TOP STORIES

• TAT Technologies Completes Merger With Oklahoma’s Limco-Piedmont
• US Airways Debuts Philadelphia – Tel Aviv Service
• Porsche Set To Offer Volkswagen Stake To Qatar
• Deutsche Bank Says Israel's GDP to Rise 2% in 2010
• Saudi Arabia Economy to Shrink 1.2%
• OECD Feels Turkey’s GDP Expected to Shrink by 5.9% in 2009
• The Fast Day of 17th of Tammuz

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu Cancels Proposed VAT on Produce
1.2 Government Approves Bank of Israel Regulation Law

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 TAT Technologies Completes Merger With Oklahoma’s Limco-Piedmont
2.2 ICL & Volkswagen Have Reached an Agreement Concerning Dead Sea Magnesium
2.3 Foreigners Buy $400 Million In Tel Aviv Shares In May
2.4 ClickSoftware Announces Listing on the NASDAQ Global Select Market
2.5 TAT Technologies Reports Transfer of Listing to the NASDAQ Global Market
2.6 Zion Oil & Gas Rights Offering Fully Subscribed - $21 Million Raised
2.7 US Airways Debuts Philadelphia – Tel Aviv Service
2.8 RADVISION Receives 2008 Communications Solutions Product of the Year Award
2.9 Volas Signs With MLiven to Distribute Redboss Games Through ICQ in Israel
2.10 Israelis Increasingly Attracted to Private Label Products
2.11 Formula Announces Filing of Draft Prospectus in Israel

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Jordanian Investors Launch Biotechnology Company
3.2 Porsche Set To Offer Volkswagen Stake To Qatar
3.3 Eaton Expands Middle East Electrical Business
3.4 Emaar Closes Algeria Office Due To Lack of Progress
3.5 Saudi College Teaches Women How To Sell Underwear
3.6 Joint Venture Positions UPS for Growth in Middle East& Turkey
3.7 Digital Ally Expands International Market Presence with Initial Orders From Turkey
3.8 CDTECH Gasoline Desulfurization Unit Starts up in Greece

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 World Bank to Fund Dead Sea-Red Sea Canal Test Project
4.2 Deutsche Bank Says Israel's GDP to Rise 2% in 2010
4.3 Committee Approves Jerusalem Waldorf Astoria
4.4 Manitoba Minister of Water Announces Joint Israeli-Canadian Water Management Research Fund

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Global HNWI Wealth Drops to $1.4 Trillion in Middle East
5.2 WTO Urges Further Trade Reforms For Morocco To Sustain Economic Growth
5.3 Arab Ministers Back Jordan Plan To Facilitate Trade
5.4 Two Consortia Interested In New Port Of Aqaba Project
5.5 Heatwave Places Record Strain On Jordan’s Power Supply
5.6 Iraq Historic Oil Auction Ends With Just One Deal
5.7 GCC Trade With Japan Increases By 43%
5.8 Kuwait MPs Approve Government’s $42 Billion Budget
5.9 UAE Wins International Renewable Energy Agency Headquarters
5.10 Dubai Inflation Slows To 5.4%
5.11 Dubai Set To Investigate Bid for 2020 Olympics
5.12 Saudi Arabia Economy to Shrink 1.2%
5.13 Saudi ICT Spending Seen to Hit $733 Million by 2011
5.14 Hilton Garden Inn Blossoms in Saudi Arabia
5.15 Canada Eyes Higher Cereals Exports to Saudi
5.16 Egyptian Mobile Subscribers Number Over 44 Million
5.17 Egypt Wind Farm Bid Attracts 72 International Firms
5.18 Russia Eyes Nuclear Power Deals in Egypt
5.19 Pakistan Imposes Carbon Tax To Raise Funds

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkey In Biggest Slump Since 1945
6.2 OECD Feels Turkey’s GDP Expected to Shrink by 5.9% in 2009
6.3 Turkish Inflation Rises Moderately
6.4 IMF Tells Cyprus To Cut Bloated Payroll
6.5 Cyprus Harmonized Inflation Follows CPI Downwards
6.6 OECD Sees Greek Economy Contracting
6.7 Greek Tourism Slumps 9.6%
6.8 Bulgaria’s GDP Forecast to Grow 3.5% in 2009

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 The Fast Day of 17th of Tammuz
7.2 First Ever Incumbent MK Gives Birth

*REGIONAL:

7.3 Prince Hussein named Jordan’s Crown Prince
7.4 Bulgaria PM-To-Be Still Hopes for Outright Majority

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Protalix Home Care Treatment Program for Gaucher Patients in Trial of prGCD
8.2 Teva & Antares Announce FDA Approval of Needle-Free Injector Product for Tev-Tropin
8.3 Pluristem Awarded a $1.9 Million Grant from Israeli Chief Scientist’s Office
8.4 Optimata to Collaborate with Teva on Clinical Development of Solid Tumor Cancer Drugs
8.5 Compugen Reports Sale of a Portion of Its Evogene Holdings
8.6 Lumenis Completes $15 Million Equity Financing From New and Existing Investors
8.7 Teva Announces Approval and Launch of Tri-Lo Sprintec Tablets
8.8 Ikaria to In-License BioLineRx’s BL-1040
8.9 Itamar Medical’s WatchPAT Ambulatory Device Receives CPT Code From the AMA

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Elbit Systems to Supply the Israeli Transportation Ministry With C-MUSIC
9.2 Waterfall Security Solutions and OSIsoft Corporation Sign a Partnership Agreement
9.3 Altair Semiconductor Announces LTE Baseband Processor - FourGee-3100
9.4 Genoa Pixcale Reduces Power Consumption by 40% for Smartphone Displays, Improves Color Quality
9.5 CopperGate Shipped Over 10 Million HomePNA Chips for Home Networking
9.6 Vringo & Innova Group Provide Video Ringtone Platform For Armenia’s Leading Mobile Operator
9.7 Magal Recently Awarded $ 8.5 Million in Orders
9.8 N-trig & Fujitsu Partner to Help Make Hands-On Computing Faster and More Fun
9.9 Panavision & Tower Announce World’s Fastest Single Port Re-Configurable Linear Image Sensors
9.10 Nova Revolutionizes Materials Characterization for Optical CD

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Prices Rise Following VAT Increase
10.2 Israel’s First Half Car Sales Down 24%

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11: In Depth

11.1 BAHRAIN: A Measured Approach
11.2 UAE: Food & Drink Report Q3 2009
11.3 EGYPT: Providing Security
11.4 TUNISIA: Statement of the IMF Mission on the 2009 Article IV Consultation
11.5 TURKEY: Economy Under Pressure
11.6 TURKEY: EU - Turkey politics - Good intentions?
11.7 TURKEY: Food & Drink Report Q3 2009
11.8 CYPRUS: 2009 Article IV Consultation, Concluding Statement of the IMF Mission
11.9 GREECE: Food & Drink Report Q3 2009

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Netanyahu Cancels Proposed VAT on Produce

On 6 July, Prime Minister Netanyahu responded to pressure from his coalition partners and decided to cancel a proposed imposition of value added tax on fruits and vegetables as part of the 2009-2010 state budget. The decision ended days of speculation ahead of key votes on budget clauses in the Knesset Finance Committee. At a Knesset press conference with Finance Minister Steinitz, Netanyahu announced he had decided to cancel cuts to income tax and a tax on companies, instead of levying the produce tax, which was expected to add $325m to the state. The pundits are now claiming that this move has put other clauses of the draft budget and Economic Arrangements Bill into serious question, as opposition and coalition lawmakers feel Netanyahu was susceptible to pressure. Hours after the announcement, Finance Committee chairman Gafni (United Torah Judaism) announced he was postponing the committee vote on the budget that had been scheduled for 7 July. Gafni said the delay came because of disagreement within the committee on a number of other key clauses. One of those clauses, the Drought Levy, was the subject of a committee hearing, during which Shas lawmakers expressed opposition to both the produce and the water measures. (JP06.07)

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1.2 Government Approves Bank of Israel Regulation Law

On 6 July, the Netanyahu government approved a draft law governing the Bank of Israel to create a monetary-policy committee to set interest rates. The proposal, which would replace a 1954 law, allows for the establishment of a six-member committee to set monetary policy and set up a system of appeal for wages, according to a draft circulated by the cabinet secretary. Until now, the bank's governor has had the sole authority to decide monetary policy. The move has not been without controversy, having been under discussion in committees since the beginning of the last decade. Proponents say it will strengthen the economic and financial stability of the economy and bring it in line with OECD standards. Some final details regarding wage policy have been left for discussion between Bank of Israel Governor Fischer and Finance Minister Steinitz. The Knesset must approve the proposal before it becomes law. The monetary-policy committee would include the central bank's governor, the deputy governor and another Bank of Israel employee, as well as three members of the public appointed by the cabinet, the draft law states. In the event of a tie, the governor would have the deciding vote. (Various06.07)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 TAT Technologies Completes Merger With Oklahoma’s Limco-Piedmont

TAT Technologies and Oklahoma’s Limco-Piedmont announced the completion of their merger pursuant to which TAT (which owned 61.8% of Limco's common stock) acquired all of the shares of Limco's common stock held by the public. Pursuant to the merger agreement, each share of Limco common stock held by the public was converted into one half of an ordinary share of TAT. 9,326,585 shares of Limco common stock were voted in favor of the merger (of which 8,964, 256 shares were owned by TAT), 838,450 shares were voted against the merger and 1,112,633 shares abstained. Upon the closing of the merger, Limco became a wholly-owned subsidiary of TAT. Limco common stock will no longer be traded on NASDAQ. In connection with the merger, TAT is issuing an aggregate of 2,520,372 ordinary shares to the former Limco shareholders representing 27.8% of the TAT ordinary shares now outstanding.

TAT Technologies (http://www.tat.co.il) provides a variety of services and products to the military and commercial aerospace and ground defense industries through its Gedera facility in Israel, as well as through its subsidiaries, Bental Industries Ltd., in Israel and Limco - Piedmont, Inc., in the U.S. TAT operates under four operational segments: (i) OEM of Heat Transfer products (ii) OEM of Electric Motion Systems (iii) MRO services; and (iv) parts services, each with the following characteristics. (TAT02.07)

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2.2 ICL & Volkswagen Have Reached an Agreement Concerning Dead Sea Magnesium

ICL, the Israel-based fertilizers and specialty chemicals company, and Volkswagen, the German-based automotive Group, have reached an agreement. Volkswagen is no longer a shareholder in Dead Sea Magnesium (DSM). DSM, a magnesium producing company at the Dead Sea is part of the chemical production complex owned and operated by ICL. DSM began operations in 1996, developing into the second largest western magnesium producer by 2008. Volkswagen stated that it ended its shareholding in DSM in order to concentrate on its core business. (ICL 02.07)

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2.3 Foreigners Buy $400 Million In Tel Aviv Shares In May

On 6 July, the Bank of Israel reported that foreigners invested $400 million in Tel Aviv-traded shares in May following two months of net sales. Most of the investment was in chemical and pharmaceutical shares. In April, foreigners sold $71m in shares and in March, they sold a net $129m. Foreign investment in Israel dropped to $8.4 billion last year from $14.7b the year before and a record $26.6b in 2006 as global economic growth slowed. Direct investment in Israeli companies fell 12% in May to $301m from a month earlier. Most of the investment was in technology companies, communications and pharmaceuticals, the central bank said. The figures include transactions made through the banking system only. Foreigners sold a net $280m in shares of Israeli companies traded in stock exchanges abroad in May. The sales followed net purchases of $24m in April and $264m in March. Foreigners sold a net $178m in Tel Aviv-traded government bonds in May, most of which were non-indexed Shahar bonds, after investing a net $37m in the previous two months. (BoI06.07)

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2.4 ClickSoftware Announces Listing on the NASDAQ Global Select Market

ClickSoftware Technologies announced that effective July 1, 2009, the Company's ordinary shares will begin trading on the NASDAQ Global Select Market. The Company's symbol (CKSW) will remain the same. The NASDAQ Global Select Market states that it has the highest initial listing standards of any exchange in the world with measures including market value, liquidity and earnings requirements. Previously, the Company's shares were listed on the NASDAQ Capital Market. ClickSoftware (http://www.clicksoftware.com) is the leading provider of mobile workforce management and service optimization solutions that create business value for service operations through higher levels of productivity, customer satisfaction and cost effectiveness. Combining educational, implementation and support services with best practices and its industry leading solutions, ClickSoftware drives service decision making across all levels of the organization. From proactive customer demand forecasting and capacity planning to real-time decision-making, incorporating scheduling, mobility and location based services, ClickSoftware helps service organizations get the most out of their resources. (ClickSoftware30.06)

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2.5 TAT Technologies Reports Transfer of Listing to the NASDAQ Global Market

TAT Technologies reported that effective June 24, 2009, the company's ordinary shares will begin trading on the NASDAQ Global Market. The company's symbol (TATTF) will remain the same. Gedera’s TAT (http://www.tat.co.il) provides a variety of services and products to the military and commercial aerospace and ground defense industries through its Gedera facility in Israel, as well as through its subsidiaries, Bental Industries Ltd., or Bental, in Israel and Limco in the U.S. TAT operates under four operational segments: (i) OEM of Heat Transfer products (ii) OEM of Electric Motion Systems (iii) MRO services; and (iv) parts services. (TAT Technologies 23.06)

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2.6 Zion Oil & Gas Rights Offering Fully Subscribed - $21 Million Raised

Zion Oil & Gas announced that on June 24, 2009 it completed its previously announced rights offering. The outcome of the rights offering, as of the close of business on June 24, 2009, indicates that (including over-subscription) the rights offering has been over-subscribed. Holders of record of Zion's common stock, as of the close of business on May 4, 2009, were given non-transferable subscription rights to purchase up to 4.2 million shares of common stock at a subscription price of $5.00 per share. The total available subscription of 4.2 million shares, for gross proceeds of $21.0 million, will be accepted (including almost all of the over-subscription) and refunds for any unfilled over-subscriptions will be refunded as soon as possible. Zion is currently drilling its Ma’anit-Rehoboth #2 well to the Triassic Formation (down to a depth of 15,400 feet) and then, it is planned, to the Permian Formation (down to a depth below 18,000 feet). Today, the drilling has reached a depth of approximately 15,750 feet. Zion Oil & Gas (http://www.zionoil.com), a Delaware corporation, explores for oil and gas in Israel in areas located on-shore between Haifa and Tel Aviv. It currently holds two petroleum exploration licenses, the Joseph and the Asher-Menashe Licenses, between Netanya, in the south, and Haifa, in the north, covering a total of approximately 162,000 acres and the Issachar-Zebulun Permit Area, adjacent to and to the east of Zion’s Asher-Menashe license area, covering approximately 165,000 acres. Zion’s total petroleum exploration rights area is approximately 327,000 acres. (Zion25.06)

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2.7 US Airways Debuts Philadelphia – Tel Aviv Service

On 1 July US Airways debuted a new, daily nonstop flying to Tel Aviv from its international gateway at Philadelphia International Airport, linking the two sister cities and bolstering travel options between Israel and the United States. New Airbus A330-200 aircraft with seating for 20 in Envoy—US Airways’ trans-Atlantic business class—and 238 in the main cabin will operate the year-round flying. The route will also be the longest in the US Airways system at more than 5,700 miles. Tel Aviv is the third of three new trans-Atlantic routes from Philadelphia in 2009. US Airways operates approximately 3,200 flights per day and serves more than 200 communities in the U.S., Canada, Europe, the Caribbean and Latin America. The airline employs more than 33,000 aviation professionals worldwide and is a member of the Star Alliance network, which offers our customers more than 16,500 daily flights to 912 destinations in 159 countries worldwide. (US Airways01.07)

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2.8 RADVISION Receives 2008 Communications Solutions Product of the Year Award

RADVISION announced that Technology Marketing Corporation (TMC) has named RADVISION’s SCOPIA Conferencing Solution as a recipient of a 2008 Communications Solutions Product of the Year Award. Easily connecting high definition desktop, room and telepresence systems with standard definition endpoints, the SCOPIA Conferencing Solution is a comprehensive communications solution that delivers a very cost-effective, high quality video experience – anywhere and anytime. Users at all levels of the organization are now able to enjoy high definition video connectivity from video conference rooms, desktops and on the road with partners, colleagues and suppliers. RADVISION’s SCOPIA Conferencing Solution offers the industry’s most technologically advanced multipoint infrastructure for real-time conferencing over any network, protocol and device. The SCOPIA Conferencing Solution was recently enhanced with the introduction of RADVISION’s SCOPIA Elite 5000 MCU and the comprehensive range of SCOPIA V7.0 high definition capabilities. SCOPIA Elite, RADVISION’s next generation solution for high definition multiparty conferencing, is the industry’s first standards-based MCU to deliver the combination of 1080p, 720p and H.264 Scalable Video Coding (SVC) for comprehensive support from telepresence to desktop and mobile applications. H.264 Scalable Video Coding provides a high degree of error resiliency to deliver a quality conferencing experience over network paths that are prone to errors, such as the public internet.

