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TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Budget Passes by One Vote While Coalition’s Labor & Shas Vote Against It
1.2 Israel’s Ministry of Industry & Trade to Invest in Periphery
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 WikiAnswers Hits 4 Million Questions
2.2 MutualArt.com Passes Member Milestone and Opens New R&D Center
2.3 Gilat Terminates Merger Agreement After Private Equity Consortium Fails to Close
2.4 US Airways to Begin Nonstop Service from Philadelphia to Israel
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 McDonald’s Partners with Total Jordan
3.2 Canadian Fish & Seafood Exports to the MENA Region Surpass $7 Million in 2007
3.3 Abu Dhabi United Group buys Manchester City Football Club
3.4 Tiger Woods Project On Track For 2009
3.5 H.B. Fuller Acquires Adhesive Business in Egypt
3.6 Turkey Signs Deal for Its First Nuclear Plant
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 IEC Joins EU Bid to Reduce Pollution
4.2 NGO to Israeli Government: Millions of Shekels Lost by Not Enforcing Polluter's Fee!
4.3 Negev Farm Sets Up First Solar Facility
4.4 Tel Aviv, Ra'anana & Petah Tikva Lead Blacklist Of Water Wasters
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Jordan and Canada Sign FTA
5.2 Jordan Holds 2008 IMF Article IV Consultation
5.3 Jordan & France Sign Nuclear Deals
5.4 Iraq & China Agree on $3 Billion Oil Service Deal
5.5 GCC Customs Duty List Ready By 2009
5.6 Persian Gulf Nations Likely To Invest Over $320 Billion in Energy Sector By 2018
5.7 Kuwait’s Oil windfall Produces $14 Billion Surplus
5.8 Kuwait Prepares $187 Billion Development Plan
5.9 Kuwait Refinery Upgrade Could Cost $22 Billion
5.10 Qatari Population Surges 18% in First Half of 2008
5.11 Qatar Signs Railway Study Deal With Deutsche Bahn
5.12 UAE to Remain With Currency Peg In View Of Rising Dollar
5.13 Saudi & Abu Dhabi Inflation at Record Highs
5.14 UAE Government in Talks With Nuclear Giant
5.15 UAE’s $5.8 Billion Smelter Will Make It a Global Powerhouse
5.16 Abu Dhabi Economy May Grow to $179 Billion by 2010
5.17 Abu Dhabi Sees Water Demand Jump 43%
5.18 Saudis to Set Up Company For Farm Investment
5.19 Egypt Among Three Largest Recipients of FDI
5.20 Libya To Sign Free Trade Deal with EU
5.21 Italy & Libya Sign Landmark Compensation Accord
5.22 Challenges To Pakistan's Ratings Mount
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey to Amend Money Laundering Law for EU Alignment
6.2 Turkey Talks Black Sea Oil With Firms
6.3 CBT Governor Announces Transition Period of “Turkish Lira”
6.4 Cypriot Inflation Hits New High, But Growth Revised Upwards
6.5 Cyprus to Record Strongest Population Growth by 2060 in EU27
6.6 Submarine Pipeline To Carry Water From Turkey To Northern Cyprus
6.7 Cyprus’ Economic Growth Expectations
6.8 Greek Economy Is Holding Up
6.9 Greece Ratifies South Stream Pipeline Deal
6.10 Bulgarian Incoming Foreign Investments Down by 12.8%
6.11 Bulgarian Unemployment Rate Stable
6.12 Promising Natural Gas Deposit Discovered Close to Bulgaria's Pleven
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Paul McCartney To Perform In Israel
*REGIONAL:
7.2 UAE President Ranked World's 2nd Richest Royal
7.3 NYPD to Make Abu Dhabi Anti-Terror Move
7.4 Burj Dubai Now a Record 688 Meters Tall And Rising
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Kamada Successfully Completes Phase II Trial with Aerosolized AAT in Cystic Fibrosis Patients
8.2 Teva Pharmaceutical to Invest in Andromeda Biotech’s Lead Product DiaPep 277
8.3 Optimata Granted Patent for Modeling Angiogenesis and Providing Optimal Treatment
8.4 Oridion Expands its OEM Partnerships - New Agreement with Spacelabs Healthcare
8.5 Monsanto & Evogene Collaborate to Increase World’s Food Supplies
8.6 Monsanto Purchases $18 Million Stake in Evogene
8.7 Pharmos Corporation Announces That it Will Cease Operations in Israel
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Citrus Fruit Producer Named Exporter Of The Year
9.2 ECI Telecom Selected as Supplier for Network Expansion in Costa Rica
9.3 Check Point Delivers New & Safer Computer Security With ZoneAlarm Internet Security Suite 8.0
9.4 Check Point Ships First Single Agent for Endpoint Security
9.5 Elbit Systems' Hermes 450 Records Another Success
9.6 Hanaro Telecom Selects Corrigent to Deploy a Converged Broadcasting Network for IPTV Services
9.7 Wavion and Leadcom Provide Public Safety Solution to Ness Ziona Municipality
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s Second Quarter GDP Rises By 4.2% Annual Pace
10.2 Israel’s Imports by Country of Origin 2007
10.3 Israel’s Chemicals Exports Increase By 55% in 2008’s First Half
10.4 Israel’s Unemployment at 20 Year Low
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11: In Depth
11.1 ISRAEL: Fitch Says Israeli Banks Benefit from Domestic Economic Growth
11.2 LEBANON: Credit Outlook Improves
11.3 LEBANON: Widening Trade Deficit
11.4 BAHRAIN: Waste Management
11.5 BAHRAIN: Investing in Food Security
11.6 QATAR: Steadier Growth
11.7 UAE: Dubai’s Multi Faceted Diamond Trade
11.8 EGYPT: Push for Fertilizers
11.9 PAKISTAN: Pakistani Coalition Collapse
11.10 TURKEY: Risk Alert - Is Inflation On The Way Down?
11.11 GREECE: Doubts Resurface About Greece's Emission-Curbing Commitments
11.12 BULGARIA: Skin Care, Cosmetics & Fragrances Markets
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Budget Passes by One Vote While Coalition’s Labor & Shas Vote Against It
Following a marathon 16-hour session concluding at 2 AM in the morning of 25 August, the Cabinet approved the proposed 2009 budget by a 13-12 vote. It ended with Prime Minister Olmert winning his demands and coalition partners Labor and Shas voting against the budget. Labor threatened earlier to quit the Cabinet if the budget was passed and Olmert later said they would be fired if they did not support the government proposal. Histadrut Labor federation’s leader Eini said the last-minute compromises by Finance Minister Bar-On (Kadima) on social spending satisfied most of his demands, stalling his call for a general strike. Bar-On said that the passing of the budget was "an important accomplishment."
The debate was permeated with accusations by Labor that Finance Minister Bar-On actually wanted the budget to fail in order to help force the government to fall, a move which might help Foreign Minister Livni, whom he backs, to win the leadership primaries. Similarly, Labor party chairman and Defense Minister Barak was accused of pulling out all stops to have the budget defeated, for political reasons. Barak failed in his attempt to have the vote postponed until week, and Kadima leaders condemned him for politicking instead of studying the proposed budget. Later, Barak complained that the vote was held at such a late hour that the ministers could barely understand what they were voting for. Olmert retorted that if Barak's demands had been met, "you wouldn't be complaining about how late it is." (IsraelNN25.08)
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1.2 Israel’s Ministry of Industry & Trade to Invest in Periphery
The Ministry of Industry, Trade and Labor has announced that it will invest a some $700m over the next three years in outlying areas under a program agreed on by its director general and the Ministry of Finance budget director. The program, which was approved by the cabinet at its meeting on 25 August, will employ a wide range of tools and new plans, designed to strengthen outlying areas by providing government backing for economic ventures that could create thousands of jobs. The director of development for the Galilee and the Negev said that the plan would have a number of focused targets. Regional industrial zones will qualify for special incentives substantially larger than those awarded to regions classed as Priority A development areas. In addition, the Investment Promotion Center will set out new guidelines for grants to low or mixed technology companies in these areas. A research institute for traditional industries will also be opened in one of the regional industrial zones. (Globes 26.08)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 WikiAnswers Hits 4 Million Questions
Answers Corporation announced that its WikiAnswers social knowledge Q&A community reached forum questions only 72 days after reaching the 3 million milestone. The 4 millionth question was: “Are there any new sports in the 2008 Beijing Olympics?” The question was answered and placed into the Beijing Olympics category by members of the WikiAnswers community, a group of over one million registered users and over 350 volunteer supervisors from every corner of the globe. WikiAnswers continues to increase its community base, working to grow its searchable and informative database of questions and answers. According to Bob Rosenschein, Answers CEO, "The 4 million questions so far represent the dynamic harnessing of collective wisdom of the greater WikiAnswers' community and its dedicated supervisors. The fact that we are witnessing this acceleration during the summer months reinforces our optimism about the upcoming back-to-school season." WikiAnswers, ranked earlier this month as a Top 20 Web 2.0 Site by Hitwise, a leading online competitive intelligence service. WikiAnswers is a social knowledge Q&A site with nearly 3,500 categories and close to 11m US unique monthly visitors (comScore, July 2008).
Jerusalem’s Answers Corporation (http://www.answers.com) owns and operates Web properties dedicated to providing useful answers in thousands of categories -- WikiAnswers and Answers.com. The award-winning reference site Answers.com includes content on five million topics from over 180 licensed sources from leading publishers, including Houghton Mifflin Company, Barron's, Wikipedia, Encyclopedia Britannica. (Answers Corporation 25.08)
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2.2 MutualArt.com Passes Member Milestone and Opens New R&D Center
New York based MutualArt.com (http://mutualart.com), the website that introduced content aggregation and personalization to the art public, announced on 27 August the opening of its Research and Development Center in the high tech hub of Tel Aviv, Israel, to service its rapidly growing membership. Five months after launch, MutualArt.com has passed the 50,000 mark, a remarkable member acquisition rate among sites targeting the affluent and tastemakers. MutualArt.com's members are leading art collectors and donors to museums and cultural causes worldwide, as well as curators, gallerists, critics and scholars, and thousands of people wishing to learn about art collecting and investing. MutualArt.com offers many unique features: personalization technology allowing members to track artists and art categories that interest them; the world's most comprehensive guide to art events, including art fairs, auctions and VIP galas and openings in 42 cities around the globe; and a massive archive of over 150,000 art-related articles from the leading art publications and critics. The most comprehensive repository for art information online, MutualArt.com boasts partnerships with over 1800 museums, galleries and investors. (MutualArt.com 27.08)
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2.3 Gilat Terminates Merger Agreement After Private Equity Consortium Fails to Close
Gilat Satellite Networks has notified the consortium of buyers that had agreed to purchase the company that it was terminating the Agreement and Plan of Merger entered into on March 31, 2008. Gilat cited the buyer’s intentional breach of the merger agreement and failure to close the merger transaction prior to 5:00 P.M. New York Time on 28 August 2008, the extended time established to complete the transaction. Since notifying the Purchasers of the requirement to close the transaction on or before August 28, 2008, Gilat received numerous verbal proposals from the Purchasers, all of which were substantially different from the agreed upon terms in the definitive agreement. Gilat’s Board of Directors unanimously determined not to accept these verbal proposals and to terminate the Agreement and Plan of Merger as of August 28, 2008. The definitive agreement provides for a termination fee in the amount of $47.3m, payable to Gilat by September 10, 2008, in the event of an intentional breach of the agreement by the Purchasers.
Petah Tikva’s Gilat Satellite Networks (http://www.gilat.com) is a leading provider of products and services for satellite-based communications networks. The Company operates three business units: (i) Gilat Network Systems (GNS), which is a provider of network systems and associated professional services to service providers and operators worldwide; (ii) Spacenet Inc., which provides managed services in North America for businesses and governments through its Connexstar service brand and for consumers through its StarBand service brand; (iii) Spacenet Rural Communications, which offers rural telephony and Internet access solutions to remote areas, primarily in Latin America. (Gilat29.08)
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2.4 US Airways to Begin Nonstop Service from Philadelphia to Israel
Starting in July 2009, US Airways will make history when the airline begins the only nonstop service between Philadelphia and Israel. US Airways will begin the new daily, year-round service between Philadelphia and Tel Aviv on July 2, 2009. Teams from the Israel Ministry of Tourism and US Airways drafted a cooperation strategy for 2008-2009 at US Airways headquarters in Tempe, Arizona, on Aug. 21. The Israel Ministry of Tourism expects that the new service will significantly add to the already record number of American tourists visiting Israel. In 2007, more than 500,000 Americans visited Israel, setting the record for U.S. tourism to the Holy Land in a year. With numbers from the first two quarters of 2008 again showing increases, IMOT projects that 2008 will set a new benchmark for American tourism to Israel. The new flight strategy will also have a direct impact on the economies of both nations as US Airways is the fifth largest domestic airline, with approximately 3,500 flights per day and service in more than 230 communities. International studies have estimated that one daily trans-Atlantic flight on a wide body jet contributes hundreds of millions of dollars into a local economy and sustains thousands of jobs.
With its central office in Jerusalem, Israel, the Israel Ministry of Tourism (http://www.goisrael.com) leads the State of Israel's efforts at maintaining a strong tourism industry. The Ministry of Tourism promotes tourism to Israel via its Israel Government Tourist Offices in Europe, Asia and the Americas. (IMOT02.09)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 McDonald’s Partners with Total Jordan
McDonald's-Jordan restaurants has signed an agreement with Total Jordan to become an exclusive fast food partner in most service stations owned by Total in the kingdom. The deal was signed at the McDonald’s offices in Amman by Total Jordan managing director Guichard and McDonald's Jordan chairman Armoush. According to the agreement, McDonald's-Jordan will open one branch in every station for Total. (TradeArabia 31.08)
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3.2 Canadian Fish & Seafood Exports to the MENA Region Surpass $7 Million in 2007
Canadian fish and seafood exports across MENA climbed to over $7.1m in 2007, recording a 43% increase when compared to the previous year, according to data released by the Consulate of Canada in Dubai. Canada is the world’s fourth largest exporter of fish and seafood products, exporting to approximately 130 countries. Over 30% of Canada’s fish and seafood exports to the MENA region find their way to the UAE marketplace. The booming demand for higher-end seafood products such as scallops, lobster, crab, shrimp, oysters, mussels and salmon in the region, especially in the dynamic growth economies like the UAE, has attracted the attention of top Canadian seafood players. The growth of the hospitality sector and the rising number of ever-more affluent and demanding tourists are driving growth for innovative foodservice menus featuring high quality and variety when it comes to fish and seafood products. The presence of state-of-the-art air cargo handling facilities and new non-stop Canada-UAE air services is also fuelling Canadian seafood players’ interest in fully leveraging this profitable market. (Al Bawaba 21.08)
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3.3 Abu Dhabi United Group buys Manchester City Football Club
Abu Dhabi United Group for Development and Investment (ADUG) has bought the English football club Manchester City. The amount paid for the acquisition of the club was not disclosed. The acquisition is seen as assisting ADUG and the Abu Dhabi brand name and allowing UAE players to play in the English premier league. Former Thailand Prime Minister Thaksin Shinawatra was the previous owner of Manchester City, one of the oldest English clubs founded in 1880. Thaksin had been looking to sell City for several weeks after his assets were frozen as a result of corruption and fraud charges in Thailand. A period of due diligence for all parties, including the FA Premier League has now been entered. ADUG expects to get a formal approval from the authorities in the UK for their acquisition of the club. Abu Dhabi United Group had been in a series of negotiations with Thaksin to purchase the club, until it successfully signed the agreement of purchase. The purchase agreement gives ADUG all management rights and Thaksin will be honorary president of the club without administrative responsibilities. ADUG will also solve all the club's problems and clear any pending payments, and will comprehensively support the club. (GN01.09)
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3.4 Tiger Woods Project On Track For 2009
Tatweer announced on 25 August that the first phase of its $1.1b Tiger Woods Dubai residential golf development is on track to be completed in the fourth quarter of next year. Properties next to Tiger Woods’ own house are still available, project director Abdulla Al Gurg told reporters at a press conference. Golf in the UAE is still “in its infancy stages” but local junior golfers are getting better by the year and it is only a matter of time before a UAE national starts to play professionally, he added. The project will house 197 properties, who will be given priority to membership of the 200 member strong golf club. The Tiger Woods Dubai development includes an 18 hole golf course, a golf academy and a luxury boutique hotel designed by Lebanese designer Elie Saab. (AB25.08)
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3.5 H.B. Fuller Acquires Adhesive Business in Egypt
St. Paul, Minnesota’s H.B. Fuller Company announced that it has completed the acquisition of the majority of the assets of privately held Egymelt, a manufacturer and marketer of hot melt and specialty water-based adhesives headquartered in Cairo, Egypt. Egymelt currently employs 21 people and had net revenue in 2007 of approximately $4m. The principle assets acquired include a manufacturing facility, equipment and inventory. The results of this business will be included in the Company’s European operating segment. Plans are already in place and being executed upon to expand capacity and augment the capability of the business to more fully serve and support key global account partners. H.B. Fuller Company is a leading worldwide manufacturer and marketer of adhesives, sealants, paints and other specialty chemical products, with fiscal 2007 net revenue of $1.4b. (HBF02.09)
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3.6 Turkey Signs Deal for Its First Nuclear Plant
On 20 August, Turkey’s Dogan Enerji signed an accord with Turkish, Belgian and Canadian companies to take part in a tender to build and operate Turkey’s first nuclear power plant, parent company Dogan Holding said. Its partners in the deal are Turkish conglomerate Anadolu Endustri Holding, Brussels-based energy company Unit Investment NV and Canada’s Bruce Power. Turkey has set a deadline of September 24 for bids to build the plant at Akkuyu near Mersin on the Mediterranean coast with a capacity of 4,000 megawatts, plus or minus 25%. Turkish conglomerate Sabanci said last month it was in talks with General Electric Hitachi Nuclear Energy and Spanish utility Iberdrola SA on the tender. (21.08)
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 IEC Joins EU Bid to Reduce Pollution
Israel Electric Corporation has joined a EU program for reducing carbon dioxide emissions at power plants. The project is examining new technologies for separating carbon dioxide from other gases during the burning of fuels. The budget for the project is €13m for the project, with the IEC contributing NIS 3.5m. IEC attaches great importance to the project, since carbon dioxide accounts for a substantial part of power plants' pollutants. Separating carbon dioxide is a first step, because the gas can then be used for commercial purposes as a raw material in manufacturing and the chemical industry, such as in soft drinks. IEC will use nanotechnologies in filters and membranes that will separate carbon dioxide from other gases. After selecting the vendor for the technology, IEC plans to initiate a pilot at one power station in 2009. IEC claims in its environmental report, published this week, that its carbon dioxide emissions in 2007 were unchanged. While emissions rose 6.5% compared with in 2006, the company attributes this to a 6% increase in electricity production in 2007. (Globes 21.08)
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4.2 NGO to Israeli Government: Millions of Shekels Lost by Not Enforcing Polluter's Fee!
