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TOP STORIES
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Israel Adds Dentistry to National Healthcare Basket
1.2 Finance Ministry Unveils Plan To Help Hi-Tech Sector
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 OECD Bullish on Israeli Growth
2.2 Morgan Stanley Raises Israel Growth Forecast
2.3 JVP Successfully Raises Around $25 Million Annex Fund
2.4 Israeli & Indian High-Tech Cooperation Agreement Signed
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Jordan Imports American Hardwoods Worth $5.6 Million
3.2 Jordanian Imports of Malaysian Timber Likely To Rise 10% In 2010
3.3 Doubletree by Hilton Expands Middle East Portfolio with Signed Development Deal in Jordan
3.4 Lockheed Martin Awarded Contract for Kuwait Air Force KC-130J Tankers
3.5 Emirates in Record $11 Billion Order For A380s
3.6 Dubai Tennis & Golf Academy Projects Scrapped
3.7 Bombardier Wins $241 Million Saudi Monorail Contract
3.8 Amstar & Renaissance Opens 100% Leased Kozzy Retail Center in Istanbul, Turkey
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 SolarEdge Named Red Herring 100 Europe Award Winner for 2010
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Jordan & USA Discuss Economic & Commercial Cooperation
5.2 Iraq Oil Exports Surge To 1.9 Million BPD
5.3 Persian Gulf States Face Food Crisis
5.4 GCC States Put EU Free Trade Talks On Hold
5.5 S&P Affirms Kuwait Sovereign Ratings
5.6 Expatriate Workforce Growth Slows In Bahrain
5.7 Qatar-Bahrain Causeway Put On Hold
5.8 UAE Growth to Reach 3.2% In 2010 Based On Oil Prices
5.9 US Exports to UAE Reach $12 Billion
5.10 Oman Inflation Climbs To 11 Month High in April
5.11 Egypt & EU Take a Step Towards Liberalizing Trade
5.12 Egypt's Unemployment Drops to 9.1% in First Quarter
5.13 US & Libya Sign Trade and Investment Framework Agreement
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey's Trade Deficit for April Doubles
6.2 Turkey & Azerbaijan To Ship More Gas To European Countries
6.3 OECD Urges Greece to Stay With Reforms Plan
6.4 Economic Downturn Takes Toll on Greek Construction
6.5 New Greek Round of Spending Cuts Contemplated
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7: GENERAL NEWS AND INTEREST
*REGIONAL:
7.1 Facebook More Popular Than Daily Newspapers in MENA
7.2 Survey Finds Turkish Society Continues To Discriminate Against Gays
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva Invests In Ontario, Canada
8.2 Teva Announces Launch of Generic Yaz Tablets
8.3 NeuroDerm Completes Enrollment & Dosing in Phase 1 Study of Dermal Patch for Parkinson's
8.4 EarlySense Raises $13 Million from Pitango and Current Investors
8.5 Successful Clinical Results for NovoCure's Device for Treatment of Recurrent Glioblastoma
8.6 Can-Fite BioPharma Opens CF101 Dermatology IND with Phase 2/3 Psoriasis Protocol
8.7 Protalix BioTherapeutics Completes Phase I Clinical Trial for PRX-105
8.8 Immunovaccine Signs Agreement with Vaxil BioTherapeutics to Advance Potential Cancer Vaccine
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Answers.com Releases Newly-Designed Mobile Web Version
9.2 Semtech & Virtual Extension Bring Wireless Mesh Networks to Smart Lighting Applications
9.3 Israel Post Launches an Innovative Service Providing Every Citizen With a Virtual Safe for Their Mail
9.4 Lucid and MSI Make Multi-GPU Gaming Accessible to the Masses
9.5 Mellanox Scalable HPC Solutions Enhance GPU-Based HPC Performance & Efficiency
9.6 Cirrus Aircraft Selected TAT Technologies as Preferred Supplier for Heat Exchangers
9.7 RADVISION Brings Revolutionary Data Collaboration to Video Conferencing
9.8 RADVISION Unveils New Groundbreaking Video Conferencing Solution for the SMB Market
9.9 Wavion Provides High Speed Internet Access for Tauranga, New Zealand's Fastest Growing City
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's Unemployment Rate Falls To 7.2%
10.2 Israel in 5th Place For Home Price Rises
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11: In Depth
11.1 ISRAEL: Petrochemicals Report Q3/2010 Will See a Moderation in Growth Rates After 2010
11.2 LEBANON: Statement at the Conclusion of the IMF's 2010 Article IV Consultation Mission
11.3 IRAQ: Are The Kurds Still Kingmakers In Iraq?
11.4 KUWAIT: Construction Sector to Grow By Only 1.39% in 2011 to $2.64 Billion
11.5 BAHRAIN: Old Players and New in the Bahraini Elections
11.6 UAE: People Puzzle
11.7 OMAN: Going Up
11.8 EGYPT: Petrochemicals Report for 2010's Third Quarter
11.9 TURKEY: Steady Growth Predicted
11.10 BULGARIA: IMF Executive Board Concludes 2010 Article IV Consultation
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1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Israel Adds Dentistry to National Healthcare Basket
On 7 June Globes reported that Deputy Minister of Health Litzman achieved a historic reform in Israel's National Health Insurance Law (5754-1994), after a long struggle that included a petition to the High Court of Justice and a reprimand from the judges on the flawed legal process. The Knesset Labor, Welfare & Health Committee approved the inclusion of dental care as part of the basket of healthcare services for the first time. The amendment will initially apply, as of July 1, to dental care for children up to the age of 8. There will be no need to pay supplementary health insurance.
Last month, Prime Minister Benjamin Netanyahu blocked Litzman's initiative by deciding that dental insurance should also apply to private dentists, who would provide care through the basket of healthcare services. Netanyahu's decision threatened to delay the reform, but the Labor Committee has now adopted Litzman's compromise. Dental care will be provided through the health funds immediately, while legislation will be formulated to allow private dentists to organize through a designated dental health fund, which will provide dentistry services. The Labor Committee went a long way toward the private dentists' position, by setting a clear timetable. Litzman's reform will come into effect through a directive by the end of November, by which time the Knesset will complete legislation for establishing the dental healthcare fund. If the legislation is not completed, the Labor Committee may extend the directive. (Globes 07.06)
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1.2 Finance Ministry Unveils Plan To Help Hi-Tech Sector
On 8 June, Finance Minister Steinitz presented a multiyear plan to support Israel's hi-tech industry and encourage the growth of large companies The Finance Ministry, in cooperation with the Ministry of Industry, Trade & Labor, their Chief Scientist's Office and private industry, seeks to expand the country's hi-tech sector, especially biotechnology and technology for financial services. The Finance Ministry reported a decline in the volume of venture-capital investment in advanced industries by local and foreign institutional investors, while at the same time emerging-market economies were increasing investment into R&D. In addition, there are fewer science and engineering graduates in the country and an increase in the number of Israeli students going abroad, especially for postgraduate studies. The plan gives Israeli academics, scientists and entrepreneurs living abroad tax breaks to lure them back. The plan includes tax benefits to encourage the growth of medium- and large-sized Israeli companies through acquisitions of smaller companies. Companies that buy smaller firms or merge will enjoy tax benefits for five years. The plan offers tax breaks on capital gains to encourage local hi-tech companies to grow into multinationals rather than be sold early, and so that their shareholders will hold onto their shares. (JP 08.06)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 OECD Bullish on Israeli Growth
Recovery from Israel's relatively mild downturn is underway, and growth should be close to potential by the end of 2011, said the OECD in its Economic Outlook on 26 May. The OECD predicts that Israel will achieve 3.8% GDP growth in 2010, and achieve 4.2% growth in 2011. The estimates are higher that the growth forecasts of the Bank of Israel of 3.7% GDP growth in 2010 and 4% growth in 2011. Recently, the Central Bureau of Statistics reported that Israel's annualized growth rate slowed to 3.3% in Q1/10 from 4.8% in Q4/09. The OECD also predicts that inflation in Israel will move back toward the upper limit of the government's 1-3% target range in 2011. The OECD reiterated its position that the Bank of Israel should officially end its currency purchases, and added that the Bank of Israel will probably substantially raise the interest rate by the end of 2011.
The OECD warns of a speculative bubble in real estate in Israel, if home prices continue to rise. The OECD's assessment is in line with the assessment by the Bank of Israel, which while insisting in its Annual Report for 2009 that there is no bubble, nevertheless cautioned that a bubble is possible if prices continue to rise. The OECD said that the jump in home prices raises the possibility of a speculative real estate bubble, which will dim the effect of a further monetary tightening. (Globes 26.05)
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2.2 Morgan Stanley Raises Israel Growth Forecast
Globes reported that Morgan Stanley has raised its 2010/11 growth forecast for Israel. Morgan Stanley said that shekel weakness may have a positive impact on exports and help boost growth. Analyst Tavfik Aksoy raised his growth forecast for Israel to 4% for 2010 from 3.7% and to 3.8% for 2011 from 3.2%. The new growth forecasts are higher than the 2010 forecast of 3.6% by the Ministry of Finance and the growth forecast of 3.7% by the Bank of Israel. Aksoy sees the shekel weakening in the near term. "With a weaker euro outlook, our expectation of extended weakness in global financial markets coupled with the persistent forex intervention policy adopted by the Bank of Israel, led us to call for further weakness in the shekel," he says. Aksoy also noted, "The recent rise in geopolitical risks has clearly added to currency volatility and poses downside risks." For over a year, foreign banks have been predicting that the Bank of Israel will gradually reduce and ultimately end its intervention in the foreign currency market. Citing comments by Governor of the Bank of Israel Prof. Stanley Fischer, Aksoy does not expect the interventions to end any time soon, which will prevent shekel strength in the near term. Aksoy reiterated his interest rate and inflation forecasts. He predicts that the interest rate will reach 2.25% by the end of 2010, and that inflation should ease to 2% this year. (Globes 08.06)
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2.3 JVP Successfully Raises Around $25 Million Annex Fund
Jerusalem Venture Partners (JVP - http://www.jvpvc.com), one of Israel's leading venture capital firms, managing 7 funds totaling over $800 million, announced that it has raised approximately $25 million for an Annex Fund to JVP IV. The new Annex Fund is due to strengthen JVP IV's portfolio companies, enabling them to capitalize on their potential, preventing premature sale, and enhance their business propositions. One such example is JVP IV and IV Annex portfolio company Qlik Technologies, which, according to a prospectus recently filed with the US Securities and Exchange Commission (SEC), generated revenues of $157 million in 2009. Another leading JVP IV and IV Annex portfolio company is Siano Mobile Silicon. Siano is enabling mobile digital TV for handheld devices and is expected to become one of the most promising players in significant markets such as China, Korea and Brazil. The Company's rapid growth illustrates Israel's Hi Tech industry's shift from communications to media and the end consumer. (JVP 07.06)
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2.4 Israeli & Indian High-Tech Cooperation Agreement Signed
On 8 June, Israel's High Tech Industry Association signed a cooperation agreement with Telecom Equipment Manufacturers Association of India (TEMA), The Indus Entrepreneurs (TiE), and the India Semiconductor Association (ISA). The heads of the three organizations are attending the 2010 Annual Conference, which opened in Jerusalem. The cooperation agreement aims to create a working structure for collaboration between companies, encourage bilateral high-tech business ties, promote innovation and entrepreneurship and promote joint projects. The organizations also plan to hold joint conferences, and establish professional relations to leverage current opportunities in the Indian and Israeli markets. (Globes 08.06)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Jordan Imports American Hardwoods Worth $5.6 Million
Jordan imported almost $5.6 million worth of hardwood lumber and veneer from the US in 2009, signaling significant demand, said the director of the American Hardwood Export Council (Ahec) for Africa, Middle East, South Asia and Oceania. He spoke on the sidelines of a recent seminar on American hardwood at the Grand Hyatt Hotel in Amman. He added that $500,000 of American hardwood lumber alone was imported during Q1/10. Increased usage of US hardwoods in Jordan's expanding furniture and interiors sectors is a sign that high quality raw materials are appreciated and it could help the furniture sector to further expand its export business. The Jordanian Furniture Exporters and Manufacturers Association (JFEMA), a non-profit organization, underlined its support for the American Hardwood Seminar and Lumber Grading Workshop, Ahec's first initiative in the kingdom. With approximately 3,000 furniture manufacturers operating in Jordan, which employ an estimated 20,000 employees, the Kingdom's furniture industry has achieved remarkable success in introducing new product lines into both domestic and export markets, a statement said. Ahec's planned foray into this market is aimed at further boosting the quality of furniture products produced in the country by helping manufacturers to understand the potential offered by America's wide range of hardwood species, which offer a wealth of design and suitability options for this growing sector. (TradeArabia 08.06)
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3.2 Jordanian Imports of Malaysian Timber Likely To Rise 10% In 2010