Tel Aviv’s RADVISION (http://www.radvision.com) is the industry’s leading provider of market-proven products and technologies for unified visual communications over IP, 3G and IMS networks. With its complete set of standards-based video networking infrastructure and developer toolkits for voice, video, data and wireless communications, RADVISION is driving the unified communications evolution by combining the power of video, voice, data and wireless – for high definition video conferencing systems, innovative converged mobile services, and highly scalable video-enabled desktop platforms on IP, 3G and emerging next-generation IMS networks. (RADVISION01.07)

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2.9 Volas Signs With MLiven to Distribute Redboss Games Through ICQ in Israel

Volas Entertainment, part of Logia Group and a provider of mobile video solutions and value added managed services, have recently signed an agreement with leading mobile games developer Redboss Games, part of MLiven, to distribute and resell Redboss mobile games in Israel. The new partnership will create an Israeli presence for MLiven's Redboss Games via ICQ's gaming site (http://mobilegames.icq.com) using a mobile billing solution provided by Volas. ICQ has 1.2 million users in Israel, and with the ICQ Mobile Games Portal users can enjoy games from the ICQ Game Center while on the go. Following the new partnership between Volas and MLiven, Israeli gamers will now be able to visit the site and download some of Redboss most popular games through any of Israel's enabled mobile operators. Some of the highly popular games currently available for download from the site include ICQ games "Balls 'n' Walls", "Zoopaloola", "Slide-a-Lama Deluxe", "Rock Paper Scissors", and "Warsheep", and Redboss provided games "S.T.A.L.K.E.R Mobile", "3D Towers of Maya", "Townsmen 4" and "Park or Die". Herzliya’s ICQ is a leading instant messaging service provider with a global online communications community. The company's robust instant messaging software, enhanced communications features and dynamic community are available in 17 languages free of charge at http://www.ICQ.com. (ICQ24.06)

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2.10 Israelis Increasingly Attracted to Private Label Products

Israelis are buying more private label products at supermarkets as a way of saving money, as in-house brands are 20 to 30% less expensive. A survey carried out by Mutagim Marketing polled 500 Israelis who were asked about their brand preferences at the supermarket. Two-thirds of the Orthodox shoppers said they buy the private label brands while 34% of those who consider themselves secular chose the supermarket brands. Almost half of the sample population said there was no difference between the private label and the better known brands while 14% thought the private brand products were better. Some 15% said the price was more important than the quality. Most of the respondents mentioned the savings - anywhere from ten to hundreds of shekels. (KT29.06)

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2.11 Formula Announces Filing of Draft Prospectus in Israel

Formula Systems has filed a draft prospectus with the Israeli Securities Authority and the Tel Aviv Stock Exchange relating to a proposed public offering of debentures in Israel. The Company currently intends to use the net proceeds from the proposed offering for general corporate purposes, which may include future acquisitions and financing its operating and investment activity. Herzliya’s Formula Systems (http://www.formulasystems.com) is a global information technology company principally engaged, through its subsidiaries and affiliates, in providing software consulting services, developing proprietary software products and providing computer-based business solutions. (Formula 06.07)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Jordanian Investors Launch Biotechnology Company

A Jordanian biotechnology company, launched on 6 July, is considered one of the first specialized investments in the Hashemite Kingdom. Capitalized at around JD700,000, the Jordan Company for Antibody Production –MONOJO is a public shareholding company comprising the Higher Council for Science and Technology and the private sector, through the participation of several pharmaceutical investors. The firm aims at transforming the output of scientific research into advanced technology, in cooperation with public and private universities. In addition to biotech products, the company will provide biotech training courses for students and technicians. MONOJO began as a small enterprise and grew through cooperating with international institutes and universities such as Cambridge University. (Petra06.07)

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3.2 Porsche Set To Offer Volkswagen Stake To Qatar

Porsche is advancing towards a deal with Qatar to give the Gulf state a shareholding in Volkswagen, a compromise that will clear the way for the car makers to merge, according to people involved in the talks. Porsche racked up €9 billion ($12.7 billion) of debt trying to swallow its much bigger rival Volkswagen before the financial crisis turned the tables and threatened to unravel the deal. The luxury carmaker then entered talks with Qatar about selling a stake in Porsche. However, with Volkswagen now set to dominate the marriage to its debt-hobbled partner, Qatar's interest has shifted to Volkswagen. Merger talks are on hold until Qatar decides whether or not to invest. In a bid to save the merger, Porsche is now prepared to surrender its right to buy about a fifth of Volkswagen's voting shares, said sources with direct knowledge of the matter. Porsche already owns roughly 50% of VW stock. A planned capital increase to open its doors to Qatar's sovereign wealth fund, the Qatar Investment Authority, had been expected to raise more than €4 billion. The German state can veto Volkswagen management with its 20% blocking vote now and would be opposed to a deal with Qatar that would reduce its influence. (BI-ME 24.06)

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3.3 Eaton Expands Middle East Electrical Business

Cleveland, Ohio’s diversified industrial manufacturer Eaton Corporation has entered into a joint venture in the United Arab Emirates. The joint venture will operate through SEG Middle East Power Solutions & Switchboard Manufacture, a manufacturer of low voltage switchboards and control panel assemblies for use in the Middle East power generation and industrial markets. Terms of the deal were not disclosed. This joint venture provides Eaton with an established operation that has built a successful business supplying switchboard and control solutions in the Persian Gulf. Eaton is a global technology leader in electrical components and systems for power quality, distribution and control; hydraulics components, systems and services for industrial and mobile equipment; aerospace fuel, hydraulics and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems for performance, fuel economy and safety. (Eaton 06.07)

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3.4 Emaar Closes Algeria Office Due To Lack of Progress

Dubai-based Emaar Properties has closed its office in Algeria due to a lack of progress on its projects in the North African country. Emaar created designs for key developments in Algeria and the master plans were submitted to the authorities for necessary approval. Due to a lack of progress beyond the company's control, the local office was subsequently closed. In March 2008, Emaar and the Algerian government signed a protocol accord on the development of $20b worth of projects, the biggest ever property development in the country of 33 million people. Some major North African real estate projects have been delayed or quietly abandoned as firms hit by the global downturn retreat from a frontier market dogged by an opaque business environment and heavy bureaucracy. Emaar did not state whether all of its projects in Algeria had now been cancelled, but said it was open to investments in the country in line with its long term strategy of developing its projects in international markets. (BI-ME 04.07)

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3.5 Saudi College Teaches Women How To Sell Underwear

On 23 June, a group of 26 women graduated from Jeddah’s liberal Dar Al Hekma Women’s College, after attending a ten day course on how to sell women’s underwear. Activist Reem Assad, a lecturer in banking and finance at the college, held the course as part of her campaign to staff lingerie stores with female tellers. The campaign, which began on social networking site Facebook, has been covered by several Saudi newspapers. Nearly all women’s underwear stores in the Kingdom are staffed with men, causing much embarrassment for customers seeking advice on which size and color to choose. The shops are banned from having fitting rooms. A 2006 Saudi law ruled that women are allowed to work in any shop selling women’s items, including underwear and other types of clothing, but this has not been implemented. Women entering the workforce is still frowned upon by conservative Saudis. High unemployment among Saudi men has added to some retailers’ reluctance to hire female staff. (Various24.06)

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3.6 Joint Venture Positions UPS for Growth in Middle East& Turkey

UPS announced a new joint venture headquartered in Dubai to coordinate management and growth of UPS express package, freight forwarding and contract logistics services across the Middle East, Turkey and portions of Central Asia. UPS will have a majority stake in the new joint venture that will acquire the small package operations of Unsped Paket Servisi San ve Ticaret A.S., its existing service agent in Turkey. Specific terms of the deal were not disclosed. Leadership of the new venture will come from Unsped CEO Haluk Undeger, who has grown the operation in Turkey to be UPS’s largest service contractor. Revenues for Unsped have increased over 18% on a compounded annual growth rate for the past three years. The nearly 2,500 employees of Unsped will continue to be managed by the Turkish leadership team and become part of the joint venture. Unsped systems in Turkey already link with UPS back-end processing to provide global visibility for customers. Increased UPS attention in this larger region also will further UPS’s opportunity with the growing oil and natural gas industry sector. This joint venture follows the announcement earlier this year of expanded UPS domestic express small package pickup and delivery services offered in Kazakhstan, Pakistan, Saudi Arabia and United Arab Emirates (UAE) with a single technology platform. Shipping processes and information visibility for all domestic and international package delivery services in these countries has been streamlined. (UPS26.06)

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3.7 Digital Ally Expands International Market Presence with Initial Orders From Turkey

Overland Park, Kansas’ Digital Ally, which develops, manufactures and markets advanced video surveillance products for law enforcement, homeland security and commercial security applications, today announced that it has received initial orders from law enforcement agencies in Turkey. Through its sales representative in Turkey, Mesan Inc., Digital Ally has been awarded an initial contract for 50 DVM-500 Plus In-Car Rearview Mirror Systems from the Turkish Gendarmerie, a branch of the Ministry of Interior that is responsible for the maintenance of public order in areas that fall outside the jurisdiction of police forces. The Gendarmerie, an armed security and law enforcement agency that is military in nature, is also responsible for internal security and general border control. The DVM-500 Plus systems will be placed into service in the Istanbul district. (Digital Ally 01.07)

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3.8 CDTECH Gasoline Desulfurization Unit Starts up in Greece

Pasadena, Texas’ CDTECH announced that Hellenic Petroleum has successfully started a new 27,000 bpd fluid catalytic cracking gasoline desulfurization unit in Greece. The unit utilizes CDTECH technologies to produce ultra-low sulfur gasoline, which reduces vehicle emissions with minimum octane loss. In addition, this unit has the capability to produce a low sulfur diesel stream, which can be blended into the diesel pool. CDTECH’s CDHydro/CDHDS technology is unique in that it combines the reactor and distillation process into one piece of equipment resulting in lower investment and operating costs. Catalytic Distillation Technologies (CDTECH) is a partnership between Lummus Technology and Chemical Research and Licensing, a part of CRI/Criterion, the global catalyst technology company of Royal Dutch Shell. CDTECH develops and licenses advanced refining and petrochemical processes based upon its proprietary catalytic distillation technology. (CDTECH 25.06)

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4: ISRAEL MACRO-DEVELOPMENTS

4.1 World Bank to Fund Dead Sea-Red Sea Canal Test Project

The World Bank has agreed to fund a pilot program of what could turn out to be one of the most ambitious water projects in the world – the Dead Sea Canal Project, which would see the construction of waterworks 112 miles in length, connecting the Red Sea and Dead Sea. The project would help replenish the Dead Sea, which is in danger of major ecological damage, according to many scientists, as well as provide a new source of fresh water for the region, with large desalination plants treating water that would be provided for Israel, Jordan and the Palestinian areas. The deal for the pilot project, which would see the construction of a pipeline between the two bodies of water, was signed on 26 June between Regional Development Minister Shalom and World Bank President Zoellick. The pipeline, to be built by 2011, will function as a study to decide the feasibility of the project.

Besides helping to replenish the Dead Sea, the project could also ease energy costs for participants. The Dead Sea, the lowest spot on earth, is 400 meters below the Red Sea, and the drop in altitude as the water flows could be used to generate hydroelectric power. The water would then be treated in a companion desalination plant, making it fit for agricultural or industrial use and easing the strain on fresh water resources in the region. Eventually, the full project could see as much as 1.8 billion cubic meters of water pumped through the system. One billion cubic meters would be pumped into the Dead Sea, and the rest would be treated at a desalination plant, to be split between Israel, Jordan and the PA. According to the World Bank, the desalination plant attached to the project would be the biggest in the world, with a final bill of around $7 billion. The pilot project, which the World Bank has agreed to fund, will cost around $15 million. (IsraelNN26.06)

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4.2 Deutsche Bank Says Israel's GDP to Rise 2% in 2010

Deutsche Bank analysts have revised their global economic growth forecast upward, for the first time since the beginning of the economic crisis, and now see global economic growth of 2.5% in 2010, compared with their previous estimate of 2% for that year. As part of the global trend, the analysts see Israel's GDP growing 2% in 2010, after falling 1.1% in 2009. They expect Israel's inflation, as measured by the Consumer Price Index (CPI), rise 2.1% in 2009, and at a slower rate of 1.9% in 2010. In contrast, the IMF sees the Israeli economy growing by just 0.3% in 2010, and the Bank of Israel's 2010 forecast is for 1% economic growth. Deutsche Bank says its higher global growth forecast is entirely based on stronger expected growth in industrial countries with growth next year now forecast to reach 1% compared to its previous call of 0.3%. The bank sees two factors pushing for stronger economic growth - a better outlook for investment growth (which they increase to 2% from 0.1% in their previous estimate ), and better export growth (up to 4.1% from -2.2% before). Deutsche Bank says, "The improved prospects for exports and investment reflect greater confidence in the effectiveness of authorities’ efforts to restore stability in the financial sector." (Globes 30.06)

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4.3 Committee Approves Jerusalem Waldorf Astoria

After ten years of discussions, the Jerusalem Waldorf Astoria Hotel project is getting underway. The Jerusalem Regional Planning & Building Committee has authorized the Jerusalem municipality to issue building permits. The project is being constructed by IPC Jerusalem, owned by Paul and Joseph Reichmann, at an investment of $107 million. The new hotel is on the site of the Palace Hotel and the historic customs house between Agron Street and King David Street, close to the Alrov Mamilla Avenue shopping and luxury residence complex, and the Old City of Jerusalem.. The project encountered many objections that were rejected by the local planning committee at the beginning of the year. The hotel will have 180 rooms and 40 suites. An eight-story residential building with 28 units will be constructed next to it. The site is listed for preservation, and the local committee instructed the developers at the beginning of the year to design the facade of the hotel in keeping with its listed status. Waldorf Astoria is a brand of Hilton Hotels Corporation. (Globes 01.07)

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4.4 Manitoba Minister of Water Announces Joint Israeli-Canadian Water Management Research Fund

Manitoba's Minister of Water Stewardship Melnick announced the establishment of a grant fund and the awarding of a research grant for a joint Israel-Manitoba fund devoted to research in water resources management. The announcement was made at an event in Canada on 4 June. A grant of $100,000 will be given for research in water resources management within the framework of joint research between Israeli, Canadian and Mexican researchers. The project will provide an internet forum for research participants worldwide whose work focuses on water resources management in extensive agricultural areas and will enable the establishment of an international database that will make research information available to other policy-makers and researchers. Furthermore, the government of Manitoba also awarded a grant fund of $50,000, with the grants intended for Canadian students who will come to Israel to study and conduct research about information that has accumulated in Israel in the field of water management. During the event it was reported that KKL-JNF will conduct the Second Water Convention in Israel in January 2010 which will focus on limnology, wetlands and water conservation with about 25 researchers, from Israel and Manitoba who specialize in water management, amongst the participants. (JP14.06)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Global HNWI Wealth Drops to $1.4 Trillion in Middle East

Following a year-long period of exceptional volatility in 2008, the world's population of high net worth individuals (HNWIs ) was down 14.9% from the year before and the population of ultra high net worth individuals (Ultra-HNWIs ) fell 24.6%, according to the 13th annual World Wealth Report, released by Merrill Lynch Global Wealth Management and Capgemini.

