• Camtek's Sela Division Chosen as Leading Nanotechnology Company in Israel
• Innovative Wireline Solutions Completes Equipment Sales Agreement with Libya's Arrawafed
• Israel Tackles Electronic Waste
• Qatar World Cup Award to Kickstart Construction
• Cyprus Annual November Inflation Halves To 1.5%
• MOROCCO: Paths to Progress
  

TABLE OF CONTENTS:

1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Eilat Port Privatization Underway
1.2 ISA Unveils Tighter Energy Exploration Reporting Rules

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Osem Buys Rest of Tivall For $129 Million
2.2 Camtek's Sela Division Chosen as Leading Nanotechnology Company in Israel
2.3 Mellanox Technologies Announces Definitive Agreement to Acquire Voltaire for Cash
2.4 Ellomay Capital Enters the Israeli Energy Market
2.5 Noble Energy Announces Operational Update at Leviathan Offshore Israel
2.6 Allot Communications Announces Approval of Dual Listing on the Tel-Aviv Stock Exchange

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Burger Fuel Plans 15 Outlets in the UAE
3.2 Polaris Wireless Expands International Operations Opening Regional Headquarters in UAE
3.3 Purfresh Extends Its Cold Storage Solution with the Release of the Multi-Room Control Box
3.4 Innovative Wireline Solutions Completes Equipment Sales Agreement with Libya's Arrawafed

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Israel Tackles Electronic Waste
4.2 Israel's Mapal Raises $9 Million from CSS Europe
4.3 China Sunergy & Pythagoras Solar Partner to Develop Highly Adaptable Solar Windows

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Lebanon & Turkey Sign Free Trade Agreement
5.2 Jordanian-Canadian FTA Approaching Final Stages of Approval
5.3 Jordan Appoints New Central Bank Governor
5.4 Kuwait Annual Inflation Eases Slightly to 5.1% in October
5.5 Kuwait Plans $1.8 Billion Wastewater Treatment Plant
5.6 Bahrain Economy Grows Y-O-Y by 4.3% in Third Quarter
5.7 Qatar to Host World Cup in 2022
5.8 Qatar World Cup Award to Kickstart Construction
5.9 UAE Steel Industry Analysis
5.10 One-Third of UAE Residents Could Have Diabetes or Prediabetes by 2020
5.11 Dubai's Real GDP Growth Expected At 2.3% in 2010
5.12 Oman's September Inflation at 19 Month High on Food & Housing
5.13 Saudi in Talks With Senegal Over Farmland
5.14 Saudi Arabia & Egypt to Link Power Grid By 2013

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkey Rises in Growth List As Government Fixes Calculation Mistake
6.2 Turkish Fuel Prices Increase Inflation In November
6.3 Cyprus Annual November Inflation Halves To 1.5%
6.4 Greek State Revenues in Sight of Goal
6.5 Greece Freight Transport Report Q1 2011

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel Thanks, Bids Farewell to Foreign Fire-Fighting Teams

*REGIONAL:

7.2 Jordanian Government to be Reshuffled
7.3 Bahrain King Names Four Women To Upper Chamber
7.4 Cypriots Feel Healthy
7.5 Egypt Vote Leaves Near Single-Party Parliament
7.6 Muammar Gaddafi's 'Cultural' Tours to Libya For Italian Models Revealed In Diary

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Pfizer & Protalix BioTherapeutics Submit taliglucerase alfa for European Marketing
8.2 Therapeutic Potential of Compugen Discovered Target for Multiple Myeloma Treatment Supported

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 HelpByLeo.com Enables Anyone to Use Any Software Application Functionality, Instantly
9.2 Objet Launches Two New Desktop 3D Printers Starting at $19,900
9.3 Navajo Systems' Virtual Private SaaS for Salesforce Now Available on AppExchange 2
9.4 Magic Software Signs New Deal with Celebi, a Leading Provider of Ground Handling Services
9.5 Nihon Unisys Has Adopted Magic Software's iBOLT Integration Tool
9.6 Nova Extends its Leadership of the Copper CMP Process Control Market
9.7 Elbit Systems to Supply a European Country With Communication Systems for €17.7 Million

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israeli Real Estate Market Ranked 4th In World

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11: IN DEPTH

11.1 ISRAEL: IMF Article IV Consultation - Concluding Statement of the Mission
11.2 KUWAIT: Towards a Healthy Future
11.3 QATAR: Qatari Law Will Test Media Freedom
11.4 SAUDI ARABIA: Infirm Politics
11.5 EGYPT: Gas Will Be the Dominant Fuel in Egypt in 2010 – Some 50% of Primary Energy Demand
11.6 EGYPT: Making the Grade
11.7 ALGERIA: Pharmaceuticals & Healthcare Market Is To Reach $5.82 Billion by 2019
11.8 MOROCCO: Paths to Progress
11.9 TURKEY: Fitch Revises Turkey's Outlook to Positive; Affirms 'BB+' Ratings
11.10 TURKEY: Pharmaceutical Market Valued At $10.83 Billion in 2009
11.11 GREECE: Finance Minister Cites 10 Major Challenges Facing Greece In 2011

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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1 Eilat Port Privatization Underway

The privatization of the Eilat Port Company is underway. On 6 December, the ministerial privatization committee authorized the Government Companies Authority to begin the privatization of Israel's third largest port. The privatization of the Eilat Port was intended to speed up the port's operations and logistics by a private party experienced in port operations. This decision follows the cabinet decision from 2005 to reform the ports. The ports reform includes selling the operating rights at the ports for 15 years, with an option to extend for 10 years. A plan to move the Israel Navy base in Eilat to the area of the civilian port delayed the privatization of the port until now. It recently became clear that moving the navy base to the civilian cost would be very costly and that a military presence in the port would result in restrictions on the types of cargo that the port could handle. Consequently, it was decided to keep the base at its present location, but to reduce its area. The vacated land will be used for Eilat's tourism development.

The Government Companies Authority has not yet decided whether to sell the Eilat Port as is, or to create a special purpose company. The Eilat Port handles 6% of Israel's marine cargo. Its main cargo last year was the import of 140,000 motor vehicles, which accounted for 65% of the port's activity, and the export of 2.4 million tons of phosphates. Eilat Port posted a net profit of NIS 20 million on NIS 100 million revenue in 2009. (Globes 06.12)

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1.2 ISA Unveils Tighter Energy Exploration Reporting Rules

On 6 December, the Israel Securities Authority presented its new reporting rules for oil and gas exploration companies. The Securities Authority wants to prevent the flood of incomprehensible announcements and to increase the transparency of the oil and gas exploration partnerships to their investors. The Securities Authority said that this document was a preliminary draft, which was being submitted for public comments, after which the final draft will be written and submitted. At the core of the guidelines is the Petroleum Resources Management System (PRMS), which is used by the global oil and gas industry, including in the US and Canada. The Securities Authority made minor adjustments to the PRMS model, but the new rules fully rely on its precise definitions and forbid notices to the TASE that do not use the model's definitions. In addition to the requirement to use the PRMS model, the Securities Authority has ordered that the discovery of oil resources will be made at the project level, in contrast to the US and Canada, where it is permissible to announces reserves according to segments at the state level, or by type of petroleum. The Securities Authority's guidelines divides oil resources or wells into two main categories: prospective resources (before the drilling of an exploratory well), and conditional resources or reserves (after the drilling of an exploratory well). All announcements after drilling of an exploratory well will now be required to use PRMS language, as defined by the Securities Authority. For stages preceding the drilling of an exploratory well, the Securities Authority recognizes that it is sometimes necessary to make a quantitative report about prospective resources "despite the subjective nature of this kind of information", as the Securities Authority put it. In addition, oil and gas exploration partnerships will be required to include in their announcements a warning that the information therein is only an assessment. An announcement will also include an opinion on the reserves available to the partnership, and an opinion on the conditional or prospective resources, provided that it has a material effect on the type, quantity, or other critical aspects of the well. (Globes 06.12)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Osem Buys Rest of Tivall For $129 Million

Israeli food processor Osem Investments announced plans to buy the 42% of Tivall its does not own for NIS some $129 million from its kibbutz owners. Osem, itself 53.8% owned by Swiss food company Nestle, already held 58% of Tivall, a stake it bought from Kibbutz Lohamei Hagetaot. Tivall makes vegetarian and meat substitute products. A 2005 deal gave Osem the option to acquire full control of Tivall in 2013, but in March the kibbutz agreed to bring forward the date of the option. Complete ownership allows the Osem Group to continue to expand in the meat substitute and salads markets in Israel, Europe and the US. In January, Tivall bought US-based Foodtech International, also a maker of vegetarian food. (Ynet 24.11)

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2.2 Camtek's Sela Division Chosen as Leading Nanotechnology Company in Israel

Camtek announced that SELA - Semiconductor Engineering Laboratories, whose share capital was fully acquired by Camtek in November 2009, was chosen as one of the top 10 nanotechnology companies in Israel by the NanoIsrael 2010 Committee. SELA is engaged in the development, manufacturing and marketing of automated SEM (Scanning Electron Microscope) and TEM (Transmission Electron Microscope) sample preparation equipment, primarily for the semiconductor industry. SELA's Xact system is the first TEM/STEM sample preparation system using Adaptive Ion Milling (AIM) technology. The AIM technology brings numerous advantages to traditional FIB (Focused Ion Beam) technology by reducing the sample thickness to below 20nm over a large area with high precision and throughput, as well as superior image quality. SELA has the ability to enable material analysis on the atomic scale and image structures and material interfaces in a controlled and unique manner otherwise unattainable.

Migdal HaEmek's Camtek (http://www.camtek.co.il) provides automated solutions dedicated for enhancing production processes and yield, enabling their customers new technologies in two industries: Semiconductors, Printed Circuit Board (PCB) & IC Substrates. Camtek addresses the specific needs of these industries with dedicated solutions based on a wide and advanced platform of technologies including intelligent imaging, image processing, ion milling and digital material deposition. Camtek's solutions range from micro-to-nano by applying its technologies to the industry-specific requirements. (Camtek 24.11)

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2.3 Mellanox Technologies Announces Definitive Agreement to Acquire Voltaire for Cash

Mellanox Technologies and Voltaire have signed a definitive agreement under which Mellanox will acquire 100% of Voltaire's outstanding ordinary shares for cash at a price of $8.75 per share, or a total equity value of approximately $218 million ($176 million net of cash). The terms of the transaction have been unanimously approved by both the Mellanox and Voltaire Boards of Directors. The transaction is currently projected to close in Q1/11, subject to certain closing conditions. The combined businesses currently have approximately 700 employees and achieved revenues of $217 million for the twelve months ended Sept. 30, 2010. Mellanox expects to run the combined business from both companies' current offices located in Israel, the United States and around the world. Further, Mellanox intends to retain both companies' existing product lines and will converge such lines in future product generations to ensure continuity for customers and partners of both companies. Through this acquisition, Mellanox expects to achieve additional scale to permit it to operate as a larger, more successful and more profitable enterprise, thus increasing value for the combined company's shareholders and customers.

Ra'anana's Voltaire (http://www.voltaire.com) is a leading provider of scale-out computing fabrics for data centers, high performance computing and cloud environments. Voltaire's family of server and storage fabric switches and advanced management software improve performance of mission-critical applications, increase efficiency and reduce costs through infrastructure consolidation and lower power consumption. Yokneam's Mellanox Technologies (http://www.mellanox.com) is a leading supplier of end-to-end connectivity solutions for servers and storage that optimize data center performance. Mellanox products deliver market-leading bandwidth, performance, scalability, power conservation and cost-effectiveness while converging multiple legacy network technologies into one future-proof solution. (Mellanox 29.11)

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2.4 Ellomay Capital Enters the Israeli Energy Market

Ellomay Capital announced today that on 25 November, a wholly-owned subsidiary of the company, Ellomay Clean Energy, entered into an agreement with U. Dori Group, an Israeli public company whose shares are traded on the Tel Aviv Stock Exchange and A. Dori Energy Infrastructures Ltd., a wholly-owned subsidiary of the Dori Group (Dori Energy). The agreement contemplates the acquisition, by Ellomay Energy of a 40% stake in Dori Energy in consideration for an aggregate amount of approx. $13.6 million. Dori Energy's only asset currently is its holdings of approximately 18.75% of the issued and outstanding share capital of Dorad Energy, an Israeli company that is in the process of obtaining financing for the construction of the largest private power plant in Israel, which is to be constructed in Ashkelon, Israel on land of the Eilat-Ashkelon Pipeline Company (EAPC). The power station is slated to have an installed capacity of approximately 800 MW, about 8% of Israel's total current installed capacity. To the Company's knowledge, the other shareholders in Dorad are Eilat-Ashkelon Infrastructure Services (EAIS), a wholly-owned subsidiary of EAPC, Edelcom, a private Israeli company and Zorlu Enerji, a Turkish company.