Israel's Zalul Environmental Association (http://www.zalul.org.il) reported that the state is losing hundreds of millions of shekels each year by not enforcing regulations that would charge companies for dumping pollutants into the Jewish state's waters. In its annual State of the Seas report, Israel's Zalul Environmental Association found that more than 50 million cubic meters of industrial waste is dumped into the country's coastal waters each year by special permit of the Inter-ministerial Committee for Issuance of Discharge Permits. However, the state has failed to collect any of the discharge fees that the committee is supposed to collect. Under Israeli law, companies are permitted to dump their wastes only after paying a discharge fee for the necessary permit. Including municipal sewage from treatment plants, Zalul estimated that more than 100 million cubic meters of waste have ended up in Israel's waters. Zalul's report looks at the discharge fees that Israel should have collected from companies requesting permits to dump their waste. According to the group's calculations, based on fees of 4 to 16.75 shekels per cubic meter, the state has lost out on at least NIS 200 million and maybe as much as NIS 900 million (the equivalent of approximately $250m).
Rather than being put toward investments to protect the environment or effluent treatment technologies, Zalul found that these millions of shekels are instead remaining in the hands of corporations that show little remorse for their actions or concern for the environment. The 2008 State of the Sea Report was written in an attempt to make the public aware of how much money the State of Israel is losing by not implementing this discharge fee - money that can be used to rehabilitate rivers and help give back to the devastated environment." (Zalul 26.08)
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4.3 Negev Farm Sets Up First Solar Facility
A farm in the Negev has established the first 50 Kilowatt solar energy system in Israel. The Tenne Farm in Ramat Hanegev built the system in stages. A 6 kilowatt facility was set up two years ago, before the Public Utilities Authority (Electricity) published its regulations on the subject. A few months ago, the Tennes set up a roof-top apparatus to generate 34 kilowatts of power, and recently added another 10 kilowatt ground-level system that tracks the sun throughout the day. The system also includes a wind turbine generating 2 kilowatts which is still being set up. The overall cost of the system is estimated to be NIS 1.5 million. The farm will use about a third of the electricity generated, and two thirds will be sold to the Israel Electric Corporation (IEC) at rates established by the Public Utilities Authority (Electricity). The system at Tenne farm is viewed as validation that it is possible to set up solar power systems on agricultural facilities. (Globes 27.08)
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4.4 Tel Aviv, Ra'anana & Petah Tikva Lead Blacklist Of Water Wasters
Tel Aviv, Ra'anana and Petah Tikva lead the Water Authority's list of shame that exposes the most wasteful cities in Israel when it comes to water. The list includes the local authorities that commit flagrant violations of water-saving regulations, such as watering public parks while ignoring the new water restriction rules that took effect in late August. The Water Authority said that in its attempts to inform the public and raise awareness, it would publish lists of violators. The authority added that its two campaigns have helped encourage households to save water, though it is still too early to estimate the amount. (29.08)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Jordan and Canada Sign FTA
The third round of negotiations between Jordan and Canada, which were held in Amman, was concluded with signing a preliminary free trade agreement to increase trade volume and the establishment of joint investments in both countries. The agreement, which is the first in the Arab region signed with Canada, will be signed in final form during the awaited visit of the Canadian Prime Minister to Jordan. Another two agreements will be signed in the field of environment, labor, and protecting and encouraging investments between the two countries in a timely manner. The agreement was signed by secretary-general of the Ministry of Industry & Trade Chairman of the Jordanian delegation Muntaser Al Uqla and the Director of access to markets department in the Canadian Ministry of International Trade Martin Brand. Uqla said that the agreement was an outcome of HRH Abdullah II’s visit to Canada in July last year, when the leaderships of the two friendly countries announced the start of negotiations on signing the free trade agreement between the two sides, pointing out that the agreement will add special advantages to the national economy through preferential advantages given to Jordan. He pointed out that the Jordanian commodities exported to the Canadian markets will be exempted of customs duties, while Jordan will reduce customs duties on Canadian commodities to a transitional period of five years. The other hand, Uqla said that the signing of cooperation agreements on environment and labor between the two countries will contribute to improve labor standards and environment in Jordan to cope with international requirements and strengthening technical cooperation between the two sides in these areas, which would have positive effects on business and investment environment in Jordan. (Petra26.08)
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5.2 Jordan Holds 2008 IMF Article IV Consultation
The 2008 Article IV consultation discussions with Jordan focused on the appropriate policy response to mounting fiscal and external vulnerabilities and higher inflation. Jordan’s economy continued to perform well in 2007, with 6% real GDP growth and lower unemployment. However, sharply higher world fuel and food prices led to a marked widening of the fiscal and external current account deficits and, more recently, a jump in inflation. Economic prospects remain broadly favorable, though the public and external sector imbalances imply increased challenges to sustaining strong macroeconomic performance.
The Jordanian authorities plan to lower the fiscal deficit in 2008, despite pressures to increase spending following the removal of fuel subsidies. Although specific measures have not yet been identified, they expect to reduce the deficit substantially more over the medium term, mainly via lower expenditure growth. The exchange rate peg has anchored monetary policy and prevented an even larger deterioration of the current account last year, when there was upward pressure on the dinar. Interest rate differentials against the U.S. will be allowed to widen further to curb inflationary pressures and credit growth. Structural reforms are proceeding, aimed at reducing distortions and enhancing the private sector’s growth prospects.
The IMF recommended that the planned tightening of fiscal policy in 2008 will help narrow the fiscal and external imbalances and bring inflation down. Significant further fiscal consolidation is needed over the medium-term to reduce the still-high public debt and the large current account deficit. The peg remains appropriate for Jordan. As long as short-term capital inflows remain limited, there is scope to tighten monetary conditions to stem inflation. Progress on the structural reform agenda is key to sustaining strong economic performance. Priority areas include public financial management, the framework for public-private partnerships, liberalization of the petroleum sector, developing the debt market, and continued enhancement of financial sector supervision. (IMF26.08)
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5.3 Jordan & France Sign Nuclear Deals
On 27 August, Jordan signed in Paris a nuclear agreement with France and a memorandum of understanding (MoU) with the French company, Areva, on nuclear cooperation. Prime Minister Nader Dahabi said this week Jordan would buy a nuclear reactor from a French private company. HRH King Abdullah II and French President Sarkozy attended the signing of the deals. On May 30, Jordan and France signed a cooperation agreement to develop nuclear energy for peaceful purposes, signaling the start of an ambitious project, which will provide an alternative source of energy for the Kingdom, which imports nearly all its energy needs. Under the multi-pronged deal, France will help the Kingdom develop a nuclear program to generate electricity and power water desalination plants, in exchange for uranium mining rights in the southern region. Jordan has also struck deals in the field of nuclear cooperation with the UK, US, Canada and China. Another agreement is expected with Russia. Head of Jordan Atomic Energy Commission Touqan said the MoU with Areva is “declaration of principles” that set the guidelines for a comprehensive agreement that is being negotiated now. He expected the exploration of uranium deal to be finalized in September, stressing that the agreement with France is not confined to mining but it tackles all aspects of cooperation in the field of peaceful nuclear energy. He said Areva will be working to calculate the exact quantities of uranium in the Kingdom, which he said are available at a commercial level. (Petra27.08)
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5.4 Iraq & China Agree on $3 Billion Oil Service Deal
Iraq and China have agreed the terms of a $3b oil service contract, Iraq's oil minister said on 27 August, announcing the first major oil contract with a foreign firm since the toppling of Saddam Hussein. The contract is for the Adhab oilfield and replaces a contract signed with China before the 2003 US-led invasion of Iraq. The revised deal has raised the target oil output for the field to 110,000 barrels per day (bpd), up from the previous 90,000 bpd. Production should start in three years and continue for 20 years. Despite that, Iraq still hoped to boost oil output by 500,000 bpd by the middle of next year. (AB28.08)
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5.5 GCC Customs Duty List Ready By 2009
Gulf Arab states should this year finalize a list of goods on which they can collect more than the agreed 5% duty under a customs union, a UAE official said on 1 September. The six Gulf Cooperation Council (GCC) countries, including Saudi Arabia, introduced a customs union in 2003 as one preparatory step towards the formation of a regional common market. But many of them still levy duties of more than the unified 5% on imports of some goods in order to protect local industries, said Saeed Khalifa al-Marri, deputy director general of the UAE Federal Customs Authority. This is one of the key hurdles to implementing the regional customs union by the end of 2008 - a deadline they have been urged to meet by Saudi Arabia's King Abdullah, Marri said. Saudi Arabia for instance charges more than 5% on about 400 imported goods, he said. The kingdom said in April it was cutting import tariffs on food and building materials, having already reduced duties on food products such as frozen poultry, dairy goods and vegetable oils to 5% from about 20%. The customs agreement will apply to 180 items ranging from basic foods, necessary building materials and other consumer goods. At a recent meeting in Riyadh, the GCC customs union committee drafted a recommendation to Gulf finance ministers to speed up the completion of the unified customs list which the ministers will study at a meeting this month. Implementation of the customs union, which initially envisioned a three-year transition period, has been fraught with hurdles as Gulf customs authorities struggle to raise awareness of the rules among traders. The main feature of the union was the introduction of a 5% tariff charged at the first Gulf port of entry, after which the goods can move freely through the region. GCC states except Oman are also driving to meet a 2010 deadline to negotiate a single currency but policy makers including Saudi and United Arab Emirates central bank governors have said the deadline would be very difficult to meet. (AB01.09)
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5.6 Persian Gulf Nations Likely To Invest Over $320 Billion in Energy Sector By 2018
Gulf Cooperation Council (GCC) countries are likely to invest more than $320b by 2018 to develop oil, gas, power and petrochemical projects to meet burgeoning energy demands of their fast expanding economies, industry estimates show. Research shows that most of the energy-related investments in the UAE would go towards building new utilities like power plants and cooling plants to meet the growing demands of the construction business. According to the latest UAE official figures, by 2020, officials expect UAE electricity demand to exceed 40,800 megawatts (MW), based on an annual growth rate of 9% beginning in 2007. At present, almost 85% of the country's 18,000MW power capacity is generated from gas-based plants. The remaining capacity is generated from oil-fired plants. Nearly all of the power generated in Dubai and Abu Dhabi comes from gas-fired plants. Investment by GCC countries in the chemicals and petrochemicals sector is projected to reach $120b during the next five years, figures from the Gulf Organization for Industrial Consulting show. GCC petrochemical production contributes nearly 7% of the global petrochemical output at present. (AB01.09)
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5.7 Kuwait’s Oil windfall Produces $14 Billion Surplus
Higher revenue from oil helped Kuwait post a $14.22b preliminary surplus in the first quarter of its 2008/09 fiscal year, Kuwaiti government data showed. The government income of the world's seventh-largest oil exporter in the three months to June 30 was $25b, nearly 53% of a state forecast of $47.43b for the whole fiscal year. Oil revenue in the first three months was $23.5b, compared with a forecast of 43.5b for the fiscal year which started on April 1, the data showed. The budget was based on a conservative oil price estimate of $50 per barrel. The budget forecast an annual deficit of $28.24b. The parliament approved in June the 2008/09 budget with record expenditure of $71b, despite warnings by the central bank to contain spending to tackle record inflation. Kuwait invests 10% of its revenues in a fund for future generations, which is managed by state-run Kuwait Investment Authority (KIA). A surplus means KIA has more funds to spend on foreign investments. The country posted a surplus of $34.887b in 2007/08. (KWA28.08)
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5.8 Kuwait Prepares $187 Billion Development Plan
Kuwait is preparing an $186.9b five-year plan aimed at boosting foreign investment and developing the financial sector. Kuwait wants to diversify its economy away from oil by becoming a regional financial centre and attracting tourists as neighboring Dubai and Bahrain have done, the state's 2009-2014 policy strategy plan showed in April. It will cost $186.778b dinars to achieve the plan, of which Kuwait's government will invest $82b and the private sector $104.5b. The draft law for the plan will be presented to parliament in October for approval. Under the plan, prepared by the country's top planning council, Kuwait wants to boost its non-oil economy, which currently accounts for less than 10% of state revenues. It also seeks to ease land ownership rules by giving the private sector more access to land, as well as controlling spending as inflation rises. More than 90% of land in Kuwait is owned by the government. The Ministry of Information will also build a media city in which 24% will be owned by the government, 26% by listed companies on the Kuwait Stock Exchange, and the rest sold to the public. (Awan21.08)
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5.9 Kuwait Refinery Upgrade Could Cost $22 Billion
Kuwait's refinery upgrade project could cost as much as $22b, $7b more than the initial estimates. State refiner Kuwait National Petroleum Co (KNPC) is awaiting approval from the Supreme Petroleum Council and Kuwait Petroleum Corp (KPC) to launch a tender to upgrade its Mina Abdullah and Mina Al-Ahmadi refineries. The refinery upgrade could cost as much as $22b, said the paper, adding that the project would be completed by Q4/13. The refinery upgrade, which is due to take effect after the closure of the ageing Shuaiba refinery in 2011, is part of plans by the major Opec producer to raise its refining capacity to 1.415m bpd from 930,000 bpd. KNPC chairman Farouk Al-Zanki told reporters in July KNPC had started prequalifying several firms for the tender, which will be split into several packages, adding that it might be worth as much as $14.96b. KNPC plans to boost the capacity of the two refineries to 800,000 bpd from 600,000 bpd by adding more units to Mina Abdullah, while Mina Abdullah would be mostly revamped. The tender would be based on a cost-plus basis like Al-Zour project. Under such a system, companies typically submit detailed cost estimates for the refinery, plus their profit margin. (Al Rai21.08)
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5.10 Qatari Population Surges 18% in First Half of 2008
Qatar's population grew 18% in the first half of 2008 to 1.45m people, the Qatar Statistics Authority said on 21 August. The population of the world's largest exporter of liquefied natural gas had grown 17% in 2007 to 1.23m. Of the total population as of the middle of 2008, 75.7%, or 1.1m, were men. Like many of its Gulf Arab neighbors, Qatar relies heavily on migrant labor from South Asia as it expands its $69b economy. Real gross domestic product (GDP) growth of 10.9% this year would be the highest in the Gulf region, according to the average forecast of economists in a Reuter’s poll in July. Per capita income in the Gulf state is forecast to surge 23% this year to $96,484, second only to Luxembourg. (AB21.08)
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5.11 Qatar Signs Railway Study Deal With Deutsche Bahn
German railway operator Deutsche Bahn has signed a deal to help design a multi-billion dollar rail network in Qatar. Qatari Diar Real Estate Investment Co, a unit of the country's sovereign wealth fund, said the project's partners would develop the blueprint for integrating Qatar's planned railways into a national and regional network. Under its remit, Deutsche Bahn will provide technical and financial assessment studies. Qatar is planning a high-speed rail link between the capital Doha and neighboring Bahrain via one of the world's longest bridges, nationwide freight and passenger services as part of a wider Gulf Arab rail network, and a metro in the capital city. With Gulf countries witnessing annual population growth of between 5 to 10%, cities are increasingly facing congestion, forcing governments to spend on improving infrastructure. The Gulf Cooperation Council, which groups the six regional states, is working on a feasibility study with the World Bank to create a $2.5b pan-Gulf rail network. Dubai is expected to complete the first phase of a two-line $4.4b metro by September 2009. Other Gulf cities including Riyadh, Mecca, Abu Dhabi and Kuwait are also planning rail systems. Deutsche Bahn has been looking at expanding its presence in the Gulf as regional economies buoyed by a more than a fivefold rise in oil prices since 2002 move to diversify their economies. The rail firm was among bidders for an estimated $5b railway contract to build a 1,100 km railway across Saudi Arabia's desert. (Der Spiegel 27.08)
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5.12 UAE to Remain With Currency Peg In View Of Rising Dollar
The Gulf’s oil producing countries are unlikely to complete monetary union by a 2010 target, but the dollar's rebound is giving them more reason to remain with their currency pegs, according to the UAE central bank governor on 27 August. Sultan Al Suwaidi acknowledged there were challenges to overcome before the long-standing plan for a single regional currency could be concluded. In July, Al Suwaidi's Saudi counterpart Hamad Al Sayyari said the bloc will decide on a "feasible" schedule for rolling out a single currency after reviewing the 2010 target. Bahrain's Rasheed Al Maraj also said then the five nations were unlikely to set a new deadline this year for the union, but he added that meeting the deadline would be difficult. Kuwait has severed its dollar peg, which was intended to remain intact until monetary union. Oman said in 2006 it will not join. Recent gains in the dollar’s value were further justifying the UAE's policy to keep the link to the US currency, Al Suwaidi said. Dollar pegs have forced Gulf central banks to track seven US interest rate cuts in the past year, driving real interest rates into negative territory and stoking record inflation. Al Suwaidi also said oil prices could fall to a range of $60 to $80 per barrel, from over $119 now. But the governor did not offer a time frame for the possible price fall and cautioned that predicting oil prices was "difficult and dangerous". (GN29.08)
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5.13 Saudi & Abu Dhabi Inflation at Record Highs
Inflation in Saudi Arabia in July accelerated to 11.1%, its highest level in at least 30 years, while in Abu Dhabi, the biggest member of the UAE federation, prices rose 12.9% in June, according to the latest data. Inflation in Gulf states has raced ahead on record revenues from windfall oil profits and massive public spending plans designed to transform the desert states into centers of finance, tourism, manufacturing and education. The states have pegged their currencies to the US dollar, whose recent recovery has done little to dampen inflationary fires, leaving Gulf central banks with few tools to combat economic overheating and soaring prices.