In the Middle East, total HNWI wealth declined 16.2% to $1.4 trillion and the HNWI population declined 5.9% to 373,600. This was the second slowest rate of decline after Latin America which declined 6.0% from the previous year. Ultra-HNWIs suffered more extensive losses in financial wealth than the HNWI population as a whole. Consistent with the drop in the Ultra-HNWI population, the group's wealth decreased 23.9%. In the UAE and Saudi Arabia, the HNWI population fell, but at a rate lower than the global average. The UAE had 12.7% fewer HNWIs in 2008 than in the previous year, down to a total of just over 67,000. In Saudi Arabia, there were over 91,000 HNWI’s, down 10.9% from the previous year. Bahrain’s population of HNWIs was 5,000 in 2008, down 19.5% from the previous year. Inhibitors of wealth in each of the Persian Gulf states was a reduction in total market capitalization and the dramatic decline in Gulf real estate capital values and rents. (BI-ME 24.06)

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5.2 WTO Urges Further Trade Reforms For Morocco To Sustain Economic Growth

The economic and trade reforms pursued by Morocco since the WTO's previous Trade Policy Review in 2003 have contributed to the positive overall performance of its economy, including its growing diversification. With an annual real GDP growth rate of 4.5% on average during the period 2002-2007, and 5.8% in 2008, nonetheless, the economy is beginning to feel the negative impact of the current economic crisis, according to a WTO Secretariat report on the trade policies and practices of Morocco. The WTO report, along with a policy statement by the government, will be the basis for the Trade Policy Review (TPR) by the Trade Policy Review Body of the World Trade Organization.

Morocco has taken steps to liberalize its economic sectors, in particular key services. It has reduced the level of its average tariff protection by 13.2%age points to 20.2%. However, Morocco still imposes some tariffs at rates higher than the bound levels, and maintains a VAT regime that does not respect the principle of national treatment. The WTO report notes that a taxation reform, including the simplification of the tariff structure through the elimination of variable duties, and a reduction of the number and levels of rates, particularly in the agricultural sector, would help Morocco to fully honor its multilateral commitments and would further simplify its trade regime. Improved commitments under the GATS would enable Morocco to consolidate its reforms in areas such as tourism and telecommunications, where its commitments fall short of the liberalization efforts already achieved. Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals. Significant developments that may have an impact on the global trading system are also monitored. (WTO24.06)

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5.3 Arab Ministers Back Jordan Plan To Facilitate Trade

Transport ministers and representatives from 12 Arab countries on 2 July approved a Jordanian plan to facilitate inter-Arab trade and formed a technical committee to study details of the blueprint. During a one-day consultative meeting in Amman, the Arab ministers discussed the proposal and approved it as an advanced step before making new moves towards cooperation in transportation sector. The ministers selected Jordan to head the committee, which will include seven members: Saudi Arabia, Syria, the United Arab Emirates, Palestinian Authority, Tunisia, Oman and Kuwait in addition to the general assembly of the Arab League. Jordan and the United Nations Economic and Social Commission for Western Asia prepared the proposal, which is considered the first practical move by an Arab country towards better joint Arab action. They discussed several issues, including custom procedures between Arab countries, visa and movement of people, goods and services, in addition to the establishment of a railway network to connect regional markets. They also discussed an Arab customs union. (JT03.07)

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5.4 Two Consortia Interested In New Port Of Aqaba Project

Aqaba Development Corporation (ADC) formally closed the tender submission process for the New Port of Aqaba project, company CEO Fakhoury said on 30 June. He added that two proposals were received from highly reputable international consortia, with experienced members from over 10 different countries. Fakhoury said "the receipt of the proposals from such highly qualified consortia is evidence that the project strategy has worked to date. We will move into the next stage of the process, which is to undertake a comprehensive evaluation of the proposals against the detailed technical and financial requirements that were defined in the Request for Proposals document.” The company, he added, in cooperation with its technical, environmental, and financial advisors would announce the Preferred Bidder within a month. The ADC was launched at the beginning of 2004 by the Aqaba Special Economic Zone Authority (ASEZA) and the Government of Jordan, with the mandate to own and maintain the development and management rights for the strategic assets in the Aqaba Special Economic Zone (ASEZ), making it the development partner for all investors interested in taking advantage of the endless opportunities that ASEZ has to offer. (Petra30.06)

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5.5 Heatwave Places Record Strain On Jordan’s Power Supply

On 1 July, Jordan’s power grid registered the highest load ever, 2,200 MW, blamed on the scorching temperatures which reached a record 38°C in Amman. The load on electric power generators increased by around 100MW in comparison with previous days, with demand rising by 5-6% compared to the same period last year, the National Electric Power Company Director General said. A hot and dry air mass, which originated in the Arabian Peninsula, pushed temperatures into the upper 30s as mercury levels rose above their annual average during this time of year by five degrees, according to meteorologists. Pressure on electric power usually runs high during summer as expatriates return home for vacation while people rely on fans and air-conditioning systems for cooling. The hot weather was also good news for shop owners who reported high turnout for water, cold drinks and ice cream. (JT02.07)

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5.6 Iraq Historic Oil Auction Ends With Just One Deal

On 30 June, Iraq's Oil Ministry ended its first auction of major oil and gas field contracts since the US led liberation after sealing just one deal, with a BP-led group for its biggest field, Rumaila. The ministry received seven revised bids from oil companies and sent them to the cabinet for consideration without making them public. The auction of deals in six oilfields and two gas fields revealed a deep gulf between the money that Baghdad, desperate for cash to rebuild after six years of war, was willing to pay, and the fees that international oil firms wanted. (Various30.06)

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5.7 GCC Trade With Japan Increases By 43%

Trade between the Gulf Cooperation Council (GCC) and Japan grew by 43% in 2008, to $172b, according to latest figures from the Dubai office of the Japan External Trade Organization (Jetro). The six-nation GCC's exports to Japan jumped 46.3% last year, to $144.2b, while imports from Japan increased 28.4% to $27.6b. The UAE is the largest export market for Japan among the GCC states, with a share of 39.2% of the GCC market in 2008. Japan's exports to the UAE grew by 34.0%, with exports of transport equipment soaring 40.6% to $5.2b. Commodities, primarily crude oil, were the main GCC export product to Japan, meeting 75% of the Asian nation's crude oil needs. The value of crude oil imports by Japan jumped by nearly 50% to $114.9b compared to $76.8b in 2007. Japan imported 1,125.7 million barrels of crude oil from the GCC in 2008, at an average price of $102.04 per barrel. Imports of petroleum gases and other gaseous hydrocarbons increased by a similar proportion to $20.6b in 2008. The only other major import from the GCC was semi-finished aluminum, mainly from the UAE and Bahrain, worth about $430 million. Japanese exports to the GCC were dominated by machinery and equipment which constituted over 80% of exports. These jumped from $17b in 2007 to $22.5b in 2008, an increase of 32.8%. The largest single item among general machinery was mechanical shovels that grew by 93.9% to $586 million, from $302 million the previous year. However, the EU is still the largest trading partner of the GCC. (GN01.07)

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5.8 Kuwait MPs Approve Government’s $42 Billion Budget

On 2 July, Kuwait's parliament approved the 2009/10 state budget which had been passed through a decree law after the legislature was dissolved in March. The lawmakers, elected in May, kept expenditure unchanged at $42.18b. OPEC member Kuwait has assumed its crude oil, the country's main revenue earner, would fetch $35 a barrel in this year's budget, down from $50 a barrel last year. But current oil prices are more than enough to meet Kuwait's budgetary needs and would generate a surplus this year, Oil Minister Ahmad al-Abdullah al-Sabah said earlier. The world's fourth-largest oil exporter relies on oil for 95% of state revenues. The ruler of the OPEC oil exporting nation, who dissolved the previous house in March after some lawmakers sought to question the prime minister, has reappointed his nephew Sheikh Nasser Mohammad Al Ahmad Al Sabah to head the new cabinet. (AB03.07)

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5.9 UAE Wins International Renewable Energy Agency Headquarters

Abu Dhabi, the capital of the United Arab Emirates, has been selected to house the secretariat of the International Renewable Energy Agency (IRENA), marking the first time an international organization has chosen a Middle East city for its headquarters. IRENA will be located in Abu Dhabi's Masdar City, the world's first carbon-neutral, zero-waste city powered entirely by renewable energy. In securing the location for IRENA the UAE faced stiff competition from Germany, Austria and Denmark, all recognized leaders in renewable energy. Since the establishment of IRENA in January, the candidate nations have been locked in a hard-fought competition. However, the UAE's ability to serve as a bridge between the developing and developed world; the allure of the world's first carbon neutral city; and a generous commitment of financial and political support won over a significant following among member states of the new organization. The UAE's bid for IRENA's headquarters is the first time the country has engaged in such an ambitious endeavor on the international stage. As part of its commitment to IRENA, the UAE offered to support the agency with a grant of $136 million over a six year period, while also covering all operational costs in perpetuity. Moreover, the Abu Dhabi Fund for Development created a special endowment of up to US $50 million annually to be used for loans in support of renewable energy projects in the developing world. (UAE29.06)

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5.10 Dubai Inflation Slows To 5.4%

Dubai's inflation rate slowed to 5.4% in the first five months of 2009, compared to 8.7% a year earlier, the head of Dubai Statistics Center (DCS) was quoted as saying on 4 July. Rental prices for residential units had risen 3.2% in January to May this year, compared to a 5.4% increase in the same period in 2008. Rents in Dubai, one of seven members of the UAE federation, have at least doubled during a building boom that came to an end late last year after the financial crisis and oil prices dropped off peaks of almost $150 a barrel last July. In June, the UAE's central bank governor said a rapid price fall in the country, which saw inflation drop to 1.9% in April, would not lead to deflation. (Various04.07)

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5.11 Dubai Set To Investigate Bid for 2020 Olympics

A top level group including government officials has been set up to explore the possibility of Dubai hosting the Olympic Games in 2020, Dubai's ruler announced on 28 June. Sheikh Mohammed bin Rashid al Maktoum, Ruler of Dubai and UAE prime minister and vice president, launched ‘Dubai 2020’, a new initiative that will "focus a number of sectors within the UAE around the common goal of furthering social and economic progress for the region". Central to this project, a working group of government and private sector representatives will explore the potential of Dubai hosting the World Expo and the Olympic and Paralympic Games in 2020. The working group will be chaired by Sheikh Hamdan bin Mohammed bin Rashid al Maktoum, Crown Prince of Dubai, while H.H. Sheikh Ahmad bin Mohammed bin Rashid Al Maktoum will be the vice chairman. A feasibility study will be undertaken before further decisions are taken regarding making any formal bids to the International Olympic Committee and the Bureau of International Expositions. (AB28.06)

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5.12 Saudi Arabia Economy to Shrink 1.2%

The Saudi economy is forecast to shrink 1.2% this year, despite a stronger market for oil and expanded government investment. The recovery of oil prices to above $60 a barrel and a forecast 24% increase in government spending is not enough to offset a sharp slowdown in private sector activity, Riyadh-based Samba Bank said on 29 June. Public sector investment has been vigorous in both the oil and non-oil sectors; private investment, in contrast, remains weak, hemmed in by extremely tight credit conditions and poor export prospects, Samba said. It forecast GDP would contract by 1.2% after 4.5% growth last year. Growth would resume next year hitting 4.4%, the bank predicted. It pointed to a continuing weakness in markets for petrochemicals and refined products, the country's leading exports after oil and natural gas, with prices for polyethylene still at half the highs of mid-2008, for example. Multi-billion-dollar refinery and petrochemical projects expected to carry economic growth have been delayed, Samba said, including the Jubail refinery planned by state oil giant Aramco and France's Total. Samba also pointed to a large oversupply in the commercial real estate market and slow investment in the government's heavily promoted new economic cities, including the ambitious King Abdullah Economic City north of Jeddah on the Red Sea. (TradeArabia 30.06)

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5.13 Saudi ICT Spending Seen to Hit $733 Million by 2011

Saudi Arabia’s information and communications technology (ICT) expenditure is projected to total $733 million from 2009 until 2011, according to recent reports. The total investment outlay, as revealed by the same report, stipulates that Saudi Arabia will spend $185.7 million this year. The forecast also indicates that collectively, mixed-use civil projects in the GCC countries will account for about $2.95 billion in communications hardware spending during the three-year period, while residential and commercial developments are expected to account for $674 million and $577 million, respectively. Driven by its aims to support to the ongoing technological revolution in Saudi Arabia, Netgear, a worldwide provider of technologically advanced and branded networking and storage products, is offering its best-of-breed products for the benefit of government departments, small and medium businesses (SMBs), as well as home users. One of the company’s latest products is the ReadyNAS NVX, a 4-bay desktop network-attached storage solution designed for SMBs, which was launched in the Middle East earlier this year. (TradeArabia 29.06)

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5.14 Hilton Garden Inn Blossoms in Saudi Arabia

Hilton Hotels Corporation opened its first Hilton Garden Inn property in the Middle East & Africa with the Hilton Garden Inn Riyadh Olaya in the Kingdom of Saudi Arabia. Hilton Garden Inn has made its foray into the Middle East in tandem with the meetings sector growth in demand. The brand, which has more than 450 hotels spread across the US, Europe and Central America, predominantly targets the fast-growing business tourism segment. Located amidst the bustle of Olaya Street, in the heart of Riyadh’s business district, the newly opened Hilton Garden Inn Riyadh Olaya features 180 guest rooms and suites equipped with a range of unique lifestyle amenities. Hilton Garden Inn is the award-winning, mid-priced brand that continually strives to ensure today’s busy travelers have everything they need to be most productive on the road — from complimentary wired and Wi-Fi internet access in all guestrooms and PrintSpots mobile printing to the hotel’s complimentary 24-hour business centre to one of the most comfortable beds with the Garden Sleep System. (Hilton02.07)

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5.15 Canada Eyes Higher Cereals Exports to Saudi

Canada hopes to increase its cereals exports to Saudi Arabia by 40% this year, the Canadian trade minister Day announced. Most of the cereals exports would be barley, Day said, speaking to reporters after meeting his Saudi counterpart in the Red Sea port city of Jeddah. Canada exported barley worth $225 million to Saudi Arabia in 2008, according to official Canadian data. Cereals make up 22% of total Canadian exports to Saudi Arabia. Saudi Arabia has said it is in talks with several countries such as Sudan, Egypt, Ukraine, Pakistan and Turkey to allow Saudi companies to establish projects to help supply it with food such as wheat, barley, soya beans or rice. (Reuters28.06)

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5.16 Egyptian Mobile Subscribers Number Over 44 Million

The number of mobile subscribers in Egypt reached 44.6 million by the end of the first quarter of fiscal year 2009, compared to 32.2 millions in December 2009, according to a recent report by the National Telecom Regulatory Authority (NTRA). Mobinil continues to be the largest mobile operator in terms of subscribers with a 47.48% market shares followed by Vodafone Egypt, which has 18.9 million subscribers displaying a market share of 42.36%. Etisalat Misr has 4.5 million subscribers which is equivalent to a market share of almost 10%. (DNE29.06)

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5.17 Egypt Wind Farm Bid Attracts 72 International Firms

A total of 72 international companies have expressed interested in a tender to build a 250-megawatt wind farm on Egypt's east coast. Egypt announced the tender for the wind farm on a build-operate-own (BOO) basis on May 9. Firms were invited to submit qualification documents by July 21 for short-listing. The project developer would be required to design, finance, construct, own and operate the power plant for 20 to 25 years, and would sell the power produced during that period to the Egyptian Electricity Transmission Company. Egypt, which is a gas and oil producer, has been developing wind power along its Red Sea coast in its east. It aims to generate 12% of its power from wind farms and a total of 20% from renewable sources by 2020. Officials say Egypt's combined oil and gas reserves will last the most populous Arab country for roughly three more decades, pushing the drive for more reliance on renewable energy. Egypt already has farms at Zafarana and Hurghada on the Red Sea coast. It has also said it wants to build several civilian nuclear power stations to help avoid an energy crunch. (Reuters01.07)