Ellomay Capital ((http://www.ellomay.com) is an Israeli company that recently invested in six photovoltaic plants, which are currently under construction, located in the Marche and Troia Regions in Italy. The Company's current plan of operations is to expand its investments in the renewable energy field and to identify and evaluate suitable business opportunities and strategic alternatives in other fields, including through the acquisition of all or part of an existing business, pursuing business combinations or otherwise. (Ellomay Capital 29.11)

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2.5 Noble Energy Announces Operational Update at Leviathan Offshore Israel

Noble Energy provided an operational update for the Leviathan exploration prospect offshore Israel. The well has penetrated the first interval in the primary objective. Based on logs taken while drilling, it is apparent that natural gas has been encountered in this interval. Noble Energy and its partners are continuing to drill through the primary objective, after which a full well evaluation will be conducted. Results from these operations are expected in mid-December. Noble Energy (http://www.nobleenergyinc.com) operates Leviathan, offshore Israel in the Rachel license, with a 39.66% working interest. Other interest owners are Delek Drilling and Avner Oil Exploration with 22.67% each and Ratio Oil Exploration with the remaining 15%. Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company operates primarily in the Rocky Mountains, Mid-Continent and deepwater Gulf of Mexico areas in the United States, with significant international operations offshore Israel and West Africa. (Noble Energy 29.11)

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2.6 Allot Communications Announces Approval of Dual Listing on the Tel-Aviv Stock Exchange

Allot Communications announced that the Tel-Aviv Stock Exchange (TASE) has approved the dual listing of the Company's ordinary shares on the TASE beginning at market open on December 21, 2010, under the ticker symbol ALLT. The Company's ordinary shares will continue to be listed on the NASDAQ Global Select Market in the United States, and Allot will remain subject to the rules and regulations of NASDAQ and of the U.S. Securities and Exchange Commission. Allot, with a market capitalization of approximately $180 million, is expected to become part of the Tel-Tech 15 index and the Mid-Cap 50 index using the TASE's fast track system. This enables dual-listed companies to enter the leading stock exchange indices shortly after they have been dual-listed.

Hod HaSharon's Allot Communications (http://www.allot.com) is a leading provider of intelligent IP service optimization solutions for fixed and mobile broadband operators and large enterprises. Allot's rich portfolio of solutions leverages dynamic actionable recognition technology (DART) to transform broadband pipes into smart networks that can rapidly and efficiently deploy value added Internet services. Allot's scalable, carrier-grade solutions provide the visibility, topology awareness, security, application control and subscriber management that are vital to managing Internet service delivery, enhancing user experience, containing operating costs, and maximizing revenue in broadband networks. (Allot Communications 29.11)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Burger Fuel Plans 15 Outlets in the UAE

New Zealand-based fast food chain Burger Fuel is planning to open 15 outlets across the UAE over the next five years, the company announced on 15 November. The expansion is the result of a franchise deal signed between Burger Fuel Worldwide Limited and Al Khayyat Investments, a Dubai holding company which represents around 150 international brands in the region, including Il Caffe Di Roma, Esspression and TigerWok. A gourmet burger restaurant chain, Burger Fuel is best known for its grass fed halal meat and already has one outlet at The Walk on Dubai's Jumeirah Breach Residence and a second is about to start construction on Sheikh Zayed Road. (Various 03.12)

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3.2 Polaris Wireless Expands International Operations Opening Regional Headquarters in UAE

Santa Clara, California's Polaris Wireless, the global leader in high-accuracy, software-based wireless location solutions, has opened a regional headquarters in Dubai Internet City, Dubai, UAE to serve the growing demand from customers in the Middle East and Africa regions. Alongside previous entries into Japan, India and Latin America, this opening is part of the company's strategy to expand its international operations. Polaris Wireless has increased its overall business revenues by 40% since its first overseas deployment, in early 2009. The business opportunity for Polaris Wireless is growing worldwide, following the global trend of wireless operators and government agencies partnering to deploy high-accuracy location solutions for lawful location surveillance and emergency call applications. The company is a leader in enabling real-time, high-accuracy location to assist authorized law enforcement agencies (LEA's) in criminal investigations and antiterrorist activities. (PW 07.12)

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3.3 Purfresh Extends Its Cold Storage Solution with the Release of the Multi-Room Control Box

Fremont, California's Purfresh, a leading provider of clean technologies that purify, protect and preserve the global food supply chain, together with certified partner, Agro Trading, announced the release of the Purfresh Multi-Room Control Box (MRCB) technology in Egypt. Integrated with Purfresh Cold Storage and Purfresh's Intellipur software analytics, this ground-breaking innovation enables a single ozone generator to precisely distribute and control ozone in up to 16 cold storage rooms. Distributing the power and advanced intelligence of Purfresh ozone generators across multiple locations, ensures retailers, distribution centers, and cold storage operations of all sizes can cost effectively take advantage of the clean power of ozone to enhance food safety, reduce decay and control ripening throughout their facilities. Agro Trading for Trade Agencies is a certified reseller of the complete line of Purfresh ozone-based cold chain solutions including Purfresh Cold Storage, Purfresh Wash and Purfresh Transport. (Purfresh 06.12)

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3.4 Innovative Wireline Solutions Completes Equipment Sales Agreement with Libya's Arrawafed

Calgary, Alberta's Innovative Wireline Solutions executed an equipment sales agreement with Libyan based company, Arrawafed Oil Services Co. Pursuant to the agreement, Arrawafed will hold the exclusive right to purchase WellRunner's designed for desert conditions in Libya from Innovative for a period of 48 months. Arrawafed will pay all manufacturing costs plus a set fee to Innovative for each Libyan WellRunner purchased. Innovative Wireline Solutions has developed a unique wireline (slickline) services truck (named the WellRunner), which has significant improvements and modifications over conventional wireline trucks. The development of the WellRunner resulted from the energy industry's desire for a full service slickline truck at more affordable rates, that would be operational through all seasons of the year, including the seasonal road ban periods when the majority of wireline trucks sit idle. (IWS 23.11)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Israel Tackles Electronic Waste

The Israel Union for Environmental Defense (IUED) has introduced into the Knesset's winter 2010 session a legislative proposal providing for collection and recycling of e-waste. IUED's legislative proposal on e-waste is based on the European Union's WEEE Directive as an appropriate regulatory framework for e-waste disposal. E-waste is discarded electrical and electronic equipment such as computers, televisions, cellular telephones, washing machines, refrigerators, etc. Despite the significant presence in e-waste of toxic materials such as mercury, lead and cadmium, Israel has no legislative provision for separation of e-waste from the waste stream. According to estimates, over 20,000 tons of e-waste are sent each year to Israel's regular solid waste landfills. A European Union survey found that even when e-waste represents only a single-figure percentage of landfill volume, it produces 70% of landfill toxicity. Because of the health and environmental dangers presented by landfilling of e-waste and its continuously rising volume, industrialized nations are placing the burden of responsibility for e-waste disposal on manufacturers and distributors. This has given rise in Europe to a variety of industry-sponsored schemes to collect and re-use e-waste as well as government-sponsored economic incentives for developing new markets for reuse and recycling off e-waste components. The IUED (http://www.adamteva.org.il) works to protect Israel's environment – as a public watchdog, as a catalyst to policy reform, as a source of free legal counsel to victims of environmental hazards, and as an initiator of strategic campaigns to further environmental goals. (IUED 13.100

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4.2 Israel's Mapal Raises $9 Million from CSS Europe

UK private equity fund Charles Street Securities Europe (CSS Europe) has invested $9 million in Israeli sewage treatment start-up Mapal Green Energy. Investors include CEO David Azori. Azori invested NIS 2 million in Mapal, and set up operations with local authorities and municipal water and sewage treatment companies. Mapal uses floating treatment systems, directing bubbles into the wastewater reservoirs to accelerate the oxygenation of contaminants in the water, degrading them biologically. Before the development of Mapal's technique, sewage treatment plants used giant, energy consuming fans to churn the water. Mapal says that its method cuts maintenance costs at municipal and industrial wastewater treatment plants by up to 80%. Mapal Green Energy (http://www.mapal-ge.com), based in Nesher, offers innovative proven technology that can significantly reduce the operations and maintenance cost of municipal and industrial waste water treatment plants. Mapal uses floating treatment systems, directing bubbles into the wastewater reservoirs to accelerate the oxygenation of contaminants in the water, degrading them biologically. (Globes 09.11)

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4.3 China Sunergy & Pythagoras Solar Partner to Develop Highly Adaptable Solar Windows

Nanjing, China's China Sunergy Co., a specialized solar manufacturer and Pythagoras Solar signed an agreement to co-market and advance the development and scale manufacturing of BIPV products from 2010-2015 in China. The agreement positions both companies to capitalize on opportunities in the growing BIPV market through the use of Pythagoras Solar's transparent, high power photovoltaic glass units (PVGU). According to the agreement, China Sunergy will work with Pythagoras Solar to rapidly advance the proliferation of PVGU products by supplying up to 75 MW of high-efficiency solar concentrator cells within 5 years. Pythagoras Solar's PVGU products combine the modularity and insulating benefits of the standard insulating glass unit (IGU) with solar power generation and architectural adaptability. Other areas of cooperation between the companies may include the reselling and production of Pythagoras Solar's PVGU products by China Sunergy; and the development and supply of new solar concentrator cells to further enhance BIPV systems. This exemplifies Pythagoras Solar's fab-less manufacturing model to build a relationship with China Sunergy, one of the market leaders to deliver capital efficiency, reliability and scale to meet global demand.

Founded in 2007, Petah Tikva's Pythagoras Solar (http://www.pythagoras-solar.com) is uniquely positioned at the intersection of energy efficient building materials and photovoltaics (PV). The company provides building integrated photovoltaic (BIPV) products that enable the architecture, engineering and construction sectors to design buildings with increased energy efficiency, renewable power generation and appealing aesthetics, thereby increasing real estate value. (Pythagoras Solar 01.12)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 Lebanon & Turkey Sign Free Trade Agreement

On 24 November, Lebanon and Turkey signed a free trade agreement to help boost ties between the two countries during Turkish Prime Minister Erdogan's visit. Official talks regarding the accord started six years ago. Trade volume between Turkey and Arab countries rose to $29 billion in 2009 from $13 billion five years earlier and more than 2,000 Arab companies operate in Turkey. Turkey and Lebanon had agreed in June on establishing a free trade zone that also includes Jordan and Syria. Under the Turkish-Lebanese accords, industrial products have been divided into three groups, with some products becoming exempt from custom tariffs as soon as the Lebanese Parliament endorses the agreement. Tariffs on the second group of industrial products will be gradually freed from tariffs over five years. (BI-ME 25.11)

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5.2 Jordanian-Canadian FTA Approaching Final Stages of Approval

The implementing legislation for the Jordanian-Canadian Free Trade Agreement (FTA) - and the side agreements on environment and labor - is currently in the final stages of approval in the Canadian parliament, according to Canada's ambassador in Amman. Canadian Ambassador to Jordan Gwozdecky said both political parties have indicated their support for the FTA, which the two countries signed in June 2009. Under the FTA, Jordanian products will enter the Canadian market free of customs duties as of the date the agreement goes into effect, which is expected in 2011. Canadian products will benefit from a gradual decrease in tariffs over a span of three to four years. The FTA secures Jordan preferential trade conditions, including full exemption from customs duties for Jordanian goods entering the market of the North American country. In return, Jordan will reduce customs duties on Canadian-made products over a transitional period of five years. According to the Canadian embassy, volume of bilateral trade stood at C$81 million in 2009, compared to C$92 million in 2008. From January to September 2010, Canadian exports to Jordan have increased by 24% while exports from Jordan to Canada have increased by 38%. (JT30.11)

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5.3 Jordan Appoints New Central Bank Governor

The cabinet of Jordan appointed Faris Sharaf as the new governor of the Central Bank of Jordan (CBJ) replacing Umayya Toukan, who completed two five-year terms in a row as the governor. Sharaf was the CEO and chairman of the investment arm of Jordan's pension fund. He occupied the position of vice governor and deputy governor of the CBJ from 2003 to March 2008, during which he worked on banking regulations and supervision development. (Various 28.11)

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5.4 Kuwait Annual Inflation Eases Slightly to 5.1% in October

Kuwait's annual inflation rate eased slightly to 5.1% in October, according to an announcement by Kuwait's News Agency (KUNA). The drop in annual inflation in October compared to September, follows a drop in inflation in three main sub-groups: foodstuff, down 0.2%; clothes and footwear, down 0.4%; and educational and health services, down 0.1%, compared to September. Prices of housing services increased y-o-y by 5.8% in October, same as in September. Annual inflation rate had reached an all-year high of 5.5% in September 2010, after growth of broad money supply (M2) witnessed in August and September. However, M2 growth decelerated in October to 1.9%, signaling a lower than expected domestic demand, which we believe slowed down the inflation rate in October. Further implementation of government expenditure plans will begin to exert an upward pressure on inflation in 2011. Inflation may average 4% in 2010 and to accelerate to an average of 5% in 2011, still within a comfortable range compared to the double digit inflation in 2008. Inflation data in Kuwait used to be released with a time lag of three to four months; now the CPI data release has become much more timely. (Beltone 24.11)

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5.5 Kuwait Plans $1.8 Billion Wastewater Treatment Plant

Kuwait plans to build a $1.8 billion wastewater treatment plant, to serve cities being constructed in the south. This plant has to be operational by January 2015, or there will be another catastrophe, because there are cities being built here and there and these cities will be ready for living in by that date. A breakdown last year in a wastewater treatment plant in Mishref, south of Kuwait City, resulted in the dumping of hundreds of thousands of cubic meters of untreated sewage into Kuwait's sea daily. The new plant is part of the government's Public-Private Partnership (PPP) program. A company will be established to build the plant, with 50% of the shares being sold in an initial public offering (IPO), 40% tendered to private stakeholders and 10% owned by the government. This is a positive development that shows that Kuwait is committed to going through with its development plans. Other major infrastructure projects are being planned and implemented as part of Kuwait's flagship four-year development plan. These projects are implemented through PPP schemes which allow for increased private sector participation and will boost activity in Kuwait's stock market, through a projected increase in the number of IPOs. (Beltone 28.11)

