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TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Zelekha Demands VIPs Pay Tax On Their Free Medical Benefits
1.2 Mazuz Set To Indict Former Finance Minister Hirchson For Embezzlement
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Nine New Incubator Companies Are Approved
2.2 N-trig Expands With Opening of North American Operations
2.3 IAF Successfully Completes Testing of Airtrax's MP2 Equipment Handler Prototype
2.4 Metalink Wins Design News' Golden Mousetrap Award
2.5 AT&T Announces Agreement to Acquire Interwise
2.6 Survey Finds 52% of Israelis Like Trying New Food Products
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Verimatrix Content Security Selected for Qatar IPTV Service
3.2 Delta to Launch Non-Stop Cairo - New York Flights
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 Middle East Scientists Find Common Ground at Malta III Conference
4.2 OECD Says Israeli Teachers’ Pay Among Lowest In West
4.3 Israel's Air Pollution 100 Times Lower During Yom Kippur
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Israel Leads Middle East and Places 30th in Corruption Perceptions Index
5.2 First Cargo of Iraqi Fuel Arrives in Jordan
5.3 US Provides $14 Million Grant to Support Judicial Sector in Jordan
5.4 Jordan Has 4.6 Million Tourist Visits in First Eight Months of 2007
5.5 Work On Qatar-Bahrain Causeway to Begin by May
5.6 UAE Car Market Poised To Grow 23% Over Three Years
5.7 Oman Firmly Committed To Rial's Peg to the Dollar
5.8 Saudi Central Bank Rules Out Change in Foreign Exchange Policy
5.9 World Bank Recognizes Saudi Arabia as One of the World's Top Reformers
5.10 Yemen Signs Accord to Build $15 Billion Nuclear Power Plant
5.11 Egypt to Host the World Economic Forum on the Middle East next May in Sharm El Sheikh
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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:
6.1 Turkey's FDI Expected to Surpass $20 Billion This Year
6.2 Turkey's Incoming Tourism Up by 16.5% in August
6.3 Iran Gas Project Expected To Progress in October
6.4 Erdogan & Ahmadinejad Agree to Build Iran-Turkey Railroad
6.5 Cyprus to Delay New VAT on Food, Medicine & Land
6.6 Greek Export Growth Slows Down While Imports Continue Unabated
6.7 Greece Unveils Plan to Slash Budget Gap
6.8 Greece's Unemployment Drops To Lowest Since 1998
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Simchat Torah Celebrated
*REGIONAL:
7.2 Eid el Fitr Marks the End of Ramadan
7.3 Musharraf's Re-Election Vote Set For 6 October
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Cheetah Medical's NICOM Non-Invasive Cardiac Output Monitor Featured
8.2 Hadasit Studies Fluorescent Whitening Agents to Combat Global ''Winter Kill'' Fish Epidemics
8.3 InSightec Resumes Clinical Trials for Non-Invasive Treatment of Brain Tumors
8.4 Can-Fite Develops a Blood Test to Predict Patients’ Response to the Company Drugs
8.5 Acro Announces Technology Agreement With LSRI
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Tower Semiconductor Wins High-Volume Manufacturing Deal for Fab2
9.2 Orsus Launches Situator v5 - All New Situation Management Software
9.3 MIND Announces Follow-on Orders
9.4 Evogene & Ormat Industries subsidiary Announce Biodiesel Collaboration
9.5 Optibase Solution Used to Prepare Military Leaders in the US Army’s Fort Leavenworth
9.6 ECI Telecom Introduces MPLS-based, Carrier-Class End-to-End Metro Ethernet Solution
9.7 BVR to Integrate Nemesysco's LVA Technology for Emotion Detection in Flight Simulators
9.8 American Electric Power Selects Orsus' Situator for Wide-Scale Deployment
9.9 Integra5 & Solusoft Provide Converged Quad Play Applications to Service Providers in Central America
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10: ISRAEL ECONOMIC STATISTICS
10.1 State Of Economy Index Continues To Rise
10.2 Unemployment in Israel Remains Static
10.3 Israel Ranks Low for Welfare Spending
10.4 Israel's August Tourist Entries Achieve Seven Year High
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11: In Depth
11.1 ISRAEL: Mixed Results in New International Economic Freedom Report
11.2 ARAB MIDDLE EAST: Islamic Finance Expanding Rapidly
11.3 ARAB MIDDLE EAST: Islamic Banking Makes Headway
11.4 LEBANON: Financing in a Time of Risk and Reform
11.5 KUWAIT: Petrochemical Production
11.6 BAHRAIN: Gas and Hot Air
11.7 QATAR: Between East and West
11.8 ABU DHABI: Aluminum to Diversify the Economy
11.9 SAUDI ARABIA: Security Wall to Be Built
11.10 EGYPT: Adding Up the Tourist Numbers
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Zelekha Demands VIPs Pay Tax On Their Free Medical Benefits
Accountant General Zelekha, in one of his last moves before Finance Minister Bar-On attempts to end his tenure, Zelekha is initiating a major change for a very influential group of former politicians. He is demanding that 400 former VIPs who receive state subsidized medical and nursing home care pay taxes on these benefits. The Accountant General's Office has asked the Health Ministry and the Tax Authority for their opinions. The benefits for the former VIPs now amount to $3.24m annually. The benefits were granted in the 1950s, when the original group of beneficiaries - judges - requested not to belong to the health funds which were all linked to political organizations. Then prime minister, David Ben-Gurion, decided to grant free medical care to those judges who did not want to identify with any specific political party. The benefits were widened to more and more former VIPs: minister, MKs, judges, chief rabbis, religious court judges and ministry director generals among others - but the perk was scaled back and only those who took office before 1986 are now entitled to the free medical care. The insurance also applies to spouses, and certain dependents.
The group of 400 is divided into two: those with full rights including former Supreme Court justices, ministry director generals and chief rabbis. These VIPs receive benefits include purchasing medicine not included in the health basket, free private medical treatments and consultations, health insurance overseas and other payments. The second group includes judges, ministers and MKs who have more restricted rights to repayments. Both groups do not receive dental care, plastic surgery or treatments overseas. The costs can reach tens of thousands of shekels a year, but it is tax free.
The treasury is considering several proposals on how to tax the benefits. One idea is to simply tax all the benefits according to the actual amount paid out. Another proposal is to set an artificial sum that will be considered taxable for all such VIPs. No decision has yet been made, and the matter is still under discussion between the ministries.
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1.2 Mazuz Set To Indict Former Finance Minister Hirchson For Embezzlement
Attorney General Mazuz has warned the lawyer for MK Hirchson (Kadima) that he plans to indict the former finance minister on fraud, the embezzlement of millions of shekels from the National Workers Organization (Histadrut HaOvdim HaLeumit), and other charges. Before any indictment in the case, the Attorney General will hold a hearing to give Hirchson an opportunity to present his side of the story. The alleged crimes occurred when Hirchson was chairman of the National Workers Organization and one of its NPOs, Nili, between 1998 and 2005. The Israel Police recently completed its investigation, which was monitored by the Office of the State Prosecutor. The police found evidentiary basis for indicting Hirchson for breach of trust, aggravated fraud, embezzlement, money laundering, and other crimes. (Globes 24.09)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Nine New Incubator Companies Are Approved
Israel's Technical Incubators Program has approved the establishment of nine new incubator companies with a total investment of some $4m. Five of the projects are in communications and software, three are in the life sciences, and one is in water technology. The Technical Incubators Program is part of the Office of the Chief Scientist of the Ministry of Industry, Trade & Labor. The projects are:
1. A project at Xenia Venture Capital Ltd. for automatically locating and removing Internet content that harms public sensibilities.
2. Two projects at Technion Entrepreneurial Incubator Co. Ltd. (TEIC). One is a search engine for finding images and content in digital databases on the basis of visual characteristics of the material. The other is a system for filing and sharing information between professionals and scientists.
3. A project at Jerusalem Venture Partners (JVP) incubator JVP Studio for the enrichment of virtual reality content, which surfers enter via their web browsers.
4. A project at Iris Ventures (formerly Am-Shav Technological Applied Development Center) in Sde Boker, to develop an information protection system for files, which also monitors the files and reports on them.
5. A project at Meytav Technological Enterprises Innovation Center Ltd. in Kiryat Shmona to develop a screwless device for knee implants.
6. A project at Maayan Ventures for a non-invasive method for continuous monitoring of cardiovascular pressure and the functioning of heart muscle.
7. A project at Rad BioMed Incubator to develop a drug delivery device for the eye.
8. A project at Kinarot-Jordan Valley Technology Incubator to develop a reliable, low cost water meter for the house and garden. (Globes 23.09)
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2.2 N-trig Expands With Opening of North American Operations
N-trig, a leading provider of dual mode technology combining pen and zero-pressure touch for mobile computers into a single device, announced its expansion into North America with the opening of its U.S. sales and technical support office in Austin, Texas. With global headquarters in Kfar Saba, Israel, N-trig (http://www.n-trig.com) is the provider of dual mode technology combining pen and zero-pressure touch for mobile computers into a single device. N-trig enables OEMs and ODMs to provide innovative new technology for the next generation of mobility by making notebook PCs more mobile, productive, user-friendly, natural, and intuitive to use. N-trig’s dual mode technology is easily integratable and supports any type of LCD, giving OEMs and ODMs more flexibility. Founded in 1999, N-trig’s manufacturing capabilities are in place for volume production with certified suppliers and quality control standards to meet the needs of its customers. (N-trig24.09)
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2.3 IAF Successfully Completes Testing of Airtrax's MP2 Equipment Handler Prototype
Blackwood, NJ's Airtrax, a developer of patented Omni-Directional Technology with military and commercial applications, announced that the Company has received formal notification from the Israeli Ministry of Defense (MOD) that the Israeli Air Force (IAF) has completed the final testing of Airtrax's MP2 Equipment Handler Prototype that was shipped to Israel for evaluation in May 2007. In addition to the vehicles themselves, the IAF expressed its intent to order certain support equipment including stand-by battery cassettes, chargers, battery installation and service carts, as well as spare consumable and replacement parts. The IAF has requested certain optional features to the vehicles beyond what was originally quoted. These add-ons to the order may significantly increase the value of the original contract. (Airtrax24.09)
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2.4 Metalink Wins Design News' Golden Mousetrap Award
YAKUM, Israel's Metalink (http://www.MTLK.com), a provider of high-performance wireless and wireline broadband communication silicon solutions, announced that it has won Design News' Golden Mousetrap Award in the "Components, Hardware, and Interconnect" category for its 802.11n-compliant WLANPlus chipset family. Since its introduction in 2006, Metalink's WLANPlus chipset family has gained recognition as the industry's best-performing 802.11n solution which offers the highest-performing transmission technology for video-grade wireless home networks. Its implementation of advanced technologies, such as a Maximum Likelihood (ML) decoder combined with advanced Forward Error Correction (FEC) scheme and Low Density Parity Check (LDPC), enable it to support up to 300Mbps transmission speeds - more than twice the reach of competing 802.11n solutions - over both the 2.4GHz and 5GHz bands. For more than two decades, the Design News Awards Program has recognized engineering innovation and creativity in product design. (Metalink 24.09)
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2.5 AT&T Announces Agreement to Acquire Interwise
AT&T has agreed, through one of its subsidiaries, to acquire privately held Interwise. AT&T will pay approximately $121 million in cash for the company. The transaction, which is expected to close in the Q4/07, strategically aligns Interwise's innovative IP-based conferencing and collaboration solution with AT&T's enterprise networking, communications and collaboration services, global MPLS-based IP network and its industry-leading conferencing portfolio of services. Following the acquisition, the company will operate as a business unit within AT&T Global Business Services. AT&T expects to retain Interwise's management team and its domestic and international operations, including its R&D center in Tel Aviv, Israel. With the acquisition, AT&T and Interwise will be able to more quickly develop and bring to market capabilities to address the evolving collaboration and communications needs of businesses around the world. Interwise (http://www.interwise.com) provides converged, IP-based conferencing solutions for enterprises. Its integrated voice, Web and video conferencing system has been repeatedly recognized by industry analyst firms and publications for its market-leading integration of VoIP- and TDM-based audio and its leadership in meeting the user and IT needs of large, global enterprises. (AT&T01.10)
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2.6 Survey Finds 52% of Israelis Like Trying New Food Products.