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5.18 Russia Eyes Nuclear Power Deals in Egypt

Russia wants to help develop nuclear power plants in Egypt and Nigeria and take part in uranium exploration there, the head of Russia's nuclear energy agency Rosatom said on 24 June. He said Egypt planned two to four reactors at its first nuclear power station and that Russia would prepare a tender proposal by the end of 2010. The financing of such projects generally involved a deal on export credits, and said Russia was interested in Egypt's uranium reserves. The starting price for a reactor was generally around €2.5 billion ($3.5 billion). Egypt said two years ago it would build several nuclear power stations to meet its growing energy needs and has had nuclear cooperation offers from China, Russia, France and Kazakhstan. Recently, Australia's WorleyParsons signed a nuclear power pact consultancy contract with Egypt worth around $160 million. (DNE25.06)

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5.19 Pakistan Imposes Carbon Tax To Raise Funds

Pakistan imposed a carbon tax and raised fuel prices by 12% in what Islamabad says is a reflection of the recovery in global prices for crude oil. Islamabad said the 12% increase reflected the rise in the price of a barrel of crude oil, which has nearly doubled since falling below $40 in December. The move sparked criticism from the Pakistani people in the wake of a $7.6b loan from the International Monetary Fund to boost the national economy. The IMF linked the loans to Pakistan removing subsidies on energy. The price increase follows a decision to impose a carbon tax on fuels, which could bring as much as $1.5b to government coffers in the current fiscal year. The abolished energy subsidy would have brought $1.6b to Islamabad. Analysts say the moves by Islamabad to shore up the economy will do little to stave off inflation, though the Pakistani government predicts inflation will dip below 10% in the new fiscal year. (Various03.07)

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkey In Biggest Slump Since 1945

As its gross domestic product declined 13.8% in Q1/09, the global financial crisis turned Turkey into a ’real economy crisis.’ The astounding data dwarfs the government’s official expectations of a 3.6% contraction this year. According to data from the Turkish Statistical Institute, or TurkStat, this represents the biggest slump since 1945, when the economy contracted 15.3%. The decline compares with a 6.2% contraction in Q4/08. The two consecutive quarters of contraction also means the economy is officially in recession. The slump in output is adding to pressure on Prime Minister Erdogan to accept assistance from the IMF. Public spending grew 5.7% in the quarter, increasing its share of GDP to 11.1% from 9% a year earlier, TurkStat said. That reflects a budget deficit that almost quadrupled to 20.1 billion Turkish Liras ($13 billion) in the first four months of 2009 from the year earlier. The construction industry declined 18.9% in the quarter, and manufacturing fell 18.5%. Private consumption dropped 9.2%. The pace of the decline in industrial output declined in April after the government cut taxes on new cars, furniture and home appliances in a bid to encourage spending. Exports fell 26% in the first quarter from a year earlier and carmakers have halted production because of falling orders. Motor vehicle output tumbled 59% from a year earlier. Industrial production fell an average of 22% in the first three months of the year and recorded a contraction of 23.8% in February, the biggest since TurkStat began releasing monthly figures in 1986. The jobless rate surged to 16.1% in the first quarter, the highest since the measure began in 2005. Citigroup lowered its forecast for Turkey’s economic contraction this year to 7% from 4%. (Hurriyet30.06)

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6.2 OECD Feels Turkey’s GDP Expected to Shrink by 5.9% in 2009

Turkey's GDP is expected to shrink 5.9% this year, before recovering to a 2.6% growth in 2010, the Organization for Economic Cooperation and Development (OECD) said on 24 June in its semi-annual economic outlook. The Turkish government has forecast a 3.6% GDP contraction for 2009. The credibility of Ankara’s economic policy is key for the recovery and finalizing a new agreement with the IMF, which would help underpin the confidence of investors. Short and medium-term risks appear relatively balanced, the OECD said, but it warned that recovery could be delayed if international conditions worsen, or if confidence in the sustainability of Turkey's macroeconomic framework weakens. The OECD also said a new loan agreement with the International Monetary Fund would help to safeguard the confidence of domestic and international investors. The OECD also said that Turkey's unemployment rate, which jumped to a record high of 16.1% in the January-March period but fell to 15.8% in the February-April period, is expected to reach 15.2% in 2009 and 16.4% in 2010. (Reporter25.06)

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6.3 Turkish Inflation Rises Moderately

Turkey’s consumer prices rose 0.11% in June, higher than a forecast unchanged level, but well within the comfort zone for the central bank to cut rates further to help Turkey’s recession-struck economy. Turkish Statistics Institute figures released on 3 July showed the CPI index posted a year-on-year rise of 5.73%, and the producer price index rose 0.94% on the month, above a forecast rise of 0.14%, for an annual fall of 1.86%. (TSI03.07)

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6.4 IMF Tells Cyprus To Cut Bloated Payroll

On 30 June, the International Monetary Fund urged Cyprus to cut a bloated state payroll feeding growing deficits it forecast could spike over the eurozone threshold of 3% this year. In a concluding report of an annual consultation, the IMF said it expected Cyprus’s general government deficit to reach 3.9% in 2009, with growth at around 0.3%. This is a sharp reversal from surpluses of 2007 and 2008, and a considerable divergence from official Finance Ministry forecasts of a 2.0-2.5% deficit this year, and 1% growth. The state payroll accounted for about a third of Cyprus’s public spending, a trend which would stoke an expansionary debt-deficit cycle if it were not intercepted, the IMF said. The imbalance would not go away by collecting more revenues or raising taxes. (IMF 29.06)

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6.5 Cyprus Harmonized Inflation Follows CPI Downwards

The annual harmonized consumer price inflation (HICP) rate continued to fall in Cyprus last month, with prices rising by just 0.1% in June 2009 compared with June 2008. The consumer price index in the same period rose by 0.2%. However, the fall masks big changes across the different categories. Whereas oil-related prices have fallen steeply, other prices have climbed. Prices of transport were 10.7% lower in June 2009 than June 2008 according to the EU-harmonized index, while prices of housing, water electricity and gas were 10.4% lower. The main year on year increases in 2009 have been in food and non-alcoholic beverages, up 6.9% in June; healthcare up 7.6%; education (4.6%); and restaurants and hotels (4.5%). (FM06.07)

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6.6 OECD Sees Greek Economy Contracting

Greece’s economy is likely to slip into recession this year, pushing up the country’s unemployment rate to above 10% in 2010, according to the Organization for Economic Cooperation and Development (OECD). The Paris-based organization said Greece’s GDP is likely to shrink by an annual pace of 1.3% this year before recovering slightly in 2010 to a growth rate of 0.3%. Exports of good and services – which are dominated by tourism and shipping receipts – are likely to dip 23.4% year-on-year, it added. The OECD’s 2009 forecast points to Greece entering its first recession in more than 15 years, as the eurozone contracts by 4.8% due to collapsing external demand and domestic demand, weakened by tight financial conditions, rising unemployment and heightened uncertainty. Unemployment among Greece’s 4.5 million work force will rise to 10.3% next year, from 9.5% in 2009. Figures from the National Statistical Service showed Greece’s jobless rate hit 9.3% in Q1/09, a three-year high. Public finances are seen as getting worse due to the deteriorating economic conditions. The OECD said it sees Greece’s budget deficit widening to 6.7% of GDP next year from 6.1% in 2009. (Ekathimerini25.06)

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6.7 Greek Tourism Slumps 9.6%

Greece's tourism industry has lost more than 19,000 jobs after arrivals at airports dropped by nearly a tenth in the first six months of the year. The country's 13 biggest airports, which account for the bulk of tourism traffic, saw a total of 3.9 million arrivals in the period, down 9.6% from last year, according to the Association of Greek Tourism Enterprises (SETE). The industry's revenue losses exceeded 10% as Greek hotels and travel agencies slash prices to attract visitors, SETE said. The data adds to evidence that Greece may face its first recession since 1993. With about 15 million visitors each year, Greece is one of Europe's biggest tourism destinations and the industry accounts for about a fifth of the country's GDP. (FM07.07)

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6.8 Bulgaria’s GDP Forecast to Grow 3.5% in 2009

Bulgaria’s economy is expected to shrink by 3.5% in 2009 versus an annual growth of 6% in 2008, while the country’s gross domestic product (GDP) is seen recovering in 2010, recording a growth of 1%, said Raiffeisen Zentralbank in its annual CEE report. Raiffeisen sees Bulgaria as the less affected country by the global financial crisis in the Central and Eastern Europe, mainly due to its currency board mechanism pegging the lev to the euro, which has ensured a remarkably stable banking system despite the powerful dynamics in the recent years, stated the report. The country’s sizeable currency reserves have guaranteed the stability of the Bulgarian currency board and staved off a negative implication from the region’s currency depreciations, said the bank. Meanwhile, Raiffeisen experts see European banks remaining strongly committed to provide the needed funding for their Bulgarian subsidiaries. However, the report expects ‘the credit market to backpedal from the recent burgeoning growth and even rise slower than the cooling deposit market, which generates much of local lenders’ liquidity.’ In May, the corporate and household lending segments rose by 15.4% and 15.7%, respectively, whereas deposits surged by 7.3% as compared to the previous month. (Raiffeisen25.06)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 The Fast Day of 17th of Tammuz

The Jewish fast day of the 17th of Tammuz is observed this year from sunup to evening on Thursday 9 July. The fast day itself commemorates five tragedies: 1. Moses descended from meeting G-d and receiving the Torah on Mount Sinai, saw the Jews celebrating with the Golden Calf and broke the two tablets G-d had given him. 2. The daily offering, which had been brought regularly in Temple in Jerusalem, was halted during the Babylonian siege before the Temple was destroyed. 3. The Romans breached the walls of Jerusalem, prior to destroying the second Temple, in 70 CE. 4. A Greek or Roman official named Apostimos held a public burning of the Torah. 5. Idols were set up in the Temple itself; it is not clear what year this happened. The 17th of Tammuz is the second of the four fasts commemorating the destruction of the Temple and the Jewish exile.

In later years this day continued to be a dark one for Jews. In 1391, more than 4,000 Jews were killed in Toledo and Jaen, Spain and in 1559 the Jewish Quarter of Prague was burned and looted. The Kovno ghetto was liquidated on this day in 1944 and in 1970 Libya ordered the confiscation of Jewish property.

The 17th of Tammuz also marks the beginning of the “Three Weeks,” which ends with the fast of the 9th of Av. Some customs of mourning, which commemorate the destruction of Jerusalem, are observed from the start of the Three Weeks. Jewish mourning customs restricts the extent to which one may take a haircut, shave or listen to music, though communities and individuals vary their levels of observance of these customs. No Jewish marriages or other major celebrations are allowed during the Three Weeks, since the joy of such an event would conflict with the expected mood of mourning during this time. The Three Weeks can be thought of as having a variety of increasing levels of mourning. Some restrictions begin on the 17th of Tammuz, some from the beginning of the month of Av, and some only come into effect the week in which Tisha B'Av occurs.

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7.2 First Ever Incumbent MK Gives Birth

Israeli MK Anatasia Michaeli has made history by becoming the first incumbent Knesset Member to give birth. She bore her eighth child, and fifth son, on 5 July in Tel HaShomer-Sheba Hospital in Ramat Gan. Born into a Christian family in St. Petersburg, Russia, where she won a city beauty contest, Michaeli married Yosef Samuelson in 1997 at the age of 22. The couple moved to Israel, and after her second son was born, she underwent an Orthodox conversion process, culminating with the couple’s remarrying in a Jewish ceremony according to Orthodox practice. The Knesset Ethics Committee recently decided that though Knesset Members are not officially entitled to maternity leave, new mothers need not attend Knesset sessions in the weeks after giving birth. The freshman MK said she is not sure how she will juggle her Knesset duties with being a new mother, but is likely to attend the Knesset at least for crucial votes, such as on the upcoming national budget. Another MK, the Likud’s Gila Gamliel, is currently in the last trimester of her pregnancy. (IsraelNN05.07)

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*REGIONAL:

7.3 Prince Hussein named Jordan’s Crown Prince

A Royal Decree was issued naming HRH Prince Hussein, the eldest son of His Majesty King Abdullah, as Crown Prince of Jordan effective July 2, 2009. When he became king in February 1999 after the death of his father, Hussein bin Talal, Abdullah named his brother Hamza as crown prince in keeping with their father's wishes. But five years later, he withdrew the nomination, leaving Hussein as de facto crown prince but without an official appointment. Under Jordan's constitution, the post of crown prince goes to the eldest son of the king, who retains the option of naming a brother. King Hussein replaced his brother Hassan with Abdullah just days before his death. King Abdullah and his wife, Queen Rania, have two boys and two girls. The Crown Prince was born on June 28, 1994. (Various03.07)

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7.4 Bulgaria PM-To-Be Still Hopes for Outright Majority

Mr. Boyko Borisov, Sofia mayor and leader of the winner in the general elections GERB party, has expressed hopes that he may win an outright majority in parliament after all ballots are counted. The party of Borisov, who embarked on his quest for the higher office with the promise that Bulgaria is a different country and the guilty will be brought to justice, secured 116 MPs in the country's 240-seat unicameral parliament, according to results from the Central Electoral Committee. Despite his hopes for an outright majority, Borisov assured that negotiations with other political parties are underway. Borisov announced plans for the closure of the Ministry of Emergency Situations and the scrapping of the posts of the Minister of European Affairs and the Deputy Prime Minister in charge of EU funds. Bulgaria's next prime minister assured he already knows the line-up of the next government and said his main priority as head of the cabinet will be the construction of highways. Asked about his idea to turn to the IMF for help, something the current government has resisted and most economists would applaud, Borisov said this is to be decided after the budget is clear. (SDN06.07)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Protalix Home Care Treatment Program for Gaucher Patients in Trial of prGCD

Protalix BioTherapeutics announced the initiation of a home care treatment program for patients enrolled in the Company’s phase III extension trial of plant-cell expressed recombinant glucocerebrosidase (prGCD), the Company’s lead product candidate. The phase III extension trial is a follow-on study to the Company’s on-going pivotal phase III clinical trial, which is evaluating the safety and efficacy of prGCD in treatment-naive patients of Gaucher disease, a lysosomal storage disorder in humans. The home care treatment program allows patients in the phase III extension trial to receive intravenous treatments of prGCD in the comfort of their own home, at a physician’s discretion and under the supervision of a registered nurse. Upon drug approval the Company intends to continue this program as part of a patient care program designed to assist, support and educate patients receiving prGCD therapy.

