TOP STORIES
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Noble Energy Raises Israeli Gas Reserves Forecast
2.2 Rocketick Secures Strategic Investment from NVIDIA
2.3 AMD to Establish Israel R&D Center in Tel Aviv
2.4 Drop in Israeli Entries to US
2.5 Hyundai Consolidates Position as Israel's Most Popular Car
2.6 TowerJazz Acquires Micron's Fabrication Facility in Nishiwaki, Japan
2.7 Benetton to Open 1st Tel Aviv Store
2.8 Personetics Secures $6.5 Million Funding from Carmel and Sequoia
2.9 XtremIO Closes $14 Million Series B Funding Led by Battery Ventures
2.10 Fisher Price Shoes Coming To Israel
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Two Jordanian Start-Ups Incubated by Oasis 500 Secure Investment Deals
3.2 Middle East Hotel April 2011 Occupancy Rates Survey Released
3.3 US Pizza Firm Eyes Major Arabian Gulf Region Expansion
3.4 World Famous Ivy Brand to Open in Dubai
3.5 First El Chico Restaurant Opens in Saudi Arabia
3.6 Fairmont Eyes 10,000 Staff for Dozen Saudi Hotels
3.7 Export Development Canada Opens Permanent Representation in Istanbul, Turkey
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Arava Power Inaugurates Israel's First Solar Field
4.2 Arava's Energy Partnership Aims to Bridge Borders & Reduce Emissions
4.3 Saudi Arabia to Generate Solar Energy Equal to its Crude Exports
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 MENA Region Planning 33,000 Kilometers of Rail Lines
5.2 Lebanon's Budget Deficit Rises to 35.51% of Spending 5.3 Lebanon's Industrial Exports Up By 4% In 2011, Arab Countries Main Importers
5.4 Saudi Arabia Grants Jordan $400 Million
5.5 Saudi Arabia Lifts Ban on Jordanian Agricultural Produce
5.6 Amman Announces Makeover of Public Sector
5.7 Jordan Unveils Plan for $1 Billion Theme Park
5.8 Iraq to Repay Egypt An Old Debt of $408 Million in Cash
5.9 G-8 Leaders Pledge Billions to Egypt and Tunisia
5.10 Bahrain King Approves $16.4 Billion Budget
5.11 Qatar's Annual Inflation Decelerates to 1.5% in April 2011
5.12 Qatar Signs Deal for Two Major Ports in Egypt
5.13 UAE's Real Growth On Track to Reach 3% to 3.5% in 2011
5.14 Oman To Boost 2011 Spending By 20%
5.15 IMF Says Saudi Economic Growth to Reach 6.5% in 2011
5.16 Saudi Plans to Build 16 Nuclear Reactors by 2030
5.17 Out-Of-Work Saudi Pilots Launch Facebook Campaign
5.18 Egypt Finalizes $3 Billion IMF Standby Financing Deal
5.19 Cairo Approves Increases in Spending & Taxes in 2011/2012 budget
5.20 Egypt Jobless Rate Up To 11.9% in First Quarter
5.21 Egypt Ranks 10th in Tobacco Consumption
5.22 Tunisia Needs $125 Billion For Economic Program
5.23 The Future of Construction in Morocco to 2015
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Israel's 3rd Largest Export Market in First Quarter
6.2 Bulgaria's Unemployment Rate Lowest Since November 2009
6.3 Bulgaria's New Car Market Starts To Improve in First Quarter
6.4 Bulgaria's Annual Inflation Rate Reaches 5.6%
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Israeli Cows Outperform Their Foreign Counterparts
*REGIONAL:
7.2 Population Crosses 1.7 Million for the First Time in Qatar's History
7.3 Egypt's Military To End Nightly Curfew On 15 June
7.4 Egypt Approves Establishment of the Muslim Brotherhood's Freedom and Justice Party
7.5 Morocco to Hold Early Legislative Vote
7.6 Ousted Gay Referee Seeks Reinstatement in Turkey
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva Announces Approval of Generic Combivir Tablets
8.2 Teva and Pfizer Settle Generic Neurontin Litigation
8.3 Teva Announces Launch of Generic Aricept Tablets in the US
8.4 LifeBond Raises $20 Million in a Third Financing Round
8.5 Teva Successful Phase III Study of Its Long-Acting G-CSF Product in Breast Cancer Patients
8.6 Mazor Robotics' Renaissance - Next Generation of Robotic Surgical Guidance Systems
8.7 Can-Fite to Spin off Its Ophthalmology Activities to a US Based Company
8.8 Brainlab Acquires Voyant Health
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 IncrediMail Integrates Facebook into Award Winning Email
9.2 IME & TowerJazz Combine Expertise to Accelerate MEMS Device Industry Development
9.3 TowerJazz Wireless Antenna Switch Silicon-on-Insulator (SOI) Process Technology
9.4 Cleaner Air Solutions to Install over 3MW of SolarEdge Systems in UK
9.5 RADCOM Reveals GEARX8, a New Powerful Technology to Support 80 Gigabits Per Second
9.6 InfoGin Offers High Capacity Mobile Browsing on Feature Phones
9.7 AppSide Introduces First Content Marketplace for Motion Controlled Entertainment Devices
9.8 Lucid Takes Virtu Graphics Virtualization to More Platforms, More Systems
9.9 Picitup's iOnRoad Wins Israel Mobile Summit Startup Contest
9.10 Next-Generation Bbox Incorporates Celeno's Video-Grade Wi-Fi Module
9.11 iPad 2 and iPhone 4 Go Touchless Using eyeSight's Gesture Recognition Technology
9.12 Silent VVM Enables Visual Voice Mail Services on MetroPCS Android-Powered Phones
9.13 Mellanox Introduces ConnectX-3 - First FDR 56Gb/s InfiniBand Multi-Protocol Adapter
9.14 MTS Award-Winning Telecom Expense Management Solution Releases Newest Version
9.15 Kornit Digital Launches its New Kornit Avalanche Printer
9.16 Conduit Offering Expands to Support iPAD APP Creation & Enhanced Social Features
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel Raises Growth Forecast To 5.2%
10.2 Israel's Unemployment Rate Drops to 6%
10.3 Income Inequality in Israel
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11: IN DEPTH
11.1 ISRAEL: Fitch Affirms Israel at 'A'; Outlook Stable
11.2 JORDAN: Railway Plans Gather Momentum
11.3 BAHRAIN: Moody's Downgrades Bahrain to Baa1 With Negative Outlook
11.4 OMAN: Taking Education Higher
11.5 EGYPT: Growth Prospects & Emerging Opportunities in the ICT Industry
11.6 EGYPT: Egypt's Freedom & Justice Party: to Be or Not to Be Independent
11.7 MOROCCO: Does Morocco Have a Place in the GCC?
11.8 TURKEY: Hats Off to Fiscal Performance Ahead of Elections
11.9 TURKEY: Loading E-Commerce
11.10 CYPRUS: Fitch Downgrades Cyprus to 'A-'; Outlook Negative Ratings
11.11 GREECE: Fitch Publishes Rating Report on Greece Ratings
11.12 GREECE: Moody's Downgrades Greece to Caa1 From B1, Negative Outlook
11.13 BULGARIA: Fitch Revises Bulgaria's Outlook to Positive; Affirms at 'BBB-'
11.14 BULGARIA: Nuclear Questions
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Interior Minister to Extend Daylight Saving Time
Minister of the Interior Yishai announced on 6 June that the professional committee he appointed to examine the question of daylight saving time recommends extending it, but by less than two weeks. The committee was set up following widespread public criticism after daylight saving time ended in September, when summer temperatures were still at their height, and a long time before daylight saving time ended in Europe and the US, causing damage to the economy estimated in the tens of millions of shekels. The committee recommended that daylight saving time should last 193 days instead of 180 days. It will end on 1 October every year and resume at the end of March. According to a survey by the Dahaf Institute, 46% of the public do not want to extend daylight saving time. They want to leave things as they are, or even to shorten daylight saving time. Among the considerations were the Yom Kippur fast and economic issues raised by industrialists. The committee presented a 200-page report. This means that daylight saving time will last 193 days and standard time 172 days. For the sake of comparison, in the US, standard time lasts a little over four months. (Globes 06.06)
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1.2 Jerusalem Considers New Smoking Crackdown
On 29 May, the Netanyahu government approved a plan to establish a unit within the Health Ministry to help reduce smoking in Israel. The plan includes expanding smoking limitations in public spaces, including bus and train depots; increased fines and barring the placement of cigarette machines in public places. One of the goals will be to cut down the number of smokers by 8% within eight years. The new plan also calls for revised warnings on cigarette packs, as well as new guidelines for labeling tobacco products. The ministers, however, were divided on the subject, with some describing the new measures as overly harsh. The plan stands to cost some $2.8 million. The Health Ministry will set up a special division to oversee its implantation and enforcement. According to the Health Ministry, the cost amounts to 0.2% of the State's income from tobacco, which in 2009 came to $1.17 billion. In addition, the Treasury will explore the current taxation on tobacco and will submit its recommendations to the government within 90 days. (Ynet 29.05)
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2: ISRAEL MARKET & BUSINESS NEWS
2.1 Noble Energy Raises Israeli Gas Reserves Forecast
Noble Energy announced at a UBS conference in the US that it may be possible that over the next few years gas reserves in the Israel region will rise to 35 - 45 trillion cubic feet (TCF) compared with the current level of 25 trillion cubic feet that is currently known. 45 TCF would be nearly triple the size of known 16 TCF reserves in the Leviathan gas field, the largest gas discovery worldwide over the past decade, of which Noble holds 39.6%. Noble also holds a major stake in the Tamar gas field which has 8.4 TCF and smaller discoveries at Dalit, Mary B and Noa. Noble plans completing development of the Tamar project by the end of 2012 and beginning to supply gas to consumers in 2013. It is expected that by the time they begin providing gas from Tamar they will already have started working on the next stage of developing this field to meet the growing domestic demand of recent years. When work has finished on the second Leviathan well, the company would remain in the region and undertake additional exploration in 2012. (Globes26.05)
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2.2 Rocketick Secures Strategic Investment from NVIDIA
Rocketick has completed a strategic B-round investment led by NVIDIA, the Silicon Valley-based leader in visual and parallel computing. This marks NVIDIA's first strategic investment in Israel. In parallel, NVIDIA will become a product licensee of Rocktick's flagship product, RocketSim, the world's first GPU-based logic simulation accelerator. As part of its $2.5 million investment, the VP of Business Development at NVIDIA will become an observer on Rocketick's Board of Directors. RocketSim is a GPU-based software product that seamlessly attaches to existing chip-verification simulators in the market, accelerates their run-time by 10x or more and reduces the server-RAM requirements by 80%. RocketSim enables the simulation of huge chip designs, both at the RTL-level and at the gate-level, which previously had not been possible. It enables semiconductor companies to shorten their time-to-market, increase their confidence in their designs and design more complex chips.
Ramat Gan's Rocketick (http://www.rocketick.com) is a pioneer in GPU-based simulation acceleration for chip verification. Its first product, RocketSim, solves functional verification bottlenecks by complementing simulators with a GPU-based acceleration solution that offers 10x faster simulations for highly complex designs. RocketSim is used today by several semiconductor customers. NVIDIA Corporation of Santa Clara, California is the worldwide leader in programmable graphics processor technologies. The Company creates innovative, industry-changing products for computing, consumer electronics and mobile devices. (Rocketick 30.05)
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2.3 AMD to Establish Israel R&D Center in Tel Aviv
Advanced Micro Devices announced that it will set up an R&D center in Tel Aviv, based on heterogeneous computing and 3D graphics developer Graphic Remedy, which it acquired six months ago. According to IVC, the acquisition was made at a value of $5 million. AMD says that the Israeli R&D center will develop next-generation parallel computing platforms. While not as large as Intel Corporation, AMD has a 10% share of the global PC processor market and it has strong R&D capability. (Globes 01.06)
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2.4 Drop in Israeli Entries to US
The number of Israeli tourists entering the United States is in decline, according to figures published recently at the International Pow Wow tourism fair in San Francisco. According to the data, compiled by the US Department of Commerce, 2011 will see some 304,000 entries from Israel – a 1% drop compared to 2010 and, quite surprisingly, a 7% drop compared to the number of Israeli entries in 2000, a year before the 9/11 Islamic terror attacks. The American forecast predicts a very small rise in the number of Israelis expected to enter the US in the next five years, with 216,000 Israeli tourists slated to arrive in 2016 – an increase of less than 4%, compared to an average rise of 39% in the number of tourists from all over the world in the next five years. According to the American forecast, close to 64 million tourist entries will be recorded in 2011, including visitors from Mexico and Canada, while more than 88 million tourists are expected to arrive in 2016. (Ynet 03.06)
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2.5 Hyundai Consolidates Position as Israel's Most Popular Car
Having overtaken Mazda as the most popular car in Israel, Hyundai has consolidated its position as the country's best-selling brand. Hyundai delivered 13,129 cars in January-May 2011, 14.5% more than in the corresponding months of 2010, while Mazda delivered 11,454 cars - 15% fewer than in the corresponding period. Some 100,975 new vehicles were delivered in January-May, 22% more than in the corresponding months. The strong pace of deliveries continued in May, with 20,712 delivers, beating expectations. Toyota is in third place, with 9,117 deliveries in January-May, up 15%. Chevrolet is in fourth place, with 6,455 deliveries, up 51%. Kia Motors rose to fifth place with 6,305 deliveries, up 105%. Volkswagen is in sixth place with 5,433 deliveries, up 44%. Industry sources attribute the increase in deliveries to purchases by car leasing and rental companies, including for private leasing through aggressive marketing campaigns at large discounts. In addition, there is strong customer flow for new cars, especially for small and inexpensive cars. (Globes 02.06)
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2.6 TowerJazz Acquires Micron's Fabrication Facility in Nishiwaki, Japan
TowerJazz completed its previously announced acquisition of Micron Technology's fabrication facility in Nishiwaki City, Hyogo, Japan. The acquisition nearly doubles TowerJazz's current internal manufacturing capacity, cost-effectively increasing production by 60,000 wafers per month. The added capacity to serve the growing needs of its expanding blue chip customer base, combined with the additional business potential in Japan, is expected to help position TowerJazz to achieve its expressed $1b annual revenue run rate target by 2014. This acquisition provides TowerJazz with operational facilities that span the globe with two fabs in Israel, one fab in the United States, additional capacity available in China through manufacturing partnerships, and the newly acquired fab in Japan. As a result, this acquisition enhances the company's geographic reach and distribution capabilities which TowerJazz believes will create a significant opportunity for revenue enhancement and increased efficiencies in manufacturing. The total value of the transaction, including assumption of liabilities, is approximately $140 million, of which $40 million was paid in cash, approximately 19.7 million Tower ordinary shares and the remainder reflects assumed long-term retirement liabilities that are payable incrementally upon employee retirements.
Migdal HaEmek's Tower Semiconductor (http://www.towerjazz.com), the global specialty foundry leader and its fully owned U.S. subsidiary Jazz Semiconductor, operate collectively under the brand name TowerJazz, manufacturing integrated circuits with geometries ranging from 1.0 to 0.13-micron. TowerJazz provides industry leading design enablement tools to allow complex designs to be achieved quickly and more accurately and offers a broad range of customizable process technologies including SiGe, BiCMOS, Mixed-Signal and RFCMOS, CMOS Image Sensor, Power Management (BCD), and Non-Volatile Memory (NVM) as well as MEMS capabilities. (TowerJazz 05.06)
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2.7 Benetton to Open 1st Tel Aviv Store
Italian clothing retailer Benetton will open its first flagship store in Israel at Tel Aviv's Dizengoff Center mall. Benetton's franchisers in Israel are interested in opening another store at Tel Aviv's Azrielli Mall, alongside international fashion chains Gap and H&M. The Benetton franchisers are expected to receive the Dizengoff Center store on 15 June and begin renovations. The store stretches over 250 square meters (2,690 square feet) in size and has a gallery measuring another 150 square meters (1,614 square feet). According to estimates, Benetton will pay some NIS 150,000 ($43,370) a month in rent, both due to the store's size and its attractive location. The company is expected to invest some NIS 1.5 million ($430,000) in the store. The franchisers are planning to open 10 stores of the Italian fashion brand in Israel, which will measure 200-500 square meters (2,153-5,382 square feet) in size, similar to Benetton's stores worldwide. The stores will include the United Color clothing brand and the Undercolor accessories. Benetton is returning to Israel after leaving the country in the late 1990s following unsuccessful sales – mainly due to its high pricing. This time, the brand's prices will be similar to those of ZARA. Benetton, which was considered an expensive brand in the past, changed its global branding in recent years and is now considered a high-quality basic brand at comfortable prices. In Israel, the brand is expected to compete against the cheap international brands which have been flocking to the Holy Land in recent years, including H&M, American Eagle Outfitters and Forever21, which offer "value for money" products at a lower quality than Benetton. (Ynet 05.06)
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2.8 Personetics Secures $6.5 Million Funding from Carmel and Sequoia
Personetics announced the completion of $6.5m fund raising from Carmel Ventures and Sequoia Capital. The company will use the funding to further develop its next generation solutions and launch business development, marketing and sales operations. Personetics mission is to help financial institutions respond to a major shift in the consumers' behavior – the channels that they use, and the user experience they expect. The company has developed Personetics Digital Banker, a self-service technology that uses customer profiles and automated intelligence to drive customer centric processes across multiple channels, including: Web, mobile and text banking. The solution is designed to handle a wide variety of customer interactions and eliminates the need to switch channels from self-service to the call center. Personetics Digital Banker empowers the consumer and increases user satisfaction, while significantly reducing cost. Tel Aviv's Personetics http://www.personetics.com provides next generation customer interactions technology for financial services that empowers the consumer and increases user satisfaction, while significantly reducing cost. Founded by a team of seasoned financial services technology entrepreneurs with deep experience in machine learning and analytics — augmented by experienced domain experts from within the financial services industry —our mission is to help financial institutions respond to a major shift in the consumers' behavior – the channels that they use, and the user experience they expect. (Personetics 23.05)
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2.9 XtremIO Closes $14 Million Series B Funding Led by Battery Ventures
XtremIO has secured a $14 million financing round led by Battery Ventures, with participation from existing investors Giza Venture Capital and Jerusalem Venture Partners (JVP). XtremIO will apply the capital to accelerate product engineering and deliver its breakthrough solution to the Enterprise storage market. Storage and I/O performance represent a major bottleneck to many IT applications and processes. The challenge is further amplified by the virtualization of modern data centers and the growing need for faster processing of larger amounts of data. XtremIO addresses these challenges with its breakthrough storage solution based on an innovative architecture and storage algorithms, and utilizing flash memory solid-state drive (SSD) technologies. XtremIO offers Enterprise storage solutions that enable dramatic application acceleration, higher levels of consolidation, simplified operations, and cost reduction. Herzliya's XtremIO http://www.xtremio.com develops breakthrough Enterprise storage system solutions based on innovative architecture and storage algorithms, utilizing solid-state drive (SSD) technologies. Their storage solutions address the growing challenges of modern IT infrastructure, creating value for our customers through dramatic gains in performance, efficiency, operational flexibility, and cost reduction. (XtremIO 06.06)
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2.10 Fisher Price Shoes Coming To Israel
The Al Srad company has received an exclusive franchise to market Fisher Price baby shoes and clothes in Israel. The American toy brand, a wholly owned subsidiary of Mattel, expanded in recent years into additional fields, including baby gear and computer games for young children. Some 30 models of first step shoes and sandals for boys and girls (up to size 27) will be marketed in Israel this summer, with prices ranging between NIS 189-239 ($53-68). Fisher Price's clothing line will be marketed in the winter. Al Srad has been very successful in marketing clothes and shoes of Mattel's Barbie brand, and is also the franchiser of the Fila and Hello Kitty brands. Fisher Price shoes will be sold in the H&O, Hamashbir Lazarchan and Factory 54 chains and in special shoe stores. (Ynet 07.06)
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3: REGIONAL PRIVATE SECTOR NEWS
3.1 Two Jordanian Start-Ups Incubated by Oasis 500 Secure Investment Deals
Two Jordanian start-ups, incubated by Oasis 500, have secured investment deals with local and international investors. MarkaVIP - founded by a group of Jordanian entrepreneurs as an online shopping community that offers members in the Middle East access to exclusive international brands at up to an 85% discount - secured investment deals worth JD2 million with the investment arm of Kawar Group, Belgian Hummingbird Ventures and a Turkish company. Wheels Express, a Jordanian web-based delivery start-up and an e-commerce portal, secured investment deals with businessman Emad Malhas and Kawar Group. The volume of the deal was not announced. The two start-ups are among 20 incubated by Oasis 500.