In Saudi Arabia, inflation has stirred public discontent and led the government to attempt a number of measures to mitigate pressures, mainly in the form of price controls, charity and subsidies on food items. Analysts expect annual inflation to hit its peak towards the end of the third quarter which coincides with the end of Ramadan, the Muslim fasting month which began on Monday and typically sees a surge in both consumption and prices. Heavy government spending, soaring food costs and a housing bottleneck that has pushed rents higher was more of an inflation driver than loose monetary policy by the central bank.
Inflation in neighboring Abu Dhabi rose 12.88% in the second quarter of 2008, signaling a likely multi-decade high for the federation on the whole. The UAE only releases national inflation figures annually. At 11.1% in 2007, it had hit the highest level in at least 20 years. Some experts say the true inflation rate in the UAE far exceeds official figures and is likely closer to 20%. Increases in food prices drove the rise, with the food index rising 19.24% in the quarter, compared to one year ago. The rental index, which includes rents, fuel and water, rose by 18.29%. (AB01.09)
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5.14 UAE Government in Talks With Nuclear Giant
General Electric, the world’s biggest manufacturer of power plant equipment, is in talks with the UAE government over its proposed nuclear energy program. In March the UAE announced it had created an agency to establish a nuclear power industry, and would seek international investors. The UAE has no plans to enrich uranium and will instead depend on outside sources to provide it with nuclear fuel, according to the government. The agency will have a $100m budget to manage the nuclear program. It was reported on August 17 that the UAE had invited companies to bid for a contract to manage its nuclear power program, and would award the contract by year-end. Power demand in the UAE is surging as it uses record oil revenue to develop new industries and infrastructure. Abu Dhabi, the biggest of the UAE’s seven emirates, will need to build additional power capacity this year to avoid a blackout in 2012, according to a recent report. In July GE, seeking higher returns overseas and Abu Dhabi’s Mubadala Development Co, formed a partnership to invest in emerging markets in the Middle East and Africa, led by an $8bn commercial finance fund. (AB27.08)
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5.15 UAE’s $5.8 Billion Smelter Will Make It a Global Powerhouse
The development of the world’s biggest aluminum smelter in the UAE will signal the country’s arrival as one of the global powerhouses for production. When the first phase is up and running in April 2010, the $5.8b smelter will be responsible for 2 - 3% of total aluminum production in the world, producing 700,000 metric tons a year and will open the way for the diversification of the UAE export market away from oil and gas. From its six square km base in Khalifa Port and Industrial Zone in Taweelah, the smelter will help encourage further industrial growth in the area, such as the establishment of foundries. A joint venture between the governments of Abu Dhabi and Dubai, the cost of the smelter has risen from $5.67b as the site is larger than first planned. So far $2.9b and four million man hours have been spent developing the operation with the 4,000-strong workforce expected to swell to 14,000 at the height of the construction project. The venture has had to overcome the challenge of securing raw materials and workers. Around 2,000 workers will be employed in the first stage of the operation and 3,000 staff once production reaches full capacity. When both phases of the smelter are complete in 2013, it will be the largest single-site aluminum smelter in the world. Phase two will see initial aluminum production capacity stepped up to 1.4 million tons per annum. The smelter will consist of four units called potlines, each with sufficient electrolytic production cells to make the aluminum. (AB27.08)
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5.16 Abu Dhabi Economy May Grow to $179 Billion by 2010
Abu Dhabi's economy could grow to $179.1b by 2010, more than double its level in 2005 as the non-oil sector expands, although inflation poses a risk to growth, the emirate's planning council said on 26 August. The economy of the UAE capital - the world's fifth largest oil exporter - should expand 54.4% in real terms over the five-year period, and could almost double again between 2010 to 2020, the Abu Dhabi Department of Planning and Economy said in a report. Abu Dhabi is investing windfall oil revenue from an almost six-fold rise in oil prices since 2002 into diversifying its economy away from a reliance on oil exports, funneling money into real estate and heavy industry. Meanwhile, the economy is set to surge. The state and private investors are set to invest about $163b in real estate projects in the emirate by 2030, according to a government projection last year. Non-oil sectors would contribute to 45% of Abu Dhabi's GDP in 2010, up from 41% in 2005, and the oil sector's contribution to the economy would fall to 45% by 2020. By 2015, Abu Dhabi will account for 75% of total UAE economic growth, up from 68% in 2010 and 59% in 2005.
However, one major challenge is inflation. Inflation in Abu Dhabi hit 11.9% in the first quarter - almost on par with its level in 2007. UAE inflation of 11.1% in 2007 was the highest in at least 20 years. Rises in consumer prices - including rents and food items - were the source of about 60% of inflation, while the rest has resulted from the UAE's currency peg to the weak US dollar and global commodity prices. (ABDP&E 26.08)
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5.17 Abu Dhabi Sees Water Demand Jump 43%
The Abu Dhabi Water and Electricity Authority (Adwea) plans to double the capacity of desalination plants in the emirate to meet water demand expected to grow 43% in the next five years. Adwea plans to produce 969m gallons of water per day in five years by "virtually doubling" the capacity of a number of desalination plants, based on Adwea forecasts. The Umm al-Nar desalination plant now produces 231m gallons per day, while another three plants produce 230m gallons. Abu Dhabi, the world's fifth-largest oil exporter, expects demand for power to rise almost 80% by 2012 on a boom in the Gulf emirate's construction and industry sectors, according to a government forecast in May. Demand would rise to 10,600 megawatts in 2012 from 5,910 MW this year, Abu Dhabi's five-year strategic plan showed at the time. Abu Dhabi is the capital of the UAE and controls over 90% of its oil reserves. (WAM23.08)
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5.18 Saudis to Set Up Company For Farm Investment
Saudi Arabia plans to set up a firm to invest in agriculture overseas within two months to ensure food security. The new company, a partnership between the public sector and domestic private companies, is part of a program to ensure adequate food supplies to the Gulf country at cheaper prices, Saudi Agriculture Minister Balghunaim said. The firm will focus on items that either cannot be grown in the kingdom such as rice and sugar or need plenty of water supplies such as wheat, barley and animal fodder, the minister said. Saudi Arabia said it would start reducing purchases of wheat from local farmers by 12.5% per year from this year, abandoning a 30-year program to grow wheat that achieved self-sufficiency but depleted water supplies. Riyadh's plan was to start importing wheat next year and move to 100% reliance on foreign purchases by 2015. The government said it would provide land for stockpiling basic staples and would increase investments to ensure its long-term food security. (TradeArabia01.09)
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5.19 Egypt Among Three Largest Recipients of FDI
A recent report by the World Bank lists Saudi Arabia, Egypt and the United Arab Emirates as the three largest beneficiaries of foreign direct investment (FDI) in the Middle East and North Africa (MENA), accounting for more than half of inward FDI flows. FDI continued to flow in MENA at high levels, some $45b in 2007, down modestly from the record $52b recorded in 2006. In contrast with 2000-2004, when FDI flows were more evenly distributed, three countries attracted the bulk of flows from 2005 forward. According to the report, Egypt and Morocco have enjoyed the strongest growth in tourism revenues over the last years, in part as investment in improved tourism infrastructure is increasingly in place (much tied to FDI from the Gulf countries). The report adds that Egypt’s efforts to diversify the tourism base, appealing to residents of the GCC, as well as new markets in Central Europe and the former Soviet Union, have paid handsome dividends. (WB26.08)
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5.20 Libya To Sign Free Trade Deal with EU
Libya is said to be planning to sign a free trade accord with the European Union, according to Libyan leader Muammar Gaddafi's influential son Saif Al Islam. Al Saif, in a speech broadcast live on Libyan state television, said the accord with the EU was a result of the North African country's improved ties with Europe and the United States since 2003. Ties between Opec member Libya and the United States have improved dramatically since 2003, when Libya accepted responsibility for the Lockerbie airliner bombing and said it would stop pursuing nuclear, chemical and biological weapons. Since then, the United States has dropped many sanctions, removed Libya from a terrorism blacklist and restored diplomatic links after decades of enmity. (Variou21.08)
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5.21 Italy & Libya Sign Landmark Compensation Accord
Libyan leader Gaddafi and Italian prime minister Berlusconi signed an accord on 30 August under which Italy will pay billions of dollars in investments and compensation for its colonial rule of the North African country. The 'friendship pact' accord should remove the latest hurdle to an improvement in ties between Italy and Libya, a major energy producer. Gaddafi and Berlusconi signed the pact at a palace which was once the headquarters of the Rome government's senior official during the 1911-1943 colonial rule, Libyan state television showed. Libya accuses Italy of killing thousands of Libyans and driving thousands more from their villages and cities during that era. Berlusconi said on arrival that under the deal $200m per year will be invested by Italy in Libya over 25 years. Italian officials said earlier the deal covered 'some billion dollars' in compensation and $5b in investments, including the construction of a highway across Libya from the Tunisian border to Egypt. It also involves a project to clear mines dating back to the colonial era. Italy expects in return to win energy contracts and for the Tripoli government to toughen security measures to stem the flow of illegal migrants, including joint maritime patrols. In a goodwill gesture on the signing, Italy returned an ancient statue of Venus taken to Rome during colonial rule. The headless 'Venus of Cyrene' was carried away from the town of Cyrene, an ancient Greek colony, by Italian troops and put on display in Rome. Italy has had difficult relations with Gaddafi since he took power in 1969. He expelled Italian residents and confiscated their property in 1970. Rome has backed Tripoli's drive to mend fences with the West, which have improved dramatically since 2003 when Libya accepted responsibility for the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland. (Various30.8)
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5.22 Challenges To Pakistan's Ratings Mount
Moody's Investors Service says that while many of the credit stresses which led to the downgrade of Pakistan to B2 from B1 in May 2008 are still present, the rapid depletion of the country's foreign exchange reserves has now emerged as the most imminent risk facing its sovereign ratings and country ceiling. "At the same time, delays in the ability of its fiscal authorities to wean themselves away from central bank financing of the budget deficit also represent a formidable obstacle for improving inflationary expectations and reducing pressure on the Pakistani Rupee," says Aninda Mitra, a VP/Senior Analyst with Moody's Sovereign Risk Unit. "Accordingly if, in coming months, Moody's concludes that a deterioration in Pakistan's credit fundamentals is becoming irreversible, then negative rating actions may follow," says Mitra. Mitra's remarks coincided with the release of a Moody's special comment on Pakistan, entitled, "Pakistan's government faces pressing challenges."
"The critical ingredient for ensuring the success of ongoing policy adjustments and structural reforms as well as negotiations for external assistance and assuaging foreign investor sentiment is an improvement in domestic political stability," said Mitra. "If the government remains unable to govern effectively, then discordant policies and their weak implementation could further set back investor confidence," says Mitra. "In turn, such a development may damage Pakistan's balance of payments stability as well as the government's fiscal financing prospects and raise the likelihood of sovereign payment arrears or enforcement of deposit controls," the author added. The report also says that Musharraf's resignation may help in limiting domestic political polarization and policy uncertainty and the Pakistani authorities now have a narrow window of opportunity for strengthening policy implementation. Furthermore, a better economic performance along with a healthy relationship between the country's politicians and military should help curb the destabilizing influence of the Taliban and religious militancy. (Moody’s 20.08)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey to Amend Money Laundering Law for EU Alignment
Turkey is making preparations to amend laws in an effort to combat money laundering and as a way to harmonize Turkey's legislation with that of the European Union, which Turkey aspires to join. Turkey has decided to speed up reforms in every field to meet EU membership criteria following the rejection of a closure case against the Justice and Development Party (AK Party), a case which greatly slowed down Turkey's efforts to join the 27-nation bloc. To this end, it plans to revise laws addressing money laundering, bearing in mind a previous warning by the EU that negotiations regarding the free movement of capital will not start unless relevant laws are amended in a way to harmonize them with those of the EU. A progress report on Turkey released by the European Commission in 2007 states that Turkey achieved some progress in the fight against money laundering with the adoption of new legislation on the prevention of laundering the proceeds of crime. However, the report stressed the alignment was incomplete and that Turkey needed to take further steps to prevent acts of money laundering in the country if it wishes to open the EU accession chapter on the free movement of capital. Changes will need to be made to relevant articles of the Turkish Penal Code (TCK), the Code on Criminal Procedure (CMK) and other relevant laws. The Ministry of Justice has already prepared a draft bill to that effect, which will be sent to Parliament for revision when deputies return from the summer recess on 1 October. With the planned amendments, Turkey will fulfill its obligations pointed out in the EU directive on the prevention of the use of the financial system for the purposes of money laundering or financing terrorism. (Zaman29.08)
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6.2 Turkey Talks Black Sea Oil With Firms
Turkey is holding talks with Germany's RWE and U.S. Chevron on conducting oil exploration in the Black Sea. Major oil importer Turkey is looking to develop its oil exploration activities as part of efforts to reduce its large fuel bill. The news source said Turkish oil company TPAO planned to open six wells in the Black Sea, of which two will be opened with Brazil's Petrobras. Talks with U.S. Chevron are continuing. The general director of TPAO said earlier this year the company would start oil exploration in the Black Sea with Brazil's Petrobras next year. The seismic surveys near the Black Sea town of Sinop with Petrobras, which is expected to invest $400m in Black Sea oil exploration in the next four years, were completed last year and the first well is expected to be opened in 2009. TPAO is hoping to find rich gas reserves in the western Black Sea and rich oil reserves in the eastern part. Officials estimate the volume of reserves in the Black Sea to amount to 10 billion barrels. (TP01.09)
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6.3 CBT Governor Announces Transition Period of “Turkish Lira”
On 27 August, Turkey’s Central Bank Governor announced the process of “New” prefix removal from the local currency. The “New” prefix used in the “New Turkish Lira” and “New Kurus” will be removed as of January 1st, 2009. The new banknotes will be introduced in October this year. As it might be recalled, the Minister of Council’s decision has been published in the Official Gazette dated May 8, 2007. The limitation period will be 10 years for YTL banknotes and will end on December 31st, 2019. (BGC28.08)
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6.4 Cypriot Inflation Hits New High, But Growth Revised Upwards
Cyprus’ Consumer Price Index (CPI) inflation hit a new five-year peak in July, recording an increase of 5.6% year-on-year, with new hikes in the price of petrol, electricity, pork and some fresh vegetables. June inflation hit 5.5%, also a five-year high and May’s was up 4.9% year-on-year as the spiral in the global price of food and fuel began to bite. From January to July this year the CPI was up 4.9% compared to the first seven months of 2007. According to the latest figures, food and non-alcoholic beverages rose 7.3% year-on-year in July this year. Housing, water and electricity rose 7.6%, transport 8.0%, hotels and restaurants 8.5%, education costs 5.1% and health costs 4.1%. Decreases in the price of clothing, footwear and furnishings were recorded due to the summer sales period. Finance Minister Stavrakis had said recently that he expected inflation to hit 6.0% by the end of August, given the current trends.
