day. We are currently studying investment offers from international companies that will establish the pipeline in return for a percentage that will be deducted for each exported barrel.” Asked why Iraq chose Syria and Jordan, he said, “The goal is to increase Iraqi export outlets and find markets for the increasing oil production. This has nothing to do with the security situation in the Gulf. The construction of the pipeline will take four to five years, and by the time it is ready, the situation might have changed.”
This contradicts Abdul Mahdi’s statements about the increasing threats facing navigation in the Strait of Hormuz, which Iran has repeatedly threatened to close. The equivalent of one-third of the world production of crude oil goes through this strait on a daily basis.
Two Norwegian oil carriers were attacked in June in the Gulf after a similar attack on Saudi tankers off the Emirati coast in May. Washington said Iran was behind the attacks, which suggests that the region is to witness further tension that could eventually disrupt the export of oil through the Strait of Hormuz, which links the Gulf to the Indian Ocean.
Of note, the pipeline expected to go through Syria would be the second of its kind if completed. A former pipeline extending from Kirkuk to the Syrian port of Banias on the Mediterranean was no longer operational after Damascus supported Iran its war with Iraq in 1980. After 2003, the tense security conditions on both sides of the border did not allow for the construction of the new pipeline. The desert areas were and still are controlled by terrorist groups such as al-Qaeda and the Islamic State (IS).
Hamza al-Jawahiri, an oil expert and former adviser in the Iraqi Oil Ministry, said, “Britain’s detention in Gibraltar of the Iranian [oil] carrier headed to Syria led Iran to pressure Iraq on 4 July into supplying Syria with oil.”
Early July, Gibraltar police announced the arrest of the captain of the Iranian oil tanker after a thorough search of the ship. Afterwards, Britain accused Tehran of trying to prevent a British tanker from entering the Arabian Gulf.
This is not the first time that Iranian vessels have headed to Syria via Gibraltar to avoid going through the Suez Canal. Saudi Arabia has significant investments in the canal zone. The sanctions imposed on the export of Iranian oil prevent Tehran from supplying Bashar al-Assad’s regime with oil products via declared official means and lead to smuggling. Haybat al-Halboosi, the head of the Committee on Oil and Energy in the Iraqi parliament, told Al-Monitor that his committee “does not know the details of the oil pipeline project between Iraq and Syria and is seeking to know its objectives from the competent government agencies.” “We believe that increasing our oil export outlets can help reduce the damage that could result from an expected conflict in the Gulf. This is why we are in principle in favor of this project,” he added.
Iran’s moves are not limited to the oil pipeline project as Tehran also has behind the railway project between the Imam Khomeini port in Iran and the Syrian port of Latakia through Iraq. These projects may be subject to internal and international sanctions that could prevent the Iranian side from breaking the economic siege.
Omar Sattar is an Iraqi journalist and author specializing in political affairs. He has worked for local and Arab media outlets and holds a bachelor’s degree in political science. (Al-Monitor 19.07)
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11.5 IRAQ: Iraqi Kurdistan’s New Government
Bilal Wahab posted in TWI Policy Alert on 11 July that after months of delay, the new cabinet must get up to speed quickly in order to put KRG-federal relations on solid legal ground, curtail Iranian influence, and unify the Peshmerga.
On 10 July, the Kurdistan Regional Government’s parliament voted in a new cabinet led by Prime Minister Masrour Barzani, eldest son of former president Masoud Barzani. Masrour succeeds his cousin Nechirvan Barzani, the long-serving KRG premier who was sworn in last month as president. The cabinet now comprises twenty-one ministers, including three without portfolio. Two seats were earmarked for Christian and Turkmen representatives; three women won seats as well, the largest number to date.
New Faces, Lingering Challenges
It took nine months to form the new cabinet following last September’s parliamentary elections. The delay was caused by deep divisions between and within the KRG’s main political parties. The Kurdistan Democratic Party, which won 45 of the parliament’s 111 seats, could not form a government without the Patriotic Union of Kurdistan (21 seats); the two factions have long vacillated between partnership and rivalry depending on political circumstances. The Gorran Party, the KRG’s largest opposition faction, came in third with 12 seats. Geographically, Sulaymaniyah province is a contested Gorran and PUK stronghold, while the KDP holds the reins in Erbil and Dahuk provinces. Before, during and after the election campaign, the three parties took turns blaming each other for the ill-fated independence referendum of 2017, which cost the KRG dearly in political, economic and territorial capital. Forming the new cabinet has seemingly given them some common ground for conciliation.
The PUK and Gorran have also suffered from internal fractures since the passing of their leaders in 2017 (Jalal Talabani and Nawshirwan Mustafa, respectively). The KDP enjoys greater unity thanks to its leader Masoud Barzani, who spearheaded the push to select Nechirvan as president and Masrour as prime minister, ushering in the transition to the family’s next generation of leaders.
Masrour has picked his priorities well so far. He has pledged that his government will focus on streamlining KRG relations with Baghdad over issues of revenue and territory while fighting corruption and improving governance and economic diversification at home. But he faces two key challenges.
The first lies in the partisan nature of his cabinet. After a politically fraught selection process, technocrats have generally been sidelined in favor of loyalists to various rival parties, which could delay or derail implementation of his agenda.
Second, all of Masrour’s past posts have been in the security sector, and he has never served on a cabinet. His previous post was chancellor of the Kurdistan Region Security Council, an important role in which he oversaw the KRG’s security apparatus and proved his strong military credentials. In that capacity, however, he was surrounded by confidantes and reported only to his father. Coming out into the public spotlight and leading a multiparty cabinet, most of whose members are first-timers, will be a different feat. The veteran guidance of Nechirvan and PUK deputy prime minister Qubad Talabani may help ease his transition.
Currently, however, Masrour is striking a tone of change over continuity, declaring in a 10 July tweet that his cabinet “marks a new era for Kurdistan.” This could indicate emerging competition between the two cousins. Missing from the cabinet is Ashti Hawrami, a Nechirvan confidante who has served as the powerful minister of natural resources. Also, the KRG website now has a new domain name and does not include links to previous cabinets. In light of such developments, the role that Barzani family dynamics will play in the transition has become a subject of much discussion in the Kurdish press and social media platforms.
Relations with the United States
Washington supports a strong KRG within a unified Iraq. A number of steps would help facilitate this goal:
Improve KRG relations with Baghdad. To advance this already declared priority, Prime Minister Barzani would need to base relations between the federal and regional governments on solid legal and formal ground rather than short-lived political handshakes. Baghdad and Erbil have longstanding disputes over oil and gas management rights, budget and revenue sharing, and territory. These disagreements have fed instability and uncertainty, hindering the U.S. and Iraqi goal of fostering a sovereign, unified, and prosperous nation. KRG-federal relations have enjoyed a honeymoon of sorts in 2019, but the detente is precarious. Therefore, Washington would welcome any substantive commitments Barzani can make to a law-based, mutually beneficial and fair relationship with Baghdad.
Keep Iran at arm’s length. The transactional nature of KRG-federal politics often invites Tehran to intervene as a mediator and enforcer. The risk of such influence has only increased since 2017, when Washington opposed the KRG independence referendum and U.S.-Kurdish relations took a sour turn. At the time, Masrour Barzani was the referendum’s chief lobbyist in Washington. Disappointed at the U.S. decision, the KDP mended its ties with Iran, among other steps. Going forward, the KRG would win favors in Washington if it pursues policies that contribute to Iraq’s independence from undue Iranian manipulation.
Unify the Peshmerga. Institutionalizing and uniting the Kurdish security forces would not only help safeguard Kurdistan from Islamic State remnants, but also bolster the KRG’s political standing at home and abroad. Much like what has happened in other parts of Iraq, unruly armed groups that report directly to political parties have dented the legitimacy of the KRG. With his security background and fresh perspective, Prime Minister Barzani has an opportunity to ensure that the Peshmerga are accountable to his government, not to the PUK and KDP. Peshmerga unity is a longstanding public demand, especially since divisions within the security forces exacerbated the losses that followed the referendum. Barzani has foreign support on this issue as well, given the mounting international pressure on Iraq to rein in militias.