Karmiel’s Protalix (http://www.protalix.com) is a biopharmaceutical company. Its goal is to become a fully integrated biopharmaceutical company focused on the development and commercialization of proprietary recombinant therapeutic proteins to be expressed through its proprietary plant cell based expression system. Protalix’s ProCellEx presents a proprietary method for the expression of recombinant proteins that Protalix believes will allow for the cost-effective, industrial-scale production of recombinant therapeutic proteins in an environment free of mammalian components and viruses. Protalix is conducting a Phase III pivotal study for its lead product candidate, prGCD, to be used in enzyme replacement therapy for Gaucher disease, a lysosomal storage disorder in humans. Protalix is also advancing additional recombinant biopharmaceutical drug development programs. (Protalix25.06)

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8.2 Teva & Antares Announce FDA Approval of Needle-Free Injector Product for Tev-Tropin

Teva Pharmaceutical Industries its Ewing, New Jersey partner Antares Pharma announced the approval of a Supplemental New Drug Application (sNDA), which added “needle-free injection” to its Tev-Tropin [somatropin (rDNA) for injection] brand human growth hormone (hGH) drug label. Teva will market the Antares needle-free device as the Tev-Tropin Tjet Injector system. Tev-Tropin is indicated only for the treatment of children who have growth failure due to inadequate secretion of normal endogenous growth hormone (GH). Tev-Tropin stimulates linear growth in children lacking endogenous GH. Treatment of growth hormone-deficient (GHD) children with Tev-Tropin produces growth rate and IGF-1 levels similar to those seen after treatment with hGH of pituitary origin. Teva Pharmaceutical Industries (http://ww.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. The Company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. (Teva29.06)

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8.3 Pluristem Awarded a $1.9 Million Grant from Israeli Chief Scientist’s Office

Pluristem Therapeutics was awarded a $1.9 million government grant from the Office of the Chief Scientist (OCS) at the Ministry of Industry, Trade & Labor of Israel, as a government participation in R&D expenses for the period March 2009 to February 2010. The OCS awards grants to industry in Israel to foster technological innovations. This is the fourth consecutive year that Pluristem has received this respected grant. The funds will be designated and used by Pluristem to support the clinical trials of the allogeneic placental-derived adherent stromal cell product, termed PLX-PAD, for the treatment of critical limb ischemia (CLI), the end-stage of peripheral artery disease (PAD), as well as for other research and development activities of the Company.

Haifa’s Pluristem Therapeutics (http://www.pluristem.com) is a bio-therapeutics company dedicated to the commercialization of unrelated donor-patient (allogeneic) cell therapy products for the treatment of several severe degenerative, ischemic and autoimmune disorders. Pluristem's first product, PLX-PAD (for the treatment of Peripheral Artery Disease), a “First-In-Human” placental-derived mesenchymal-like stromal cell product, has received FDA and IMPD clearance and is being investigated in a Phase I clinical trial. The Company is developing a pipeline of products derived from human placenta, a non-controversial, non-embryonic, adult stem cell source. The (PLacental eXpanded) cell products are stored off-the-shelf, ready-to-use, and require no histocompatibility matching. (Pluristem 29.06)

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8.4 Optimata to Collaborate with Teva on Clinical Development of Solid Tumor Cancer Drugs

Optimata has signed a collaboration agreement with Teva Pharmaceutical Industries focused on clinical development of drug candidates for solid tumor cancers. The agreement is intended to efficiently rescue and redirect the clinical development of discontinued drug candidates which have been shelved by their originators pharmaceutical companies, using Optimata’s bio-simulation technology known as the Optimata Virtual Patient (OVP). Under the terms of the collaboration Optimata will receive upfront payments, development milestones and royalty payments; in a separate agreement, Teva Pharmaceutical Industries has also made an undisclosed equity investment in Optimata. The Optimata Virtual Patient is a unique predictive biosimulation technology, comprising computer-implemented mathematical algorithms of key physiological, pathological and pharmacological processes in the body of the patient. It thoroughly unfolds drug - patient dynamic interactions, enabling drug developers to perform rapid numerous virtual clinical trials, clinical indication match for patient population, and to forecast optimal drug treatments for a given trial end point.

Ramat Gan’s Optimata (http://www.optimata.com) is an interdisciplinary science-based company developing computerized tools – Virtual Patient engines – for navigating drug development towards better drugs, faster. Applying bio-mathematics to develop a predictive bio-simulation software toolkit, this technology provides a comprehensive drug development solution, from the pre-clinical phase through treatment personalization. (Optimata30.06)

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8.5 Compugen Reports Sale of a Portion of Its Evogene Holdings

Compugen has received approximately $3.6 million from the private sale of 1,000,000 Evogene shares to a single purchaser. The funds generated from this transaction are expected to be used by Compugen for general corporate purposes through mid 2010. After this sale, the Company continues to hold 1,150,000 Evogene shares. Rehovot’s Evogene (http://www.evogene.com) was established as an independent company in 2002 to utilize certain of Compugen’s in-silico predictive discovery capabilities in the agricultural field. Evogene securities are listed for trading on the Tel Aviv Stock Exchange. Tel Aviv’s Compugen (http://www.cgen.com) is a leading drug and diagnostic product candidate discovery company. Unlike traditional high throughput trial and error experimental based discovery, Compugen’s discovery efforts are based on in-silico (by computer) prediction and selection utilizing a growing number of field focused proprietary discovery platforms accurately modeling biological processes at the molecular level. The resulting product candidates are then validated through in vitro and in vivo experimental studies and out-licensed for further development and commercialization under various forms of revenue sharing agreements. (Compugen30.06)

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8.6 Lumenis Completes $15 Million Equity Financing From New and Existing Investors

Lumenis has completed an equity financing in which a new investor, Agate Medical Investments LP, together with two existing significant shareholders LM Partners L.P. and Ofer Hi-Tech Group, have invested $15 million in the Company. In addition, the Company completed a restructuring of its bank debt allowing for a convenient loan repayment plan spread over 8 years until 2017. Yokneam’s Lumenis (http://www.lumenis.com), a global developer, manufacturer and seller of laser, light-based and radio frequency devices for surgical aesthetic and ophthalmic applications, is Israel's largest medical device company with more than 700 employees worldwide. The Company invests heavily in R&D and is an industry leader in the markets in which it serves. Lumenis has over 250 patents worldwide, over 75 FDA clearances, worldwide presence in over 100 countries, and an installed base of over 70,000 systems. (Lumenis 30.06)

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8.7 Teva Announces Approval and Launch of Tri-Lo Sprintec Tablets

Teva Pharmaceutical Industries announced that the U.S. FDA has granted approval for the Company’s Abbreviated New Drug Application (ANDA) to market a generic version of Ortho McNeil Janssen’s oral contraceptive, Ortho Tri-Cyclen Lo. Shipment of this product, for which Teva’s trade name is Tri-Lo Sprintec, has commenced. As the first company to file an ANDA containing a paragraph IV certification for this product, Teva has been awarded a 180-day period of marketing exclusivity. Teva is currently involved in patent litigation concerning this product in the U.S. District Court for the District of New Jersey. A trial date has not been set. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 20 pharmaceutical companies in the world and is the world's leading generic pharmaceutical company. The Company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients, as well as animal health pharmaceutical products. (Teva01.07)

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8.8 Ikaria to In-License BioLineRx’s BL-1040

Clinton, N.J.’s Ikaria Holdings and BioLineRx announced that Ikaria has entered into an agreement to obtain a worldwide exclusive license to BioLineRx’s BL-1040, a potential breakthrough treatment for preventing pathological cardiac remodeling following acute myocardial infarction (AMI). BL-1040, currently in a phase I/II clinical trial, is administered via the coronary artery during standard catheterization and flows into the damaged heart muscle, where it forms a protective “scaffold” that enhances the mechanical strength of the heart muscle during recovery and repair. BL-1040 is the first program to graduate from the BIJ (BioLine Innovations Jerusalem) incubator subsidized by the Israeli Office of the Chief Scientist. Under the terms of the agreement, BioLineRx will receive upfront and milestone payments. BioLineRx will also receive royalties on annual net sales. Ikaria will be responsible for completing clinical development and commercialization efforts. The deal is contingent upon receipt of the approval of Israeli Office of the Chief Scientist. Jerusalem’s BioLineRx (http://www.biolinerx.com), a clinical stage drug development company traded on the Tel Aviv Stock Exchange, is dedicated to building a robust pipeline of promising therapeutics for unmet medical needs. The Company’s leading programs are BL-1020 for the treatment of schizophrenia and BL-1040 for the treatment of damaged heart tissue post-acute myocardial infarction. BioLineRx advances projects from early stage discovery and lead generation to advanced clinical trials. (BioLineRx06.07)

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8.9 Itamar Medical’s WatchPAT Ambulatory Device Receives CPT Code From the AMA

The American Medical Association (AMA) has awarded Itamar-Medical’s WatchPAT device a Category III CPT (Current Procedural Terminology) code. A level III code will allow the medical community to begin the process of collecting much necessary usage information. This information, in turn, will be critical when the process moves to determining a reimbursement value for which a Category I code is expected in the near future. In March 2009 WatchPAT was formally recognized by Medicare as being nationally covered for reimbursement across the US. The California Technology Assessment Forum (the technology assessment arm of Blue Shield of California) recently approved WatchPAT as directly affecting patient outcome out of 36 reviewed devices for sleep testing (only one other device was approved). WatchPAT is the most scientifically and clinically investigated ambulatory device for sleep related breathing disorders and sleep staging. It offers physicians the ability to fully analyze the 6 channels of tamper-proof, sleep-related data and manually edit the suggested automatic analysis in a manner similar to standard PSG (Polysomnograph) recordings. Used by physicians across the US on over 120,000 patients, WatchPAT has made Itamar-Medical the leader in home sleep testing. Caesarea’s Itamar Medical (http://www.itamar-medical.com) is a publicly-traded medical technology company utilizing PAT (Peripheral Arterial Tone) signal technology and applications. The PAT signal is a non-invasive "window" to both the cardiovascular and autonomic nervous systems. (Itamar Medical 06.07)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Elbit Systems to Supply the Israeli Transportation Ministry With C-MUSIC

Elbit Systems will supply the Israeli Ministry of Transportation with the C-MUSIC system (commercial multi-spectral infrared countermeasure) under a contract in the amount of approximately $76 million. The system, to be supplied by Elbit Systems' wholly owned subsidiary, Elbit Systems Electro-optics El-Op Ltd., is to be installed aboard a variety of commercial aircraft owned by Israeli commercial airlines. C-MUSIC is based on the MUSIC system, a direct infra-red countermeasure technology for military aircraft and helicopters that disrupts missiles fired at aircraft and causes them to veer off course by transmitting a laser beam. The systems' reliability, rapid-response and ability to deal with multiple threats is considered to be among the most advanced systems of its kind in the world today. Leading aviation industries and air forces have expressed increasing interest in the system and its capabilities.

Haifa’s Elbit Systems (http://www.elbit.co.il) is an international defense electronics company engaged in a wide range of defense-related programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned air vehicle (UAV) systems, advanced electro-optics, electro-optic space systems, EW suites, airborne warning systems, ELINT systems, data links and military communications systems and radios. The Company also focuses on the upgrading of existing military platforms and developing new technologies for defense, homeland security and commercial aviation applications. (Elbit Systems25.06)

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9.2 Waterfall Security Solutions and OSIsoft Corporation Sign a Partnership Agreement

Waterfall Security Solutions announced a new partnership agreement with California’s OSIsoft, the global leader in software infrastructure for real-time information and performance management. The agreement follows successful installations of the Waterfall SCADA Monitoring Enabler for OSIsoft PI at several major utilities worldwide. Waterfall's patent pending solutions enable effective, hardware-enforced network segregation (air gapping) and provide top-level and impenetrable security for operational and critical industrial networks. Waterfall's SCADA Monitoring Enabler (WF-SME) for OSIsoft PI is a high performance solution for replicating, in real-time and with high-throughput, PI information, from within secure SCADA networks and industrial control environments, to a replica PI server residing on corporate, public or 3rd party networks. This makes the PI data fully available to external users, without exposing the critical and industrial networks, in any way, to external hacking and cyber-terror threats. The WF-SME for OSIsoft PI has already been successfully deployed at critical utilities in North America, Europe and Israel. The WF-SME is a powerful and robust solution for achieving NERC-CIP, CFATS and other compliance and cyber-security regulations. Rosh HaAyin’s Waterfall Security Solutions (http://www.waterfall-security.com) is the leading provider of secure unidirectional connectivity for Process Control systems, Industrial Networks, SCADA systems, Remote Monitoring and Segregated Networks. (Waterfall25.06)

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9.3 Altair Semiconductor Announces LTE Baseband Processor - FourGee-3100

Altair Semiconductor announced the details of its LTE baseband processor, the FourGee-3100. The FourGee-3100, which will be available in Q4/09, is a fully optimized LTE CAT-3 baseband processor that will operate with devices from mobile handsets, data cards and USB dongles to various handheld consumer electronics devices. The FourGee-3100 is bundled with a complete LTE L1 and protocol stack. Altair's LTE chipsets are architected using the company's proprietary and market-proven O2Psoftware-defined 4G processor, which offers extremely high performance at unmatched power consumption levels. The FourGee-3100 will join Altair's existing products, the FourGee-2150 for mobile WiMAX, and the FourGee-4150, for XGP, both recognized as leaders in their respective markets for high performance and power efficiency. In the coming months, Altair will continue to roll out its LTE product portfolio, including: FourGee-6150 - a MIMO RF transceiver that supports LTE-TDD, and FourGee-6200 - a multi-band LTE-FDD MIMO transceiver that supports the most popular LTE bands in North America, Japan and Europe.

Hod HaSharon’s Altair Semiconductor (http://www.altair-semi.com) is the world's leading developer of ultra-low power, small footprint and high performance 4G semiconductors. The company's products provide device manufacturers integrating any 4G technology into their products with a highly power-optimized, robust and cost-effective solution. (Altair23.06)

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9.4 Genoa Pixcale Reduces Power Consumption by 40% for Smartphone Displays, Improves Color Quality

Genoa Color Technologies today announced Pixcale technology to address the twin challenge of delivering longer battery life and vivid TV-quality color on high-resolution mobile phone displays. The company’s customized implementation of its patented multi-primary technology lets mobile handset makers reduce the power consumed in phone displays by 40% while providing improved image appearance, incurring virtually no increase in cost. Genoa’s multi-primary technology, while new to the smartphone market, is already fully developed, proven, and implemented in digital projectors, and in numerous LCD TV panels. The display module consumes 50% of the typical smartphone power budget, making such significant power reduction in the display module exceedingly attractive to handset makers. Genoa’s multi-primary technology offers a 35 – 50% backlight power savings in mobile device display modules. Because the added color filters represent only 4% of the total cost of Genoa’s solution, the cost impact to manufacturers is negligible. Herzliya’s Genoa Color Technologies (http://www.genoacolor.com) licenses and develops Multi Primary technology, which significantly enhances image quality and power efficiency for a wide range of displays. (Genoa Color Technologies29.06)

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9.5 CopperGate Shipped Over 10 Million HomePNA Chips for Home Networking

CopperGate Communications has shipped over 10 million HomePNA chipsets. CopperGate HomePNA chips are used in digital devices deployed worldwide in home entertainment networks and IPTV solutions, converting existing home wiring into usable Ethernet over coax and phone networks. They are deployed by more than 40 telecommunications, cable and satellite companies as key components of their home entertainment offerings to consumers. The chips provide high-speed, low-cost, triple-play (voice, data and video) options for use with existing coax and phone wiring inside homes. CopperGate chips are based on the widely-used HomePNA technology, the marketing name for the open, interoperable International Telecommunication Union (ITU) G.9954 industry standard for “no new wires” home networking applications. During the past year, most telcos that deploy IPTV using phone and coax, as well as other service providers, have standardized on HomePNA. It is the fastest-growing industry standard technology for home entertainment networking and is used by four out of the top five telcos who are deploying IPTV in North America.

Tel Aviv’s CopperGate Communications (http://www.copper-gate.com) is the only company whose standards-based chipsets enable carrier-class distribution of broadband digital content over all three types of existing wires in the home: coax, phone and power. The company sells its technology to OEMs who build solutions for multimedia home networking and multi-dwelling unit (MDU) broadband access markets. CopperGate's chips are used in set-top boxes, residential gateways, optical network terminators and Ethernet bridges. (CopperGate29.06)

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9.6 Vringo & Innova Group Provide Video Ringtone Platform For Armenia’s Leading Mobile Operator

Vringo and its partner, Innova Group, have announced a partnership with Armenia’s leading mobile operator VivaCell-MTS, a subsidiary of Mobile TeleSystems OJSC (MTS). Through the partnership, Vringo’s video ringtone service will be available to more than 2,000,000 mobile subscribers of VivaCell-MTS in Armenia through a co-branded VivaCell-MTS-Vringo online platform and will constitute the first deployment of such innovative and stimulative technology in CIS countries. The VivaCell-MTS-Vringo service, to be rolled out on a subscription basis, will provide access to Vringo’s video ringtone application and its library of 4,000-and-counting video ringtone clips. For a fee, subscribers may download this premium content. This is the fourth custom-built in-language carrier platform Vringo has created for an international mobile partner. Others include platforms in Vietnamese for Viettel, in French for Bouygues Telecom and in Turkish for mobile provider Avea.