Founded by local venture capital firms, technology companies and investors, Oasis 500 started accepting applications for its entrepreneurship program in August last year with the goal of helping fund 500 ideas from the Middle East and North Africa by the year 2015. Oasis 500 has recently hosted a regional Angel Network Event, providing 70 top leaders and investors from Jordan, the region and California's Silicon Valley with the opportunity to meet with promising start-up companies that represent lucrative and stable investment opportunities in the MENA region. (JT 31.05)
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3.2 Middle East Hotel April 2011 Occupancy Rates Survey Released
Occupancy rates in Middle East hotels reached 69.1% in April 2011 from 68.5% in March 2011, according to a joint Deloitte and STR Global study. At a RevPar of $147, Middle East hotels continued to lead the global market in April 2011 despite the political turmoil. Dubai hotels witnessed occupancy rates of 81.3% in April 2011 from 80.7% in March 2011. Dubai's RevPar reached $217 in April 2011 from $199 in March 2011. Meanwhile, Abu Dhabi's occupancy rates dropped to 69.3% in April 2011 from 71.2% in March 2011. RevPAR in Abu Dhabi also declined to $114 in April 2011 from $126 in March 2011. The impact of the political unrest, however, was evident in Oman where occupancy rates in Muscat dropped to 53.1% in April 2011 from 59.5% in March 2011 and 67% in April 2010, while RevPar also declined to $137 in April 2011 from $147 in March 2011 and $165 in April 2010. Hotels in Beirut witnessed an occupancy rate of 58.3% in April 2011 which is higher than the 47.9% witnessed in March 2011 but lower than 72.5% witnessed in April 2010. Beirut's RevPAR reached $114 in April 2011 from $91 in March 2011. (Various 07.06)
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3.3 US Pizza Firm Eyes Major Arabian Gulf Region Expansion
The owner of the award-winning Russo's New York Pizzeria and Russo's Coal Fired Italian Kitchen is eyeing a major expansion in the Arabian Gulf region. The company said on Sunday that it has awarded exclusive UAE territory rights to Dubai-based Prime Hospitality, a division of Ghobash Trading and Investment Company. It has also signed other agreements to enable growth in the region which will see the restaurant chain opening at least 26 outlets in Gulf countries over the next decade. Prime Hospitality will be operating Russo's Restaurants throughout the UAE, with first openings planned in Dubai and Abu Dhabi later this year. Numerous expressions of interest were received by Russo's after the 2011 Gulfood Exhibition in Dubai, adding that the company has set up a new office in the UAE city. (AB 05.06)
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3.4 World Famous Ivy Brand To Open in Dubai
The world famous Ivy restaurant brand is set to open its doors in Dubai in partnership with Jumeirah Restaurants. The Ivy in Dubai will share the same standards of food, ambience and service as The Ivy in London, when it opens on the ground floor of The Boulevard, Jumeirah Emirates Towers. The Ivy in Dubai will offer a brassiere-style menu including The Ivy's world famous shepherd's pie, Dover sole, and Scandinavian iced berries with hot white chocolate sauce. Jumeirah Restaurants' portfolio includes The Noodle House, Sana Bonta, Urbano, AllFreshCo, Rice plus Spice and The Flaming Revolution. (AB 01.06)
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3.5 First El Chico Restaurant Opens in Saudi Arabia
Dallas' Consolidated Restaurant Operations (CRO) and the Safari Group of Companies jointly announced the grand opening of the first El Chico restaurant in Riyadh, Saudi Arabia. The original Tex-Mex restaurant brand established in 1940, El Chico offers Mexican cuisine in a simple, relaxed atmosphere. Safari Group is a Saudi based group of companies with headquarters in Riyadh. Safari recently formed a new company, Unique Hospitality Company (UHC), a fully owned subsidiary of Safari Group. The El Chico brand is owned by CRO, a Dallas, Texas based company operating 117 restaurants. The CRO portfolio of brands includes Cantina Laredo, Cool River Cafe, Silver Fox, Good Eats, Lucky's and III Forks brands. CRO has development agreements in place to build 100 restaurants over the next seven years including restaurants now operating in Dubai, Abu Dhabi and Cairo. (CRO 06.06)
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3.6 Fairmont Eyes 10,000 Staff for Dozen Saudi Hotels
Fairmont Hotels and Resorts plans as many as 12 hotels in Saudi Arabia in the next three to four years, requiring up to 10,000 additional employees. The US hotelier, which in April announced plans to build its fourth property in the Saudi kingdom, plans to tap into rising demand for luxury travel in the Arabian Gulf's wealthiest economy. Saudi's cities play host to millions of religious tourists each year, who flock to the kingdom to undertake the pilgrimages hajj and umrah. The number of pilgrims entering the kingdom is expected to grow to almost 14 million by the end of the decade. Hoteliers Hilton Worldwide, Marriott International and Hyatt International recently signed deals to operate 12 properties in Mecca, as part of a $5.5bn mega-project in the city. Fairmont operates two hotels in the kingdom, the Raffles Makkah Palace and the Makkah Clock Royal Tower, which opened in September. The hotelier will open its third hotel, the 1,500 room Makkah Swissotel, later this year and plans to build a fourth, the Fairmont Business Gate, in the Saudi Capital. (AB 25.05)
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3.7 Export Development Canada Opens Permanent Representation in Istanbul, Turkey
Export Development Canada (EDC) officially opened a permanent representation in Istanbul, Turkey, to further the growing trade between Canada and the Eastern Mediterranean region. EDC will be looking to advance Canada's expertise in sectors such as power generation, infrastructure and green technologies, including water treatment, as key areas of growth that match up well with the needs of the Eastern Mediterranean region. Two-way merchandise trade between Canada and the Eastern Mediterranean region totaled CAD 1.56 billion in 2010, having risen steadily from the 2006 level of CAD 709 million. In 2010, EDC provided financial solutions for 433 Canadian firms doing business in the region, facilitating more than CAD 1.3 billion of trade with Turkey in 2010 and close to CAD 2 billion in the Eastern Mediterranean region. Countries supported by EDC's new representation include: Albania, Bosnia Herzegovina, Bulgaria, Croatia, Greece, Macedonia, Montenegro, Romania, Serbia, Slovenia, Georgia, Azerbaijan, Israel and Turkey. EDC is Canada's export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. (EDC 31.05)
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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Arava Power Inaugurates Israel's First Solar Field
After 5.5 years of bureaucracy, Arava Power inaugurated the first Israeli solar field at Kibbutz Ketura on 5 June. The first solar field in Israel, called Ketura Sun, is located in the fields of Kibbutz Ketura, in the Arava. They started planning the field at the end of 2006 and they are now in the middle of 2011. In other western countries, solar fields of this scope are built in a much shorter time span. In Germany, it takes six months. The first Israeli solar field is spread over about 20 acres of land and consists of 18,500 photovoltaic panels, which were produced by Chinese Suntech Power. All the panels are expected to produce about 9 million kilowatts per year, which would provide electricity for a year for three average size kibbutzim in the Arava. Arava Power's solar power will be transferred to the national grid and the Israel Electric Corporation will pay NIS 1.5 for one kilowatt hour. About NIS 100 million was invested in the Ketura Sun project by: Bank Hapoalim, GSP (Global Sun Partners) located in the Virgin Islands; and by members of Kibbutz Ketura and other US investors, including Siemens, and the Jewish National Fund. (Globes 05.06)
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4.2 Arava's Energy Partnership Aims to Bridge Borders & Reduce Emissions
Kibbutz Ketura's Arava Institute for Environmental Studies http://www.arava.org is a multinational education center whose aim is to use environmental projects to scale back more than just carbon emissions. Director of Arava's Center for Renewable Energy, Dr. Abu Hamed, said that among Abu Hamed's projects is a passive, or natural, cooling system made of aluminum thins, which he is developing in collaboration with a Jordanian scientist, Aiman Alshare, professor at the German Jordanian University in Amman. By increasing the surface area of the back of the panels and allowing for great fluid buoyancy, the temperature of the panels is naturally lowered. Water, which is generally used cooling PV panels, is quite scarce in the region. Kibbutz Ketura announced that it would be building Israel's first medium-sized 4.9MW photovoltaic solar field in partnership with Arava Power. This field will make the cooling technology even more important for a region that already relies heavily on solar power. In Israel, nearly all apartment buildings and homes use rooftop solar panels to heat water. Arava's other projects include developing new hydrogen fuel cells for cars that require less water than previous models, biogas production from biowastes and water recycling systems, both projects that are particularly important for desert Bedouins who lack access to running water and electricity. (AOL Energy 27.05)
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4.3 Saudi Arabia to Generate Solar Energy Equal to its Crude Exports
Saudi Arabia is planning to generate solar energy equaling the amount of its energy from crude exports, according to Saudi's Oil Minister Ali Al-Naimi. Solar energy projects include Saudi Aramco plan to build the Kingdom's biggest solar energy plant, which would produce 10 MW of power and Saudi Electricity Co., joined by Saudi Aramco and Showa Shell Sekiyu K.K., to develop a solar-power plant that can generate as much as 15 MW of electricity on Saudi Arabia's Farasan Island. Saudi Arabia, as well as other Gulf oil producers, is seeking ways to use less of its exportable oil and gas as fuel for power stations. (Various 05.06)
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5: ARAB STATE & PAKISTANI DEVELOPMENTS
5.1 MENA Region Planning 33,000 Kilometers of Rail Lines
More than 33,000km of railway lines are planned to be built in the Middle East and North Africa with the region's mainline rail network set to almost double in size, according to the Mena Rail Report 2011. In all, there are plans to build more than 30,000km of mainline routes and more than 3,000km of metro, tram and monorail lines, according to the report by MEED Insight. A review of rail projects across the Middle East, North Africa and the Levant showed there was more than $250b of planned investment set out by governments and rail operators. The two main motivations for the investments are to improve the logistics infrastructure of the countries as they strive to diversify their economies away from their current reliance on the oil and gas sector, and a need to make urban transport more efficient in the rapidly growing cities. There is also a political dimension to some of the rail spending, in particular in the Gulf where the plans for the GCC Railway are an integral part of the project to enhance the economic and political ties between the six member states. According to the report, the need for improved freight transport is playing a central role in many of the first schemes to move ahead because governments are seeking more efficient ways of connecting inland mines and petroleum hubs with export ports.
Among the major freight lines being built are the North-South line in Saudi Arabia, the Shah-Ruwais line in Abu Dhabi, and the new national network in Jordan. One of the biggest spenders on rail projects will be Qatar which aims to complete its $35b plans by 2020, two years before the country hosts the World Cup. The Gulf state plans to build 358km of rail line, 119 of which will be underground, more than 100 stations and trains capable of speeds up to 350 km/h. Plans are also in the pipeline for an underground West Bay People Mover project which will be 12km long, have 19 stations, two flagship stations and maintenance facilities, and will be designed for rubber-tire vehicles. (AB 29.05)
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5.2 Lebanon's Budget Deficit Rises to 35.51% of Spending
Lebanon's budget deficit in the first four months of this year rose by LL1.081 trillion (little more than $666 million) as tax revenues continued to plunge, adding more strains on the public finances, the Finance Ministry said on 3 June. The ministry added that the primary surplus, excluding the cost of debt servicing, fell by LL994b. According to the Finance Ministry's statement, the budget deficit up to May reached LL2.108 trillion, registering a deficit of 35.51% of spending compared to a deficit of 19.45% in the same period of last year. The budget deficit has been climbing steadily over the past few months amid growing concern that the Finance Ministry may not be able to check the surge of the deficit if Prime Minister-designate Mikati fails to form a Cabinet before the end of this year. The public debt, which now stands at more than $52b, could rise by $1.5b a year if badly needed reforms are not implemented soon. Caretaker Finance Minister al-Hasan blamed the rise in the deficit on the refusal of caretaker Telecom Minister Nahhas to transfer the telecom revenues to the treasury. She believes that over $1.8b from the telecom revenues are sitting in the coffers of the Central Bank. Hasan has repeatedly called on Nahhas to send part of these revenues to cut the deficit and pay the state's dues. But Nahhas stressed that the Constitution allows him to transfer part of the telecom proceeds to the Finance Ministry at the end of the year while the remaining revenues should go to the municipalities. Economists and businessmen have warned that the sharp political rift and inability to form a Cabinet are taking their toll on the economy in general. The caretaker government, according to the law, is not authorized to spend above the last budget which was endorsed by both the Cabinet and the Parliament. (TDS 04.06)
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5.3 Lebanon's Industrial Exports Up By 4% In 2011, Arab Countries Main Importers
Lebanon's industrial exports jumped by 4% during the first four months of 2011 to reach $1.93 billion compared to $1.51 billion in the same period of 2010, according to a report issued by the Industry Ministry. Industrial exports increased by 23.3% in the first four months of 2011 compared to the same period in 2009. The industrial exports have been continuously increasing in the past three years reaching $302.4 million in April 2011 compared to $259 million in April 2010 and $205 million in April 2009. Precious metals and pearls lead Lebanon's exports list during April reaching a total of $81.3 million followed by ordinary metals with total exports of $45.3 million. Chemical industrial exports increased from $19 million in April 2010 to $40.6 million in April 2011 with Bangladesh, France and Turkey being the main importers. On the other hand, the export of electrical equipment fell from $55 million in April 2010 to $41.6 million in April 2011. Arab countries were the main recipients of Lebanese industrial exports. Arab countries have imported $119.5 million worth of industrial products from Lebanon, which is equivalent to 39.5% of the total industrial Lebanese exports. Total imports of industrial equipment during the first four months of 2011 reached $77.2 million compared to $77.1 million in the same period of 2010. The total imports of equipment and industrial machines in April 2011 reached $24.4 million, 27.1% up on April 2010. (TDS 28.05)
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5.4 Saudi Arabia Grants Jordan $400 Million
Saudi Arabia granted Jordan a $400 million cash grant that will improve the country's fiscal stability after increased social spending earlier this year widened the budget deficit, according to Jordan's Finance Minister Hammour. Hammour announced the cash grant will be channeled to infrastructure projects and capital expenditure, which had been curtailed in a $8.98b revised budget last February that allocated more funding to a $650 million social package. The Saudi grant would help Jordan maintain a 2011 budget deficit target at 5.5% of GDP. (Beltone 05.06)
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5.5 Saudi Arabia Lifts Ban on Jordanian Agricultural Produce
Saudi Arabia lifted a 21-year-old ban on Jordanian agricultural products, Jordan's Ministry of Agriculture said. Jordanian fruit and vegetable exports to Saudi Arabia are due to resume in mid-June. Shipments were halted after allegations that Jordan used waste water for irrigation. The Saudis demand that all agricultural produce to be exported to Saudi Arabia will be irrigated from underground water wells. Jordan exported last year about 750,000 tons of vegetables and fruit to the Arabian Gulf states, Syria, Lebanon, Iraq, Egypt and Europe, according to ministry figures. The kingdom exported 213,228 tons of fruits and vegetables to Saudi Arabia in 1990, the last year produce was allowed to enter the country. (AB 05.06)
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5.6 Amman Announces Makeover of Public Sector
An administrative reform plan announced on 30 May will see the salaries of employees of independent state agencies cut and the number of these agencies slashed. Jordanian Prime Minister Bakhit told a press conference that the plan addresses flaws and imbalances in the salaries of these corporations' employees and those of regular civil servants to achieve justice among the public sector cadre. To be effective as of January next year, the scheme mainly targets the financial advantages enjoyed by the employees of 42 independent public institutions, which will be cut down to 33 entities under the restructuring process, the premier said.