Bilal Wahab is the Nathan and Esther K. Wagner Fellow at The Washington Institute. (TWI 11.07)
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11.6 UAE: China Deepens Ties with UAE with Industrial Investment
Jonathan Fuller posted in Al-Monitor on 10 July that East Hope Group, one of China’s largest companies, announced last May that it is considering a $10 billion investment in Khalifa Industrial Zone Abu Dhabi (KIZAD). This comes on the heels of several major Chinese investments in KIZAD over the last two years and underscores the deepening ties between China and the United Arab Emirates (UAE). Emirate leaders have been looking in China’s direction as they diversify their relations with global powers, while from the Chinese side, its Middle East presence is growing through its ambitious Belt and Road Initiative (BRI). The UAE increasingly looks like the load-bearing pillar of China’s Middle East policy, and the expansion of China’s role in KIZAD indicates that Abu Dhabi is considered a pivot city in the BRI.
The proposed East Hope investment would be implemented in three stages over 15 years. It would begin with an alumina facility, then a red-mud research center and recycling project would follow. The final phase would be large upstream and downstream facilities to process non-ferrous metals. Both East Hope and Emirates Global Aluminum (EGA) are among the world’s largest aluminum producers. Abu Dhabi’s sovereign wealth fund Mubadala, which jointly owns EGA, has partnered with Chinese institutions in a joint investment fund with the aim of capitalizing projects in the UAE and China that support the BRI and Abu Dhabi 2030, the emirate’s development plan. East Hope’s chief executive officer Liu Yongxin explicitly linked the project with Beijing’s BRI ambitions, stating it “will become the benchmarking project along the BRI between China and the UAE.”
The BRI is China’s signature foreign policy initiative, a series of hard and soft infrastructure projects stretching across Eurasia and the Indian Ocean region. As a larger number of states agree to link their domestic infrastructure needs to China’s BRI, Beijing’s interests are expanding far beyond its traditional sphere of influence, and several states and regions are taking on a new significance in China’s foreign policy. The Middle East is one of these, and the UAE is among its more important partnering states.
The China-UAE relationship has deepened significantly in recent years. A state visit from President Xi Jinping last summer was used to upgrade the relationship to a comprehensive strategic partnership, China’s highest level of diplomatic relations. Shortly afterward, the UAE appointed Khaldoon bin Mubarak, CEO of Mubadala, as a presidential special envoy to China, the first such appointment the emirates has made. Economic relations have flourished, with bilateral trade growing from $17 billion in 2010 to nearly $60 billion in 2017. There is a substantial Chinese community in Dubai, numbering between 200,000 to 300,000, with over 4,000 Chinese-owned businesses operating there. Chinese state-owned enterprises and multinationals have established a deep presence in Jebel Ali Free Zone (JAFZA), servicing contracts throughout the Arabian Peninsula and broader Middle East. Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum recently represented the UAE at the recent Belt and Road Forum in Beijing, where $3.4 billion in deals were signed between Dubai and Chinese firms.
This all highlights an interesting point. Until the recent interest in KIZAD, much of China’s UAE energy was focused on Dubai. Abu Dhabi is quietly catching up and the manner in which it is doing so is a sign of a top-down initiative coming from both sides rather than a loose set of investment opportunities by Chinese multinationals.
In KIZAD, the Jiangsu Provincial Overseas Cooperation and Investment Company (JOCIC), a consortium of five companies, has been active in driving relations, with several large investments over the past two years. It established the China-UAE Industrial Capacity Cooperation Construction Management Company in 2017 and invested $1.1 billion into Khalifa Port. JOCIC hosted an investment promotion conference in September 2018, inviting a delegation from KIZAD and Abu Dhabi Ports to Nanjing, where they met with over 180 Chinese government agency representatives and 90 representatives from Chinese companies to showcase investment opportunities.
Beyond JOCIC’s efforts, there is serious support coming from the top. COSCO Shipping, China’s largest shipping company and a major state-owned enterprise, signed a 35-year agreement with KIZAD in 2016, in the process moving its regional freight operations from JAFZA. The $738 million deal included a commitment to double KIZAD’s container-handling capacity, a project expected to be complete by next year. COSCO’s stake in KIZAD makes Abu Dhabi the trans-shipment hub for its Middle East freight. That the groundbreaking ceremony for COSCO’s KIZAD terminal was attended by Ning Jizhe, deputy director of the National Development and Reform Commission (NDRC) is telling; the NDRC plays a major role in the BRI, and Ning is a member of the CCP’s Central Committee. His presence is proof that leaders in Beijing consider the KIZAD investment to be an important strategic asset.
This builds upon a little-discussed Chinese Middle East initiative: the “industrial park-port interconnection, two-wheel and two-wing approach” cooperation framework. This initiative picked up momentum during last summer’s China-Arab States Cooperation Forum ministers’ meeting and maps out the shape that the BRI will take in the Middle East as Chinese investment in four ports and four industrial zones will link supply chains and build business clusters. The industrial zones (KIZAD, Duqm in Oman, Jazan in Saudi Arabia and Ain Sokhna, Egypt) and ports (Djibouti, Port Said in Egypt, Duqm and KIZAD) establish connectivity from the Arabian Gulf to the Mediterranean Sea and demonstrate how each individual project is part of a much larger strategic approach to the Middle East. As such we can anticipate much deeper Chinese engagement in each of these, and of them, Abu Dhabi — with the endowments of a central location, logistics infrastructure and business-friendly incentives — stands to become a key city in China’s BRI ambitions.
Given the importance of the BRI in China’s foreign policy, it will shape much of Beijing’s approach to the Middle East. KIZAD will continue to be a magnet for Chinese investment and we can expect to see a greater Chinese presence in the UAE’s capital in the coming years.
Jonathan Fulton is an assistant professor of political science at Zayed University in Abu Dhabi, UAE. (Al-Monitor 10.07)
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11.7 UAE: Moody’s Changes Sharjah’s Rating Outlook to Negative, Affirms A3 Rating
On 18 July, Moody’s Investors Service changed the outlook on the Government of Sharjah’s long-term issuer ratings to negative from stable and affirmed the long-term issuer ratings at A3. The negative outlook reflects the government’s deteriorating fiscal position which, in the absence of significant fiscal consolidation measures, would point to credit metrics consistent with a lower rating.
The A3 rating continues to be supported by a reasonably well diversified economy, relatively high income levels, low non-financial public sector debt, and its membership within the federal structure of the United Arab Emirates (Aa2 stable).
The affirmation of the A3 rating also applies to the senior unsecured debt ratings of Sharjah Sukuk Limited, Sharjah Sukuk (2) Limited and Sharjah Sukuk Program Limited. The (P)A3 senior unsecured MTN program of Sharjah Sukuk Program Limited was also affirmed. In Moody’s opinion, the payment obligations of the notes issued by these entities are direct obligations of the government and ranked pari passu with other senior, unsecured debt issuances of the government.
Ratings Rationale: Rationale for the Negative Outlook
The negative outlook reflects the government’s deteriorating fiscal position which Moody’s expects to continue unless significant consolidation measures are taken.
Spending increases have outweighed revenues, resulting in the further accumulation of government debt. Debt-to-GDP increased to 25.4% in 2018 from 19.5% in 2017, now more than twice the level when the sovereign rating was first assigned in 2014. Meanwhile, debt-to-revenues rose to 246% in 2018 from 209% in 2017, which is significantly higher than the A-rated median. While the revenue from the newly-introduced VAT will lower this ratio in 2019, Moody’s expects the debt burden to rise again from next year.
New revenue raising measures introduced in 2018 had mixed outcomes. The government’s main own-source revenue measure introduced last year – an increase to road tolling rates for heavy vehicles – did not raise as much additional revenue as the government expected. By contrast, the AED1.6 billion share of federal-collected VAT revenues allocated to Sharjah was significantly higher than the government initially anticipated, although the disbursal of these receipts from the federal government was delayed until the first half of 2019. The revenue shortfall for 2018 was only partially offset by an acceleration of the 2019 budget contribution from Sharjah Electricity and Water Authority.
Meanwhile, the government’s existing revenue streams continued to be volatile. All in all, while growth in revenues was below the government’s expectations, expenditure exceeded the budget by 9.3% and overall was 24% higher than in 2017, as a result of both higher current spending relating to salary increases and larger capital expenditure.