Every fifth Israeli consumer buys a new product to try out according to a TGI survey. The survey indicates that Israelis are among the world’s top early adopters. The TGI analyzed its survey for July 2006-June 2007 for Product of the Year Israel product innovation awards. They survey found a clear willingness by Israeli consumers to try new products, especially food products. 52.6% of respondents said that they liked trying new food products, 24% said that they liked trying new beverages, and 20% frequently buy new products. The increasing willingness of Israelis to try new products stands in contrast to their declining wish to remain up-to-date about technological innovations. The proportion of Israeli consumers interested in staying up-to-date about technological innovations has dropped from a peak of 48.6% in 2000 to 41.6% today. A possible reason for this trend to the appearance of so many new products, some of which seem threatening or remote from consumers’ needs. (Globes01.10)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Verimatrix Content Security Selected for Qatar IPTV Service
Headquartered in San Diego, Verimatrix, setting the standard in content security technologies that enhance the value of pay-TV networks, announced that it is providing the security solution for the world’s first fully integrated IPTV triple-play deployment in Qatar. This new service from Qtel offers voice, broadband internet and MPEG4-AVC encoded IPTV over its upgraded infrastructure to subscribers across the state of Qatar. Verimatrix’s Video Content Authority System (VCAS) will protect MPEG4-AVC data streams through advanced encryption to prevent unauthorized access or piracy and to provide premium content suppliers with confidence that their revenue streams are secure. (Verimatrix 24.09)
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3.2 Delta to Launch Non-Stop Cairo - New York Flights
Delta Air Lines, the leading US carrier between Africa and the US, has announced plans to operate non-stop service between Cairo and New York. The five-times weekly flight between Cairo International Airport and New York’s John F Kennedy Airport start on June 5, 2008, subject to government approvals. It will be the only non-stop service to the United States from Egypt operated by a US carrier and will offer passengers convenient connections via Delta’s New York JFK hub to business and leisure destinations throughout the US including Los Angeles, Orlando, San Francisco, Atlanta and Tampa. For freight forwarders and cargo shippers, the route will expedite shipments of goods throughout the United States. The new service will be operated using 767-300ER aircraft with up to 214 seats in a two-cabin configuration featuring Delta’s award-winning BusinessElite service, offering the airline's industry-leading Delta on Demand entertainment system at every customer's seat. (TradeArabia 26.09)
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4: ISRAEL MACRO-DEVELOPMENTS
4.1 Middle East Scientists Find Common Ground at Malta III Conference
Scientists from Israel and 13 other Middle Eastern countries will search for solutions to common environmental issues, particularly air and water quality, that defy geopolitical barriers when they join together in December for the third in a series of precedent-setting conferences. The five-day conference will take place in Istanbul, Turkey, on a date embargoed for security reasons. Titled "Frontiers of Chemical Sciences III: Research and Education in the Middle East - A Bridge to Peace," it is expected to attract over 76 chemical scientists along with seven Nobel laureates. In a series of workshops intended to foster collaborative solutions, participants will work together to address such global environmental issues as greenhouse gases, global climate changes and water and air quality. Groups represented include: Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, the Palestinian Authority, Qatar, Saudi Arabia, Turkey and the UAE. The first two conferences were held in Malta in 2003 and 2005. Initiatives springing from recommendations made at them include: Malta III is sponsored by: UNESCO, the International Union of Pure and Applied Chemistry, the American Chemical Society, the Royal Society of Chemistry - London, the German Chemical Society, and Columbia College Chicago. (Hodge Schindler 18.09)
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4.2 OECD Says Israeli Teachers’ Pay Among Lowest In West
Israel is one of the lowest ranking countries in terms of teachers’ salaries, according to an OECD report, "Education at a Glance". The report does not provide a flattering picture about Israeli education. The report says that a senior primary school teacher earns $25,131 a year, compared with the OECD average of $45,666. The highest primary teacher salaries were paid in Luxembourg - $100,314; South Korea - $82,915; Switzerland - $63,899; and Japan - $61,054. Of the countries surveyed, Israel outranks only Turkey - $21,623 and Hungary $20,682. The reports notes that the average classroom hours for children under 5 is 15.7 hours in Israel, compared with the OECD average of 17.7.
The situation in Israeli higher education is no better. Tuition in Israel is one of the highest among the 23 countries listed in this category. Israel’s sixth place ranking for tuition in 2005 underscores this point. The figures are even more worrying given the Shochat committee recommendations to raise tuition from NIS 8,500 to NIS 14,800. The report says that without a change in higher education policy, Israel will lag behind OECD countries in this area. The report warns about Israeli higher education’s high dependence on private donors for financing, which is increasing in relation to public financing. Israel is ranked sixth in the ratio of private financing for higher education. In the past decade, the proportion of private financing has risen from 10% of higher education expenditure to 50%. (Globes 20.09)
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4.3 Israel's Air Pollution 100 Times Lower During Yom Kippur
On 23 September, the Ministry of the Environment announced that air pollution in Jerusalem and the Dan region was 100 times less on Yom Kippur than on ordinary days. Their air pollution monitors recorded that levels of nitrogen oxide in the Dan region over Yom Kippur were two to 12 parts per billion, though when the holiday was over, the figure rose to 205 parts per billion. In Jerusalem, the numbers declined from 250 parts per billion in the afternoon before Yom Kippur to between two and 12 parts per billion during the holiday. Nitrogen oxide is the compound emitted by vehicle exhaust pipes and is one of the prime urban pollution indicators. One component of this kind of pollution, nitrogen monoxide, is considered particularly dangerous to health, causing chronic and even fatal respiratory conditions. (Various24.09)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Israel Leads Middle East and Places 30th in Corruption Perceptions Index
On 26 September, Transparency International (http://www.transparency.org) released its 2007 Corruption Perceptions Index. The survey reviews perceptions of public sector corruption in 180 countries and territories - the greatest country coverage of any CPI to date – and is a composite index that draws on 14 expert opinion surveys. It scores countries on a scale from zero to ten, with zero indicating high levels of perceived corruption and ten indicating low levels of perceived corruption.
Israel scored 6.1, ranking 30th out of 180 states in the 2007 "Corruption Perceptions Index." The ranking represents a slight improvement from 2006, when Israel came in at 34th, receiving a score of 5.9 out of 10. For the Middle East, Israel was followed by Qatar (32nd with 6.0), UAE (34th with 5.7) and Bahrain (46th with 5.0). Oman and Jordan tied at 53rd with a 4.7 score, followed by Kuwait (60th with 4.3), Saudi Arabia (79th with 3.4) and Lebanon (99th with 3.0). Greece was ranked 56th with 4.6 and Turkey was 64th with 4.1. Pakistan was ranked 138th with a 2.4 rating.
Denmark, Finland and New Zealand tied for first place on the list, scoring at 9.4, and Singapore and Sweden followed them at 9.3. Britain is ranked 12th and the United States 20th, with scores of 8.4 and 7.2, respectively. India and China are both ranked 72nd on the list, with scores of 2.3. Russia is 143rd, with a score of 2.3, ranked below Iran, which is 131st on the list. (TI26.09)
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5.2 First Cargo of Iraqi Fuel Arrives in Jordan
The first cargo of Iraqi fuel comprised of eight trucks that came within the agreement concluded between the two countries last year arrived at the Jordanian-Iraqi border on 28 September. The Ministry of Energy & Mineral Resources said that eight trucks loaded with Iraqi fuel started to unload their cargo of the Iraqi fuel to Jordanian tanks in a designated area for this purpose at the crossing boarder. The quantity will gradually rise from 10,000 bpd to 100,000 bpd. The fuel comes from Kirkuk in the North of Iraq transported by Iraqi tanks to the Jordanian-Iraqi border. (Petra28.09)
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5.3 US Provides $14 Million Grant to Support Judicial Sector in Jordan
On 19 September, Jordanian Minister of Planning & International Cooperation Al-Ali signed a grant agreement for $13.9m to support various projects in the areas of justice, media, and increased transparency. The grant is provided by the United States Agency for International Development (USAID) as part of its regular economic assistance program for FY 2007. US Ambassador to Jordan Hale and the USAID Mission Director in Jordan signed on behalf of the U.S Government. During the ceremony, which took place at the Judicial Institute in the presence of the Minister of Justice, Al Ali confirmed that projects and programs funded under this agreement will be implemented in close coordination with relevant Government stakeholders mainly; Ministry of Justice, Ministry of Political Development, Ministry of Planning and International Cooperation and the Jordan National Commission for Women. The Planning Minister indicated that this grant will fund various project that aim at increased judicial transparency through capacity building, automation of courts and external and internal training programs for those working in the judicial sector. Al Ali also underlined that this grant will assist in training and building the capacity of civil society institutions in order to better contribute to the path of sustainable development. She also confirmed the Government's commitment to the media, mentioning that the grant will be utilized to build capacity within the various public and private institutions that operate within the sector. Al Ali also reiterated the Government's commitment to instituting the elements of democratization and sound governance which is reflective of the needs and aspirations of the Jordanian people. (Petra19.09)
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5.4 Jordan Has 4.6 Million Tourist Visits in First Eight Months of 2007
The total number of tourists to Jordan, including overnight and one-day, stood at 4.556 million in the first 8 months of 2007 compared to 4.280 million in the same period of last year, a 6.4% increase. Total tourism revenues stood at JD841.1 million compared to JD749.9 million for the same period a 12.2% increase, according to figures of Ministry of Tourism and Antiquities. As for Petra, about 354,000 persons visited the ancient city during the period from January to August, compared to 259,000 for the same period of last year. The number of tourists who visited Petra during the month of August jumped by 184.6% reaching 65,000, from 23,000 in the same period of last year. (Petra24.09)
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5.5 Work On Qatar-Bahrain Causeway to Begin by May
Work on building a 40-kilometre (25 mile) causeway between Qatar and Bahrain will begin by May next year at a cost of $2b. A memorandum of understanding was signed between the Qatar-Bahrain Causeway Foundation (QBCF) and a consortium led by state-owned Qatari Diar and French construction firm Vinci. Work will start some seven months from now and the new link would be completed by 2011. The causeway will provide both road and rail connections between the Qatari peninsula and the island state of Bahrain. Dubbed the "Friendship Causeway", the new link was partly conceived as a symbol of improved relations between the two Gulf states which clashed in 1986 over a decades-old territorial dispute. The agreement to build the bridge came after the dispute over the Hawar islands was resolved by the International Court of Justice in March 2001. Both countries are strong allies of the United States, with Bahrain home to the US navy's Fifth Fleet and Qatar home to two US bases. A 25-kilometre (15.5 mile) causeway already links Bahrain with Saudi Arabia. (AFP02.10)
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5.6 UAE Car Market Poised To Grow 23% Over Three Years
The UAE market for new cars is expected to grow by 23% in the next three years, leading automobile dealer Arabian Automobiles said. Sales of new cars could cross 260,000 this year, as the UAE automotive market has witnessed double digit growth over the past five years. The market is estimated to cross 320,000 units by 2010. He sees more than 45% growth in sales of small and medium sports utility vehicles this year. The company aims to sell 40,000 cars a year by 2010. Arabian Automobiles earlier this year announced it would spend $137m on building new showrooms, warehouses and service centers in its quest for a bigger share of the local car market. (GN25.09)
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5.7 Oman Firmly Committed To Rial's Peg to the Dollar
Oman, one of five Gulf Arab oil producers that peg their currencies to the dollar, said on 30 September it is "firmly committed" to keeping the value of its rial unchanged even as some traders bet on a regional revaluation. Like Saudi Arabia and Bahrain, Oman has held back from lowering interest rates to match the September 18 cut in the United States, saying domestic economic considerations need to take precedence in deciding monetary policy. The moratorium has fuelled speculation that some Gulf Arab states, like Saudi Arabia and the United Arab Emirates, will allow their currencies to appreciate to offset the declining value of the dollar against the world's major units. Gulf currencies, including Oman's rial, have hit several-year highs this month. Gulf Arab states are battling to bring down inflation that has soared to near record highs as a second bumper year in oil revenue on the back of record prices fuels economic growth. Omani inflation accelerated to 5.98% in the year to July, the highest this year. Rather than revaluing its currency, Oman is using alternative means to control price rises. In July, it dropped a provision allowing banks to use their foreign currency holdings as part of their 3% reserve requirement. Oman's $35.3b economy may expand by 6.5% this year, the second-fastest pace in six years, according to HSBC Holding. (Reuters30.09)
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5.8 Saudi Central Bank Rules Out Change in Foreign Exchange Policy
On 26 September, Saudi Arabia's Central Bank Governor Hamad Saud Al-Sayyari said the monarchy would not change its foreign exchange policy because the US-dollar peg offered flexibility. Despite the statement, the Saudi riyal firmed very slightly to 3.7336 per dollar as markets interpreted the guarantee as less than water-tight. The central bank also highlighted the inflation risk and blamed rising food prices, though pegs to the weakening dollar are widely blamed for surging inflation in the Gulf. Saudi Arabia, one of five Gulf Arab states with a dollar peg, said last week it would not cut interest rates after a 50-basis-point cut by the US Federal Reserve, fuelling speculation the oil producer would revalue its currency. (Reuters26.09)