Listing the major decisions under the plan, Bakhit pointed out that the government has combined the ministries of political development and parliamentary affairs to become the Ministry of Parliamentary Affairs and Political Reform. Also, the Ministry of Public Sector Development will be merged with the Civil Service Bureau in one entity to become Ministry of Civil Service and Public Sector Development, while the Institute of Diplomacy will lose its financial and administrative independence as it will be placed under the organizational structure of the Ministry of Foreign Affairs. (JT31.05)
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5.7 Jordan Unveils Plan for $1 Billion Theme Park
Middle East entertainment firm Rubicon has signed a deal with US media giants Paramount and CBS to launch a $1b theme park and resort in Jordan. Rubicon Group Holding, creators of the Arabic children's television show Ben & Izzy, will design and produce the Red Sea Astrarium, a 184-acre entertainment resort in Aqaba, Jordan. The entertainment resort will include a Star Trek-themed attraction inspired by the 2009 film Star Trek, which is being developed by Paramount Recreation. The resort will generate jobs for more than 500 skilled workers in the local community, the company said. It did not specify how the theme park would be funded. Jordan saw revenues from tourism increase 17% to JD2.423b in 2010 compared to the previous year. The industry has been thrown into crisis in the wake of the political protests sweeping the Arab world, after foreign embassies issued travel warnings and tour groups cancelled their trips. The country lost an estimated $70m as a result of the Middle East unrest, according to government data. (AB 22.05)
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5.8 Iraq to Repay Egypt An Old Debt of $408 Million in Cash
Iraq agreed to pay Egypt $408 million in cash, settling an old debt owed to Egypt for more than 20 years. The debts formulated when Egypt paid, on behalf of the Iraqi government, salaries to Egyptian citizens residing in Iraq after UN sanctions were imposed on Iraq following the 1990 Iraqi invasion of Kuwait. (Beltone 05.06)
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5.9 G-8 Leaders Pledge Billions to Egypt and Tunisia
On 27 May, leaders of world's eight leading industrialized nations, the G-8, and Russia pledged $20 billion in international aid to Arab countries on the path to democratization. They also united in calling for Syria's regime to stop using force against protesters. Meeting in France at their annual summit, the G-8 leaders pledged that Egypt and Tunisia could receive more than $20 billion (€14 billion) in aid from international banks from now until 2013. How much they would contribute, and how the aid from international banks would be broken down, remained unclear. About €3.5 billion was expected to come from the European Investment Bank. The leaders of several African nations, including Tunisia and Egypt, took part in the meeting at the French seaside resort of Deauville in Normandy. G-8 leaders encouraged oil-rich Arab nations to help support the Egyptian and Tunisian economies. The International Monetary Fund (IMF) has warned of growing financial difficulties in the Arab world. The IMF has estimated that the countries pushing for democracy in the Middle East and northern Africa would need more than $160 billion (€112.9 billion) over the next three years to help their economies in a time when they are suffering, among other things, from rising commodity prices. (Spiegel 27.05)
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5.10 Bahrain King Approves $16.4 Billion Budget
Bahrain's king approved a budget of $16.44b over the next two years, a finance ministry said, a 44% rise in expenditures in the kingdom. The king passed the law for the budget for 2011 and 2012. It will approve expenditures for 6.198b Bahraini dinars. Facing a rising subsidies bill and dragged down by its struggling banking sector, the small non-OPEC energy producer has the weakest fiscal position among Gulf Arab nations. The tiny Gulf island kingdom was dealt a further blow after weeks of anti-government protests in February and March that lead to an imposition of emergency law, which later revoked. Analysts polled by Reuters expected Bahrain to post deficits of 1.4% of gross domestic product in 2011 and 1.7% for 2012. (Various 05.06)
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5.11 Qatar's Annual Inflation Decelerates to 1.5% in April 2011
Qatar's annual inflation decelerated in April 2011 to 1.49% from 1.71%, mainly following a slowdown in food price inflation and a lesser fall in housing costs. Annual food price inflation increased 4.29% y-o-y in April 2011 from 5.24%, while housing costs (CPI's largest component, accounting for 32.2% of the Index) fell 4.5% y-o-y in April 2011 from a 5.09% y-o-y contraction witnessed in March 2011. Inflation has remained almost steady on a monthly basis, inching up 0.06% m-o-m in April 2011 from 0.03% in March 2011, as food prices saw a marginal dip of 0.18% m-o-m after rising 0.73% in March 2011 and housing costs contraction (-0.02% m-o-m in April 2011) was not as wide as that seen the month before (-0.42% m-o-m in March 2011). Transport and communications, though decelerating on an annual basis to 5.7% in April 2011 from 6.2% in March 2011, accelerated on a monthly basis, rising 0.7% m-o-m in April compared with 0.01% in March 2011. Despite the monthly changes, inflation in Qatar continues to be weighed down by the decline in housing costs led by rents, which dilutes the impact of rising food prices and other items that are affected by the pick-up of imported inflation. Housing costs have been on an overall monthly contracting trend since the beginning of 2009, and while the monthly contractions have eased in 2010 and Q1/11, the change in housing costs continue to be in the negative zones, reflecting the weakness in Qatar's property sector and oversupply in the market. Qatar's inflation is expected to remain subdued for the remainder of the year, and is forecast to average 1.9% in 2011 from an average deflation of 2.4% in 2010. (Beltone 01.06)
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5.12 Qatar Signs Deal for Two Major Ports in Egypt
On 29 May, Qatar announced that it had signed an agreement with Egypt to establish two new ports with the potential to create more than a million jobs. The ports will be built in Port Said and Alexandria. Qatar's Minister of State for International Cooperation Al Attiyah said, after leading a delegation to Egypt, that there will also be bilateral cooperation in establishing two investment companies in Africa, with one focused on Sudan. He said that 1m job opportunities would be created by the Port Said port project with another 200,000 jobs as a result of the Alexandria proposal. The Minister said that the two sides would draw up a plan to carry out their agreements and set a time frame for the establishments of the ports. He added that a delegation of Qatari businessmen would visit Egypt next month to look for investment opportunities. (AB 29.05)
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5.13 UAE's Real Growth On Track to Reach 3% to 3.5% in 2011
The UAE's real GDP is expected to grow 3% to 3.5% in 2011. The expectation is re-iterated by indicators seen over the first five months of 2011. Separately, the National Bureau of Statistics has released data that put UAE real GDP growth at 1.4% in 2010 to AED977.3 billion (from a 1.6% contraction in 2009) and nominal GDP at AED1,093 billion (10% y-o-y growth) in 2010. Real non-hydrocarbon growth was 4.8% in 2010, reaching AED670.5 billion, after falling 4.2% in 2009, with all non-hydrocarbon sectors (including real estate and trade which had contracted in 2009), seeing growth, except for farming.
Beltone said limited economic statistics and data releases by the UAE make it difficult to assess the progress of economic growth in 2011; however, based on anecdotal evidence and by tracking trade (mainly non-oil in Dubai and UAE-wide), tourism and passenger traffic data, and banking indicators thus far in 2011, it is felt that the UAE is on track to reach forecast growth level of 3.5% in 2011, which is in line with the Ministry of Economy's forecast. While growth in the non-hydrocarbon sector will be given a further boost by the recovery seen in Dubai's trade, services and tourism sectors, as well as continued infrastructure spending by Abu Dhabi (albeit at a more gradual and cautious pace), Beltone believes that challenges facing the property and construction sector, in Dubai specifically and also UAE-wide, will continue to limit further expansion in the non-hydrocarbon sector. Meanwhile, UAE's crude production may have started to recover after being cut nearly 12% in 2009; output increases, however, are still limited, and remain below their pre-crisis levels, continuing to be capped by the OPEC-led quotas in place. (Beltone 02.06)
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5.14 Oman To Boost 2011 Spending By 20%
Oman expects 2011 spending to be about 20% higher than previously planned due to extra spending on social programs but plans to reach a balanced budget, a finance ministry official announced on 5 June. The 2011 budget was earlier set with a deficit of 850 million rials ($2.2b), or 3.8% of GDP, based on an oil price of $58 per barrel, after the government posted a deficit of 48.4 million rials last year. The small, non-Opec oil exporter has been hit by rallies over the past few months with protesters demanding jobs, higher salaries and an end to graft, as unrest has spread through the Arab world. (Various 05.06)
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5.15 IMF Says Saudi Economic Growth to Reach 6.5% in 2011
Economic growth in Saudi Arabia is set to increase to 6.5% this year, up from 4.1% in 2010, the International Monetary Fund said. Leading indicators for Q1/11 show a strengthening in economic activity due to an increase in oil output and more government spending. Inflation would likely rise to about 6%, the IMF said without elaborating. Government data released on 14 May showed annual inflation rose to 4.8% in April due to higher food and transport costs. "Oil production is increasing further to compensate for lower output elsewhere in the region," the IMF said, adding that both fiscal and external balances in Saudi Arabia are likely to register strong surpluses amid an increase in oil production. (BI-ME 01.06)
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5.16 Saudi Plans to Build 16 Nuclear Reactors by 2030
Saudi Arabia plans to build 16 nuclear power reactors by 2030 which could costs more than $100 billion. Though world's top crude exporter, Saudi is struggling to keep up with rapidly rising power demand. It has considered boosting its domestic energy capacity using nuclear reactors. Many have backed away from atomic plans after the accident at Japan's Fukushima Daiichi plant but Arabian Gulf states are among the few countries looking to make major investments in nuclear power plants. It is estimated that the cost of each reactor will be around $7 billion. The Saudi kingdom is in the process of planning for the nuclear project and coordination with specialized companies. The kingdom plans to cover 20% of its electricity needs using nuclear energy. Power demand in the top oil exporter is estimated to grow 7-8% during the next 10 years. In December 2009, the United Arab Emirates awarded a South Korean consortium the contract to build four nuclear power plants worth $20.4 billion. (AB 01.06)
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5.17 Out-Of-Work Saudi Pilots Launch Facebook Campaign
Hundreds of unemployed pilots from Saudi Arabia have launched an online campaign on Facebook to highlight their career problems. The "Let Us Fly" protest was created by a group of more than 700 people, who have not been hired by Saudi Arabian Airlines (Saudia), even after receiving their flying certificates from international aviation institutes recognized by the General Authority of Civil Aviation (GACA). According to their campaign, new conditions have been implemented for the admission of new pilots, including an age limit of 27 (compared to the previous limit of 40) and the necessity of passing a German Space Agency exam, which costs around €5,000. One member of the group is now working as a taxi driver, while another is currently a security guard. (ASC 05.06)
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5.18 Egypt Finalizes $3 Billion IMF Standby Financing Deal
On 5 June, Egypt secured a $3 billion, 12-month standby financing agreement with the International Monetary Fund. The authorities' economic program is a first step to laying the foundation for a more inclusive private-sector-led economic growth. Monetary and exchange rate policies will aim at maintaining macroeconomic stability, including by preserving a comfortable level of reserves to ensure that Egypt will have a buffer against unanticipated shocks. Egypt has been seeking funds to plug an estimated $10-12b balance of payments gap in the wake of a political upheaval that toppled the government in February. Earlier, Egypt's Finance Minister Radwan said the IMF funds would be disbursed quarterly under a 12-month agreement, but that Egypt was asking that a large portion of the funds be delivered early. Cairo has been asking international donors and lenders for funding help after protests that ended President Mubarak's 30-year rule scared away tourists and investors, two of its main sources of foreign exchange. The crisis has cut into the government's revenue from taxes at a time of increasing demands on expenditure, which include calls for higher wages from state employees and pressure to raise subsidies on basic commodities. (IMF 05.06)
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5.19 Cairo Approves Increases in Spending & Taxes in 2011/2012 budget
On 1 June, Egypt's cabinet approved the budget for FY2011/12 that increases spending by 25%. To help finance the increased spending, Egypt will introduce a 5% increase in the income tax levied on corporations and individually owned companies, whereby the higher income tax will be applied to companies and individuals that have a tax pool of more than E£10 million, according to a cabinet statement. The Cabinet statement mentioned there will also be a 10% capital gains tax on dividends, mergers and acquisitions and asset revaluations. Dr. Radwan said the government would also levy a new 10% sales tax on cigarettes. That levy and the capital gains tax will each generate about E£1.1 billion. The budget forecasts expenditure increasing to E£514.5 billion and revenue rising to E£350.3, according to the statement said. The FY11/12 deficit is equivalent to 10.95% of GDP.