He added that due to the reduction in the price of oil, the outlook had improved. Even though July’s 5.6% figure was large, it would be the highest inflation rate expected for the next two years. Inflation would gradually fall to 4.8-5.0% by the end of this year and will drop dramatically in 2009 below 3.0%, Stavrakis said. He added that despite the global problems, the Cyprus economy was doing well, and that the growth rate was being revised upwards to 4.0%. Commenting on tourism, he said that there were signs of recession in traditional markets such as Britain but there was considerable growth from places such as Russia. The Minister also said private consumption, borrowing and the use of credit cards were on the increase but these activities served to increase inflation, he said. Employment conditions also remained buoyant compared to the rest of Europe, Stavrakis said. Stavrakis also forecast that the public debt would drop in 2008 to 47.5% by the end of the year, compared to 48.5% a month ago. (Cyprus Mail 08.08)
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6.5 Cyprus to Record Strongest Population Growth by 2060 in EU27
Cyprus will record the strongest population growth between 2008 and 2060 among all EU-27 member states. According to Eurostat, between 2008 and 2060, the population in EU27 is projected to rise in thirteen member states and fall in fourteen. The strongest population growth is projected to be recorded in Cyprus (+66%), Ireland (+53%), Luxembourg (+52%), the United Kingdom (+25%) and Sweden (+18%), and the sharpest declines in Bulgaria (-28%), Latvia (-26%), Lithuania (-24%), Romania (-21%) and Poland (-18%). Cyprus’ population is 795,000 in 2008, in 2035 it will reach 1,121,000 and in 2060 will increase further to 1,320,000, recording an increase of 66.2% between 2008-2060. (FM28.08)
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6.6 Submarine Pipeline To Carry Water From Turkey To Northern Cyprus
Turkey will build a dam on a creek in the Mediterranean region to carry fresh water to Turkish Republic of Northern Cyprus (TRNC) through an 80-kilometers submarine pipeline. The Alakopru Dam will be constructed on Dragon Creek in Anamur town of the Mediterranean province of Mersin and is planned to be completed within three years once the construction works are started. The project aims to pump 75m cubic meters of water yearly to the island, 15 of which will be used as drinking water and the rest for irrigation. Turkish State Minister Tuzmen said project design works would be finalized next year. Turkey first started the project in 1998 to build a dam on Dragon Creek and Turkish construction company Alarko was contracted for the project. An MoU was signed by Turkish State Hydraulic Works and Alarko in 2005. The project will bring water to the island from Alakopru Dam through a 80-kilometers submarine pipeline to be installed 120 meters deep in the Mediterranean Sea. Turkish Cypriot people, cultivating their land by means of dry farming for years, will now be able to carry out irrigated farming, officials said. (TU-UK17.08)
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6.7 Cyprus’ Economic Growth Expectations
Cyprus expects economic growth of close to 4.0% in 2008, its Finance Minister announced, saying a quarter-on-quarter dip in Q2 was seasonal. The Cypriot statistics department reported 3.9% year-on-year growth in the second quarter, down from 4.1% in the first. Quarter-on-quarter growth stood at 0.7%, from 1.1% in the first quarter. The Finance Ministry said the dip is a combination of seasonal factors. There have been specific issues which have affected the second quarter, like the tourism season which had not fully started, and the oil crisis. Tourism, a key earner for Cyprus and a sector representing about 13% of the island’s gross domestic product, does not get into full swing until July and August. (grhomeboy26.08)
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6.8 Greek Economy Is Holding Up
Greece's GDP is showing remarkable signs of resilience in the face of high energy prices and financial market turmoil. Athens News assessed that the Greek economy is sputtering but not stalling. Gross domestic product (GDP) rose at an annual pace of 3.4% in the second quarter of this year, according to an initial estimate by the National Statistical Service that was announced on August 11. That may be the slowest economic growth rate in nine years, but it comfortably beats gloomier expectations and exceeds economic performance in the eurozone. Exorbitant oil prices, euro appreciation and the global financial meltdown are taking a much heavier toll on other European economies. Annual economic growth in the 15-nation eurozone stood at 2.1% in the first quarter. The European Central Bank said on August 7 that it expects European GDP growth for mid-2008 to be "substantially weaker'' than that.
Greek unemployment figures released separately on August 12 provide further ammunition for the optimists' camp. Joblessness literally took a nosedive in May, dropping to 6.6% from 7.7% in the same month last year. This is the lowest figure on record since the statistics agency started compiling monthly unemployment data four years ago. Consumer spending, which unexpectedly shrank in the first quarter, has recovered somewhat in the second. It rose by 1.1% quarter-on-quarter and by 2.6% year-on-year. Luckily, high inflation (at 4.9% for a third straight month in July) seems to have led Greeks to curb consumption exactly where it benefits the economy most: imports.
Falling imports significantly boosted GDP. They dropped for a second quarter in a row, declining by an annual 3.8%, as rising energy prices led Greeks to consume less fuel. The effect of rising energy prices on imports can also be linked to falling car sales. Registrations of new cars, buses and trucks declined by an annual 3.3% between January and July, the statistics agency said on August 5. By contrast, registrations of new motorbikes, which are cheaper to buy and consume less fuel, went up by 1.7% over the same period. (ATHENS NEWS 15/08)
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6.9 Greece Ratifies South Stream Pipeline Deal
On 29 August, the Greek Parliament ratified a deal to build a section of the South Stream natural gas pipeline with the Russian gas giant Gazprom. Greek Development Minister Folias said the development of South Stream was on schedule, with the project expected to go online in 2014. Greek lawmakers signed the agreement in April, calling it a "historic" development. South Stream eventually may replace a portion of the Blue Stream pipeline from Russia to Turkey. It will travel 560 miles through the Black Sea from Russia to the Bulgarian port of Varna. Russia hopes South Stream will rival the Western-backed Nabucco pipeline, though South Stream is plagued by financial and environmental concerns. Folias, however, said South Stream was not a rival to Nabucco, saying the additional line would satisfy rising regional energy demands. The $10b pipeline is expected to transport around 1.1 trillion cubic feet of natural gas per year. (AB30.08)
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6.10 Bulgarian Incoming Foreign Investments Down by 12.8%
The Bulgarian National Statistics Institute announced that the direct foreign investments in Bulgaria are down by 7.5% during the second trimester of 2008 compared with the same period of 2007 and by 12.8% compared with the H1/07. The net amount of the direct foreign investments for the first trimester of 2008 is €115,562m, while their net amount for the first half of the current year is €180,670m. During the second trimester of 2008, the most investments have been made in the construction area. However, investment in real estate registered a decrease. According to experts, direct foreign investments are generally down in the beginning of each year and the reduction is usually compensated by the year's end. In 2008 however, the negative trend could deepen due to the global finance crisis and the decrease in bank crediting. In 2007, the net amount of direct foreign investments in the country reached the record €5.2b, 60% of them were invested in the area of tourism and real estate. Currently many British investors have withdrawn from the market leading to beliefs that the forecast for a 10% increase of the direct foreign investments in 2008 might not become reality. (TSW31.08)
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6.11 Bulgarian Unemployment Rate Stable
Bulgaria’s jobless rate stayed virtually unchanged at 5.96% in July, Labor Ministry data showed on 20 August. The unemployment rate was 5.97% in June and 7.25% in July 2007. The ministry said dole queues fell slightly, to 220,879 people, in July, down by 210 from the previous month and 47,567 from the same month last year. Strong economic growth and improved business perspectives following Bulgaria’s 2007 entry into the European Union have cut unemployment in Bulgaria and already created labor shortages. The Balkan country is considering importing labor from neighboring Balkan non-EU nations and some Asian countries to meet the rising demand for skilled workers. Nearly 1m Bulgarians have left the country since communism collapsed in 1989, seeking better pay abroad. (Various21.08)
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6.12 Promising Natural Gas Deposit Discovered Close to Bulgaria's Pleven
A significant deposit of high-quality natural gas has been discovered at the village of Deventsi close to the city of Pleven in central north Bulgaria. Direct Petroleum Bulgaria said the deposit could be described as promising. The company completed the first phase of the prospecting on August 17 reaching a gas current with a pressure of about 800 atmospheres. This is the highest pressure of a natural gas deposit ever recorded in the whole Balkans region. The bed of the deposit is located at a depth of 4 740 m, whereas the drilling reached 5 900 m. The natural gas samples are of very high quality, without any hydrogen sulfide, water, or other admixtures. Direct Petrolium Bulgaria is expecting a delivery of special equipment from the USA at the beginning of September in order to estimate the size of the natural gas deposit. The company said the exploitation of the deposit could start by mid 2009, when it would also be connected to the existing gas supply network. (TSW23.08)
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Paul McCartney To Perform In Israel
British rock 'n' roll icon Paul McCartney says he "can't wait" to perform in Israel during September. The 25 September concert is to take place in Tel Aviv more than four decades after Israel's government barred McCartney's former band the Beatles from performing there for fear its music might corrupt the country's youth. McCartney booked the gig after Ron Prosor, Israel's ambassador to England, visited the band's birthplace of Liverpool earlier this year and apologized for the "misunderstanding" that transpired back in 1965. "We can't wait to get out there and rock," McCartney said in a statement issued to the BBC. "I've heard so many great things about Tel Aviv and Israel, but hearing is one thing and experiencing it for yourself is another. We are planning to have a great time and a great evening." (Various28.08)
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*REGIONAL:
7.2 UAE President Ranked World's 2nd Richest Royal
UAE president Sheikh Khalifa Bin Zayed Al-Nahyan has been ranked second in a list of the world's richest royals. The ruler of Abu Dhabi's fortune of approximately $24b was topped only by the King of Thailand's $36b. Meanwhile, Sheikh Mohammed Bin Rashid Al Maktoum, ruler of Dubai, was ranked fifth with an estimated fortune of $18b. Elizabeth II, the Queen of England, is now the world's 12th richest monarch after slipping one place in the royal rich list published by Forbes Magazine. Top of the royals, according to the list, is King Bhumibol Adulyade - the world's longest-reigning monarch - who bumped last year's winner the Sultan of Brunei out of first place. Estimates of the Thai king's fortune rose seven-fold since last year due to increased transparency over his holdings. The Sultan of Brunei - one of only two rulers to see their wealth fall during the year - is now in fourth place with an estimated fortune of $20b. Ahead of him is the UAE's Sheikh Khalifa and King Abdullah Bin Abdulaziz of Saudi Arabia, who was ranked third with a fortune of about $21b.
Middle Eastern royals have done particularly well during the past 12 months with the price of oil soaring, numbering 7 out of the top ten. The list also includes Sheikh Hamad Bin Khalifa Al Thani of Qatar (7th), King Mohammed IV of Morocco (8th), Prince Albert II of Monaco (9th) and Sultan Qaboos bin Said Al Said of Oman (10th).
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7.3 NYPD to Make Abu Dhabi Anti-Terror Move
The New York Police Department will soon station at least one liaison officer in Abu Dhabi, as part of an expansion of its counter terrorism efforts. An NYPD intelligence division officer will "share information and training techniques" with security officials in the Gulf nation, according to NYPD Commissioner Kelly. Kelly said he had signed an agreement last week with Abu Dhabi that clears the way for an officer to be posted there full-time in the autumn. Since the Sept. 11, 2001 terror attacks, the NYPD has sought to bolster homeland security by redeploying about 1,000 officers to counterterrorism duty here and abroad. The department already has officers stationed in 10 other spots around the world: London, Madrid, Paris, Lyon, Singapore, Montreal, Toronto, Santo Domingo, Tel Aviv and Amman, Jordan. (AB28.08)
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7.4 Burj Dubai Now a Record 688 Meters Tall And Rising
The iconic tower Burj Dubai has reached a new record height of 688 meter. The tower became the world's tallest after surpassing North Dakota, USA's KVLY-TV mast (628.8 meters) in April 2008. Currently at over 160 stories, the tower also has the largest number of floors in any building. When completed, Burj Dubai will meet all four criteria listed by the Council on Tall Buildings and Urban Habitat (CTBUH), which classifies the world's tallest structures. CTBUH measures the height of buildings to the structural top, the highest occupied floor, the top of the roof and the tip of the spire, pinnacle, antenna, mast or flagpole. Currently, some 7,500 professionals and skilled workers are employed on-site at Burj Dubai. Cladding work is nearing completion and work has started on the interiors, which will boast superior finishes. Many energy efficient technologies are being deployed to ensure that the iconic building is also a standard for energy usage and recycling of water. (AB01.09)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Kamada Successfully Completes Phase II Trial with Aerosolized AAT in Cystic Fibrosis Patients
Kamada announced that it has completed a Phase II Study with Aerosolized Alpha-1 Antitrypsin (AAT), delivered via an optimized eFlow platform nebulizer (PARI Pharma GmbH), in cystic fibrosis (CF). Preliminary results indicate that the product has an excellent safety profile; final data should be available by year-end 2008. This is a major milestone for Kamada. There is significant potential for the aerosolized version of AAT, which is an innovative approach for treatment of chronic inflammatory processes that could potentially prevent degeneration of lung function. The trial, which was a double-blind, placebo controlled study was performed at the renowned Cystic Fibrosis (CF) Medical Center, Hadassah – Hebrew University Medical Center Mount Scopus in Jerusalem, Israel. The trial aimed at validating the safety of the product in CF patients and to assess its potential influence on lung inflammation. The results indicate an excellent safety profile of the product. Kamada’s Aerosolized AAT, which utilizes an optimized eFlow platform nebulizer, has been designated an Orphan Drug for the treatment of CF and Alpha-1 Deficiency, in both Europe and the U.S. This designation grants Kamada various benefits such as research fund support, tax incentives, reduced official fees and seven to twelve years of exclusive distribution rights, if the company’s product is first on the market. Phase II trials in bronchiectasis are currently ongoing.
Ness Ziona’s Kamada (http://www.kamada.com) is a public biopharmaceutical company developing, producing and marketing a line of specialty life-saving biopharmaceuticals using its proprietary chromatographic purification technologies. Licensed and marketed worldwide, several of these specialty therapeutics are currently undergoing advanced clinical trials. (Kamada 21.08)
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8.2 Teva Pharmaceutical to Invest in Andromeda Biotech’s Lead Product DiaPep 277
Andromeda Biotech, a wholly owned subsidiary of Clal Biotechnology Industries Ltd. (CBI), announced that Teva Pharmaceuticals decided to exercise their option and invest in Andromeda Biotech according to an amended agreement which was signed on 17 August 2008. According to the amendment, at this stage, Teva will invest $3m in Andromeda from a total amount of $10m in the original agreement signed in February 2008. After the receipt of the second interim analysis report for the current Phase III trial, which is anticipated to occur during Q4/08, Teva will continue to invest the remaining $7m. Other terms of the original agreement will be implemented and executed upon the completion of the $10m investment by Teva. Rehovot’s Andromeda Biotech (http://www.andromedabio.com) is focused on development of innovative treatment for autoimmune diabetes. The company lead product DiaPep277, currently in phase III clinical studies, is a novel therapeutic approach in treating type 1 diabetes (T1D). It is a unique peptide derived from the human protein, HSP60, which immunomodulates the immune system, prevents the destruction of pancreatic cells that secrete insulin and preserves their natural function. (Andromeda Biotech 28.08)
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8.3 Optimata Granted Patent for Modeling Angiogenesis and Providing Optimal Treatment
Optimata has been granted U.S. Patent 7,418,374, entitled: “Treatment protocol generation for diseases related to angiogenesis”. The patent protects a system and methods for modeling diseases which relate to angiogenesis processes, and optimization methods to predict improved treatment regimens. Angiogenesis is a key process in the progression of different diseases such as solid tumor cancers, cardiovascular diseases, hematological disorders and macular degeneration. The potential to block tumor growth and metastases by angiogenesis inhibition represents an intriguing therapeutic strategy for the treatment of cancer. There are currently an unprecedented number of anti-angiogenic drugs in clinical trials. (There are 683 open interventional studies, according to the listings of the U.S. National Institute of Health). Optimata’s patent-protected technology, which comprises a computerized biosimulation system for optimizing drug therapies, is expected to benefit such studies. The patent grants Optimata protection for its proprietary technology that demonstrates simulations of the angiogenesis course and the way it is affected by diverse drugs.