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5.9 World Bank Recognizes Saudi Arabia as One of the World's Top Reformers
On 25 September, the World Bank recognized the Kingdom of Saudi Arabia as one of the world's top reformers in its annual "Ease of Doing Business" report. Recent reforms in Saudi Arabia improved the Kingdom's position from 38th to 23rd out of 178 countries in the World Bank rankings. The report ranks Saudi Arabia as the best place to do business in the entire Middle East and Arab World, ahead of Kuwait (40th) and the UAE (68th). The report also ranks Saudi Arabia ahead of advanced economies such as France (31st) and Austria (25th). In 2006 US companies provided $1.6bn of foreign direct investment into the Kingdom, comprising 9% of the total, and making the US the third largest investor into Saudi Arabia. Such companies as Cisco, Boeing and Dow Chemicals have already recognized Saudi Arabia's economic potential for increased profits, and there is plenty of room for more US industries to enter the Saudi market and take full advantage of all the benefits the Kingdom has to offer. The Kingdom's exceptional performance in this year's rankings has been driven by King Abdullah's vision to increase the prosperity of the people of Saudi Arabia. The King has been the country's strongest advocate for modernizing the Saudi business environment. He has sought to encourage domestic and foreign investment in the country by enacting a new foreign investment law, establishing the Saudi Arabian General Investment Authority (SAGIA), privatizing public companies, and pursuing membership to the WTO. The reform agenda is having its desired effect. Saudi Arabia has become the number one recipient of foreign direct investment in the Middle East. Inflows have increased from $2b to $18b in the last two years. These figures will only grow more rapidly with the development of Saudi Arabia's Economic Cities, special economic zones that are attracting the world's top companies with mega investment opportunities. Meanwhile, the jump in the World Bank rankings from 38th to 23rd is a major step towards achieving the "10 by 10" goal. (SAGIA26.09)
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5.10 Yemen Signs Accord to Build $15 Billion Nuclear Power Plant
On 25 September, a delegation of American and Canadian investors in the field of nuclear energy left Yemen after signing an initial agreement with the Yemeni government to fund a nuclear power plant at an estimated cost $15b. The firms would carry out feasibility studies for building the plant with a total production capacity of 5,000 MW. The agreement with the US and Canadian firms envisages the construction of five nuclear reactors over 10 years to produce nuclear energy. Yemen is looking to build nuclear plant to generate electricity and to desalinate sea water in order to meet the needs of its growing urban population of electrification and water and boost the country's industrial development. It also hopes to diversify and expand its energy resources due to declining oil production. Yemen's Energy & Electricity Minister Bahran said the contract was made with the Houston-based Powered Corp. (Mena Report 25.09)
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5.11 Egypt to Host the World Economic Forum on the Middle East next May in Sharm El Sheikh
Representatives of the World Economic Forum and the Egyptian Ministry of Trade and Industry met on 25 September in Cairo to sign a Memorandum of Understanding that marks the official start of preparations for the World Economic Forum on the Middle East meeting on 17 to 19 May 2008 in Sharm El Sheikh. The MoU was signed between Egypt's Minister of Trade & Industry, and the Managing Director of the World Economic Forum. The World Economic Forum on the Middle East will feature a fresh and future-oriented approach to shaping the agenda of the Middle East and North Africa. Building on the Forum's unique reputation as a neutral platform for dialogue and discussion, the program will stimulate participants to think creatively and collaboratively about the future of the region. The emphasis will be on facilitating new connections, provoking innovative ideas and providing fresh perspectives. More than 1,200 participants drawn from the highest level of government and business worldwide are expected to take part in the meeting. (Various25.09)
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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS:
6.1 Turkey's FDI Expected to Surpass $20 Billion This Year
The goal of Turkey's Investment Support and Publicity Agency is to improve Turkey's ability to attract foreign direct investment (FDI) from around the world. The Agency says that investments by foreign capital in Turkey this year will exceed $20b. The Investment Support and Publicity Agency was established 11 months ago with the goal of making Turkey the world's fifth most-attractive country for foreign direct investment. As the agency's plans include launching an international publicity campaign, the Chief Executive Officers (CEOs) of 40 companies that currently hold investments in Turkey took part in several promotional ads explaining their reasons for their interest and commercial involvement in the country as well as the outcomes of their investments. FDI flowing into Turkey hit $20.2 billion in 2006. The share of privatizations in foreign direct investment last year was 14%. Some 70% of the investments Turkey attracted came via purchases and mergers. This amount has helped Turkey to rank 13th in attracting the most investments within the last five years. The FDI inflow into Turkey reached $12.7b during the first seven months of 2007, up by 35.3%, compared to 2006. During the same period, capital outflow and net inflow are calculated as $34m and $11.31b respectively. During the January - July 2007 period, privatizations and the sale of shares in private sector companies netted some $11.7b. (Hurriyet26.09)
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6.2 Turkey's Incoming Tourism Up by 16.5% in August
On 20 September, the Turkish Statistics Institute (TUIK) announced the returns for arrivals and departures for the January-August period. The report indicated that 13.9 million foreign tourists visited Turkey in the January-August period. As for the methods of entry, the number of visitors entering via land borders rose 13.7%, those by air were up 17.2% and those by sea jumped 16.6%. The only decline was in those entering Turkey by rail, which fell by 16.5%. The country of origin of those entering Turkey was, in descending order: Germany, Russia, Britain, Iran, Bulgaria, the Netherlands, France, Italy, Ukraine and Belgium. These nations constituted 63.3% of all visitors to Turkey in the period studied. The number of people coming from Asian countries rose 34.3%, while those coming from Oceania fell by 47.1%. The overall number of foreigners exiting Turkey also increased by 18.5% and reached 3.87 million in August 2007. The railway was again the least preferred route with a 25.1% decline. (TUIK20.09)
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6.3 Iran Gas Project Expected To Progress in October
Turkey expects to sign an agreement with Iran in October naming the companies to take part in their natural gas deal, Turkish officials said on 27 September. Iran and Turkey have signed a preliminary agreement to pump Iranian gas to Europe via Turkey. The United States has asked NATO ally Turkey to halt energy cooperation with Iran due to concerns over Tehran's nuclear program. However, Ankara’s plan is currently not challenged by this request as the final terms and second stage agreement are to be finalized by mid October. (BGC28.09)
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6.4 Erdogan & Ahmadinejad Agree to Build Iran-Turkey Railroad
In the framework of the UN General Assembly's 62nd session in New York, Turkish Prime Minister Erdogan and Iranian President Ahmadinejad agreed to build a railroad connecting Iran and Turkey. Erdogan and Ahmadinejad also consulted with the Iranian Minister of Roads and Transportation Rahmati, who said Iran can cover the expenses. Iran and Turkey already signed a preliminary agreement on delivery of Iranian gas to Turkey, which met a sharp reaction of the United States. Although Turkey defends ties with Iran, U.S. official calls on Turkey to seek alternatives such as agreeing with other regional suppliers including Turkmenistan and Kazakhstan. Energy Minister Hilmi Guler is expected to meet his Iranian counterpart this month to sign a major energy deal. (TNA01.10)
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6.5 Cyprus to Delay New VAT on Food, Medicine & Land
Nicosia will delay the introduction of EU-mandated VAT on food, medicine and land so that it does not coincide with Cyprus' January 1 adoption of the euro. The decision will give embattled consumers a temporary reprieve from a fresh wave of price hikes and has already been welcomed by political parties. Finance Minister Sarris said the government hoped to secure approval from Brussels to suspend the new taxes until 2010. Barring that, Nicosia will simply not comply with its obligation until mid-2008 at the earliest. Costlier grains and fuel have already pushed up food prices, prompting storms of protests from consumers already uneasy about the imminent arrival of the euro. Brussels is understood to share Nicosia's concerns that the higher prices will be blamed on the arrival of the European common currency. But whether it will actually agree to more sweeping demands submitted by Cyprus and other new Member States is another issue. Euro-adoption day coincides with a change in the VAT regime - the introduction of 5% on food and medicine and 15% on the sale of building plots. VAT on restaurant meals is set to jump from 8% to 15% on the same date. Early last year Cyprus, Poland and the Czech Republic had sought a 2010 date for the introduction of VAT on building plots in discussions last year. They finally gave a reluctant agreement to a compromise formula hammered out by the Austrian EU presidency that did not include land. Instead the compromise deal gave them the choice to cut VAT rates on a series of labor intensive services such as hair-dressing, house cleaning and home care. (Cyprus Weekly 21.09)
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6.6 Greek Export Growth Slows Down While Imports Continue Unabated
Greek export growth slowed down appreciably in the first half year-on-year, the Panhellenic Exporters’ Association (PSE) said, citing provisional data on 19 September. The total value was 4.9% higher at €8.52b, against a rise of 22.2% in H1/06. PSE said the drop was mainly pronounced in exports to the Middle East and North Africa (less 32.3%) and Turkey (down 26.6%). Separately, the Bank of Greece said yesterday the country’s current account deficit widened in July, by €1.87b year-on-year to reach €2.35b, mainly due to an increase in the trade and income account gaps. (Reuters 20.09)
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6.7 Greece Unveils Plan to Slash Budget Gap
On 1 October, Greece's newly re-elected conservative government pledged to cut its budget deficit next year by one-third and eradicate it in 2010. Finance Minister Alogoskoufis presented an ambitious 2008 draft budget, aimed at slashing the deficit to 1.7% of GDP from an estimated 2.5% this year. He told a news conference the government's main target was to continue to cut deficits amid a climate of buoyant economic growth until the books are balanced in 2010. After repeatedly under-reporting its budget deficits to the EU for years, including 2001 when it joined the euro zone, Greece has shored up public finances and was removed from the EU's list of budgetary offenders earlier this year. It remained firmly under the 3% EU limit but slightly missed an initial target of a 2.4% of GDP deficit this year as state coffers were strained by financial relief to the victims of forest fires that killed 65 people in August. Greece is awaiting the EU's approval of a GDP revision that will increase the national output by about 25%, including parts of the black economy. The draft budget is based on figures before the revision. If approved by Eurostat, the review could mean the 2008 deficit would go down by about half a percent, economists estimate. Next year's budget aims for GDP growth of 4% with public debt dropping to below 100% of GDP for the first time, Alogoskoufis said. It sees inflation averaging 2.6% versus 2.7% in 2007. (Reuters02.10)
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6.8 Greece's Unemployment Drops To Lowest Since 1998
Greece’s unemployment rate dropped to 8.1% in the second quarter from 9.1% in the first three months of the year, the lowest quarterly reading since 1998, the National Statistics Service (NSS) said on 21 September. Year-on-year the jobless rate also improved from 8.8% in the second quarter of 2006, the NSS said. Despite Greece’s strong economic growth, 4.2% in the second quarter, joblessness remains higher than the 6.9% eurozone average. The NSS said there were 398,006 people officially unemployed in Greece. It also estimated that 4.52 million people had jobs. Joblessness continued to affect women more than men. In the second quarter, unemployment in the female population was 12.6% compared to 5.0% for men. It was a more severe 17.8% for people in the 15-29 age group. The long-term unemployed, people out of work for more than 12 months, made up 52.3% of the jobless pool, the NSS said. (Reuters22.09)
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Simchat Torah Celebrated
On the evening of 3 October and the 4th, the holiday of Simchat Torah is observed. The day after the seventh day of Sukkot is the holiday Shemini Atzeret. In Israel, Shemini Atzeret is also the holiday of Simchat Torah. Simchat Torah means "Rejoicing in the Torah." This holiday marks the completion of the annual cycle of weekly Torah readings. Each week in synagogue Jews publicly read a few chapters from the Torah, starting with Genesis Ch. 1 and working around to Deuteronomy 34. On Simchat Torah, Jews read the last Torah portion and then proceed immediately to the first chapter of Genesis, demonstrating that the Torah is a never ending circle. This completion of the readings is a time of great celebration. There are processions around the synagogue carrying Torah scrolls and plenty of high-spirited singing and dancing in the synagogue with the Torahs. Shemini Atzeret and Simchat Torah are holidays on which work is not permitted. The close of Simchat Torah ends the Jewish fall holiday period.
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*REGIONAL:
7.2 Eid el Fitr Marks the End of Ramadan
The Moslem world will mark Eid-el-Fitr beginning on 12/13 October (the first day of the month of Shawwal). The three day festival marks the end of Ramadan, the month of fasting. This festival is a time of gift giving and of giving alms. The fasting of Ramadan is meant to remind people what life is like for their less fortunate brethren and the alms giving at Eid (known as Zakat-el-Fitr) is a continuation along the same idea. Both fasting and the giving of alms are two of the five pillars of the Islamic faith. Ramadan is a holy month in which drinking, smoking, and eating is prohibited. Fasting is forbidden on Eid el-Fitr and Moslems are encouraged to rise early and partake of some dates or a light, sweet snack, significant because for the past 30 days they have abstained from all food and drink from dawn till dusk. Muslims are encouraged to dress in their best clothes, new if possible, and to attend a special Eid prayer that is performed in congregation at mosques. Before the prayer the congregation recites the Takbiir: The Eid prayer is followed by a sermon and then a prayer asking for forgiveness, mercy and help for the plight of Muslims across the world. It is then customary to embrace the persons sitting on either side of you as well as your relatives, friends and acquaintances. Children are normally given gifts or money. Women (particularly mothers, wives, sisters and daughters) are normally given special gifts by their loved ones.