Finance Minister Radwan forecast that the economy will grow by 2.6% this year and by 3.2% in 2011/12. The government last month estimated 2011/12 growth at 3 - 4%. The government plans to increase subsidies on consumer goods by 26% to E£22.4 billion to make them more affordable for the population. Separate fuel subsidies for consumers will rise to E£99 billion, an increase of E£31.3 billion, according to the statement. Meanwhile, the government will exempt incomes of up to E£12,000 a year from income tax, up from E£9,000 previously. Radwan raised the minimum wage to E£700, and said he aimed for a minimum wage of E£1,200 within five years. It is worthy to note that the new budget has been approved only by the cabinet, and will be subject to national debate and awaits the approval of SCAF afterwards, before being implemented. (Various 01.06)
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5.20 Egypt Jobless Rate Up To 11.9% in First Quarter
Egypt's unemployment rates soared to 11.9% during the first quarter of 2011 - an increase from 8.9% from late 2010, according to CAPMAS. Negative economic impacts from events that accompanied the 25 January revolution caused the increase. The total of unemployed Egyptians increased from 799,000 to more than 2.1 million in the same period - an increase of 24.2%. Compared with the first quarter of 2010, the number increased by 21.6%. (MENA 25.05)
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5.21 Egypt Ranks 10th in Tobacco Consumption
Egypt ranks 10th in tobacco consumption in a world ranking, according to Minister of Health Hatem. A global tobacco survey showed that 20% of people aged 18 and above are smokers in Egypt and 80% of citizens suffer from second-hand smoking. In addition, the survey showed that 16% of people aged 13 - 15 are smokers. Hatem said that the government bears a cost of E£3 - 4 billion annually on treatment of tobacco-related diseases. In response, Hatem announced that the government is studying the feasibility of increasing levied taxes on tobacco companies to 70%, in favor of the Ministry of Health, in coordination with the Ministry of Finance. (Beltone 30.05)
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5.22 Tunisia Needs $125 Billion For Economic Program
Tunisia's government said it needs $125 billion in funding over the next five years to finance a massive economic program aimed at boosting growth and cutting unemployment. The government earlier presented a plan to support its new development program to the Group of Eight Summit in Deauville, at which G8 nations pledged $25 billion in loans to Tunisia. Public consultation is set to begin in Tunisia on the program, which will address good governance, the modernization of infrastructure, human resource development, economic integration in the global markets and the modernization of the financial sector. Nearly a quarter of Tunisia's population currently lives below the poverty line and unemployment affects 700,000 people, including a majority of young people, Tunisian Minister of Social Affairs Mohamed Ennacer said. Protests against poverty and unemployment in Tunisia toppled former President Zine al-Abidine Ben Ali on January 14 after 23 years of autocratic rule, sparking a wave of similar protests across the Arab world. Internal forecasts suggest that Tunisia's economy will grow by a mere 1-2% this year due to ongoing uncertainty, mainly because of a crisis in tourism and successive strikes. (AB 29.05)
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5.23 The Future of Construction in Morocco to 2015
Research and Markets (http://www.researchandmarkets.com) "The Future of Construction in Morocco to 2015" says the industry has witnessed reasonable growth over the review period, although the industry suffered some losses during the global financial crisis in 2008-2010. The industry recorded a CAGR of 9.76% over the review period, supported by government reforms including the liberalization, modernization and privatization of previously government-run sectors along with a 22.0% growth in 2007. The growth also influenced by the steady performance of the residential construction market over the last four years. Despite the global economic slowdown in 2008-2009, the government continued to increase expenditure on the construction and renovation of roads, airports and seaports in the country. The government's total capital investment in 2009 grew to $28.3 billion, part of a long-term investment that is expected to see total capital investment more than triple, from $12.3 billion in 2004 to $38.1 billion by 2014. As a result, the Moroccan construction industry defied the global downturn and grew during 2010. (R&M 31.05)
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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS
6.1 Turkey Israel's 3rd Largest Export Market in First Quarter
Notwithstanding political tensions between Israel and Turkey, Turkey rose to Israel's third largest export market in Q1/11 from ninth place in Q1/10, the Israel Export and International Cooperation Institute announced. Exports of goods (excluding diamonds) to Turkey totaled $500 million in the first quarter, 73% more than in the corresponding quarter. The US is still Israel's largest export market, with exports to that country totaling $3 billion. Exports to Turkey rose more than exports to other countries. According to Export Institute figures, most of the growth is thanks to a 57% increase in exports of chemicals and refined oil products to $260 million in the first quarter. China is Israel's fifth largest export market, and the largest export market in Asia. Exports to China totaled $443 million in the first quarter, 12% more than in the corresponding quarter. Exports to India fell 6% to $336 million, putting it in eighth place, mainly due to unusually heavy exports to it in the corresponding quarter. Exports of avionics were affected by a single deal in 2010, and fell from $100 million to zero. Israel's top ten export markets are, in order, the US, the Netherlands, Turkey, Germany, China, Italy, the UK, India, France and Canada. (Various 30.05)
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6.2 Bulgaria's Unemployment Rate Lowest Since November 2009
In May 2011, Bulgaria registered its lowest monthly unemployment rate since November 2009, according to official data from the State Employment Agency. Thus, formal figures indicated that in May 2011, Bulgaria's unemployment rate was 8.87%, which is 0.42 points lower than in April, and the first time since October 2010 when the unemployment is below 9%. The previous lower monthly unemployment figure was recorded back in November 2009 when it was 8.66%. A total of 328,533 persons were registered as unemployed by the State Employment Agency in May, 15,000 fewer than in April 2011. About 20,000 people started new jobs in May, the majority of those being hired in the processing industry, trade, and tourism. (SMN 07.06)
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6.3 Bulgaria's New Car Market Starts To Improve in First Quarter
The market of new cars in Bulgaria has registered a modest but nonetheless tangible year-on-year growth in the first quarter of 2011. A total of 4,638 new cars were sold in Bulgaria in January-March 2011 vs. 3,956 sales in the same period of 2010, a growth of 17%, according to data of the Association of Car Importers. In March, a total of 1,816 new cars were sold, compared to 1,358 in February and 1,464 in January. Bulgaria's all time record first quarter in terms of new car sales was in 2008 when a total of 15 224 new cars were sold in the country, just months before the economy got into a depression and the market collapsed. The total number of vehicles, including cars, trucks, buses, and motorcycles, sold in the first quarter of the year is 4,888 vs. 4,116 in Q1/10. The most popular brand in Q1/11 in Bulgaria was Volkswagen with 567 new car sales, followed by Toyota with 427 sold vehicles. Ford is third with 414 sales, Peugeot comes in fourth with 369 sales, followed by Dacia with 357 and Skoda with 302. Mercedes is the leader in the sales of new buses and trucks – a total of 45 in the first quarter. Peugeot has the lead in the sales of new motorcycles – 42, or 67% of all motorcycles sold in Bulgaria in this period. (SMN 13.04)
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6.4 Bulgaria's Annual Inflation Rate Reaches 5.6%
Bulgaria's annual inflation rate reached 5.6% in March 2011, according to the country's National Statistical Institute's consumer price index (CPI). The consumer price index in March 2011 compared to February 2011 was 100.6%, i.e. the monthly inflation was 0.6%. The inflation rate since the beginning of the year (March 2011 compared to December 2010) was 2.4%. The annual average inflation, measured by CPI, in the last 12 months (April 2010 - March 2011) compared to the previous 12 months (April 2009 - March 2010) was 3.5%. The harmonized index of consumer prices (HICP) in March 2011 compared to March 2010, i.e. the annual inflation, was 4.6%, while the monthly inflation in March 2011 compared to February 2011 was 0.4%. The inflation rate since the beginning of the year (March 2011 compared to December 2010) was 1.4%. The annual average inflation, measured by HICP, in the last 12 months (April 2010 - March 2011) compared to the previous 12 months (April 2009 - March 2010) was 3.7%. The consumer price index (CPI) is the official measure of inflation in Bulgaria. The Harmonized Index of Consumer Prices (HICP) is the comparable measure of inflation across EU member states. HICP is one of the criterions of price stability and for readiness of Bulgaria to join the euro-zone. (SMN 13.04)
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7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 Israeli Cows Outperform Their Foreign Counterparts
Israeli dairy cows produce more milk than their counterparts in other countries, data released by the Central Bureau of Statistics on 6 June show. The study said local cows produced an average of 10,208 kilograms (around 10,000 liters) of dairy in 2009, outperforming cows in the US (9,331 kg. per cow), Japan (7,497), the European Union (6,139) and Australia (5,601). A total of 1,304 million liters of milk was produced by Israeli cows in 2010, a slight increase on the previous year. On the consumption side, dairy and honey purchases accounted for 2.2% of average Israeli household expenses in 2009. Each month Israeli households spent NIS 52 on milk, NIS 35 on cheese and dairy delicacies such as yogurt, NIS 37 on yellow cheese, NIS 53 on white cheese and NIS 6 on honey. Notably, the price of milk actually dropped by 0.9% in 2010, the bureau said, even though the consumer price index rose by 2.7% in the same 12-month period. White cheese spreads were currently the most popular type of cheese in the country, with local consumers buying 52,000 tons of the products per year. Fruit and cream yogurts have also been growing in popularity. (Ynet 06.06)
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*REGIONAL:
7.2 Population Crosses 1.7 Million for the First Time in Qatar's History
Qatar's population crossed the 1.7 million mark for the first time in Qatar's history reaching, 1.703 million at the end of May 2011, according to the Qatar Statistics Authority. The last time the population figure was nearer was in April 2010 when it was slightly more than 1.69 million. (Various 05.06)
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7.3 Egypt's Military To End Nightly Curfew On 15 June
Egypt's military has decided to end the nightly curfew on 15 June. The curfew was initially imposed at the height of the popular uprising that toppled President Mubarak in February. An army source said the decision was made to "encourage the return to normal life". A curfew from 18:00 to 7:00 was imposed on 28 January when Mubarak was still in power. It was shortened over several stages and now extends from 02:00 to 05:00. (Beltone 07.05)
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7.4 Egypt Approves Establishment of the Muslim Brotherhood's Freedom and Justice Party
The Political Parties' Affairs Committee approved the establishment of the Muslim Brotherhood's Freedom and Justice Party on 6 June. The group now has official permission to participate in political activities, after having been banned since 1954. Mohamed Saad al-Katatny, a leader and spokesperson from the group, submitted a letter to the committee on 18 May to notify it of the party's establishment. The Freedom and Justice Party is the second party, after the Wasat Party, to receive official approval to engage in political activity since the 25 January revolution. (Beltone 07.05)
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7.5 Morocco to Hold Early Legislative Vote
Morocco will hold parliamentary elections on 7 October, three months after the referendum on the new constitution, Finance Minister Mezouar announced on 26 May during his visit to the United States. The announcement followed rumors that the elections, originally scheduled for September 2012, might take place in October 2011, at the end of the year or at the beginning of 2012. Prime Minister El Fassi and the Istiqlal Party were among the first ones to call for early parliamentary elections. Morocco should not wait till next year and must hold the vote immediately after the July 1st referendum, the prime minister argued. (Magharebia 31.05)
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7.6 Ousted Gay Referee Seeks Reinstatement in Turkey
A former Turkish soccer referee who says he was forced out of the football federation two years ago because of his homosexuality pleaded to be reinstated at an Istanbul court on 2 June. Halil Ibrahim Dincdag, 35, has accused the Turkish Football Federation of passing documents to the media showing he was exempted from compulsory military service because of his sexual orientation, which in turn led to death threats. The case is being closely followed by rights groups and has attracted much attention in Turkey, where homosexuals are excluded from the military, although many hide their sexuality and complete military service due to fears of social prejudice. Dincdag, who served as referee for 14 years for Turkey's second-tier league, told the court his right to work and to privacy had been violated, and demanded his job back, along with TL110,000 ($69,000) compensation. The Turkish football federation declined to comment but has said that referees must have completed military service or have been exempted for reasons unrelated to health. The court hearing was adjourned until 20 October. European Union candidate Turkey has been slammed for its poor record on gay rights by activists and the bloc itself. In a May report, Human Rights Watch urged Turkey to urgently change laws to protect lesbian, gay bisexual, and transgender people from harassment and violence. (Various 02.06)
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8: ISRAEL LIFE SCIENCE NEWS
8.1 Teva Announces Approval of Generic Combivir Tablets
Teva Pharmaceutical Industries announced that the US FDA has granted approval for the Company's Abbreviated New Drug Application (ANDA) to market a generic version of ViiV Healthcare Company's HIV treatment, Combivir Tablets (Lamivudine and Zidovudine). Shipment is expected to commence during Q4/11, as per the terms of a settlement agreement between Teva and Glaxo Group and ViiV Healthcare. As the first company to file an ANDA containing paragraph IV certification for these products, the FDA has determined that Teva is eligible for a 180-day period of marketing exclusivity.
Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Headquartered in Israel, Teva is the world's largest generic drug maker, with a global product portfolio of more than 1,450 molecules and a direct presence in about 60 countries. Teva's branded businesses focus on neurological, respiratory and women's health therapeutic areas as well as biologics. (Teva 26.05)
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8.2 Teva and Pfizer Settle Generic Neurontin Litigation
Teva Pharmaceutical Industries announced that patent litigation with Pfizer related to generic versions of Pfizer's Neurontin (gabapentin) capsules and tablets sold by Teva and its subsidiary IVAX Pharmaceuticals has been dismissed by the United States District Court for the District of New Jersey pursuant to a settlement between the parties, which provides for a full release of Teva and its subsidiaries. The financial terms of the settlement are confidential. Israel's Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Teva is the world's largest generic drug maker, with a global product portfolio of more than 1,450 molecules and a direct presence in about 60 countries. (Teva 31.05)
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8.3 Teva Announces Launch of Generic Aricept Tablets in the US
Teva Pharmaceutical Industries announced that the U.S. Food and Drug Administration has granted approval for the Company's Abbreviated New Drug Application (ANDA) to market a generic version of Eisai's Alzheimer's treatment Aricept (Donepezil Hydrochloride) Tablets, 5 mg and 10 mg. Shipment of this product has commenced. Israel's Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Teva is the world's largest generic drug maker, with a global product portfolio of more than 1,450 molecules and a direct presence in about 60 countries. (Teva 01.06)
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8.4 LifeBond Raises $20 Million in a Third Financing Round
LifeBond has completed a $20m fund raising, which was led by Giza Venture Capital and Aurum Ventures. Also participating in the round were existing investors: Pitango Venture Capital and Mr. Robert Taub, GlenRock Israel and The Zitelman Group. LifeBond is developing surgical sealants and hemostats intended for preventing leakage and bleeding. Proceeds from the round will be used for completion of the pre-clinical and clinical phases of the Company's initial product: LifeSealGI, a sealant indicated for reinforcement of gastro-intestinal anastomoses. Post-surgical leakage from anastomoses is currently a significant risk factor that can result in life threatening complications and costly re-operations. In certain surgical procedures the risk of leakage is up to 20% of overall procedures. LifeBond anticipates that LifeSealGI will reach the market toward the end of 2012, pending regulatory approval. In addition, the company will continue to develop its severe bleeding control product, LifePatch, which is based on the same technology platform.
Caesarea's LifeBond (http://www.lifebond.com) is developing a line of biosurgical products for prevention of surgical leakage and bleeding. The company received seed funding from the Trendlines Israel Fund, followed by a $1.5M Round A financing rounded by GlenRock Israel. In 2009 the company secured additional $8.5M from Pitango and Mr. Robert Taub. (LifeBond 23.05)
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8.5 Teva Successful Phase III Study of Its Long-Acting G-CSF Product in Breast Cancer Patients
Teva Pharmaceutical Industries announced that lipegfilgrastim (INN; internal code - XM22) achieved its primary endpoint of reducing the duration of severe neutropenia in a Phase III study designed to evaluate the efficacy and safety of lipegfilgrastim (XM22) compared to pegfilgrastim (Amgen's Neulasta). Lipegfilgrastim (XM22), a long acting granulocyte colony-stimulating factor (G-CSF), was added to Teva's portfolio through the acquisition of ratiopharm. It is being developed to reduce the duration of severe neutropenia in cancer patients undergoing chemotherapy. Neutropenia is a condition in which the number of white blood cells is decreased, leaving patients more susceptible to potentially life-threatening bacterial infections. The Phase III, multinational, randomized, double-blind controlled study was conducted in over 200 breast cancer patients receiving four cycles of chemotherapy (doxorubicin/docetaxel). Patients were randomized to receive treatment with either 6mg of lipegfilgrastim (XM22) or with the active comparator, pegfilgrastim 6mg (Neulasta). Israel's Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. (Teva 06.06)
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8.6 Mazor Robotics' Renaissance - Next Generation of Robotic Surgical Guidance Systems
Mazor Robotics introduced Renaissance, the next-generation of the world's only spinal robotic surgical guidance system. Renaissance is equipped with new capabilities that will extend the ability of surgeons to perform a wide range of procedures, including complex spine surgeries. Renaissance is powered by Mazor Robotics' core technology which has been clinically validated with SpineAssist, Mazor Robotics' previous system for spine surgery. SpineAssist was successfully utilized in over 2,000 spinal surgeries worldwide, accurately placing more than 12,000 implants. Investigators of a recent 14-site international multicenter study published in the peer-review journal Spine concluded that Mazor Robotics' technology "offers enhanced performance in spinal surgery when compared to freehand surgeries, by increasing placement accuracy and reducing neurologic risks." Renaissance features an entirely new design and human interface, as well as next-generation hardware and software technologies. These are designed to increase surgical safety as well as extend the range of clinical applications, enabling osteotomies, transfacet and translaminar-facet implant placements, in addition to procedures such as spinal fusions and scoliosis corrections currently performed with Mazor Robotics' technology. Renaissance also serves as a platform that will support future clinical applications, such as robotic-guided cranial surgeries. Caesarea's Mazor Robotics (http://www.mazorrobotics.com) is dedicated to the development and marketing of innovative surgical robots and complementary products that provide a safer surgical environment for patients, surgeons and OR staff. Mazor Robotics systems have been successfully used in the placement of over 12,000 implants in the USA and Europe. (Mazor Robotics 06.06)
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8.7 Can-Fite to Spin off Its Ophthalmology Activities to a US Based Company
Can-Fite BioPharma signed an agreement to spin off its ophthalmic indications to a US based public company, Denali Concrete Management Inc. According to the agreement, Can-Fite shall grant a sublicense for the CF101 clinical development in the ophthalmology field to an Israeli subsidiary fully owned by Denali Concrete Management Inc. (Denali). Upon conclusion of the transaction, Can-Fite will become the main shareholder of Denali. Concurrently with the aforesaid transactions, and as a condition for closing, an investment will be made in Denali of not less than $5m. Denali will continue the clinical development of CF101 for the ophthalmic indications including Dry Eye Syndrome, Glaucoma and Uveitis.
Petah Tikva's Can-Fite BioPharma (http://www.canfite.com) is a public company, trading on the Tel Aviv Stock Exchange. It is focused on the development of small molecule drugs, ligands to the A3 adenosine receptor. The latter mediates anti-inflammatory and anti-cancer effects and is suggested as a biological predictive marker. The company's lead drug, CF101, is in advanced clinical development for the treatment of autoimmune inflammatory and ophthalmic diseases. The CF102 drug candidate is being developed for the treatment of liver diseases including liver cancer and Hepatitis C. Can-Fite has a wealth of clinical experience: to date, more than 700 patients have participated in clinical trials conducted by the company. (Can-Fite 06.06)
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8.8 Brainlab Acquires Voyant Health
Munich, Germany's Brainlab announced that it has entered into a definitive agreement to acquire Voyant Health. Voyant Health's core technology, TraumaCad, allows orthopedic surgeons to access patient images online and to plan and digitally template surgical procedures from anywhere – the clinic, the home, the hospital or the operating room (OR). Another key technology is VoyantLink, which makes it easier for hospitals and care providers to obtain diagnostic images from their referral network. It eliminates the cumbersome and time-consuming manual transfer of images by CDs, and allows fast, easy and secure transfer of images through the Web to the hospital without VPNs or other expensive middleware. Images are uploaded by the referring center using a secure VoyantLink website, which are then sent automatically to the hospital PACS. Voyant Health's technology complements Brainlab in several ways. Brainlab will create new possibilities in orthopedics with the integration of TraumaCad and OrthoWeb with Brainlab orthopedic surgical navigation technology. VoyantLink will expand the framework for Quentry, the groundbreaking online network for physicians developed by Brainlab. Starting in July 2009, Munich-based Brainlab and Tel Aviv-based Voyant Health began a partnership to broaden the reach of surgical planning by improving and easing access to images. When combining Voyant Health's orthopedic templating product with Digital Lightbox by Brainlab, the companies saw more opportunities. Voyant Health has one mission: dramatically improve the orthopedic surgeons' work life to support high-quality care and allow more time with patients. They help surgeons do this every day by delivering integrated workflow solutions for the clinic, the hospital, the operating room and beyond. (Brainlab 06.06)
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9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 IncrediMail Integrates Facebook into Award Winning Email
IncrediMail announced that it has integrated Facebook into its email product, offering consumers access to Facebook right from their desktop. The integration of Facebook into IncrediMail offers consumers access to their two favorite mediums, email and Facebook, in one convenient desktop location where users can connect to the people they care about, stay in touch, save time online and enhance their social connections. Features include: the ability to read and post comments or updates directly to and from Facebook; automatic address book synchronization with Facebook friends; one click upload of photos to Facebook; download and search of Facebook photo albums; and easy viewing of friends' thumbnail photos from the friends view. Simple to use search features are also built into IncrediMail to help make navigating Facebook a little easier. A beta version of the IncrediMail-Facebook integration was released in mid-April and based on early results we expect to have over 20 million posts to Facebook in the first year. Tel Aviv's IncrediMail (http://www.incredimail.com) is a digital media company that builds downloadable consumer applications. The company's award winning e-mail product, IncrediMail Premium, is sold in over 100 countries in 10 different languages. Other products include, HiYo a graphic add-on to instant messaging software and Magentic, a wallpaper and screensaver software. (IncrediMail 26.05)
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9.2 IME & TowerJazz Combine Expertise to Accelerate MEMS Device Industry Development
Singapore's Institute of Microelectronics (IME), an institute of the Agency for Science, Technology and Research (A*STAR) announced their cooperation with TowerJazz, the global specialty foundry leader, on breakthrough projects in micro-electro-mechanical systems (MEMS), packaging and application-specific integrated circuits (ASICs). IME seeks to advance research and development (R&D) in microelectronics in the area of MEMS, packaging and IC design. IME engages with fabless or fab-lite product companies as R&D partners, along with TowerJazz as a manufacturing partner in a three-party collaboration framework. This joint effort with TowerJazz has yielded outcomes in the areas of inertial sensors, pressure sensors and micromirrors with MEMS product companies. Potential future collaborations include those in the fields of through-silicon via (TSV) and advanced packaging, 3-dimensional integrated chips, photonics and nanoelectronics.