Founded in 2006, Beit Shemesh’s Vringo (http://www.vringo.com) is bringing about the evolution of ringtones. With its award-winning video ringtone application, Vringo takes a sledgehammer to the traditional call signature, transforming the basic act of making and receiving mobile phone calls into a highly visual, social experience. Innova Group, headquartered in Athens-Greece, with local presence in five more countries (Albania, Armenia, Bulgaria, Cyprus and Romania) operates within the Telecommunications and IT ecosystem, providing complete solutions for VAS, Information and network Security, next Generation networking and OSS & IT. (Vringo29.06)

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9.7 Magal Recently Awarded $ 8.5 Million in Orders

Magal Security Systems announced that during May 2009, it was awarded a total of approximately $ 8.5m in purchase orders to protect two airports and several nuclear power stations in South East Asia, to reconstruct a border in Israel and to extend an existing airport project in Eastern Europe. Most of the orders are expected to be completed during 2009. The first turnkey project is the extension of an airport Perimeter Intrusion Detection System (PIDS) in Eastern Europe for $ 1.6 million and it includes infrastructure, a Taut Wire barrier as well as Command and Control System. The second project is the reconstruction of a border protection solution in Israel for $ 4.6 million. The third order is for various nuclear power station sites in South East Asia, and will incorporate a Volumetric Intrusion Detection System for $ 1.3 million. The fourth order is for the protection of two airports in South East Asia, which will incorporate a variety of intrusion detection solutions including Taut Wire and Vibration Sensors for $ 1.0 million.

Yehud’s Magal S3i (http://www.magal-ssl.com) is a leading international solution provider, in the business of Security, Safety, Site Management and Intelligence analysis. Based on 35 years of experience and interaction with customers, the company has developed a unique set of solutions and products optimized for perimeter, outdoor and general security applications. Magal S3i's turnkey solutions are typically integrated and managed by a single sophisticated modular command and control software, supported by expert systems for real-time decision support. (Magal29.06)

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9.8 N-trig & Fujitsu Partner to Help Make Hands-On Computing Faster and More Fun

N-trig and Fujitsu Microelectronics Europe (FME) reached an agreement to co-operate on N-trig's next-generation chipset, to be developed by N-trig and manufactured by Fujitsu Microelectronics. The combined efforts of the two technology leaders will provide both the consumer and enterprise markets with the best pen and multi-touch computing experience with multiple simultaneous touch points being recognized. N-trig’s DuoSense technology, which combines pen and multi-touch capabilities, is utilizing Fujitsu’s extensive silicon technology solutions and long, reliable history of high-quality products and established production facilities to offer end-users the most efficient and natural means to Hands-on computing. By providing enhanced feature sets for OEMs and ISVs, this partnership will help meet rapid market growth as demand increases for multi-touch-enabled systems.

Kfar Saba’s N-trig (http://www.n-trig.com) is revolutionizing the way people interact with computers by providing the industry’s first dual-mode pen and touch input device. N-trig’s DuoSense technology is the only combined pen, touch, and multi-touch interface for today’s advanced computing world. N-trig’s DuoSense dual-mode digitizer uses both pen and zero-pressure capacitive touch to provide a true Hands-on computing experience for mobile computers and other digital input products over a single device. DuoSense enables greater mobility and usability in the next generation of computing devices and notebook PCs, enabling new market opportunities for OEMs and ODMs to introduce computer products that offer a more intuitive and interactive experience. (N-trig30.06)

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9.9 Panavision & Tower Announce World’s Fastest Single Port Re-Configurable Linear Image Sensors

Homer, New York’s Panavision Imaging, a pioneering innovator and developer of high performance CMOS image sensors, and Tower Semiconductor announced production of Panavision’s family of DLIS-2K re-configurable line scan CMOS image sensors. The DLIS-2K sensors were developed using Tower’s Advanced Photo Diode (APD) pixel process and pixel IP with Panavision’s patented Imager Architecture. These re-configurable linear image sensors offer high performance at a low cost and combine high sensitivity, high speed and versatility to address many applications in consumer, industrial, automotive and scientific markets. The DLIS-2K Imager is a Quad Line Sensor with 11 bit A/D, High Dynamic Range, and Correlated Multi-Sampling (CMS) for Enhanced Sensitivity. The sensors are used in Spectroscopy, barcode, touch screen, OCR, machine vision, measurement and other applications. Migdal Ha’Emek’s Tower Semiconductor (http://www.towersemi.com), a global specialty foundry leader, manufactures integrated circuits with geometries ranging from 1.0 to 0.13-micron and provides complementary technical services and design support. Tower, along with its fully owned U.S. subsidiary, Jazz Semiconductor, offers a broad range of process technologies including Digital, Mixed-Signal and RFCMOS, HV CMOS, Power Management, Non-Volatile Memory (NVM), Embedded NVM, MEMS, and CMOS Image Sensors. (Tower30.06)

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9.10 Nova Revolutionizes Materials Characterization for Optical CD

Nova Measuring Instruments announced the launching of MatMaker, a Product-Driven Materials Characterization package which revolutionizes one of the most critical elements of Optical CD measurement. The Company recently announced all time record orders for its stand-alone Optical CD product and the addition of the MatMaker Package is intended to further solidify the Company's position in the market. Spectral Optical CD technologies need material optical properties (spectral n&k) to interpret the optical spectrum into a profile measurement. Nova's novel technology eliminates the step-by-step method. It capitalizes on proprietary breakthrough algorithms for enhancing the sensitivity of Scatterometry measurements, directly utilizing Scatterometry targets on the product wafer to determine the optical properties of the various constituent materials together with the geometrical profile parameters. Multiple film depositions on blanket wafers are no longer needed as a prerequisite for Scatterometry applications development, and any and all process-induced changes to materials optical properties can now be uniquely and accurately captured inside the Scatterometry model. The MatMaker Package is available as an option to the latest version of NovaMARS Applications Development Software. Rehovot’s Nova Measuring Instruments (http://www.nova.co.il) develops, produces and markets advanced integrated and stand alone metrology solutions for the semiconductor manufacturing industry. Nova is traded on the NASDAQ & TASE under the symbol NVMI. (Nova30.06)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Prices Rise Following VAT Increase

The price of basic products under state supervision went up by 1% on 1 July, morning following the value added tax (VAT) hike to 16.5%. Due to the earlier decision approved in the Knesset, the price of common dark bread now stands at NIS 4.63 a loaf, while a kilogram of salt now costs NIS 1.78. In addition, due to the increase in oil prices, the price of fuel in Israel went up at midnight by 21 agorot per liter. Water also became significantly more expensive, with every cubic meter over 15 cubic meters used costing NIS 28 instead of the previous eight. The extra tax, instigated by the Water Authority to discourage waste, is still pending Knesset approval, but will be imposed retroactively. Meanwhile, consumer organizations expressed concern that businesses will decide to up prices even further. (JP01.07)

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10.2 Israel’s First Half Car Sales Down 24%

According to the Israel Motor Vehicles Importers Association, 78,055 new vehicles were delivered in H1/09, 24% fewer than in H1/08. During H1/09, 64,066 passenger cars were delivered, 32% fewer than in the first half of last year. Deliveries of off-road vehicles fell 24% to 6,945 vehicles in the first half. In June, 17,578 vehicles were delivered, 10% fewer than in June 2008. Over 22% of the vehicle sales in the first half were in June.

Mazda had the most deliveries in the first half, at 12,650 cars, 39% fewer than in the corresponding period. Mazda delivered 3,002 cars in June, the largest monthly figure so far this year. Hyundai was in second place, with 9,527 deliveries in the first half, down 27% compared with the corresponding period of last year. Toyota was in third place in the first half, with 8,506 deliveries, down 30%. Toyota delivered 2,015 cars in June. Ford was in fourth place, with 5,265 deliveries in the first half, down 11%. Chevrolet was in fifth place, with 4,832 deliveries, down 43%. Vehicle industry sources attributed the jump in deliveries in late June to buyers who had already paid for their cars and brought delivery forward to beat the VAT take hike that came into effect on July 1. (Globes 06.07)

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11: In Depth

11.1 BAHRAIN: A Measured Approach

With many regional economies looking to post negative growth in 2009, Bahrain appears set to buck the trend. A recent report by the IMF predicted the Kingdom's economy would expand by 2.6% this year, twice that of the regional average. This growth is in no small part due to Bahrain's long-standing policy of diversifying the country's economic base, which has resulted in the Kingdom being far less exposed to the fluctuations in the global energy market.

According to data released by the Central Bank of Bahrain (CBB) in May, the country ran a $2.25bn current account surplus for 2008. Though some $636m down on the 2007 total, it was still well up on the $2.18bn of 2006. The report also showed a 25% increase in non-oil exports, which earned Bahrain $3.5bn, underscoring the expansion of the economy away from hydrocarbons. Bahrain's GDP was $21.8bn in 2008, an 18% increase, with the non-oil sector contributing $15.58bn of the total.

One of the cornerstones of the Bahraini economy is its financial sector, which contributes around 27% to GDP. While it could have been expected that this particular sector could have been hard hit by the global financial meltdown, this does not appear to have been the case. In large part, this was because Bahraini institutions had limited exposure to the US-driven subprime market. Though there may be some ripples in Bahrain due to the continued aftershocks of the crisis, such as the defaults of Saudi Arabian business groups Saad and Algosaibi, their impact is unlikely to be severe.

Mayank Malik, the chairman of the Bahrain Association of Banks, told regional press in June that, "Things are improving in the emerging markets and they will lead the process of economic recovery, starting with India and China. We are close to leveling out and I see economic expansion." While there were still challenges to be faced, Malik warned against any overreaction. "We have the benefit of the learning curve and hindsight. There will always be booms and busts, but it depends on how we manage them and take action before things happen," he said.

Bahrain seems to have avoided both boom and bust. An example of this is the controlled pace of inflation, which increased in May to 3.5% from 3.1% the preceding month, pushed up by a rise in housing and utilities expenses. Though prices may be on the rise, unlike in most other Gulf states, Bahrain had also avoided high inflation in the boom times of the past few years.

In part this too can be attributed to its more diverse economy and limited dependence on the energy sector, along with careful economic management. While not benefitting from the windfall revenues of soaring oil prices to the same extent as its neighbors, Bahrain had to be more circumspect in its spending program, especially on infrastructure and other state projects. This moderated domestic demand and helped keep inflation in check, with price rises for last year reaching 3.5%, compared to the double-digit inflation experienced by some other Gulf Cooperation Council (GCC) members in 2008.

Bahrain's economy has also benefitted from the liberal approach taken by the state towards investment and the conducting of business, with the government having cut red tape and created an open economic environment. The World Bank rates the Kingdom as the second-easiest place in the GCC in which to operate in its "Doing Business 2009" report, while the Heritage Foundation's 2009 Index of Economic Freedom ranks Bahrain as the freest economy in the Middle East and North Africa, and 16th globally.

Though very much a market economy, and one that is keeping well clear of recession, there is still a hint of caution in Bahrain's business community. According to the results of the latest HSBC Bank's "Gulf Business Confidence Survey", released in mid-June, confidence levels in Bahrain slipped slightly in May from March, falling to 78.2 from 80.7, with 100 as the base level of confidence recorded in the first quarter of 2007. The confidence rating may reflect Bahrain's more steady policy towards economic developments. Having managed the worst of the global financial storm and fared far better than most of its neighbors, the Kingdom can easily afford a considered approach to the future. (OBG06.07)

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11.2 UAE: Food & Drink Report Q3 2009

Research and Markets (http://www.researchandmarkets.com) announced the addition of the "United Arab Emirates Food and Drink Report Q3 2009" report to their offering. The United Arab Emirates Food Drink Report provides independent forecasts and competitive intelligence on the United Arab Emirates' food and drink industry.

The UAE has moved to the top of the regional Food & Drink Business Environment Ratings table for Q3/09. However, a sustained decline in crude oil and property prices, coupled with a marked decline in private investment, has forced us to revise down the UAE's GDP forecast to reflect a 1.7% contraction in 2009. Despite this, the country's standing as an attractive market for investors in search of near-term returns with premiumization potential remains largely intact. One of the world's highest per capita GDP's and a lack of market saturation are among the main attractions pulling food and drink investors to the UAE. Its soft drinks industry continues to be the subject of much attention, as discussed in this recently published UAE Food & Drink Report for Q3/09.

Earlier this quarter, Abu Dhabi-based food and drink giant Emirates Foodstuff and Mineral Water Company (Agthia) reported turnover of $232.5m and net income of $19.66m for FY08. The posting represented stellar year-on-year (y-o-y) growth of 48% and 89% respectively. Largely through its subsidiary Al Ain Mineral Water, Agthia's water and beverage business grew 40% y-o-y to $37.74m.

Continued revenue uptick should continue in FY09, not least because water is an essential household good and the UAE's standing as the world's highest per capita bottled water consumer. Unsurprisingly, the bottled water subsector is fiercely competitive with a number of UAE-based companies jostling for market share. Agthia shares the market with a band of manufacturers including Masafi, Oasis and Gulfa. Meanwhile, DohlerGroup, a high profile Germany-based producer of beverage ingredients, has launched a centre of expertise in Dubai. Targeting unmet demand, particularly within the health and functional drinks segments as demand for lower-sugar soft drinks pushes up rapidly, the company will look to supply domestic beverage companies. A growing number of consumers are likely to experiment with innovative drinks such as natural energy drinks and juices with lower sugar content.

Despite an uptick in demand for healthier soft drinks, led initially by the UAE's expatriate-heavy population and now picking up among Emirati citizens, demand for traditional carbonates and high-sugar juices is unlikely to fall by the wayside and will continue to represent the bulk of soft drinks sales minus the bottled water segment.

We has forecast soft drinks value sales to grow by 52.77% through to 2013, while per capita soft drinks consumption is set to grow by 26.75% over the same period - reflecting the opportunities that remain despite the UAE's small population. Investors seeking entry are likely to seize their opportunity (provided they can secure capital) before market saturation becomes a more pressing concern. (R&M29.06)

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11.3 EGYPT: Providing Security

With irrigation efforts moving slowly and imports beset by inconsistencies, Egypt has begun to follow its neighbors' lead into overseas farming. In particular, persistently high wheat prices, and the resulting social instability over the price of bread, have motivated the government to seek new sources for the staple. The so-called "land grab", where rich but infertile nations head to poorer yet arable ones to secure food for their populations, while not unfamiliar, is now happening on an unprecedented scale. Egypt did not embrace the trend as quickly as some of its neighbors, but since the bread riots in spring 2008 the government has announced two such projects in the hopes of providing respite to the price shock of the past year.

News of the first project came only one month after the bread riots broke out. In May 2008 Egypt and Sudan signed an agreement to start a joint project close to the shared border town of Wadi Halfa to help both countries become self-sufficient in wheat. Once production starts, it should produce 2m tonnes a year.

Operations have yet to begin in Sudan, but earlier this month the government announced its intention to sign another agreement, this time with Uganda. The details of the 200-ha project are still being debated over in the Egyptian parliament, but both sides stand to benefit and the deal is likely to go through. For Egypt, the deal offers Ugandan infrastructure, irrigation equipment, local staff and labor. In turn, it will provide technical and financial assistance, as well as the experts and seeds necessary for the project. Assuming the parliament approves, the government hopes to begin implementation early in the new fiscal year beginning July 1.

The wheat farms are not Egypt's first foray into overseas farming - the government operates a corn farm in Zambia, a rice farm in Niger and a vegetable farm in Tanzania, and there are plans to launch operations at a total of 14 farms across Africa - but they are significant because they are among the first efforts to address wheat scarcity after the instability in March and April of last year. The farms are particularly notable because they offer a sustainable solution, rather than the short-term measures the government took to diffuse frustrations.