Malaysia's timber exports to Jordan are expected to grow by 10% in 2010, Malaysian Timber Council (MTC) officials announced on the sidelines of meetings between a Malaysian business mission and Jordanian businesspeople. The mission comprises representatives from 13 established timber companies. Trade exchange between Jordan and Malaysia stood at $188 million in 2009. Jordan's imports of timber and timber products from Malaysia stood at only $3 million in 1998, but in 2007 they rose to $32.1 million. Jordan's imports of timber from Malaysia reached $41.1 million in 2008, while in 2009 they rose to $48.1 million. Malaysia's timber exports to the Middle East stood at $508 million in 2009. Jordan is the 5th largest Arab importer of timber from Malaysia after the UAE, Yemen, Saudi Arabia and Egypt. Malaysia is the 2nd largest exporters of tropical timber in the world after Brazil, which account for 5% of the country's overall exports and its contribution to gross domestic product stands at about 4%. (JT02.06)
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3.3 Doubletree by Hilton Expands Middle East Portfolio with Signed Development Deal in Jordan
Hilton Worldwide has signed a management agreement with Jordan Maritime Complex for Real Estate Investments Co. for the Doubletree by Hilton, Aqaba, marking the brand's entry into Jordan with a stylish, upscale, full-service hotel product in Q3/10. The 181-room, new-build property will be located in the popular resort destination of Aqaba on Jordan's southern coast. In the centre of the business district, and less than a kilometer from the beach and the city's marina, the site for the new Doubletree by Hilton, Aqaba is ten kilometers from King Hussein International Airport. Doubletree by Hilton, Aqaba will feature five food and beverage outlets including an all-day dining outlet, poolside restaurant, coffee shop, wine bar and club. Leisure facilities include a health club and spa with sauna, steam room, gymnasium, two treatment rooms, as well as semi-outdoor swimming pools. The hotel will house one multi-purpose meeting room with pre-function area. Tourism is a vital sector of Jordan's economy, with tourism related revenues representing approximately 14% of the country's GDP. International arrivals have been growing steadily, to over seven million tourists in 2008. The company currently operates 44 hotels in Middle East & Africa – 16 hotels in Egypt, nine hotels in the UAE, six in Saudi Arabia and one each in Oman and Kuwait, plus another 11 hotels in Africa and the Indian Ocean. (Hilton 03.06)
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3.4 Lockheed Martin Awarded Contract for Kuwait Air Force KC-130J Tankers
Lockheed Martin received a $245 million contract from the U.S. Government for the Foreign Military Sale of three KC-130J tanker aircraft to Kuwait. The program will be managed by the U.S. Navy. The Kuwait Air Force's new KC-130Js will provide aerial refueling for its F18 fleet and augment its current airlift fleet of three Lockheed Martin L-100s. Kuwait's KC-130Js also will perform air mobility, disaster relief and humanitarian missions throughout the world. Kuwait's first KC-130J delivery is scheduled for late 2013, with deliveries completed in early 2014. Using only wing and external tanks, the KC-130J has a 57,500 pound fuel offload capability. The KC-130J is configured to accept a fuselage tank, adding another 24,392 pounds of available fuel. The standard probe-and-drogue configuration of the KC-130J is suited for both fixed and rotary wing aircraft. In addition to aerial and ground refueling, the KC-130J has the same airlift capability as non-tanker variants - including airdrop and paradrop. Headquartered in Bethesda, Md., Lockheed Martin is a global security company that employs about 136,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. (Lockheed Martin 27.03)
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3.5 Emirates in Record $11 Billion Order For A380s
Airbus landed a record $11 billion order for super jumbo aircraft from Dubai's Emirates, the Arab world's largest airline, as the carrier shook off the risk of another recession and struck a blow to its older European rivals. The request for the 32 double-decker A380s brought Emirates' Airbus order to 90 aircraft. Airbus, which has been facing a range of operational difficulties, called the unexpected vote of confidence the largest commercial aircraft order by dollar value ever. While airlines had upgraded their industry forecasts this week, the sheer size and scope of the A380 order stunned Emirates' competitors. At first glance, some analysts were skeptical about the deal, with US aerospace analyst Aboulafia suggesting it was most likely a bargaining chip for Emirates in its push to get landing slots in Berlin. He said it was possible that ultimately some of the order might not be fulfilled. But others said it fit with the model of the Middle East as a driver of demand as the industry recovers from the recession. Emirates became Dubai's flagship company and one of the biggest contributors to the local economy after the property crisis devastated real estate firms. The government-owned group expects to earn $1.16 billion in 2010 and rivals more established names for traffic between Europe and East Asia. (GN 07.06)
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3.6 Dubai Tennis & Golf Academy Projects Scrapped
The Nick Bollettieri and David Leadbetter branded sports academies, which were to be based at Dubai Lifestyle City in Dubailand, have been officially scrapped. Dubai-based developer ETA Star Group struck a deal in 2007 with US-based IMG Academies to develop a range of branded academies at the $653m Dubai Lifestyle City (DLC) in Dubailand, including the Nick Bollettieri Tennis Academy and David Leadbetter Golf Academy. IMG Academies is a sports education and training facility based in Bradenton, Florida and consists of The Nick Bollettieri Tennis Academy, The David Leadbetter Golf Academy, the IMG Baseball, IMG Basketball, IMG Soccer, IMG Lacrosse and IMG Football Academies, and the IMG Performance Institute. In 1983, the first David Leadbetter Golf Academy was established and there are currently 28 academies in thirteen countries, with the Dubai outpost intended to become the first in the Middle East. However, the latest statement from IMG Academies confirms that it has severed links with ETA Star and DLC. (AB 31.05)
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3.7 Bombardier Wins $241 Million Saudi Monorail Contract
Bombardier's rail division has signed a $241 million contract to supply, install, operate and maintain its next generation Innovia Monorail System in Riyadh. The 3.6-km monorail transit system for the King Abdullah Financial District will include six driverless Innovia Monorail 300 trains, for a total of 12 cars. Bombardier Transportation won the contract from Saudi Oger Limited, a leading Saudi Arabian construction company. Saudi Oger Limited, as the contractor responsible for the full turnkey construction of the new monorail system, was awarded the contract by the Rayadah Investment Company, the investment vehicle of the Public Pension Agency of the Saudi government. Engineering and design for the monorail vehicles will be centered at Bombardier's site in Kingston, Canada, and manufacturing of the 12 cars will be carried out by the company in Pittsburgh, USA. Together with Saudi Oger, Bombardier will also provide its branded Innovia O&M (operation and maintenance) services for the system for an initial period of 10 years. Completion of the monorail system is scheduled for 2012. (TradeArabia 01.06)
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3.8 Amstar & Renaissance Opens 100% Leased Kozzy Retail Center in Istanbul, Turkey
Denver, Colorado's Amstar and Turkey's Renaissance Development celebrated during April the grand opening of Kozzy Shopping Center, the Kadikoy district's newest neighborhood retail project offering local residents a diverse, high-quality mix of 60 international and domestic retailers, a nine-screen cinema, indoor and outdoor restaurants and cafes and 260 underground parking stalls. At grand opening, the 40,000-square-meter (430,560-square-foot) center was 100% leased with more than 70% of the shops open to the public. Amstar in partnership with Renaissance developed and leased the project. Construction began in 2008 and the development team partnered with the Kadikoy Municipality to secure a ground lease of the Municipality's land in exchange for an office and theatre component reserved for the Municipality's use. Amstar and Renaissance formed a joint venture to develop projects throughout Russia and Turkey. In addition to Kozzy, the partnership is developing shopping centers in Adana, Turkey, Novosibirsk, Russia and has a strong pipeline of future projects. Renaissance is one of the leading general contractors and commercial real estate development groups in Russia, Turkey, Ukraine and Libya, and is expanding into Turkmenistan and the Gulf countries. During its 15 years of operations, Renaissance has completed more than 420 projects valued at over $5.0 billion. Currently, the Company has over 11,000 employees working at 32 different locations. (Amstar 27.05)
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 SolarEdge Named Red Herring 100 Europe Award Winner for 2010
SolarEdge Technologies announced that Red Herring Magazine selected the company for its 100 Europe award, a prestigious list honoring the year's most promising private technology ventures from the European business region. The Red Herring editorial team selected SolarEdge Technologies from a pool of hundreds from across Europe. The nominees are evaluated on both quantitative and qualitative criteria, such as financial performance, technology innovation, quality of management, execution of strategy, and integration into their respective industries. Herzliya's SolarEdge (http://www.solaredge.com) takes a unique and innovative approach to boosting PV system output. SolarEdge's system, which comprises of PowerBoxes which are per-module power optimizers, a multi-string solar inverter and module-level solar monitoring software, allows for an increase of up to 25% more energy production from any PV installation. The SolarEdge PowerBoxes perform MPPT per individual panel while monitoring the performance of each panel and communicating across existing power lines. Moreover, PowerBoxes always maintain a fixed DC string voltage, allowing optimal efficiency of the SolarEdge multi-string PV inverter, which is tailor made to work with power optimizers. As a result, the SolarEdge system provides more power from any given installation, eliminates design constraints, provides complete panel-level and whole-system visibility for monitoring and maintenance alerts, solves all safety hazards and provides anti-theft mechanisms, all while reducing the cost of energy. During the several months leading up to the announcement, Red Herring analyzed hundreds of companies in the telecommunications, security, Web 2.0, software, hardware, biotech and clean tech industries which sent in their submissions to qualify for the award. (SolarEdge 28.05)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 Jordan & USA Discuss Economic & Commercial Cooperation
On 7 June, Jordanian Minister of Industry & Trade Hadidi discussed with Special Representative for Commercial and Business Affairs of the U.S State Department Hariton scopes of boosting cooperation between Jordan and the US, especially in economic and trade areas. The two officials highlighted the importance of the Global Entrepreneurship Program (GEP) for the development of business as well as for the success of small-scale economic projects. Hadidi provided an overview of Jordan's participation in the Economic Dialogue and the Investment Forum recently held in the US, stressing the necessity of benefiting from the American expertise in Jordan. He welcomed new programs that will stimulate innovation and creativity to create new job opportunities. Hariton gave a briefing on the GEP and said the visit aims at implementing the program in Jordan. (Petra07.06)
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5.2 Iraq Oil Exports Surge To 1.9 Million BPD
Iraq's oil exports rose in May to 1.9 million barrels per day from 1.767 million bpd the month before, the head of the State Oil Marketing Organization (Somo) said on 1 June. Iraq exported an average of 1.460 million bpd from the southern oil hub of Basra and 440,000 bpd from the northern oilfields around Kirkuk, including 10,000 bpd by trucks to Jordan. Iraq's oil exports in May were expected to exceed 1.9 million barrels per day, recovering from a dip in April caused by bad weather and a bomb attack. Oil exports are expected to rise over the coming months in excess of 1.9 million bpd. Exports from Basra, Iraq's main oil-exporting hub, can fluctuate widely due to weather conditions or technical problems, while repeated bomb attacks hampered crude flow from Kirkuk fields in recent months. The Opec member has signed deals with global oil firms that could boost its output capacity to 12 million bpd in six to seven years' time from the current 2.5 million bpd. That would rival top producer Saudi Arabia's capacity, and is viewed by most industry experts as a highly ambitious target. Iraq hopes the deals will generate the billions of dollars desperately needed to rebuild the economy. (TA 01.06)
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5.3 Persian Gulf States Face Food Crisis
The scramble by Saudi Arabia and the Persian Gulf states to secure strategic food supplies by buying up vast tracts of farmland in Africa and Asia won't be enough to stave off a surge of food imports over the next decade, a Saudi bank report says. "The era of cheap food is over," NCB Capital, the investment arm of Saudi Arabia's National Commercial Bank, declared in the report issued several weeks ago. The wholesale investment in arable land in Sudan, Tanzania, Kenya, Ethiopia and other African states won't prevent the level of food imports of the six Gulf Cooperation Council states - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - from rising sharply over the next decade. The NCBC report urged the GCC states to boost domestic food production through sustainable agriculture to head off an eventual crisis caused by a dramatic surge in the global demand for food that will push prices ever upward. It said that the Saudis at least are providing financial incentives to expand the use of new crop technologies, water management and new types of seeds that require less water. Riyadh's 2010 budget allocates $12.3 billion to the agriculture and water sectors, a 31% increase over 2009. New desalination plants are also planned.