Migdal HaEmek's Tower Semiconductor (http://www.towerjazz.com), the global specialty foundry leader and its fully owned U.S. subsidiary Jazz Semiconductor, operate collectively under the brand name TowerJazz, manufacturing integrated circuits with geometries ranging from 1.0 to 0.13-micron. TowerJazz provides industry leading design enablement tools to allow complex designs to be achieved quickly and more accurately and offers a broad range of customizable process technologies including SiGe, BiCMOS, Mixed-Signal and RFCMOS, CMOS Image Sensor, Power Management (BCD), and Non-Volatile Memory (NVM) as well as MEMS capabilities. (TowerJazz 25.05)
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9.3 TowerJazz Wireless Antenna Switch Silicon-on-Insulator (SOI) Process Technology
TowerJazz announced availability of its wireless antenna switch SOI process technology applicable to multiple wireless standards. SOI based solutions cost substantially less than legacy solutions based on GaAs pHEMPT or silicon-on-sapphire (SOS) technologies. The TowerJazz SOI technology is unique relative to other SOI processes in that it maintains full compatibility with its bulk CMOS process enabling integration of control functions, low-noise amplifiers and power amplifiers on a single chip. High-end smart-phones can benefit most from integration while lower-end phones can benefit simply from the lower cost of SOI making the technology relevant for most of the 1.4 billion handset units sold each year. In addition to the process, design IP is available to kick-start the design effort. An example is a switch IP block optimized to achieve excellent channel isolation of better than -40 dBm, insertion loss of 0.47 dB in low-band and 0.58 dB in high-band, low harmonics of better than 75 dBc at cellular power levels, and intermodulation distortion measured as low as -117 dBm.
Migdal Ha'Emek's Tower Semiconductor (http://www.towerjazz.com), the global specialty foundry leader and its fully owned U.S. subsidiary Jazz Semiconductor, operate collectively under the brand name TowerJazz, manufacturing integrated circuits with geometries ranging from 1.0 to 0.13-micron. TowerJazz provides industry leading design enablement tools to allow complex designs to be achieved quickly and more accurately and offers a broad range of customizable process technologies including SiGe, BiCMOS, Mixed-Signal and RFCMOS, CMOS Image Sensor, Power Management (BCD), and Non-Volatile Memory (NVM) as well as MEMS capabilities. (TowerJazz 31.05)
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9.4 Cleaner Air Solutions to Install over 3MW of SolarEdge Systems in UK
SolarEdge Technologies and Cleaner Air Solutions, one of the largest providers of solar PV systems in the UK, announce a new distribution partnership increasing SolarEdge's activities in the UK. In Q1/11 Cleaner Air Solutions ordered 3MW of SolarEdge power optimizers and solar inverters. The run rate is expected to rise through the spring and summer. SolarEdge installations harvest up to 25% more energy than traditional PV systems, tracking the MPP of each module individually. In addition, installers benefit from a new form of design freedom which enables the installation of PV systems on rooftops across multiple roof facets and with partial shading. PV owners such as property management companies and social housing organizations will benefit from increased energy output, and from employing more rooftops for PV. The possibility of monitoring PV systems at module level and in real time is another significant novelty which helps save on maintenance and operation costs while giving added peace of mind to installers and end-users. The SolarEdge PV monitoring solution is complete with a built-in safety mechanism which automatically switches off DC voltage once the system is disconnected.
Hod HaSharon's SolarEdge Technologies (http://www.solaredge.com) provides end-to-end distributed solar power harvesting and PV monitoring solutions, allowing maximum energy production for faster return on investment. The SolarEdge power optimizers perform MPPT per individual panel while monitoring performance of each panel and communicating across existing power lines. Moreover, a fixed DC string voltage is maintained, allowing optimal efficiency of the SolarEdge Solar inverter, which is tailor made to work with power optimizers. As a result, the SolarEdge system provides optimal power, while enabling flexible design and optimal roof utilization. (SolarEdge 31.05)
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9.5 RADCOM Reveals GEARX8, a New Powerful Technology to Support 80 Gigabits Per Second
RADCOM revealed its GEARX8 technology. This new powerful technology can provide support of up to eight ports of ten gigabits each, thus making it the first technology in the market that supports 80 Gigabits per Second (Gbps). This technology was revealed at RADCOM's annual business partners' meeting that took place in Israel. These fast speeds and unique capabilities, enabled by RADCOM's new GEARX8 technology, enable RADCOM to provide a solution for the high speeds demanded by today's mobile data market. GEARX8 allows one platform to provide unmatched monitoring performance, independent of technologies or services, on all layers; and offers built-in load balancing and advanced filtering capabilities as well as session-level parsing, classifying, filtering, capturing and deep-packet analysis. It is a development of the GearSet technology used up to now in RADCOM's solutions. The unique parallel processing/architecture hardware and software takes the capabilities in the existing GearSet and boosts them by eight. This new technology can be integrated into RADCOM's outstanding R70S platform and make it the first platform in the market that supports up to 80 Gbps, the most in a 2U environment, therefore providing the best port density currently offered in the market. Tel Aviv's RADCOM (http://www.RADCOM.com) provides innovative service assurance solutions for communications service providers and equipment vendors. RADCOM specializes in solutions for next-generation networks, both wireless and wireline. RADCOM's comprehensive, carrier strength solutions are used to prevent service provider revenue leakage and enable management of customer care. (RADCOM 31.05)
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9.6 InfoGin Offers High Capacity Mobile Browsing on Feature Phones
Kfar Saba's InfoGin (http://www.infogin.com), a global market leader of mobile browsing solutions that enable carriers and publishers to provide the ultimate browsing experiences on any mobile device, announced the availability of a high capacity mobile browsing solution that enables carriers to significantly increase their revenues from traffic on feature phones. Along with its mobile content adaptation capabilities, InfoGin's high capacity browsing solution offers traffic optimization that helps carriers overcome data traffic congestions caused by the ever increasing rise in mobile data consumption, as well as providing users with a faster browsing experience. The browsing solution significantly reduces carriers' CAPEX and OPEX - latest deployments have indicated up to 80% reduction, with low floor-space. Based on InfoGin's award winning Intelligent Mobile Platform(TM) (IMP(TM)), the high capacity mobile browsing solution enables branded header and footer insertion, allowing mobile users to enjoy a more effective navigation experience while at the same time offering carriers new channels to promote their branding and services. To further support carriers' marketing efforts, it allows for advertising insertions, based on carrier's pre-determined location and format. InfoGin's high capacity mobile browsing solution enables subscribers to view Web content on more than 13,500 devices, by adapting the Web page to the specific devices' features. (InfoGin 31.05)
9.7 AppSide Introduces First Content Marketplace for Motion Controlled Entertainment Devices
Leveraging market leading motion game expertise, advanced sensor UI technology, an extensive developers' community and rich content catalog, AppSide has launched the first content marketplace for entertainment devices that use innovative motion-controlled user experiences. With AppSide's central marketplace, manufacturers of motion-controlled entertainment devices can ensure the best user experience by giving players easy access to browse and purchase the greatest motion controlled games and apps. AppSide's end-to-end solution helps developers monetize their investment by distributing and selling games and apps to a wider user-base of consumers. The AppSide solution is tailored to each device's audience and brand, and also includes a rich SDK, tools and APIs. The first motion controlled entertainment device featured in the AppSide marketplace is the ASUS WAVI Xtion entertainment center for the PC (http://www.asus.com), a next generation device that extends PC usage into the living room with a controller-free experience. WAVI Xtion offers easy access to limitless enjoyment with total integration of living room entertainment, social networking and gaming. It redefines the way of enjoying internet entertainment, movie-watching and photo viewing, simply by waving the hands and moving the body to navigate on larger fonts, icons and livelier graphics on the TV. Better still, WAVI Xtion provides various PC, online and gesture games in racing, adventure and family genres. AppSide's white-label SaaS solution (platform and content) will be embedded in WAVI Xtion to allow users to easily find games and apps in a customized and player-centric buying experience.
Founded in 2011, Tel Aviv's AppSide (http://www.app-side.com) is the first end-to-end content marketplace for motion-controlled entertainment devices. With years of experience in the motion field, AppSide provides the "missing link" between hardware manufacturers, developers and end-users, in the fast growing market of motion-controlled/Natural Interaction entertainment devices. AppSide end-to-end marketplace (platform and content) gives users easy access to innovative motion controlled games and apps using the best device experience possible. (AppSide 30.05)
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9.8 Lucid Takes Virtu Graphics Virtualization to More Platforms, More Systems
LucidLogix demonstrated its Virtu Universal GPU virtualization software, on notebooks, All-in-One (AiO) and desktop PCs based on both Intel and AMD integrated graphics processing units (GPUs). Virtu Universal is a new product that builds on the capabilities of the popular LucidLogix Virtu GPU virtualization software for Intel Sandy Bridge H61, H67 and Z68-based motherboards. Virtu Universal dynamically allocates graphics resources between integrated and discrete GPUs on Intel second-generation Core processors and AMD Brazos and Bulldozer platforms, allowing the systems to take full advantage of the processing power provided by both GPUs. Consumers will no longer have to choose between popular media processing features like Intel QuickSync video transcoding and DirectX 11 3D gaming performance. Virtu provides consistent, simultaneous performance with both. In addition to the recently introduced Lucid Virtu software benefits of complete media and 3D gaming performance, LucidLogix Virtu Universal also features Virtual Vsync benefiting all gamers from casual to hard-core who no longer have to compromise between visual quality and performance. Virtual Vsync delivers maximum gaming frame rates and responsiveness, while eliminating distracting and image-distorting visual tearing.
Kfar Netter's Lucid Technologies (http://www.lucidlogix.com) has reinvented multi-core graphics with its HydraLogix real-time distributed processing engine and its recently introduced Virtu GPU virtualization software. Lucid is a fabless SoC and virtualization software provider, headquartered in Kfar Netter, Israel with sales and marketing in Silicon Valley. (Lucid 01.06)
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9.9 Picitup's iOnRoad Wins Israel Mobile Summit Startup Contest
Ramat Gan's Picitup (http://www.picitup.com), a leading provider of machine vision solutions, officially announced the launch of their latest product, iOnRoad, a smartphone app that warns drivers of encroaching danger and helps drivers make smarter driving decisions. The announcement was made from the Israel Mobile Summit, where iOnRoad was announced as the winner out of 24 Israel-based mobile startup companies in the Israel Mobile Summit Startup Contest. The summit took place in the central region of Israel, where the cell phone was first developed. iOnRoad is an app that uses the smartphone's native camera and sensors to detect the vehicles in front of the driver, and will alert users when they are in danger. Similar to a visual radar, the iOnRoad app constantly maps the range of the objects in front of the driver in realtime, considering the user's current speed. As the risk crosses a certain threshold, a visual warning will pop up along with a sound alert to warn the driver of a possible collision, allowing them take action. Using a car mount for their smartphone, users can set the iOnRoad app in either the "Augmented Reality" mode, similar to the HUD system that pilots use to display mission critical information or "Background" mode, where the application can run behind another app, only alerting when it needs to warn the driver of danger. This setting allows users to access their GPS or use their loudspeaker. (Picitup 01.06)
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9.10 Next-Generation Bbox Incorporates Celeno's Video-Grade Wi-Fi Module
France's Bouygues Telecom announced that its next-generation Bbox will incorporate a concurrent dual band video-grade Wi-Fi module from Celeno. The Celeno module is powered by its OptimizAIR technology, which improves connectivity speed and robustness to set-top boxes, tablets, iPads and portable displays to enable Bbox subscribers to consume broadcast video, VoD and DVR content on additional screens anywhere in the home while ensuring a perfect, flicker-free experience of the content.
Celeno's field-proven OptimizAIR technology, which builds on and optimizes standards-based 802.11n for HD video streaming, is embedded in the concurrent dual band module and integrated with the Bbox to deliver best-in-class video-over-Wi-Fi performance. The technology combines digital beam forming with channel aware rate selection and TDM scheduled MAC which increases available bandwidth at a longer range and improves signal stability. Ra'anana's Celeno (http://www.celeno.com) is a leading provider of high performance Wi-Fi chips for HD multimedia and entertainment home networking applications. Powered by Celeno's system-on-chip (SoC) and its OptimizAIR technology, home gateways, multi-room DVRs and media servers can distribute multiple and simultaneous HD video streams to standard set-top boxes, PCs, television sets and other Wi-Fi-enabled consumer devices. (Celeno 01.06)
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9.11 iPad 2 and iPhone 4 Go Touchless Using eyeSight's Gesture Recognition Technology
eyeSight Mobile Technologies has added iPhone 4 and iPad 2 to the family of devices supported by its innovative technology, enabling the operation of these devices by simple hand gestures. Android, Windows, Linux and Meego are already supported by eyeSight's Hand Gesture Recognition Technology and the addition of iOS and Apple's advanced portable devices will allow the company to further increase its offerings. eyeSight's software-based technology complements the iPhone and iPad touchscreeen user interface, enabling the easy usage of applications and content in situations in which touching the device is not ideal, such as driving, cooking and so on. eyeSight's technology meets the growing market demand of new and enhanced user interaction with devices. eyeSight's solution offers touchless control for tablets, mobile phones, PCs, TVs, Set top boxes and various other camera-enabled devices. Tel Aviv's eyeSight Mobile Technologies (http://www.eyesight-tech.com) is a leader in touch free Interfaces for consumer electronics. Its technology allows users to control mobile and portable devices with simple hand gestures by using the built-in camera, advanced real-time image processing and machine vision algorithms. (eyeSight 02.06)
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9.12 Silent VVM Enables Visual Voice Mail Services on MetroPCS Android-Powered Phones
Silent Communication announced that its visual voicemail (Silent VVM) mobile client has been deployed to power MetroPCS' new Visual Voice Mail and Visual Voice Mail Plus services. Silent Communication's serverless Device and Network Agnostic (DANA) deployment technology enables MetroPCS to roll out its full-featured Visual Voice Mail services to Android-powered devices in its portfolio. The Silent VVM mobile client allows subscribers to manage voice mail with the same ease in which they manage SMS, MMS or email. Users can browse voice messages visually, listen to messages with one click, and respond to voice messages via call back, SMS, MMS or email. Users can also view text transcriptions of their voice messages, allowing customers to manage voice mail from end-to-end in environments where audio message playback is impractical. The pioneering provider of Device and Network Agnostic (DANA) mobile client solutions, Tel Aviv's Silent Communication (http://www.silentcom.com) works with mobile network operators, device manufacturers and value added service (VAS) providers to rapidly expand deployment and revenue opportunities for mobile Value Added Services. Silent Communication applies its advanced, serverless DANA deployment technology to popular services to ensure that they operate on any device and on any network. (Silent Communication 06.06)
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9.13 Mellanox Introduces ConnectX-3 - First FDR 56Gb/s InfiniBand Multi-Protocol Adapter
Mellanox Technologies announced the availability of its performance-leading ConnectX-3 Virtual Protocol Interconnect (VPI) adapter ICs and cards, providing next-generation FDR 56Gb/s InfiniBand and 10/40GbE connectivity combined with the next-generation PCI Express 3.0 host bus for unprecedented scalability and fabric flexibility. ConnectX-3's innovative design, low power, and flexible protocol capability delivers the highest level of I/O throughput while reducing system power consumption and enabling cost-effective networking topologies, making it the preferred solution for high-performance computing, financial services, database, Web 2.0, virtualized data centers and cloud computing. Utilizing FDR 56Gb/s InfiniBand and the support of PCIe Gen3, ConnectX-3 ICs double the throughput of prior generations and include industry-leading GPU and MPI collectives acceleration engines to deliver best-in-class high-performance computing application efficiency and scalability, accelerating the pace for Exascale computing. ConnectX-3's 40GbE connectivity, with backwards compatibility to 10GbE helps set the stage for efficient, optimized data centers connected with high-bandwidth Ethernet fabrics that maximize performance and reduce costs, power and complexity. With its ultra-low power and fabric agnostic capabilities, ConnectX-3 provides the world's leading solution for converged I/O infrastructures.
Yokneam's Mellanox Technologies (http://www.mellanox.com) is a leading supplier of end-to-end InfiniBand and Ethernet connectivity solutions and services for servers and storage. Mellanox products optimize data center performance and deliver industry-leading bandwidth, scalability, power conservation and cost-effectiveness while converging multiple legacy network technologies into one future-proof architecture. (Mellanox 06.06)
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9.14 MTS Award-Winning Telecom Expense Management Solution Releases Newest Version
MTS - Mer Telemanagement Solutions announced the release of version 2.0 of its award-winning TEM Suite platform. Building upon the company's AnchorPoint and Application Suite TEM platforms, TEM Suite version 1.0 recently won a 2010 INTERNET TELEPHONY Product of the Year Award in February of 2011. Version 2.0 adds to that platform's success with its expanded capabilities and ease of use. TEM Suite provides enterprises a single platform to support their telecom expense management activities across the entire wireline and wireless TEM lifecycle, including: procurement, help desk, asset management, invoice auditing, invoice management and payment, dispute management, optimization, bill presentment, contract negotiation and management, mobile management, cable management, allocation and chargeback, and full lifecycle reporting and dashboards. In a managed services or BPO deployment, TEM Suite offers customers the flexibility to outsource as little or as many of their telecom expense management processes as they want. The platform's modular design allows enterprises to outsource the entire TEM lifecycle, or outsource selective processes such as the labor intensive processes of invoice processing, dispute management, help desk or vendor payment.