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5.6 Bahrain Economy Grows Y-O-Y by 4.3% in Third Quarter

Bahrain's real GDP grew year-on-year by 4.3% in Q3/10, compared to a y-o-y growth of 4.6% in Q2/10, data released on the Central Informatics Organization indicated. Q-o-q growth reached 0.8% in Q3/10, compared to quarterly growth of 1.1% in Q2/10. In Q3/10, the oil sector grew y-o-y by 1.1% on the back of the increasing oil and gas production levels, while the non-oil sector grew y-o-y by 4.8%. The building and construction sector grew by 4.5% y-o-y and by 1.2% q-o-q, on the back of maintenance works held on previously built infrastructure projects, as well as on building privately owned small-scale projects. The real estate sector saw 1.7% y-o-y growth and 1.6% q-o-q. The sluggish growth in the real estate sector comes as a result of the lack of liquidity in the domestic market, given the banks' resilience to lend to the sector. The financial sector, which accounts for more than 25% of the GDP, grew by 5.7% y-o-y in Q3/10, slightly lower than growth levels of Q1/10 and Q/10 of 6% and 7%, respectively, albeit, well above growth levels of 2009, which overall saw the sector falling on annual basis by 6.0%. The Central Bank of Bahrain sees the economy growing between 3 - 4% in 2010 and 2011. (Various 28.11)

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5.7 Qatar to Host World Cup in 2022

FIFA's executive committee voted for Qatar to host the 2022 World Cup over rivals Australia, Japan, South Korea and the United States. Qatar, which will be World Cup's smallest host ever, shrugged off fears of searing summer heat to become the first Arab, Middle Eastern or Muslim country to be awarded the right to stage football's World Cup. The bid team successfully swayed FIFA with promises of a glitzy, compact and carbon-neutral World Cup that will be held in solar-powered stadiums where temperatures would be maintained at a comfortable 27 degrees Celsius with the help of novel cooling technology. The voting process took place against a highly charged background after British media outlets made allegations of corruption against a number of FIFA's executive committee members. The executive committee voted in secret. (Various 02.12)

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5.8 Qatar World Cup Award to Kickstart Construction

Qatar's successful bid to host the 2022 soccer World Cup will speed up its construction program and boost property prices, with contractors expected to flock to the Gulf state to snap up projects worth billions of dollars. The world's largest liquefied natural gas exporter will try to ease concerns about its lack of infrastructure by spending some $100 billion over the next five years, according to some estimates, as it rushes to prepare for soccer's biggest tournament, the first to be held in the Arab world. Some projects in Qatar have stalled this year due to a property market slump. In August, Qatari developer Barwa Real Estate Co said it delayed its $8.3 billion Al Khor project due to sluggish market conditions. The World Cup win would also likely speed up work on the $3 billion 40-kilometre Qatar-Bahrain Causeway. Over the next five years Qatar will build a $25 billion rail network, an $11 billion new airport and a $5.5 billion new deep water seaport. The Gulf state will also spend billions more on 12 air-conditioned soccer stadiums, boosting its need for additional power capacity in a country where summer temperatures can soar to above 50 degrees Celsius. Other projects include a $1 billion crossing linking the new airport with mega-projects in the northern part of the capital, Doha. It will also spend an additional $20 billion on new roads. (Various 06.12)

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5.9 UAE Steel Industry Analysis

Research and Markets (http://www.researchandmarkets.com) "UAE Steel Industry Analysis" says the UAE has witnessed an unparalleled development and revolution over the past few years, mainly due to its high oil wealth. The country's rapid economic development has resulted into the extraordinary growth in the construction and infrastructure industry, which has attracted investors from all around the world. Steel demand in the UAE has strongly soared over the past few years in the backdrop of construction boom, cheap and reliable gas and energy supply, growing investment in the real estate sector, economic growth and rising income level. However, demand for steel has contracted on account of the global economic crisis, but the scenario is expected to change with turnaround in real estate and construction sector that will boost demand for steel and other materials. The consumption of steel is expected to reach around 11 Million Metric Tons by the end of 2013.

The authors have found that the UAE steel industry is highly import-oriented. The country imported around 15.2 Million Metric Tons of steel in 2008. With the reduction in import tariff by the GCC, imports of steel are expected to increase in the years to come. However, some major expansion plans of steel players in the country will increase domestic steel output. This research highlights that real estate projects in Dubai and Abu Dhabi are currently the key driving forces behind the steel industry growth. The report further reveals that this trend and government initiatives are playing a critical role in promoting reforms and increase competitiveness in the steel industry. Realizing the current market trends and anticipating the future prospects, the authors have done a comprehensive analysis of the UAE steel industry. With immense growth potential, this research foresees huge opportunity for various market players like Emirates Steel Industries, Al Nasser Industrial Enterprises, Alam Steel Industries, Qatar Steel and Al Ghurair Iron & Steel. (R&M 06.12)

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5.10 One-Third of UAE Residents Could Have Diabetes or Prediabetes by 2020

One in three United Arab Emirates (UAE) residents could have diabetes or prediabetes by the end of the decade, according to a new analysis from international health and well-being company UnitedHealth Group. The report, “Diabetes in the United Arab Emirates: Crisis or Opportunity?,” estimates that 32% of the country's adult population, including both UAE nationals and expatriates, may have diabetes or prediabetes by 2020 at a cost of $8.52 billion over the next decade if current trends continue. Currently in the UAE, it is estimated that the vast majority of cases of prediabetes and about 35% of cases of diabetes remain undiagnosed, representing lost opportunities to avoid the costs and complications of a largely preventable disease. If left uncontrolled, type 2 diabetes can lead to severe complications, such as heart and kidney disease, nerve damage, blindness and limb amputation. Medical costs due to diabetes and prediabetes in the UAE may rise to an annual $1.04 billion by 2020, representing a 58% increase from an estimated $657 million in 2010, according to the report. According to some estimates, the UAE's type 2 diabetes rate is among the top five countries in the world. In the UAE, about 13% of the population between 20 and 79 years of age has diabetes – more than double the global average of 6.4%. (UHG 07.12)

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5.11 Dubai's Real GDP Growth Expected At 2.3% in 2010

The Dubai Statistics Centre (DSC) said Dubai's economy is expected to show real GDP growth of 2.3%, based on preliminary estimates of economic sectors' performance during H1/10. This forecast is based on the positive growth seen during H1/10 in the manufacturing; transportation and logistics; retail; wholesale and trade; hotels and restaurants, in addition to government services sectors. The decline in rental costs, which constituted up to 43% of total household expenditure, is behind the deceleration in inflation levels. Other pundits expect that Dubai will see positive real GDP growth of around 1.5 - 2% in 2010, after contracting by an estimated 2.5% in 2009. The shift back to positive growth territory will be led primarily by the recovery in Dubai's externally facing sectors, namely trade and logistics, retail, and tourism, owing to its role as a major regional and global trade and services hub. Growth levels in 2010, however, will continue to be sub-par and dampened by the weakness and sharp slowdown in property and the real estate sector. (Beltone 24.11)

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5.12 Oman's September Inflation at 19 Month High on Food & Housing

Oman's inflation rose to a 19 month peak of 4.2% year on year in September as food and housing costs picked up sharply, official data showed. Price pressures in the Gulf Arab region have been growing this year, raising concern about excessive price growth among governments. Oman's inflation has risen mainly on food and housing costs, while higher crude prices have helped its trade balance improve. Consumer inflation accelerated to 4.2% year on year in September, from 3.4% in August, data from the economy ministry showed. Food, beverage and tobacco costs, which account for more than a third of the index, jumped 2.6% on a monthly basis from 1.2% in the previous month. Food inflation traditionally climbs during the holy month of Ramadan, which ended in mid September, when families enjoy larger and more elaborate evening meals after daylight fasting.

Inflation stood at 1.7% in January this year and is still down sharply from a record high of 13.7% reached in June 2008, before the financial crisis. The country's central bank governor said in September he was not much worried about inflation which he said was a "reasonable range". Furniture and housing costs rose 0.2% month-on-month in September, after a 0.3% drop in August, the data showed. Rents, which account for 15% of Oman's consumer price basket, were unchanged at 0.1% month on month in September. Last year, the global crisis slashed oil output in Gulf Arab oil producing nations, trimming economic growth rates in Saudi Arabia and the United Arab Emirates, the biggest oil exporters in the region. Much smaller Oman was less affected because as a non OPEC member it did not have to join the group's output cuts. (Various 30.11)

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5.13 Saudi in Talks With Senegal Over Farmland

Senegal is in talks with Saudi Arabia to lease farmland to grow food on an area nearly four times the size of Manhattan. Like other Gulf states, Saudi Arabia has been buying farmland in Asia and Africa to secure food supplies after inflation had nearly doubled the price of food in 2008. According to the contract terms being discussed, the deal will allow up to 100% of the food being produced on the land to be exported by the investors.
Due to limited water supplies, the kingdom plans to phase out production of all the water intensive crops that had depleted resources. The crops include wheat, soya beans and animal fodder. Saudi Arabia needs around 2.6 million tonnes of wheat annually and the government said last year it would rely entirely on wheat imports by 2016. Last year, Foras International Investment Company, a group of Saudi-based investors, including the Islamic Development Bank launched a seven-year plan worth $1 billion in Africa to reduce dependency on rice imports and supply the Middle East region. The so-called 7X7 project aims at developing and planting 700,000 hectares of farm land to produce within seven years seven million tonnes of rice. (Various 06.12)

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5.14 Saudi Arabia & Egypt to Link Power Grid By 2013

Construction of a power grid linking Saudi Arabia and Egypt will be completed in 2013, according to Saudi Minister of Water & Electricity al-Hussayen. The project will save power for both countries during peak hours. Saudi Arabia will export power to Egypt in the evening, while the most populous Arab country will export power to the region's largest economy in the morning. The 1,300 kilometer (800-mile) cable will have a capacity of 3,000 megawatts, the Egyptian Ministry of Electricity said on 15 July. (BI-ME 24.11)

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkey Rises in Growth List As Government Fixes Calculation Mistake

Turkey's rank among the world's biggest economies rose to 15th following the Turkish Cabinet's decision to fix some figures in its 2011 annual program. The change is all the more striking in per capita income, which rose by $2,354, up from $13,038 to $15,392, since the figures corrected in the annual program pertain to purchasing power data calculation. The State Planning Organization, or DPT, formerly calculated the national per capita income according International Monetary Fund standards, whereas it should have been using OECD standards. Because IMF standards involve more countries Turkey appeared to have a smaller national income. After noticing the inaccuracy, government officials changed the purchasing power parity, or PPP, for 2010 from 1,159 to 0,982 (according to dollar/ Turkish Lira ratio) and did so to 2011 parity, from 1,211 to 1,025. This seemingly slight change had a drastic effect in worldwide rankings, with Turkey surpassing Indonesia to become the 15th biggest economy in the world. In terms of per capita income, Turkey surpassed Lebanon, Chile, Libya, Gabon, Malaysia, Uruguay, Latvia, Belarus and Mexico in one night, ranking 63rd in the world. (Radikal 26.11)

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6.2 Turkish Fuel Prices Increase Inflation In November

The Turkish Central Bank's November Inflation Report notes that price increases in fuel and gas products increased inflation in the energy group by 1.02%. The report points out that the consumer price index (CPI) for November rose by 0.03% while annual inflation decreased by 1.33 points to 7.29%. The downward correction in unprocessed food prices was the determining factor in the fall of inflation. Moreover, the report underlined that price increases in basic groups and services were in line with mid-term targets. Inflation is expected to decline in the coming months while core price indices will see a limited increase, the report noted. In October, prices in the basic group decreased by 0.08% while prices in the service group increased by 0.35%. This led to the annual inflation rate in the basic group to fall to 8.47%, while inflation in the service group increased to 3.98%. The inflation rate in the service group saw a limited rise due to price increases in the prices of fuel and food. (Zaman 07.12)

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6.3 Cyprus Annual November Inflation Halves To 1.5%

Cyprus's consumer price inflation fell sharply to 1.5% year-on-year in November from 3.0% a month earlier due to a drop in food prices and electricity costs. The consumer price index (CPI) fell 0.37% on a monthly basis to 114.63 points. A drop in the November inflation rate, in addition to the upsurge of the preceding three months, was to a large degree the result of prevailing prices of fresh fruits and vegetables, the statistics department said. For the January to November period, the CPI tracker recorded an increase of 2.5% compared to the corresponding period of 2009, it said. (FM 02.12)

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6.4 Greek State Revenues in Sight of Goal

Greek state revenues from a tax amnesty scheme and hike in value-added tax helped boost income in the first 11 months of 2010, placing the government closer to its goals for the first time this year. The Finance Ministry is some €375 million short of its fiscal targets for the January to November period and will need to earn €6 billion in the last month of the year if it wants to meet 2010 goals. In December last year, when the recession was not as severe as it is now, the government collected €5.2 billion in revenues. According to provisional figures from the Finance Ministry, net revenue in November rose by an annual pace of 18% to €4.5 billion. At the same time, revenues from VAT increased 10.4% over the same period last year. For the 11-month period, revenues rose 5.1%, versus the 6% annual target, to €45.5 billion. Greece's initial target for annual revenue growth stood at 13.6%. (ANA 02.12)

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6.5 Greece Freight Transport Report Q1 2011