The patent covers optimization methods and systems relating to mathematical models of angiogenesis, which include pro-angiogenesis and anti-angiogenesis components, e.g. the regulatory factors; vascular endothelial growth factor (VEGF), platelet derived growth factor (PDGF), angiopoietin 1, angiopoietin 2, etc. Optimata’s technology also incorporates simulation of the process of vessel maturation and related development processes; as well as the effects of a drug or a combination of drugs on each of the model components and on the outcomes for disease progression.
Ramat Gan’s Optimata (http://www.optimata.com) is an interdisciplinary science-based company developing computerized tools – Virtual Patient engines – for navigating drug development towards better drugs, faster. Applying bio-mathematics to develop a predictive bio-simulation software toolkit, this technology provides a comprehensive drug development solution, from the pre-clinical phase through treatment personalization. (Optima26.08)
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8.4 Oridion Expands its OEM Partnerships - New Agreement with Spacelabs Healthcare
Oridion Systems announced an OEM agreement with Spacelabs Healthcare, a leading global medical device and service company. With this agreement, Spacelabs now employs Oridion Microstream capnography technology in its new, compact and ultra-lightweight patient monitoring system, elance. Spacelabs Healthcare, recognizing the importance of monitoring CO2, has decided to use the Oridion patented Microstream capnography technology and proprietary EtCO2 sampling technology in its new elance patient monitoring system. Microstream capnography technology and FilterLine breath sampling products improve patient safety by providing the earliest assessment of a patient's ventilatory status. The Spacelabs new elance monitor with Microstream technology is being launched in the current quarter.
Jerusalem’s Oridion Systems (http://www.oridion.com) is a global medical device company specializing in patient safety monitoring. Oridion develops proprietary medical devices and patient interfaces, based on its patented Microstream technologies, for the enhancement of patient safety through the monitoring of the carbon dioxide (CO2) in a patient's breath. These products provide effective, proven airway management and are used in various clinical environments, including procedural sedation, pain management, operating rooms, critical care units, post-anesthesia care units, emergency medical services, transport, alternate care and other settings where patients' ventilation may be compromised and at risk. (Oridion25.08)
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8.5 Monsanto & Evogene Collaborate to Increase World’s Food Supplies
St. Louis, Missouri’s Monsanto Company and Rehovot, Israel’s Evogene have concluded into a five- year research and development collaboration focused on identifying key plant genes related to yield, environmental stress and fertilizer utilization. The accord seeks to enhance research efforts to both discover and deliver novel, yield-enhancing technologies at a time of increasing demand for grain globally. Under the accord, Evogene will provide Monsanto with candidate genes discovered by Evogene’s computational platform which are predicted to improve yield, fertilizer utilization and a plant’s reaction to environmental stress. The genes will be validated in model plants. This will afford Monsanto access to new genes strengthening its entire gene discovery program. Monsanto will receive exclusive licensing rights to such genes in a number of crops, including corn, soybean, canola and cotton. Evogene expects to receive approximately $35m over the research term of the collaboration in the form of an upfront payment and annual research payments, in consideration for the performance of the research. Evogene is also entitled to development milestone and royalty payments based on sales of any resulting products. In September of 2007, the two companies announced a collaboration to improve nitrogen use efficiency in corn, soybeans, canola and cotton.
Rehovot’s Evogene (http://www.evogene.com) is a leading developer of improved plants for the ag-biotech and biofuel industries. The company’s proprietary product development platform combines state of the art computational gene discovery technologies, plant and field validation capabilities and unique selection systems. The platform’s computational biology component - the ATHLETE - is based on Compugen's in-silico predictive discovery capabilities. (Monsanto28.08)
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8.6 Monsanto Purchases $18 Million Stake in Evogene
St. Louis, Missouri’s Monsanto Company has purchased an $18 million equity stake in Evogene and has agreed to purchase an additional $12 million in the future, subject to certain Evogene diligence requirements. Monsanto and Evogene have also just concluded a five- year R&D cooperation agreement which focuses on identifying key plant genes related to yield, environmental stress and fertilizer utilization. The accord seeks to enhance research efforts to both discover and deliver novel, yield-enhancing technologies at a time of increasing demand for grain globally. Monsanto’s financial support helps insure that Evogene has the resources required to aggressively pursue its goals of developing improved plants for agriculture and novel feedstocks for biofuels. Monsanto Company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. Rehovot’s Evogene (http://www.evogene.com) is a leading developer of improved plants for the ag-biotech and biofuel industries. The company’s proprietary product development platform combines state of the art computational gene discovery technologies, plant and field validation capabilities and unique selection systems. The platform’s computational biology component - the ATHLETE - is based on Compugen's in-silico predictive discovery capabilities. (Monsanto28.08)
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8.7 Pharmos Corporation Announces That it Will Cease Operations in Israel
On 29 August, Pharmos Corporation announced that effective October 31, 2008 it will cease operations in Rehovot, Israel and manage those activities currently based in Rehovot out of the Company's US headquarters in Iselin, New Jersey. The research programs in Israel are the CB2 receptor selective library of compounds, including preclinical development of PRS-639,058 for neuropathic pain. Additionally the Company has almost completed a Phase 2a trial with its proprietary 3% diclofenac NanoEmulsion cream for use as a topical treatment for osteoarthritis pain. The Company's strategy is to seek a partner who will take the lead in both operating and funding the research programs in Israel. To facilitate these efforts, the Company engaged and has been working with a boutique life science investment bank. Pharmos discovers and develops novel therapeutics to treat a range of indications including specific diseases of the nervous system such as disorders of the brain-gut axis (GI/IBS), pain/inflammation, and autoimmune disorders. (Pharmos29.08)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Citrus Fruit Producer Named Exporter of the Year
Israel’s Ministry of Industry, Trade & Labor, together with the Export Institute, have named Gan Shmuel Food Industries (http://www.ganshmuel.com) as the 2007 Outstanding Large Exporter and Golan Heights Winery (http://www.golanwines.co.il) as the Outstanding Small Exporter division. Gan Shmuel’s plants are at Kibbutz Gan Shmuel and Kibbutz Gat which also owns the Yotvata dairy. The Gan Shmuel plant processes and sells citrus and tropical fruit products as well as tomatoes. It employs 420 people and provides a livelihood for the families on Kibbutz Gat and Kibbutz Beit Nir. The company exports to more than 50 countries with sales showing a 27% increase last year over the previous year. Golan Heights Winery, founded in 1983, has achieved international prestige in its 25 years winning two awards at respected wine expos and competitions worldwide. Golan Heights wines can be found in some 30 countries under three separate labels: Yarden, Gamla and Golan. The winery employs 110 people. Judges for the awards included representatives of both the Manufacturers Association and Kibbutz Industries, various officials in the trade ministry, the government investment center and Export Institute. (KT25.08)
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9.2 ECI Telecom Selected as Supplier for Network Expansion in Costa Rica
ECI Telecom announced that Radiografica Costarricense S.A. (RACSA), telecom provider for data, Ethernet and Internet services in Costa Rica, will expand its network with ECI’s XDM Multi-Service Provisioning Platform (MSPP). ECI was chosen for its ability to cost-effectively combine SDH, Ethernet switching and WDM on a single, converged platform. The network is managed by ECI’s LightSoft multi-layer network management system, delivering an end-to-end solution to manage the different equipments, network segments and technologies under one management system. Faced with increased competition in Costa Rica, RACSA has begun a major expansion project to provide more data services as well as add video and voice services to its customers. To support their aggressive expansion efforts, RACSA issued an open RFP to leading equipment vendors to provide transport offerings to support its existing and future networks. ECI's offer was chosen as the most advanced, fully compliant and price competitive solution, providing SDH, WDM and Ethernet on a cost-effective converged XDM platform. ECI's Global Services Division unit, together with ECI Costa Rica staff, have worked closely with RACSA to allow the full deployment of an end-to-end turnkey project. In addition, ECI is now concluding with RACSA the expansion of this network.
Petah Tikva’s ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. Founded in 1961, Israel-based ECI has consistently delivered customer-focused networking solutions to the world’s largest carriers. (ECI26.08)
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9.3 Check Point Delivers New & Safer Computer Security With ZoneAlarm Internet Security Suite 8.0
Check Point Software Technologies announced the release of ZoneAlarm Internet Security Suite 8.0, featuring core security and performance enhancements along with a new user interface providing consumers and small businesses the safest, fastest and easiest PC and identity theft protection available. Check Point also new versions of ZoneAlarm Pro and ZoneAlarm Antivirus. ZoneAlarm Internet Security Suite 8.0 expands security with enhancements such as Early Boot Protection, which guards the computer during system start-up where other security products leave systems vulnerable, and Rootkit Protection in the OSFirewall, which blocks attacks targeting processes deep in the operating system. A new user interface with “1-Click Fix-it” offers users a simple, easy way to keep their security up-to-date, and new antivirus scan modes improve overall performance. ZoneAlarm Internet Security Suite also features new daily credit report monitoring and a newly designed Identity Protection Center that allows users to conveniently protect their identities and personal information in both the online and offline worlds.
Tel Aviv’s Check Point Software Technologies Ltd. (http://www.checkpoint.com) is the leader in securing the internet. Check Point offers total security solutions featuring a unified gateway, single endpoint agent and single management architecture, customized to fit customers’ dynamic business needs. This combination is unique and is a result of our leadership and innovation in the enterprise firewall, personal firewall/endpoint, data security and VPN markets. (Check Point26.08)
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9.4 Check Point Ships First Single Agent for Endpoint Security
Check Point Software Technologies has began shipping a new version of Check Point Endpoint Security, the first single agent for endpoint security to combine the highest-rated firewall, network access control (NAC), program control, remote access, antivirus, anti-spyware, full disk encryption and media encryption with port protection. The new release, Check Point Endpoint Security R70, features a newly enhanced and streamlined interface as well as additional tools for enterprise deployment. By creating a single endpoint security agent with a single client interface, deploying and managing endpoint security is dramatically simplified. A single tray icon on the endpoint device makes reviewing security status and settings easier and eliminates interoperability conflicts. Consequently, Check Point Endpoint Security’s single agent and client interface reduces the time and costs associated with endpoint security. Single client interface for all local endpoint security administration assures compatibility of endpoint security technologies and simplifies end-user experience and the unique distribution utility lets administrators deploy customized installations quickly and easily.
Tel Aviv’s Check Point Software Technologies Ltd. (http://www.checkpoint.com) is the leader in securing the internet. Check Point offers total security solutions featuring a unified gateway, single endpoint agent and single management architecture, customized to fit customers’ dynamic business needs. This combination is unique and is a result of our leadership and innovation in the enterprise firewall, personal firewall/endpoint, data security and VPN markets. (Check Point26.08)
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9.5 Elbit Systems' Hermes 450 Records Another Success
Elbit Systems was awarded a contract to supply Hermes 450 UAV systems to a country in the Americas for the total of approximately $25m. The contract also includes Skylark I systems, all to be delivered within a year. Hermes 450 is a unique Elbit Systems development and has been the base platform of the IDF's operational UAV fleet as well as the basis for the UK's armed forces' UAV program Watchkeeper, the largest such program in Europe. The Hermes 450 UAVs are used extensively in armies worldwide, including active war zones such as Iraq and Afghanistan. So far, the Hermes 450 has accumulated over 100,000 operational flight hours. Skylark is a mini/man-pack UAV system, equipped with features derived from Elbit Systems' Hermes family of larger UAVs. The system is operational with the IDF's Ground Force's Command and in several other armed forces. Skylark is currently operationally active in several theatres of the global war on terror, with over 10,000 successful operational sorties and a world record in high altitude flights, exceeding 15,000 feet. The Skylark systems have already been purchased by numerous customers worldwide.
Haifa’s Elbit Systems (http://www.elbit.co.il) is an international defense electronics company engaged in a wide range of defense-related programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned air vehicle (UAV) systems, advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms and developing new technologies for defense, homeland security and commercial aviation applications. (Elbit01.09)
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9.6 Hanaro Telecom Selects Corrigent to Deploy a Converged Broadcasting Network for IPTV Services
Corrigent Systems announced that its CM-100 product line was selected by Hanaro Telecom, Korea's leading ISP, as a main network infrastructure to deliver premium IPTV services. Hanaro Telecom, Korea's second largest broadband carrier, plans to offer differentiated content and value-added services as part of its competitive IPTV service. A couple of years ago, Hanaro Telecom launched a 100Mbps broadband access service for residential areas, and plans to increase its penetration using FTTH technology, as an enabler for its advanced IPTV services. Corrigent’s technology enables Hanaro Telecom to provide legacy TDM services together with advanced data services, such as broadcast TV (IPTV) over a converged network infrastructure. Corrigent's CM platforms offer a 10Gbps solution combining Ethernet transport, full support of legacy SONET/SDH capabilities, MPLS and RPR technologies, with end-to-end network management. It's designed to deliver highly scalable, cost-effective and resilient video, voice and data multi-play services. Tel Aviv’s Corrigent Systems (http://www.corrigent.com) is a leader in next generation metro transport systems. Corrigent’s products represent the convergence of traditional transport and carrier Ethernet. They merge the well defined and proven resiliency, quality, OA&M and cost characteristics of the transport network with state-of-the-art carrier Ethernet packet processing and traffic management capabilities to allow scalable and reliable delivery of video, voice and data services. Orckit Communications is the parent company of Corrigent Systems. (Corrigent 02.09)
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9.7 Wavion and Leadcom Provide Public Safety Solution to Ness Ziona Municipality
Wavion and Leadcom Integrated Solutions announced the successful deployment of a comprehensive video surveillance project in the municipality of Ness Ziona, Israel. Wavion delivered the high-speed wireless connectivity (Wi-Fi) using its advanced WBS-2400 base stations. Wavion’s powerful WBS-2400 spatially adaptive beamforming base stations provide extended range and higher throughput connectivity to standards-based Wi-Fi clients. Wavion’s Wi-Fi solution requires one third fewer units than other competing Access Points (APs) to cover the same area, with superior indoor penetration and fewer dead spots. The superior Wi-Fi performance makes Wavion an ideal infrastructure solution for video surveillance. The use of a wireless connectivity offers significant savings and simplifies the deployment and time to market of a video surveillance solution. There is no need to lay cumbersome cables throughout the city and cameras can easily be mounted at any position.
Yokneam’s Wavion (http://www.wavionnetworks.com) is transforming the metro Wi-Fi and rural markets with a new category of spatially adaptive base stations. The company’s digital beamforming and SDMA technologies are the first and only to resolve the significant performance, penetration and profitability challenges facing large scale metro and rural deployments. Leadcom Integrated Solutions (http://www.leadcom-is.com), established in 1982, is an international leader in innovative telecommunications solutions. Incorporated in Israel, Leadcom was admitted to London’s AIM market in April 2005. (Wavion02.09)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s Second Quarter GDP Rises By 4.2% Annual Pace
The Central Bureau of Statistics announced that Israel's Gross Domestic Product grew faster than expected in Q2/08, driven by thriving chemical and fertilizer sales. The economy expanded at a 4.2% annualized rate in April-June, exceeding the median forecast of 4% from five economists surveyed by Bloomberg. Israel. The Bank of Israel forecast in June that the economy this year will probably expand some 4.2%. The GDP grew at a rate of 5.3% during the first half of 2008, the Bureau reported. This places Israel ahead of the world's developed economies, which the International Monetary Fund said will grow 1.7% this year. Israel's business GDP grew 4.9% in the Q2 from 6.5% in Q1/08. While the shekel reached its strongest against the dollar in about 12 years on July 9, Israel's chemical industry has increased sales abroad because of strong global demand for agrochemicals and fertilizers.