As a result, Sharjah’s budget deficit increased to 4% of GDP in 2018 from 2.8% in 2017. While the disbursement of two years of accrued VAT revenues is likely to narrow the budget deficit on a cash basis in 2019, Moody’s expects the budget deficit to widen again in 2020 as the disbursal of VAT revenues begins to align more closely with the timing of their generation.
In addition to higher financing needs for the government budget, the government’s recapitalization of Invest Bank also contributed to the increase in the debt burden, as did the incorporation of municipal debt into the classification of Sharjah’s government debt last year.
With a renewed widening of the deficit in the absence of new fiscal consolidation measures, Moody’s expects that the debt burden (measured relative to GDP) will continue to rise in the next few years.
Rationale for Affirming the A3 Rating
Sharjah continues to benefit from a relatively diversified economy. In particular, Sharjah’s economy is more diversified than the UAE on aggregate due to the small size of the hydrocarbon industry. Sharjah also benefits from relatively high incomes in global terms, broadly in line with the median of A3-rated sovereigns although substantially lower than in neighboring Abu Dhabi (Aa2 stable) and Dubai.
Sharjah’s membership in the federal structure of the UAE also provides numerous credit strengths which support the rating at the current level, including a highly credible currency peg, strong banking sector oversight and indirect financial support via spending on infrastructure and social projects.
Sharjah’s event risk is moderate, the same level as Abu Dhabi (Aa2 stable) and the UAE. The UAE is moderately exposed to geopolitical event risk, which primarily arises from tensions between Iran and members of the Gulf Cooperation Council. Risks include a potential disruption of international shipping through the Strait of Hormuz, which for Sharjah would result in lower customs revenues. The exposure to regional geopolitical event risk is also reflected in UAE’s military engagement in Yemen and the current dispute with Qatar (Aa3 stable).
Event risks stemming from Sharjah’s government liquidity risks or the UAE’s balance of payments are limited in Moody’s view given the UAE’s sizable foreign assets. Notwithstanding the increase in recent years and potential further rise, the moderate level of Sharjah’s government debt, and the liquid banking sector, which acts as the government’s primary creditor support Moody’s view of low government liquidity risks.
What Could Change the Rating Up/Down
Given the negative outlook, an upgrade is unlikely in the foreseeable future.
The introduction of fiscal consolidation measures sufficient to arrest the upwards debt trajectory would likely support a stabilization of the outlook, particularly if combined with a track record of decreasing volatility in government revenues.
Moody’s would likely downgrade the rating if in the absence of a change in fiscal stance, government debt continued to rise faster than government revenues, pointing to weaker fiscal strength and less effective fiscal policy than Moody’s currently assumes. (Moody’s 18.07)
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11.8 OMAN: Fiscal & Security Pressures Highlight Oman’s Unique Position in the Region
Robert Mogielnicki posted on 9 July in the Arab Gulf States Institute in Washington that as fiscal constraints increase, tensions in the Gulf rise, and uncertainties surrounding political transition loom, Oman’s role in the Gulf Arab region could come under pressure.
Oman sits in a dangerous neighborhood: Two petrochemical tankers were attacked in the Gulf of Oman in June, following attacks on four tankers in May. Meanwhile, the war in neighboring Yemen seems to be sparking tribal divisions and popular discontent in Mahra governorate, long considered to be squarely in Oman’s sphere of influence. Amid such potential instability, Oman has historically maintained positive relations with a wide range of regional players, allowing it to play a unique role as an intermediary and arbiter in the broader Middle East.
Oman’s unique position could take on added importance in de-escalating tensions, but the country faces significant and potentially urgent problems that could affect this role. Oman is confronting steeply mounting debt and a series of deficits that could force it to consider looking to its neighbors for an economic aid package. Despite the depiction of Oman as a calm Middle Eastern Switzerland, regional tensions pose genuine security threats. The aging Sultan Qaboos bin Said – the popular leader who carefully navigates controversial relations with Iran, Qatar and Israel and has inspired decades of political confidence at home – has not publicly designated a successor. As fiscal constraints increase, tensions in the Gulf rise, and uncertainties surrounding political transition loom, Oman’s role in the Gulf Arab region could come under pressure, and any change could shape the contours of regional dynamics in the coming years.
Financial Woes
Oman is encountering numerous fiscal challenges. The International Monetary Fund lowered Oman’s 2019 economic growth forecast from a modest 1.1% to just 0.3%. In April, Standard & Poor’s Global Ratings cut its outlook on Oman from stable to negative, owing to a lack of substantial fiscal measures to curtail government deficits. Oman expects the 2019 budget deficit to reach $7.27 billion – approximately 9% of gross domestic product. Gross general government debt increased from below 5% of GDP in 2014 to nearly 50% in 2018; estimates suggest this debt could reach as high as 64% by 2022. Year-on-year fiscal deficits and reduced government revenue due to a period of lower oil prices have made the country increasingly reliant upon external financing.
Economic aid and development funding are important levers of external influence for the wealthiest Gulf Arab states. In 2018, Saudi Arabia, the United Arab Emirates and Kuwait pledged $10 billion to Bahrain. Qatar pledged $15 billion to shore up Turkey’s beleaguered banking industry, although it is unclear how much, if any, of this funding has materialized. Bahrain also received a $10 billion development aid package from GCC states after the 2011 protests, but Oman refused most of the funding from a similar support package. With the new financial constraints Oman is facing, the sultanate may need to consider accepting a similar economic package in the future, although that would depend on what kind of strings might be attached to the offer.
Oman is trying to avoid financial dependence, but its fiscal maneuverability is limited. The Central Bank of Oman possesses approximately $17.4 billion in gross international reserves, a rather small sum given the country’s consistent budget deficits, and an estimated $18 billion worth of assets are in the country’s State General Reserve Fund. The Omani government also hired a group of international banks for a debt sale – the first international issuance of 2019 – that could reach $2 billion. Although Oman has not yet imposed a value-added tax, which all GCC states have committed to implement, the country introduced an excise tax on tobacco, alcohol, carbonated and energy drinks and pork in June to help balance the budget. However, the expected revenue of $260 million per year will barely make a dent in the deficit. In addition to local and foreign borrowing, the government can resort to asset sales, but these one-off initiatives represent a fiscal Band-Aid more than a sustainable solution. On 1 July, Sultan Qaboos issued four royal decrees – including a Foreign Capital Investment Law – to attract new investors.
Security Concerns
The region’s security issues may hamper efforts to make Oman a more attractive investment hub. The May attacks on oil tankers off the coast of Fujairah and the June attacks in the Gulf of Oman occurred in the sultanate’s backyard. These maritime security concerns threaten substantial state and private investments in port and free zone projects in Sohar and – to a lesser degree – Duqm. In late June, the Sohar Port and Freezone, which is just 55 miles south of Fujairah, announced plans to construct four new hydrocarbon and petrochemical plants, which aim to attract approximately $2.5 billion in investments.
Oman’s governorate of Musandam offers premier access to one of the world’s most vital commercial waterways, but the territory remains an area of concern for Omanis. The small exclave is surrounded by UAE territory and juts into the Strait of Hormuz, permitting not only influence over commercial affairs in the strait but also providing a strategic base for military operations. Allegations that Gulf Arab neighbors have attempted to purchase influence in Musandam and other strategic Omani locations through real estate transactions are long standing. A 2017 incident wherein the Louvre museum in Abu Dhabi displayed a map of Musandam as a UAE territory rekindled fears over Emirati territorial ambitions. In 2018, Qaboos passed a royal decree prohibiting foreigners from owning land in Musandam and other strategic locations in the country.
Oman’s southern region also confronts security threats. A fragile equilibrium governs interactions along the border between the Omani governorate of Dhofar and the Yemeni governorate of Mahra. Indirect competition between Saudi Arabia, the UAE and Oman has led to tribal divisions and popular discontent on the Yemeni side of the border. The increasing tension between armed tribal groups in Mahra heightens the risks that regional rivalries may spill into Oman.
Follow the Leader
In stark contrast to other Gulf Arab states, there is no clear succession plan in Oman. Qaboos is believed to have placed sealed envelopes designating his successor in royal palaces in Muscat and Salalah, but many observers expect that a council of Qaboos’ relatives will ultimately determine the next sultan. The stakes are high. On the domestic front, Oman has struggled to address persistent unemployment challenges: The rate of youth unemployment is 49%, according to the World Bank. While the government under Qaboos has long utilized hydrocarbon revenue to minimize socioeconomic conflict and develop expansive infrastructure, the country’s Vision 2040 reflects an acknowledgment that future economic growth must come from non-oil sectors. The next leader confronts the complicated task of building a diversified economy that provides more jobs for Omani citizens and remains globally competitive.