The dependence of the GGC members on food imports is already high, particularly concerning basic foodstuffs such as rice, barley and maize. Imports accounted for 92-100% of consumption in the Persian Gulf, while for milk and dairy products the figure is 77%. Saudi Arabia and its Gulf partners turned to the large-scale purchase or long-term leasing of farmland in Africa and further afield in Pakistan and Turkey, because they failed to devote sufficient resources to agriculture in the 1970s and 1980s. The institute estimated that Saudi Arabia and the UAE, the main buyers of African land, have acquired some 6 million acres worldwide, largely in Sudan, Pakistan and Indonesia. Other estimates are much higher. The report said that additional purchases by the Saudi government and private investors are under way with Egypt, Ethiopia, South Africa, Kazakhstan, Australia and Brazil. Eventually, the report pointed out, these countries will have to curtail the export of food grown on their farmland because they will have to feed their own swelling populations rather than someone else's. The land-buying spree by the Arab states is likely to continue as desertification worsens. (UPI 27.05)
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5.4 GCC States Put EU Free Trade Talks On Hold
The six-member states of the Gulf Cooperation Council suspended free-trade negotiations with the European Union that have been going on for about two decades after failing to overcome obstacles to an agreement. Free-trade negotiations between the 27-nation EU and the GCC have faltered over disagreements on petrochemical subsidies and foreign companies holding majority stakes in GCC companies. The free-trade agreement has been under negotiation since 1991, according to information on the website of the European Union. GCC member states have resisted attaching any political conditions, such as improved human rights, to an agreement with the EU. Some say that this is a pressure tactic by the GCC to force progress on this issue. (AB 26.05)
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5.5 S&P Affirms Kuwait Sovereign Ratings
Standard & Poor's (http://www.standardandpoors.com) has affirmed its AA-/A-1+ sovereign credit ratings on Kuwait. The outlook is stable. The stable outlook on Kuwait balances the government's strong financial position against elevated regional geopolitical risks, increased contingent liabilities and potential impediments to growth, Standard & Poor's Ratings Services said. The ratings on Kuwait are supported by the sovereign's rich resource endowment, which, combined with prudent policies, has enabled the State to build very strong external and fiscal balance sheet positions in recent years, a statement said. These strengths comfortably balance Kuwait's increased contingent liabilities, high institutional risks, and the slow progress thus far on structural reform, which remains a constraint upon economic growth, it added. A stabilization of the relationship between the government and the parliament, along with a political consensus that helps to accelerate both private domestic and foreign investments, should alleviate major impediments to growth and would be positive for the rating. Conversely, a sustained worsening of political and event risks, such as a deterioration in relations with Iran, or a significant and sustained erosion of the government's asset position, could put Kuwait's creditworthiness under pressure. Significantly reduced geopolitical risk could lead to a rise in rating in the future, it added. (S&P 01.06)
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5.6 Expatriate Workforce Growth Slows In Bahrain
Bahrain saw a big slowdown in the growth of its expat workforce in 2009 due to the decline in construction activity. The annual rate of growth in foreign workers employed in Bahrain fell to around 7% last year, compared to about 17% in 2008. According to CB Richard Ellis' latest MarketView report, the total expat workforce in Bahrain grew by 28,740 to 467,000 last year compared to an increase of 65,000 in 2008. Foreign employees continued to dominate the kingdom's workforce, as they made up 77% of the total working population. It said the largest share of new work visas for foreigner continued to fall in the construction category, which made up nearly a third of the total visas granted. Despite the construction slowdown, CB Richard Ellis said the kingdom's well diversified economy "should help it see out the economic downturn." "Alternative sources of income include estimates of $1.75bn in tourist expenditure in Bahrain during 2009 and significant planned growth in the industrial and logistics sectors," the report added. The report also predicted that Bahrain's oil reserves would be trebled over the next 20 years thanks to an initiative that will increase production to 100,000 barrels per day. (AB 26.05)
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5.7 Qatar-Bahrain Causeway Put On Hold
Faced by escalating costs, the $3 billion planned bridge linking Bahrain and Qatar was put on hold. The 40 km causeway was set to play a key role in improving infrastructure connections between members of the GCC. Bahrain's parliament economic committee said the project has been on hold for some time, but it is not cancelled, adding that cost increases and financing issues had played a role. The project, first announced in 2001, had already been delayed in 2008 to change the project scope to include trains, and at the end of 2009 the countries said work would start in the Q1/10 and be completed by 2015. (Beltone 08.06)
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5.8 UAE Growth to Reach 3.2% In 2010 Based On Oil Prices
The UAE's economic growth is expected to accelerate to up to 3.2% this year and no further major restructuring of Dubai debt is seen, according to the Minister of Economy, Sultan bin Saeed Al Mansouri, after a presentation of the government's 2009 economic report. He said 2009's GDP growth was 1.3% and they expect GDP growth for 2010 to be around 2% to 3%, depending on oil prices, which are expected to move between $75 and $85 a barrel in 2010 and 2011. In 2009, the oil sector contributed about 29% to GDP of the UAE, household consumption, which accounted for 47% of total expenditure, grew 2.0% year-on-year, while government purchases and private fixed capital formation rose by 3.9% and 5.9%, respectively, the report indicated. Mansouri said UAE's open economy was likely to be affected by the euro zone debt crisis, but the impact was hard to quantify at the moment. It is felt that the UAE economy will grow by 2.1% in 2010, up from forecasts of 0.6% growth in 2009, as hydrocarbon activities continue to grow and the construction, financial services and retail trade sectors rebound. Inflation is expected to average 2.5% in 2010, up from 1.6% in 2009, as prices rise from their 2009 lows. (Various 29.05)
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5.9 US Exports to UAE Reach $12 Billion
The US goods exports to the UAE surged a record 237% from $3.6 billion in 2002 to $12.1 billion in 2009 despite the global crisis. The bilateral trade between the remained robust with the US goods trade surplus reaching $10.6 billion in 2009, according to the US - UAE Business Council. This is the fourth largest bilateral American surplus with any country. The council said the trade to UAE witnessed a massive surge compared to a 52% hike in the same period in exports to other countries. The '2010 US-UAE Trade and Investment Relationship' report emphasizes the growing foreign direct investment (FDI) opportunities in both the US and the UAE and focuses on the open commercial and strategic co-operation between the two countries. (TA 29.05)
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5.10 Oman Inflation Climbs To 11 Month High in April
Oman's inflation climbed to an 11-month high of 3.0% year-on-year in April as food prices and housing costs edged up. The global downturn reduced price growth across the region last year from record double-digit peaks in 2008, with the United Arab Emirates and Qatar seeing months of deflation. Inflation in non-Opec Oman started picking up again in December, when it rebounded from a low of 0.8% in the previous month. It reached 2.6% in March but is still far away from the June 2008 high of 13.7%. Consumer prices rose 0.2% month-on-month in April, following a 0.1% decrease in the previous month, the economy ministry data showed. Food prices, the largest item accounting for 30% of the basket, rose 0.3% on the month in April, after falling by the same amount a month before. Housing costs rose 0.2%, the same pace as in March, while transport prices remained stable for the third month in a row, the data showed. The sultanate's consumer prices soared in 2008 on imported inflation as a result of the weak US dollar, which the rial currency is pegged to. (TA 31.05)
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5.11 Egypt & EU Take a Step Towards Liberalizing Trade
A newly-amended EU-Egypt Association Agreement seeks to further liberalize bilateral trade in agricultural, processed agricultural products and fish and fishery products. The agreement, which entered into force 1 June, is a step towards canceling tariffs applied to these products. Egypt and the European Union member states signed their partnership agreement in 2001, aiming at gradually establishing a free trade area by 2016. The original agreement between Egypt and the EU stipulated quotas and export schedules for the respective exports of agricultural goods of both Egypt and the EU. With the new stipulations, the former system regulating trade between Egypt and the EU is fundamentally changed: All agricultural and fishery products coming from Egypt are now exempted from both taxes and quantitative restrictions. Some exceptions include tomatoes, cucumbers, artichokes, table grapes, garlic, strawberries, rice, sugar, processed products with high sugar content and processed tuna and sardines, which will be subject to duty free quotas and export calendars, but will receive preferential treatment. On the other side, nearly 90% of the EU exports of agricultural, processed agricultural and fishery products to Egypt will benefit full liberalization, except tobacco, wines and spirits, pig meat, confectionery, chocolate, pasta and bakery products. The EU is Egypt's first trading partner: A third of Egypt's overall trade is with the EU, amounting to €18.7 billion in 2009. The Egyptian Ministry of Trade and Industry expects that this agreement will increase Egyptian exports of agricultural goods to the EU by more than €1.5 billion a year. (DNE 03.06)
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5.12 Egypt's Unemployment Drops to 9.1% in First Quarter
Unemployment in Egypt fell to 9.1% in Q1/10, despite the rise in the number of the unemployed, according to CAPMAS. Unemployment had stabilized at 9.4% in the last three quarters of 2009, rising from a low of 8.4% in 2Q2008 as a result of the global and domestic economic slowdown. Around 76% of the unemployed were in the youth segment in the age bracket of 15 to 25, with 92% of the unemployed being holders of medium and high level graduate degrees. The pundits had expected that unemployment could rise to as much as 10% in the aftermath of the crisis, as the private sector's ability to absorb new entrants to the labor market declined with the drop in economic growth. Due to the poor quality of the education system, most of the unemployed fall in the semi-skilled labor segment, with unemployment being lower in the skilled labor and informal sectors. (Beltone 29.05)
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5.13 US & Libya Sign Trade and Investment Framework Agreement
On 20 May, the Office of the United States Trade Representative (USTR) and the Libyan General People's Committee on Industry, Economy & Trade signed a Trade and Investment Framework Agreement (TIFA). The TIFA will provide a forum to address trade issues and will help build trade and investment relations between the United States and Libya. The TIFA will establish a forum for discussion of our bilateral trade and investment relations and will help build those relations. The TIFA mandates the formation of a joint U.S.-Libya Council on Trade and Investment, which will address a wide range of trade and investment issues including market access, intellectual property, labor, and environmental issues. The Council will also help to increase commercial and investment opportunities by identifying and working to remove impediments to trade and investment flows between the United States and Libya. The TIFA is the latest step in a joint effort by the United States and Libya to broaden and deepen our bilateral relations. In 2009, Libya was the United States' 69th largest goods trade partner with $2.6 billion in two-way trade. Top U.S. exports to Libya include vehicles, machinery, agricultural products, medical instruments and iron & steel products. Oil was Libya's principal export to the United States. (USTR20.05)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey's Trade Deficit for April Doubles
Turkey's trade deficit widened in April from a year earlier, the sixth consecutive expansion as the economy accelerates out of recession, drawing in raw materials from abroad. The trade gap expanded to $5.5 billion from $2.6 billion in the period from a year earlier. The trade deficit is widening as economic growth picks up after four consecutive quarters of contraction. GDP expanded 6% from a year earlier in the last quarter of 2009 and is likely to grow more than 10% in the first three months of this year. Exports rose 25.2% from a year earlier to $9.5 billion in April. Imports increased 47.4% to $14.9 billion. In April 2010, income from exports covered 63.4% of imports, while the figure was 74.7% in April 2009. Turkish exports in the first four months rose 11.3% over the same period of last year and amounted to $35.66 billion and imports rose 36.6% and amounted to $53.26 billion. The foreign trade deficit in the January to April period increased 152.8% over the same period of 2009 and amounted to $17.6 billion. The foreign trade deficit during the period covering the January to April period in 2009 was $6.9 billion. (Hurriyet 31.05)
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6.2 Turkey & Azerbaijan To Ship More Gas To European Countries
On 7 June, Turkey and Azerbaijan signed a deal that will provide 11 billion cubic meters (388 billion cubic feet) of Azeri natural gas a year to Turkey beginning as early as 2016. Azerbaijan turned down Turkey's request to allow it to re-export some of those gas shipments to Europe but the energy ministers of both countries said their deal would "pave the way" for Azerbaijan to eventually provide gas to a pipeline project aimed at reducing the European Union's reliance on Russian energy. An eventual agreement by Azerbaijan to ship gas through the proposed Nabucco pipeline is key to making it a viable rival to Russian pipelines running to Europe. European countries sealed a deal on the Nabucco project last year, but at best it would only put a dent in Moscow's dominance, even if it finds the gas supplies. Azerbaijan's Energy Minister Aliev said his country has supported the Nabucco pipeline project, which intends to bring natural gas from Central Asia and the Middle East to Europe to diversify the continent's energy sources and reduce Russia's dominance. (Kathimerini 07.06)
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6.3 OECD Urges Greece to Stay With Reforms Plan
On 26 May, the Organization for Economic Cooperation and Development (OECD) warned the Greek government against deviating from its reforms program, saying that it is vital to getting the economy back on its feet. After recently raising taxes and slashing spending as part of efforts to save €30 billion over the next three years, the Greek government is in the process of finalizing social security reforms expected to be submitted to Parliament in June. Recent polls show the popularity of Prime Minister Papandreou has fallen since the measures were announced with the vast majority of Greeks labeling reforms as being unfair. The Paris-based organization is slightly more upbeat than the Greek government on the country's anticipated economic course over the next two years. The OECD predicts the economy to contract by an annual pace of 3.7% this year, versus the government's forecast for negative gross domestic product of 4%. For 2011, it sees a contraction rate of 2.5% year-on-year, marginally better than the government's negative 2.6% GDP estimate. Commenting on the recent deal between the European Union and the International Monetary Fund worth €110 billion, the OECD said the agreement "enhanced the credibility of fiscal adjustment, which should lower borrowing costs and stabilize the level of public debt." On the job front, conditions are seen as steadily worsening on plummeting private and government consumption. Unemployment is tipped to hit 14.3% next year, up from an expected 12.1% in 2010. An improvement in external demand is the only bright spot on the forecast, lifting export growth for the next two years by between 3.3% and 5.9%. (Kathimerini 27.05)
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6.4 Economic Downturn Takes Toll on Greek Construction
Building contractors in Greece have been shutting down at a fast pace so far this year as the recession bites hard into one of the economy's largest sectors. Data from the Federation of Building Developers, which has some 15,000 members, show that five building companies have been closing down daily this year. In the first five months of 2010, some 734 building contractors were deleted from the federation's membership list, which is equivalent to roughly 5% of total members. The downturn in the construction sector is attributed to a significant decline in consumer demand and tighter lending policies adopted by banks, which fear that customers might struggle to repay loans due to the deepening recession. Industry sources said that they don't expect any sign of a turnaround in the sector anytime soon. Construction accounts for about 7% of Greece's annual economic output, which is expected to contract by 4% this year. The slowdown in building activity is weighing heavily on the job market as the construction sector employs some 400,000 workers, according to data from the end of last year. The latest figures from the Hellenic Statistical Authority (ELSTAT) for February show that construction activity, measured by the number of new building permits issued, fell 23.1% year-on-year, after rising nearly 13% in the previous month. (Kathimerini 01.06)
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6.5 New Greek Round of Spending Cuts Contemplated
Athens is expected to move ahead with cuts to state spending as a means of securing its difficult fiscal targets. Every form of deviation recorded on the revenue front means an automatic cut in spending. For example, lower-than-expected revenues of €700m for the first five months of the year have led the Finance Ministry to reduce expenditures in five areas, such as in overtime pay for civil servants, the operating expenses allocated to each ministry and money pumped into state-owned enterprises. Other options where the state can reduce expenditure include the public investment program as well as by not renewing civil servant work contracts that have expired. As a last option, the ministry could bump up revenues by immediately implementing steps planned for 2011 and 2012, such as slapping a new one-off tax on 2009 corporate profits above €100,000. The increase in value-added tax on all product and service groups to the same higher level is also being eyed by the ministry. The idea involves increasing VAT on products such as foodstuffs and medicines to 23% from 11%, based on tax rates applicable in July. One concern, however, with raising VAT levels is that the increase often weighs on tax revenues while also harming economic activity in the sector.