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7.3 Musharraf's Re-Election Vote Set For 6 October
Pakistani President Musharraf will seek re-election on October 6, despite legal challenges in the Supreme Court and slumping popularity. General Musharraf, who came to power in a coup eight years ago, has said he will retire from the army if elected, but opposition parties are seeking to block his plan. The Supreme Court is hearing a set of petitions challenging Musharraf's right to retain his dual role, the legality of being elected while in uniform, and whether he should be allowed to get a mandate from the sitting assemblies before they are dissolved for a general election due by mid-January. Musharraf's current tenure is due to expire on 15 November and his top legal aide has told the court that he will be sworn in as a civilian leader if he is given a fresh five-year mandate. The decision of the court is crucial for Musharraf's political future as analysts say he might impose emergency rule if the court blocks his move to get re-elected. In Pakistan, members of the parliament - National Assembly and Senate - as well as those from the four provincial assemblies elect the president. Musharraf's allies enjoy simple majority needed to elect the president. However, Musharraf, who has seen his popularity eroded since he tried to sack the chief justice of the country, is trying to forge a power-sharing alliance with former prime minister Benazir Bhutto, head of largest political party, to shore up his position. However, other opposition groups oppose Musharraf's bid for re-election and threatened to quit parliament if his nomination is accepted. (Various20.09)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Cheetah Medical's NICOM Non-Invasive Cardiac Output Monitor Featured
Cheetah Medical, developers of the Cheetah NICOM system, for non-invasive, real-time cardiac output monitoring, announced at HFSA the results of the study "Markers of ventilatory inefficiency in heart failure are related to peak exercise." The study used the NICOM to measure the cardiac output of 36 patients. Results showed that the NICOM accurately measured cardiac output. This is the first time that the NICOM was used in a study during cardiopulmonary exercise on heart failure patients. The NICOM Cardiac Output Monitor, developed by Cheetah Medical, is a portable system that utilizes the proprietary BIOREACTANCE technology to measure cardiac output in virtually any clinical setting. Cheetah considers BIOREACTANCE to be a superior modality to measure cardiac output, especially in clinical settings where continuous monitoring of cardiac output is imperative, and in clinical environments such as intensive care units, emergency departments and during stress tests, where there is significant electrical noise and patient movement. Cheetah's BIOREACTANCE technology has been validated in the United States and Europe on hundreds of hemodynamically challenged patients in a variety of clinical settings, in the presence of significant environmental factors. The Cheetah family of NICOM Cardiac Output Monitors implements the unique and proprietary BIOREACTANCE technology. BIOREACTANCE is a novel technology platform which analyzes changes in amplitude as well as frequency of electrical impulses as they traverse the chest. Cheetah Medical (http://www.cheetah-medical.com) is based in Tel Aviv, Israel and Indianapolis, Indiana. The company is establishing NICOM as a frontline tool to monitor cardiac function in inpatient and outpatient areas of high unmet need. (Cheetah Medical 19.09)
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8.2 Hadasit Studies Fluorescent Whitening Agents to Combat Global ''Winter Kill'' Fish Epidemics
Hadasit is currently engaged in an advanced study of specific types of fluorescent whitening agents as a treatment for Saprolegnia parasitica, one of the most prevalent fish pathogens. The whitening agents are being studied for both prevention and treatment applications of Saprolegnia infections which occur in aquatic organisms including fish and fish eggs. The study, funded by the Chief Scientist of the Ministry of Agriculture of Israel, is being conducted at the Hadassah-Hebrew University Medical Center and the Laboratory of Fish Health in Nir David, Israel. It is anticipated to last for two years. The data will be presented to the Veterinary Chemical Products Registration Committee, Israel’s regulatory body for chemical permits. The economic loss from Saprolegnia parasitica infection is in the tens of millions of dollars for many countries worldwide. Hadasit is actively pursuing dialogues with potential partners interested in supporting and coordinating the regulatory, manufacturing and marketing aspects of this project. Hadasit (http://www.hadasit.co.il), the Technology Transfer Company of Hadassah Medical Organization (HMO) in Jerusalem, Israel, promotes and commercializes HMO’s continuously generated intellectual property (IP) and R&D capabilities. IP generated by HMO has already gained global recognition due to Hadasit’s successful enterprising of Hadassah’s biomedical technology, including novel therapeutics, diagnostics and devices. (Hadasit24.09)
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8.3 InSightec Resumes Clinical Trials for Non-Invasive Treatment of Brain Tumors
InSightec has begun the second stage of its FDA approved Phase I clinical trial for non-invasive treatment of brain tumors using MR guided Focused Ultrasound Surgery on the ExAblate system. The objectives of the study are to evaluate the safety of focused ultrasound delivered through an intact skull and to estimate the effect of the thermal ablation on the tumors. Patients with recurrent and inoperable glioblastomas or cerebral metastases are being recruited for this study. ExAblate uses high-intensity focused ultrasound waves to ablate (destroy) tissue in combination with Magnetic Resonance Imaging (MRI). The system provides visualization of the tumor and acoustic energy beam path as well as real time thermal feedback that allows the physician to monitor and control the treatment process. Haifa, Israel's InSightec (http://www.insightec.com) is a privately held company owned by Elbit Medical Imaging (EMI), General Electric, MediTech Advisors and employees. It was founded in 1999 to develop the breakthrough MR guided Focused Ultrasound technology and transform it into the next generation operating room. (InSightec 24.09)
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8.4 Can-Fite Develops a Blood Test to Predict Patients’ Response to the Company Drugs
Can-Fite BioPharma completed the development of a blood test that determines the mRNA expression levels of the A3 adenosine receptor. The latter is a G protein cell surface receptor, highly expressed in inflammatory and cancer cells and has low expression in normal cells. The Company drugs target with high affinity and selectivity this cell surface receptor. The blood test, which was developed by Can-Fite scientists, requires minute blood quantities and can be analyzed by qualified labs. Company scientists have also found that the blood levels of this receptor reflect its status in the remote pathological organ. The Company has applied for a patent to protect its newly developed blood test. Can-Fite recently reported the completion of preclinical trials in the US with CF102, the Company's second molecule in development, for the treatment of liver cancer and hepatitis. The Company estimates that CF102 will enter clinical trials shortly. Petah Tikva, Israel's Can-Fite Biopharma (http://www.canfite.co.il) is a public company traded on the Tel-Aviv Stock Exchange. Can-Fite develops targeted drugs that specifically attack affected cells without compromising normal body systems and therefore have a favorable safety profile. The Company's drugs are based on a scientific concept, which was proven in trials, suggesting that the A3 adenosine receptor, the target of the drug is only expressed on the surface of affected cells. The Company has recently developed a procedure that uses pre-treatment blood tests to determine the receptor level, which may be indicative of treatment response. (Can-Fite25.09)
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8.5 Acro Announces Technology Agreement With LSRI
Caesaria, Israel's Acro (http://www.acrosec.com), a developer of explosive detection solutions, announced the conclusion of the negotiations of a technology agreement with LSRI - Life Science Research Israel, a subsidiary of IIBR - Israel Institute for Biological Research. Under the terms of the agreement, LSRI will license the long-proven technology of IIBR's explosives testing kit (ETK) to Acro, for incorporation into Acro's pen-like device, allowing the detection of commercial and military explosives. The agreement is subject to minimum annual revenues to be achieved by Acro and royalties to be paid to LSRI. The technical appendix of the agreement will be signed in the next few weeks. The new device will complement Acro's ACRO-P.E.T., the company's peroxide explosive tester for the detection of improvised explosives. ACRO-P.E.T. is designed for rapid field detection of peroxide-based explosives, such as triacetone triperoxide (TATP), ACRO-P.E.T. Its main advantages include high sensitivity, high selectivity, fast response, simple operation, small size and cost effectiveness. Ness Ziona, Israel's LSRI (http://www.iibr.gov.il/LSRI.asp) focuses on the commercialization of IIBR's novel technologies and scientific achievements. Established in 1979, LSRI's mandate is to promote biomedical projects and market IIBR-developed products and services. LSRI represents IIBR in the establishment of all forms of collaboration, joint ventures and partnerships with private and public companies.
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Tower Semiconductor Wins High-Volume Manufacturing Deal for Fab2
Tower Semiconductor has won a multi-million dollar per month manufacturing deal for its Fab2 at the 0.13-micron technology generation from a first-tier, U.S. integrated device manufacturer (IDM). Under this deal, technology will be transferred during the coming several quarters after which Tower expects to manufacture between five and eight thousand wafers-per-month, utilizing the new tools it is purchasing from companies such as AMD and Intel, as was previously announced. The high-volume production shipments are expected to commence towards the end of 2008. Following such production, Tower expects that the U.S. IDM could become one of Tower’s top three customers. Migdal Ha'Emek, Israel's Tower Semiconductor (http://www.towersemi.com) is an independent specialty foundry that delivers customized solutions in a variety of advanced CMOS technologies, including digital CMOS, mixed-signal and RF (radio frequency) CMOS, CMOS image sensors, power management devices, and embedded non-volatile memory solutions. Tower’s customer orientation is complemented by its uncompromising attention to quality and service. Its specialized processes and engineering expertise provides highly flexible, customized manufacturing solutions to fulfill the increasing variety of customer needs worldwide. (Tower Semiconductor 20.09)
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9.2 Orsus Launches Situator v5 - All New Situation Management Software
Orsus announced the launch of Situator Version 5, a full-featured release of their Situation Management software suite that includes significant enhancements to the software enabling greater system management and capabilities than before. The brand new Situator Version 5 adds many new enhancements based on customer input from the many operational field-installed systems. Situator is a security and safety Situation Management software for integrated control rooms. It creates an environment where all current and future technologies, people and actionable procedures are fused into a unified control and management platform. It leverages existing security investments and empowers security personnel to focus on exception management. With its advanced, yet easy-to-use planning tools, Situator helps transform routine and emergency plans into actionable, adaptive tasks and procedures and integrate them with virtually any security and safety devices, management systems, dynamic data sources and communication systems.
Or Yehuda, Israel's Orsus (http://www.orsus.com) is a Situation Management pioneer. Situation Management is a new, holistic approach to optimizing situation planning, response and analysis. Situator is the first comprehensive Situation Management software platform to unify management of the entire Control Room Lifecycle for security, safety and emergency services where the risk of human error can lead to financial loss, injury and damage to public image. With successful implementation in a variety of industries and a reputation for innovative ideas and development Orsus possesses the knowledge, experience and determination to shape the future of Situation Management. (Orsus19.09)
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9.3 MIND Announces Follow-on Orders
MIND CTI announced customer follow-on orders. MIND has received a significant follow-on order for license increase and professional services from a mobile carrier that is extremely successful in the US and additional smaller follow-on orders, mainly for expanded functionality from customers in various locations. Yokneam, Israel's MIND CTI (http://www.mindcti.com) is a leading provider of convergent prepaid and postpaid end-to-end billing and customer care solutions for Wireless, Wireline, VoIP and Quad-play carriers worldwide. (MIND19.09)
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9.4 Evogene & Ormat Industries subsidiary Announce Biodiesel Collaboration
Evogene and Orfuel Inc, a US subsidiary of Ormat Industries, announced a collaboration in the field of alternative energy and biofuels, aimed at providing substantially improved feedstock sources for biodiesel production. Evogene and Orfuel will collaborate to develop non edible plants displaying improved oil yield and capable of being grown in non arable lands, thus addressing the key problems facing the industry. In addition to the other benefits, these plants are expected to significantly decrease feedstock costs for biodiesel production. Under the terms of the collaboration, Evogene will utilize its advanced biotechnological capabilities (such as gene and molecular marker discovery), in the development of the enhanced crops which will then be evaluated in field trials conducted by Orfuel in the expected target locations. In addition, Orfuel will evaluate suitability and methodologies for using such crops for biodiesel production. Upon project completion, Evogene and Orfuel intend to establish a joint venture aimed at commercialization of the developed plants. The companies obtained approval in principle for a grant from the BIRD Foundation (Israel-US Binational Industrial Research and Development Foundation) for financial support of the project. Rehovot, Israel's Evogene (http://www.evogene.com) seeks to be a world leader in delivering improved plant traits to the agro-biotechnology and biofuel industries through the use of a continuously improving proprietary platform that combines state-of-the-art computational genomics, molecular biology and advanced breeding methods. Evogene’s current product development portfolio includes such traits as: abiotic stress tolerance and yield, improving nitrogen use efficiency, enhancement of cotton fiber quality, increasing oil yield for the biodiesel industry and plant manufacturing of therapeutic proteins. (Evogene24.09)
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9.5 Optibase Solution Used to Prepare Military Leaders in the US Army’s Fort Leavenworth
Optibase, together with InfoValue, a leading provider of comprehensive broadband streaming platforms and solutions, supplied Fort Leavenworth’s Command and General Staff College with an end-to-end IPTV system for its officers’ leadership educational program. The US Army’s Command and General Staff College (CGSC), located at Fort Leavenworth, educates and trains intermediate level Army Officers, International Officers and Interagency leaders. In order to deal with the complexities of new global threats, it was necessary to integrate a sophisticated video solution as part of the training toolset. Optibase’s carrier grade Media Gateway (MGW) 1100 video encoding and streaming platforms, combined with InfoValue’s BizTV IPTV solution created a complete educational broadcasting system that brings the outdoor operational environment inside the college premises. Optibase’s MGW platforms offer a Telco-grade IPTV streaming solution in a compact, cost-effective platform. By utilizing cutting-edge MPEG-4 H.264 technology to encode and stream channels to the classroom, live video can be delivered with high picture quality and low bit rates. Herzliya, Israel's Optibase (http://www.optibase.com) provides professional encoding, decoding, video server upload and streaming solutions for telecom operators, service providers, broadcasters and content creators. The company’s platforms enable the creation, broadband streaming and playback of high quality digital video. Optibase’s breadth of product offerings are used in applications, such as: video over DSL/Fiber networks, post production for the broadcast and cables industries, archiving; high-end surveillance, distance learning; and business television. (Optibase 25.09)
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9.6 ECI Telecom Introduces MPLS-based, Carrier-Class End-to-End Metro Ethernet Solution
ECI Telecom announced the availability of MPLS functionality, enhancing its end-to-end carrier-class Ethernet solution. This family of MPLS line cards, developed for ECI's XDM Multi-Service Provisioning Platform (MSPP), allows support for real-time services such as triple play for residential customers, mission critical Virtual Private Network (VPN) for businesses, and Ethernet-based 3G cellular backhauling. ECI's MCS/M family of MPLS line cards is fully compliant with the Metro Ethernet Forum (MEF) requirements for Carrier Ethernet. Carrier-class Ethernet services in metro networks are increasingly growing and gaining popularity among different service providers. MPLS-based connection-oriented Ethernet addresses the need for robust carrier-class capabilities and assured service delivery with the right quality of service for all types of applications. By adding MPLS line cards to new and/or deployed XDM-based SONET/SDH networks, service providers can efficiently migrate their networks and increase revenues through the introduction of new enhanced Ethernet services. These line cards are fully interoperable with existing ECI Carrier Ethernet solutions and with MEF-compliant third-party equipment, complementing ECI's end-to-end (E2E) Carrier Ethernet offerings. Petah Tikva, Israel'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. (ECI Telecom 24.09)
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9.7 BVR to Integrate Nemesysco's LVA Technology for Emotion Detection in Flight Simulators
Nemesysco and BVR Systems announced that Nemesysco's LVA technology (Layered Voice Analysis) is to be integrated into BVR's virtual, live and constructive training systems. Initially, the LVA is planned to be integrated into BVR's Flight Simulator. BVR's full mission simulators provide training for all aspects of the mission's flight and procedures. Integrating Voice Analysis technologies into the simulators provides a whole new aspect of the training and debriefing and enhances the benefits for their customers. They introduced the integrated solution in the recent International Paris Air Show and received excellent feed-backs. This cooperation is another step in our efforts to encompass high-end technologies in our simulation solutions.