Research and Markets (http://www.researchandmarkets.com) "Greece Freight Transport Report Q1 2011" said that in early August 2010, Greek Prime Minister Papandreou said his government would continue with its plan to liberalize the road freight industry despite strikes by truck and tanker drivers. Papandreou said at a cabinet meeting that opening up the sector would boost competition and create the possibility for better and cheaper services, paving the way for growth. The proposed reforms for liberalization of protected sectors led to strikes and protests. Truck and fuel-tank owners staged an open-ended strike on July 26 2010, with nearly 33,000 haulers walking off the job. Greece is part of, and is affected by, wider EU transport trends and developments. Road haulage has been dominated by private sector companies, with the government responsible for building and maintaining the highway network. Road haulage is by far and away the most dominant method of inland freight transport in Greece. There are also indications that demand for road haulage by trucks has been among the fastest growing of all transport modes. (R&M 03.12)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel Thanks, Bids Farewell to Foreign Fire-Fighting Teams

Ceremonies marking the departure of some of the international fire fighting teams that arrived to help Israel fight the Carmel forest fire were held throughout 6 and 7 December in the Israel Air Force bases. Nearly 200 foreign crewmen received IAF medals in appreciation of their services and all the delegations received a special honorary greeting from IAF Commander Maj.-Gen. Nechushtan, stating, "You have earned this honor for putting out the deadly fire in the Carmel. You have shown responsibility, determination, camaraderie and courage". Dozens of firefighting airplanes and helicopters, as well as supply planes carrying equipment, professional teams and experts from different countries arrived between 2 – 5 December to assist in fighting the Carmel fires. The IAF organized an emergency operations center to coordinate and utilize all Israeli and foreign aerial support for fighting the fire. The first planes to arrive were a Bulgarian Airbus carrying Bulgarian firefighters and a Greek C130. Later aircraft from Greece, UK, Turkey, Russia, France and Italy also came. In addition, the American Supertanker arrived on 5 December, as did aircraft from Switzerland, Russia, the Netherlands, France, Azerbaijan and Romania. (IsraelNN 6.12)

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*REGIONAL:

7.2 Jordanian Government to be Reshuffled

King Abdulla accepted the resignation of the government headed by Prime Minister, Samir Rifai, and requested that a new government be assembled. The resignation of the government comes after Parliamentary elections were held on 9 November. The elections were boycotted by Jordan's main opposition group, the Muslim Brotherhood, which demanded political reforms including a new election law that provides proportional representation. The Muslim Brotherhood movement had previously opposed the elections in 2007 for not being transparent and fair. After dissolving the cabinet in November 2009, half-way through its four-year term, the king appointed Samir Rifai as Prime Minister and delegated him to follow a development and reform program, including setting a new electoral law which was passed in May 2010 by Rifai's government. This limited the representation of cities that have a strong Islamist orientation, in favor of rural and Bedouin areas. After the results of 9 November elections were released, there were accusations of fraud in the elections by opposition groups. (Beltone 24.11)

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7.3 Bahrain King Names Four Women To Upper Chamber

On 25 November, King Hamad of Bahrain appointed a Jew and a Christian among four women to the 40-member upper chamber, following a parliamentary election last month. The king kept 30 members of the outgoing Shura, or consultative, council including the speaker, Ali Saleh al-Saleh. Nancy Khadhori joined the chamber after a fellow Jew, Huda Nono, left the house to take the role of Bahrain's ambassador to the United States. Khadhori is one of only 37 Bahraini Jews who originated from Iraq. Meanwhile, Hala Qarrisah entered the house as fellow Christian Alice Samaan, who was deputy head of the council, exited the parliament. Bahrain's Christian community numbers around 1,000. The Shiite opposition emerged as the largest single bloc in Bahrain's lower chamber following the parliamentary election on October 23. The Shura Council has the authority to over-rule parliamentary decisions. (BI-ME 26.11)

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7.4 Cypriots Feel Healthy

The vast majority of Cypriots feel healthy, according to the latest “European Health Interview Survey 2008” published by the Statistical Service, Cystat. The report provides statistical information related to the health status of the population, longstanding illness or longstanding health problem, accidents, physical conditions, personal care, emotional condition, health care services, smoking, alcohol consumption and other health topics.

The main findings recorded in 2008 are as follows.

The report found that 79.6% of population aged 15+ consider their health status as good or very good, 15.2% fair and 5.1% bad or very bad.

The most frequent long-standing health problems are hypertension, low back disorder or other chronic back defect, hypercholesterolemia (including hyperlipidemia), allergies, neck disorder or other chronic neck defect, severe headaches, asthma, ulcer and diabetes.

During the preceding 12 months, 8.2% of the population was admitted in a hospital or clinic as an inpatient. Day care was provided to 7.0% of the total population.

During the preceding 12 months 59.3% of the population visited medical or surgical specialists, whereas 11.0% visited general practitioners or family doctors.

During the preceding 12 months 46.4% of the population visited dentists, orthodontists or other dental care specialists.

During the preceding 2 weeks, 37.5% of the population used prescribed medicines whilst 16.1% used non-prescribed medicines.

Among the population aged 15+ the majority (69.9%) reported not smoking at all, 26.5% smoke daily and 3.6% smoke occasionally. (FM 22.11)

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7.5 Egypt Vote Leaves Near Single-Party Parliament

President Hosni Mubarak's party was poised to win almost every seat in a parliamentary election runoff on 5 December, boycotted by Egypt's main opposition parties over fraud and intimidation allegations. The National Democratic Party (NDP), which has already dominated parliament for three decades, won 209 out of 221 seats in the first round on 28 November, after which the two major opposition blocs withdrew from the race. The stage was set for a repeat performance, with 383 NDP candidates left to compete mostly against rivals within the same party for the remaining elected seats of parliament. The Muslim Brotherhood, the only serious opposition force, did not win a single seat in the first round. The group controlled a fifth of the outgoing parliament, using independents to circumvent a ban on religious parties. The Brotherhood said that its remaining 27 candidates would not participate in the second round, the first such decision by the Islamist group since the 1990s, although it complains of fraud after every election. The liberal Wafd party, which usually has working ties with the government, won two seats. The fractured party announced in a rare display of resolve that it would also pull its candidates out of the runoff. Three other parties which each won a seat last week decided to keep their candidates in the race. Analysts said the NDP appeared to have overplayed its hand by virtually wiping out its opposition, strengthening the impression of Egypt as a one-party state. Egypt's veteran president appoints 10 lawmakers in addition to the 508 elected members of parliament, with most of them expected also to go to the ruling party.

The vote is seen as a possible indication of Egypt's far more important presidential poll due in late 2011. Mubarak, 82, has yet to announce whether he will run and is widely believed to be grooming his son Gamal for succession. The near absence of opposition parties in parliament means whoever stands for the NDP in the presidential election will have almost no competition, a scenario which could raise questions over the president's legitimacy. (BI-ME 5.12)

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7.6 Muammar Gaddafi's 'Cultural' Tours to Libya For Italian Models Revealed In Diary

On 28 November, Tom Kington wrote in the Observer that the travel diary of a Roman model has provided a compelling insight into bizarre "cultural visits" arranged by the Libyan leader, Colonel Muammar Gaddafi, for scores of attractive young women from Italy. Maria M, aged 28, declined to give her full name, but allowed the Observer to examine her account of a lavish trip to the Libyan desert in October after she was recruited by the Rome-based agency Hostessweb. In her diary Maria tells of an eccentric week-long tour for which she and 19 other young women were reportedly each paid €3,000.

Six such "cultural" visits to Libya by agency recruits have been organized since Gaddafi visited Rome in 2009. On one visit Gaddafi tried to marry off one of his guests to his nephew. But there also appears to have been a religious motive. "He asked if any of us were interested in converting [to Islam]. We all looked at each other and then, incredibly, two girls rose up, something I never thought they would do," wrote Maria, adding that she believed bonuses had been offered to the "converts".

Gaddafi developed a taste for preaching to Italian women during his 2009 visits, and again in August this year, when Hostessweb, which recruits models and hostesses, laid on busloads of women to hear him talk about Islamic culture and faith. "This is all about social and cultural integration," said Alessandro Londero, one of the organizers of the trips. "Here in Rome we have sent dozens of girls to attend Arabic courses at the Libyan cultural institute."

On Maria's arrival in Tripoli in October, the 20 hostesses were given their €3,000 and then taken on a week-long tour by Gaddafi aides of Libya's Roman ruins and its modern hospitals, souks and the women's police academy. The tour then moved to the leader's tent in the desert. "They put us in government cars headed for Gaddafi's tent," wrote Maria. "About 30km from Sirte there is movement and lights in the middle of nowhere and we are stopped by men armed to the teeth at three successive checkpoints before we see two enormous tents, a couple of camper vans serving as toilets, a massive and noisy generator and hundreds of camels."

After they had waited for hours, Gaddafi appeared, "straight from hunting, dressed extremely casually in a wrinkled shell suit and old trainers with messed-up hair. He gives us a huge smile, we clap and he swaps the 'papal' throne laid on for him for a plastic chair." After looking at photos of their trip, Gaddafi turns to proselytism. "He tells us most of Europe will turn Muslim thanks to the entry of Turkey into the EU… that we must embrace Muhammad's faith because Christ predicted that a prophet would come after him to take his place." Then, with Libyan TV filming, Gaddafi converted the two girls who stepped forward. "That brings the converts to seven or eight," said Londero. "Sometimes they kneel before him while it is broadcast on TV."

Maria said some girls were not convinced by their colleagues' religious zeal. "There was talk of cash prizes, jobs, houses," she wrote. One woman who converted on a trip in March confirmed she had been rewarded. "It is a present for those who choose Islam, a form of help, although Gaddafi's willingness to guide us is the biggest present," said Rea Beko, 27, an Albanian from an Orthodox Christian family who lives in Rome. Londero said the list to sign up to meet Gaddafi "now seems to be longer than the waiting list to visit the pope," but warned he would be screening out Israelis, anyone who says they want to convert, or appears interested only in a large check. Future trips, he said, could involve women from other countries. "I would not rule out an event in the UK like those Gaddafi has held in Rome." (Guardian News 28.11)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Pfizer & Protalix BioTherapeutics Submit taliglucerase alfa for European Marketing

Pfizer and Israel's Protalix BioTherapeutics (http://www.protalix.com) announced the submission of a Marketing Authorization Application to the European Medicines Agency for taliglucerase alfa, a plant-cell expressed form of glucocerebrosidase (GCD) for the treatment of Gaucher disease. Taliglucerase alfa was granted Orphan Designation by the European Commission for the treatment of Gaucher disease on March 23, 2010. On November 30, 2009, Pfizer and Protalix BioTherapeutics entered into an agreement to develop and commercialize taliglucerase alfa. Under the terms of the agreement, Pfizer received exclusive worldwide licensing rights for the commercialization of taliglucerase alfa, while Protalix retained the exclusive commercialization rights in Israel. Taliglucerase alfa was granted orphan drug designation by the U.S. FDA. A New Drug Application (NDA) for taliglucerase alfa has been accepted by the FDA and assigned a Prescription Drug User Fee Act (PDUFA) action date of February 25, 2011. Taliglucerase alfa is available to patients with Gaucher disease in the United States under an Expanded Access protocol as well as to patients in several member states of the European Union, Israel and other countries under Named Patient provisions. (Pfizer 30.11)

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8.2 Therapeutic Potential of Compugen Discovered Target for Multiple Myeloma Treatment Supported

Compugen announced results from recently completed studies that further demonstrate the therapeutic potential of CGEN-928 as a drug target for treatment of multiple myeloma (MM) through mAb therapy. CGEN-928, a previously uncharacterized protein, was earlier shown by Compugen to be broadly expressed in multiple myeloma tumor cells. In addition, these earlier studies demonstrated that CGEN-928 is uniquely present in advanced disease stages of MM as well as in drug-resistant and aggressive MM, indicating potential targeting of the more aggressive disease stages and types, currently an unmet medical need. Based on the positive results of these initial studies, Compugen initiated a number of functional studies at the IMBCR to explore CGEN-928's involvement in MM tumor biology. The recently completed studies demonstrated that a polyclonal antibody which specifically recognizes CGEN-928, decreases MM tumor cell proliferation and induces apoptosis, a process in which cells undergo a programmed cell death. These positive results were seen in both MM cells from patients and in MM cell lines and indicate that an antibody specific for CGEN-928 may cause the specific killing of MM cells.

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) product candidate prediction and selection utilizing a broad and continuously growing infrastructure of proprietary scientific understandings and predictive platforms, algorithms, machine learning systems and other computational biology tools to address important unmet therapeutic and diagnostic needs - either for Compugen or its partners. (Compugen 06.12)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 HelpByLeo.com Enables Anyone to Use Any Software Application Functionality, Instantly

When was the last time you had to accomplish a new task in a software application you use daily, for example, filtering rows in Excel according to their values, or changing privacy settings in Facebook? Did you ask colleagues or Google the task until you figured it out? How much time did you waste? How frustrated were you until you figured out the task? Now, with the introduction of Leo, a new technology offering, you can perform your tasks quickly and painlessly. Leo is a downloadable interactive help tool that actually performs the task for you on your computer environment in real time. Leo is available free, for personal use only, at http://www.helpbyleo.com.