A plan likely to be implemented immediately is the reintroduction of games of chance. A draft bill on the issue is expected to be submitted to lawmakers soon, in a move seen as providing a major boost to revenues. The Finance Ministry also hopes to get a tighter grip on spending by pension funds, hospitals and universities – state organizations that create a financial headache for the government. Steps in this direction include keeping the pace of spending hikes in line with annual expansion rates in gross domestic product. In the event of economic contraction, spending cuts should outpace the negative GDP rate. (Kathimerini 08.06)
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7: GENERAL NEWS AND INTEREST
*REGIONAL:
7.1 Facebook More Popular Than Daily Newspapers in MENA
Facebook has more than 15 million users in the MENA region, whereas the region's newspaper sales count fewer than 14 million. The news comes just over a year after Facebook introduced an Arabic platform, said a study conducted by Spot On Public Relations, a Middle Eastern PR agency specializing in social media. The growth in Arabic language users has been very strong indeed: some 3.5 million Arabic language users began using Facebook during the past year, since the introduction of Arabic support and we can expect millions more Arabic language users to join the platform. Five country markets in MENA now account for some 70% of Facebook users; Egypt, Morocco, Tunisia, Saudi Arabia and the UAE, with a gender bias towards male users that flies in the face of international figures – only 37% of Facebook users in the Middle East are female compared with 56% in the USA and 52% in the UK. Despite the strong growth in the number of Arabic language users, the report also shows that some 50% of MENA Facebook users select English as their primary language, with 25% selecting French and just 23% Arabic.
Egypt's 3.5 million Facebook subscribers help to make North Africa the largest Facebook community in MENA accounting for 7.7 million out of a total of 15 million MENA users; 98% of MENA's French language users are from North Africa. The GCC states today account for some five million Facebook users. The two key markets of the Saudi Arabia and the UAE have been quick to embrace Facebook – some 33% of the UAE's population uses Facebook and it also now stands as the country's second most visited website after google.ae (according to websites ranked by Alexa.com). Interestingly, some 68% of Facebook users in the Emirates are over 25 years old, counter perceptions that social media is a ‘generation Y' phenomenon. However, much of Facebook's growth across the rest of the region has been driven by the under twenty-fives.
Over 48% of Facebook subscribers in Saudi Arabia are under 25 years old, with an equal split between English and Arabic users. However, about three times the number of Arabic users has joined Facebook in Saudi over the past year, compared with the number of English language users. (TradeArabia 02.06)
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7.2 Survey Finds Turkish Society Continues To Discriminate Against Gays
Turkish public opinion continues to advocate for a total restriction of rights for atheists and homosexuals, according to recent study conducted by Bogazici University and the Open Society Association. The survey meant to gauge tolerance levels in Turkish society is titled "The Otherization and Discrimination in Turkey" and was conducted in 18 provinces with the participation of 1,811 interviewees. The most striking result of the survey concerns the question on "who deserves a restriction on their rights?" The answers given by the respondents indicated that the discriminatory tendencies and the level of tolerance have changed little in the last five years. An astonishing 53% of participants strongly believed that the right to freely express a different sexual orientation should be restricted. Similarly, 37% of the people sampled denounced the right of believing in no religion, with 59% standing against atheists flaunting their lack of religion. Moreover, 28% denounced the right of non-Muslims to be open about their religious identity. The results showed that 72% of the sample supported the idea that "those who have a different sexual orientation, like homosexuality, should be open about their sexual identities."
According to the 2005 results of the survey, 58% said non-heterosexuals should not be equally free. The percentage of those who say the rights of those who have a different native language other than Turkish should be restricted is 19%, the same figure as the 2005 survey. Those who say that all ethnicities, religions and sects should be secured by the Constitution make up 74%. Some 36% of the interviewees said their primary identity was "being a citizen of Turkey," whereas a 29% thought "having a Turkish national identity" was most important. Meanwhile, 66% said they have no other ethnic culture and they are rooted completely in Turkish culture, while 20% said their ethnic culture and language were secondary to Turkish language and culture. Some 8% said their language or culture came before Turkish culture while 2% said they had absolutely no connection to Turkish culture and language.
Some 67% said there was discrimination against women in the workplace, the family and the education system, while 44% said mandatory religion classes were discriminatory against Alevis. Some 42% of respondents, however, said the courses were not discriminatory. (Radikal 27.05)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva Invests In Ontario, Canada
Teva Pharmaceuticals is investing £37 million to expand its Stouffville, Ontario production plant. Ontario is providing a £4.25-million grant to Teva Canada, which will retain 182 high-skilled workers and hire 20 new employees. More than half of the drugs produced by Teva in Canada are exported. The partnership was announced on the same day Ontario Premier McGuinty, and other members of the Ontario delegation, met with scientists at Israel's Weizmann Institute of Science to explore opportunities for new partnerships and investment. The institute is one of the world's foremost research institutions and is recognized for its work on finding new ways to fight hunger and disease, math and computer science research, and pure physics. Teva Canada's parent company, Teva Pharmaceutical Industries Limited (http://www.tevapharm.com), employs 35,000 people around the world. Ontario's life sciences industry employs more than 40,000 people at about 850 companies with revenues of £10 billion a year. (Ontario 27.05).
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8.2 Teva Announces Launch of Generic Yaz Tablets
Teva Pharmaceutical Industries has commercially launched Gianvi (Drospirenone and Ethinyl Estradiol) Tablets, the Company's generic version of Bayer's Yaz Tablets. As the first company to file an Abbreviated New Drug Application (ANDA) containing a paragraph IV certification for this product, Teva has been awarded a 180-day period of marketing exclusivity. As previously announced, Teva has the right to launch an authorized generic version of the product, supplied by Bayer, in July 2011. Teva Pharmaceutical Industries (http://www.tevapharm.com), headquartered in Israel, is among the top 15 pharmaceutical companies in the world and is the leading generic pharmaceutical company. The company develops, manufactures and markets generic and innovative pharmaceuticals and active pharmaceutical ingredients. (Teva 01.06)
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8.3 NeuroDerm Completes Enrollment & Dosing in Phase 1 Study of Dermal Patch for Parkinson's
NeuroDerm announced the successful enrollment and dosing in its Phase I clinical trial of ND0611. ND0611, a proprietary drug formula administered via a dermal patch, is designed to maintain continuous therapeutic levodopa concentrations for improving the treatment of Parkinson's disease. ND0611 increases levodopa bioavailability and extends its effects by administering a novel pharmaceutical. Previous animal studies found that ND0611 modified levodopa pharmacokinetics by (i) increasing levodopa plasma half-life and area-under-the-curve (AUC), (ii) maintaining levodopa plasma concentrations in a typical therapeutic range, and (iii) extending dopaminergic stimulation in the brain. ND0611's mode of action involves an under-exploited levodopa metabolic pathway and has the potential for markedly improving clinical benefits from levodopa (the most effective drug for Parkinson's disease). This Phase 1 study was conducted in healthy volunteers with the purpose of measuring the safety and tolerability of ND0611 at different doses. Further analysis will be completed to determine the pharmacokinetic profile of levodopa in plasma. The company expects to present the results of this phase 1 study in the second half of 2010.
Ness Ziona's NeuroDerm (http://www.neuroderm.com) is an emerging pharmaceutical company that develops therapeutic dermal patches for the treatment of CNS diseases. NeuroDerm's technology is based on proprietary reformulations of well established oral drugs whose low bio-availability is the major impediment to better efficacy. The company's lead product is ND0611, a revolutionary skin patch for the treatment of Parkinson's disease. Other products for the treatment of various diseases, including ADD, ADHD, schizophrenia and Alzheimer's disease, are in different stages of development. (NeuroDerm 01.06)
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8.4 EarlySense Raises $13 Million from Pitango and Current Investors
EarlySense, developer of the Everon patient supervision system for hospital and post acute care, announced that the company has closed a $13 million third financing round led by Pitango Venture Capital. Current shareholders Etgar Challenge Fund, Proseed VC Fund, Docor International Management, Noaber and Bridge Investment Fund also participated. To date, EarlySense has raised about $24 million in three rounds. The company's lead product, the EverOn, is a contact-free patient supervision system installed underneath a hospital bed mattress. There are no leads or cuffs to connect to the patient, who has complete freedom of movement and is not burdened by any irritating attachments. The system measures patient vital signs and movements and alerts medical personnel of the changes in a patient's condition. EverOn detects heart and respiration rates, bed entries and exits, as well as patient movement. EverOn also helps the medical staff to better implement patient turns by verifying the turning process, which can positively influence the treatment and the prevention of pressure ulcers. Clinical evaluations performed worldwide with EverOn show significant improvement in clinical and economic outcomes for hospitals using the system.
Ramat Gan's EarlySense (http://www.earlysense.com) is bringing to market a pioneering technology designed to advance proactive and preventive patient supervision to enable better patient outcomes. The company's flagship product, EverOn, is an automatic, continuous, contact-free patient supervision device that follows and documents a patient's vital signs and movement. The system is currently installed at several medical centers in the USA and Europe. (EarlySense 03.06)
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8.5 Successful Clinical Results for NovoCure's Device for Treatment of Recurrent Glioblastoma
Data from the first phase III clinical trial of NovoCure's NovoTTF device for treatment of patients with recurrent glioblastoma (GBM) show that NovoTTF, a novel, non-invasive, portable medical device, may be as or more effective than the best available chemotherapies for GBM, but without the toxicity usually associated with cytotoxic or targeted treatments. The study enrolled 237 patients with recurrent, late-stage GBM, the most malignant form of primary brain cancer. Using low intensity, alternating electric fields to disrupt tumor growth, NovoTTF is the first non-drug, non-radiation, non-surgical treatment approach to show promise of clinical benefit for the treatment of brain cancer. An ongoing US and European, multi center, phase III study of NovoTTF combined with chemotherapy for the treatment of newly diagnosed GBM was initiated in 2009.
NovoTTF is a novel, non-invasive, portable medical device developed by NovoCure (http://www.novocuretrial.com). The device disrupts the division of cancer cells in the brain using alternating electrical fields delivered by means of insulated electrodes applied to the surface of the scalp. The electrodes generally resemble bandages with wires attached. The device is powered by a small lightweight battery pack. Patients carry the NovoTTF device in a specialized over-the-shoulder bag and receive continuous treatment without changing their daily routines. NovoCure is a private company dedicated to developing innovative therapies to help patients suffering from cancer. NovoCure's research center is located in Haifa, Israel. The company has clinical and pre-clinical research operations in the US and Europe. (NovoCure 05.06)
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8.6 Can-Fite BioPharma Opens CF101 Dermatology IND with Phase 2/3 Psoriasis Protocol
Can-Fite BioPharma has opened Investigational New Drug application (IND) with the US FDA. The IND is for Can-Fite's lead compound, CF101, for the treatment of patients with psoriasis. This is the third US IND for CF101, and the fourth for Can-Fite. The basis for the new IND and its Phase 2/3 clinical protocol is the previously-announced Phase 2 data showing that CF101 at a dose of 2 mg orally showed statistically significant (p = 0.03) clinical benefit, as determined by Psoriasis Activity and Severity Index (PASI) scoring, versus a placebo group. Using these efficacy data, and a supporting safety analysis of >700 Phase 2 patients in CF101 clinical trials in inflammatory diseases, Can-Fite assembled and filed the IND. Can-Fite was notified by FDA that the IND was accepted and that clinical testing could proceed. The success in this study adds up to the success in a recently announced clinical study in dry eye patients. In both these studies the patients were treated with CF101 as a stand-alone treatment. Psoriasis and dry eye disease are inflammatory diseases. The success in both these studies points to the potential general efficacy of CF101 in treatment of inflammatory diseases, with very large market potential. Furthermore and most importantly success in these studies validates the technology platform of the company.