Israel’s exports of goods and services grew an annualized 6.6% in Q2/08, slowing from 11.2% in the first quarter. Imports of goods and services dropped at an 8.6% rate, the first decline in five quarters. Consumer spending fell at a 3.6% annual rate, compared with an increase of 9.3% in the previous month. The decline in consumer spending was led by a 46% annual decline in purchases of durables, such as electronics, following two quarters of double-digit growth. Investment in fixed assets edged down at a 0.5% rate after rising 7.5% in the previous quarter. Israel's index of leading economic indicators, after rising 0.7% in the second quarter, declined a preliminary 0.3% in July as exports fell, marking the first drop since February 2005. (CBS24.08)
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10.2 Israel’s Imports by Country of Origin 2007
On 26 August, the Central Bureau of Statistics published data on Israel’s import of goods by country of purchase. In 2007, the countries of origin from which imports were above $1b were: U.S.A., China, Belgium, Germany, U.K., Italy, Japan, Russia, India, Turkey, Switzerland, France, Hong Kong, Netherlands and South Korea. It should be noted that this was the first time that imports from Netherlands reached this level. In 2007, the countries of origin from which imports (excluding diamonds) were above $1b were: U.S.A., China, Germany, Italy, Japan, Turkey, France, U.K., Netherlands and South Korea. Imports from China (by country of origin) have grown from $900m in 2000 to $4.6b in 2007. During the same period imports from Russia (by country of origin) grew from $600m to $1.8b and imports from India grew from $500m to $1.7b. Other countries with a considerable increase (by country of origin) between the years 2000-2007 were: Poland, The Czech Republic, Indonesia, Vietnam, Egypt, Colombia, Brazil and Argentina. (CBS26.08)
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10.3 Israel’s Chemicals Exports Increase By 55% in 2008’s First Half
Israel’s chemicals exports totaled $7.6b in H1/08, 55% more than in H1/07, according to the Manufacturers Association of Israel Chemical, Pharmaceutical & Environmental Society. The export growth was attributed to an increase in global demand for chemical products and the result of investment in the industry and marketing efforts by companies. Global population growth was a contributing factor by increasing demand for fertilizers. A breakdown of export figures shows that human and veterinary pharmaceutical exports totaled $2.3b in H1/08, 42% more than in the corresponding half. Mineral exports totaled $950m in the first half, up 187%, chemicals exports rose 30% to $932m and fertilizer exports rose 121% to $571m. Oil and oil product exports rose 15% to $158m, mostly because of rising global oil prices. A breakdown of chemicals exports by destination showed that exports to Thailand totaled $54m in the first half, up 126% on the corresponding half, exports to Turkey rose 19% to $277m, exports to Canada rose 55% to $157m, exports to Romania rose 21% to $20m, exports to Nigeria rose 64% to $1.8m and exports to Sweden tripled to $7.9m. Chemicals exports to China rose 64% to $83.7m, exports to India rose 170% to $275m, exports to Malaysia rose 40% to $4m and exports to Taiwan rose 13% to $43.1m. (MA31.08)
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10.4 Israel’s Unemployment at 20 Year Low
According to data released on 27 August by the Central Bureau of Statistics, Israel’s unemployment rate has continued to fall over the course of the second quarter, achieving a quarterly average of 5.9%, based on trend data. The rate is the lowest for twenty years. The quarterly average unemployment rate in Q1/08 was 6.2%. In Q2/07, the average unemployment rate was 7.6%. Men had an unemployment rate of 5.7% in Q2, compared with 5.9% in Q1. Women displayed a greater improvement, with a 6.2% unemployment rate compared with a 6.7% unemployment rate in the Q1. On a seasonally adjusted basis, the number of employed workers in Q2 reached 2.77 million, 0.5% higher than the 2.757 million workers in Q1 and is 3.4% higher than the 2.68 million employed workers in Q2/07. There was also a drop of 10.7% in the Q2 in the number of workers who were involuntarily working in part time positions. Involuntary part-time workers are defined as people who want to work in full-time jobs but are unable to find one. (Globes 27.08)
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11: In Depth
11.1 ISRAEL: Fitch Says Israeli Banks Benefit from Domestic Economic Growth
On 1 September, Fitch Ratings (http://www.fitchratings.com) said that a period of solid economic growth in Israel, helped by structural reforms and fiscal consolidation, has lead to a strengthening in key banking system indicators, according to a special report entitled "The Israeli Banking system and Prudential Regulations". Various regulatory reforms have, however, yet to achieve the desired impact of reducing the dominance of the two main banks in the system. "Strong economic growth in recent years has supported improved core profitability trends, as well as better asset quality and capital adequacy indicators in the Israeli banking sector," says Zarema Lyanova, Associate Director at Fitch Ratings. "Profitability was helped by a favorable economic environment, the increasing share of higher-yield business, fees and commissions from financial management services as well as cost management efforts and a decline in loan loss provisions. However, the low level of provisions reported by banks in 2007 is unsustainable in the long term, especially given a forecast of a slowing economic growth in 2008 and 2009. Fitch expects the change in economic outlook to weigh on the banking sector's profitability and asset quality in the short- to medium-term."
The impact from the US crisis has been manageable for the sector overall. The Israeli banking sector as a whole is now better positioned to weather an expected slow down in the economy than it has been in the more recent past, having managed to strengthen their balance sheets since the last 2001-2 recession. Fitch views that the capitalization of Israeli banks remains only adequate, given high concentrations and levels of unreserved NPLs. However there has been an improving trend and the agency views the regulator initiative to raise banks' capital ratios to 12% by end-2009 as a positive one.
Various regulatory reforms including the so-called Bachar reforms have had some impact; however desired changes towards a less bank-centric financial sector and competitive banking sector are yet to be seen. The highly concentrated Israeli banking sector is dominated by two financial groups - Bank Hapoalim (rated 'A-' (A minus)) and Bank Leumi (rated 'A-' ('A minus')), which together controlled around 60% of the market at end-2007.
"Capital market reforms have encouraged disintermediation, with a broad range of corporates increasing leverage by raising funding outside the banking sector," says Mark Young, Managing Director at Fitch Ratings. "While positive, the concentrated nature of the financial system and its lack of depth means that there is a risk that banks become exposed to the refinancing risks should these markets become closed to the corporate sector." (Fitch Ratings01.09)
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11.2 LEBANON: Credit Outlook Improves
Capital Intelligence, the international credit rating agency, announced on 6 August that it has revised the outlook on Lebanon’s ‘B-‘ (B minus) long-term foreign and local currency ratings to Stable from Negative. The outlook on the ‘B-‘ (B minus) long-term foreign currency ratings of six Lebanese banks – Bank Audi-Audi Saradar Group, BBAC, BLOM Bank, Byblos Bank, Credit Libanais and Fransabank – has also been changed to Stable. The ratings of the six banks continue to be constrained by the sovereign ratings.
The change in the sovereign outlook is in response to the improvement in the domestic political climate following the agreement reached by the main political leaders in Doha, Qatar in May and the subsequent election of a new president and formation of a multi-party government. The government’s policy statement was endorsed by parliament on 8 August and marks the end of a political impasse that has lasted for almost two years.
A return to relative political normalcy should help to revitalize trade, investment and tourism and increase donor financing. It could also open the way for further progress on economic and social reforms, potentially leading to higher credit ratings, although Capital Intelligence does not expect any significant reforms to take place before the next parliamentary elections, which are due to be held in mid 2009. Constitutional and security issues are likely to dominate the political agenda in the near term, with electoral reform among the most pressing challenges for the new government.
More effective governance and economic reforms are needed to put the public finances on a sustainable footing and reduce the large debt overhang that constrains economic growth and leaves the country vulnerable to exogenous shocks. However, the level of commitment of the main political factions to the medium-term reform program of fiscal consolidation, privatization and structural reform presented to international donors at the Paris III conference in January 2007 is not clear and there is a risk that the national unity cabinet, in which opposition parties have been allocated enough seats to veto the decisions of the majority grouping, will be deeply divided and unable to reach a consensus on important policy issues.
Capital Intelligence notes that Lebanon has proven remarkably resilient to political and economic shocks and the sovereign has a strong debt-service record. During the past 18 months of political deadlock and heightened inter-communal tensions, foreign capital has continued to flow into the country and central bank foreign exchange reserves have increased, reaching $12.3 billion in June 2008. Government financing needs, which include foreign currency debt service payments of approximately $1.8 billion in the second half of 2008 and $4.5 billion in 2009, are substantial but manageable. (CI06.08)
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11.3 LEBANON: Widening Trade Deficit
Lebanon's trade deficit, in large part driven by high oil prices and a weak US dollar, has widened in the first six months of the year, fuelling the country's inflation rate and undermining efforts to strengthen the economy. The gap grew 33,9% to $5.568bn from January to June, while total foreign trade was valued at $9.060bn, according to figures released by the Higher Customs Council in mid-August.
Lebanon's currency, like for most countries of the Middle East, is pegged to the US dollar. With the greenback's retreat over the past 18 months, Lebanon's import bill has climbed, with calls being made to switch the currency linkage to the euro. While the US is Lebanon's largest single source of imports, the combined Euro zone accounts for around 38% of all imported goods, with other non-bloc countries also using the European currency as its basic trading unit. Riad Salameh, the governor of Lebanon's Central Bank, has repeatedly rejected suggestions to decouple the Lebanese pound from the dollar, saying the weakened US currency has helped boost the competitiveness of the country's exports.
True enough, overseas sales of Lebanese goods and services increased 33.1% to $1.746bn in the first half of 2008. However, Lebanon's lack of industrial and production capacity means it will remain a net importer of goods and services and a net exporter of cash. According to a report issued by Byblos Bank at the end of July, the rising price of oil and the continued weak value of the US dollar have, over a period of four years, added $1.92bn to the trade deficit.
The impact of rising oil prices and currency fluctuations on Lebanon's inflation was underscored by the World Bank, which estimates that imports account for more than 33% of the country's domestic consumption. In its report on Lebanon for 2007, the bank said 70% or more of inflation was due to fuel cost increases and exchange rate movements.
Meanwhile, figures released by the Central Administration of Statistics in late August highlighted the effects of high fuel and imports costs on the nation's inflation rate. Lebanon's Consumer Price Index (CPI) rose by just under 7.2% for the first seven months of the year, with transportation being the single biggest contributor, climbing by 20%. The cost of electricity and fuel increased by 15.6%, while prices at restaurants and hotels rose by 17.5%, reflecting in part the high levels of imported foods and consumer goods used by these establishments.
One factor underpinning the Lebanese economy is the high level of remittances from citizens living overseas. Last year, $5.5bn of remittances flowed into Lebanon, a 6.2% rise on 2006, according to the World Bank's Migration and Remittances Fact Book for 2008, released in mid-August. In total, remittances accounted for 22.3% of Lebanon's gross domestic product last year, the highest in the Middle East and North Africa (MENA) region, the bank said. Thanks in part to rising remittances, Lebanon recorded net capital inflows of $5.649bn for the first half of 2008. However, while both exports and financial inflow are on the rise, the country's Finance Ministry has warned these results could be put at risk by any renewed political unrest.
The ministry said Lebanon remained vulnerable to possible changes in regional liquidity and demand, despite the fact that the region has so far been isolated from the slowdown in major industrial countries, in its August 12 report on the progress in implementing the economic and social reforms set out during the January 2007 Paris III donors' conference. "A worsening of the Lebanese political and security situation could rattle confidence and trigger a slowdown or even a reversal of deposit inflows, which would complicate the government's financing strategy and put pressure on reserves," the ministry report said.
Ironically, the recent lessening of political tension in Lebanon, with the forming of the new national unity government and the resumption of parliament, could actually add to inflationary pressures, one economist has warned. Saad Andary, the deputy general manager of the Bank of Beirut and Arab Countries, said Lebanon's relatively low inflation could break out and match the double digit rates of the Gulf region should domestic demand increase. If Lebanon is able to enjoy a period of political stability, with general elections scheduled for next year, there could be a strong increase in levels of capital inflow, Andary told the local press on July 29. "We have not yet seen the money flowing in the way it should from the Gulf," he said. "If there is political stability for a length of time, it is going to translate into inflationary pressures."
While no one would advocate a return to the violent clashes and political infighting that have marked Lebanon's recent past, peace may come at a price, though this could be eased if international oil costs continue their recent retreat. Even with lower fuel costs, Lebanon will have to pay for its dependence on imported energy and consumer goods for a long time to come, despite government efforts to overhaul and modernize the country's electricity industry and encourage higher levels of domestic production. (OBG27.08)
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11.4 BAHRAIN: Waste Management
Bahrain is looking to go green in an effort to preserve falling stocks of natural resources, preserve the environment and create new business opportunities through the development of recycling processes in the petrochemicals sector, heavy industry and waste disposal.
On August 13, petrochemicals firm Gulf Petrochemical Industries Company (GPIC) announced it had finalized plans to build a carbon dioxide (CO2) recycling plant at its main facility. The unit, to be constructed in co-operation with Italy's Technoment and Mitsubishi Heavy Industries Company of Japan, will recover CO2 from flue gas emitted at its existing petrochemical plant.
Due to be completed at the beginning of 2010, the recycling plant will recover up to 100,000 tonnes of CO2 emissions annually. The recovered CO2 will then be used to increase urea and methanol production. GPIC's new technology could open up a range of side industries, with CO2 used in the production of dimethyl ether, carbonated drinks and dry ice. Significantly for Bahrain, it could also be used in Enhanced Oil Recovery (EOR), being pumped into wells that have falling output to raise pressure and facilitate extraction. With its reserves dwindling and production just meeting domestic requirements for oil, Bahrain has embarked on an extensive EOR program to extend the life of its existing wells.
The move also makes strong environmental sense, with Bahrain ranked fourth in terms of per capital carbon emissions by the World Wildlife Fund (WWF), averaging 21 tonnes of emissions per person, almost five times the global average. Of these emissions, 50% are produced by the country's energy industry, with a further 24% emanating from the manufacturing and construction sectors.
Bahrain could also benefit by building up greenhouse gas credits. As an offshoot of the carbon recycling project, on July 24, GPIC signed an agreement with the Abu Dhabi Future Energy Company (Masdar) to further profit from the emission reduction process. Under the agreement, Masdar will develop and manage GPIC's Clean Development Mechanism (CDM), a regulatory mechanism governed and audited by the United Nations. The CDM provides financial incentives to reduce greenhouse gas emissions in countries that do not have binding reduction commitments under the Kyoto Protocol, by turning emission reductions into tradable assets or Certified Emission Reductions (CERs).
According to Abdul Rahman Jawahery, the general manager of GPIC, the recycling project and the CDM process are a major step forward for the company's program of sustainable growth. "... we are dedicated to leading the promotion of the CDM within the petrochemical industry being the first petrochemical and fertilizer company that opted for the CDM project in the region," he said when signing the deal with Masdar.
Though still in the planning stages, UAE-based ETA Star Group announced last year it would construct a $12m aluminum recycling plant at Al Hidd, Bahrain, to process scrap brought from Saudi Arabia, producing ingots for export to India and China. If brought on line, the new plant would be the kingdom's second such facility, with the Bahrain Recycling Plant (BRP), established in 1980 to process aluminum scrap.
Bahrain's efforts to cash in on unwanted by-products are by no means limited to industry. In early August, Majeed Milad, the chairman of the Manama Municipal Council, announced plans for a recycling factory to process much of the 3000 tonnes of waste produced in the kingdom daily. The project, a joint effort between the five municipalities in Bahrain and the national government, foresees the processing of waste for use in energy production, with projected output being 50 kilobytes. The plant could also be used to produce fertilizer, as well as separate reusable materials such as metals. Though no details have been released concerning the cost of the project, it has been announced that the plant will be located in the Southern Governorate. Bahrain's Tender Board has already awarded the $750m contract to build the recycling plant to French firm KNIM. "We're keen to adopt sustainable waste management including recycling and re-use, recovery of secondary raw materials and maximizing the value of waste," Milad told the local press on August 6.
Currently, most of this waste is disposed of in land fill sites. However, with an area of just 665 sq km, land is at a premium in Bahrain, making in-fill waste disposal an increasingly inefficient form of processing rubbish. Not all of the municipalities are fully behind the recycling plant project though, fearing it could cause as many problems as it solves. In July, the Southern Municipal Council voted against having the factory located within its boundaries, citing concerns over hazardous emissions from the plant's incineration unit. Ali Al Mohannadi, the chairman of the Southern Municipal Council, said that while the plant was necessary, and the technology to be used highly advanced, he would not support it being built in the area covered by the municipality. "I am keen on pushing for the project in Bahrain, but not in my governorate," he said on August 2.
While the council's "not in my backyard" opposition might slow down the project, it is unlikely to stop it, with at least one other municipality keen to host the new plant, and the Muharraq Municipal Council foreseeing opportunities for investment and employment. (OBG29.08)
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11.5 BAHRAIN: Investing in Food Security
In a bid to ensure its long-term food security, Bahrain is negotiating a series of import agreements and investing in farmland in South East Asia. As noted by the Oxford Business Group, in response to sharp rises in basic commodities, especially rice, Prime Minister Sheikh Khalifa bin Salman Al Khalifa said in March that Bahrain and other countries in the region had to turn their attention to maintaining adequate supplies for their populations as a matter of urgency. "We need to draw lessons from the current spiraling inflation hitting the world and start seriously to think about ensuring food security in the Arab world," he said during a meeting with local officials.
With less than 3% of its 665 sq km landmass being rated as arable, Bahrain has limited agricultural lands that do not exceed 6000 ha, thus making the country heavily dependent on food imports. The Kingdom's growing population has exacerbated this situation, with a sharp rise in the number of foreign workers over the past decade. Today, some 1.2m people live in one of the most densely populated countries in the world.
Of prime concern is ensuring a steady supply of Basmati rice, one of the daily staples of the Bahraini diet. Bahrain imports an average of 44,000 tonnes of rice annually, mainly from Pakistan, India and Thailand. Though import levels have remained constant over the past five years, costs have not, with prices surging 20% last year, according to data from the Bahrain Centre for Study and Research (BCSR). The once affordable 40kg bag of Basmati rice that used to sell for $45, has doubled in price in the past 12 months, though the steep climb in prices is easing off as countries such as Thailand have been reporting strong harvests.