After downloading Leo, all you have to do is type your question into the Leo search bar, choose the result and run it. Leo will continue to operate the application for you, step-by-step, stopping for you at key decision points. For example: You want to change your Facebook privacy settings to specify which of your friends are allowed to post on your wall, but you don't know how to do it? Simply open Leo, type 'Who can comment on my posts in Facebook' in the search bar, choose 'Customize who can add comments on my posts' from the search results, and press 'do it'. Leo will actually move your mouse and navigate Facebook based on your input and complete the task for you. In addition, Leo also offers a 'Guide Me' mode. With 'Guide Me', Leo acts as a tutor, instructing the user where to click in order to perform the desired task. Leo was developed to address the modern day challenges of attaining complete proficiency in the applications we use every day in order to improve our productivity and free our time.

Tel Aviv's Kryon Systems (http:// www.kryonsystems.com) is the Israeli startup that revolutionizes the way we interact with computer software. Kryon Systems developed Leo (Learn, Evolve, Operate), which is an innovative interactive help for applications solution. Leo provides more than answers to users' questions; it actually performs the task required in a step-by-step, interactive manner. (Kryon 02.12)

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9.2 Objet Launches Two New Desktop 3D Printers Starting at $19,900

Objet Geometries revealed the new family of desktop 3D printers (Objet24 and Objet30), starting at $19,900. The company is also holding a unique technology demonstration of new advanced materials featuring clear transparency, high-temperature resistance and ABS-like quality simulating engineering plastics. The Objet24 and Objet30 are part of Objet's latest family of affordable, easy to use 3D printers, making high-quality 3D printing convenient for the office of every designer and product engineer. The Objet24 is especially suited to the office environment, providing low-cost 3D printing without compromise on model detail or functional versatility. The Objet30 is capable of printing a range of materials making it suitable to a number of applications. Both Objet24 and Objet30 produce models with extremely smooth surfaces and fine details. Objet is simultaneously launching the new Objet VeroWhitePlus material. Featuring the high dimensional stability of Objet VeroGray now in white, Objet VeroWhitePlus is ideal for fit and form testing for a wide range of industries. The Objet VeroWhitePlus will replace the Objet VeroWhite during 2011.

Rehovot's Objet Geometries (http://www.objet.com), the innovation leader in 3D printing for rapid prototyping and additive manufacturing, provides 3-dimensional printing systems that enable manufacturers and industrial designers to reduce cost of product development and dramatically shorten time-to-market of new products. Objet's ultra-thin-layer, high-resolution 3-dimensional printing systems and materials utilize PolyJet polymer jetting technology, to print ultra-thin 16-micron layers. (Objet 02.12)

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9.3 Navajo Systems' Virtual Private SaaS for Salesforce Now Available on AppExchange 2

Navajo Systems has launched Virtual Private SaaS (VPS) for Salesforce on salesforce.com's AppExchange 2. VPS for Salesforce eliminates data regulation restrictions that may apply to corporate data stored in the cloud, and is available on AppExchange 2 at http://www.salesforce.com/appexchange. VPS for Salesforce ensures that all sensitive or regulated data stored and processed by Salesforce remains encrypted, while allowing Salesforce to work normally. As a result, VPS for Salesforce dismantles many of the regulatory barriers facing cloud computing around the world. The application is easy to understand and operate, requires no software modifications and is easy to deploy.

Jerusalem's Navajo Systems' (http://www.navajosystems.com) vision is to dramatically expand the use of cloud computing by eliminating the oft-cited barriers of data security and regulatory compliance concerns. Founded by experts in the fields of information security, infrastructure security and Web application security, Navajo Systems has introduced a patent-pending technology that promises to revolutionize SaaS application data security. The company is funded by Jerusalem Venture Partners (http://www.jvpvc.com), a leading Israeli venture capital fund with more than $780 million under management. (Navajo Systems 30.11)

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9.4 Magic Software Signs New Deal with Celebi, a Leading Provider of Ground Handling Services

Magic Software Enterprises announced that its wholly owned subsidiary, HERMES Logistics Technologies, a leading provider of air cargo management solutions, has signed a purchase agreement with Celebi to implement its state-of-the-art cargo management system. The HERMES system, powered by Magic Software's award-winning application platform, will enable Celebi to leverage the advantages of mobile handheld terminals to track and manage cargo in real-time within its cargo hubs. HERMES will also allow Celebi to employ proactive service level management of all shipments with its built-in warnings and automatic reminders to operational staff. With a presence in 28 airports worldwide, Celebi's ground handling operations can be found in Turkey, India, Hungary and most recently a new facility based within Europe's third busiest airport, Frankfurt International. The introduction of this additional site to Celebi's portfolio prompted senior management to embrace a new technology solution in the form of the superior ground handling software: HERMES. Installation of the software will allow the new Frankfurt operation to compete at the highest levels, providing the organization with the latest business process support, demanded in today's competitive world of cargo handling.

Or Yehuda's Magic Software Enterprises (http://www.magicsoftware.com) is a global provider of cloud and on-premise application platform solutions – including full client, rich internet applications (RIA), mobile or Software-as-a-Service (SaaS) modes – and business and process integration solutions. Magic Software has 13 offices worldwide and a presence in over 50 countries with a global network of ISVs, system integrators, value-added distributors and resellers, as well as consulting and OEM partners. The company's award-winning, code-free solutions give partners and customers the power to leverage existing IT resources, enhance business agility and focus on core business priorities. (Magic 02.12)

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9.5 Nihon Unisys Has Adopted Magic Software's iBOLT Integration Tool

Magic Software Enterprises announced that Nihon Unisys in Japan has adopted Magic Software's iBOLT business integration suite as part of its offering to its clients. Nihon Unisys, Japan's most successful system integrator and one of the largest SaaS platform providers in Japan, chose Magic Software's iBOLT code-free business integration suite (marketed in Japan as jBOLT) to increase its offering to its SaaS customers by providing them access to built-in data integration services. As the popularity of cloud computing rapidly increases, there is a growing need for enterprises to take advantage of the great benefits of cloud computing while maintaining their existing applications. Therefore, enterprises need to be able to connect both cloud-based applications and on-premise legacy applications. The iBOLT-based data integration services offered now by Nihon Unisys enable its customers to leap onto new IT grounds by assuring that on-premise IT systems remain active and in full sync with new cloud-based systems.

Or Yehuda's Magic Software Enterprises (http://www.magicsoftware.com) is a global provider of cloud and on-premise application platform solutions – including full client, rich internet applications (RIA), mobile or Software-as-a-Service (SaaS) modes – and business and process integration solutions. The company's award-winning, code-free solutions give partners and customers the power to leverage existing IT resources, enhance business agility and focus on core business priorities. (Magic Software 06.12)

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9.6 Nova Extends its Leadership of the Copper CMP Process Control Market

Nova Measuring Instruments announced that an additional top tier foundry has decided to adopt its integrated metrology solution for copper CMP. Nova's integrated metrology tools are part of a process control scheme which was designed to tighten the process window and improve productivity for device geometries of 32nm and below. 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. (Nova 06.12)

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9.7 Elbit Systems to Supply a European Country With Communication Systems for €17.7 Million

Elbit Systems was awarded a contract valued at €17.7 million to provide a European Ministry of Defense with advanced tactical communication systems to be delivered during 2011- 2012. The communication systems to be delivered under the contract are Tadiran CNR 9000 and Tadiran HF 6000. These tactical radio systems offer voice and high data rate transfer and are considered the industry's leading technology. Haifa's Elbit Systems (http://www.elbit.co.il) is an international defense electronics company engaged in a wide range of 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 aircraft systems (UAS), 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, developing new technologies for defense, homeland security and commercial aviation applications and providing a range of support services. (Elbit Systems 06.12)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israeli Real Estate Market Ranked 4th In World

The "Global Property Guide's survey of changes in home prices for Q3/10 puts Israel in fourth place, after Hong Kong. The survey ranks residential real estate markets by the change in prices from the corresponding quarter of the previous year. The Latvian capital of Riga is in first place, with a 24.6% rise in nominal home prices, followed by Singapore, with a 22.9% rise in nominal home prices. Hong Kong is in third place, with nominal home prices 20.5% higher in the third quarter than in the corresponding quarter. "Global Property Guide" notes that home prices rose strongly over the year, even after the imposition of stamp duty, plus tighter financing conditions, and restrictions on home ownership. Israel is in fourth place, with nominal home prices 16.4% higher in the third quarter than in the corresponding quarter and 4.4% higher than in the preceding quarter. Housing prices in Israel have surged continuously since 2009 and in the year to Q3/10 prices rose 14.12%. This marked the fifth consecutive double-digit quarterly year-on-year rise in prices of owner-occupied dwellings in Israel. The next six places in the top ten fasting rising home market prices are Australia (eight cities), Taiwan, Finland, Norway, South Africa and the UK (nationwide). (Globes 06.12)

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11: IN DEPTH

11.1 ISRAEL: IMF Article IV Consultation - Concluding Statement of the Mission

Summary

On 29 November, the IMF announced that Israel passed through the global recession swiftly, the fruit of decisive policies and strengthened macro-financial policy frameworks. The challenge now is to sustain growth and low inflation while boosting medium-term prospects - in the context of continued global uncertainty, capital outflows from advanced countries, shekel appreciation and a housing market that is overheating.

In our view, buoyant activity and employment alongside incipient inflation pressures calls for the overall stance of policies to be tightened more quickly than planned. But the onus for the accelerated effort should fall mainly on fiscal rather than monetary policy. This shift in the policy center of gravity will help to contain inflation, reduce upward pressure on the shekel and support the new fiscal rule. Alongside, monetary policy should focus on inflation and move further towards a neutral stance. In so doing, it should continue to respond to shocks to global demand, and foreign exchange intervention should become more symmetric. Steps to rebalance housing supply and demand can support these efforts.

To secure Israel's medium-term prospects, greater coordination between the authorities responsible for the stability of the financial system, enhanced procedures governing medium-term public spending, and sharply accelerated efforts to integrate minorities into the labor force will be essential.

1. Output growth is strong by industrial country standards. It rose by 0.8% in 2009 and is set to grow around 4% in 2010. Unemployment is already back down to around 6%, close to its historic low.

2. This reflects good preparation and a firm policy response - including pre-crisis fiscal consolidation, low leverage of households and decisive policy adjustments to the global downturn. The latter comprised cuts in policy interest rates to a percent, pre-programmed foreign exchange intervention, accommodation of large automatic stabilizers taking the budget deficit to 5% of GDP, and steps to contain financial sector stress.

3. Strong crisis policies were complemented by strengthened policy frameworks—adoption of a strong Bank of Israel Law, increased bank capital requirements, a reinforced tripartite arrangement, entry into the OECD, and underpinning all these, a new fiscal rule targeting debt reduction. In addition, in a constructive innovation, Israel initiated a “two-year” budget framework, which helped to stabilize expectations in mid-crisis, and established an important precedent for the future.

4. With the resumption of strong growth, withdrawal of policy stimulus has begun. The Bank of Israel (BoI) policy rate has been raised in steps to 2%, and forex intervention has been reduced and is now discretionary. With tax revenues buoyed by economic activity, the headline fiscal deficit is back on a downward track, heading below 4% of GDP in 2010. This package is supported by the recent cautious and consensual public wage settlement for 2010-12. Several macro-prudential steps have been taken, focusing on the housing market. Nevertheless, with real interest rates negative and the budget in structural deficit, the overall policy stance remains expansionary.

5. This performance has, however, come at a cost. Buoyed by global capital movements, the shekel appreciated by some 15% in real terms relative to pre-crisis levels, and is still rising. Competitiveness has been adversely affected, and this may already be reflected in loss of export market share in 2010, falling FDI inflows, and in recent months, outright falls in exports and flat employment. The strong shekel has, however, helped to contain inflation, which recently returned into its 1-3% target range after a lengthy period just above it. But private sector nominal wage growth has picked up, and inflation expectations across the medium term have risen to the top of the target band, all in the context of an output gap that has, in our view, all but closed. Alongside, and in an echo of advanced countries in the early 2000s, nominal house prices took off in 2008 after years of stagnation, rising over 40% in just two years.

6. Thus, looking ahead, policy faces several challenges. With inflation expectations elevated, emerging strains on capacity, and a high public debt ratio, policy tightening is needed. But this should be done in a way that minimizes the impact on competitiveness, given that capital inflows are expected to persist as long as low growth induces capital outflows from advanced countries. With the WEO 90% confidence interval for global growth as wide as 2-6%, policy also has to be calibrated with a close eye on external uncertainties.

7. Fiscal consolidation is the cornerstone. Given the concerns with the erosion of competitiveness associated with further monetary tightening, this fiscal action will help to secure stable inflation and lower domestic absorption, and so ameliorate the impact of capital inflow pressures. It will put public debt back on its downward track and leave monetary policy the task of adjusting to global developments.

8. The authorities' plans therefore mark an essential step in the right direction. In the context of the forecast temporary deceleration in the global economy in 2011, the authorities plan reductions in the headline fiscal deficit in their two-year budget to 3 and 2% of GDP in 2011 and 2012 respectively, anticipating further reductions to 1% of GDP from 2014. On our estimates, this implies a structural consolidation of some 1½%age points of GDP over the next two years. Alongside, further increases in the BoI policy rate of 75-100 basis points are anticipated during 2011. In this context, growth is projected to slow to 3½% in 2011 before rising again in 2012.

9. But given sustained capital inflows, the announced fiscal trajectory still leaves monetary policy with too stark a choice between addressing inflation concerns and sustaining competitiveness. Both need to be secured.