Petah Tikva's Can-Fite Biopharma (http://www.canfite.co.il) is a public company traded on the Tel Aviv Stock Exchange. The Company was founded on the basis of scientific findings made by Prof. Pnina Fishman and focuses on the development of small molecule-based drugs that bind to A3 adenosine receptors of cancerous or inflammatory cells and inhibit their development. (Can-Fite 07.06)
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8.7 Protalix BioTherapeutics Completes Phase I Clinical Trial for PRX-105
Protalix BioTherapeutics announced the completion of its phase I clinical trial of PRX-105, a plant cell expressed pegylated recombinant human acetylcholinesterase in development for biodefense indications. The trial established the pharmacokinetics of the protein and demonstrated that single dose, intravenous administration of PRX-105 is safe and well tolerated. The Company plans to perform additional safety studies in healthy volunteers and animals in collaboration with civil and military agencies in the United States and Israel, for which discussions have been initiated. Given the nature of the biodefense indications for which the Company is developing PRX-105, efficacy trials of PRX-105 in humans (phase II and phase III) are not required. The phase I clinical trial of PRX-105 is a first in human, open label, non-randomized, single-dose study. PRX-105 is administered intravenously by slow bolus injection to 10 healthy volunteers in the trial. The trial is being conducted in collaboration with Professor Hermona Soreq, from the Hebrew University in Jerusalem, Israel, a world leader in the field of acetylcholinesterase research. The production of PRX-105 is based on patents that were licensed to Protalix Ltd. by Yissum, the Technology Transfer Company of the Hebrew University, Jerusalem. Pre-clinical studies have indicated that PRX-105 successfully protects animals exposed to organophosphate nerve gas agent analogs, in both the prophylactic and post-exposure settings.
Karmiel's Protalix (http://www.protalix.com) is a biopharmaceutical company focused on the development and commercialization of proprietary recombinant therapeutic proteins expressed through its proprietary plant cell based expression system. Protalix's ProCellEx presents a proprietary method for the expression of recombinant proteins that Protalix believes will allow for the cost-effective, industrial-scale production of recombinant therapeutic proteins in an environment free of mammalian components and viruses. Protalix is also advancing additional recombinant biopharmaceutical drug development programs. Taliglucerase alfa is an enzyme replacement therapy in development under a Special Protocol Assessment with the FDA for Gaucher disease. (Protalix 08.06)
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8.8 Immunovaccine Signs Agreement with Vaxil BioTherapeutics to Advance Potential Cancer Vaccine
Vaxil BioTherapeutics has signed a collaborative agreement with the Canadian Immunovaccine to explore the efficacy of Vaxil's cancer antigens in Immunovaccine's DepoVax vaccine enhancement platform. In preclinical studies, the DepoVax delivery platform has a demonstrated ability to enhance vaccines, generating a prolonged immune response. Vaxil feels that this could fit well with their products and they look forward to making strong advances together in developing the next generation of cancer therapeutics. Ness Ziona's Vaxil BioTherapeutics (http://www.vaxilbio.com) is a pioneer in the development of novel T-cell synthetic vaccines for both therapeutic and prophylactic use. Using a proprietary technology VaxHit the company has identified a large number of vaccine candidates in the fields of cancer and infectious diseases. The company's lead product – ImMucin, an anti-MUC1 therapeutic cancer vaccine has received regulatory permission to start Phase I/II clinical trials in Multiple Myeloma patients, due to commence in 2010. (Vaxil 07.06)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Answers.com Releases Newly-Designed Mobile Web Version
Answers.com introduced its newly-designed mobile version for iPhone, Android and other handheld devices. With mobile Web usage and apps exploding and Facebook's recent announcement to have surpassed 100 million monthly mobile users, Answers is very excited about connecting Answers.com with the ever-increasing proportion of users on the go. Mobile access is a fantastic opportunity to expand their user-base, their data-base and their brand. The mobile site can be accessed by entering http://m.answers.com or www.answers.com into the mobile browser of any Web-enabled handheld device. Jerusalem's Answers Corporation (http://www.answers.com) owns and operates Answers.com, the leading Q&A site, which includes WikiAnswers and ReferenceAnswers. The site supports English, French, Italian, German, Spanish and Tagalog. WikiAnswers is a community-generated social knowledge Q&A platform, leveraging wiki-based technologies. Through the contributions of its large and growing community, answers are improved and updated over time. The award-winning ReferenceAnswers includes content on millions of topics from over 250 licensed dictionaries and encyclopedias from leading publishers, including Houghton Mifflin, Barron's and Encyclopedia Britannica. (answ-g 01.06)
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9.2 Semtech & Virtual Extension Bring Wireless Mesh Networks to Smart Lighting Applications
Camarillo, California's Semtech Corp., a leading supplier of analog and mixed-signal semiconductors, and Virtual Extension announced a two-chip wireless mesh network chipset that brings a new level of performance and signal robustness to smart lighting applications. The chipset pairs Semtech's SX1211 transceiver for industrial, scientific and medical (ISM) band applications with Virtual Extension's VE209S wireless mesh controller. Smart lighting designers now have a low-power, high-performance solution for building a wireless sensing network with no single point of failure and very robust signal processing. This low-power chipset is also perfectly adapted to battery-operated applications with a 10-year operating lifetime. The VE209 family of high-performance mesh controllers serves as the main building blocks of a VEmesh unit, either a gateway or a node. VEmesh units provide highly reliable bi-directional communication and best-in-class range and coverage for distributed monitoring and data collection of sensor and metering systems. All VEmesh nodes also act as relays to retransmit data from other units in order to create a modular solution with no practical limitation to the number of nodes or size of coverage area.
Operating since 2000, Tel Aviv's Virtual Extension (http://www.virtual-extension.com) has pioneered Diverse Path Mesh technology for Smart Metering, Smart Lighting and Wireless Sensor Networks. The company's OEM customers rate its products as having the best range, resiliency and simplicity of deployment. Virtual Extension provides a system that literally enables removing the wires from an existing sensor and replacing them with self-organizing wireless devices. Virtual Extension's design wins power a diversity of applications, including remote lighting, pipeline security applications, agricultural, industrial control and monitoring applications. (Semtech 27.05)
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9.3 Israel Post Launches an Innovative Service Providing Every Citizen With a Virtual Safe for Their Mail
Cyber-Ark Software announced the deployment of the Inter-Business Vault, part of its Governed File Transfer Suite, as the underlying security infrastructure for iPOST—the Israel Postal Company's pioneering electronic mailbox. With the Inter-Business Vault, iPOST provides a secure and reliable online platform for the transfer and storage of electronic mail. In recognition of the increasing consumer demand for online communications, this new form of electronic mail provides a level of service and cost-efficiency that ensures the continued relevancy of the Israel Postal Company. With iPOST, the Israel Postal Company has developed a cost-efficient service to provide organizations that deliver a high-volume of official statements and messages with a centralized solution that can be leveraged to extend their reach to existing customers through online mail. This new line of business will supplement or, in some cases, eventually replace the traditional physical mailbox. Since its launch, iPOST has already emerged as a significant new revenue generating opportunity for the Israel Postal Company. Fifty of Israel's largest mailers have joined the service with the intention of reducing overhead costs and strengthening their brand through use of an environmentally-friendly, paperless distribution channel.
Petah Tikva's Cyber-Ark Software (http://www.cyber-ark.com) is a global information security company that specializes in protecting and managing privileged users, applications and highly-sensitive information to improve compliance, productivity and protect organizations against insider threats. With its award-winning Privileged Identity Management (PIM) and Highly-Sensitive Information Management software, organizations can more effectively manage and govern application access while demonstrating returns on security investments. (Cyber-Ark 01.06)
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9.4 Lucid and MSI Make Multi-GPU Gaming Accessible to the Masses
LucidLogix and Taipei, Taiwan's MSI announced that the Lucid HYDRA 200 real time distributed processor is now being used in MSI's 870A Fuzion and P55A Fuzion motherboards. The new motherboards will provide consumers with performance multi-core graphics and gaming at an affordable price along with the flexibility to choose any major brand graphics card and CPU platform. MSI was the first to introduce a motherboard with the HYDRA 200 in its high-end Big Bang Fuzion in January 2010. Now, the company is launching two new products that will deliver the benefits of silicon-agnostic, multi-GPU computing to mainstream motherboards. Even budget-conscious consumers will now have the freedom to mix and match up to three ATI or NVIDIA graphics accelerators of their choice (new or repurposed), while also adding the flexibility to choose between platforms. Designed with the PC gamer in mind, the HYDRA engine offers a flexible solution for performance hungry consumers who may wish to upgrade to multiple GPUs from a variety of vendors. This new approach provides interoperability among GPUs and chipsets, auto-correct load balancing and multiple GPUs that simultaneously process a single frame within a game, thus resolving bottlenecks and inter-frame dependencies prior to rendering. Kfar Netter's LucidLogix Technologies (http://www.lucidlogix.com) has reinvented multi-core graphics with its HYDRA real-time distributed processing engine that improves visual computing for both business and gaming applications. A fabless SoC provider, Lucid's innovations are protected by more than 60 patents and patents pending. (Lucid 01.06)
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9.5 Mellanox Scalable HPC Solutions Enhance GPU-Based HPC Performance & Efficiency
Mellanox Technologies announced the immediate availability of NVIDIA GPUDirect technology with Mellanox ConnectX-2 40Gb/s InfiniBand adapters that boosts GPU-based cluster efficiency and increases performance by an order of magnitude over today's fastest high-performance computing clusters. Today's current architecture requires the CPU to handle memory copied between the GPU and the InfiniBand network. Mellanox was the lead partner in the development of NVIDIA GPUDirect, a technology that reduces the involvement of the CPU, reducing latency for GPU-to-InfiniBand communication by up to 30%. This communication time speedup can potentially add up to a gain of over 40% in application productivity when a large number of jobs are run on a server cluster. NVIDIA GPUDirect technology with Mellanox scalable HPC solutions is in use today in multiple HPC centers around the world, providing leading engineering and scientific application performance acceleration.
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. For the best in performance and scalability, Mellanox is the choice for Fortune 500 data centers and the world's most powerful supercomputers. (Mellanox 27.05)
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9.6 Cirrus Aircraft Selected TAT Technologies as Preferred Supplier for Heat Exchangers
TAT Technologies announced that Cirrus Aircraft Inc. (Cirrus) has issued a letter of intent designating TAT as the preferred supplier of heat exchangers for Bleed Air Supply System and Ice Protection System onboard the new Cirrus Aircraft SF 50 Vision Jet. The parties will now begin the formalization of a Supply Agreement as well as the next phase of integrating TAT's Heat Exchangers into the Cirrus SF 50 Vision Jet systems. The program is estimated at $10M value over 10 years. Following the 10 years of production additional significant business volume may be generated by "after market" services to be provided by TAT. Cirrus is the world's leading innovator of single-engine, piston-powered aircraft. Gedera's TAT Technologies (http://www.tat.co.il) is a leading provider of services and products to the commercial and military aerospace and ground defense industries. TAT operates under three operational segments: (i) OEM of Heat Transfer products (ii) OEM of Electric Motion Systems; and (iii) MRO services. TAT also holds approximately 37% of the equity of First Aviation Services, a world-wide distributor of products and services to the aerospace industry and a one-stop-shop for MRO services (wheels, breaks, propellers and landing gear) for the General Aviation Industry. (TAT 24.05)
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9.7 RADVISION Brings Revolutionary Data Collaboration to Video Conferencing
RADVISION announced major advancements to its SCOPIA solution including extending video conferencing data collaboration to the Apple iPad, iPhone and iPod touch providing interoperability with video conferencing systems for data. The new advanced data collaboration is also the first in the video conferencing industry to provide users with extended capabilities with H.239 interoperability. With this capability, materials such as presentations, spreadsheets, documents and images shared in a video conference can be easily viewed on these highly popular Apple mobile devices. This advanced data collaboration will be available in RADVISION's SCOPIA Mobile product offering, a free application extending the SCOPIA conferencing solution to the latest generation of mobile devices, and adds to SCOPIA Mobile's conferencing control and management capabilities. SCOPIA's new advanced data collaboration also provides the ability to immediately review previously shared data. Conference participants can now review information and catch up if they arrived late to a meeting or want to spend additional time on critical points in material presented. Preview images of materials presented provide a quick way to jump back to sections of documents previously shared. For example, if a conference participant wanted to view an agenda slide in a presentation that was delivered when the meeting first started, they can easily navigate back to that particular slide, while the conference leader continues the presentation for the other participants.
Tel Aviv's RADVISION (http://www.radvision.com) is the industry's leading provider of market-proven products and technologies for unified visual communications over IP, 3G and IMS networks. With its complete set of standards-based video communications solutions and developer toolkits for voice, video, data and wireless communications, RADVISION is driving the unified communications evolution by combining the power of video, voice, data and wireless – for high definition video conferencing systems, innovative converged mobile services, and highly scalable video-enabled desktop platforms on IP, 3G and emerging next-generation IMS networks. (RADVISION 03.06)
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9.8 RADVISION Unveils New Groundbreaking Video Conferencing Solution for the SMB Market
RADVISION announced a unique video conferencing solution especially suited to the communication requirements of Small and Medium Businesses (SMB) – the SCOPIA XT1000 SMB solution – providing an all inclusive HD video conferencing room system, with integrated desktop conferencing and multi-party MCU. Built on the recently introduced SCOPIA XT1000 HD room system, with the highest capacity embedded MCU in the industry today, the new SCOPIA XT1000 SMB solution creates a new video conferencing product class by combining HD room system capabilities, embedded multi-party conferencing, desktop conferencing and firewall traversal into the only integrated solution of its kind available in the market. The SCOPIA XT1000 by itself is a very compelling solution for the SMB market with its industry leading combination of high performance, advanced features and pricing. Now, with its integration with SCOPIA Desktop, it provides the ability to host a conference with full multi-party HD video and data collaboration, including a combination of room systems, SCOPIA Desktop software users both inside and outside an organization and SCOPIA VC240 desktop conferencing system users. Its fully integrated deployment model does not require detailed technical skills to install or manage making it ideal for the SMB market.