Ra'anana's MTS - Mer Telemanagement Solutions (http://www.mtsint.com) is a worldwide provider of innovative solutions for comprehensive telecommunications expense management (TEM) used by enterprises, and for business support systems (BSS) used by information and telecommunication service providers. (MTS 06.06)
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9.15 Kornit Digital Launches its New Kornit Avalanche Printer
Kornit Digital announced the Asian launch of its Kornit Avalanche industrial Direct-To-Garment printer. The Kornit Avalanche is a dual-pallet industrial digital inkjet printer for mass production of light and dark garments. With an extremely innovative and robust industrial platform, designed for printing vast quantities in a high-level production environment, the Kornit Avalanche is capable of printing at an impressive rate which ultimately reduces costs by shorter turnaround times and production schedules. As a part of its dual-bridge platform technology, specifically designed for industrial production of extremely large quantities, the Kornit Avalanche includes 12 print heads (8 CMYK + 4 White) and demonstrates an unparalleled ability to generate four-color process prints at lightning speed. Kornit continues to explore how to improve its solutions and make them friendlier to the environment adapting to the green environmental policies. The Kornit Avalanche uses Kornit's new V323 ink series, which is the first digital textile ink that is formaldehyde- free. Rosh HaAyin's Kornit Digital (http://www.kornit.co.il) is a dynamic, leading edge company that develops, manufactures and markets state-of-the-art solutions for the textile industry. With a globally installed base, Kornit Digital is dedicated to providing its customers with cutting-edge solutions that assure high-quality, innovative and profitable results. (Kornit Digital 07.06)
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9.16 Conduit Offering Expands to Support iPAD APP Creation & Enhanced Social Features
Conduit announced the latest updates to the Conduit Mobile platform. Conduit Mobile allows publishers to create one mobile app that is suitable for all major smartphone devices, and now also for iPads. Furthermore, social functionality integrated into Conduit-powered mobile apps allows users to connect more deeply with one another from within the app itself. The Conduit Mobile platform is a complete solution for creating, publishing, promoting and managing mobile and browser apps. In addition to all major smartphone devices and web browsers, Conduit publishers can now deploy mobile applications to the iPad, furthering engagement with users in a burgeoning device category. When creating a mobile app on the platform, an optimized iPad version is automatically created as well. These Conduit-powered apps, created to work on mobile devices as well as iPads, will feature enhanced graphics suited for the relevant Apple device. Customized styling for iPads, including integration of different graphics for the iPad's higher resolution, will help publishers create unique and one-of-a-kind tablet apps. The newly available social features will help in further promoting Conduit-powered apps, increasing usage and providing more revenue opportunities for publishers. The social capabilities allow users to share app content on their Facebook wall and via e-mail. Additionally, when app users share content on Facebook, the post will include a link to the app page, thus accelerating viral marketing efforts.
Ness Ziona's Conduit (http://www.conduit.com) is the largest network of web and mobile app publishers with over 260,000 members and their 230 million users. The Conduit Network empowers publishers—from global brands to independent developers—to create, exchange, and distribute apps, and to collaborate through business partnerships. (Conduit 01.06)
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10: ISRAEL ECONOMIC STATISTICS
10.1 Israel Raises Growth Forecast To 5.2%
The Bank of Israel is raising its growth forecast for the Israeli economy, following a 4.7% growth in the first quarter of 2011. On 1 June, the central bank updated its macroeconomic forecast for 2011/12, based on the Israeli economy's achievements in the first quarter of the year. According to the forecast, the Israeli economy is expected to grow by 5.2% in 2011 and the average unemployment rate will drop to 5.8%. The expected growth in 2012, according to the Bank of Israel, will be 4.2%. In March, the Bank of Israel predicted that Israeli economy would grow by only 4.5% in 2011 and by 4% in 2012. In the same annual report, the bank's economists said the average unemployment rate in 2011 would total 6.1%.
It turns out that the bank's forecast writers were pleasantly surprised by the Israeli economy's performance. The high growth rate of GDP and use of resources in the first quarter of the year, and particularly the rapid growth in exports and fixed investments, led to an upward revision of most clauses. High growth was recorded in exports as well, but because the increase in imports was even higher, and because the shekel's appreciation against the euro and US dollar affected the exports' profitability, the surplus in the current account of the balance of payments is smaller. The bank noted that the sharp increase in capital stock, as a result of the rise in investments in 2011 and the ongoing growth in labor force participation to 58%, is expected to contribute to a higher growth rate than the potential rate although the economy is in a full employment environment. (BoI 03.06)
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10.2 Israel's Unemployment Rate Drops to 6%
Israel is close to breaking its lowest ever unemployment rate. The Central Bureau of Statistics reported that Israel's unemployment rate had dropped to 6% compared to 7% in the beginning of 2010. The lowest unemployment rate in Israel, 5.9%, was reached about three years ago. The unemployment rate dropped by another 0.1% in February – a drop of 30,000 in the number of unemployed, which now reaches some 180,000. According to Central Bureau of Statistics figures, the unemployment rate in Israel has dropped since November 2010 by 0.4%, which is 12,000 fewer unemployed. In July 2009, the unemployment rate in Israel was still 7.7%, which is about 50,000 fewer unemployed than in February 2011. The Israeli economy recovered from several years of recession in the past year, but it turns out that the fruits of the growth were mainly enjoyed by those earning the highest salaries. (CBS 28.05)
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10.3 Income Inequality in Israel
An annual report published by the Adva Center – Information on Equality and Social Justice in Israel shows that the salary of all Israeli workers grew by less than 1% in the past year, while executives' salary rose by 10%. The report also reveals that workers of Ashkenazi descent earned more than workers of Sephardic descent and more than new immigrants and Arabs.
According to the report, Israel's national income stood at NIS 688 billion (about $200 billion) in 2010. The report stated that if the workers' part of the 2010 pie had been 68%, as it was in 2000, and not 63% as it was in reality, each worker would have received an average of NIS 976 ($283) a month. The report shows that the national income grew by 33% in the past decade, but that the workers' part grew by 24% and the employers part grew by 44%. According to the report, the wage cost of a manager in a company whose shares are traded in the Stock Exchange stood at NIS 236,000 ($67,000) in the past month. On the other hand, about 40% of workers earned NIS 4,260 ($1,208) in the past year – half of the average salary in the Israeli economy. Some 27% of the workers received an average salary or more, and 4% had a salary of NIS 25,000 ($7,090) and up. (Ynet 28.05)
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11: IN DEPTH
11.1 ISRAEL: Fitch Affirms Israel at 'A'; Outlook Stable
On 27 May, Fitch Ratings (http://www.fitchratings.com) affirmed Israel's Long-term foreign currency Issuer Default Rating (IDR) at 'A', local currency IDR at 'A+' and its Short-term foreign currency IDR at 'F1'. It has simultaneously affirmed the Country Ceiling at 'AA-'. The Outlook on the Long-term ratings is Stable.
"The affirmation reflects the resumption of the downward trend in public deficits and debt, the robust outlook for Israeli growth, and a strengthening in the sovereign's external balance sheet," says Purvi Harlalka, Director in Fitch's Middle East and Africa Sovereign Ratings Group. "These positive trends mitigate concerns surrounding an overheating housing market and a more difficult geo-political environment. The latter developments, which currently appear manageable, bear close watching."
The improvement in public finances reflects both revenue growth, as a result of buoyant output, and expenditure control, due to the adoption of new fiscal rules and the reversal of the temporary loosening in fiscal policy to counteract the global economic slowdown in 2009. As a result, the central government deficit fell to 3.8% of GDP in 2010 from 5.2% in 2009 and debt moderated to 76.6% of GDP from 79.3% in 2009.
Although below pre-crisis levels (77.3% in 2008), Israel's debt level remains the highest in the 'A' category. In this context Fitch is encouraged by the adoption of an explicit debt target - 60% of GDP - Israel's high financing flexibility, proven ability to cope with shocks and unblemished debt service record. However, any improvement in Israel's rating would be predicated primarily on a marked reduction in indebtedness, which necessarily requires Israel to maintain fiscal discipline and high output growth for a prolonged period, particularly given its susceptibility to shocks. However, in the longer-term, peer comparisons will benefit from recent substantial gas discoveries and a much lower level of unfunded pension liabilities than in other OECD countries.
Israel's high value-added, hi-tech industrial structure, whose exports have weathered the global slowdown relatively well since they appeal to both developed and developing economies, will play a key role in maintaining dynamic growth rates. However, the recent strong growth performance (4.7% in 2010 on average and 5.7% y-o-y in Q1/11) also reflects an aggressive policy response by the Bank of Israel (BoI) that included a sharp reduction in interest rates (by 375bps to 0.5% between Q408-Q109) and sustained intervention to keep exchange rates competitive.
Faced with rising inflationary pressures (at 4% on average so far in 2011, breaching the 1% to 3% target) the BoI has also been quick to tighten policy rates, by 275bps from the trough, to 3.25% in May. However, the widening spread with US policy rates has served to attract substantial short-term inflows, which tend to bid the exchange rate up and conflict with the BoI's efforts to contain shekel appreciation. In an attempt to address the latter, intervention has added over $40bn to Israel's stock of foreign exchange reserves since 2007, turning the public sector from a net external debtor owing 2% of GDP in 2007, to a net external creditor with claims amounting to 18% of GDP in 2010.
Rising interest rates also reflect attempts to dampen the housing market, which is in danger of overheating. House prices have risen to more than 1.5x their level in early 2008. A shortage of housing supply, low household and banking sector leverage, high personal savings and conservative lending practices all suggest that the starting point for private sector financial health is favorable.
The authorities have taken several demand and supply side measures to curb housing market growth and incipient signs suggest that these might be gaining some traction. House price inflation eased to 14% (annualized) in April 2011 as against 22% in early 2010 and the supply of public sector housing has increased. Nevertheless, mortgage credit growth remains high at 18% y-o-y in February, though overall (private) credit growth is lower at 10%.
Israel's rating continues to be constrained by its political context and its location amid hostile neighbors. The uprising in Egypt could result in the emergence of a regime that is less friendly to Israel than before. Political turbulence in other neighbors also clouds the outlook and could lead to greater instability in the region around Israel. Over time these developments could reverse some of the secular decline in defense spending since the 1970s. High geopolitical risks also elevate defense spending and, given the susceptibility to shocks, other things being equal, argue for a lower public debt/GDP ratio than in other countries at a similar stage of development. (Fitch 27.05)
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11.2 JORDAN: Railway Plans Gather Momentum
A $5bn railway plan to transform Jordan into a center for regional trade and commerce received a major boost recently when the Islamic Development Bank (IDB) announced, as cited by the Oxford Business Group, that it is in talks with global financial institutions to fund the mega-project.
The IDB said on 27 May that it was working with the World Bank and the European Investment Bank on the deal. Other sources have confirmed to media that the Agence Française de Développement, the Saudi Fund for Development, the Japan Bank for International Cooperation and Kfw (Germany's state-owned development bank) also plan to participate. The planned railway is expected to have a major impact on the region, providing a cargo and ultimately a passenger link from Jordan to Lebanon, Syria, Iran, Turkey and Iraq, as well as Saudi Arabia and other GCC countries.
Stretching some 1600 km, the railway will link the Red Sea port of Aqaba with Syria via the capital, Amman, and Zarqa. It will also link the Saudi and Iraqi borders with the northern Jordanian city of Irbid and the towns of Mafraq and Azraq in the north-east. Cargo train speed is expected to reach 120 km per hour and 160 km per hour for passenger trains.
The country currently has about 507 km of track, with the most important link between Damascus and Amman part of the 1300-km Hejaz Railway, which was built by the Ottomans in the early 1900s. "According to feasibility studies, once operational, the rail project will spur economic growth and job opportunities not only in Jordan but also neighboring IDB member countries, including those in Asia and Europe," said the IDB in a statement in May.
Alongside the economic benefits of the rail link for the wider region, Jordan is eyeing advantages in its links with the GCC, an economic bloc to it is currently applying for membership. Bilateral trade with the GCC runs into the billions of dollars per year (resulting in a trade deficit of $2.6bn for Jordan last year), while visitors from Gulf Arab countries accounted for 28.2% of tourist traffic in 2010, both areas that would likely receive a boost from the rail project.
Citing the minister of transport, Mohannad Qudah, Bloomberg reported that the kingdom is due to start the first bids for the project by the end of June, with Jordan set to provide JD370m ($522m) for the railway. The IDB has not said how much it would contribute to the project.
International media has reported that plans for a key section of the track between Aqaba and Baghdad saw progress this month in the form of a memorandum of understanding on the project signed by Qudah and the Iraqi minister of transport, Hadi Al Ameri. "The accord is designed to boost bilateral integration and [enhance] safe and efficient transport with a view to increasing the flow of passengers and merchandise between the two countries," Qudah said during the signing ceremony.
Past plans for Jordan's regional rail link envisioned a build-transfer-operate model, with cargo traffic expected to include oil and minerals from Saudi Arabia and cement from Jordan to Iraq. Consultants interviewed by the Railway Gazette, an industry publication, estimated annual revenues would grow from JD229m ($322.5m) in 2015 to JD365m ($514m) in 2030 and over JD1.4bn ($1.97bn) in 2050.
According to the Ministry of Transport, the first stage in the plan would be to replace the 1050-mm gauge Hejaz Railway link between the Syrian border and Zarqa that connects to Saudi Arabia. The second stage would add lines to Aqaba, replacing the current narrow-gauge phosphate line, and from Mafraq to Irbid, while also laying track east to the Iraqi border.
The Jordanian initiative comes amid a prospective boom in the region's railway links, with more than 33,000 km planned to be built in the Middle East and North Africa (MENA) and the region's mainline rail network set to almost double in size. Indeed, the "MENA Rail Report 2011", released in May by MEED, found more than $250bn of planned investment set out by governments and rail operators in the region.
The report noted that the need for improved freight transport is playing a central role in many of the first schemes to move ahead because governments are seeking more efficient ways of connecting inland mines and petroleum production sites with ports. For Jordan, which relies heavily on its roads to transport the oil imports it relies on, a better-connected rail network that can relieve the pressure on its causeways and improve links with neighbors would certainly be a boon to the local economy. (OBG 06.06)
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11.3 BAHRAIN: Moody's Downgrades Bahrain to Baa1 With Negative Outlook
On 26 May, Moody's Investors Service (http://www.moodys.com) downgraded Bahrain's government bond ratings by one notch to Baa1 from A3, and assigned a negative outlook to the rating. This rating action concludes the review for possible downgrade that Moody's initiated on 23 February 2011. Moody's decision to downgrade Bahrain's ratings is driven by the following three reasons:
1. The likely adverse effect of the recent political turmoil on the country's growth prospects and its public finances.
2. Continuing increases in the break-even oil price that is needed to balance the budget.
3. A weakening of the fundamental strength of Bahrain's large banking sector.
The negative outlook on the Baa1 ratings reflects Moody's continued concern over the political situation in Bahrain.
Ratings Rationale
The main driver underlying Moody's decision to downgrade is the significant deterioration in Bahrain's political environment since February. The government of Bahrain has forcibly suppressed an uprising by the Shi'ah-led opposition with the backing of an intervention of armed forces from other member states of the Gulf Cooperation Council (GCC), most importantly from its neighbor Saudi Arabia. Political tensions in the country remain high and there seems little prospect of the underlying causes of the unrest being peaceably resolved, at least over the short term. The political outlook is therefore highly uncertain.
Moody's believes that these events are likely to have damaged economic growth significantly, especially in services sectors such as tourism, trade and financial services. These sectors had previously been championed by the government in its effort to diversify the economy away from oil. The timing and pace of any economic recovery will very much depend on political developments. In any case, the negative effect on consumer and investor confidence will likely linger.
The crisis has also affected Bahrain's public finances. In February, the government announced cash transfers to families, and in May the parliament approved an expansionary budget for 2011-12. The resulting rise in current expenditure is reducing fiscal flexibility.
The second factor informing Moody's rating action is the continued rise in the break-even oil price for the budget, which Moody's estimates exceeded $100 per barrel in 2010 [the break-even oil price is the average annual oil export price necessary to balance the budget, all other things being equal]. Despite historically high levels of oil prices, the government has posted wide deficits during the past two years. Unlike other GCC oil exporters, Bahrain does not have a sovereign wealth fund of offshore financial assets.
The third driver is the likely further worsening of the fundamental strength of Bahrain's large banking system owing to weakened asset quality, particularly in relation to loans for real estate or equity purchases. This is negative for the sovereign rating because banks potentially represent a contingent liability for the government. Moody's changed its outlook on Bahrain's banking system to negative in 2009 and has since downgraded the ratings of a number of retail and wholesale banks. Those ratings are now under review for possible further downgrade, reflecting concerns about potential erosion in asset quality and liquidity pressure.
Moody's has limited this sovereign downgrade to one notch because of an assumption of continued strong political and financial support from Saudi Arabia (rated Aa3, stable) and other GCC neighbors. These countries have continued to provide strong political backing for the Bahraini government and have announced a $10 billion aid package for Bahrain, although the terms and disbursement profile of this aid are not yet clear. Given this linkage, Bahrain's sovereign ratings could be negatively affected by any downgrade of our sovereign ratings of other GCC states.
Country Ceilings
Since Bahrain's stock of government debt is relatively modest and seems to have limited roll-over risk, Moody's believes that the government has sufficient capacity at present to meet its debt servicing needs. Longer-term concerns and heightened systemic risk, however, have prompted Moody's to lower the rating ceilings it applies to Bahrain's bank deposits and other private sector debt obligations, both in domestic and foreign currency. Moody's has downgraded Bahrain's local currency ceilings to A1, and the country's offshore bank ceilings to A1 with a negative outlook. It has downgraded Bahrain's country ceiling for foreign currency bonds by one notch to A2 with a negative outlook, while the country ceiling for foreign currency bank deposits has also been downgraded by one notch to Baa1 with a negative outlook. Bahrain's short-term ceilings have been downgraded to Prime-2. (Moody's 26.05)
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11.4 OMAN: Taking Education Higher
Oman's higher education system is set to be bolstered by a program that will fine-tune its services to better meet the needs of both students and the national economy, while also bringing the system in line with international standards.