10. Accordingly, fiscal deficit reduction needs to be more rapid than planned. A strengthening of the planned fiscal stance for 2011 and beyond—by some 1%age point of GDP in structural terms—is recommended. This action would dampen demand growth, lowering inflation pressures, thereby allowing a slower rise in BoI rates than would otherwise be needed. In turn, this would ease upward pressure on the shekel.

11. A mix of expenditure and tax actions is recommended. The latitude under the budget operation mechanisms to hold spending below budgeted authorizations—including by retention of all the various reserves in the budget—should be applied. But if this greater-than-planned structural consolidation is to be secured, risks on the revenue side—arising from generous official estimates—may also need to be addressed. With discretionary spending restraint already assigned to strengthen the deficit, action may be needed on indirect taxes.

12. Alongside, steps to cool the housing market may be required. The pace of house price inflation cannot continue without risk of broader instability—notably in the banking sector. Given uncertainty about when stabilization will occur, prompt measures to check the momentum of prices should focus on actions needed anyway to establish a healthy housing sector for the long run. Building on such measures already taken, this focus will also be to the particular benefit of young home buyers. Possible measures include further relaxation of land supply and licensing constraints, and reduced exemptions in the taxation of capital gains on housing and rental income to establish level playing fields in both areas.

13. The recommended fiscal action and strengthened medium-term spending procedures will also boost overall fiscal credibility. Faster consolidation would underscore commitment to the new fiscal rules—targeting deficit reduction and capping real expenditure growth over the medium-term. But the credibility of the rules will require reinforcement in other ways also—notably because outstanding bottom-up spending commitments exceed the ceilings over the medium term. This longstanding issue highlights the need for a coordinated review of medium-term expenditure priorities. Indeed, discipline over such commitments and, eventually, systematic medium-term spending reviews should support the biannual budget system in securing both continued fiscal discipline and high quality public spending.

14. In this medium-term context, a review of the taxes on non-renewable resources—notably natural gas—and arrangements for spending of the proceeds is appropriate. Thus, the establishment by the Ministry of Finance of a commission to review the current tax arrangement is most welcome. Its general intention to raise the “tax take” from these activities to advanced country norms is fully appropriate; in part as a fair tax system is also more likely to be stable. We encourage other reforms to adopt international best practice in this area, including appropriate pricing arrangements in the tax and to secure appropriate intergenerational distribution of the proceeds. Accordingly, the first use of such tax receipts should be to reduce public debt, given that overall revenues will be modest on current estimates of the volumes of gas. But if large additional finds are made, revenues should be placed in a sovereign wealth fund.

15. On the monetary side, with output and employment buoyant and inflation expectations high, further progress towards a neutral stance is appropriate. If fiscal policy is tightened as recommended, policy rates could rise broadly as is now anticipated. But if not, a faster than anticipated rise in policy rates will be needed—albeit at the expense of competitiveness—to head off risk of higher inflation and the need to correct that later.

16. But given nominal policy rates already well above the lower bound, monetary policy can also play a key role in responding to global uncertainty. Policymakers should remain ready to act decisively—swiftly raising policy rates if upside global risks materialize, and vice versa.

17. With the balance of core policies adjusted in this way to address immediate strains, other policy instruments could also play a supportive role. Further foreign exchange intervention on both sides could help to sustain orderly market conditions. But given that reserves and central bank sterilization losses are already considerable, and that persistent one-sided use of this instrument undermines the credibility of the floating exchange rate regime, it is ill-suited as the main means of reconciling inflation and competitiveness objectives. Likewise, capital controls could be considered. But any use of them would have to be focused in ensuring effectiveness in the face of sustained pressures, and better options may be available. Accelerated progress towards the eventual Basle III capital requirements for banks, especially if coupled with countercyclical buffers, could support restraint.

18. The Bank of Israel Law of 2010 codifies much precedent in Israel and provides a strong foundation for the monetary and exchange rate regime. To strengthen the framework further, consideration could be given to issuing memoranda of understanding between the Government and the BoI on various aspects of how the new law will be implemented. It would also be useful to clarify the role of the new Monetary Committee in decision-making on macro-prudential matters.

19. A range of regulatory and supervisory measures are underway. In mid-2010, banks were required to secure core capital of at least 7% by year end. In the non-bank sector, supervisory powers and capacity, transparency by market participants, and risk management by institutional investors are all being strengthened, notably via Solvency II.

20. In this context, the available indicators of financial stability are reassuring—but limited in scope. Capital adequacy—including Tier 1 capital relative to risk-weighted assets—and impaired loans have improved and non-bank financial institutions have advanced similarly, both in the context of the upswing. But with stress testing still focused at sub-sector level and in its early stages, and a number of indicators of risk not available, caution is warranted. Though perhaps masked by the cycle, credit quality in the corporate bond market remains a lingering concern following its rapid expansion since 2004, as does the latent threat to banking stability if rapid house price inflation continues.

21. Accordingly, further progress is needed to strengthen diagnosis and management of risks. Stress testing procedures need considerable further development, with added focus on systemic risk assessed over longer horizons. Progress in this area, and formulation of the appropriate policy responses, requires full collaboration between and within supervisory institutions. It also requires routine guidance from and feedback to all the authorities responsible for stability, including the BoI and the MoF. Formalization of these arrangements would remain appropriate whatever the final decisions on the location and structure of supervisory bodies. Steps to improve diagnosis and collaboration should not await the anticipated FSAP, but other matters—such as possible need for a deposit insurance scheme and early bank resolution arrangements could be taken up in that context.

22. Furthermore, the adequacy of resources, capabilities, autonomy and accountability of the non-bank financial supervisors remains of concern. With the sector still relatively new, the infrastructure of conventions and rules governing markets, issuance, and institutions is still being developed, as reflected in the sector's fragility in 2008-09. This infrastructure needs further development—building on proposals in the “Hodak Committee”—and supervisors need to enhance their monitoring and management of risks. Our view remains that these considerations warrant moving supervision out of the MoF, as is typical in the OECD, with a number of good options for where it should go—including the option chosen by about half of OECD countries of full independence.

23. The thrust of our macro-financial advice hinges on continued structural reform. This includes progress in education, research, the business environment and infrastructure. But the highest priority in this area is to fully integrate minority populations into the labor force, so as to lower social spending pressures and to raise the long-run productive potential of the economy. (IMF 29.11)

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11.2 KUWAIT: Towards a Healthy Future

The Oxford Business Group reports that while Kuwait's rapid modernization over the past two decades has seen a rise in life expectancies and a decline in illness rates, the changes in lifestyle associated with rising wealth have created their own set of challenges. In early November the United Nations Development Program (UNDP) released its latest human development index (HDI), a broad-based measure of wellbeing that combines assessments of economic prosperity with life expectancy, health and education levels.

Kuwait ranked a creditable 47th of the 169 countries covered by the report. Between 1980 and 2010 the country's HDI has increased at an average rate of 0.4% annually, rising from 0.675 to 0.771. By comparison, the HDI of Arab nations increased from 0.398 in 1980 to 0.590 in the same period, placing Kuwait well above the regional average.

One factor that helped Kuwait's climb through the rankings was the overall health of the nation, with the emirate having the longest life expectancy, 78, of any country in the Gulf region. In the report's section covering perceptions of individual wellbeing and happiness, 89% of Kuwaitis were satisfied with their standards of personal health, higher than the global and regional average.

However, the report did highlight areas where Kuwait needs to improve health services, particularly in the ratio of physicians and beds available to the public. In both instances the number was just 18 per 10,000 of the population. While this figure is higher than many other countries in the region, it is below the average for the UNDP's high human development bracket.

The government and the Ministry of Health are currently striving to increase the number of doctors, nurses and the ratio of beds to the population, through efforts to step up recruitment overseas and train more local medical personnel. The ministry has also launched a construction program to strengthen health infrastructure, with plans for at least 11 hospitals that will add more than 4,000 beds to existing capacity. Apart from recruiting new staff and building new facilities, there has also been an increasing drive to reinforce health awareness through schemes aimed at prevention rather than cure.

Although the country has long since overcome many health problems that affect developing nations – such as malnutrition and water-borne diseases – economic success has seen an increasing number of people suffer from lifestyle-related maladies.

Kuwait, as elsewhere in the GCC, has one of the highest incidences of diabetes in the world, with some 26% of the population suffering from the disease. Up to 80% of Kuwaitis are classified as overweight or obese, a problem that easily leads to cardiovascular disease and other adverse complications. Local nutritionists have said the high rates can be put down to inactive lifestyles, a proliferation of so-called junk food and a lack of education in regard to healthy eating habits. It is difficult to put a figure on the cost to the economy of these illnesses, as loss of productivity has to be taken into account alongside direct health costs. However, with a budget allocation of $3.8bn for the 2010-2011 financial year, the Ministry of Health is set to take direct aim at addressing the issue.

In an interview with the Al Watan newspaper in mid-September, Dr Ibrahim Abdulhadi, the undersecretary at the ministry, said there would be more emphasis placed on promoting a healthy lifestyles alongside improvements in health infrastructure.

Reforms have been proposed that aim to establish an independent authority which deals with the administrative side of the medical and health service under the direct supervision of the cabinet. This would allow the ministry to focus on core functions, such as reducing the incidence of lifestyle-related illnesses, said Abdulhadi. If these reforms are adopted, the ministry will, “be able to focus on providing preventive and medical services as the highest level,” he added. (OBG 23.11)

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11.3 QATAR: Qatari Law Will Test Media Freedom

Jennifer Lambert wrote on 1 December in the Carnegie Arab Reform Bulletin (http://www.carnegieendowment.org/arb) that Qatar will unveil its first media law in 30 years by the end of 2010. While the release of this much-anticipated law is an important step for Qatar, there already seems to be cause for concern. In an interview with Qatari daily al-Sharq on October 24, Minister for Cabinet Affairs Sheikh Nasser bin Mohammed bin Abdulaziz al-Thani stressed the importance of regulation and the need for more Qataris to work in the media because “any sector that is not supported by native staff can cause misunderstandings.” These statements have left journalists, especially foreign journalists, concerned that the new law might restrict certain types of speech.

When Emir Sheikh Hamad bin Khalifa al-Thani came to power in 1995, he took several steps to enhance Qatar's image and differentiate it from neighboring Saudi Arabia. As part of this strategy, he declared an end to media censorship, closed the Ministry of Information, and helped personally fund the establishment of al-Jazeera in Doha. Al-Jazeera became increasingly popular as the first Arab satellite news channel to air critical coverage of Arab regimes and cover previously taboo topics. Several Arab regimes temporarily withdrew ambassadors from Qatar or shut down al-Jazeera bureaus. The Emir's refusal to censor coverage, however, won the praise of international groups such as Reporters without Borders (RWB).

The Qatari regime attempted to build upon this positive attention by opening the Doha Center for Media Freedom, under the patronage of the Emir's wife Sheikha Mozah, in 2008. The center's main aim was to promote press freedom around the globe and offer shelter to threatened journalists. Even though al-Jazeera rarely covered Qatari affairs and the U.S. State Department's Human Rights Report indicated that the Qatari press routinely practiced self-censorship, the Emir's strategy seemed to be working. Qatar's place in RWB's annual press freedom index improved markedly; it moved up from being ranked 115 of 166 countries surveyed in 2003 to 74 of 173 countries surveyed in 2008. UNESCO even chose Qatar as its site for an international conference on International Press Freedom Day in 2009.

Several events in 2009, however, cast doubt on Qatar's actual commitment to freedom of the press. Robert Menard, then Director of the Doha Center for Media Freedom, became frustrated when the Qatari government refused to issue visas to threatened journalists, citing diplomatic concerns. He issued a public letter on the center's website accusing members of the Qatari government of being unsupportive of the center's mission.

Then in May of 2009, Flemming Rose, the cultural editor who published cartoons depicting the Prophet Muhammad in the Danish press, arrived in Doha as part of the UNESCO-sponsored conference. His attendance sparked outrage among some Qataris, and Menard received most of the blame. A Doha mosque denounced the media center in Friday prayers. The Qatari daily al-Watan accused Menard of inviting “Satan” to Doha and insulting all Muslims. In June, a member of Qatar's Advisory Council (a 35-member legislative body appointed by the Emir) called for Menard's dismissal, and Menard resigned.

Advisory Council Chairman Mohamed bin Mubarak al-Kholaify spurred further debate about the Qatari media by declaring that “hypocrites had entered the field and were trying to spoil the image of the country.” The debate focused on Menard and his “lack of understanding” of Qatar.

Following this incident, the Advisory Council passed a new media law imposing stiff fines and a one-year jail term for any journalist who slandered the ruler or threatened national security, religion or the Qatari Constitution. Editor-in-Chief Khalid al-Sayed of the Qatari daily The Peninsula issued a front page criticism in June 2009, writing “We find it strange that the Advisory Council, made up of Qatari nationals, has this kind of opinion when His Highness the Emir has given us the freedom to voice our opinion on issues freely and in a fair manner.” The law was left unsigned by the Emir, and to date, the only official media law in the country is still the 1979 Press and Publications Law.

By the summer of 2009, journalists were asking that a new media law be drafted with their input. The government announced in October 2010 that a new media law would be ready by the end of this year, but it is still unclear whether the media will be consulted. As Khalid al-Sayed explained in a recent conversation, “We hope that the new law will also be reviewed by the media…after all, this law concerns the media so it is only right that the media should know and be aware about it.” Journalists are concerned that the law might prohibit criticism of the Qatari state, the Emir, or Islam - such provisions are extremely common in the media laws of Arab countries - which al-Sayed argues is unnecessary. He noted in a May 2010 editorial that no article in the Qatari press has ever caused the state, the Emir or Islam any harm.