Tel Aviv's RADVISION (http://www.radvision.com) is the industry's leading provider of market-proven products and technologies for unified visual communications over IP, 3G and IMS networks. With its complete set of standards-based video communications solutions and developer toolkits for voice, video, data and wireless communications, RADVISION is driving the unified communications evolution by combining the power of video, voice, data and wireless – for high definition video conferencing systems, innovative converged mobile services, and highly scalable video-enabled desktop platforms on IP, 3G and emerging next-generation IMS networks. (RADVISION 07.06)
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9.9 Wavion Provides High Speed Internet Access for Tauranga, New Zealand's Fastest Growing City
Wavion, Airoma, a wireless hardware distribution company in New Zealand, and EOL, a leading Internet Service Provider in New Zealand, announced the deployment of Wavion's Wi-Fi solution for high speed Internet access in Tauranga, New Zealand's Fastest Growing City. The deployment is based on Wavion's WBS-2400 and WBS-5800 base stations, working, accordingly, in 2.4 GHz and 5.8 GHz unlicensed band, in conjunction with off-the-shelf standard Wi-Fi client devices. The network covers over 1,400 square kilometers and serves both urban and rural customers in the Bay of Plenty region in New Zealand, providing both fixed and roaming VoIP and Internet access services. Wavion's Carrier Grade, unique and powerful WBS-2400 and WBS-5800 spatially adaptive beamforming base stations, provide extended range, higher throughput and NLOS coverage. As a result, unlike more conventional equipment, it does not require costly high towers and can be easily installed on poles and yet provide the widest homogeneous coverage and Indoor penetration. Moreover, the flexible architecture and ruggedized and weather-proof enclosure add significantly to the unique value offering for Telecom Operators.
Yokneam's Wavion (http://www.wavionnetworks.com) is a technology leader in Metro and Rural Wi-Fi and Wireless broadband access, with deployments in more than 57 countries. The company's digital beamforming and SDMA technologies are the first and only to resolve the significant performance, penetration and profitability challenges facing large scale Metro and Rural deployments. (Wavion 07.06)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel's Unemployment Rate Falls To 7.2%
On 27 May, the Central Bureau of Statistics announced that Israel's unemployment rate fell to 7.2% of the civilian labor force in Q1/10 from 7.3% in Q4/09. The civilian labor force totaled 3.03 million people in Q1/10, of whom 2.82 million had jobs and 218,000 did not. Some 1.48 million men and 1.33 million women had jobs in Q1/10. However, the proportion of full-time employees (at least 35 hours a week) fell by 1.6% compared with the preceding quarter; 30,000 few people had full-time jobs. In contrast, the number of part-time employees rose by 8.1%, or 61,000 persons. The number of involuntary part-time employees fell to 113,000 in the first quarter, 1.9% fewer than in the preceding quarter, amounting to 4% of the total workforce. (CBS 27.05)
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10.2 Israel in 5th Place For Home Price Rises
Globes cited a survey by Global Property Guide that stated Israel had the fifth highest rise in home prices in Q1/10, compared with Q1/09. First quarter home prices in Israel were 12% higher than in the first quarter of 2009 and 2.92% higher than in the fourth quarter, in inflation-adjusted figures. Hong Kong led the rankings, with a 27.15% rise in home prices over the year; followed by Singapore, with a 23.88% rise; Taiwan, with an 18.46% rise; and Australia (eight cities), with a 16.58% rise. Israel was in first place in the Global Property Guide for Q1/09, with a 5.52% rise in home prices compared with Q4/09. In the survey for the second quarter, Israel was again in first place, with an 8.4% rise in home prices compared with the corresponding quarter of 2008. Israel was also in first place in the survey for the third quarter. (Globes 27.05)
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11: In Depth
11.1 ISRAEL: Petrochemicals Report Q3/2010 Will See a Moderation in Growth Rates After 2010
Research and Markets (http://www.researchandmarkets.com) "Israel Petrochemicals Report Q3 2010" says that despite the risk of a return to recession in global markets and its impact on Israeli chemicals and plastics production, this latest Israel Petrochemicals Report is broadly positive and anticipates growth in the years ahead, assisted by a gradual recovery in private consumption and capital investment.
Private consumption, which accounted for around 57% of nominal GDP last year, will remain the principal driver of real growth over the coming years. Petrochemicals output growth in 2010 will be led by exports, which makes it vulnerable to external shocks, particularly if the weak expansion in developed states falters and causes a double-dip recession. Of particular concern is Israel's exposure to the US economy, which is set to see a moderation in growth rates after 2010. The other risk factor is the gradual withdrawal of monetary and fiscal stimuli across developed and emerging markets over the coming quarters, which would depress external demand for Israeli petrochemicals exports with an attendant impact on domestic output.
Regardless of these downside risk factors, the situation facing the Israeli petrochemicals industry is broadly positive. Over the course of our five-year forecast period, we project annual real GDP growth to average 2.9%. Interest rates are very low by historical standards and we expect investment to pick up over the coming quarters, although it will take until 2011 for it to return to 2008 levels. We also highlight the strong recovery in purchases of durable goods over the course of 2009, which should bolster domestic consumer goods industries that utilize plastics. As unemployment falls, private consumption should grow. Coupled with a revival in key export markets in Europe and North America and expansion in developed markets such as India, this should bolster growth in the Israeli petrochemicals sector. Notably, the manufacturing sector indicators continue to head in the right direction as well, with the production index showing signs of significant improvement from Q4/09, thereby generating endogenous demand for petrochemicals and chemicals products.
In 2009, Israel's petrochemicals industry included capacities of 450,000tpa ethylene, 345,000tpa propylene, 125,000tpa benzene, 230,000tpa xylenes, 165,000tpa PE, 450,000tpa PP, 160,000tpa PVC and 60,000tpa of methanol. The authors do not envisage any substantial increase in capacities over the next five years, with no plans for new petrochemicals plants over the medium term. The authors forecast that ethylene production will rise from 200,000tpa in 2006 to reach 450,000tpa by 2014, due to expansion program of Carmel Olefins (COL). PP capacity should remain at 450,000tpa beyond the forecast period on current indications, while PE capacity is not forecast to change from current levels of 165,000tpa. However, the authors expect new investment plans following the privatization of ORL, with a likely expansion over the forecast period.
In the Middle Eastern Petrochemicals Business Environment Rankings matrix, Israel lies in sixth place with a score of 55.2 points, up 0.4 points since the previous quarter due to an improvement in country risk. It has fallen one place since the previous quarter due to a surge in Kuwait's position in the rankings, linked to the Gulf states growth in petrochemicals capacities. With no planned significant growth in petrochemicals capacities over the medium-term, Israel's score is unlikely to change much over the next five years, although it could be improved by better political, economic and business risk ratings. (R&M 26.05)
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11.2 LEBANON: Statement at the Conclusion of the IMF's 2010 Article IV Consultation Mission
An International Monetary Fund (IMF) mission visited Beirut from May 27 to June 8, to conduct the annual discussions for the Article IV consultation. The mission met with the Minister of Finance, Ms. Raya Haffar El Hassan, the Governor of the Banque du Liban (BdL), Mr. Riad Salameh, a number of other members of cabinet and officials of the administration, the President of the Finance Commission of Parliament, and representatives of the private sector and the academia. At the conclusion of the discussions, the mission chief for Lebanon, Mr. Andreas Bauer, made the following remarks:
"Lebanon is reaping the benefits of improved domestic stability and prudent policies. The economy has continued to perform remarkably well, notwithstanding the challenging global environment. Strong momentum has carried over into 2010, and real GDP growth could exceed 8% this year if current trends continue.
The authorities have accumulated a comfortable financial cushion and taken initial steps to address fiscal vulnerabilities. High growth and rising primary surpluses have led to a drop by 30%age points in the government's debt-to-GDP ratio from its peak of 180% in 2006.
While progress is palpable on many fronts, vulnerabilities remain high. At 148% of GDP at end-2009, the government's debt is still among the highest in the world. Progress in strengthening economic institutions and addressing structural weaknesses, including important infrastructure gaps, most notably in the electricity sector, has also been limited.
Today the authorities are facing two important challenges. First, managing cautiously the buoyant economy to avoid potential overheating risks. Second, seizing on the positive economic momentum to implement a range of pending reforms. The current environment of low global interest rates and abundant liquidity is not likely to persist indefinitely. Complacency should be avoided and a consensus built to quickly address Lebanon's structural weaknesses and vulnerabilities. This could set the stage for extending the current growth spell and achieving a stable and long-lasting economic expansion.
Plans to increase public investment, together with the implementation of sectoral reforms, are welcome. In the short term, however, there is little need for a fiscal impulse this year given the buoyant economy. Therefore, budget execution should aim at a higher-than-budgeted primary surplus in 2010.
The medium-term framework for fiscal policy should provide room for more public investment and social spending, and substantially higher primary surpluses to decisively reduce the public debt-to-GDP ratio. For that, fiscal space could be created through a combination of measures to increase the quality of public spending and mobilizing additional revenues.
Reducing the deficit of Electricity du Liban is particularly urgent and will require adjusting tariffs, reducing technical and non-technical losses, and improving governance. A package of tax measures could include elements such as introducing the global income tax, taxing capital gains, broadening the VAT base by reducing exemptions/refunds and considering gradual moderate increases in VAT and corporate income tax rates, which are relatively low by international standards.
The recent focus of monetary policy has rightly been on moderating the pace of deposit inflows by lowering policy rates, given that foreign exchange reserves have now reached a comfortable level. To ensure a smooth adjustment of the deposit inflow, a cautious approach to further policy interest rate reductions seems warranted.
Lebanon's banking system has weathered recent regional and global crises well. Bank supervision should continue to focus on preventing excessive risk-taking in the context of a buoyant economy. The ongoing regional expansion of Lebanese banks also justifies a heightened focus on effective cross-border supervision.
The recent rise in real estate prices requires vigilance. If credit growth accelerates further, the authorities should consider capping and gradually phasing out incentive schemes that provide exemptions to reserve requirements.
Public-private partnerships (PPPs) provide a potentially useful way to address infrastructure bottlenecks, but a sound institutional framework, with strong involvement of the fiscal authorities, must be put in place to avoid possible fiscal risks. Finally, to support effective policymaking, continued efforts are needed to improve the statistical system, including its coverage, quality and timeliness." (IMF 08.06)
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11.3 IRAQ: Are The Kurds Still Kingmakers In Iraq?
Denise Natali wrote on 26 May in the Arab Reform Bulletin (http://www.carnegieendowment.org/arb) that since 2003 the Kurds have been considered kingmakers in Iraq, playing a key role in keeping the country together while negotiating Kurdish nationalist demands in Baghdad. The Kurdistan Regional Government (KRG) has taken advantage of the weak central government, an ambiguous Iraqi constitution and high-level positions to establish its place in a federal Iraqi state. Yet, relative Kurdish leverage in Iraq has weakened over time as Arab groups have become increasingly organized and represented across the country. In response to the declining influence that became apparent in the March 2010 parliamentary election results, the KRG has reaffirmed its commitment to "one Kurdish voice in Baghdad." This strategy might temporarily unify the fragmented Kurdish parties and consolidate Kurdish nationalist interests, but it limits opportunities for sustainable coalition-building and creates new challenges for opposition groups inside the northern region.
The March 2010 parliamentary election results have clarified a trend in Kurdish politics: KDP-Barzani family power is deepening in the Kurdistan Region but overall Kurdish leverage in Iraq is diminishing. The imbalance of seats won within the Kurdistani List - 30 for the Kurdistan Democratic Party (KDP) and 14 for the Patriotic Union of Kurdistan (PUK) - as well as challenges by the opposition Change movement (Gorran, which won 8 seats), has made the strategic agreement signed between the two parties in May 2006 virtually defunct. The PUK might have won 5 seats in Kirkuk and continues to share a significant but undisclosed part of the KRG budget, but it is increasingly becoming a burden for the KDP as a joint power-broker. In effect, the power-sharing arrangement has tacitly become one in which the KDP tolerates the PUK but has assumed the lion's share of power, resources, and authority in the region.
While the KDP has consolidated power in Irbil, the Kurds have lost leverage in the Iraqi state. They have diminished their representation in the Baghdad parliament from 58 to 57 seats while the total number of seats has increased from 275-325; they also have lost seats on important provincial councils. Further, the KRG has lost its veto power through the Presidential Council, and in particular, Iraqi president and Kurdish PUK leader Jalal Talabani. Even if Talabani is re-elected to the presidency, according to the constitution, the president's role in the next Iraqi government will largely be ceremonial. The prime minister, who is unlikely to be a Kurd, will become more powerful. Nor do the Kurds have effective regional veto power. Although the constitution states that amendments to the constitution can be refused by the majority of two governorates, there is still no regional law or council that has been created to enact this veto right.