The new sultan will also be thrust into a fractured GCC, with young and ambitious leaders in Saudi Arabia, the UAE and Qatar driving regional agendas. These individuals would welcome a long-term ally to support their respective visions for the region. How Oman’s leadership navigates the reconfiguration of regional alliances will determine the viability of Oman’s distinct status within the GCC.
The Future of the GCC
Oman follows a singular regional approach, of which its warm relations with Iran constitute a visible pillar. For example, Oman and Iran signed a defense cooperation agreement in 2010 and, following six days of joint military commission meetings and naval exercises in April 2019, the two countries signed a memorandum of understanding to further boost military cooperation. Saudi Arabia and the UAE have long permitted Oman to remain a generally responsive if independent-minded member of the GCC. Such an approach permitted Oman to serve what its neighbors often saw as a useful role as a hub for regional mediation and outreach, as has been the case with the Yemen conflict.
Overt attempts to bring Oman more squarely within the fold of the Saudi-Emirati bloc may create additional alignment on foreign policy and economic integration. However, a definite move would reduce the flexibility afforded by Oman’s style of negotiation and its reputation as a neutral arbitrator in the Gulf. In the estimation of Oman’s neighbors, immediate fiscal, security, and political concerns surrounding Oman’s position within the broader Gulf region may outweigh the longer-term benefits of maintaining Oman’s outward-looking, mediatory status quo. How Oman addresses these challenges in the coming years will serve as an informative bellwether of regional dynamics and relations among Gulf Arab actors.
Robert Mogielnicki is a resident scholar at the Arab Gulf States Institute in Washington. (AGSIW 09.07)
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11.9 OMAN: Fitch Affirms Oman at ‘BB+’; Outlook Stable
On 22 July, Fitch Ratings affirmed Oman’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BB+’ with a Stable Outlook.
Key Rating Drivers
Oman’s ratings balance its undiversified economy, high fiscal and external deficits and debt ratios against relatively high GDP-per-capita and other strong structural features relative to ‘BB’ category peers. Oman’s sovereign external asset position remains for now stronger than other ‘BB’ category sovereigns, supporting the government’s financing flexibility.
Fitch Ratings forecasts a widening of the fiscal deficit to around 10% of GDP in 2019 (around 3x the ‘BB’ median), as a moderation in oil prices offsets modest spending cuts and gains in non-oil revenue (including from the recent introduction of excise tax). Oil revenues are also under pressure from Oman’s voluntary commitment to OPEC, which is constraining average oil production slightly below the 2018 level and well below capacity. We estimate the fiscal break-even Brent price at $90/bbl in 2019. The preliminary fiscal deficit in H1/19 was only around 2% of full-year GDP, but we expect budget performance to weaken in H2/19, with spending traditionally concentrated towards the end of the year.
Continued spending restraint, the introduction of VAT in H2/20 and revenue gains from the new Khazzan gas field and potential increases in oil production could narrow the deficit to below 7% of GDP by 2021. This is in spite of an assumed moderation of oil prices to $60/bbl. However, there are large implementation risks. Underlying fiscal policy turned slightly more expansionary in 2018 as measured by a widening of the non-oil primary balance, highlighting the rigidity of expenditure and weaknesses in Oman’s policy framework.
The Omani authorities now aim to reach a sustainable fiscal balance by 2023, and a new high-level committee has been set up to identify a set of policies to deliver on this target. However, details remain unclear, and Oman has shown only limited ability to adhere to previous fiscal targets, with spending being over budget in each of the past three years, and government debt already exceeding a previous ceiling of 50% of GDP.
Fiscal deficits are leading to a sharp deterioration in Oman’s sovereign and external balance sheets. We expect government debt to continue on an upward trend well into the 2020s, reaching 61% of GDP by 2021, from 51% of GDP in 2018, and well above the historical ‘BB’ median of 39% of GDP. Sovereign net foreign assets will become a negative 8% of GDP in 2021, from an asset position of 8% of GDP in 2018, becoming worse than the ‘BB’ median of a negative 3% of GDP. This reflects government external borrowing, the drawdown of reserves and the use of the State General Reserve Fund (SGRF) for financing. Oman’s overall net external debt will rise to 50% of GDP in 2021 from 37% of GDP in 2018, also reflecting SOE borrowing. The historical ‘BB’ median net external debt is around 10% of GDP.
The outlook for oil production, prices and the pass-through of oil revenue to the government’s budget is highly uncertain. We estimate that a $5/bbl change in oil prices could change the fiscal deficit by around 2% of GDP, all else equal. A change in oil production of around 5% (around 50,000 bbl/day) relative to our forecast could shift the overall fiscal deficit by more than 1% of GDP. Petroleum Development Oman appears to be on track to expand oil production capacity by around 100,000 bbl/day from 2017 levels, equivalent to a 10% addition to Oman’s existing production.
Oman has funded its fiscal and external deficits from a range of sources, and significant public sector assets greatly mitigate financing risks. External borrowing this year will be lower than the $7.6 billion in 2018 despite a higher deficit, on account of asset sales proceeds amounting to $1.8 billion and pre-funding equivalent to more than $1.5 billion in 2018. The government expects to draw around $1.6 billion from various loan facilities, including a project-linked loan with a Multilateral Investment Guarantee Agency guarantee, a UK Export Finance facility and the Arab Fund for Economic & Social Development. We assume a further $2 billion of Eurobond issuance, more than $1 billion in local debt issuance, and a similar amount to be drawn from the SGRF, which had $17.4 billion in foreign assets at April 2019.
Real GDP expanded by 3.4% in 2018 according to official estimates, from a contraction of 0.9% in 2017. This is largely driven by 6.1% growth in hydrocarbon GDP (from -3% in 2017) because of higher gas production. Non-hydrocarbon GDP expanded by 2.1% (from 0.9% in 2017) amid higher government spending and a pick-up in refining. The construction sector remained the main laggard, contracting by nearly 13%. The weakness of the construction sector reflects a reduction in government capital spending projects and is contributing to falling expatriate employment (down by more than 4% y-o-y in March 2019). We forecast a dip in overall GDP growth to 1.8% in 2019 as Oman’s commitment to OPEC constrains oil production (we assume this will expire in 1Q20).
There is significant potential for higher growth and government revenue from new hydrocarbon projects, which will be critical to stabilizing public and external finances. Phase 2 of the Khazzan gas field could start producing in 2021, adding a further 0.5 billion standard cubic feet (scft)/day of capacity (around 0.1 million boe/day), after the 1 billion scft/day addition from Phase 1 in 2017-2018. The government recently signed interim agreements with Shell and Total for the development of the Mabrouk field, which is estimated to contain more than 4.9 trillion cubic feet of recoverable gas (a 12% addition to Oman’s existing reserves) and 112 million barrels of condensate (a 2% addition to existing reserves of oil and condensate). The government’s agreements with Shell and Total also call for the construction of a new gas-to-liquids plant at Duqm and an LNG bunkering facility at Sohar.
Most structural indicators are above the ‘BB’ median, including World Bank governance indicators. Fitch views the banking system as relatively strong, with regulatory capital at around 16% of risk-weighted assets and non-performing loan ratios in the low single-digits (despite a recent up-tick). The social pressure resulting from the low employment rate of young Omanis is a risk to public finances. The domestic political scene remains stable, but uncertainty continues to envelop the eventual succession to Sultan Qaboos, who has not publicly designated a successor. The constitution stipulates that the ruling family must choose a new Sultan within three days of the post becoming vacant; otherwise a letter containing the sultan’s recommendation is opened. The economy and government budget revenues are still not diversified, although structural reforms are underway that seek to address this.
Rating Sensitivities
The main factors that could lead to positive rating action are:
-A marked narrowing of the budget deficit resulting in stabilization of the government debt/GDP.
-Sustainable reduction of net external debt/GDP.
The main factors that could lead to negative rating action are:
-Continued increases in government debt/GDP or drawdown in assets, for example due to a failure to reduce the budget deficit.