Between the start of 2007 and mid-2008 the food price index rose by 78%, according to research by The Economist. In Egypt, the price of non-subsidized bread rose 25% in February 2008 alone. The increase, combined with an inflation rate of 13%, sparked demonstrations. Throughout the crisis, the government worked to show citizens that it was taking concrete steps to ease their burden, including announcements of pay raises for state workers and drafting the army to bake bread, but the international partnerships aim to address the problem itself, rather than just soften the consequences of rising prices. As it stands now, the government's efforts already strain national accounts. Bread subsidies require 5.5% of the national budget, about $3.1bn a year, and while the government has no plans to cut them soon, with the effects of the recession hitting national accounts, raising them would be difficult.

The offshore farms, therefore, offer a good compromise. Although they require an investment upfront, officials hope that they will help make up at least part of the estimated 9m tonnes shortfall that Egypt faces annually. The country does produce about 50% of its consumption and has stepped up irrigation and importing efforts, but at this point neither strategy is able to cope with demand.

Still, once some of the problems are ironed out, they should be more reliable sources. In an effort to address the water shortage, the Ministry of Agriculture and Land Reclamation has targeted 1.4m ha of the Sahara for reclamation by 2017. The plans are well on track and further expansion is slated in the Nile Delta, the Southern Valley, East Owaynat and the Suez Canal region. The government is also encouraging a gradual shift towards more efficient irrigation practices, in an effort to conserve increasingly depleted water resources. According to Abdel Ghani El Gindy of the Faculty of Agriculture at Cairo's Ein Shams University, the Ministry of Agriculture will cover 25% of the cost for modified methods of water conservation.

Even once the projects are finished, however, Egypt simply does not have enough water to sustain all the necessary production, according to Helmy Abouleish, the chairman of the Industrial Modernization Centre. "Self-sufficiency is not an option," he told OBG. "It's all about prioritizing the resources you have in order to achieve a better situation for farmers."

Egypt has traditionally relied on imports to offset its limited resources, but recent problems with shipments have complicated the usually dependable supply. The country has begun to rely more heavily on Black Sea wheat in recent years, as lower freight costs have made it more appealing. Between June 2008 and February 2009, Egypt imported 3m tonnes of Russian wheat, compared with 1.5m tonnes from the US. While the lower prices are attractive, there have been some problems with the quality of the shipments. A Russian shipment, which arrived with dead bugs and other impurities, has been under investigation since May. Egypt Trades, the company that imported the wheat, has been ordered to repay $9.6m to Egypt's main state wheat buyer, General Authority for Supply Commodities, amid accusations that the documents pertaining to the shipment were forged. Since then, over 100,000 tonnes of Russian wheat have been quarantined at Damietta, Port Said and Safaga ports for testing.

Despite the problems with the Black Sea shipments, the government has said that it has not placed any new restrictions on imports. It also issued a statement saying that the seizures of low-quality wheat will not affect this year's prices or supply levels because the 4.02m tonnes already reserved are enough to last through 2009.

The fragility of the quality of imports does, however, support the government's decision to reduce dependency on imported products. The government has said that it aims to reduce imports of wheat to about 45% of total annual consumption. While this is a good long-term goal, which efforts such as overseas farming and irrigation will support, the population is more likely to find relief from shifting macroeconomic factors. With inflation steadily decreasing for its peak of 23.6% in August 2008, to its May level of 10.2%, consumers have more purchasing power. Inflation is set to continue contracting over the next few months, which will help maintain social stability and allow the government to focus on the structural changes it needs to make to ensure long-term food security. (OBG02.07)

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11.4 TUNISIA: Statement of the IMF Mission on the 2009 Article IV Consultation

An International Monetary Fund (IMF) staff mission issued the following statement on June 24, 2009 in Tunis:

“An IMF mission has been in Tunis since June 10, 2009 to conduct the regular consultation under Article IV of the IMF Articles of Agreement, which requires an annual review of the economic policies of all IMF member countries. This review will conclude with the preparation of a report, which will be discussed by the Executive Board of the IMF in August 2009.

“The discussions focused on economic policies as well as the short- and medium-term economic outlook. The mission held wide-ranging discussions with the Governor of the Central Bank of Tunisia (BCT); as well as with the Ministers of Finance, Development & International Cooperation, Industry, Energy & Small & Medium-sized Enterprises, Social Affairs, Solidarity & Tunisians Abroad, Agriculture & Water Resources, Tourism, State Secretary to the Minister of Finance responsible for Taxation, State Secretary to the Minister of Commerce responsible for International Trade and State Secretary to the Minister of Development & International Cooperation responsible for International Cooperation and Foreign Investment. The mission also met with other members of the government and the administration, members of the Economic and Financial Committee of the Chamber of Deputies, representatives of the banking sector and business community, representatives of academia, and the social partners.

“Tunisia is relatively well positioned to withstand the international economic crisis owing to the reforms it has undertaken in recent years and its prudent macroeconomic policies, especially in the fiscal and monetary areas.

“After recording an annual increase in real gross domestic product (GDP) of 4.6% in 2008, Tunisia has experienced an economic slowdown since early 2009, in particular a significant decline in its exports, as the international economic environment has deteriorated. However, owing to the resilience of its tourism receipts, remittances of Tunisian workers abroad and foreign direct investment (FDI) inflows, its external position remains solid, with comfortable reserve levels totaling some $9 billion at end-May 2009. The current account deficit, which stood at 4.2% of GDP in 2008 as a result of rising imports of commodities and capital goods, continues to be largely financed by foreign investment inflows. Inflation declined from an average of 5% in 2008 to 3.3% in May 2009 thanks to lower global prices and an appropriate monetary policy. The fiscal position improved markedly in 2008 as the deficit fell to 1.2% of GDP, which brought the public debt ratio down to 47½% of GDP. At the same time, the external debt continued to decline, with a medium- and long-term external debt ratio of 42% at end-2008 compared with 54% in 2005.

“The Tunisian financial sector has not been directly affected by the international crisis. The authorities have continued their long-term strategy of reinforcing the banking sector, which has led to a decline in the ratio of non-performing loans to total loans from 17.6% in 2007 to 15.5% in 2008 and an increase in the provisioning ratio from 53.2% in 2007 to 56.8% in 2008. The authorities intend to continue this effort even after they reach their targets of 15% and 70%, respectively. The mission noted that a more forward-looking and comprehensive approach to the prudential indicators could be beneficial, particularly in the context of the implementation of Basel II.

“With the economies of its trading partners expected to shrink some 4% in 2009, Tunisia’s immediate challenge is to minimize the impact of the decline in external demand on growth by rapidly implementing an economic recovery program. At end 2008, the Tunisian authorities adopted a series of measures that will be broadened and extended under the 2009 Supplementary Budget, which also calls for additional fiscal expenditures aimed at supporting domestic demand. The resulting increase in the budget deficit to 3.8% should not undermine macroeconomic stability, particularly the external position, public debt ratio, and inflation. Moreover, the BCT has reacted to the economic slowdown by appropriately easing monetary policy. The mission supports the authorities' economic recovery program and notes that the fiscal stimulus should continue in 2010 until the global economic recovery strengthens. On this basis, the GDP growth target of 3% in 2009 could be achieved if recovery measures rapidly impact demand. However, the persistence of uncertainties about the global economy presents a downside risk for tourism receipts and remittances from emigrant workers.

“In the medium term, Tunisia's main objective remains reducing the unemployment rate, particularly among young university graduates. The policy of opening up Tunisia’s economy to the global economy, which continued despite the international economic and financial crisis, and sustained continued structural reforms, particularly in the financial sector, should enable the Tunisian economy to benefit fully from the global economic recovery and to increase its long-term growth potential.

“The mission supports the authorities’ intention to rapidly return to their medium-term policy of fiscal consolidation when economic growth is restored in their trading partners, which will allow the public debt ratio to return to a declining path. Moreover, with a vigilant monetary policy on the part of the BCT - aimed at preventing inflationary pressures from eventually intensifying - preservation of macroeconomic stability will continue to create a sound environment favoring private investment. Tunisia is also pursuing policies to improve its business environment, particularly by simplifying customs procedures and creating better logistical infrastructures in support of international trade.” (IMF29.06)

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11.5 TURKEY: Economy Under Pressure

Turkey's economy is still dealing with the effects of the global recession, having seen export markets dry up and domestic demand weaken, though it has avoided a repeat of large-scale financial meltdowns of the past and is expected to return to growth in 2010. The World Bank and the IMF forecast that the Turkish economy would shrink by 5 - 5.5% this year, an estimate the government has come to accept, though until April some officials were still hoping that the country could avoid falling into recession and would post growth of 4% in 2009.

The Organization for Economic Cooperation and Development (OECD) was somewhat harsher in its latest predictions, forecasting a 5.9% contraction in a report issued on June 24. While saying the Turkish economy could rebound in 2010, posting growth of 2.6% thanks to interest rate cuts and tax relief measures for the private sector, the OECD warned that the government had to keep spending in check, with an IMF loan agreement assisting to lock in austerity measures. "A new standby agreement with the IMF would also help by providing a reliable funding source and credible monitoring," the report said.

However, there is no certainty that any agreement with the international lender will be struck. Though Turkey broached the issue of a new loan with the IMF late last year, with a figure of up to $45bn being discussed, there have been a number of sticking points that have prevented any deal being finalized.

In particular, the government does not want to have its hands tied regarding fiscal policy, rejecting IMF demands to implement a wider austerity program, or to create an autonomous tax administration, a move Prime Minister Erdogan has described as unacceptable.

The government has been giving out mixed messages over the standby discussions with the IMF - Erdogan saying in mid-June that a standby arrangement is not essential for Turkey, though earlier in the month he said an agreement would be sealed by autumn at the latest. On June 25, the deputy prime minister, Ali Babacan, who is also the state minister for the economy, said talks were continuing with the IMF, though the government was making preparations for two different scenarios, one taking into account reaching a loan agreement with the fund, and the other relying on other resources.

A number of Turkey's leading business groups, including the influential Turkish Industrialists and Businessmen's Association, have called for the government to finalize an agreement with the IMF, both to provide a cash injection into the economy and bolster confidence.

Confidence, along with liquidity, remains in short supply. Though the latest figures issued by the Turkish Board of Statistics in mid-June show the unemployment rate has eased, falling from 16.1% in February to 15.8% in March, much of this improvement can be attributed to seasonal factors, with the agriculture sector soaking up some of the excess in the labor pool due to planting and harvesting requirements. Since mid-2008, the Turkish economy has shed around 1.2m jobs, with a total of 3.7m workers listed as unemployed.

Turkey's industrial sector has been especially hard hit by the crisis, with output and capacity utilization falling for each of the past nine months. Output figures for April, released at the beginning of June, showed production levels fell by 18.5% compared to the same month in 2008, though the rate of decline was slightly slower than for the previous month, prompting some analysts to suggest the crisis in the industrial sector was easing, aided by cuts in sales taxes put in place by the government in March.

Worst affected is the automotive sector, one of the Turkish economy's growth engines in the past and its leading industrial export earners. Vehicle production was down 59% in the first quarter of the year, with most major manufacturers halting assembly lines for periods over that time and into the second quarter. Overall exports are also down, falling 39.97% in May and totaling just $35.8bn for the first five months of the year, well off the performance of 2008 that saw Turkey send more than $120bn of goods and services overseas.

There was some good news for Turkish exporters in the OECD's June 24 reports, with the organization saying that the European economy will be flat in 2009, an improvement on the expected 4.8% contraction this year. With Europe being Turkey's largest export market, representing around 50% of all overseas sales of goods and services, an end to the steep downturn in the Eurozone will be seen as a hopeful development for Turkey.

While many of the cornerstones of the Turkish economy have been eroded by the crisis, the tourism sector has shown itself to be remarkably resilient. According to figures released by the Culture and Tourism Ministry on June 23, some 7.37m overseas visitors came to Turkey in the first five months of the year, just 0.7% down on the January to May period in 2008. With tourism being one of the largest foreign currency earners for Turkey, a solid performance in the peak summer season could help mitigate some of the effects of the recession.

To try and stimulate the economy and restart the flow of money into the market, the Turkish Central Bank has instituted a series of cuts to its prime interest rates, the latest on June 16, which saw the bank's key borrowing and lending rates reduced to all time lows of 8.75% and 11.25% respectively, though the bank struck a cautious note. "Foreign demand continues to be weak and internal investment demand is regressing," the bank's monetary policy board said in a statement announcing the most recent cuts. "We believe recovery in economic activity will take time, employment conditions will stay the same for a while and that inflation will remain low."

Hopes for a quick recovery of the Turkish economy will be linked in part to its major trading partners bouncing back from the effects of the global recession, as well as an increase in domestic demand. With only limited funds at its disposal and under pressure from the IMF to take a measured approach to spending, the Turkish government's room for fiscal stimulus remains somewhat limited. (OBG02.07)

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11.6 TURKEY: EU - Turkey politics - Good intentions?

The Economist Intelligence Unit reported that Turkey's EU membership negotiations have made painfully slow progress since they were formally launched in October 2005. The talks are now practically at a standstill, with eight chapters blocked because of the Cyprus issue and Turkey failing to meet the preconditions on many more. Despite recent announcements by the government that it intends to push forward on EU-related reforms, little substantial progress is expected in the coming months, not least because the Turkish parliament went into recess on 1 July.

Over the past three and a half years Turkey has opened just ten of the required 35 negotiating chapters. Only one was provisionally opened and closed before the EU suspended negotiations on eight chapters in December 2006 because of Turkey's refusal to ratify the so-called Ankara protocol requiring it to open its ports and airports to Greek Cypriot ships and aircraft. Nine others were opened, but they may not be provisionally closed until the protocol is ratified. In comparison, Croatia, which started EU accession negotiations at the same time as Turkey, has opened 22 chapters and provisionally closed seven.

Since the July 2007 general election, expectations that the pro-EU Justice and Development Party (AKP) government led by Prime Minister Erdogan would speed up the reform process to revive Turkey's flagging EU negotiations have been repeatedly disappointed. It remains to be seen whether recent government announcements following a cabinet reshuffle on May 1st will result in any concrete progress. The incentive is certainly there, because Turkey-EU relations will face a difficult test towards the end of 2009 when the EU will present its review of Turkey's refusal to ratify the protocol.

A government spokesman, Cemil Cicek, had previously indicated that before 1 July the AKP planned to pass several bills intended to bring Turkish legislation into line with EU norms. The bills include reforms to strengthen the fundamental freedoms of speech, religion and association, as well as stronger anti-corruption legislation and judicial reform. On May 22nd the newly appointed Foreign Minister, Ahmet Davutoglu, visited all of the political parties in parliament to gauge to what extent the government would be able to count on their support for the bills. None had been approved by the recess, having been held up at the parliamentary committee stage. There is still a possibility that an extraordinary session of parliament could be held during the summer recess, given that parliament is due to elect a new speaker in August. This could allow the package of bills on EU reform to be tabled, so that it can be voted on when parliament reconvenes on October 1st, before the EU's review of the Ankara protocol is presented.

Providing a glimmer of encouragement to the accession talks was the announcement on June 26th by Turkey's chief negotiator with the EU, Egemen Bagis, that an eleventh negotiating chapter - on taxation - is due to be opened on the final day of the Czech Republic's EU presidency on June 30th. Turkey has apparently met all the conditions for the chapter to be opened, although it will continue to face resistance from member states who feel that no new chapters should be opened before the end-of-year review.

On hold

In late May, Prime Minister Erdogan declared in an interview that Turkey would not be willing to open Turkish ports to Greek Cypriot vessels, unless reciprocal measures were taken by the Greek Cypriot authorities (such as the recognition of Ercan airport in Northern Cyprus). At present, it is unlikely that Turkey will back down from this stance unless it can be persuaded that a settlement of the decades-old division of Cyprus is about to be brokered.