These trends have implications for Kurds' options as coalition partners in Baghdad. Indeed, with ongoing economic dependency on the central government, vested financial interests in the petroleum sector, and unresolved nationalist claims, the Kurds will attempt to negotiate with the fractious Iraqi parties, just as they have done since the 2005 elections. The KRG is likely to continue to use the Iraqi constitution as the basis for territorial gerrymandering, or delineating the administrative jurisdiction and boundaries of disputed areas.
Additionally, given the concern by most parties about forming a government in a timely manner, the unlikelihood of Maliki's State of Law party allying with Iraqiyya, and the total distribution of seats in Baghdad - with no party winning more than 91 seats - the Kurds are in a good position to become part of a larger Iraqi coalition government. In fact, the Kurds are currently prepared to join the State of Law coalition or any other group that promises to recognize their national rights in the Iraqi state.
Still, the Kurds are aware of the obstacles ahead and have adopted new measures to strengthen their bargaining power in Baghdad. Under the direction of Masoud Barzani, president of the Kurdistan Region and head of the KDP, the Kurds have produced a "Roadmap to Baghdad" that provides guidelines for how they should approach the central government. While the four Kurdish lists, or political group representations (Kurdistani List, Gorran, The Islamic Union and Islamic Group), which have merged into one Kurdistan coalition group, are free to ally with other groups on non-national issues, they may only do so as long as the alliance does not contradict the initial road map. The Kurdish lists are therefore committed to acting in unison on key national issues: the constitution, budget, peshmerga, the hydrocarbons law, Kirkuk and the disputed territories. As representatives of the Kurdistan Region and members of the coalition group, the lists also are accountable to the Iraqi Kurdistan Parliament and Masoud Barzani for their actions and voting patterns in Baghdad, even if they represent opposition groups in Irbil.
Despite efforts to act as a unified nationalist block, the Kurds have their own house to put in order before a meaningful coalition can be sustained. Gorran still has unresolved issues with the PUK and KDP and has indicated that it "cannot be a Kurdish brother in Baghdad if it is looked upon as an enemy in Irbil." Interparty rifts remain on the hydrocarbons law, Kirkuk, and the presidency of the Kurdish coalition and Iraq. Also, while the KDP and PUK want to assure control of the Kurdish coalition group and keep Talabani to lead the country, Gorran argues for a rotating coalition presidency and rejects Talabani as Iraqi president. Yet, with provincial council elections in the Kurdistan Region scheduled for October 2010 and criticisms by some supporters for having sold out to the Kurdistani List, Gorran has its own challenges ahead. The opposition group has to prove its commitment to Kurdish nationalism while maintaining its distinction from the KDP and PUK.
As the final election results remain undetermined, the Kurds will continue to jockey for power and influence in Baghdad, seeking alliances with Iraqi parties they think will assure a minimal level of Kurdish autonomy in the next Iraqi government. But the Kurds' myopic focus on securing their nationalist interests first sends a clear sectarian message that may ward off potential non-Kurdish allies. It also overestimates Kurdish autonomy in Iraq and shows the political bottlenecks that are likely to continue when the next Iraqi government is eventually formed. (ARB26.05)
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11.4 KUWAIT: Construction Sector to Grow By Only 1.39% in 2011 to $2.64 Billion
Research and Markets (http://www.researchandmarkets.com) "Kuwait Infrastructure Report Q3 2010" report says that Kuwait is on the brink of an infrastructure development plan that will on paper change the face of the country over the coming years. As MPs in Kuwait's National Assembly passed a $108bn package for infrastructure development in February 2010, it became harder for more cynical observers to deny that Kuwait is soon to experience a genuine infrastructure boom. BMI's more sober forecast in its latest Kuwait Infrastructure Report, however, demonstrates how instrumental the political environment will be in a year of anemic growth of 0.53% in construction.
The defining four-year development plan albeit reduced from $129bn leaves few sub-sectors untouched, with rail, power, oil, water, health and education all slated for investment as the government develops new ports and cities. The smooth implementation of the development plans will be paramount in a country where projects have been plagued by disputes between the executive and legislature.
The cabinet promisingly approved the transfer of $16.6bn of the $108bn four-year package to the annual state budget for spending, which is effective from April. An additional $10.8bn was handed to the Ministry of Public Works in March 2010 for infrastructure spending. The litany of projects or at least those that come to fruition will lift growth Kuwait's construction sector up from $2.54bn in 2010 by about 1% year-on-year to 2014 according to BMI calculations.
Moves were also made this quarter to expand gas supplies as some progress was seen on the joint Kuwaiti and Saudi Dorra offshore gas field. The Dorra field is an important one for Kuwait, as one of its few non-associated gas reservoirs producing gas independently of oil extraction and is being developed by Al-Khafji Joint Operations (KJO). Further gas supplies yet may come from the more unlikely source of Iran's South Pars gas fields via a new 577km pipeline. Kuwait and Iran stopped short of a final price arrangement during the latest in a number of talks on the pipeline, which will pump 8.5mn cubic meters of gas from Iran to meet Kuwait's increasing appetite.
Meanwhile, the health of Kuwait's banking sector took a turn for the worse in the latest quarter partly due to its exposure to the construction sector, placing even greater urgency on the implementation of the country's development plan. The wider banking sector sees a potential boon in the country's four-year development plan as it will help ease the current disincentive to further expose balance sheets to the construction industry. The Central Bank of Kuwait moved again to help unleash liquidity in the hope that the banking sector will step-up lending at a time when the emirate moves closer to the resumption of mega-projects.
The highly uncertain political climate does not currently justify a significant adjustment in growth forecasts. BMI sees the construction sector growing by just 1.39% in 2011 to $2.64bn. Growth will peak over the forecast period in 2014 at 3.2%, taking the value of Kuwait's construction industry to $3.22bn. (R&M 26.05)
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11.5 BAHRAIN: Old Players and New in the Bahraini Elections
On 2 June, Abdellah al-Derazi wrote in the Carnegie Arab Reform Bulletin that as Bahrain heads toward elections for the lower house of parliament in September or October, a climate of public unhappiness with the incumbents prevails. The parliament elected four years ago was dominated by Islamists, including the Shi'i opposition al-Wefaq Islamic Society on one side and the two Sunni groups al-Minbar Islamic Society (an offshoot of the Muslim Brotherhood) and al-Asala Political Society (Salafi), which allied with the government, on the other. Most secular and leftist candidates, who probably would have allied with al-Wefaq to form a majority bloc, did not win seats due to government interference.
This year's elections will see a similar cast of characters, as all these blocs will run again and others, such as the opposition Haqq movement, will stay out as it did last time. But a large number of independent candidates, including women and businesspeople, are expected to run. In 2006, the government discouraged businesspeople from running, but this time they seem determined to get into the game and put up their own candidates rather than lobbying for the support of others. Kadhem al-Sa'eed, a member of the board of the Bahrain Chamber of Commerce and Industry, recently announced that he would run. Given the public's sense that those elected last time accomplished little, new candidates running either on lists or as independents stand a good chance, making the outcome of the elections unpredictable.
The government will use the tools at its disposal in order to control the outcome. Chief among these tools is the relatively powerful appointed upper house, the Shura Council. Opposition politician Ebrahim Sharif (Secretary General of the National Democratic Action Society, al-Wa'd) remarked recently that it will be impossible to score a goal against 40 goalkeepers, meaning the 40 members of the Shura Council who have equal legislative power. The government might also try to perpetuate the sectarian power struggle between Sunni and Shi'i that characterized much of the 2006 parliament. But such tactics can backfire. Political analysts across the country share the view that government-orchestrated attacks accusing al-Wefaq of maintaining close ties to Iran ended up helping that group regain the grassroots support it had lost previously to Haqq.
Al Wefaq also gained support among Shi'i due to its engagement on the tiny kingdom's highly divisive property issue. An investigation committee headed by al-Wefaq found that 65 square kilometers of land valued at some $37.1 billion has been transferred to private ownership through dubious and corrupt means since 2002. This money, the committee determined, could have solved the housing shortage for over 50,000 Bahrainis on a waiting list, most of whom are Shi'i.
The opposition has been advocating an amendment to the elections law, unsuccessfully so far. Opposition concerns focus on three issues: districting, the existence of general voting centers, and voter lists. With respect to districting, the Shi'i-dominated Northern Governorate is densely populated but lightly represented. For example, the district in which al-Wefaq Secretary General Sheikh Ali Salman won has over 14,000 voters represented by one MP, while a district in the Southern Governorate has 400 voters represented by one MP. The opposition has also raised questions about the existence of general centers at which any voter regardless of district may vote (apparently a Bahraini innovation). In 2006 the opposition accused the government of using the public centers to bring in busloads of soldiers and other pro-government voters in order to defeat popular Wa'd candidates Munira Fakhro and Abdulrahman al-Nu'aimi. Regarding voter lists, they display only the name and the ID number of the voter, not the address, making it difficult for candidates to campaign door to door.
None of the issues raised by the opposition are likely to be resolved before the fall elections, although King Hamad might amend some other articles of the law, such as lowering the voting age from 20 to 18. The government is also likely to continue the policy of extending nationality to thousands of non-Bahraini Sunnis in order to sway the vote.
It is too early to predict the elections' outcome, but it is safe to assume that many of the same players will continue to dominate, perhaps with a greater role played by businesspeople, many of whom are liberals. The new parliament will take up many of the same issues, such as housing, unemployment, security, public properties, health and social security. The government might ease up a bit and offer a few concessions - such as allowing fairer electoral redistricting or giving more powers to the elected lower house - in an effort to demonstrate that the democratic experiment begun in 2000 is succeeding. In addition, new issues are emerging, such as the idea of a truth and reconciliation commission to compensate those whose rights were violated before 2000 that might prove important in the next parliament.
Abdellah al-Derazi is Secretary General of the Bahrain Human Rights Society. (ARB 02.06)
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11.6 UAE: People Puzzle
On 2 June, the Economist Intelligence Unit reports that a UAE government agency has added to the confusion over the size of the country's population by publishing an estimate putting it at 8.19m in 2009, more than double the figure of 4.1m in 2005 that was reported in the most recent national census. The estimate, contained in a report on the economy by the National Bureau of Statistics, was published after the government suspended plans to carry out a fresh census in April. It does seem probable that the 2005 figure understated the real figure, mainly owing to difficulties in accurately counting expatriates, but the bureau's estimate appears to entail a major overcompensation.
According to a report summarized by The National, an Abu Dhabi newspaper (the report and the underlying statistics are not displayed on the bureau's website), the population stood at 8.07m in 2008 and is projected to have increased by 125,000 in 2009. The report does not appear to offer a breakdown by emirate or by origin (local or expatriate). There is also little indication of the methodology beyond a note stating that the figures were derived from estimations based on administrative records. These records are presumed to include ID cards (which the government is in the process of making compulsory for all residents) and the issue or cancellation of residency visas.
The 2005 census showed that the population had increased by almost 60% since the previous count was done in 1995, which showed a total of 2.4m. There was a suspicion at the time that the figure could have omitted a significant portion of the expatriate community. Even so, the 2005 count showed that expatriates made up 80% of the total, a proportion that is likely to have increased over time as the birth rate among Emiratis is on a declining trend, according to the World Health Organization.
The Economist Intelligence Unit has assumed that the population increased rapidly between 2005 and 2008 as the UAE economy went into overdrive, creating hundreds of thousands of jobs for expatriates. Based on the official census figure for 2005, we estimate that the population reached 5.6m at end-2008, but that it remained flat or even declined in 2009 as a result of the sharp slowdown in economic activity that stemmed from the global recession and the Dubai debt crisis.
Moving target
The federal authorities and, in particular, the government of Dubai have shown themselves to be sensitive to media speculation about recession-induced population decline. The Dubai Statistics Centre, for example, recently announced that the emirate's population had grown by 7.6% in 2009 to 1.77m, compared with 1.65m the previous year. However, on closer examination it emerged that the figure was based simply on an extrapolation of the annual average population increase during the boom period between the 1995 and 2005 national censuses. The end-2008 figure may well have been an underestimate, as many people in Dubai would have good reason to conceal their existence from the authorities owing to a lack of valid residence permits. However, anecdotal evidence suggested strongly that Dubai's population contracted in 2009, although the government has presented some proxy data such as electricity and telephone subscriptions and enrolment in private schools to claim otherwise.
Expat Surplus
If, as the statistics bureau seems to be implying, the 2005 census did understate the total, there would be grounds for making a higher estimate for the population at end-2008 than our figure of 5.6m. However, until the bureau provides more details on the basis of its estimates it will remain hard to make a firm judgment. Ultimately, the puzzle of the UAE's population can only be solved when a new census is carried out in a credible manner. The preponderance of expatriates presents particular problems for the government as it tries to marshal accurate population data. These problems relate both to the gathering of the statistics themselves for resident non-citizens and to the political ramifications - if we accept the 8.2m figure, that suggests that the proportion of expatriates in the total population must be getting close to 90%, based on the breakdown in the 2005 census and assuming that there was not some sort of explosion of Emirati fertility in the meantime. (EIU 02.06)
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11.7 OMAN: Going Up
A surge in crude oil production, coupled with higher oil prices, ensured that Oman's budget returned to a healthy surplus in the first quarter of 2010. The Sultanate's Ministry of Economy reported a surplus of $1.09bn for Q1/10, against a slight deficit of $43.1m a year earlier.