-Continued increases in net external debt/GDP.
Key Assumptions
Fitch assumes that Brent crude will average $65/bbl in 2019, $62.5/bbl in 2020 and $60/bbl in 2021.
Fitch assumes that an eventual transition of power from Sultan Qaboos will be smooth and ensure broad policy continuity.
Fitch assumes no change to the peg of the Omani rial to the US dollar. (Fitch 22.07)
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11.10 SAUDI ARABIA: IMF Executive Board Concludes 2019 Article IV Consultation
On 10 July, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with Saudi Arabia.
Real non-oil growth is expected to strengthen to 2.9% in 2019 as government spending and confidence increase, but real GDP growth is projected to slow to 1.9% as real oil growth slows to 0.7% with the implementation of the OPEC+ agreement. Growth is expected to pick-up over the medium-term as ongoing reforms take hold. The unemployment rate among Saudi nationals has moved down but remains high at 12.5%.
The fiscal deficit is projected to widen to 6.5% of GDP in 2019 from 5.9% of GDP in 2018 as spending is projected to increase and exceed the budgeted amount and offset an increase in non-oil revenues. The deficit is then projected to decline to 5.1% of GDP in 2020. With oil prices implied by futures markets declining over the medium-term, the deficit is then projected to widen. The current account surplus is projected to narrow to 6.9% of GDP in 2019 from 9.2% of GDP in 2018 as oil export revenues moderates and import growth picks up.
CPI inflation has declined in recent months, mainly due to falling rents, and is forecast to decline by 1.1% in 2019, before turning positive in 2020 as further energy price increases are implemented. Credit growth is expected to strengthen with the stronger non-oil economy and bank liquidity should remain comfortable.
The authorities are continuing to implement their reform agenda. Fiscal reforms include lowering the registration threshold for the VAT, adjusting gasoline prices on a quarterly basis, and increasing fiscal transparency. Reforms to the capital markets, legal framework, business environment, and SME sector are ongoing.
Executive Board Assessment
Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for the progress in implementing their economic and social reform agenda, including the introduction of the value-added tax and energy price reforms. Directors noted that reforms have started to yield results and that the outlook for the economy is positive; however, volatility in global oil prices poses uncertainty. They emphasized that continued commitment to prudent macroeconomic policies and appropriate prioritization of reforms will be key to promoting non-oil growth, creating jobs for nationals, and achieving the objectives of the authorities’ Vision 2030 agenda.
Directors underscored that fiscal consolidation is key to rebuilding fiscal buffers and reducing medium-term fiscal vulnerabilities. They encouraged the authorities to build on their fiscal reforms, including by continuing with the planned energy and water price reforms and increases in expatriate labor fees. Directors considered that additional fiscal measures would also be needed and highlighted that containing the government wage bill and a more measured increase in capital spending could yield fiscal savings. They also acknowledged that the authorities have committed to introduce further fiscal measures if needed.
Directors encouraged the authorities to continue to improve expenditure management and strengthen the fiscal framework, noting that, despite important reforms, spending has increased. They welcomed reforms to strengthen public procurement, which will help improve the efficiency of government spending and reduce the risks of corruption in procurement. Directors welcomed the efforts to enhance fiscal transparency. However, they considered that publishing more detailed budget and spending execution data would further increase fiscal transparency and viewed a robust asset-liability management framework as essential to guide analysis of the public sector balance sheet, cash flows, and risk/return tradeoffs.
Directors welcomed the authorities’ ambitious reforms to develop the non-oil economy. They noted the ongoing efforts to strengthen the business environment and considered that careful implementation of industrial policies could encourage the development of new sectors of the economy. Directors emphasized that any government support should be made available at the sectoral level, be time bound, and have strict performance criteria attached.
Directors considered that policies to develop new economic sectors will be successful if Saudi workers have the needed skills for the private sector and the incentives to offer them at competitive wages. They emphasized the need to ensure that wages and productivity are well aligned and that labor market policies should focus on setting clear expectations about the limited employment prospects in the public sector, strengthening education and training, and increasing female employment.
Directors underscored that reforms should be inclusive and vulnerable households protected from any negative effects. They welcomed the review of social assistance programs to ensure they provide adequate support to those in need and are well targeted.
Directors welcomed the continued resilience of the financial sector and ongoing capital market reforms. They agreed that the development of agency banking and Fintech could help broaden the channels of financial access. Directors agreed that improving financial access for young and growing companies, women, and youth are important, but emphasized that specific sector lending targets should be avoided. They welcomed Saudi Arabia’s ongoing strengthening of the AML/CFT framework and its recent membership of the Financial Action Task Force.
Directors agreed that given the current structure of the economy, the exchange rate peg to the U.S. dollar continues to serve the economy well. Directors emphasized that further improving the quality and availability of data is important and were encouraged by the authorities’ commitment to subscribe to the Fund’s SDDS by the end of the year. (IMF 18.07)
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11.11 EGYPT: Egypt Weighs Pros and Cons of IMF Loan
Rasha Mahmoud posted in Al-Monitor on 18 July that as the IMF reform program with Egypt is set to come to an end in August, future cooperation agreements between the two sides are yet to be revealed as experts weigh the pros and cons of the program.
As the end of the economic reform program that the International Monetary Fund (IMF) asked Egypt to implement in exchange for a $12 billion loan draws near, Cairo has yet to officially reveal whether it intends to cooperate with the IMF once again. Although Egyptian Finance Minister Moeit said the country might renew cooperation with the IMF, the latter has yet to determine how such cooperation could unfold.
In an interview with Bloomberg, Moeit said that Egypt aims to conclude a nonfinancial agreement with the IMF by October to replace a three-year loan deal that expires this month — a step that may help the country remain an attractive market for foreign investors. He said the new program could last about two years. Tarek Amer, governor of the Central Bank of Egypt, said in remarks on the sidelines of the Seamless North Africa 2019 Conference, “the government is discussing with the IMF new forms of cooperation.”
However, on the day following Moeit’s statements, Camilla Anderson, assistant director of the IMF’s communications department, denied the existence of negotiations with the Egyptian government regarding a new borrowing program.
In August 2016, the IMF technical mission announced from the heart of Cairo that the IMF had reached a staff-level agreement with the Egyptian government. This agreement required the Egyptian government to implement a series of reform measures and adopt radical and bold solutions.
Under the agreement, Egypt received a loan of $12 billion divided into six tranches over a period of 36 months. The value of each tranche amounted to $2 billion, and Egypt received five visits from the IMF technical mission to follow up on the implementation of the economic reform program, which Egypt began implementing in August 2016. Egypt is scheduled to receive the final tranche, which is worth $2 billion, once the program is completed this upcoming August.
As the IMF program nears completion, Standard Chartered Bank said the IMF would remain involved in Egypt’s economic reform process. A report issued by the bank indicated that Egypt has continued to improve the macroeconomic fundamentals under the IMF’s Extended Fund Facility, which concludes in the second half of 2019.
Ziad Bahaa Eldin, an economic expert and head of the Financial Regulatory Authority, told Al-Monitor over the phone, “The program was and still is controversial. While international organizations and financial institutions consider it a huge success, the prevailing public opinion in Egypt blames it for the high cost of living and the hardships suffered by the people.”
“The program was neither a bad nor a purely good thing. I think it was a mix of both. But if we are to look on the bright side, the IMF statement was accurate regarding the macroeconomic reforms that required courage, especially the liberalization of the exchange rate regime and the reduction of the energy subsidies. The downside is that the program caused unexpected waves of inflation that Egyptians failed to cope with despite the increased expenditure on social protection programs. It is not economic reform that led to such waves of inflation but the government’s failure to accompany macro reform with policies and operational programs that encourage productive investment and create sustainable employment opportunities,” he said.
Bahaa Eldin stressed Egypt’s need for a second program away from the IMF and other international actors. The country, he said, needs a social and economic reform program that focuses on citizens, gives priority to the poor, activates the idle investment potential and channels public expenditure toward what people need.