Netanya, Israel's Nemesysco (http://www.nemesysco.com) is a leading provider of voice analysis and emotion detection technologies, for defense and civilian markets. Nemesysco's LVA (Layered Voice Analysis) technology detects the emotional content of a conversation, in real-time or from recorded materials, enabling analysis of different types of stress, cognitive processes and various emotional reactions. Nemesysco's products are implemented in a wide variety of applications for law enforcement, homeland security, insurance and banks fraud prevention, employee screening, call center quality monitoring, healthcare and entertainment. Rosh Ha'Ayin, Israel's BVR Systems (http://www.bvrsystems.com) is a world leader in development, manufacture and delivery of training and simulation turnkey projects for the military and civil markets. BVR offers highly efficient and cost-effective integrated solutions for air, sea and land forces, and has provided outstanding products to our international customer base since 1987. (BVR25.09)
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9.8 American Electric Power Selects Orsus' Situator for Wide-Scale Deployment
Orsus has been awarded a contract for its Situator product suite with American Electric Power (AEP). The project includes integrating thousands of security devices, located in 200 remote sites, into a unified platform. Situator is a security and safety Situation Management software for integrated control rooms. It creates an environment where all current and future technologies, people and actionable procedures are fused into a unified control and management platform. Situator leverages existing security investments and empowers security personnel to focus on exception management. With its advanced, yet easy-to-use planning tools, Situator helps transform routine and emergency plans into actionable, adaptive tasks and procedures and integrate them with virtually any security and safety devices, management systems, dynamic data sources and communication systems. The AEP project marks the largest deployment of Situator for Orsus in North America. AEP is one of the largest electric utilities in the United States, with more than 5 million customers and operations that span 11 states. Or Yehuda, Israel's Orsus (http://www.orsus.com) is a Situation Management pioneer. Situation Management is a new, holistic approach to optimizing situation planning, response and analysis. Situator is the first comprehensive Situation Management software platform to unify management of the entire Control Room Lifecycle for security, safety and emergency services where the risk of human error can lead to financial loss, injury and damage to public image. (Orsus 24.09)
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9.9 Integra5 & Solusoft Provide Converged Quad Play Applications to Service Providers in Central America
Integra5 and Solusoft, a Panama-based IT consulting firm, announced a partnership to deliver Integra5-provided converged applications to telecom and cable operators in the Caribbean and Central American regions. Under the agreement, Solusoft is reselling Integra5's Converged Services Platform (i5 CSP) and i-Communicate applications, including TV Caller ID, PC Caller ID, Message Waiting Indication, Call Log on TV/PC and SMS to TV/PC, along with its own suite of network assessment, implementation and integration services. This combination offers service providers a comprehensive, turnkey converged services solution to accelerate the time-to-market for these products throughout the Caribbean and Central America. After extensive analysis of the converged service opportunity in its markets, Solusoft is already in discussion with multiple service providers about using Integra5 applications to blend their triple and quad play bundles. Solusoft's first Integra5 deployment will take place in October, when a Panama-based triple play provider launches TV Caller ID.
Integra5 (http://www.integra5.com) is the global leader in blending triple and quad play bundles into converged services. Featuring patented and patent-pending technologies, the company's i5 Converged Services Platform (i5 CSP) blends voice, video, data and mobile services into new communications and content applications for delivery across TVs, PCs and other devices. The i5 CSP works in today's cable and IPTV networks and can be seamlessly integrated into future IMS environments. Integra5 is headquartered in Burlington, Mass., and has an additional research and development office in Rehovot, Israel. (Integra526.09)
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10: ISRAEL ECONOMIC STATISTICS
10.1 State Of Economy Index Continues To Rise
The Bank of Israel announced on 23 September that the State of the Economy Index rose by 0.7% during August 2007. The index rose 2.4% in June-August. The Bank of Israel said that the increase "demonstrates continuing rapid growth in economic activity." The State of the Economy Index has been rising by 0.7-0.9% per months since January, and rose 6.5% in January-August. The rise in the index corresponds with growth estimates published by the Central Bureau of Statistics. (BoI23.09)
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10.2 Unemployment in Israel Remains Static
Unemployment is not currently falling in Israel. On 19 September, the Central Bureau of Statistics reported that the unemployment rate in July remained unchanged at 7.7%, in trend figures. This represents a weekly average of some 220,000 unemployed people. The Central Bureau of Statistics also revised upwards the unemployment figures for January to July. According to the revised figures, the unemployment rate was table, at 7.7%. Only two weeks ago, the Central Bureau of Statistics reported a slightly lower seasonally adjusted rate for Q2/07 of 7.6%. The rate has fallen 2.2% since the 10.9% peak recorded in mid-2003. (CBS19.09)
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10.3 Israel Ranks Low for Welfare Spending
On 24 September, Israel's National Insurance Institute released figures showing that Israel lags far behind most OECD countries, despite last week’s flattering upgrade to "developed" status by the FTSE Group. The National Insurance survey for 2006 indicates that Israel has fallen close to the bottom in the OECD rankings for welfare spending, including health, nursing, and pensions. Welfare spending as a proportion of GDP fell from 18.7% in 2003 to 16% in 2006. The OECD average is 20.9%. Israel fell to 27th place (fourth from the bottom) from 21st. The US outranks Israel by one place. Average welfare spending by EU members is 23.9% of GDP. Sweden tops the list with 31.3%. Inequality also widened in 2006, despite, or possibly because of, Israel’s rapid economic growth. The survey says that the poor bore the burden of the recession and welfare cuts in 2001-03, but the wealthy have reaped the fruits of the growth that began in 2004. Although aggregate real income rose by 2.4% in 2001-06, the aggregate income of the bottom 10% fell 20%, while the aggregate income of the top 10% increased by 6%. (NII24.09)
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10.4 Israel's August Tourist Entries Achieve Seven Year High
On 19 September, the Ministry of Tourism and the Central Bureau of Statistics announced that 223,000 tourists entered Israel in August 2007. This is the highest monthly total since the all-time high of 259,000 in August 2000. August tourist entries were 82% more than in August 2006 and 13% more than in August 2005. Some 1.46 million tourists entered Israel in January-August and the Ministry of Tourism predicts 2.3 million visitors for the year as a whole. The ministry has set a target of 2.8 million tourists in 2008 and five million in 2012. Minister of Tourism Aharonovich said that the August tourism figures showed that the tourism industry has recovered from last summer’s Second Lebanon War. He added that rising tourist entries necessitates the building of more hotel rooms, of which there is already a shortage. In a related development, the Central Bureau of Statistics reports that a record 1.1 million Israelis traveled abroad in July-August: 569,000 in July and 531,000 in August. 2.8 million Israelis traveled abroad in January-August, 10% more than in the corresponding period of 2006. 104,000 Israelis left by sea, an increase of 13%. (CBS19.09)
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11: In Depth
11.1 ISRAEL: Mixed Results in New International Economic Freedom Report
Israel has seen a slight improvement in its level of economic freedom over the past decade but is falling behind compared to the rest of the world, according to the Economic Freedom of the World: 2007 Annual Report, a new report released by the Jerusalem Institute for Market Studies, a non-profit economic policy think tank. Hong Kong once again tops international rankings for economic freedom, with Singapore a close second and New Zealand in the third spot Israel ranked 44th this year, after ranking 39th in last year’s report. Despite the drop in ranking, however, Israel's cumulative score improved 0.1 points to 7.1 in 2005, the latest year in which data is available.
The annual peer-reviewed report uses 42 different measures to create an index ranking countries around the world based on policies that encourage economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of private property.
"Israel has seen drastic improvements over the past 25 years and become a freer society. This coincides with a global trend towards greater economic freedom. While Israel has moved from a socialist to a post-socialist economy it is not moving fast enough to keep up with the rest of the world," said Corinne Sauer, director of the Jerusalem Institute for Market Studies (JIMS). "While Israel has seen several positive changes such as the decline of socialism in kibbutzim and a burgeoning high-tech sector and tremendous entrepreneurship, Israelis are more divided then ever. While there is greater support for capitalism and a free economy than ever before, there are other segments of Israel's population that have become entrenched in their support for socialism and an unfree economy."
Research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms, and longer life spans. Five nations, including Israel, increased their score by more than three points since 1980: Hungary (3.0), Peru (3.0), Uganda (3.2), Ghana (3.6), and Israel (3.7).
Israel's scores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):
• Size of government: changed to 5.3 from 4.8 in the last year’s report
• Legal structures and security of property rights: changed to 6.6 from 6.7
• Access to sound money: changed to 9.3 from 9.4
• Freedom to trade internationally: changed to 7.8 from 7.9
• Regulation of credit, labor and business: changed to 6.7 from 6.0
Israel's rankings were significantly weakened due to Israel's oversized government. One of Israel's lowest ratings (2.1), stable since 1990, was in the rate of government spending as a percentage of total consumption. Israel also loses points due to extremely burdensome tax rates. Israel only observed Tax Freedom Day one month ago – August 2 -- later than most of the rest of the world. Yet, this represents a significant improvement over decades past – in size of government alone Israel improved 3.4 points since 1980. However, at a high of 5.3 this year, much more needs to be done in order to shrink Israel's bloated and wasteful government, according to JIMS. Israel also received extremely poor marks in the cost of bureaucracy and the ownership of banks. Israel's ranking in bureaucracy costs (4.4) is a sharp decline from its high of 8.2 in 2000.
Israeli banks are an oligopoly – dominated by a small number of competitors. Controlled by a handful of owners, this discourages competition and results in inflated fees. "A recent report in The Marker showed that Israelis are paying more in bank fees than the rest of the world due to the lack of competition. While Bank of Israel governor Stanley Fisher must be commended for his recent attempts to bring foreign banks into Israel, he has not yet been successful in this important mission," said Corinne Sauer. "The concentrated banking sector limits competition and hurts everyone and results in less investment. Israel's working class is especially hit hard by the lack of competition."
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Global Spread of Economic Freedom
The 2007 edition of the Economic Freedom of the World report also includes new research showing how economic freedom spreads between countries. The report notes that historically, many foreign policy decisions have been based on the notion that economic reforms in a few key nations would substantially improve the economies of other countries throughout the region – the so-called "domino effect." The authors conclude that while economic freedom changes in one country have only a modest impact on neighboring countries, when multiple neighbors experience simultaneous changes in economic freedom, the impact is much greater. Broad regional changes in freedom can and do have significant impacts on surrounding countries. This research indicates that free-trade agreements allowing a number of nations to simultaneously coordinate trade liberalization could have a sizeable influence on spreading economic freedom to economically repressed regions of the world.
This spells bad news for Israel, as Israel's ranking in freedom to trade internationally has declined over the past few years. Its score in taxes on international trade is the lowest since 1980. "By reducing freedom on international trade and raising taxes and tariffs the government has not only made goods more expensive for the average consumer – a regressive prohibition which especially harms the poor and middle class – but has also reduced the chances of promoting economic freedom among our neighbors, who truly live in an unfree environment," said Avi Hein, Director of Programs at Jerusalem Institute for Market Studies. "In Milton Friedman's Capitalism and Freedom, he made the case that economic freedom was required in order for there to be political freedom. The more economic freedom in Israel, the more likely that, over time, this domino effect could allow us to live in peace and security with our neighbors."