Sheikh Khalifa call has prompted Bahraini officials to take action. Following a visit to the Far East in late May, Hassan Abdulla Fakhro, the Minister of Industry and Commerce, announced an agreement with officials in the Philippines to allocate large plots of land to grow basmati rice in a bid to secure the Kingdom's needs at reasonable prices.
While the Philippines, like Bahrain, is a net importer of rice, it does have large tracts of arable land that could be developed if funding was made available. If the project goes ahead, it has the potential to not only improve the Kingdom's food security but also maintain rice supplies to the local population, and create employment. This is a significant factor considering the protests that occurred in some South East Asian countries over rice shortages, at a time when exporters have been reaping windfall profits through taking advantage of high international prices. Bahrain has also held talks with Thailand, the world's largest rice exporter, about investing in its agriculture sector, as well as inking a long-term agreement to buy up to 40,000 tonnes of rice over a certain period of time, as yet undetermined.
Bahrain has also been moving on the domestic front to make sure its rice needs are met and price rises do not hit locals too hard. The government has given 15% salary increases to public sector employees, as well as including other important products in its subsidy program and granting families around $120 in monthly assistance. Additionally, it has recently beefed up price support on a number of basic commodities, including rice and flour, and has also cut import tariffs on many food products to help keep prices down.
While rising prices, high fuel and freighting charges, a weakening dollar and poor harvests experienced by some of Bahrain's main trading partners have combined to make food security a serious cause for concern, some argue that poor policies have also played a part. According to researcher Abdullah Al Hadad, one of the prime causes for Bahrain's food shortages is the rapid urbanization of the country. A lack of planning has contributed to the reduction of agricultural land in Bahrain as high-rise buildings have been constructed in all parts of the Kingdom - sparing nothing in their way, even farms, he was quoted as saying by local media on June 21.
There are additional concerns prompting Bahrain to consider offshore investments in agriculture. Primary amongst these is water. Jaffar Habib, the assistant undersecretary of agricultural production at Bahrain's Ministry of Municipalities and Agriculture Affairs, said there were limits on how far the Kingdom's agricultural resources could be stretched. "Our biggest challenges are the limited agricultural lands in Bahrain and shortage of water resources, so we are forced to use treated water for irrigation, despite conflicts we are facing from the public who fear the hygiene and purity of the water," he was reported as saying on July 18. An additional concern identified by Habib is the reluctance of Bahrainis to work in the agriculture sector, with long hours and relatively low pay discouraging many from taking up a job on the land.
Bahrain is not the only Gulf state looking offshore to guarantee its food requirements. The United Arab Emirates government has been looking at investing in the agriculture sectors of Kazakhstan, Pakistan and Sudan, while Saudi Arabia is looking at plans to invest in farms in Thailand and reportedly holding talks with Pakistan over a land for oil deal. (OBG22.08)
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11.6 QATAR: Steadier Growth
Qatar's economy may be booming, with Gross Domestic Product (GDP) growth, per capita income and energy production all at near record highs, but the world's largest exporter of liquid natural gas still has some hurdles to overcome on the road to economic strength and stability. So notes the Oxford Business Group.
In its latest quarterly review of Qatar's economic and social development, released in late August, Qatar National Bank (QNB) estimated that GDP would grow by 19.5% this year. This rise is partly due to an increase in oil output from last year's average of 815,000 barrels per day (bpd) to nearly 840,000 bpd, continued high oil prices and high gas exports, tipped to hit a record 40m tonnes, the bank said. While other studies predict less robust growth, with projections putting GDP expansion in the 13 to 15% range for this year, they still rank Qatar ahead of the rest of the pack in the Gulf region.
According to QNB, growth will remain strong in 2009, but is likely to fall back to around 16%, around half the rate enjoyed in the years 2004 to 2006. Meanwhile, the International Monetary Fund (IMF) has projected an annual rate of increase of just 12% between 2008 and 2012. Even this lower rate would be healthy by most countries' standards, though it does indicate the Qatari economy may be entering a period of steadier growth. This could be partly due to uncertainty over long-term oil and gas prices, along with expectations that Qatar's fossil fuel production capacity will plateau out in the coming years.
Additionally, the weakening of the US dollar, to which the Qatari rial is pegged, as well as soaring commodities and construction materials prices have both contributed to the country's present near record inflation, which is hovering around 14%.
In a move to curb inflationary pressure, the Ministry of Economy and Finance issued instructions to food retailers and wholesalers in late August not to raise the price of any commodity without consent from the ministry. In June the government announced a three-year ban on increasing the prices of four main construction materials - sand, steel, cement and gabbro - in an effort to stabilize building costs. With the majority of the country's food and construction materials being imported, rising prices for these items have been a strong contributor to Qatar's domestic inflation.
Another strain on the Qatari economy is the country's population boom, with the number of people registered as living in Qatar rising by 18% in the first half of the year, according to figures published by the Qatar Statistics Authority (QSA) on August 21. Coming on top of a 17% increase in 2007, Qatar's population reached 1.45m at the end of June, the authority's report said.
Like much of the country's inflation woes, its population explosion is largely imported, with around three quarters of Qatar's residents originating from overseas, the vast majority being temporary workers. While these workers are the mainstay of the country's expanding economy, providing the manpower needed to drive Qatar's energy and construction industries, their presence also fuels inflation, pushing up demand for housing, services and commodities.
While the Qatari government imposed a two-year freeze on rental increases in March, covering all contracts signed since 2005, a QSA report issued on August 25 showed local householders had to spend 29.3% of their income to meet housing, water and electricity needs. This was up from 17.6% in 2001, when the population was a more manageable 770,000. For expatriates, housing costs accounted for 30.8% of monthly spending.
Though a large overseas workforce is vital for Qatar's future growth, the expansion of the economy is currently not keeping up with the rate of new arrivals. While the spate of incoming workers may ease in the future, as Qatar's state-sponsored infrastructure and energy production expansion program nears completion in the coming years, the high influx of workers will continue to put pressure on the economy in the short-term.
One other factor affecting Qatar's economy is the country's position in a potentially unstable region. According to the 2008 Gulf Cooperation Council Credit Survey conducted by ratings agency Standard & Poor’s, geopolitical issues are a significant contributor to Qatar not getting higher sovereign ratings. Currently, the agency has assessed Qatar's sovereign rating at AA-. For Qatar's ratings to be raised even further, several things need to take place, the S&P report said. "If there is progress in containing the geopolitical pressures, institutional reforms remain on track and continued economic growth combined with further improvements in the general government net asset position, this could lead to the rating being raised," it said.
While the agency said there was no great risk of a conflict breaking out between Iran, the US or Israel in the Gulf region, such considerations did play a part in assessing Qatar's sovereign ratings. Inflation, location, population and global economic situation could all play a part in slowing down the rate of growth of the Qatari economy. However, having produced a series of strong budgetary surpluses over the past few years, the government is well- placed to ease the country through any downturn, that is if GDP growth of 12% can be called a downturn. (OBG02.09)
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11.7 UAE: Dubai’s Multi Faceted Diamond Trade
Dubai's drive to become one of the world's leading diamond trading centers was given a timely boost with news that the emirate's total trade in rough stones had topped $3bn for the first half of this year. Imports of rough, or uncut, diamonds rose by 23% from $937m in the first six months of 2007 to $1.15bn at the end of June, while exports climbed to $1.88bn from $1.3bn. Dubai's total volume of diamond trading, both rough and polished stones, was $11.23bn in 2007.
According to Ahmed Bin Sulayem, the executive chairman of the Dubai Multi Commodities Centre (DMCC), the continued surge in diamond trade is testament to Dubai's success in attracting traders from around the world. "We have witnessed healthy growth in bilateral trade with various countries, reflecting the growing confidence in the trading infrastructure and opportunities offered by Dubai," he said on August 16.
It is not just Dubai's rough diamond trade that is growing. According to figures released by the DMCC in late June, the value of polished gems traded hit $2.7bn, well on target to eclipse the 2007 total of $6.4bn. This reflects Dubai's desire to become a sales and distribution hub, according to Bin Sulayem. In a June 29 statement, he explained that emerging economies such as the United Arab Emirates (UAE), Saudi Arabia, Turkey and Egypt are set to become the centre of the fast-growing jewellery business over the next three years, "with Dubai being the natural gateway for the wider region".
Dubai has set itself the target of becoming one of the major diamond trading centers, challenging traditional clearing houses such as Antwerp, New York and London. These ambitions are focused on the DMCC, and its subsidiary Dubai Diamond Exchange. In February 2007, the DMCC unveiled a master plan for advancing Dubai's diamond sector, laying out plans for bolstering grading services, industry training and financing. Most of the program is now in place, with diamond grading courses being conducted, and the International Diamond Laboratories (IDL) opening last November to provide world class assaying services using advanced technology to complement the age old visual techniques.
To meet the growing need for financial services in the trade out of Dubai, the Antwerp Diamond Bank (ADB), Belgium's largest diamond bank and the diamonds and precious metals unit of HSBC Bank's Middle East division, opened branches at the DMCC centre. Both are providing import credits, working capital and receivables financing, along with factoring services and precious metals hedge funding.
Dubai's development as a leading diamond clearing centre has not gone unnoticed elsewhere. Dipuo Peters, the premier of the South African province of North Cape, warned that Dubai was stealing a march on the domestic industry. "Today, we are told about the initiatives around Dubai. If we don't do something while there is still time, history will judge us," Peters told the local press on July 18.
While Dubai is forging ahead as a stone trading centre, and is fast establishing its credentials in diamond assaying, it faces stiffer competition in becoming a beneficiation market leader - whereby stones mined in Dubai and also cut and polished in the country, thus capturing a larger share of the diamond industry value chain. Indeed, most of the polished stones it sells are currently imported from other countries.
India conducts 57% of the world's diamond polishing trade, importing rough stones worth $8.8bn in 2006-07 and exporting $10.9bn of polished gems. One of its biggest clients is Dubai, which imported polished diamonds worth $2.33bn from India last year.
While its global market share in the polishing industry could be whittled away as other countries such as Dubai, and producers like Angola, Namibia and Botswana all seek to meet their beneficiation objectives; India is working to consolidate its position. A new $2bn diamond trading and processing centre is due to open some time before the end of the year in Mumbai, along with a large scale international diamond trading hall, which could serve as a rival to Dubai's ambitions.
Though Dubai may be the coming player in the global diamond trade, it still has a long way to go before it could seriously compete with Antwerp, the centre of the precious stone industry, which last year had an estimated turnover of $29bn. However, while the Belgian city has lost some of its glitter through India becoming the main polishing hub, so too Dubai could establish itself as a rival in trading, assaying and finance in the diamond industry. (OBG22.08)
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11.8 EGYPT: Push for Fertilizers
As food price hikes push agricultural yields, the Oxford Business Group said Egypt’s fertilizer industry is getting a boost from fresh investment and increased demand from local and foreign players. A grouping of local and foreign companies recently announced the building of a new phosphate fertilizers complex in Aswan, Upper Egypt. The local companies taking part in the venture are Polyserve, Egyptian Financial and Industrial Company (EFIC), Abou Kir Fertilizers, Helwan Fertilizers and El-Nasr Mining Company. Greece's Indagro and US-based Agirfos will also have stakes in the new production facility.
Each of the Egyptian companies will have an 18% stake in the project, equal to $300m, while both foreign investors will have a 5% share each, local media reported. The new complex is expected to start production in early 2011 and cost a $2bn.
A reflection of the demand driving the expansion came in June, when China Agritech, a liquid organic fertilizer manufacturer in China, announced the shipping of $75,000 worth of liquid organic fertilizer, the equivalent of 10,000 liters, to be distributed in the country, local media reported. Several factors are attracting fertilizer producers to the country. In addition to the growing demand from Egypt's agricultural industry, the country's geographical position is encouraging international players to build fertilizer production units and use the country as a convenient export base. The availability of cheap gas is also proving attractive. "The cost advantages here in Egypt are very significant," Shrouk Diab, an analyst at Beltone Financial, told OBG.
Despite the gradual reduction of subsidies as part as the government's economic program of liberalization - the government has been steadily raising the price of natural gas and aims to have it at $2.65 per MBtu in 2009-10 - this is still cheap by international standards. In the US for example, the price of natural gas currently stands at $11 MBtu, so Egypt is very attractive for foreign companies, she said.
On the back of cheaper energy and good logistic connections, exports of Egyptian fertilizers have been rising. The country sold over E£6bn ($1.1 bn) worth of fertilizers onto the international market in 2005, and that figure jumped to E£13.4bn ($2.5 bn) in 2007, according to the ministry of trade and industry. Figures to June this year indicate an export value of E£8.5bn( $1.6 bn).
Traditional export markets for Egyptian fertilizers have been Europe and Latin American countries such as Argentina and Brazil. These two agricultural giants could prove a good option for further expansion of the industry. "Egypt is now becoming one of the great exporters of fertilizers. This may be one of the areas for cooperation between both nations," said Egyptian Minister of Trade and Industry Rachid Mohammed Rachid, speaking in Sao Paulo, Brazil, during an earlier visit to the South American powerhouse.
Rising world demand for fertilizer products is also welcome news for Egypt. As several governments are looking to enhance agricultural production to offset recent increases in food prices, world fertilizer prices have been rising fast. Diammonium phosphate fertilizer, for example, sold for $250 per tonne in January 2007. It is now valued at around $1,230 per tonne; Nitrogen-based fertilizers have risen from $277 to over $450 per tonne during the same period.
Nonetheless, prices on the Egyptian market are still below the international average. This is partly due to the fact that the fertilizer market in Egypt is subsidized by the government, costing the budget around LE1.3bn every year, according to local media. Indeed, farmers can have access to subsidized fertilizers through the state-owned Bank for Development & Agricultural Credit. Furthermore, producers can only legally sell in the domestic market through the governmental distribution scheme.
This situation has created market distortions on the domestic front, as a proportion of the subsidized low-cost product is resold on the black market at higher prices. One bag of fertilizer costs around E£90 ($16.7) through the government system. Farmers are allowed an average of two bags of subsidized fertilizer per fedan (acre), depending on the governorate. But if they need more, they must turn to the black market, where a bag can cost up to E£180($33.5). This, in turn, has led the government to raise the price of fertilizers in the first quarter of 2008 in a bid to rein in illegal trade.
The ministry of trade and industry decided to increase the price of azotic fertilizer by 90%, bringing the official domestic price to E£1500 ($280) per tonne, closer to international prices, which stand at around E£2100 ($390) per tonne, according to local media reports. The government plans to gradually eradicate subsidies, to eventually bridge the gap between prices in the official and unofficial markets.
Meanwhile, international demand is expected to grow further, thus fuelling exports by Egyptian fertilizer producers. "Prices have been rising, which is good for the industry, as there is world demand for our fertilizers", Adel Attia, marketing manager at Egyptian Fertilizers, told OBG. However, while the industry is reaping the benefits of inflated prices, it is not immune to rising costs. "There is a lot of pressure from the input side," Diab told OBG. "The price and supply of fertilizer products will be determined by the availability of mineral resources". For Egyptian fertilizer producers, this might mean that with growing business there will be a need for more efficiency as well. (OBG20.08)
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11.9 PAKISTAN: Pakistani Coalition Collapse
Barely a week after forcing the resignation of President Pervez Musharraf, Pakistan's ruling coalition has collapsed. The Pakistan Muslim League (Nawaz), or PML (N), dropped out of the government on August 25th, accusing its main coalition partner, the Pakistan People's Party (PPP), of breaking a promise to reinstate judges dismissed by Mr. Musharraf last year. The PPP retains enough parliamentary support to govern alone. But with a presidential election looming, rivalry between the erstwhile coalition partners will exacerbate Pakistan's political fragility.
First Straw
It was probably inevitable that the ruling coalition would collapse sooner rather than later after Mr. Musharraf's exit. The PPP and the PML (N) have a history of bitter antagonism, and the brief marriage of convenience that lasted until yesterday was premised on the parties' mutual enmity towards the former president. Moreover, the stakes in the judges dispute are very high. If the former judges are reinstated, they could revive corruption charges against the PPP's co-leader, Asif Ali Zardari. If they are not, this would diminish chances that the PML (N)'s leader, Nawaz Sharif, could have the legal obstacles preventing him from being elected to parliament removed. Even if the two parties had managed to resolve their disagreements on the judges issue, any serious attempt to tackle jointly Pakistan's pressing economic and national-security challenges would have brought their underlying ideological differences to the fore.
The implications of the coalition's split for Pakistan's political stability are mixed. Despite losing the support of the PML (N), which has 91 seats in the 339-seat national assembly, the government's position may not be under threat. In addition to the PPP's 124 seats, Mr. Zardari can rely on the votes of several minor parties. However, without the PML (N)'s support, the PPP would clearly struggle to muster the two-thirds majority required to amend the constitution—for example, to curtail the powers of the presidency. As a result, if the split could give the PPP a freer hand to implement its preferred policies, such as taking a harder line against Islamic militants, the prospect of stepped-up rivalry between the PPP and the PNL (N) could more than cancel out this possible benefit. Notwithstanding Mr. Sharif's promise that his party will act as a "constructive" opposition, all bets would be off if his political ambitions continue to be stymied by the PPP-led government.