The economic reform program that the IMF required in exchange for the loan included a set of economic policies and governmental measures to achieve higher growth and reduce the budget deficit to the current 10%, public debt to 80% by June 2022. In this regard, the government has taken several measures, notably the liberalization of the exchange rate regime and the complete lifting of fuel subsidies. This led to a sharp rise in the prices of many other goods and services such as food products, real estate, transportation and agricultural products. Also, many factories and companies were forced to close after they could not afford the increase in production costs. Add to this the fact that more than 13 million citizens stopped benefiting from government subsidy cards to buy food staples amid successive increases in the prices of electricity, water and gas.
Hassan Hussein, chairman of the Banking and Stock Exchange Committee of the Egyptian Businessmen’s Association, told Al-Monitor that it is necessary for Egypt to sign a new contract with the IMF given the progress, economic stability and growth recovery achieved by the economic reform program. He said he appealed to the government to sign a new contract with new objectives for several reasons. Chief among these are the current economic reforms, which must be sustained until growth reaches 8%. Hussein stressed that economic reform is a long-term journey in which the state continuously aims to sustain growth in light of changing economic and political conditions.
Rasha Mahmoud is an Egyptian journalist, scriptwriter and filmmaker. She has worked for Anadolu Agency, HuffPost and Huna Sotak. (Al-Monitor 18.07)
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11.12 EGYPT: Settlement Agreement Ends Egypt’s Long-Simmering Gas Dispute with Israel
Amira Sayed Ahmed posted on 10 July in Al-Monitor that Egypt and Israel reached a settlement deal ending a long-standing dispute over Egypt’s decision to cancel gas exports to Israel.
Egypt’s Ministry of Petroleum has recently ended the long-simmering gas dispute with Israel after signing a settlement agreement worth $500 million to compensate Israel for halting deliveries of gas. Under the agreement, the compensation due to be paid to Israel has decreased from $1.8 billion to $500 million.
On 16 June, the Egyptian General Petroleum Corporation (EGPC) and the Egyptian Natural Gas Holding Company (EGAS) signed the agreement with the state-owned Israel Electric Corporation (IEC). “It was amicably agreed to resolve the dispute as well as settling and reducing the compensation amount,” the Ministry of Petroleum said in a statement received by Al-Monitor.
The IEC is to waive all its rights arising from an arbitration ruling that was issued in its favor in 2015. The settlement amount is to be paid over 8½ years, according to the agreement. Also, the IEC has the right to terminate the settlement agreement in case of not receiving the settlement amount. “This is a dazzling success for Egyptian diplomacy. Israel has a ruling. However, Egypt managed to reduce the compensation and reach a settlement agreement,” said Tharwat Ragheb, professor of petroleum and energy engineering at the British University in Egypt.
Ragheb told Al-Monitor that settling the gas dispute between Egypt and Israel has become a must, putting into consideration the country’s plan to become a regional gas hub. “The agreement lifts a huge financial burden off the Egyptian government’s shoulders,” he said.
The Egypt-Israel gas dispute has passed through many phases, starting from signing an agreement to export gas to Israel, to the international arbitration and finally to the settlement agreement.
In May 2005, Egypt signed an agreement to export gas to Israel for a period varying between 15 and 20 years, at a fixed price throughout the supply period. Under the agreement, Egypt is committed to exporting 1.7 billion cubic meters of gas per year to Israel through an intermediary company — East Mediterranean Gas Company (EMG) — with exports beginning in mid-2008.
The price mentioned in the agreement was set at $0.75 per million British thermal units. The agreement also stipulates that this price could increase up to $1.25 if the Brent crude price reached $35 per barrel. In the meantime, Egypt was importing gas from Algeria, Russia, Saudi Arabia and the United Arab Emirates at $3.50 per million British thermal units.
On the same day of signing the agreement, the Organization of Arab Petroleum Exporting Countries published a statement saying that the global price of gas at that time had been estimated at $6 per million British thermal units, which sparked a row over the key reasons lurking behind exporting gas to Israel at a meager price.
After huge waves of anger criticizing the agreement, the Egyptian government demanded in 2009 to increase the price of gas exports to Israel under the pretext that the agreement price is not commensurate with world prices, a matter that was met with Israeli rejection. Israeli newspaper Yedioth Ahronoth published an article back then expressing its surprise as Egypt gave Israel very low prices while signing the agreement, without considering the global gas prices at the time. Despite this dispute, the Israeli media said that halting gas deliveries will not harm the political ties between the two countries.
Though the Egyptian Supreme Council of Energy took a decision in 2008 not to sign any new contracts for the export of gas to Israel until the end of 2010, Hussein Salem, Egyptian businessman and partner in EMG, signed three deals with industrial companies in Tel Aviv in 2010 to export Egyptian gas to Israel, at a price of $3 per million British thermal units.
In 2011, particularly in the wake of the June 25 Revolution, Egypt plunged into a whirlwind of political instability. After the revolution, Egypt’s gas pipeline to Israel was hit by about 18 explosions, which led to the halt of supplies. In April 2012, the Egyptian government decided to cancel the gas export agreement with Israel and sent a letter informing intermediary company EMG of this move. (EMG was exporting the Egyptian gas to Israeli electricity companies via the Arish-Ashkelon pipeline.)
Under the three new agreements signed by Salem, Egypt exports to Israel an additional 1.7 billion cubic meters of gas, bringing Egypt’s total annual export to Israel to 3.4 billion cubic meters, which is double the quantity set for in the 2005 agreement. More importantly, Israel said that about 16% of the electricity generated in Israel came from Egyptian gas. “We should not blame the Egyptian government for those three deals. Such deals were signed between companies, not between states. That’s why the Egyptian government later on decided to halt gas exports to Israel, tightening its control over the sector,” Ragheb argued.
The IEC resorted to international arbitration in Geneva seeking compensation for the losses caused by Egypt’s decision to stop supplying natural gas. In December 2015, the International Chamber of Commerce in Geneva issued a ruling requiring EGAS and EGPC to pay $288 million to EMG and $1.7 billion to IEC. Until it announced the settlement agreement, the Egyptian government entered into negotiations with Israel to reach a compromise regarding this ruling over the last few years.
“Even the settlement amount will not be a burden on the government budget since Israel will start to send gas from the fields of Delek Drilling and its partner Noble Energy to the Egyptian gas liquefaction companies as of July. So through these services the compensation will be paid,” Medhat Youssef, former EGPC vice president, told Al-Monitor. The settlement agreement and putting an end to the hustle related to the Egypt-Israel gas deal will help promote the investment environment in Egypt, Youssef concluded.
Amira Sayed Ahmed is a Cairo-based freelance journalist and full-time editor of local news at The Egyptian Gazette, Cairo’s oldest English-language daily. She has been involved in writing about political, social and cultural issues in Egypt since 2013. (Al-Monitor 10.07)
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11.13 TUNISIA: IMF Staff Concludes Visit to Tunisia
An International Monetary Fund (IMF) staff team visited Tunis from 11–17 July 2019 to discuss Tunisia’s recent economic developments, outlook and reform program. At the end of these discussions, the IMF made the following statement:
“Following up on the recent conclusions for the 5th Review, we had fruitful discussions with the authorities on recent economic developments and the outlook for Tunisia. Strong monetary and fiscal policy implementation during the first half of 2019 have helped reduce inflation to 6.8% in June from a peak of 7.7% a year earlier, lower refinancing as of end-June and laid the foundation for a second year of fiscal deficit reduction.
“At the same time, risks to the economic outlook for 2019 have increased since the Fifth Review. Growth will likely be limited to at most 2%, reflecting notably the disappointing performance of industry in recent months. Moreover, the recent appreciation of the dinar, the increase in oil prices, and slower growth in Tunisia’s main trading partners are likely to weigh on the fiscal and external current accounts, despite the more favorable than expected performance of the tourism sector. These trends make it even more critical to stay the course on policy implementation.
“Meeting the budget deficit target of 3.9% of GDP for 2019 is critical to slow down the accumulation of public debt that reached 77% of GDP at the end of 2018. This will require continued strong performance on tax and tax arrears collection as well as additional measures to contain current expenditures, including through continued moderation of the wage bill and energy subsidies, in an environment of higher international oil prices. Staff also supports the authorities’ ongoing efforts to strengthen social safety nets especially for low-income households. Monetary policy should remain geared towards reducing inflation that erodes the purchasing power of Tunisians, while exchange rate flexibility can support an improvement in the current account and international reserves.