The Jerusalem Institute for Market Studies (http://www.jims-israel.org) is an independent, non-profit economic policy think tank whose mission is to promote social progress in Israel through economic freedom and individual liberty. Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. (JIMS04.09)
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11.2 ARAB MIDDLE EAST: Islamic Finance Expanding Rapidly
Awash with liquidity, thanks to the ongoing oil boom, Islamic financial institutions are increasingly eyeing investments that are compliant with Islamic law (Shariah) to accommodate their excess capital. Similarly, hedge funds and conventional institutional investors have increasingly been drawn to Islamic securities in search for yield pickup and diversification. This has resulted in a flurry of Islamic securitization transactions, with the issuance of sukuk (non-interest-bearing securities based on Islamic principles) quadrupling to over $27 billion in 2006 from $7.2 billion in 2004.
Adhering to principles
Among the various forms of securitization in Islamic finance, the most popular is commonly referred to as sukuk. These instruments operate similarly to conventional asset-backed securities but are structured to ensure compliance with Islamic finance principles, which, among other provisions, prohibit the receipt and payment of interest and stipulate that income must be derived as profits from shared business risk rather than guaranteed return. As such, Islamic principles require sukuk investors to own the underlying asset via a special purposes vehicle (SPV), which funds payments to investors from direct investment in real, religiously sanctioned economic activity.
While 14 types of sukuk are recognized by the Accounting and Auditing Organization of Islamic Finance Institutions, their structure relies on one of the three basic forms of legitimate Islamic finance, murabahah (synthetic loans/purchase orders), musharakah/mudharabah (profit-sharing arrangements), and ijara (sale-leasebacks), or a combination thereof.
A simple example of such a securitization—in this case ijara, which is typically associated with leasing projects (usually equipment or real estate) is where assets are sold by the issuer into a special-purpose vehicle and leased back for the duration of the project.
When the notes mature, the obligor buys back the asset. The acceptance of these Islamic investment structures has considerably contributed toward the development of local capital markets.
The Big Players
Sukuk issuance has been concentrated in parts of Asia and countries of the Gulf Cooperation Council (GCC)—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. There, the development of the sukuk market has been facilitated by sovereign benchmark issues that have been growing strongly (up 40% in the first six months of 2007 compared to 2006 as a whole). In value terms, about half of these issues originate in Asia (primarily Malaysia and also Brunei) and the other half in the GCC.
Corporate issuance-both public and private-has also expanded rapidly, doubling both between 2004-05 [from $5.7 billion to $ 11.3 billion] and 2005-06 [from $ 11.3 billion to $ 24.8 billion]. While Asia (specifically Malaysia) accounted for the bulk of all Shariah-compliant corporate issues in 2004 (close to 90%), issuance in the GCC has picked up rapidly and now accounts for close to half of all issues in the marketplace.
Many corporate issues—particularly large ones—are quasi-sovereign and as such are seen to benefit from an implicit sovereign guarantee. Thus, although these issues may be linked to an underlying asset, investor appetite may be driven primarily by the sovereign nature of the risk. It also helps to explain successful large scale placements that have been made in recent years, including two Dubai-based issues of $3.5 billion in 2006. Currently, the top five originators, including the Malaysian government, Nucleus Avenue of Malaysia, and Nakheel Development of UAE, represent more than 40% of global sukuk issuance. "In the absence of conventional securitization in many Islamic countries, sukuk issuance will remain a favored structured finance funding option in these markets."
While there may be a cyclical element of current demand stemming from high oil revenues in the GCC, this demand supplements a long-term upswing in demand for Shariah-compliant securities from Islamic institutional investors. In the absence of conventional securitization in many Islamic countries, sukuk issuance will remain a favored structured finance funding option in these markets. In addition, hedge funds and conventional investment institutions are beginning to hold sukuk for purposes of either yield pickup or diversification.
Outside Asia and the GCC, the demand for sukuk has been limited, but they are beginning to gain popularity. The German State of Saxony-Anhalt was the first sovereign obligor to issue a sukuk in a non-Islamic jurisdiction and several corporate sukuk were issued in the United Kingdom and the United States in recent years. The World Bank also issued its first local currency-denominated 760 million Malaysian ringgit ($200 million) sukuk in 2005.
Room To Grow
The current level of sukuk issuance remains a fraction of the issuance of either conventional bonds or asset-backed securities in emerging markets. But a growing number of countries are considering tapping the sukuk market to diversify their investor base and deepen domestic capital markets.
In this context, the IMF is receiving a growing number of requests for technical advice as part of its expanded work on sovereign liability risk management and capital market development, and has advised member countries on sukuk issuance as an alternative to more traditional financing instruments. This increase in demand, along with the standardization of Islamic securities, is expected to fuel further growth of the sukuk market. According to recent market reports, governments and corporates are expected to issue over $30 billion in sukuk annually over the next three years, which would lift the market size of sukuk to more than $150 billion.
Overcoming Obstacles
Despite the strong potential for the sukuk market, as is the case with any evolving securitization market, a number of economic, legal, and regulatory challenges remain, irrespective of Shariah compliance. These include the substitution of standard structural features in conventional securities, such as credit enhancements, which are not normally contractually permissible in the Islamic context; legal uncertainty arising from the fact that the transaction structure needs to satisfy commercial as well as Islamic law, in particular in non-Islamic countries; and, regulatory differences between national regulators.
Ongoing efforts by key Islamic regulators—notably the Accounting and Auditing Organization for Islamic Financial Institutions, the International Islamic Financial Market, and the Islamic Financial Services Board—to facilitate harmonization of standards and practices should help overcome some of these teething pains. (IMF19.09)
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11.3 ARAB MIDDLE EAST: Islamic Banking Makes Headway
The IMF noted that Islamic banking has grown by 10-15% per year over past decade and despite fast growth, Islamic finance is still uncharted territory for some authorities. An understanding of the principles governing Islamic banking is essential as Islamic banking is steadily moving into an increasing number of conventional financial systems.
It is expanding not only in nations with majority Muslim populations, but also in other countries where Muslims are a minority, such as the United Kingdom and Japan. Similarly, countries such as India, the Kyrgyz Republic, and Syria have recently granted, or are considering granting, licenses for Islamic banking activities.
In fact, there are currently more than 300 Islamic financial institutions spread over 51 countries, plus well over 250 mutual funds that comply with Islamic principles. And, over the past decade, the Islamic banking industry has experienced growth rates of 10-15% per year—a trend that is expected to continue.
Despite the rapid growth, many practitioners and supervisory authorities are unfamiliar with the process by which Islamic banks are introduced into a conventional system, or with the gamut of principles governing Islamic banking. While an understanding of both process and the principles is important for succeeding in the industry, this article focuses on the latter.
Islamic Banking - Four Main Principles
Besides the well-known Quran admonishment against riba (interest), gharar and maisir (contractual uncertainty and gambling), and haram industries (prohibited industries such as those related to pork products, pornography, or alcoholic beverages), practitioners and supervisors must observe other principles to comply with Islamic jurisprudence. Paramount among these are: compliance with the Shariah (Islamic law), segregation of Islamic and conventional funds, accounting standards, and awareness campaigns.
Shariah compliance: Islamic finance in based on the principles established by the Shariah as well as other jurisprudence or rulings, known as fatwa, issued by qualified Muslim scholars. Some of the issues covered by these rulings can be quite complex, forcing the institutions involved to often seek the assistance of experts in interpreting them. As a result, it has become a common practice for Islamic banks to appoint their own board of Shariah scholars.
Nevertheless, since expertise in these matters is still relatively scarce in some countries, different Islamic banks often share the same scholars. This phenomenon has the beneficial side effect that it promotes consistency across the services and products offered by these institutions.
Therefore, the first measure that an institution wishing to offer Islamic products must undertake is to appoint a Shariah board or, at a very minimum, a Shariah counselor. This initial step is essential for the future operations of the institution, as it will help minimize Shariah risk—the risk that the terms agreed in a contract do not effectively comply with Islamic jurisprudence and thus are not valid under Islamic law.
Financial regulators should also appoint their own Shariah experts, a move that would provide advice on the instruments and services offered by the institutions in their jurisdiction. Consultation with these experts would be crucial to ascertain whether the regulations issued by the supervisor with regard to Islamic institutions, as well as the licensing of different activities, are compatible with Islamic principles.
Another important aspect for the regulator is that its rulings and decisions are consistent with those of the Shariah boards of foreign supervisory agencies. An important effort toward achieving international consistency was the creation of two multilateral institutions: the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which issues internationally recognized Shariah standards on accounting, auditing, and governance issues; and the Islamic Financial Services Board (IFSB), which issues standards for the effective supervision and regulation of Islamic financial institutions.
Segregation of funds: An important principle behind Islamic finance is the desire to maintain the moral purity of all transactions. The funds intended for Shariah-compatible investments should therefore not be mixed with those of non-Islamic investments. The rationale behind this principle is rather one of prudence, in the sense of taking all the necessary precautions to ensure that Islamic funds do not become mixed with other funds that may be involved with riba, gharar, or haram activities.
Therefore, to ensure compliance with Islamic principles, conventional banks wishing to offer Islamic products must guarantee and publicize that the funds devoted to conventional activities will not be commingled with those destined for Islamic activities. In operational terms, this requires that banks establish different capital funds, accounts, and reporting systems for each type of activity.
Accounting & Auditing Standards: The rapid expansion of the Islamic financial industry that started in the 1970s was not initially accompanied by the creation of a set of internationally recognized accounting rules. Islamic institutions around the globe, therefore, had to resort to developing their own accounting solutions for their new products, rendering comparisons across institutions difficult, and sometimes even giving the impression of lack of transparency.
The need for a body of accounting standards purposely designed to reflect the specificities of Islamic products became even more pressing as new and more complex instruments were being marketed. To close this widening gap, the AAOIFI was created in 1990. One of the main goals of this organization is to design and disseminate accounting and auditing standards that can be applied internationally by all Islamic institutions.
The AAOIFI also plays a crucial role in pursuing the harmonization of Shariah-based rulings across jurisdictions. In those jurisdictions where Islamic finance is still nascent, regulators and financial institutions should familiarize themselves with the standards set by the AAOIFI, and apply them to the maximum extent possible.
The pursuit of international consistency not only eases the task of supervising internationally active institutions, but it would also ultimately favor the regulated institutions, as Islamic transactions would become better understood, and thus more attractive for Muslim and non-Muslim investors across the world. In addition, it would foster the integration of Islamic institutions into the international financial community.
Awareness Campaigns: The speed and degree of success with which Islamic banking will emerge in conventional systems will largely depend on whether potential depositors and investors are well informed about the opportunities and risks at hand, and on whether Islamic banking is perceived as a transparent and well-regulated activity.
From a prudential standpoint, regulators should communicate to the public what types of Islamic institutions and products will be supervised. They should also require institutions offering Islamic products to actively pursue awareness campaigns. For instance, commercial banks should inform investment (mudarabah) depositors of the profit-and-loss nature of their deposits. In practice, these tasks can be easily accomplished by simply providing an explanatory prospectus to interested customers.
Source of Support
A number of multilateral institutions have been recently created to provide assistance to governments and supervisory agencies to help them understand Islamic banking and to issue standards and best-practice guidelines for this industry. These organizations are the best places for governments to turn to initially for advice. They include the IMF, IFSB, AAOIFI, and the Islamic Development Bank. In addition, the authorities should engage in dialogue with the local interlocutors of this industry, to promote an open and fluid exchange of information and ideas. (IMF19.09)
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11.4 LEBANON: Financing in a Time of Risk and Reform
This September, the World Bank signed agreements with Lebanon's Ministry of Finance to dispense a $100m loan to tackle social and energy sector reforms. The World Bank's funds for the country are split into three segments with the first representing $100m in the form of a 15-year loan with a five-year grace period. The second is a grant of $1m being provided in the form of technical assistance split between $700,000 for the reform of the National Social Security Fund (NSSF), around $200,000 to develop the information systems of the Ministry of Social Affairs and $100,000 as support for the Health Ministry. The third disbursement is a $338,000 grant to the Institute of Finance to provide training support in the area of public finance management.
As reported by the Oxford Business Group, the funds form part of the total $975m pledged by the World Bank at Paris III, the international donor conference for Lebanon held in Paris this January. Together, the European Commission and the EU member states committed to provide nearly 40% of the $7.6bn in soft loans and grants pledged by the international community at Paris III.
This month, the EU loaned $100m to finance six projects that focus on the rehabilitation and reconstruction of infrastructure, facilitating access to bank loans for Lebanese enterprises, reconstruction assistance, support for institutional reforms and an EU university scholarship fund for Lebanese of Palestinian descent. This money is part of the total $2.9bn pledged at Paris III by the EU, of which $486m was pledged by the European Commission. "The grant will help Lebanon carry out its economic reform program. It is part of the assistance pledged at the Paris III conference," Prime Minister Fouad Siniora said while announcing the release of the funds.