Even before the law comes out, Qatar's most recent rankings in the RWB press freedom index reflect concern about press freedom in the country. Qatar's rankings fell in both 2009 and 2010; it is now ranked 121 out of the 178 countries surveyed. If the new media law imposes fines or imprisonment for certain types of speech, journalists will surely protest and efforts to differentiate Qatar from its neighbors will suffer a serious setback.

Jennifer Lambert recently completed her PhD dissertation on domestic reform and external legitimacy in Qatar. She currently teaches at the George Washington University and works as an Arab Media Analyst at Strategic Social. (CARB 01.12)

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11.4 SAUDI ARABIA: Infirm Politics

The Economist Intelligence Unit (http://www.eiu.com) wrote on 22 November that with the king and the crown prince both in their mid- to late-eighties, a change at the top in Saudi Arabia is coming sooner rather than later. King Abdullah, apparently the more robust of the two half-brothers, has now been flown to the US for treatment after complications resulting from a slipped disc. How well prepared is Saudi Arabia for a possible dual succession, and what impact will this have on regional politics and global oil security?

The Saudi authorities have chosen to be relatively open about the health of King Abdullah since his affliction with a herniated disc in early November - although there was gap of about four days before the government offered an explanation for his absence from the weekly cabinet meeting on 8 November. The most recent bulletin from the royal court on 19 November indicated that as a result of the slipped disc the king had suffered a blood clot in his spine, and that it had been decided to send him to the US for specialist treatment. His condition was said to be stable.

The government has been less forthcoming about the crown prince, Sultan bin Abdel-Aziz al-Saud, who underwent surgery in the US in February 2009 for an undisclosed ailment and who has spent much of the intervening period convalescing in New York and the Moroccan resort of Agadir. As the king prepared to depart for the US, it was announced that Prince Sultan would be returning to Saudi Arabia after his "vacation" in Morocco (where he has been since August). It is commonly assumed that Prince Sultan is seriously ill, most probably with cancer.

Succession roadmap

The Saudi royal family has mapped out the next two stages in the succession, and established a mechanism, in the form of an "allegiance council", for further transfers of power. However, this consensual veneer cannot disguise the fact that there is intense rivalry between the various branches of the extended family, which could breed instability if it not carefully handled.

In March 2009 the king appointed the interior minister, Prince Nayef bin Abdel-Aziz, as second deputy prime minister, a post that has traditionally been a stepping-stone to that of crown prince. Nayef's position in the pecking order was recently confirmed when he chaired the 8 November cabinet meeting and stood in for the king in welcoming pilgrims to Mecca for the hajj.

3G?

The Basic Law of Saudi Arabia - in effect the Al Saud constitution - specifies that any king must be a direct descendant of the country's founder, King Abdel-Aziz al-Saud. His five successors have all been from the second generation and this could continue for several more reigns based on the available stock of eligible princes - the main contenders, along with Prince Nayef, include Prince Salman (the governor of Riyadh), Prince Muqrin (the chief of intelligence) and Prince Ahmed (the deputy interior minister). Nayef and Salman are in their mid-seventies, while Muqrin and Ahmed are both about ten years younger. Also in the picture are two older brothers, Abdel-Rahman (the deputy defense minister) and Mishaal (the minister of rural affairs and the head of the allegiance council).

A number of prominent third-generation princes have been jockeying for position for some time in order to strengthen their eventual claims on the throne. In a telling reflection of this rivalry, the king on 17 November, during the Eid al-Adha, one of the most important religious holidays of the Islamic calendar, appointed his son, Prince Mitab as commander of the Saudi Arabian National Guard (SANG), the principal power base of his branch of the family. The trigger for Mitab's elevation -he has been effectively in charge of this 100,000 strong force for several years - was a request from his uncle, Prince Badr bin Abdel-Aziz, to be allowed to retire from his post as deputy commander. King Abdullah himself has been the commander of SANG since 1962, and the new appointment signifies that he had now relinquished that post. By virtue of the promotion, Prince Mitab also becomes a minister of state and a member of the Council of Ministers. Further enhancing his future standing has been the allocation to SANG of a significant portion of the $60b arms deal recently agreed with the US, notably including more than 100 helicopters.

Barriers

Similar dynastic plays are evident in the defense and interior ministries, which are headed, respectively, by Crown Prince Sultan and Prince Nayef. Khaled bin Sultan has established himself in the Ministry of Defense and Aviation (MODA), where he is assistant deputy minister. However, his route to the top of the ministry is barred by Prince Abdel-Rahman. The Sultan line has also had some difficulty in preserving its patronage networks since Abdullah took charge of the kingdom in the late 1990s when King Fahd suffered a debilitating stroke (he eventually died in 2005). Abdullah subjected defense contracts to stronger finance ministry scrutiny, and has involved Prince Salman more closely in strategic matters. Likewise in the interior ministry, Mohammed bin Nayef has gained a high profile owing to his role in combating al-Qaida's efforts to destabilize the kingdom, but there is no guarantee that he would be promoted to full minister if his father were to become king, as Prince Ahmed would be likely to press his own claim to this position.

Solidarity

Despite these turf wars, the Al Saud are likely to maintain a unified front, if only because of the risk that they could jeopardize the family's continued rule if they allow rivalries to get out of control. This points to a relatively smooth succession, probably based on the accession of Nayef with Salman as crown prince, and the preservation of King Abdullah's legacy of modest reforms, in particular in economic policy. This is certainly the outcome that the US will be hoping for, given the critical role that Saudi Arabia plays in the oil market - generally supportive of Western interests -and as a buttress against the expansion of Iranian power. US support of the Al Saud has also had its downsides. The endorsement of a regime based on a pact between a tribal dynasty and a deeply conservative clerical establishment has never sat easily with the US promotion of freedom and democracy; likewise, the contradiction between the Al Saud's profession of Islamic piety and its alliance with a Western power that has provided unconditional support for Israel has played its part in making Saudi Arabia a breeding ground for al-Qaida. However, the US has established a long tradition of working with the Saudi system, and it has no realistic option other than to try to promote stability by supporting the choices of the ruling family. (EIU 22.11)

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11.5 EGYPT: Gas Will Be the Dominant Fuel in Egypt in 2010 – Some 50% of Primary Energy Demand

Research and Markets' (http://www.researchandmarkets.com) "Egypt Power Report Q4 2010" from BMI forecasts that the country will account for 11.76% of the Middle East and Africa (MEA)s regional power generation by 2014, struggling to cope with demand unless capacity is expanded significantly. BMI's MEA power generation estimate for 2010 is 1,221 terawatt hours (TWh), representing an increase of 4.0% over the previous year (where markets were depressed by the economic slowdown). We are forecasting an increase in regional generation to 1,463TWh by 2014, representing a rise of 19.8% between 2010 and the end of the period. MEA thermal power generation in 2010 is estimated by BMI at 1,138TWh, accounting for 93.2% of the total electricity supplied in the region. Our forecast for 2014 is 1,333TWh, implying 17.2% growth in 2010-2014 that reduces slightly the market share of thermal generation to 91.1% thanks in part to environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. Egypt's thermal generation in 2010 is an estimated 120TWh, or 10.59% of the regional total. By 2014, the country is expected to account for 10.48% of regional thermal generation.

Gas will have been the dominant fuel in Egypt in 2010, accounting for an estimated 50.2% of primary energy demand (PED), followed by oil at 42.5% and hydro with a 4.3% share. Regional energy demand is forecast to reach 1,074mn tonnes of oil equivalent (toe) by 2014, representing 16.3% growth over the period since 2010. Egypt's estimated 2010 market share of 8.75% is set to rise to 9.11% by 2014. Egypt's estimated 15.5TWh of hydro generation in 2010 is forecast to reach 22.1TWh by 2014, with its share of the MEA hydro market rising from an estimated 39.73% to 40.67% over the period.

Egypt is now ranked third behind the UAE in BMI's updated Power Business Environment Ratings, reflecting its market size and above-average proportion of renewables (hydro-power) use. While the regulatory environment is not particularly attractive, the power sector is modestly competitive, with some progress towards privatization. Egypt has, as expected, been able to pull away from Saudi Arabia, but is unlikely to be able to catch UAE above it.

BMI now forecasts Egyptian real GDP growth averaging 5.12% a year between 2010 and 2014, with a 2010 growth assumption of 4.90%. Population is expected to expand from 84.5mn to 90.3mn, with GDP per capita and electricity consumption per capita to increase by 64% and 15% respectively. Power consumption is expected to increase from an estimated 123TWh in 2010 to 151TWh by 2014, putting constant pressure on the electricity supply industry even assuming 5.2% average annual growth in power generation.

Between 2010 and 2019 we forecast an increase in Egyptian electricity generation of 53.9%, above the middle of the range for MEA. This equates to 25.2% during 2014-2019, up from 22.9% in 2010-2014. PED growth is set to be 24.0% in 2014-2019, up from the 21.0% expected for 2010-2014, representing 50.0% for the entire forecast period. An increase of 80% in hydro-power use in 2010-2019 is an important element of generation growth. Thermal power generation is forecast to rise by 43% between 2010 and 2019. More details of the long-term BMI power forecasts can be found later in this report. (R&M 27.11)

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11.6 EGYPT: Making the Grade

Moves to encourage greater private investment in education in Egypt could provide an important boost to the country, bringing in resources and supporting ongoing reform efforts. As cited by the Oxford Business Group, education is a key area in which Egypt is seeking higher levels of foreign investment.

Education is a rising sector across the Middle East, its expansion driven by a number of factors, first and foremost growing and youthful populations. The growth and modernization of regional economies has also led to a growing demand for highly skilled labor. Egypt, like some other countries in the region, recognized some years ago that the education infrastructure needed to reform to meet the future needs of the economy, and the past two decades have seen education remain a consistent national priority.

Due to this commitment, major public investments have been made in the system, providing much-needed resources. Egypt's 2010-11 budget increased education spending to €6b from €5.8b in the previous fiscal year – though it is worth pointing out that it accounts for 22.7% of social expenditure, with Egypt's costly subsidy system taking a 47.7% share. Despite expenditure cuts made in response to the global economic crisis, with the overall state budget trimmed by 10% in 2009-10, education expenditure rose by 16%.

Private capital and expertise can make an important contribution to enhancing education, and reforms are being introduced to enhance the quality of teaching and put more emphasis on the skills needed for a knowledge-based economy, including IT literacy and creativity.

Part of this process is increasing the autonomy of schools considered to have the capacity for greater independence, and, crucially, a growing role for the private sector in many areas. Changes are taking place not only in the classroom, but also at administrative level, with funding structures, data management and policy-making all being re-examined.

Decentralization was also a crucial component of the first stage of Egypt's national educational reform plan, which saw the launch in 2007 of three pilot programs giving schools direct control over their finances. Funds were first delivered directly last year, and initial results suggest that money is being spent more efficiently.

An important project for modernization was the Egypt Educational Reform Program (ERP), conducted in partnership with the Egyptian government and several other organizations. The ERP, which ran from 2004 to 2009, put schools and school autonomy at the heart of the reform process and aimed to deliver better teacher training, girls' education, the creation of multi-grade schools, greater community participation in schooling, and date-driven decision making in the system.

Teacher training is another vital area of focus. A teacher testing pilot program started in 2008, offering pay rises of up to 50% for those who pass and possible dismissal for those who repeatedly fail to make the grade.

The private sector's role holds potential for expansion, and a number of successful education schemes already exist, sponsored and part-developed by firms including Microsoft and Oracle. This could also enhance Egypt's international appeal as a destination for IT outsourcing and business process outsourcing (BPO). “Many Egyptian graduates are highly skilled, well-educated and multi-lingual. There is a much larger pool of fluent speakers in numerous languages than in other emerging market countries which are limited almost entirely to English,” Medhat Khalil, the chairman and CEO of the telecommunications firm Raya Holding, told OBG.

Egypt has a proud tradition of education, but more private investment will be needed to support the ongoing modernization efforts and to ensure that school and university systems do not fall behind regional leaders. Egypt has a proud tradition of education, but more private investment will be needed to support the ongoing modernization efforts and to ensure that school and university systems do not fall behind regional leaders. (OBG 02.12)

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11.7 ALGERIA: Pharmaceuticals & Healthcare Market Is To Reach $5.82 Billion by 2019

Research and Markets (http://www.researchandmarkets.com) "Algeria Pharmaceuticals and Healthcare Report Q4 2010" calculates that Algerian pharmaceutical sales to have been $2.55b in 2009 and expects them to reach $2.84b in 2010. The market is characterized by a relatively low per-capita spend of $73 (in 2009) and a large generics sector 22% of total drug expenditure. It is forecast pharmaceutical consumption growing to $4.22b by 2014, equivalent to a compound annual growth rate (CAGR) of 12.55% in local currency. The long-term 10-year forecast is for the strong growth to continue, with the market reaching $5.82b in 2019.

The incidence of diabetes (especially type II) is on the rise in Algeria as both affluence and urbanization increase. Official figures estimate that around 8% of Algerians suffer from the condition. Around 30,000 new cases of cancer are registered each year, although the country only has four specialist oncology centers. In January 2010, a conference on environmental health highlighted healthcare problems caused by various pollutants, calling for a national plan to tackle the issue.