“The IMF team met with Minister of Finance Chalghoum, Minister of Development, Investment and International Cooperation Laâdhari, Minister of Major Reforms Rajhi, and Central Bank Governor El Abassi, as well as their staff. It also held discussions with representatives of the labor and employers’ unions, the private sector, civil society, and the diplomatic community.” (IMF 17.07)
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11.14 MOROCCO: IMF Executive Board Concludes 2019 Article IV Consultation with Morocco
On May 13, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Morocco. Economic activity weakened in 2018, reaching 3%, due to lower growth in the agricultural and tertiary sectors. The unemployment rate remains close to 10% and particularly high among the youth. Headline inflation reached 1.9% in 2018 in part due to higher food prices. Fiscal consolidation slowed in 2018, with the fiscal deficit stabilizing at 3.7% of GDP, due to strong VAT revenues and wage bill containment, which partially offset lower corporate taxes and grants, and higher butane subsidies.
Despite strong export performance in the automobile and phosphate sectors, the current account deficit widened to 5.4% of GDP due to higher imports of energy and capital goods, as well as lower remittances, official grants, and tourism receipts. At the same time, net FDI increased substantially to 2.5% of GDP. International reserves dropped to $24.4 billion but remain comfortable, at about 5.2 months of imports.
Bank capitalization is adequate, and the risks to financial stability are limited. Nonperforming loans remain relatively high, but they are well provisioned. Regulatory limits to reduce credit concentration and cross-border supervisory collaboration to contain risks related to Moroccan banks’ expansion in Africa are being strengthened.
Morocco’s medium-term prospects remain favorable, with growth expected to reach 4.5% by 2024. However, this outlook remains subject to significant domestic and external risks, including delays in reform implementation, lower growth in key partner countries (particularly the euro area), higher oil prices, geopolitical risks, and volatile financial conditions. On the upside, lower international oil prices could help further strengthen the economy’s resilience and increased regional integration in the Maghreb region could become an added source of medium-term growth for Morocco.
Executive Board Assessment
Executive Directors commended the authorities for implementing sound macroeconomic policies and welcomed the acceleration in reforms that has helped improve the resilience of the Moroccan economy and increase its diversification. Nevertheless, Directors noted the potential impact of global uncertainty and risks on the Moroccan economy and called for continued commitment to sustain sound policies in order to reach higher and more inclusive growth.
Directors encouraged the authorities to continue fiscal consolidation to preserve debt sustainability, while safeguarding priority investment and social spending in the medium term. They welcomed the ongoing control of public wage spending and the outcome of the May 2019 national tax conference, which will inform a comprehensive tax reform targeted at achieving greater equity and simplicity in the tax system. Directors supported further improvements in the efficiency and governance of the public sector through civil service reform, careful implementation of fiscal decentralization, strengthened state-owned enterprise oversight, and better targeting of social spending.
Directors noted that accommodative monetary policy remains appropriate in a context of moderate inflation and subdued economic and credit growth. They welcomed the beginning of the transition to greater exchange rate flexibility last year which will help the economy absorb potential external shocks and remain competitive. They encouraged the authorities to use the current window of opportunity to continue this reform in a carefully sequenced and well-communicated manner.
Directors noted that the banking sector system is sound and resilient, while stressing the need to remain vigilant given its increasing complexity and cross-border expansion. They also called for continued efforts to address weaknesses in the AML/CFT framework. Directors noted that adopting the central bank law and continuing to make the supervisory framework more risk-based and forward-looking will help further improve financial sector soundness. They welcomed the recent adoption of a comprehensive financial inclusion strategy, which will ensure that the financing needs of underserved groups and small and medium-sized enterprises are better addressed.
Directors stressed the importance of sustaining the pace of structural reforms to move toward a more private-sector-led and inclusive growth model while reducing inequalities and protecting the most vulnerable. Directors emphasized the need to revamp labor market policies and implement education reforms to help create job opportunities, especially for women and youth. While they welcomed the ongoing improvements to the business environment, Directors encouraged continued efforts to strengthen governance and fight corruption. (IMF 16.07)
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11.15 TURKEY: Fitch Downgrades Turkey to ‘BB-‘; Outlook Negative
On 12 July, Fitch Ratings downgraded Turkey’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BB-‘ from ‘BB’ with a Negative Outlook.
Key Rating Drivers
The downgrade of Turkey’s IDRs reflects the following key rating drivers and their relative weights:
HIGH: The dismissal of the central bank governor Murat Cetinkaya heightens doubts over the authorities’ tolerance for a period of sustained below-trend growth and disinflation that Fitch considers consistent with a rebalancing and stabilization of the economy. It also highlights a deterioration in institutional independence and economic policy coherence and credibility.
The completion of a prolonged electoral cycle in June potentially offered a supportive political backdrop for economic adjustment after policy stimulus boosted growth in Q1/19. However, the firing of the central bank governor on 6 July by presidential decree risks damaging already weak domestic confidence (evidenced by rising dollarization), jeopardizing the inflow of foreign capital needed to meet Turkey’s large external financing requirement, and worsening economic outcomes. The move adds to uncertainties over the prospects for structural reforms and management of the public sector finances.
Less predictable decision-making comes in an environment where checks and balances have been eroded, and there has been a concentration of powers in the presidency. Municipal elections in Istanbul were re-run, ostensibly due to irregularities after the ruling AKP lost by a narrow margin in a campaign given high priority by the party despite the weak economy. The AKP suffered a heavier defeat in the re-run. In addition, Turkey continues to run the risk of US sanctions, triggered by delivery of S400 missile components from Russia, which is reportedly close. While Fitch expects any such sanctions would be of a relatively mild form with minimal direct economic effect, the impact on sentiment could be significant.
The president has regularly expressed unorthodox views on the relationship between interest rates and inflation, and has indicated the governor was replaced because he did not follow government instruction on interest rates. A delayed policy reaction to the deterioration in sentiment last year added to downward pressure on the lira. However, by allowing the real rate to increase as inflation has fallen, the central bank was rebuilding credibility. In Fitch’s view, this process has been set back.
A change in the trade-off between growth and inflation leading to cuts in interest rates that go beyond market expectations brings the risk of currency depreciation, which could add to stresses on corporate and bank balance sheets and impair economic rebalancing and stabilization. Fitch now forecasts a somewhat faster cut in the policy rate, to 18.0% at end-2019 (compared with 20.0% in our June Global Economic Outlook) and further depreciation. At the same time we have maintained our GDP forecast of a 1.1% contraction this year and growth of 3.1% in 2020, as weaker investment sentiment offsets the more expansionary monetary policy this year.
MEDIUM: Inflation is far in excess of peers (averaging 10.3% in the five-years to end-2018 compared with the current ‘BB’ median of 3.5). Tighter monetary policy, combined with weak domestic demand has put inflation on a downward path (to 15.7% in June from a peak of 25.2% in October) and base effects have an inflation-reducing effect later this year. However, the near-term path may be disrupted by post-election changes to administered prices and we have revised up our end-year inflation forecast in light of expected currency weakness to 16.0%, the highest of any sovereign rated above the ‘B’ category. We have similarly revised up our end-2020 and end-2021 forecasts to 13.0% and 11.0%, respectively.
A shift to a more expansionary monetary stance or a deterioration in sentiment risk undermining the adjustment of the external sector. The current account has transitioned from a deficit of $49.3 billion in the 10 months prior to July 2018, to a surplus of $2.9 billion in the subsequent 10 months. Fitch forecasts a deficit of just $4 billion in 2019 (0.6% of GDP), the smallest since 2002, driven mainly by import compression on the back of weak domestic consumption and investment. Despite this, private sector debt repayments mean the external financing requirement will remain large, estimated at $173 billion (including short-term debt) in 2019, down from $212 billion in 2018. As a result, Turkey will remain vulnerable to global investor sentiment and financial conditions, domestic political and economic policy uncertainty and any pronounced deterioration in relations with the US.
Gross official foreign exchange reserves (including gold) have risen $4.2 billion so far this year to $97.2 billion, and Fitch views this as a more important measure than net reserves (given the gross external financing requirement primarily reflects private sector liabilities). Nevertheless, on a net basis reserves have been flatter this year at $30 billion, and lower still if FX swaps with local banks are stripped out, at closer to $20 billion. Turkey’s International Liquidity Ratio, at an estimated 75.7%, continues to compare unfavorably with the ‘BB’ median of 172.5%.