Mr. Sharif's pledge will come under immediate pressure in the run-up to the presidential election scheduled for September 6th. The PML (N)'s candidate is a former judge with no party affiliation, but his campaign is likely to be fuelled by outrage at Mr. Zardari's decision to angle for the presidency himself. In theory, both the PPP and the PML (N) are keen to undo Mr. Musharraf's changes to the constitution, which included conferring on the president the power to dissolve parliament. But whichever party wins the presidency could also be tempted to use its broadened powers to its own advantage.
Outlook
Regardless of who controls the presidency, rivalry between the PPP and the PML (N) will almost certainly worsen Pakistan's political instability. Political paralysis would be damaging at the best of times, but Pakistan urgently needs a coherent, stable government capable of dealing authoritatively with several looming crises. The economy is in dire straits; inflation is running at around 25% amid food and fuel shortages. The government's control over the tribal regions bordering Afghanistan, where the army is battling a full-scale Taliban insurgency, looks increasingly tenuous. A fresh outbreak of sectarian violence in disputed Kashmir calls for urgent diplomatic engagement with India. Renewed antagonism between the PPP and the PML (N) will only make it harder for the government to tackle these problems.
Pakistan's new army chief has made it clear that the military intends to stay out of politics. However, in the worst-case scenario, a further deterioration in political stability could lead the army to intervene to restore order. This prompts a depressing thought: having ended military rule and elected its first fully democratic government in nearly a decade, could Pakistan be headed back to where it was before Mr. Musharraf seized power? After all, in 1999 the coup launched by then-General Musharraf ended years of debilitating rivalry between the same two parties that have just overtly renewed their battle for political pre-eminence. (EIU26.08)
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11.10 TURKEY: Risk Alert - Is Inflation On The Way Down?
As elsewhere in the world, Turkey has struggled to control its inflation in 2008. The country’s annual consumer price index (CPI) has continued to rise, jumping from 10.61% in June to 12.06% in July. Elevated energy and food prices have fuelled the upwards trend despite interest rate hikes from Turkey’s central bank over recent months. While headline inflation—which includes energy and food price changes—will continue to rise for the rest of the summer, Turkey’s disinflationary process should take hold by autumn. This is thanks to a multiplicity of factors including the anticipation that global oil and food prices will continue to recede or stabilize. It also includes the recent restoration of political stability in Turkey, low domestic demand and tight monetary policy of the Central Bank of Turkey (TCMB). The Justice and Development Party (AKP) government is not expected to loosen fiscal policy significantly, while Turkey’s central bank will likely delay interest rate cuts until next year.
Energy & Food Prices
Increases in energy, food and commodity prices, coupled with the depreciation of the Turkish lira in March and April, have pushed Turkey’s headline inflation up since the middle of 2007. Figures from the TCMB show that 6.8% of the 10.61% year-on-year inflation rate in June 2008 arose from food and energy price rises. Turkey’s core inflation—which excludes food, energy, beverages, gold and tobacco—likewise increased in the second quarter of 2008 owing to an exchange rate pass-through. Core inflation rose from 4.3% in February to 6.5% in July.
Although Turkey’s headline inflation continues on an upward trend in 2008, inflationary pressures should gradually recede. Many local economists say CPI inflation will come down from September of this year. AK Securities expects CPI to hit 10% at the end of 2008, declining further to 7% by the end of 2009. The central bank's CPI target for 2009 currently stands at 7.5%.
A number of factors account for these projections. Global energy prices recently declined while food prices stabilized—a trend that many economists expect to continue. As the US economy slows and European economies contract, so demand for oil in these regions falls, placing downward pressure on the crude price. Turkey’s poor harvest in 2007 and persistently high global agricultural commodity prices kept the price of processed food elevated, although an improvement in weather conditions in the first half of 2008 has helped stabilize local food prices. Many market observers therefore anticipate a further decline or leveling of energy and food prices, although the trend is not guaranteed.
Global credit market conditions will in the meantime keep domestic demand low and help to support disinflation in the medium-term. Turkey has not seen a substantial increase in real wages, which would boost demand, consumption and in turn perpetuate inflation. Yet, the inflationary risk associated with a real wage hike is low considering the high level of unemployment in Turkey. Unemployment officially stood at 11.6% as of February 2008 but is closer to 24% when considering Turkey’s seasonal workers, underemployed and the country’s unregistered unemployed.
Political Factors
The July decision by Turkey’s Constitutional Court not to ban the ruling AKP also bodes well for the inflation outlook. The favorable ruling by Turkey’s highest court has restored investor confidence and removed the prospect of double elections in the aftermath of a ban.
While friction between Turkey’s staunch secularists and the conservative government may persist, the prime minister, Recep Tayyip Erdogan, is expected to pursue a cautious political approach on the domestic front. This should involve greater engagement with the opposition in the interest of political and economic stability. The divisive headscarf issue is therefore not likely to re-emerge on the AKP’s agenda in the short-term. Mr. Erdogan has pledged to invest at least $11bn in infrastructure projects in the south and southeast of the country over the coming five years and may be inclined to increase expenditure in the run up to the March 2009 municipal elections. Yet, plans to increase spending have nonetheless come at a time when public finances are on a sound footing. Government expenditure in 2008 and 2009 is therefore not expected to derail the disinflationary trend.
That the government is unlikely to allow fiscal policy to slacken dramatically derives from its own political and economic pragmatism. The AKP’s solid economic record since 2002 is a proven vote-winner. Fiscal discipline is also a must to ensure the continuous inflow of foreign investment which came to $7.6bn by the end of June for 2008 despite domestic political uncertainties and global market conditions. The figure is expected to reach $15bn by year-end and should exceed $20bn for 2009. Foreign direct investment remains an essential source of funding for Turkey’s current-account deficit, recently projected to hit around $56bn by end-2008.
Opting for a precautionary standby agreement with the IMF would reduce risk and ease investor concerns as to the future direction of fiscal policy. Such an agreement is therefore likely to be made in September. Moving ahead with EU-related reform will also be a confidence booster for investors.
Monetary Tightening
That the central bank’s monetary policy committee (MPC) did not increase interest rates during its August 2008 meeting also confirms expectations that the disinflation process will take over before the end of the year. The central bank has kept the overnight borrowing rate on hold at 16.75%, in line with market expectations. This decision comes following three months of consecutive rate hikes from 15.25% to 16.75%, equivalent to a cumulative increase of 150 basis points.
High interest rates should buffer inflation by repressing domestic demand. But the tightening of monetary policy has so far failed to visibly reduce inflation, thanks to high food and commodity prices in 2008. The anti-inflationary impact of rate hikes should be felt by autumn, however. Turkey’s central bank is then likely to begin cutting interest rates in the second quarter of 2009. Global market conditions, external demand and the AKP’s fiscal approach will nonetheless affect the inflation outlook and future responses of the TCMB.
The Turkish central bank is quite rightly cautious in face of global uncertainties and the effect these can have on energy prices. Disruption of oil supplies from the Middle East or the Caucasus for instance could disrupt the disinflationary process, particularly given Turkey’s dependency on imported fossil fuels. Equally, a further tightening of global liquidity conditions would increase Turkey’s exposure to external shocks. The TCMB is therefore taking a wait-and-see approach. But domestic and external conditions currently suggest that Turkey can look forward to a reversal in inflationary figures from September of 2008 and beyond. (EIU Risk Briefing 20.08)
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11.11 GREECE: Doubts Resurface About Greece's Emission-Curbing Commitments
Less than 16 months before being obliged to meet its first European Union emissions target, Greece has yet to submit a comprehensive national plan to combat atmospheric pollution, according to environmental experts. As reported by the Athens News, Greek Environment Minister George Souflias announced on 22 July that he had signed a joint ministerial agreement approving a national program to reduce the country's yearly emissions of the four principal air pollutants - sulphur dioxide (SO2), nitrogen oxides (NOx), non-methane volatile organic compounds (VOCs) and ammonia (NH3) - in order to meet the EU's requirements to cap these emissions by 2010.
However, Mihalis Petrakis, the director of the Athens Observatory's Institute of Environmental Research and Sustainable Development, told the Athens News that he is unaware of any detailed environment ministry program to reduce air pollutants. At the same time, WWF climate change spokesman Achilleas Plitharas condemned the ministry announcement as superficial.
Six days after Souflias' press release, the European Environment Agency (EEA) released a report indicating that Greece is among the worst offenders of the EU27 for atmospheric pollutants and - as of March this year - is the only country that has yet to submit a national emissions-reduction plan, as foreseen in the European directive of 2001 determining the emissions ceilings.
The directive (2001/81/EC) states that a national plan outlining programs for the progressive reduction of yearly atmospheric pollutant emissions should be submitted by October 2002 at the latest and that member states should make available "to the public and to appropriate organizations, such as environmental organizations, [these] programs... in [a way that is] clear, comprehensible and easily accessible".
Greece was referred to the European Court of Justice in 2005 for its failure to incorporate this directive into national law. Despite the directive being since passed into law, a national plan has still not been received by European officials.
No Strategy
In the ministry statement, Souflias said that Greece would meet its 1 January 2010 targets to limit SO2 emissions (mistakenly referred to in the release as CO2) to 523 kilotonnes, NOx to 344kt, VOCs to 261kt and NH3 to 73kt - in other words, in line with EU requirements. The ministry's reported 2006 figures for these pollutants are 536, 316, 291 and 68kt, respectively.
However, while not suggesting that Greece is unlikely to meet these targets, the EEA report highlighted that in 2006 - the most recent figures available - Greece was the fourth-worst offender (in percentage terms) of the EU27 in the emission of NOx and VOCs, sixth-worst for carbon monoxide (CO) and second-worst (behind only Romania) for SO2.
"The National Observatory of Athens (NOA) produced a program for the reduction of air pollutants relevant to different thematic sectors - agriculture, heating, traffic etc - some years ago, but I haven't seen a strategic program by the ministry detailing the different measures to be taken in order to reduce air pollutants. So you are right [that the ministry has yet to publish a detailed national plan]," Petrakis said. "You must also bear in mind that these programs need to be updated because quite a few variables change," he said. "The rising price of oil means lower oil consumption and increasing attention to renewable energy sources."
Asked whether he thinks Greece will meet its EU emissions-cutting targets, Petrakis said: "It can be done, but it is difficult. There have to be mechanisms in place to examine the implementation of these measures. Personally, I think there is no serious involvement of different organizations, such as the NOA and other institutes that deal with these issues. So, I am skeptical."
Turning Up the Heat
With electricity and heat production constituting the main source of SO2 emissions, Greece produced 29% more of the acidifying gas in 2006 relative to 1990 levels, with other EU27 countries - apart from Cyprus (27%) and Romania (11%) - reporting reductions from 18 to 92%.
The EEA report also stressed that levels of primary particulate matter PM10 and PM2.5 have not been reported by the country since the implementation of the directive. These harmful organic chemicals, acid aerosols and trace metals are, according to another EEA report in November last year, reducing life expectancy in Greece by 9-36 months, principally due to the burning of lignite (a low-grade coal) at power plants. "All that is being proposed is to reduce the pollutant levels to exactly those demanded by the directive," Plitharas told this newspaper. "At the same time, however, we know that there is a daily breaching of the legal atmospheric pollution levels for particulate matter, as well as nitrogen and sulphur oxides, in the lignite-fired power plants in Ptolemaida [in western Macedonia]. There is no study that accompanies the ministry statement indicating how these reductions are going to be achieved."
Atmospheric pollutants can cause serious respiratory problems, the acidification of forests and water ecosystems, and eutrophication of soils and waters, leading to limited supplies of oxygen in rivers and lakes. Plitharas stressed that, unlike greenhouse gas emissions, these are principally felt at a local level. He added: "We are told that desulphurisation units will be created at lignite-fuelled power generation plants, but [with the exception of one unit in Megalopolis, Arkadia] we are not told where and when. Likewise, we are told that old technology vehicles are to be taken off the road, but with no mention of what this will cost and who will foot the bill."
Targeted Criticism
Further European rebuke will seriously dent confidence in the environment ministry's ability to coordinate Greece's emission-curbing targets over the coming years. Under its Kyoto Protocol commitments, Greece must limit its greenhouse gas emissions to a 25% rise relative to 1990 levels by 2012. The EU bloc target to reduce these emissions by 20% relative to 1990 levels by 2020 is even more stringent.
In April this year, Greece was expelled from the Kyoto Protocol's so-called flexible mechanisms for its failure to accurately measure these emissions. No environment ministry or EEA spokesman was available for comment.
According to the EEA report, across the EU27 the largest reduction in atmospheric pollutants in percentage terms has been in acidifying SO2 (almost 70% less in 2006 than in 1990). Of the other pollutants responsible for the formation of harmful ground-level ozone, CO (-53%), VOCs (-44%) and NOx (-35%) all displayed significant reductions.
Souflias' plan to curb yearly air pollutants by 2010 includes the following:
- The obligatory use of low-sulphur fuel will reduce SOx emissions by 100kt*.
- Desulphurisation units at lignite-fired power plants in Megalopolis will reduce SOx by 100kt.
- The closure of two Megalopolis power plants will reduce SOx by 90kt.
- The implementation of pollution-reduction technology in cars will reduce nitrogen oxides by 40kt.
- The connection of some islands to the national power grid will reduce nitrogen oxides by 10kt.
- The use of natural gas instead of fuel oil and diesel for electrical production in Crete will reduce nitrogen oxides by 35kt. (*All figures in kilotonnes) (ATHENS NEWS 15.08)
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11.12 BULGARIA: Skin Care, Cosmetics & Fragrances Markets
Research & Markets (http://www.researchandmarkets.com) has announced the addition of the "Fragrances in Bulgaria" report to their offering. The findings indicate that 2007 brought the highest growth rates in the past decade.
In 2007 Bulgarian cosmetics and toiletries achieved a successful year as most of the categories saw positive growth rates, both in terms of value and volume sales. Well above the average was the growth rate of sun care, for example, but its impressive progress was actually mostly due to its initial low base and the category still generates the low sales levels. The majority of the color cosmetic categories performed well, with many managing to achieve double-digit growth in value and volume sales. Oral hygiene, however, was the least dynamic category but has significant potential for future growth.
Premium Cosmetics Become a Key Segment in the Industry
2007 was the year when rising disposable incomes stirred the market and stimulated the growth of premium and high-end cosmetics. Although actual sales achieved were still low, that was a clear indication that the local premium cosmetics category is changing and will become even more profitable for the key players. Premium color cosmetics and sun care were the most dynamically progressing products but it is premium fragrances and premium skin care that generate the highest value sales. Conversely, the low end of the category is notably shrinking as the quality is becoming more important than the price of a product. A decade ago consumers were choosing most of the products by comparing prices. In the review period, however, it became clear that the attention of the users of cosmetics can be kept by showing consistency in quality and ensuring positive perception for the manufacturer and the brand.
Multinational Brands Expand, Local Manufacturers Shrink
2007 saw expected success for global brands such as Avon, Nivea, L’Oreal, Dove, etc. All of the multinational companies maintained their shares and stabilized their positions. Most managed to expand their share at the expense of local manufacturers, which were unable to cope with the intensifying competition. In spite of the recent investments in quality improvement, major Bulgarian companies such as Aroma, Alen Mak and Rubella Beauty remain unable to halt their falling shares. The key factor which limits their potential is their limited financial background, which does not allow them to invest in marketing and advertising. As a result, even new launches remain unnoticed while foreign companies invest massively in advertisements, which facilitate their progress further.
Store-Based Retailing Remains the Key Distribution Channel
Store-based retailing was the key distribution channel for cosmetics and toiletries in Bulgaria. Health and beauty retailers account for the greater part of the value sales in the industry, alongside perfumeries and independent small grocers. The importance of the grocery stores is increasing, mainly because of the growth of sales of the large supermarket/hypermarket chains as they are able to negotiate bigger discounts and offer popular brands at slightly lower prices. Along with that, the direct sellers like Avon and Oriflame have also managed to strengthen their distribution networks, resulting in growth of direct sales. Avon Bulgaria EOOD, which was the company with the largest overall share, is the major distributor of cosmetics and toiletries and successfully operates in categories including skin care, color cosmetics and fragrances.
Moderate Growth & Fierce Competition Expected
The forecast period promises stable positive growth, driven by rising disposable income, which will boost demand for high quality sophisticated products. Skin care and sun care will show the highest growth as these categories are still underdeveloped and have the highest potential for progress. The positive advance and the increasing unit prices are expected to intensify competition between companies and they will bring the rivalry to another level – instead of only attracting the attention of the potential consumers, leading brands will have to keep it and invest in creating sustainable brand loyalty. (R&M01.09)
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- Turkish Lira conversions done at a rate of NTL 1.10 = $1.00
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