The Algerian pharmaceutical industry is in urgent need of investment. Pharmaceuticals currently account for 0.008% of all exports but 4.5% of all imports. Algeria's import substitution legislation means drugs that can be manufactured in the country cannot be imported. Despite this, local firms are unable to meet local demand, leaving the market at risk of shortages, a situation several news reports have stated is becoming increasingly common. Currently, Algeria is not under pressure to diversify its exports due to its total trade surplus as a result of oil exports. However, the local industry's generic focus means it has immense potential to increase these exports.

Algerian drug makers are set to face increasing competition from firms in neighboring Tunisia, which are increasing capacity, expanding and exporting to other African markets. This ramping up of exports in Tunisia could not come at a worse time for Algeria, with local manufacturers unable to meet even local demand. While the local market remains under-fulfilled, opportunities for local manufacturers may arise given the lack of any substantial government policies to promote and invest in the Algerian pharmaceutical sector. Tunisia will be more likely to attract foreign direct investment (FDI).

Algeria's uncertain political environment, high levels of bureaucracy and corruption and the requirement to enter the country's market through a joint venture deter significant FDI and will cause Algeria to suffer in comparison with its North African neighbors. The situation will not be helped by the recent announcement that Algeria suspended meetings with WTO until 2011 after their last negotiation, held 29 March – 3 April 2010, failed to lead to membership. (R&M 24.11)

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11.8 MOROCCO: Paths to progress

Optimism in Morocco's business environment, seen in recent World Bank plaudits for its measures to protect investors, is likely to be further boosted by a series of major transport infrastructure projects that are under way. As cited by the Oxford Business Group, Speaking at a World Economic Forum conference held in Marrakech in October, Karim Ghellab, equipment and transport minister, noted that the country has earmarked €11b for transport improvements between 2008 and 2012. “In the last ten years, Morocco has quadrupled its investments in transport infrastructure,” Ghellab was quoted as saying by Moroccan News Agency, MAP. “Morocco is capitalizing on infrastructure because improving infrastructure is likely to contribute to both economic and human development,” he said.

In-keeping with the government's plans to attract more Foreign Direct Investment (FDI), the minister mentioned the launch of several infrastructure projects such as a Tangier-Med port complex and motorway network. Another area seen as key to modernization is the upgrade of rail links.

A Casablanca-Tangier high-speed rail line commenced construction in June. It is expected to be completed in 2014 and begin commercial use a year after. The €1.82b project, which is being handled by French rail company SNCF, will eventually be extended to Marrakech. Tracks have already been laid for a 19-km, 31-station tram network between Rabat and Sale which will cross the Bou Regreg River, and drivers are now being trained to begin work by the end of this year. The network, expected to cost €365m will be able to carry some 180,000 people per day. It will connect major public facilities such as rail stations, hospitals and universities to the main residential areas.

The government is also developing a tram system for Casablanca that, when completed, is expected to reach 76 km in length. Turkish construction firm Yapi Merkezi won the first major construction contract for this project in mid-August. The company will be building the platforms and laying track for a 30-km stretch of the network between Sidi Moumen and Hay Mohammad. Tender rounds for two other sections of the network will be launched soon.

France's Systra, an international consulting firm that specializes in rail and urban transport projects, is heavily involved in the project, with the French government providing €620.2m in preferential loan funding and the balance made up of €501.6m in other loans, €173.3m in grants, €437.8m from the Moroccan government budget, and €91.2m from the Hasan I Fund for Economic and Social Development. Work is expected to be completed in 2014, with operational testing and use to begin in 2015.

As for conventional rail, the country already has a track in place from its main northern line to the port of Nador and there are plans to extend this network to Agadir on the Atlantic coast and perhaps Laayoune in Western Sahara.

Rail is not the only form of transport that is being upgraded and expanded. A new terminal is under way at Marrakech Menara International Airport that will double its capacity and a €56m upgrade of the Fez Saiss Airport is also in the works. Both projects are being financed by loans from the African Development Bank.

As the country continues to expand its transportation networks, not only to more traditional areas such as Europe but also to the rest of Africa and the Gulf, investors will find it easier to do business in Morocco. A recent World Bank report commended the country for strengthening protection of investors, also highlighting significant progress in simplifying business procedures, which holds promise for future investors, particularly in the growing transport sector. The World Bank's “Doing Business 2011” report lauded Morocco's efforts to attract and protect investors, citing the recent decision to reduce minimum capital requirements from €2,736 to €91. This has contributed to a 40% increase in the number of established firms and Morocco is now considering abolishing the requirement altogether. (OBG 06.12)

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11.9 TURKEY: Fitch Revises Turkey's Outlook to Positive; Affirms 'BB+' Ratings

On 24 November, Fitch Ratings (http://www.fitchratings.com) revised the Outlook on the Republic of Turkey's Long-term foreign and local currency Issuer Default Ratings (IDR) to Positive from Stable and affirmed them at 'BB+'. The agency has also affirmed Turkey's Short-term foreign currency IDR at 'B' and the Country Ceiling at 'BBB-'. "The revision in Turkey's Outlook reflects its strong economic recovery, improving public finances and increasing confidence that a lasting transformation in the country's economic prospects and stability is underway," says Ed Parker, Head of Emerging Europe in Fitch's Sovereigns team. "Nevertheless, there is some uncertainty whether Turkey can grow robustly without generating significant imbalances that pose a threat to macroeconomic stability."

Turkey's improving public finances are increasing confidence in its sovereign creditworthiness. Fitch forecasts the general government (GG) deficit (excluding privatization receipts) to narrow to 4% in 2010 and 3.2% in 2011 from 5.9% of GDP in 2009, broadly in line with the new Medium Term Program. Debt dynamics are favorable, helped by strong GDP growth and a marked decline in interest rates. Fitch forecasts GG debt to decline to around 42% at end-2010 and 40% at end-2011 from 45.5% of GDP at end-2009 (compared with the ten-year 'BB' range median of 41%). In addition, the government is lengthening the maturity of its debt, thereby reducing market risk; while financing is supported by a deep local market, as well as strong current capital inflows.

The country is enjoying a strong "V-shaped" recovery, after a severe recession (in which GDP contracted by 14.6% in the year to Q1/09). GDP was up 11% y-o-y in H1/10 and Fitch forecasts growth of 8% for 2010 and 5% in 2011 and 2012, led by domestic demand.

However, Turkey's external finances are deteriorating. The current account deficit (CAD) has widened markedly to $37b in the 12 months to September 2010 from $13b in the 12 months to October 2009. Fitch forecasts the CAD at $44b (5.9% of GDP) in 2010 and $53b in 2011, up from 2.3% of GDP in 2009. Moreover, the quality of financing has deteriorated with an increasing proportion coming from short-term and portfolio debt inflows (which totaled $32b in Q1/10 to Q3/10). These trends are worsening the external liquidity position and expose the country to an abrupt shift in global liquidity. External debt and debt service ratios are higher than for its rating peers.

Furthermore, Turkey has a record of inflation that is higher and more volatile than its rating peers. The Central Bank of Turkey (CBT) will miss its year-end inflation target for the fourth time in five years (despite lowering it in 2008). Although core inflation is low, the headline rate (at 8.6% in October) and price expectations are above target, GDP and bank credit are growing rapidly and real interest rates are negative. However, the CBT has indicated it does not expect to raise interest rates until Q4/11. In this challenging policy environment, with strong "hot money" capital inflows, Fitch believes there is a risk of inflation remaining above target and, at some point, financial volatility occurring.

Turkey's ratings are underpinned by GDP per capita that is above the 'BBB' range median, a strong banking system, a floating exchange rate regime, and a favorable business climate and governance relative to peers. Political risk weighs on the ratings: the World Bank ranks Turkey below the 'B' range median for "political stability" in its Governance Indicators.

The revision in the Outlook follows the agency's two-notch upgrade of the FCIDR to 'BB+' in December 2009, which recognized an improvement in Turkey's credit fundamentals and its relative resilience to the global financial crisis.

Potential triggers for future rating actions could be:

- The implementation of fiscal policy consistent with a downward trend in the government debt-to-GDP ratio could lead to an upgrade. Fitch would also regard favorably a further lengthening in the maturity of government debt.

- Robust economic growth consistent with disinflation and broad macroeconomic balance (this does not necessarily preclude a sizeable CAD) would put upward pressure on the rating. Major labor market reform would be positive.

- Coming through the parliamentary elections (in June 2011) and prospective constitutional amendments without a material increase in political instability would support the case for an upgrade.

- Significant macroeconomic or financial instability (or signs of overheating) - for example emanating from inflation or balance of payments shocks - material fiscal slippage or a major political shock could lead to negative rating action. (Fitch 24.11)

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11.10 TURKEY: Pharmaceutical Market Valued At $10.83 Billion in 2009

Research and Markets (http://www.researchandmarkets.com) "Turkey Pharmaceuticals and Healthcare Report Q4 2010" states that while Turkeys compound quarterly score has improved somewhat, its regional ranking has actually worsened to sixth (from fourth), overtaken by Russia and Hungary. Globally, Turkey remains 26th of the 83 pharmaceutical markets surveyed by BMI. While a number of major multinationals have indicated that Turkey is of major interest to them as a key emerging market, the recent pricing and reimbursement reforms will continue to weigh on the growth of market values, as will shortcomings in its intellectual property (IP) environment.

In fact, during the most recent European Union (EU)-Turkey Association Council's meeting, the EU backed Turkey's constitutional amendments, a small step on the long road to accession. Despite some positive moves, the EU stated concerns over many aspects of Turkey's business environment, including the pharmaceutical industry. The EU called for Turkey to establish legal certainty on regulatory data exclusivity, a theme also raised by the Pharmaceutical Research and Manufacturers of America (PhRMA)'s Special 301 report for 2010, which placed Turkey on the Priority Watch List. The EU has also requested that Turkey suspend new requirements on Good Manufacturing Practices (GMP), as they impose a 'de-facto ban' on imports of certain products, instead suggesting that Turkey develop its capacity in-line with international harmonization initiatives for GMP.

Turkey's pharmaceutical market was valued at $10.83b in 2009, making it the 14th largest market globally. Despite a blip in growth expected in 2010, through to 2014 the market will reach $20.38b at consumer prices. While the development of the generics segment will be stimulated by cost-containment pressures, international standards and IP protection requirements should also work in favor of patented drugs, which are expected to largely retain their share of the total market by value at the same level as in 2009.

In the meantime, the economic rebound expected for Turkey should also stimulate the development of the pharmaceutical market in both volume and value terms once the effects of the 2009 pricing and reimbursement changes are fully digested. We stand by our view that Turkey is among the best positioned emerging markets over the long run. Turkey's domestically-oriented economic structure, diversified industrial sectors, healthy local capital market, pro-reform government and greater leverage potential all suggest that the economy is set to outperform its core emerging European peers, which are some of the other factors providing a solid base for investment in the country's pharmaceutical market. (R&M 24.11)

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11.11 GREECE: Finance Minister Cites 10 Major Challenges Facing Greece In 2011

On 23 November, Greek Finance Minister Papaconstantinou outlined what he called the 10 most significant challenges facing the Greek economy in 2011, saying: "we have a lot of work ahead, we have structural reforms to ensure the sustainability of reducing deficits and viability of the country's public finances". Speaking to reporters, the Greek minister sounded "open" to a possibility of extending the repayment period of loans received by the €110b support mechanism, although he stressed that no decision over an extension has been taken. Moreover, he dismissed speculation of additional loans from 2013 onwards. Papaconstantinou stressed that Greece's aim was to return to capital markets in 2011, saying "we are doing our job. The rest will come in due time, depending on how things are going".

Additionally, Papaconstantinou categorically reassured that "there is no issue of dismissals in the public sector", saying that transfer of workers in the public sector would not be counted as new hirings. The Greek minister thanked his colleagues in government for their cooperation with the troika experts, while he criticized the opposition for its stance. Amongst others, Papaconstantinou listed the 10 biggest challenges facing the economy in the coming year, including:

1. Better management and control of public spending with the appointment of economic supervisors to the most significant general government's agencies, drafting a medium-term fiscal strategic framework for the period 2012-2014 aimed at reducing the fiscal deficit from €17 billion to €6.4 billion.

2. Combating tax evasion via provisions envisioned in draft law on tax legislation, such as accelerating tax trials, restructuring the finance ministry and merging tax agencies.

3. Reducing public sector enterprises' deficits through the closure and merger of organizations. Loss-making enterprises will have to reduce their workforce but not with dismissals but with workers' transfers.

4. Reforming the public sector. The minister said 40,000 employees will leave the public sector in 2010 and around 8,000 new hirings will be made in 2011 with priority given to education, health and insurance. A new payroll system for the public sector will be operational by the end of 2011.

5. Cutting overspending in health.

6. Labor relations. A new draft bill will be presented by the end of the year giving business agreements more power over sector agreements within certain limits without hitting the minimum wage.

7. Opening up of closed professions. A draft bill will be approved in the first quarter of 2011.

8. Business environment-growth. An action plan to deregulate energy markets will be presented by the end of 2011.

9. Financial sector. Restructuring ATEbank (in Q4/10) and operational division of a Savings and Loans Fund (Q1/11).

10. Better management of state real estate property-privatizations with the aim to raise €7.0 billion in the 2011-2013 period and at least €1 billion in 2011.

Papaconstantinou said Greece was and will continue to be in a volatile international environment with great difficulties resulting to fluctuations in bond yield spreads. He said that an updated memorandum will be signed with the troika within the next 10 days. (ONA 25.11)

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