Reforms have already been made, progress that was noted by the UN in its most recent Human Development Index, released in November last year. That report, entitled "The real wealth of nations: Pathways to human development", showed that in the past 40 years Oman had made the greatest progress of any of the 135 countries in the non-income section of the index.
The overall progress was largely thanks to the state's investment in education, which has seen the number of schools rise from just three in 1970 to more than 1000, as well as the founding of the state-funded Sultan Qaboos University, technical colleges and numerous private centers of higher learning. Figures released by the government late last year show that more than $40bn has been pumped into the education system since 1970 – the year Sultan Qaboos bin Said Al Said came to the throne – as Oman sought to fast track itself into becoming a modern state and bring its education system up to international standards.
That process took another step forward on May 15, with the Oman Academic Accreditation Authority (OAAA) announcing it would launch an institutional standards review and revision project aimed at further refining the education system to help it meet the challenges of a changing world. As one of the state agencies tasked with helping to develop the country's higher education sector through auditing programs and setting academic standards, the OAAA has worked closely with the Ministry of Higher Education to provide quality control for the country's universities and colleges.
According to Hamed Al Dhahab, the acting chairman of the OAAA, the best strategy for Oman's young and rapidly developing higher education sector to achieve the goals set for it is to put in place a developmental pathway to international standards. "Consideration of quality assurance practices around the world showed that a combination of institutional quality audits, followed several years later by standards-based assessment, is the most appropriate method for providing this pathway," Al Dhahab wrote in a speech delivered on his behalf at the launch of the review and revision project.
It is vital that Oman have a set of institutional standards that recognizes the diversity of the higher education sector in Oman, that are in context, and are internationally benchmarked, he wrote. "We need to ensure that we develop institutional standards which go beyond minimum requirements and support higher education institutions to pursue excellence," he said.
US-based education consultancy Voorhees Group will be working with Omani officials and agencies on the project, which will involve a revision of the institutional standards of the Requirements for Oman's System of Quality Assurance (ROSQA) in higher education. Introduced in 2004, the ROSQA sets out the standards for educational institutions; provides guidelines on how they should be assessed, giving benchmarks for performance and accreditation processes; and serves as a roadmap for institutions developing their own internal planning and quality assurance arrangements.
The OAAA will soon have at least one new institution to advise and assess, with plans under way to expand the higher education system. In early May, Sultan Qaboos issued a royal directive authorizing the establishment of a new state university that will focus on a science-based curriculum. Speaking at a meeting of the cabinet on May 1, the Sultan said it was important to develop the education sector, saying it was central to meeting "the aspirations of this country towards progress".
The Sultan also directed the cabinet to boost vocational training schemes and expand the network of colleges of technology, a move he said was aimed at opening up "new horizons for Omanis to join the workforce that will have a constructive impact on them and will reflect positively on their standards of living".
Though it will take time to put in place all the pieces needed for a new university, and indeed broaden the base of technical institutes across the country, the directives issued at the beginning of May will set in motion a process that will in time allow more Omanis to progress from secondary to higher education.
With the government looking to reduce the numbers of expatriate workers in the economy, a move aimed at improving the employment opportunities for locals, an expanded education system will not only satisfy young Omanis' hunger for learning but help meet the economy's needs for a trained and skilled workforce. (OBG 03.06)
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11.5 EGYPT: Growth Prospects & Emerging Opportunities in the ICT Industry
Research and Markets (http://www.researchandmarkets.com) new report "Economic 360 for Egypt: Growth Prospects and Emerging Opportunities in the ICT Industry" says Egypt is a democratic country, currently witnessing political unrest. Economic growth is expected to reach the pre-recession growth rate of 6.0% in 2011. The private-public partnership led ICT industry is segmented into telecom and IT. Government initiatives coupled with investment is likely to make Egypt an ICT hub in the Middle East.
Deregulation of telecom sector has led to rise in tele-density and tele-accessibility across the country. The emerging technologies of 3G and Wi Max have demonstrated a strong potential for growth of the industry. The domestic ICT industry is likely to face increased competition from international entrants like Intel and IBM which are expected to establish technical innovation centers in Egypt
Egypt strategically serves as the link between the Mediterranean, Europe, Africa, Asia and the Arab countries. It has already emerged an attractive investment destination for ICT and is well on its way to becoming a leading global outsourcing hub. It has been attracting unprecedented foreign direct investments (FDIs) from several multinational companies such as Wipro, Stream Tele-performance and Vodafone. The industry signed a major deal in 2010 with IBM, which invested in 1,500 full-time equivalents (FTEs) in global delivery centers that employed high-level IT consultants.
The Government is striving to create state-of-the art infrastructure to make the ICT industry globally competitive. It is channeling considerable funds into telecom and IT services and have initiated prominent programs such as Smart School Network (SSN), Egyptian Education Initiatives (EEI), National Healthcare Capacity Building (NHCB) project, national land registration system projects and the Egyptian Geography Network (EGN). The escalating demand for mobile phones has also thrown open partnership opportunities with the state-owned incumbent, Telecom Egypt, to ensure dissemination of mobile technology expertise and services throughout the country. The software industry reflects strong potential for global system for mobile communication (GSM) solutions and applications, while voice over Internet Protocol (VoIP) technology is also expected to gain traction as a popular communication technology. (R&M 27.05)
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11.6 EGYPT: Egypt's Freedom & Justice Party: to Be or Not to Be Independent
Khalil al-Anani wrote on 1 June in the Carnegie Arab Reform Bulletin (http://carnegieendowment.org/arb) that for the first time since its founding in 1928, the Egyptian Muslim Brotherhood formally submitted a request to establish a political party on May 18, 2011. The Freedom and Justice Party (FJP) boasts some 9,000 founding members – well over the 5,000 member minimum required by the Political Parties Law, as amended after the January 25 Revolution. The Brotherhood's establishment of a political party is a milestone in its history, and many questions have been raised about the party's political platform, the selection of its leadership, and the extent to which a consensus exists within the Brotherhood about its future relationship with the FJP.
While Islam remains the party's chief frame of reference, the FJP platform (Arabic) has introduced several amendments to the draft platform the Brotherhood unveiled in 2007. Perhaps the most prominent difference between the two platforms is the omission of the controversial provision giving clerics a formal role in politics and lawmaking. The Brotherhood's 2007 program (Arabic) called for the formation of a committee of senior religious scholars, chosen in national elections, to advise parliament and the president, thereby creating a system which many found to be akin to the Iranian one.
The FJP also removed the article on the importance of the state's religious functions, which had implicitly ruled out a Copt or other non-Muslim becoming head of state. The new platform does not rule out the election of women to government, although Brotherhood members have recently said they consider women "unsuitable" for the presidency. Overall, the Brotherhood has chosen to remain mum on controversial issues, hoping to dodge criticism from other political parties and segments of society.
Even though the FJP labels itself as a civil party, religion has a heavy presence throughout its platform. The party declares as its primary objective not to gain power, as one would expect of any civil party, but rather to "enhance Islamic morals, values, and concepts in individuals' lives and society," which are goals closer to that of a religious group than a political party.
Moreover, the FJP platform is ambiguous and inconsistent in the use of key terms. For instance, when discussing the nature of the state, the word "shura" (consultation) is used, as this is thought by Islamists to be a broader and more inclusive term than democracy. In other parts of the platform, "shura" and "democracy" are used interchangeably, an apparent reflection of the conflict between the party's religious ideals and its political ambitions. This usage also reflects the party's attempt to balance the discourse of the conservatives with that of the reformers in the Brotherhood, with "shura" being favored by the conservatives and "democracy" appealing to the reformers.
In terms of its economic vision, the FJP now clearly embraces social liberalism, which shows that the Brotherhood's economic ideology has come a long way since 2007. The platform backs the principles of economic freedom that achieve social justice and a redistribution of income, while also encouraging foreign and domestic investment. The 2007 draft platform, in sharp contrast, had been based on an Islamic economic system.
The way the party was founded and its leaders were selected has also been controversial. Party leaders, including its chairman Mohamed Morsi, deputy chairman Essam El-Erian and secretary-general Mohamed Saad El-Katatny, were not chosen through elections. Instead, the Brotherhood's internal Shura Council chose the party's leadership behind closed doors. This move left many disgruntled, especially young Brotherhood members, who believe that the Brotherhood's old guard has been trying to impose control over the FJP since its inception. Morsi has said, however, that his leadership is only temporary until a party conference can be held to organize internal elections.
The FJP has been at pains to show that it is open to all Egyptians, taking on a Christian vice president (Rafiq Habib, a Copt who was a consultant for former Brotherhood Supreme Guide Mahdi Akef) and including nearly 1,000 female co-founders. But this diversity is belied by the fact that up to 70% of FJP founders are active members of the Brotherhood as well as the dearth of youth and women in leadership positions. In general, the FJP leadership is dominated by Brotherhood conservatives, with no representation for the reformists. The reformist leadership has been on the decline within the Brotherhood after the resignation of Ibrahim Zafarani and the announcement by Abdel Moneim Aboul Fotouh that he was going to run for president of Egypt as an independent – news which was hardly welcomed by the Brotherhood's leadership.
Indications so far suggest that the FJP will remain politically and ideologically subordinate to the Brotherhood while enjoying fiscal and administrative autonomy. The FJP is expected to be the Brotherhood's political arm, unable to take independent political stances, becoming the Egyptian equivalent of the Brotherhood-affiliated Islamic Action Front in Jordan. The FJP and the Brotherhood have gone to lengths to clarify their stances on women's rights, minority rights, and the relation between religion and the state. The Brotherhood and FJP will need to clarify their relationship to each other, however, and give the party enough independence to facilitate its activities and decrease friction with non-Islamist sectors of society. They will also need to quell the concerns of the party's youth, who feel sidelined in the current arrangement.
Khalil al-Anani is an expert on political Islam and author of The Muslim Brotherhood in Egypt: Old Age Struggling with Time (Dar el-Shurouq, 2007). (CARB 02.06)
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11.7 MOROCCO: Does Morocco Have a Place in the GCC?
Anouar Boukhars wrote on 25 May in the Carnegie Arab Reform Bulletin (http://www.carnegieendowment.org/arb) that in the face of the extraordinary revolutions of 2011, the conservative monarchies of the Gulf Cooperation Council (GCC) have gone into self-preservation mode, bolstering their defensive capabilities, recalibrating their security alliances, and expanding their partnerships. The counter-revolutionary chieftain of the club, Saudi Arabia, has taken the lead in organizing a patterned response to what it perceives as a populist and doctrinal attack on the existing order.
It is in this context that the GCC opened its institutional doors to Jordan and Morocco, which happen to share the same religious identification and threat perception and had long sought the financial benefits that come with GCC membership. Reliable allies of the GCC, the Jordanian and Moroccan monarchies have stationed thousands of security officers in the Gulf for decades – partnerships that the GCC states see as critical in this time of upheavals. For their part, Jordan and Morocco need desperately to address the fiscal deficits generated by the recent expansion of state subsidies and significant increases in civil servant wages and pensions.
Morocco as a Gulf State?
In Morocco, the regime cautiously welcomed the invitation to join the club of the superrich in the Middle East, in contrast to the more enthusiastic welcome Jordan gave to the initiative. Morocco has always enjoyed privileged partnerships with most of the Gulf countries, but given its physical distance from the Gulf, cultural differences and close ties with Europe, membership in the GCC was never seriously contemplated, at least not during the reign of King Mohammed VI. The young monarch does not have the close personal connections that his father had with Gulf leaders, nor has he maintained King Hassan's active involvement in Arab causes.
Mohammed VI certainly wants his strategic relations with the GCC to deepen, however, in order to bolster Morocco's regional political power and the geopolitical framing of its conflict with neighboring oil-rich Algeria. The latter has used its oil bonanza to step up its defense spending as well as its diplomatic offensive in order to shore up support for the Polisario separatists and their secessionist claims on the Moroccan-controlled Western Sahara.
In a tense climate of rivalry and mistrust, Morocco has been struggling to keep up with the Algerian military spending spree and maintain the precarious balance of power in the Maghreb. Deepening political and economic ties with the GCC will provide a major diplomatic, political and economic boost. The Saudis are known to have helped finance several Moroccan military purchases, and further such assistance is needed. Morocco is also in need of an upgrade of Gulf countries' financial investments in the Kingdom, as well as easier work permits for its legions of unemployed.
Despite the many advantages that a closer association with the GCC would bring to Morocco, the public reaction was one of bewilderment and derision. The timing of the initiative is suspect in the eyes of many Moroccans, who fear that Gulf monarchies are pressing the Moroccan monarch to scale back the reforms to which he committed in a 9 March televised address. Unlike previous promises, the king set out a clear timetable for enshrining the separation of powers, the independence of the judiciary, and parameters for decentralization in the constitution. He also allowed protests to proceed largely unhindered, freed political prisoners and empowered the National Human Rights Council and the Competition Council with additional competencies.
These reforms were carefully considered to meet the most pressing demands of the protesters: to curb the King's extensive legislative and executive powers and to tackle the major problems of corruption, lack of accountability, and impunity for senior officials. The King's announced reforms will not transform the nature of monarchical powers, but they will pave the way for an evolution towards a better equilibrium between the King and the other branches of government. It is such evolution that the Saudis are said to fear, for if a peaceful democratic transition happens in the kingdom of Morocco, the event would be as seminal as the extraordinary revolutions in Tunisia and Egypt. The Moroccan monarchy would provide a powerful model that the monarchies of the Gulf might potentially be forced to follow.
Moroccans are also concerned that they might become entangled in another doctrinal war between Sunni Saudi Arabia and Shi'a Iran. The last thing that Morocco needs now is a replay of the 1980s, when Gulf money nurtured the development of the Salafi movement as a counterweight to revolutionary Shi'ism and political Islam. The Saudis have long tried to shape ideological debates within Islamist movements in ways that fit their own Salafi persuasions. It is this brand of Islamism that has been party to escalating tensions between Christians and Muslims in Egypt, as well as creating tension with other Islamist movements, whom Salafis press to renounce their steady evolution towards pragmatism, tolerance and democracy.
Morocco's membership in the GCC is still a proposal at this point and must be followed by several steps to become a reality. The gap between the Moroccan economy and those of its counterparts in the Gulf is wide. While the specific criteria for accession to the GCC in its charter are unclear, the economic mismatch between Morocco and Gulf States would require significant efforts and political will to achieve full economic integration and harmonization of rules and regulations in legislation, finance, customs, trade, and administration.
An enlarged GCC can potentially play an important and constructive role in helping to resolve Arab crises and has the means to help stabilize governments in transition. The challenge, however, is how to convince this kings' club that it should support stable transitions and prevent it from becoming a reactionary bloc intent on defending the status quo and sabotaging the Arab desire for democracy.
Anouar Boukhars is assistant professor of international relations at McDaniel College, Westminster, Maryland, and a former visiting fellow at the Brookings Doha Center. He is the author of Politics in Morocco: Executive Monarchy and Enlightened Authoritarianism (Routledge 2010). (CARB 25.05)
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11.8 TURKEY: Hats Off to Fiscal Performance Ahead of Elections
On 7 June Tevfik Aksoy wrote at Morgan Stanley (http://www.morganstanley.com) that The Turkish economy is clearly facing key challenges such as a widening current account deficit and fast credit expansion. The former has mostly been a result of rising global energy prices but also on the back of vibrant domestic demand, while the latter has been raising the risk of over-borrowing, leading to further widening in the current account deficit and potentially pulling inflation higher. Facing such challenges, policy-makers have certain choices to tackle the outstanding problems . The obvious and conventional approach would be to tighten monetary and fiscal policies.
Monetary policy can't fight the battle alone: A tight (or tightening) monetary policy to curb credit growth, containing inflationary expectations and actively managing liquidity conditions are some of the key measures that the monetary authority can take. The Central Bank of Turkey, in our view, had been delivering these to a significant extent, albeit in an unconventional way that has been received with skepticism by the market. We differ in our approach in various ways. In our view, there is a good chance that the CBT's new approach might become successful given sufficient time and there is sufficient evidence at hand that the alleged overheating debate has been overblown. Here, we need to emphasize the term ‘sufficient time'. We think it will take some time for the quantitative tightening to lead to meaningful increases in bank loan rates and some lag for the transmission mechanism to work. This can be as long as two quarters, while the situation of pent-up demand on the consumer front also normalizes. Clearly, the currency and the TRY-based assets might remain vulnerable to exogenous shocks in the meantime, but we believe that the CBT has ample room and ammunition to stem any extreme volatility if and when it happens.
Fiscal prudence remains a key ingredient: The other policy response is clearly a tight fiscal one in nature and in most cases much more important than monetary policy, as the latter is more difficult to steer, requires a long time to show impact and in most cases is politically costly. Any tendency to loosen fiscal policy might negate the impact of monetary policy, cause the risk premium to rise and add further upside to overheating pressures. We believe that fiscal policy in Turkey has been very supportive of monetary policy over the past years (especially from an inflationary perspective) and, with the exception of the recession-related spending/tax measures, the performance in general has been highly commendable.
More importantly, the successful fiscal policy implementation has been achieved despite 2011 being an election year; partially reflecting the government's self-confidence (instigated by the polls showing a comfortable lead over its rivals) and the realization that unnecessary election-related spending in the past had brought minor upside to popularity, in our view. To our knowledge, the pre-election fiscal performance has been by far the most impressive in Turkey's history.