Very little progress has been made in the Cyprus negotiations, which began in September 2008, although both Cypriot leaders - the Greek Cypriot president of the Republic of Cyprus, Demetris Christofias, and the Turkish Cypriot president of the unrecognized Turkish Republic of Northern Cyprus (TRNC), Mehmet Ali Talat -still appear to be committed to finding a solution. During a visit to the UN on June 5th Mr. Davutoglu, probably aware that time is running out, called upon the UN, EU and the US to weigh in more heavily to help Cyprus reach a final settlement.

That said, Turkey's role will also be crucial in reaching any final agreement. Turkey has a direct say in two of the most contentious issues - territory, and security and guarantees - since it has tens of thousands of troops in northern Cyprus. A settlement would be a huge boost to Turkey's EU membership prospects. However, even with the goodwill that is currently being shown by the two sides, there is a considerable risk that time will run out before Mr. Talat faces almost certain defeat to a more hardline opponent in the presidential election in April 2010. (EIU29.06)

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11.7 TURKEY: Food & Drink Report Q3 2009

Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "Turkey Food and Drink Report Q3 2009" report to their offering.

The impact of the global economic crisis is being felt in Turkey, due to the fact that a deep recession for the country in 2009 is all but unavoidable, as discussed in this recently published Turkey Food & Drink Report for Q3/09. With the global economic outlook deteriorating further and with a protracted credit constriction accentuating waning foreign capital inflows, it is clear that there will be some tough times ahead for the country. Turkey is facing its largest economic contraction in at least two decades, with our real GDP growth forecast revised to -5.7% for 2009, which will have a clear impact on domestic demand, including the food and drink sector.

Already a number of industry leaders have reported poor full-year results for 2008. In April, local drinks major Anadolu Efes reported a fall in net profit despite double-digit sales growth. The company's net profit dropped by 17% year-on-year (y-o-y) to TRY309.7mn ($193.4mn) while turnover grew by 21% y-o-y to hit TRY3.67bn ($2.33bn). Meanwhile, Anadolu Efes' subsidiary Efes Breweries International (EBI) posted a net loss of $57.4mn for FY08, despite excellent revenue growth, as sales increased 24.1% y-o-y to $1.04bn. An adverse foreign exchange climate has hampered both drinks companies. Despite EBI's turnover picking up sharply in FY08, turnover growth slowed down markedly in Q408, reflecting a noticeable deterioration in consumer confidence across EBI's markets, including Russia where it experienced a 5% y-o-y contraction in that quarter.

Meanwhile, Turkey-based soft drinks giant Coca-Cola Icecek (CCI) also announced poor results, as net profit fell by 47% y-o-y, despite strong volume growth. The company attributed this hit to its bottom line to an unfavorable foreign exchange climate. Like EBI, CCI's international turnover could come under strain in 2009, as its foreign business includes a number of CIS markets that are expected to fall into deep recessions this year. However, we note that while the recession of 2009 will certainly impinge on CCI's turnover potential, the soft drinks industry (particularly the carbonates and bottled water segments) typically performs well during periods of economic strain - as belt tightened consumers are likely to turn to cheaper carbonates ahead of more expensive segments such as juices. CCI's outlook is bolstered further by the fact that it faces fairly limited competition from alcoholic drinks in its predominantly Islamic domestic market.

Another drinks producer which is hoping to do well out of the current crisis in Lipton, the world's largest tea brand. Unilever, the firm that produces Lipton teas, has said that sales have actually been increasing in the face of the current financial crisis as more consumers entertain at home. As was the case with Turkey's other recessions over the past two decades, we expect a recovery to positive growth in subsequent years. However, we caution that with the external climate likely to remain weak, the recovery will be mitigated, indicating that producers will be facing lower profits for several years to come. (R&M26.06)

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11.8 CYPRUS: 2009 Article IV Consultation, Concluding Statement of the IMF Mission

The global crisis has started to affect Cyprus. After some years of credit-financed overheating, the economy is headed for a sharp slowdown which will put pressure on the private sector, banks and the public sector to adjust balance sheets. Cyprus has been relatively shielded from the crisis until now, largely because of a lesser reliance on exports, prudent fiscal policies in the past, euro adoption and a resilient financial sector which has not needed public capital injections. However, the evaporation of growth in 2009–10 will worsen credit risk in the banking sector which will bear monitoring and make current fiscal policies unsustainable without a policy correction. Structural reforms will be needed to assist the recovery and boost growth potential.

1. Cyprus appears to be weathering the global crisis so far. It is the only country in the euro area to record positive growth in Q1/09, and among those that have not required public capital injections into its financial sector. The relatively benign impact of the crisis is due, in part, to conservative financial sector practices and strict supervision, and the elimination of exchange rate risk following euro adoption. Past budget surpluses, low public debt, and the long-awaited enactment of pension reforms have also sustained investor confidence, as evidenced by a successful sovereign bond issue in June 2009.

2. Nevertheless, the economy is headed for a sharp slowdown in 2009-10. This deterioration is inevitable given Cyprus’ close links with its key economic partners - the U.K., Greece and Russia - who are already facing economic difficulties. Growth is forecast to fall sharply in 2009 followed by a mild recovery to some 1% in 2010. A recession looks unlikely at this stage, although, given large uncertainties, a worse outcome cannot be ruled out. Medium-term recovery will be tepid unless competitiveness is enhanced.

3. The downturn has begun to expose underlying vulnerabilities that have built up during the credit-financed overheating of the economy in 2007-08. The private sector is highly leveraged, and banks and households have large exposures to the property market which is beginning to correct itself. Balance sheets will therefore need to adjust to the new economic realities. Moreover, the budget deficit has increased sharply due to recent inelastic spending increases in combination with declining revenues. Finally, a large current account deficit may not be sustainable over the medium-term.

4. Policies for 2009-10 will need to mitigate short-term risks without endangering medium-term sustainability. Euro adoption has shrunk the policy tool kit, with the onus on fiscal policy, financial sector supervision and structural reforms to deliver the authorities’ medium-term objectives of promoting growth and fostering social cohesion. The mission’s recommendations therefore focus on identifying the main priorities for policymakers.

Financial Sector: Prevention will be easier than a cure

5. A key priority should be to preserve the strength of the financial sector through continued strong supervision and early detection of risks. Given the large size of the sector relative to the economy and high concentration ratios, problems in this sector can quickly escalate to systemic proportions with serious repercussions for the economy. Policies should therefore focus on nipping problems in the bud.

6. The financial sector is holding up, helped by its focus on traditional banking activities, predominant reliance on domestic retail funding and limited exposure to toxic assets. Both domestic and foreign deposits are holding steady thanks to confidence in the banking system, the planned expansion of deposit insurance and the relative strength of the banking sector compared with the region. Lending has decelerated as underwriting standards have been tightened to protect asset quality. Deposit rates have started to decline as liquidity concerns have subsided.

7. Banks, supervisors and policymakers have reacted appropriately to the crisis. Banks are restructuring their balance sheets by increasing interest rate spreads to preserve profitability, strengthening capital, securing funding and enhancing risk management. Supervisors have increased vigilance and welcome improvements to the regulatory framework are in the works. There has been significant progress in implementing EU Directives and recommendations from the IMF’s 2008 Financial Sector Assessment Program. Increased funding for the deposit insurance scheme is reassuring. A legal framework for covered bonds should ease banks’ access to ECB liquidity facilities and should be implemented rapidly. The draft law on crisis management should strengthen the authorities’ hand in preemptively addressing liquidity or insolvency problems.

8. Although bank soundness indicators are likely to weaken further, risks seem manageable. Bank profitability and capital buffers have declined, while NPLs have risen. These indicators are likely to deteriorate further, but stress tests indicate that risks remain contained. Risks from counterparty exposure and contagion have also eased in line with improving global financial conditions. Going forward, the most important risk to financial stability is the worsening economic environment, given a highly leveraged private sector and a relatively unseasoned and untested bank credit portfolio.

9. There will be continued need for strong supervision and enhanced cross-border cooperation. Cyprus’ reputation as a financial center depends on effective and arms-length supervision by an independent and accountable central bank. Since liquidity risk can rise quickly in response to international developments, the Central Bank of Cyprus (CBC) will benefit from EU initiatives on monitoring developments in bank funding, cross-border exposures, and counterparty risk management. The CBC could consider preemptively requiring higher regulatory capital on account of an expected deterioration in asset quality and liquidity risk—this may delay planned dividend pay-outs. Loan-to-value ratios on second homes may need to be reviewed in line with property price developments. Shortening the foreclosure procedure will facilitate a more rapid property price correction and bank balance sheet adjustment. Participation—as host and home supervisor—in supervisory colleges by end-2009 should strengthen cross-border supervision.

10. There is room to further improve supervision and the safety net. The stress testing framework should be expanded to include a wider coverage of institutions (including cooperatives) and risks. Better monitoring and cross-checking of results and improved CYSTAT statistics on real estate and household leverage would help risk assessment. Additional resources would be required for financial sector supervisors and financial stability assessments. Over the medium term, a single supervisor for all credit institutions operating in Cyprus could enhance efficiency, and establish a level playing field. Given the integrated nature of the financial sector in Cyprus, a more integrated supervisory structure based in the CBC would be preferable to the current sectoral approach. Ongoing work in the EU to strengthen the crisis management framework (including deposit guarantee schemes) is expected to strengthen the Cypriot authorities’ preparedness further.

Fiscal Policy: The public sector must live within its means to be sustainable

11. The mission supports the government’s desired fiscal objectives—to reduce the budget deficit below 3% of GDP in 2009-10 and achieve a balanced budget over the medium-term. For a small open economy like Cyprus, fiscal expansion to support growth is less likely to be effective given high import elasticities. As markets increasingly differentiate between country risks even within the euro area, the fiscal multiplier could turn negative if large deficits reduce investor confidence in fiscal sustainability. A conservative fiscal stance would, on the other hand, help sustain confidence in the financial sector by improving the perceived ability of public finances to absorb financial sector-related contingent liabilities, and keep public sector guarantees credible.

12. Current policies would need to be strengthened significantly to achieve the government’s objectives. On current spending plans, we estimate that the general government deficit will reach 3.9% of GDP in 2009, a sharp reversal from the surpluses of 2007-08. Without significant course correction in 2009-10, this could be the beginning of an expansionary debt-deficit cycle which will soon be unsustainable. The mission estimates that the budget deficit would need to decline by some percentage of the GDP a year to achieve the government’s own objective of structural fiscal balance over the medium-term.

13. The announced spending priorities are appropriate; however policies are moving in the opposite direction. According to the Stability Program, the government intends to curtail public consumption while emphasizing productivity-enhancing investments, structural reforms and social spending. The measures identified so far are all on the revenue side, with relatively small and temporary effects on the budget deficit. Spending measures—for example, the envisaged hiring plans and wage increases and untargeted social support measures introduced in past years—will permanently increase public consumption. On the other hand, productivity-enhancing investments have been slow to get off the ground and plans to expedite private investment approvals have not been effective.

14. Fiscal adjustment should rely on reducing public consumption, especially the wage bill which accounts for a third of total spending. Hiring and wage controls and a more efficient use of civil servants in the context of a broader public administration reform would be desirable. It may be time to extend the concept of flexicurity from the private sector to the public sector. These measures would control the wage bill, reduce crowding out of the private sector in the labor market, improve social cohesion and increase productivity. To further enhance social cohesion and protect the budget, social support measures should be targeted to reach the truly needy; untargeted schemes implemented in 2008 may need to be revisited. It would also be critical that the temporary stimulus measures be reversed when the economy recovers. A medium-term budget framework aiming to contain spending below nominal GDP growth and control public sector employment should be implemented.

15. Public sector asset-liability and cash management should be improved. It should be bolstered by transparently accounting for contingent liabilities which would need to be monitored carefully so that overall exposures do not deteriorate rapidly as economic conditions worsen. Public sector aid programs should be designed to protect competition and minimize moral hazard and adverse selection.

16. The passage of long-delayed pension reforms is commendable; however, additional reforms may be needed down the road to reduce budget spending. The recent reforms increase contribution rates, tighten eligibility criteria and aim to establish an independent body to manage assets. Real reserves are being accumulated in the Social Investment Fund with periodic reviews to assess the Fund’s viability and take necessary corrective actions. Additional reforms that will become necessary over time are: increasing the retirement age in line with other euro area countries; indexing benefits to prices to reduce spending pressures, and better aligning public and private pension benefits.

Structural reforms: Translating plans into action will be critical

17. Improving competitiveness will assist recovery and enhance growth potential. Cyprus remains attractive to foreign investors due to strategic, historical, institutional and economic advantages. It is also gaining competitiveness in the broader service sector. However, manufacturing and tourism face competitiveness problems, and wage growth has outstripped productivity increases. Cyprus will also need to replace jobs lost in construction.

18. The priorities and plans in the National Reform Program are appropriate; however, implementation has been slow. A key priority should be to reduce red tape and improve the business climate, helped by improving the productivity of the public sector. Plans to implement the EU Services Directive by end-2009 are welcome.

19. Wage increases must align with productivity. The automatic wage indexation mechanism (COLA) hampers competitiveness. Alternative measures could be considered to limit the damaging impact, for instance, by targeting COLA more effectively. Until such time as the COLA mechanism can be amended, it would be important to keep inflation under control by raising productivity though competitiveness-enhancing structural reforms. In this regard, the willingness of labor unions, government and businesses to follow through with the wage cuts determined by the COLA mechanism in the second half of 2009 is welcome. (IMF29.06)

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11.9 GREECE: Food & Drink Report Q3 2009

Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "Greece Food and Drink Report Q3 2009" report to their offering. The Greece Food Drink Report provides independent forecasts and competitive intelligence on Greece's food and drink industry.

The Greek dairy sector has tremendous potential for international growth, with demand for Greek style yoghurt, feta cheese and other Greek dairy specialties increasing rapidly. This is in contrast to the domestic sector where high levels of competition and market maturity mean that many firms struggle to turn a profit. With the opportunities abroad so much greater than those at home, Greece's major dairy producers are now turning their attentions to the international stage.

Greece's largest dairy firm Fage is enjoying significant success on the export front, led by its Total yoghurt brand. In 2008, Fage's international sales increased by 22.5% in volume terms and 17.7% in value terms - thanks largely to volume growth of 42% in the US, 11% in the UK and 9.5% in Italy. The firm's products therefore look well positioned to deliver dynamic growth in international markets in line with growing interest in ethnic and regional cuisines. Total yoghurt also has the additional advantage of being produced from 100% natural ingredients (indeed the only ingredient is yoghurt). A move towards natural products that use a limited number of ingredients has been one of the major food trends of the last few years and sets Total apart from the offerings of other international dairy firms. This growth has been matched with investment, and in February 2008 Fage inaugurated new production facilities in the US, which should facilitate the firms continued expansion in this region.

Meanwhile, in January 2009, Greece's largest food group Vivartia announced that it had established a partnership with Japanese dairy group Morinaga. The deal will see Vivartia supply the Japanese firm with the technical know-how to produce Greek-style yogurt and give the Greek firm a base for offering its products to the Japanese market. To aid its international expansion, Vivartia has reached the conclusion that these types of partnerships will become increasingly important and has recognized that its current organizational structure may be too large and unwieldy to facilitate this. The group will therefore split into four separate subsidiary companies - responsible for drinks and dairy, bakery and confectionery, food service and entertainment, and frozen, as part of a wide-ranging revamp designed to aid international expansion. The move is being pursued to help the firm attract international partners and bring greater flexibility to each unit's decision making. Vivartia will remain as a holding company for the group.

This international success is in contrast to the Greek domestic market, where high levels of competition have put a dampener on profits. This level of competition meant that Fage actually posted a net loss in both 2007 and 2008, with its gross profit also declining. This suggests that while opportunities abound on the international front, there may be over capacity on the domestic front, which could prompt future consolidation activity. (R&M26.06)

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- Turkish Lira conversions done at a rate of NTL 1.60 = $1.00
- Euro conversions done at a rate of € 1.00 = $1.25
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