Pledges made at Paris III are closely tied to the implementation of a five-year reform initiative, for which the government had presented an outline at the conference. The plan is wide-ranging in scope and includes social, fiscal and economic reform proposals.
The International Monetary Fund (IMF) stated the Paris III reform program offers "a promising way out of the large debt overhang and financial vulnerabilities, and the 2008 budget...implementation of the structural reforms now being launched in the telecom, power and social sectors will be key in generating a clear forward momentum." At the same time, the IMF is clear on the presence of risks and so warns that in order to sustain adjustment and reform over the medium term, "it will be important to: generate a broad consensus behind the reform objectives; ensure [that] spending priorities and structural policies are supportive of high private-sector growth; and reform institutions to improve the effectiveness of policy making."
A Ministry of Finance report issued in July said "significant progress" has been made in setting up the institutional structures needed to implement and monitor the reform program. This includes the formation of a coordination office and three inter-ministerial committees (social, economic, and infrastructure and privatization), all of which have begun operations.
According to the IMF, the success of the Paris III reform initiatives depends on the timely disbursement of pledged donor support and the honoring of "the authorities' request that donors convert their pledges from project to budget support, or at least align their project disbursements to the government's own spending priorities". Of the total $7.6bn pledged at Paris III, the Ministry of Finance expects to receive more than $1bn this year in the form of budgetary support. By the end of June, $177m had been transferred. Discussions with donors are underway regarding $1.47bn of support for the reform agenda.
Fears that the ensuing political crisis may deepen has prompted visits from foreign envoys to Beirut in September, including French Foreign Minister Kouchner and US Principle Deputy Assistant Secretary for International Finance and Development Dibble. Concerns lie in the deadlock gripping the choice of a new president, which could result in the establishment of two rival governments or a power vacuum. Dibble confirmed that the $770m in economic and financial aid pledged at Paris III would continue on the condition the reform plan continues to be implemented, regardless of which government takes power.
Reforms are also susceptible to the explosive political climate which continues to dog the country. The assassination of Antoine Ghanem, a member of the Lebanese parliament, this September added fuel to the crisis surrounding the upcoming parliamentary vote to select a new president. The EU condemned the murder, and its External Relations Commissioner Benita Ferrero-Waldner said, "These attacks should by no means obstruct the process of electing the new president and the process of reform that lies ahead of Lebanon." In this context, parliament's postponement until October of the election of a new president is discouraging news. (OBG26.09)
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11.5 KUWAIT: Petrochemical Production
In a series of moves designed to boost the country's profile as a heavyweight in the industry, Kuwait's petrochemical companies have been unveiling a number of plans to increase capacity, both domestically and internationally. Long considered one of the supporting players in the regional petrochemical industry due to its low supply of feedstock, the Oxford Business Group said that Kuwait has unveiled over $8bn worth of new projects to boost its production of both aromatics (namely benzene and xylene isomers) and olefins (such as ethylene and propylene).
The bulk of the expansion comes from the Olefins II project, which is being spearheaded by EQUATE Petrochemical Company, a joint venture project between The Dow Chemical Company and Kuwait's state-owned Petrochemical Industries Company (PIC). The project, which will be located in the expansive petro-derivatives complex in Shuaiba in southern Kuwait, will boost local production of olefins and plastics, with a planned 850,000 tons per annum (tpa) ethane cracker, a 600,000 tpa ethylene oxide/glycol plant and a 225 tpa polyethylene expansion.
In addition to Olefins II, PIC announced plans to construct an aromatics plant and Dow and PIC are constructing an ethylbenzene/styrene plant with a styrene capacity of 450,000 tpa adjacent to EQUATE's existing facilities. The aromatics plant will be financed in part by a 14-year $1.4bn loan, with a $347m sharia-compliant component. EQUATE, the largest petrochemical player in Kuwait, has announced plans to double its capacity and product numbers by late 2008 - early 2009. Following expansion, it expects to produce 1.32m tons of ethylene glycol, 825,000 tons of polyethylene and 450,000 of styrene annually. Last year, EQUATE finalized a financing plan comprising one of the largest commercial loans in the Gulf, with $2.5bn worth of loans from 33 different local and international banks.
The growth of Kuwait's petrochemical sector is a relatively recent event. When the $1.9bn EQUATE complex first came online in 1997, the industry was operating at a loss. The performance from the Dow-PIC joint venture turned the sector around in three years, churning out a profit of more than $180m that year. By 2006, boosted by record production and strong global demand for petroleum products, it had more tripled that number, pumping out more than $560m in profit.
The reason behind the late blooming of Kuwait's petrochemical industry is due in part to the relatively small amount of natural gas supplies in Kuwait, which limits the amount of raw materials that can be used for production. According to Walid Al Asfur, general manager of Qurain Petrochemicals, a private sector Kuwait-based petrochemical company, gas is essential as a feedstock for the petrochemical industry. "If you don't have it, you will not be very competitive as you are going to depend on other alternatives, which are very expensive to crack."
However, the recent discovery of new gas fields in the north of Kuwait, including the al-Dhabi field, has opened up an estimated 35tr cubic feet of gas - a significant boost in feedstock for the petrochemical sector. Kuwait National Petroleum Company's newly upgraded liquefied natural gas (LNG) plant in Ahmadi, which underwent over $400m worth of renovations to increase its ethane recovery rate by 40% to 96%, will also increase the amount of raw materials available for petrochemical production.
Talking to OBG, Dan Gibbs, senior vice president of EQUATE, said, "Following the recent discoveries of additional gas fields, Kuwait's local petrochemical industry should have the potential for further growth and expansion." While the gas discoveries have bolstered interest in Kuwait's petrochemical sector, Kuwaiti companies have been extending their reach abroad, with several projects and investments being launched overseas. PIC is currently working alongside Shell, Dow and Chinese para-statal conglomerate Sinopec on a $5bn project in Nansha, in China's Guangdong province. The project would include a 12m-barrel-per-day refinery, in addition to an 800,000 tpa ethylene cracker. Qurain Petrochemical Industries Company is working with a consortium to build a $1bn, 1m tpa methanol plant in Algeria, while Kuwaiti investors are also behind a $1.2bn petrochemical project in the Egyptian city of Suez.
Kuwait is also participating in the regional petrochemical industry's nascent professional body, the Gulf Petrochemicals and Chemicals Association (GPCA). Eight companies from around the Gulf Co-operation Council region, including EQUATE and PIC, signed an agreement last year to co-ordinate efforts to further grow the sector in the Middle East. The Gulf market, which is expected to grow by 5% per year in the coming years, is a key region for the global petrochemical industry but has faced a number of challenges recently, including high oil prices, which trigger higher costs for production. (OBG21.09)
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11.6 BAHRAIN: Gas and Hot Air
Manama and Tehran are edging closer to an agreement, as noted by the Oxford Business Group, which will see Iran become a major supplier of natural gas to Bahrain, helping to fuel the country's program of industrial expansion and diversification. If all goes according to plan, Bahrain could be receiving shipments of Iranian natural gas as early as 2012, via a pipeline that is to be laid beneath the Gulf.
On September 23, Abdul-Hussain Mirza, Bahrain's minister of Oil & Gas Affairs and head of the National Authority of Oil & Gas, announced that a second round of negotiations on the project would be held in Tehran in October. According to Mirza, it is not so much a question of whether Bahrain will import gas from Iran, but rather how the project will be funded and operated. Both sides are studying the best way to facilitate the import whereby either Bahrain would invest in the Iranian oilfields in co-operation with an international firm and would be provided with gas in return or it would import the gas directly, he said.
Talks between representatives on the joint Bahraini-Iranian technical committee established to shape the project should be completed within a year, with the laying of the pipelines linking the two countries expected to take another three or four years, Mirza said. A first round of talks, held in early September in Manama, described as a success by Mirza, focused both on the plan to import Iranian gas and on ways to facilitate Bahrain's investments in Iranian oil and gas projects.
Newly appointed Iranian Ambassador Hossein Amir Abdollahian has flagged Tehran's enthusiasm for the project. After presenting his credentials to King Hamad bin Isa Al Khalifa on September 15, Abdollahian said his country was ready to expand its economic ties with Bahrain and push forward with discussions on energy co-operation.
With the talks still in the early stages, there has been no finalizing of details such as how much gas will be shipped to Bahrain, or of the cost for the project's infrastructure and who will be doing the paying. 'It is too early to estimate the price of Iranian gas, said Mirza on September 15. However, in later statements to media, the minister said he did not see any obstacles to reaching a final agreement some time next year.
That the project to import Iranian natural gas has advanced so quickly is a triumph of real politic over politics, with relations between Tehran and Manama having been decidedly strained only a couple of months ago. A claim made in the Iranian press by Hossein Shariatmadari, a close advisor to Iran's supreme leader Ayatollah Ali Hosseini Khamenei and editor or an Iranian daily, that Bahrain was a province of Iran and should be reunited with the native land provoked understandable outrage in the kingdom.
The article, published on July 9, saw a flurry of diplomatic activity, with Iranian Foreign Minister Manouchehr Mottaki dispatched to Manama to douse the flames. However, Mottaki's visit did not forestall large protests outside the Iranian embassy in Manama, or a wave of articles in the Bahrain media lambasting Tehran for having expansionist policies. On the other side of the Gulf, Mottaki's visit to Bahrain also came under fire, with hard- line parliamentarian Daryoush Ghanbari describing the apology tendered by the foreign minister an affront to Iran's national dignity.
Affront or not, economic rationalism played its part in the smoothing of ruffled feathers. Amidst assurances of mutual respect and admiration at the meeting between Bahraini Foreign Minister Sheik Khalid bin Ahmed Al Khalifa and his Iranian counterpart, the issue of gas imports also got a mention.
Holding a joint economic commission meeting after the fasting month of Ramadan and establishing a committee to finalize the gas purchase project from Iran are appropriate grounds to expand mutual ties, Sheikh Khalid said. Manama seriously intends to expand ties with the Islamic Republic of Iran and strengthen opportunities and brotherly ties between the two countries. The proposal to import Iranian gas is part of Bahrain's plan to secure its long-term energy needs. The country's own gas and oil reserves have only a limited lifetime, with current oil production no longer sufficient to meet its requirements.
While it still has gas reserves sufficient for the immediate future, with unofficial estimates putting stocks at around 92bn cu meters, and is still conducting further exploration off its shores to identify new stocks of gas and oil, the ambitious program of economic diversification requires supplies to be locked in for the decades to come. (OBG28.09)
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11.7 QATAR: Between East and West
A consortium of Gulf Cooperation Council (GCC) companies spearheaded by Qatar is planning to invest in the oil and gas, Islamic banking and property sectors in Malaysia. The consortium, as reported by the Oxford Business Group, will be led by the national insurance company, Qatar General Insurance and Reinsurance Company, Gulf Petroleum of Qatar and several other leaders from the GCC region.
The $1.4bn deal, while significant on its own, represents a new trend for Qatar and many other GCC countries, since it will reshape how and where Qatari petrodollars are invested. The move will significantly reshape the economic landscape well into the future as Qatar looks to counter its exposure to the dollar by expanding its investment reach in Asia. Furthermore, it will lead closer to the establishment of a regional headquarters in Malaysia for further growth in the greater Asia Pacific region.
Thanks to high oil prices, the continued growth of the hydrocarbon sector, and controlled growth and expansion, the Qatari state coffers are continuing to increase. This represents a microcosm of the greater GCC area where, for the period 2002-2006, the six GCC member states (Qatar, Oman, UAE, Bahrain, Kuwait and Saudi Arabia) earned $1.5 trillion dollars from oil exports, which was more than double the amount earned in the five preceding years. While close to $1trn of that was spent on imports, the remaining current account surplus of $542bn dollars went abroad. The question of late has been where the GCC puts all of that money.
Such questions remain quite an important and difficult topic to decipher, since most of the statistics are not published by the GCC countries and, therefore, must be pieced together by foreign sources. It is important for hedge fund managers to track petrodollar investments, as they are largely believed to be more volatile than other sources of global liquidity, such as Asian reserves. These petrodollars can also come with high amounts of leverage through investments in private equity firms and hedge funds.
Published statistics released by the American Treasury's International Capital System (which provides information on foreign holdings of American securities); the Bank for International Settlements (which tallies figures on foreign-owned bank deposits); and Bloomberg's database on global mergers and acquisitions show some $260bn of capital flows from Gulf states over the past five years, or about 48% of the GCC's cumulative surplus. Statistics from the Institute of International Finance (IIF), a global bankers' group, show that around $60bn may have gone to Asia, where Qatar and other Arab oil exporters are pouring money into infrastructure projects as well as buying property and firms.
While this increase in exposure to Asia is significant and relatively recent, the expansion is not at the expense of exposure to European and American markets, but more of a counter-balance to a continuously weak dollar that comes along after an announcement made by Sheik Abdullah bin Saoud bin Abdulaziz Al Thani, governor of the Qatar central bank, at a meeting of Arab central bankers in Damascus, that Qatar will not abandon its currency peg to the US dollar. In May, Kuwait changed its currency peg from the dollar and began allowing the dinar to appreciate. Many have speculated that other countries in the region would follow suit, so the announcement came as somewhat of a relief.