Weak growth and pre-election measures have worsened public finances. Over the first five months, primary spending rose 25% and revenues 6%, with a primary deficit (program definition) of TRY66 billion (1.5% of Fitch projected full-year GDP), compared with TRY11 billion in the same period of 2018. While some of these measures have been withdrawn and Fitch assumes a tightening of policy, we nevertheless project an increase in the general government deficit to 3.8% of GDP this year, the highest since 2009 and up from 2.8% last year. In addition, the government issued notes worth 0.6% of GDP to increase the capital of state banks in April. Factoring in the bank support, we forecast general government debt/GDP to increase to 33.1% of GDP in 2019 from 30.4% in 2018 (but still below the ‘BB’ median of 44.6%). There has also been a steady increase in contingent liabilities, albeit from a low base.
Turkey’s ‘BB-‘ IDRs also reflect the following key rating drivers:
The rating is supported by Turkey’s large and diversified economy with a vibrant private sector, and GNI per capita, human development indicators, government debt/GDP and government revenues/GDP that are more favorable than the peer group medians. Set against these factors are Turkey’s weak external finances, manifest in a large external financing requirement, low foreign reserves and high net external debt, high inflation, a track record of economic volatility and political and geopolitical risks.
Challenging operating conditions continue to put pressure on the banking sector. NPLs were moderate at 4.2% at end-May 2019 but Stage 2 loans, which could migrate to NPLs as they season, have risen to a high level. The sector capital adequacy ratio (17.1%) is comfortably above the regulatory minimum, and Fitch’s stress tests show that pre-impairment profit and capital buffers provide a significant cushion against a potential marked deterioration in asset quality, a weakening in profitability and lira depreciation. There are sizeable refinancing risks given the large stock of short-term external debt on banks’ balance sheets (Q1/19: $91 billion). However, Fitch estimates banks’ total external foreign currency debt due within 12 months, net of more stable sources of funding, to be $40 – $45 billion compared with available foreign currency liquidity of $85 – $90 billion.
The two-notch downgrade of the local currency rating reflects the divergent trend between external and public finances, as the current account has adjusted, while the weaker macroeconomic environment has negatively impacted the trend in public finances. Persistent double-digit inflation and an increase in the proportion of government debt denominated in foreign currency (to 50.8% at end-May from 39% at end-2017) are also no longer consistent with the local currency rating being notched higher than the foreign currency rating.
The removal of the one-notch uplift in the Country Ceiling relative to the Long-Term Foreign-Currency IDR also reflects an increased risk, in our view, of unorthodox policy-making that could affect the availability of foreign currency for non-sovereign external debtors, as well as greater banking sector dollarization.
Rating Sensitivities
The main factors that, individually, or collectively, could lead to a downgrade are:
-Failure to rebalance and stabilize the economy consistent with lower inflation and external vulnerabilities.
-Heightened stresses in the corporate or banking sectors potentially stemming from a sudden stop to capital inflows or a more severe recession.
-A marked worsening in the government debt/GDP ratio or broader public balance sheet.
-A serious deterioration in the domestic political or security situation or international relations.
The main factors that, individually, or collectively, could lead to a stabilization of the Outlook are:
-A sustainable rebalancing of the economy evidenced by lower inflation and a stabilization in the current account balance that reduces external vulnerabilities.
-A pronounced improvement in macroeconomic policy-making and performance.
Key Assumptions: Fitch forecasts Brent Crude to average $65/b in 2019 and $62.5/b in 2020 and $60.0/b in 2021. (Fitch 12.07)
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11.16 TURKEY: EU Cuts Diplomatic Ties and Funding with Turkey Over Gas Drilling Near Cyprus
Diego Cupolo noted in Al-Monitor or 16 July that Ankara remains undeterred as EU imposes punitive measures on Turkey over controversial gas drilling activities near Cyprus.
In the latest escalation over Turkey’s gas drilling activities within disputed offshore territories near Cyprus, EU foreign ministers imposed an initial round of punitive measures on Ankara on 15 July. The move follows months of increasing tensions, in which the Republic of Cyprus issued arrest warrants for crewmembers aboard Turkish gas exploration ships and Ankara responded by deploying a third ship, expanding its energy development operations off the island’s shores.
The measures include the suspension of high-level diplomatic contact between the EU and Turkey, as well as negotiations on the Comprehensive Air Transport Agreement, which regulates regional commercial flights, and a reduction of pre-EU accession financial aid for Turkey in 2020. EU ministers also prompted the European Investment Bank to review its lending programs in Turkey, which totaled $434 million in 2018. “The council deplores that, despite the European Union’s repeated calls to cease its illegal activities in the eastern Mediterranean, Turkey continued its drilling operations west of Cyprus and launched a second drilling operation northeast of Cyprus within Cypriot territorial waters,” the foreign ministers said in a statement after passing the measures.
Markets did not initially respond to the EU measures, and the Turkish lira traded at a steady 5.70 per US dollar throughout the day.
The developments underline growing discord between Turkey and its Western allies on multiple fronts. Ankara faces a separate set of sanctions for its acquisition of Russian S-400 missiles, and its continued gas drilling activities near Cyprus have thrown long-stalled reunification talks on the island into question, disrupting a delicate geopolitical balance in a region where neighboring states are vying to develop yet untapped energy resources.
Responding to the EU measures, Turkish Foreign Minister Mevlut Cavusoglu said he was unfazed by the funding cuts and that Turkey would continue its activities near Cyprus by sending a fourth ship to the Eastern Mediterranean. “There is no need to take [the measures] very seriously,” Cavusoglu said. He added, “We have three ships there, God willing we will send a fourth ship to the Eastern Mediterranean as soon as possible. Let them understand that they cannot deal with Turkey with such methods.”
Cavusoglu’s sentiments reflect those set forth in a Foreign Ministry statement, in which he said Turkey would continue drilling activities until the Republic of Cyprus accepts a cooperation proposal to share hydrocarbon resources with Turkish Cypriots, who inhabit a third of the island in a breakaway republic recognized solely by Ankara. Turkish Cypriots are barred from receiving energy revenues from gas fields in the Republic of Cyprus’ Exclusive Economic Zone. “If Turkey understands the Republic of Cyprus and the EU’s stance as an escalation, then it can be expected that Turkey may also choose to escalate the situation,” Harry Tzimitras, director of the Peace Research Institute Oslo Cyprus Centre, told Al-Monitor.
As nations in the Eastern Mediterranean develop recently discovered offshore gas fields in the region that may one day supply both regional and export markets, officials in Ankara have repeated their frustrations over what they perceive as Turkey’s exclusion from the growing energy hub. Such discontent has translated into the increased presence of Turkish drilling ships near Cyprus, which Ankara says are rightfully exploring energy resources that belong to Turkish Cypriots.
Meanwhile, state leaders in the Republic of Cyprus have maintained that discussions of energy cooperation and revenue sharing on the island can only begin after a comprehensive reunification settlement. To date, such a settlement has proven elusive and the island remains divided among ethnic lines since an occupation by the Turkish armed forces in 1974.
Some observers have said tying energy negotiations to reunification talks may further complicate an already drawn-out process, but Tzimitras argues that restarting reunification talks would at least bring Greek and Turkish Cypriots to a negotiating table. “A very pragmatic position would be that negotiations need to restart now,” Tzimitras told Al-Monitor, adding they could facilitate “de-escalation and a platform for the two sides on the island to discuss their positions,” which could be expanded to energy cooperation issues, as well as Turkey’s ongoing drilling activities.
Yet the increased tensions come as US lawmakers voted to lift an arms embargo on Cyprus recently and the EU measures may dissuade officials in Ankara from engaging in multilateral discussions. “We don’t know what’s going to happen,” Erol Kaymak, a professor of political science and international relations at Eastern Mediterranean University in Northern Cyprus, told Al-Monitor. “This is a game of brinkmanship, a game of chicken with Turkey saying, ‘I can stand whatever sanctions you send my way, but I’m going to keep on drilling and you can’t stop me.’ And then the question is who will blink first.”
Diego Cupolo is a freelance journalist and photographer based in Ankara, Turkey. His work has appeared in The Atlantic, The Financial Times, Foreign Policy and The New Statesman, among other publications. (Al-Monitor 16.07)
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