Altogether, government revenues climbed a total of 47.9% year-on-year to $5.18bn, while expenditure rose 15.3% to $4.08bn. The ministry had originally forecast an overall budget deficit of $2bn for 2010, based on a conservative estimate for the average price of Omani crude oil of $50 a barrel. In contrast to this prediction, Omani oil averaged $76.68 between January and March this year, a recovery of 70.6% on 2009's early lows. The demand for crude saw net oil income for Q1 more than double from OR709.2m ($1.8bn) in 2009 to OR1.425bn ($3.7bn). The benefit of this price recovery to Oman was enhanced by an increase in oil output in the Sultanate of 8.7%, reaching an average of 855,400 barrels per day (bpd) over the same period.
Oman also saw a fiscal benefit from higher gas production. Some 278bn cu feet of gas were produced in the Sultanate during Q1, a year-on-year increase of 3.9%. As a consequence, gas revenues nudged up by just over 2% to OR219m ($570m).
As a non-member of OPEC, Oman is not bound by external quotas for its oil production and can more freely adjust levels according to global demand. The Sultanate's ability to respond positively to increased global oil demand also has much to do with significant new investment in enhanced oil recovery (EOR) techniques. EOR has enabled Oman to reverse a long-term decline in oil production, which peaked in 2001 at just under 1m barrels per day. A turnaround in 2008 was followed by a further increase in production of 7.4% last year, while the government hopes 2010 will see production eventually reach around 860,000-900,000 bpd.
Petroleum Development Oman (PDO), the company that accounts for around 90% of oil production in the Sultanate and nearly all of its gas production, has pioneered technology such as thermal, chemical and miscible gas injection into reservoirs to increase the amount of recoverable reserves. PDO, which is jointly owned by the Omani government (60%), Shell Group (34%), Total (4%) and Partex (2%), announced in April that it believed Oman retained "tremendous potential" for further application of EOR techniques, with "billions of barrels" of additional oil that could potentially be recovered through EOR.
The sharp bounce-back in Oman's budget last quarter is a strong testament to the potential of EOR techniques when properly applied. The Sultanate's model of maintaining independence from OPEC, while working in tandem with Western independent oil companies, appears to have provided its oil sector with a welcome resurgence. (OBG 03.06)
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11.8 EGYPT: Petrochemicals Report for 2010's Third Quarter
Research and Markets (http://www.researchandmarkets.com) "Egypt Petrochemicals Report Q3 2010" says that with downstream industries skewed heavily towards fertilizer production, this latest Egypt Petrochemicals Report argues that the petrochemicals sector is better able to weather the economic downturn. In the fertilizer sector, the country had ammonia and urea capacities of 7.52mn tpa and 4.32mn tpa respectively in 2009. Agriculture has been among the least affected sectors in the global downturn. Egyptian fertilizer producers will look forward to growth in the months ahead, with domestic and foreign demand, notably from India, driving output. This is in contrast to the lackluster performance of PE and PP, with prices on the Egyptian market failing to firm up in Q110. The slow performance of PP end product markets led to poor market activity over the course of the quarter, although converters started to receive better demand for their end-products in March 2010.
In the long term, the most dynamic downstream sectors will remain in plastics, an area that Egypt has only recently sought to expand in a meaningful way. Expansion in polymers capacities in 2010 should help ensure that Egyptian producers secure a share in that growth, although there are concerns about volatility in the short term.
In 2009, Egypt had ethylene capacity of 300,000tpa with PP and PE capacities at 200,000tpa and 225,000tpa respectively. Ethylene capacity is expected to reach 600,000tpa in 2010. PE capacity should rise from 225,000tpa in 2009 to 600,000tpa in 2010. However, the market situation will be precarious over the short term. Domestically, key petrochemical consuming industries have achieved strong growth in recent years due to growing investments from the Gulf and state-led economic reform programs. There are signs that the construction industry is still managing to do better than expected and the need for residential construction remains high, providing a boost to the local market in construction-related polymers, particularly segments such as PVC that are highly exposed to the construction sector.
The authors expect PP capacity to rise to 600,000 by the end of the forecast period. We do not believe the Egypt Hydrocarbon Corporation (EHC)s proposed complex near Suez will come online by 2013, even if it does manage to secure financing in 2010. Similarly, it is doubtful that the General Authority for Investment and Free Zones (GAFI)s bid for foreign investment in a $200mn PVC plant with a capacity of 120,000tpa and a $150mn PS plant with a capacity of 200,000tpa will materialize in time for them to be onstream by the end of the forecast period.
The EMethanex joint venture (JV) may be onstream in 2010. The original cost of the facility, which will manufacture 1.3mn tpa of methanol, was estimated at $620mn. This has already increased to $950mn, the newspaper al-Ahram reported. Once operational, the methanol plant will turn Egypt into a net methanol exporter. Other projects include the Egyptian Propylene & Polypropylene Company (EPPC)s new 350,000tpa PP facility in Port Said, which the authors believe will be fully functional in 2010. The nitrogen-based fertilizer sector is also expected to expand, with Egypt Basic Industries Corporation (EBIC) and Agrim adding about 2.2mn tpa of ammonia production capacity by 2010. A new VCM and PVC plant complex by TCI Sanmar originally due to start up in February 2010 was delayed, possibly to September/October 2010. The VCM plant will have a capacity of 400,000tpa and the PVC plant will have a capacity of 200,000tpa that is scheduled to double by 2012. (R&M 26.05)
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11.9 TURKEY: Steady Growth Predicted
Turkey's economy is well on the way to erasing memories of recession, posting solid growth from late 2009 onwards, though recent woes in neighboring Greece and beyond will have many in Ankara casting a wary sidelong glance towards the West.
Having contracted by 4.7% in 2009, Turkey's economy has been on the rebound since the final quarter of last year, growth being spurred by a strong surge in export sales and climbing consumer demand at home. The government of Prime Minister Erdogan is predicting a 3.5% rise in GDP for 2010, yet some ministers are increasingly suggesting this will be at the lower end of the economy's possible performance. In early April, Deputy Prime Minister Ali Babacan, who also serves as state minister for the economy, told local media that the growth target set by the government was conservative and would probably be revised upwards in June, when the cabinet next meets to rejig its medium-term economic plan.
This sense of optimism is shared by a number of international organizations and agencies. In late April, the IMF raised its projections for the Turkish economy, forecasting an increase of 5.2% for the year. By the end of the month, Deloitte went further, predicting GDP to expand 5.7-6%.
While inflation is edging up, and could finish the year close to 10% according to Central Bank estimates, this is in part a result of rising domestic demand and is seen as a sign the economy is gearing itself up for further expansion. The reserve bank has deliberately chosen not to target inflation at the moment, keeping interest rates at an historic low of 6.5% for the past six months in an effort to stimulate lending to help reboot the economy. Though many of Turkey's domestic economic indicators are good, there are still suggestions of a possible cooling off, most likely due to external factors.
The main factor in any possible change is the debt crisis in Europe, which could spread from Greece westward to Portugal and Spain, potentially destabilizing the eurozone. Ali Babacan has sought to play down reports the debt crisis will have a major impact on his country. "An economic slowdown in the eurozone may affect our exports as one might argue the demand in the EU will go down," he said on May 8.
Even though Turkey has relatively limited trade with Greece – exports totaled just €1.88bn last year – the EU as a whole accounts for some 50% of Turkish exports. Some of its main trading partners, such as Germany, are at the forefront of efforts to bail out the Greek economy. There is the risk that by funding the multibillion-euro rescue package being provided to Athens, other eurozone economies could be denied the funds needed to continue their own recoveries. Another hint that the Turkish economy is not guaranteed a smooth ride comes from a report by the Turkish Automotive Manufacturers' Association, issued in May, which shows that while output from the sector was up nearly 21% in April, month-to-month production has slipped by 8.5% from April to May.
The automotive sector is one of the key indicators of the country's economy, the industry being the largest manufacturing exporter in Turkey. Last year, at the height of the recession, many of Turkey's leading automotive producers put the breaks on their assembly lines, laying off staff or putting them on unpaid leave as orders from Europe dried up. While April's fall in production could be a one-off, should Europe slip into recession again, the resurgence of Turkey's automotive sector could run out of gas.
The Turkish economy is far more resilient to external shocks than ever before, a result of reforms implemented over the past decade. These reforms, including a major restructuring of the banking sector in the wake of a series of bank collapses in 2001, mean Turkey has moved out of recession far faster than many of its neighbors and should be less prone to fall back into the red. (OBG02.06)
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11.10 BULGARIA: IMF Executive Board Concludes 2010 Article IV Consultation
On 3 May 2010, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Bulgaria.
Background
In the years that preceded the global economic and financial crisis, large capital inflows into Bulgaria generated a domestic demand boom. This brought strong GDP and employment growth, but also widened the current account deficit to very high levels, and led to an overheating of the economy, with high wage growth and double-digit inflation.
The boom came to an end in the fourth quarter of 2008, amid the global crisis that followed the default of Lehman Brothers. A sharp reduction in capital inflows led to a contraction of domestic demand, while the recession in Bulgaria's trading partners caused a drop in exports. As a result, GDP contracted by 5.0% in 2009.
An increase in exports will lead to a recovery this year, and real GDP is projected to increase by 0.2% in 2010. Investment will likely drop further, on the back of an unwinding investment boom, tightened credit and weak economic activity, while private consumption is forecast to suffer from the decline in employment. Inflation is projected to remain moderate at 2.2%, while the current account deficit is expected to drop from 9½% in 2009 to 6¼% of GDP in 2010.
The downturn has led to a correction of previously built-up flow imbalances, although stock imbalances and vulnerabilities remain high. However, while capital inflows will, over time, recover somewhat from the low levels during the crisis, they will mostly likely remain well below the unsustainable levels experienced before 2009, and both the private sector and public sector will need to adjust to lower capital inflows. The private sector will need to shift resources from the non-tradable to the tradable sector. Public policies will also need to attune to the end of the domestic demand-driven revenue boom and adjust spending growth to the new environment. Sustaining the built-up public buffers is important because private sector vulnerabilities remain considerable. Private sector external debt stood at 102.7% of GDP at end-2009, while gross foreign currency debt of the non-financial private sector amounts to 80% of GDP.
Executive Board Assessment
Executive Directors commended the Bulgarian authorities for maintaining prudent macroeconomic policies, which had helped steer the economy through the global financial crisis. Directors noted that while the economy is poised to recover this year after a sharp contraction, large private external debt and the potential spillover from regional uncertainties pose considerable downside risks. Capital inflows are likely to remain low and domestic demand is expected to decline further, requiring substantial adjustments by both the private and public sectors. Wage moderation, alongside structural reforms to increase productivity, will help facilitate a reorientation of the economy toward the tradable sector, while containing the growth of public spending is a necessary response to the end of the revenue boom.
Directors underscored the importance of adjusting public policies to help prepare the country for eventual euro area membership. The currency board arrangement has been a pillar of stability, and euro adoption continues to be the most viable exit strategy. Maintaining fiscal discipline and deepening structural policies will not only strengthen economic fundamentals but also demonstrate that Bulgaria can rapidly adjust its economy within the confines of the currency board arrangement.
Directors recognized the challenges facing fiscal policy in 2010, arising from revenue shortfalls and a higher-than-expected stock of payables and arrears. They endorsed the government's plan to implement a package of measures in order to achieve the revised cash deficit target, notably further cuts in current spending. Directors welcomed the authorities' readiness to take further steps to preserve fiscal sustainability, including tax measures. The higher-than-expected build-up of arrears in 2009 also highlights the need for timely and adequate fiscal reporting, including on an accrual basis.
For 2011 and beyond, Directors saw a larger role for fiscal policy in stabilizing the economy by focusing, within a medium-term budgetary framework, on the overall spending envelope rather than on headline balances. This would help make public spending more predictable and limit the large intra-year adjustments. They encouraged the authorities to save revenue windfalls, and to compensate any tax rate reductions by further expenditure cuts. On the fiscal reform agenda, high priorities are closing the gap between pension contributions and pension expenditures, and improving the efficiency and quality of the health care system.
Directors welcomed the continued stability of Bulgaria's financial system, underpinned by prudent regulation and adequate capital buffers. Nevertheless, in light of the rising non-performing loans and the risk of a reversal of parent funding to subsidiaries in Bulgaria, it will be important that the authorities remain vigilant, monitor liquidity closely, and continue close cooperation with parent bank supervisors. Enforcement of a cautious dividend policy and contingency planning are also priorities. Directors welcomed the recent creation of a financial stability unit at the central bank, and looked forward to further improvements to the bank resolution framework. (IMF 02.06)
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- Israeli Shekel conversions done at a rate of NIS 3.80 = $1.00
- Turkish Lira conversions done at a rate of NTL 1.60 = $1.00
- Euro conversions done at a rate of € 1.00 = $1.40
- Jordanian Dinar conversions done at a rate of JD 1.00 = $1.41
- UAE Dirham conversions done at a rate of Dh 3.67 = $1.00
- Omani Rial conversions done at a rate of OR 0.385 = $1.00
- Pakistani Rupee conversions done at a rate of Rs 82 = $1.00
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