Qatar has increasingly been looking into several opportunities across Asia for the diversification of its economy in the long-term. South Korea and Japan already account for 58.4% of Qatar's exports with Japan leading the way. Although Korea's trade volume of $5.6bn is considered a good one, a prominent Qatar Chamber of Commerce & Industry (QCCI) member said, "We are still looking for more cooperation due to the potential our two countries have." Ali bin Abdul Latif Al Mohannadi was addressing a joint meeting of Korean and Qatari businessmen at a meeting at the QCCI.
Another major trading partner for future Qatari development will be China. The Gulf region supplies 60% of the Asian industrial powerhouse's growing oil needs. This number is expected to pursue an exponential rise in the near and long terms. There is already $45bn in bilateral trade between China and the Gulf and the number is set to rise substantially as relationships are cemented between the two regions.
At the China-Middle East Investment Summit in Dubai, it was noted that the Gulf could invest as much as $250bn in Asia - mainly in China - over the next five years. While many bankers doubt that such a large amount of the GCC's expected capital outflows will flow to Asia, the summit brings to light the increasing ties between the two regions. Besides, with Qatar being the largest supplier of LNG gas and considering continuing growth in its general output, a very bright future of growth is set.
While Qatar is seeking to expand across several countries in Asia, there is clear evidence that it will not come at the expense of the country's exposure to the North American and European markets. This has been evidenced by the Riyal peg to the US Dollar and by Qatar's impressive move at purchasing a nearly 30% stake in the London Stock Exchange (LSE), which is currently held by NASDAQ. This will not only keep the balance in Qatar's portfolio of investments and its overall exposure, but will also catapult the country into achieving its goal of becoming a regional financial hub, further diversifying the Qatari economy. This is the type of long-term balance that Qatari leaders are seeking to ensure continued economic growth. (OBG20.09)
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11.8 ABU DHABI: Aluminum to Diversify the Economy
Work is on track for the ground breaking of what will be the world's largest aluminum smelter, a project that will place Abu Dhabi at the forefront of the metal's industry. The Oxford Business Group reported that the facility, to be built at the Khalifa Port and Industrial Zone in Taweelah, is a joint venture between the Mubadala Development Corporation and the Dubai Aluminum Company, better known as Dubal. The company that will operate the plant, the Emirates Aluminum Company (Emal), with be equally owned by the two partners. Construction of the first stage of the facility is set to begin in Q1/08, with completion due in 2010. Work on the second stage will commence as soon as the first is up and running.
Though its initial capacity will be 720,000 tons, later stages of the project will increase this to 1.44m tons. When it reaches full capacity, the plant in Abu Dhabi will almost equal the combined annual output of Aluminum Bahrain and Dubal, the two main producers in the Gulf Cooperation Council region, which have a production of 1.6m tons.
The total budget for the project has been set at $8bn, with $5bn dedicated to the initial stage, which will include port facilities, infrastructure, a power station and the first smelting plant. The remaining $3bn will mainly be invested to double the facility's capacity. Much of the plant's output is expected to be exported to the booming economies of Asia, and especially to the automotive industry in the Far East.
A small hurdle for Emal was passed on September 14, when the European Commission (EC) announced that it did not have any objections to the joint venture formed in February this year. Given that Dubal is the world's seventh largest Aluminum producer, the EC understandably scrutinized the new venture, which is paving the way for the Middle East to become one of the world's centers for aluminum production.
Last year, Middle Eastern companies accounted for 7% (2.38m tons) of the world's aluminum production of 34m tons, a figure that is tipped to rise to 6m tons by 2020, around 10% of the projected global output at that time, the CEO of Dubal, Abdulla Jassim Kalban, reported recently. "This is the first in a number of business synergies between Mubadala and Dubal, which will make the United Arab Emirates (UAE) a first-tier player and a global force in the Aluminum industry," said Mohammed Al Bowardi, Mubadala's vice chairman of development.
While Dubal has a proven track record in the industry, Mubadala is a relative newcomer. Established in late 2002 as a wholly owned investment vehicle for the government of Abu Dhabi, it has quickly built up a portfolio ranging from real estate and energy to manufacturing and utilities. Obviously with the Emal project in mind, it has also been investing in upstream sectors of the Aluminum industry, buying into a number of developments overseas.
In May, Mubadala joined forces with Dubal, BHP Billiton and Global Alumina International in a $3bn project to develop and operate the Sangaredi refinery in the Republic of Guinea. With Guinea having an estimated one third of the world's bauxite reserves, partnership in Sangaredi will give the emirate's companies, along with BHP Billiton, almost unlimited access to processed alumina, the raw material needed for Aluminum production. The Abu Dhabi and Guinea developments are not the only joint projects being undertaken by Mubadala and Dubal. In March, the two signed an agreement with Algeria's state oil and gas company Sonatrach to build and operate Algeria's first Aluminum smelter.
The $5bn facility, which will have an annual production capacity of 700,000 tons, will further expand Mubadala's involvement in the Aluminum sector and build on its existing investment base in Algeria, said the company's chief executive officer, Khaldoon Khalifa Al Mubarak. "This investment is necessary to provide for an increased demand for Aluminum globally," he said. "The rising cost of energy in some regions continues to make older smelters uneconomic, whereas Algeria's abundant supply of energy and regional position makes for an exciting opportunity." With the world's demand for Aluminum growing at a rate of more than 6% annually, Mubadala has, in a matter of months, positioned Abu Dhabi at the heart of a rapidly expanding industry. (OBG19.09)
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11.9 SAUDI ARABIA: Security Wall to Be Built
Saudi Arabia recently announced plans to build an iron curtain-style security wall along its border with Iraq. The project, as described by the Oxford Business Group, estimated to cost around $1bn, is being constructed to prevent terrorists and illegal immigrants from entering the kingdom. It is just one part of a wider operation to secure the kingdom's borders. Major General Mansour Al Turki, spokesperson for the interior ministry, said tenders had been invited for the building of the fence, which will stretch 900 km along the desert border with Iraq.
The closing date for submitting quotations has been set for October 28. Among the companies invited to bid are Saudi Binladin Group, Saudi Oger and Al Saif Engineering and Construction Co. However, even with the upcoming bid closure date, Interior Minister Prince Naef bin Abdul Aziz told the local press, "The contract for building the fence will be awarded soon, God willing."
Amid regional concerns about the sectarian violence in Iraq, Saudi Arabia moved for the construction of the security fence, concerned that tensions and terrorist activities could spill over into the kingdom. Following the September 11, 2001 attacks on the US, Saudi authorities were made aware of the danger posed by Al Qaeda extremists within the kingdom. By 2003-2004, the number of attacks committed on Saudi soil was a potential deterrent to international investors. The subsequent crackdown on local extremists has been very successful and the battle with Al Qaeda militants was declared won on the home front. Now, the kingdom wants to protect itself from the potential risk of Iraqi insurgents crossing the border.
The project is expected to be at least partially complete by the end of 2008. Fitted with the latest technology, the protection line will consist of fences on either side of a 100-metre "no-man's land" fortified with two rows of barbed wire obstacles, ultraviolet sensors, night-vision cameras with facial recognition technologies and buried motion detectors. There will also be command posts, helipads and observation towers.
According to the Saudi National Security Assessment Project, the government has already invested around $1.8bn for the security of its northern border since the US-led invasion of Iraq in 2003. At present, there is a 6-metre-high berm and a regularly patrolled security zone that is nearly 10km wide along the border between the two countries.
Unofficially known as the "MIKSA project", the $12bn overall Saudi Border Guard Program, which involves the ministry of interior, is an attempt to improve internal security and bolster the kingdom's defenses against external threats along its entire border.
The umbrella project includes supplying a telecommunications network and scores of reconnaissance aircraft and helicopters. The system would organize the surveillance and protection of the border with the help of 225 radar installations that can detect any intrusion by ground, air or sea. An alarm would be raised by satellite to a headquarters located in Riyadh, allowing the Saudi National Guards to take action. Additionally, the project entails the construction of 400 border posts, barracks likely to accommodate 20,000 soldiers and military personnel and regional station control rooms.
Due to bilateral co-operation between Paris and Riyadh in the past decade, French-based Thales, a software systems provider for aerospace, defense and security markets, has fulfilled some of the overall military needs of the ministry of interior. However, last year, in a bid to promote transparency, the government decided to open the contract to bidders for international competition, inviting a range of companies, including Thales, Raytheon, BAE Systems, EADS and Finmeccanica. The deal is still on the table with details yet to be confirmed. (OBG26.09)
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11.10 EGYPT: Adding Up the Tourist Numbers
Egypt's tourism figures for FY2006/7, released at the end of August, showed impressive growth. The Oxford Business Group noted that tourism is an increasingly important part of the economy and the government has set its sights on even higher visitor numbers. As such, it is looking to boost numbers from traditional tourist markets such as the Middle East and North America as well as focusing on new regions, particularly Asia.
In the year to the end of June 2007, a record of 9.7m tourists visited Egypt, up 13% year-on-year. Tourists spent a total of $8.2bn in the country, an increase of 14% on the previous 12 months and stayed 92.3m nights, up 8.5%. These figures are calculated from July to June to coincide with Egypt's financial year. According to the Ministry of Tourism, the government has targeted receiving 14m visitors a year by 2011, necessitating an increase in hotel capacity to 240,000 rooms, up from 175,000.
"Tourism is showing great potential as a competitive sector," Adla Ragab, professor of economics and economic advisor to the Minister of Tourism, told OBG. Talking about 2006, Ragab said, "The number of tourist arrivals has increased from 5.1m in 2002 to 9.1m in 2006, recording an average annual growth rate of 15%. This has been reflected in the growth of the number of tourist nights from 33m nights in 2002 to 89m nights last year in the and revenues generated by tourism from $4.3bn to $7.6bn in the same period. This confirms tourism as a major source of foreign currency earnings - accounting for 23% of receipts - and it contributes, through direct and indirect means, 11.3% of GDP."
Such is the importance of tourism, it is feared that should a terrorist attack occur and significant numbers of tourists be put off visiting the country, its economic growth and stability could be significantly damaged, at least in the short term. However, Egypt has rebounded from terrorist atrocities in the past. Bombings in Sharm el-Sheikh in 2005 and Taba and Nuweiba the previous year raised fears of a return to bloody attacks targeting tourists after a lull following the 1997 attacks at Luxor, in which 62 people were killed. However, security has been tightened and tourist numbers continue to grow.
Significantly, there has recently been an increase in the number of visitors from the US, due to two main reasons: renewed confidence in the security situation as the tourism levels return to normal after taking a hit in the aftermath of the September 11, 2001 attacks; and the strength of the euro against the dollar - making Europe less affordable for Americans. Last year, the number of visitors from the US increased 16.5% to 228,183, according to the ministry of tourism.
In 2006, the number of visitors from the Middle East, traditionally a reliable market for Egypt, increased 12.9% from 1.5m to 1.7m. The number of visitors from all Arab states increased by 23%, Ragab told OBG. She said, "The European market [including Russia] accounts for 71% of our visitors. The number of British tourists has exceeded 1m, with an 11.5% increase in 2006. Russians followed with an 11% increase in tourist numbers, Germans 10.6% and then Italians 9.5%."
The Los Angeles Times recently reported that more American tourists were giving the Eurozone a wide berth, to the benefit of more affordable destinations such as Egypt. Turkey was equally losing out to Egypt in attracting US visitors because of the appreciation of its currency against the dollar. Significantly, the number of nights spent by Arab tourists in Egypt reached 2m in June 2007 alone, an increase of more than 18% on June 2006. The largest number of Arab visitors came from Sudan, followed by Libya, Kuwait, Saudi Arabia and Yemen.
While the number of Europeans visiting Egypt continues to grow, tourism authorities are increasingly focusing on other markets to promote the country as a destination. China and India are two examples - with large, increasingly mobile and affluent middle class populations whose interest in travel is growing. Last year, the number of Chinese visitors to Egypt reached 51,371, up 45.4% on 2005. Arrivals from India grew 13.2% on the previous year, to 61,301. A recent report in the Indian press stated, "Egypt has suddenly become a favorite, so much so that cynics predict it will be another run-of-the-mill destination for Indians soon." It went on to list favored destinations and activities that included Cairo, cruises on the Nile and diving at Sharm el-Sheikh.
Looking to the future, tourism authorities are hoping the sector will be boosted by the implementation of an open skies agreement with the EU and other major tourism partners. A report last year by the World Tourism and Travel Council estimated that the liberalization of access to Cairo International Airport would raise visitor numbers by 6%, GDP by more than 2%, tourism investment by 6.2%, direct employment in the tourism industry by 7% and indirect employment by 13%. It is expected that an agreement with the EU will be finalized in the next two to three years, after the completion of the new airport terminal in the first half of next year. (OBG20.09)
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- Israeli Shekel conversions done at a rate of NIS 4.10 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.2 = $1.00
- Cypriot Pound conversions done at a rate of C£ 1.00 = $1.60
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.66 = $1.00
- Omani Rial conversions done at a rate of OR 0.385 = $1.00
- Pakistani Rupee conversions done at a rate of Rs 60 = $1.00
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