Targets were overachieved in 2010: The central government budget deficit target, which was revised down during the year, has been undershot. Against the targeted deficit of 4% of GDP, the outcome was 3.7%, along with a primary surplus of 0.8% against the anticipated deficit of 0.7%. Hence, Turkey started to deliver good fiscal results already in 2010.
Despite a fairly robust and steady performance on the primary balance front, the last month of 2010 saw a sharp decline that caused mild concern on our part. After all, 2011 was an election year and the knee-jerk reaction would be to assume increased fiscal spending. The government's explanation was that, given the outperformance for most of 2010, the fiscal authority decided to bring forward part of the planned spending into 2010. After four months, fiscal data confirmed this idea, as the primary balance once again turned positive in 1Q and extended further into 2Q.
General elections are due on June 12 and there is no sign of deterioration on the fiscal front so far: This is clearly a first in Turkey's modern political history to our knowledge. Looking at the comparative fiscal performance over the past six years, we see a visible improvement in the primary surplus in 2011 at 0.9% of GDP. Moreover, the overall budget deficit at 0.4% of GDP is the lowest in the past four years.
However, the performance was mostly due to cyclical reasons.. . There is no doubt that the government had been careful in limiting its spending, especially on the non-interest expenditures front, since the recession of 2009. However, the performance in the budget was clearly on the back of the strength in real GDP growth, which raised budgetary tax revenues to record levels. While non-interest expenditures remained more or less stable at 5.3% of GDP in comparison to the past couple of years and some 1pp higher than the pre-crisis period, revenues displayed a remarkable jump to 5.1%, exceeding not only the performance of recent years but notably also that of 2006-07.
Lowering our deficit forecast: An encouraging aspect of the fiscal outlook is that the government had set highly ambitious targets for 2011-13. The budget deficit is targeted to ease to 2.8% of GDP, which is now looking quite likely to be achieved. In fact, we have cut our 2011 budget deficit to GDP forecast by 0.6pp to 2.7%. We believe that 2H11 might bring somewhat lower tax revenues in comparison to 1H on the back of the expected (gradual) slowdown in growth. Meanwhile, we do not expect non-interest expenditures to be cut in tandem with this, but there might be certain one-off increase in revenues associated with the recent restructuring of government receivables, comprising overdue taxes and arrears.
Significant boost to revenues and a chance to lower debt by a noticeable margin: According to Deputy PM Ali Babacan, the recent attempt to restructure state receivables reached a significant sum of TRY 58 billion ($36 billion) and exceeded the government's own expectations. If the government receives even a certain portion of this during 2011-13 (payments commencing in June), we see a good possibility that the overall budget deficit will be even lower than anticipated.
At any rate, whether our projections hold or the government delivers the targeted deficit, we believe that the outcome will be useful in further lowering debt to GDP. We expect debt to GDP to ease below 40% this year and continue its descent in 2012. Especially in an environment where almost all European countries (with the exception of Hungary) have been experiencing adverse debt dynamics, the ongoing trend places Turkey in a rather strong position, in our view. That said, we believe that the government will still need to curb non-interest expenditures further in order to support the central banks' efforts to maintain price stability and also raise saving to curb the current account deficit.
What to expect post elections: Based on 1Q results and taking into account the strong performance in April, we see a second consecutive year of undershooting of the budget deficit target as likely. The same argument is valid for the budgeted primary surplus and we believe that the year-end results will be more than satisfactory. There is always a possibility for the government to increase spending later in the year, which has been a typical pattern especially in any given December, but even so, there seems to be plenty of room from a purely fiscal standpoint. That said, all the cyclical gains on the revenue side should be saved or used for lowering the outstanding debt in order to lower the sovereign risk profile further, in our view.
Fiscal measures to curb current account deficit: Given the fact that domestic demand has been strong and there seems to be a widespread consensus that monetary policy might not be sufficient to win battles on various fronts, we expect the fiscal authority to introduce measures to curb consumption in selective terms. This might happen in the form of marginal increases in special consumption taxes, higher import levies on cars imported from non-EU markets or even efforts to raise the cost of lending. The officials might hesitate to raise taxes immediately after the elections, but this might be an effective and straightforward way to tackle the problem. There might be a tendency to wait and see the extent of the restructuring of the receivables, hoping that the lower disposable income would cause a natural slowdown in demand on the part of households and small/medium-sized enterprises but we believe that some fiscal action is necessary.
Taxes and levies on consumer loans? Another possible channel to slow down credit growth might be to introduce higher taxes and/or special levies on consumer loans, which would clearly help to curb retail demand. More importantly, this would raise loan rates across the board and eliminate the possibility of increased competition among local banks to gain market share, which has so far been hindering the success of monetary policy. (MS 06.06)
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11.9 TURKEY: Loading E-Commerce
As Turkey's internet usage rises and opportunities for online shopping gain traction, the rapid expansion of the e-commerce market has attracted the attention of international players. Approximately 36.4m Turkish people have access to the internet on a regular basis, according to the International Telecommunications Union. With the infrastructure for internet service in place and user numbers climbing, the Turkish market is the 12th largest for internet usage globally and a penetration rate of only 45% means there is still plenty of room for growth going forward.
The country has a number of e-commerce sites that go beyond the retail offering, serving such niches as online bidding, the sale of second-hand goods, real estate, ticket purchases and food delivery. The nation's three leading players are the for-sale-by-owner website Sahibinden.com, the auction house Gittigidiyor.com and the miscellaneous goods retailer Hepsiburada.com. Other major players include the Ticketmaster subsidiary, Biletix.com, and food delivery platform Yemeksepeti.com.
The range of items on offer through local websites – electronics, car accessories, stationery, books, movies, health products and clothes – has been central to the market's rapid expansion, with frugal customers seeking out the best deals and high-end buyers purchasing hard-to-find luxury goods.
International companies have started to take notice of Turkey's upside potential. The world's largest online marketplace, eBay, announced in April that it would expand its stake in Turkish counterpart GittiGidiyor.com from the minority holding it acquired in 2007 to controlling 93% share.
At the same time, at least one of Turkey's major e-commerce companies is looking abroad. Yemeksepeti.com has expanded its network to 3500 member restaurants in Turkey, processing some 15,000 daily orders from more than 900,000 registered customers. The firm brought in $105m over the course of 2010 and has been actively expanding internationally, taking orders for 400 Moscow-based restaurants through its subsidiary izrestorana.ru and 450 restaurants in the UAE via foodonclick.com.
The recent eBay move to increase its exposure to the Turkish market follows a very upbeat 2010 for local e-commerce companies, with the metrics for several services illustrating confirming this headline trend. Biletix.com exceeded 1m registered customers in 2008 and sells approximately 3.5m tickets through its website each year. Having seen revenues of $164m in 2008, Hepsiburada.com is expecting to reach turnover of $660m in 2011.
According to Aytug Igneli, the general manager of Hepsiburada.com, the major players in e-commerce have seen exponential growth with the expanded provision of internet services. "In 2010 we acquired an average of 1500 new members every day," she told local press.
The growth trend illustrated by Hepsiburada.com fits that of the larger industry. The company's 2010 report reported that Turkish e-trading volume was approximately $171.8m in 2003, but over the course of the decade it grew rapidly, reaching $6.6b by 2009 and $9.9b by the end of 2010.
Such growth has seen Turkish entrepreneurs quick to offer new logistical and niche services for the burgeoning sector. Among these news services are E-Cozum, an e-commerce platform that supports small and medium-sized enterprises (SMEs) by integrating supply, logistic and financial services; mmmNefis, an online store for traditional Turkish foods; Netport Bilisim Hizmetleri, which works with the e-commerce provider SmartShop to assist SMEs with online solutions; and Baba2Baba.com, an e-commerce portal for merchants. These new businesses are playing a key role in expanding online activity, as they enable more firms to move online while diversifying their revenue streams.
While its growth outlook is positive, the e-commerce sector has had to face a number of challenges during its expansion. Most recently, allegations of illegal activity damaged public perceptions of the industry. Quest Net, which recently rebranded as QNET, was hit with accusations that it was operating a pyramid scheme. The Turkish ministries of industry and finance both investigated the firm's activities, seizing documents and detaining employees in the process. However, after initially being banned from operating in Turkey, the ministries reconsidered and have allowed the firm to remain in its rebranded form.
Though there is still some cause for caution on the part of local customers, the e-commerce industry is unlikely to be negatively affected in the medium term. Growth expectations are even driving postal services throughout the Mediterranean to collaborate on preparations for the uptick in shipments. A new mail service and e-commerce logistics agreement was signed in Rome in mid-March, with 13 providers, including Turkey, forming the Postal Euromed group. The new organization is expected to develop common policies with regard to transporting packages and one of the key areas to be addressed is the creation of a common e-commerce platform for member countries.
With local and regional developments supporting further expansion, and the online marketplace seeing strong, sustained growth, operators are confident that 2011 will be another solid year for e-commerce companies, with the sector likely to continue to benefit as new technologies are rolled out. (OBG 30.05)
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11.10 CYPRUS: Fitch Downgrades Cyprus to 'A-'; Outlook Negative Ratings
On 31 May, Fitch Ratings (http://www.fitchratings.com) downgraded the Republic of Cyprus's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'A-' from 'AA-' and removed them from Rating Watch Negative. The Outlook on the Long-term IDRs is Negative. Fitch has simultaneously downgraded the Short-Term Foreign Currency IDR to 'F1' from 'F1+'. The Country Ceiling has been affirmed at 'AAA', the ceiling appropriate for euro area members.
"The downgrade reflects the severity of the crisis in neighboring Greece and the risk this poses for the Cypriot banking system and consequently the public finances of Cyprus," said Chris Pryce, Director in Fitch's Sovereign Group.
Cyprus is a small economy with a large banking system equivalent in terms of assets to approximately nine times its GDP. Exposure to Greece is a significant source of vulnerability that has intensified with successive downgrades of the Greek sovereign since January 2011, when Fitch put Cyprus on Rating Watch Negative citing fiscal and financial sector risks. Roughly one third of the banking system's assets are booked as Greek exposure, including that of Greek subsidiaries based in Cyprus. This exposure includes almost €14b of Greek sovereign bonds and an estimated €5b of Greek bank bonds. In addition, Cypriot-owned banks have lent through their substantial networks in Greece significant amounts to Greek companies and households.
Most Greek-related exposure is held by three major Cypriot banks: Bank of Cyprus, Marfin Popular Bank and Hellenic Bank. Fitch believes that these banks are relatively well placed to absorb the impact of a sovereign debt crisis in Greece that entailed an assumed 50% haircut to face value of Greek government bonds. The agency estimates that in this scenario the cost of recapitalizing the banks to a tier one capital ratio of 10% would be of the order of €2b (11% of GDP), only part of which might have to be met by the state. However, in a more severe stress test, where a Greek sovereign default was associated with significant deterioration in asset quality such that non-performing loans rose to 25%, Fitch estimates that the cost of recapitalizing the banks could rise to 25% of GDP, necessitating more extensive sovereign support.
Fitch believes that the Cypriot government would be willing and able to provide effective support to Cypriot banks in a stress test of this magnitude. At 61% of GDP Cypriot general government debt is not high by euro area standards. However, the cost of providing financial sector support could materially alter the government's debt profile in a manner that would be negative for the sovereign ratings. Fitch does not rule out additional funding pressures arising for banks, including subsidiaries of Greek banks. However, the agency believes that the European Central Bank would provide liquidity support in such an environment, thereby preserving financial stability in Cyprus.
Fitch says developments in Greece will continue to have an important bearing on Cyprus's ratings, underlining the importance of sound public finances and a robust, well-capitalized banking system. (Fitch 31.05)
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11.11 GREECE: Fitch Publishes Rating Report on Greece Ratings
Fitch Ratings (http://www.fitchratings.com) announced on 31 May that following its downgrade of Greece's sovereign ratings from 'BB+' to 'B+' and the placement of the ratings on Rating Watch Negative (RWN) on 20 May 2011, Fitch has published a special report further examining the factors behind this rating action.
Fitch remains of the opinion that only the combination of sustained economic recovery and fiscal consolidation, and structural reform offer a credible path to the restoration of sovereign creditworthiness for Greece. However, the scale of the challenge before the Greek authorities, including a new commitment to privatize €50b of state assets by 2015, and their ability to deliver in the face of rising implementation and political risk is increasingly in doubt. These concerns, coupled with the recognition that new money will be needed to address a fiscal funding shortfall from 2012 and avert a sovereign default, were key factors behind the downgrade.
Fitch first highlighted the risk of renewed funding gaps emerging in 2012 in early 2011. In Fitch's view, the outcome of the EU Heads of Government Summit on 24 - 25 March heightened this risk still further, by raising market expectations of the inevitability of some form of debt restructuring under the auspices of the newly created European Stabilization Mechanism. Investor sentiment towards Greek sovereign risk in the wake of this initiative has deteriorated to such an extent that Fitch now believes that it is highly unlikely that Greece will be able to regain market access during the remaining life of the IMF-EU program (May 2013).
Incorporated into the 'B+' rating is Fitch's expectation that substantial new money will be forthcoming for Greece from the EU and the IMF and that Greek sovereign bonds will not be subject to a "soft restructuring" or "re-profiling" that would trigger a "credit event" and consequently a default rating from the agency.
Without renewed market access, new money from official creditors will be required to address the fiscal funding shortfalls that are set to reappear in 2012. In Fitch's opinion additional financial support for Greece would only be credible in providing a path to solvency if it were fully funded beyond the end of the current €110b program in 2013, implying additional financial support.
Fitch expects to resolve the RWN following the completion of the fourth review of the IMF-EU program in the latter half of June 2011. The agency expects this event to be accompanied by clarification of how future funding needs will be met, the role of private creditors and any likely additional policy conditionality. (Fitch 31.05)
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11.12 GREECE: Moody's Downgrades Greece to Caa1 From B1, Negative Outlook
On 01 June, Moody's Investors Service (http://www.moodys.com) downgraded Greece's local and foreign currency bond ratings to Caa1 from B1, and assigned a negative outlook to the ratings. The rating action concludes the review for possible downgrade that the rating agency initiated on 9 May 2011.
The main triggers for today's downgrade are as follows:
1. The increased risk that Greece will fail to stabilize its debt position, without a debt restructuring, in light of (1) the ever-increasing scale of the implementation challenges facing the government, (2) the country's highly uncertain growth prospects and (3) a track record of underperformance against budget consolidation targets.
2. The increased likelihood that Greece's supporters (the IMF, ECB and the EU Commission, together known as the Troika) will, at some point in the future, require the participation of private creditors in a debt restructuring as a precondition for funding support.
Taken together, these risks imply at least an even chance of default over the rating horizon. Moody's points out that, over five-year investment horizons, around 50% of Caa1-rated sovereigns, non-financial corporate and financial institutions have consistently met their debt service requirements on a timely basis, while around 50% have defaulted.
Greece's Caa1 rating incorporates Moody's assumption that current negotiations between the Greek government and the Troika will result in further official support for the Greek government and the announcement of additional austerity and structural reform measures.
The negative outlook on the Caa1 rating reflects Moody's view that the country's very large debt burden, the significant implementation risks in its structural reform package, and the country's ongoing need for external support skew risks of future rating actions to the downside.
Ratings Rationale
The first trigger for the downgrade is Moody's view that Greece is increasingly likely to fail to stabilize its debt ratios within the timeframe set by previously announced fiscal consolidation plans. The Greek government failed to achieve a number of the fiscal consolidation targets in 2010 as a result of fiscal shortfalls (both spending cuts and revenue collections) at the general government level and persistent weaknesses in tax collection. It has also become readily apparent that, under current policies, Greece is unlikely to meet its previously announced budget targets for 2011. These shortfalls have occurred in part because GDP growth has been weak -- in fact, the recession was deeper than was expected in 2010, and 2011 growth forecasts have been revised downwards. Moreover, in the coming weeks, Moody's expects the announcement of further fiscal austerity measures, which are likely to depress growth in 2011. This may in turn further weaken the political consensus within Greece to endure all the adjustments mandated by the reform package.
The expectation of a repeated failure to meet targets carries two implications. First, Greece is unlikely to return to the credit markets in 2012 for funding, and will require additional financial assistance from the Troika in order to avoid a default. The quid pro quo for such assistance will inevitably be further fiscal austerity and economic reform measures that will be necessary to address the shortcomings of the program to date. Second, Moody's believes that raising the austerity bar still higher will further increase implementation risk for the Greek program.
Heightened implementation risk in turn underpins the other key driver of today's downgrade to Caa1. Namely that the increased likelihood that the Troika will make the provision of financial assistance to Greece over the medium term conditional on a debt restructuring, in which private sector creditors would absorb some economic losses. Moody's believes that the public discussion about current policy options -- including the possibility that financial assistance to Greece may be delayed or suspended -- indicates that officials' cost-benefit analysis of a Greek restructuring is shifting.
Heightened Implementation Risk of Program Increases Default Risk
In light of recent comments by EU and IMF officials, Moody's believes that Greece is running out of options and that heightened implementation risk inherent in any new program also increases the probability of a default event. This view is supported by the following observations:
- Greece's large debt burden means that, even under the most positive scenarios, the country's debt sustainability will remain vulnerable to adverse macroeconomic developments, shocks to the Greek financial system or shifts in market sentiment for years to come. This will be true even if additional liquidity support is given to the government and if the full €50 billion privatization program is implemented on schedule. Regardless of how strong the incentives to prevent Greece from defaulting, the longer the reform program takes to be seen to be having its desired effect on debt sustainability and the longer that Greece needs to rely on support from the Troika, the more likely a default becomes.
- Further fiscal austerity is likely to deepen and prolong the recession and further undermine domestic political support for the reform program. A failure to secure broad political support for the country's fiscal and economic reform package would threaten the program and increase policy instability.
Nevertheless, Moody's does not believe that a restructuring of Greece's debt is inevitable. This is because a default in the short term would very likely be highly destabilizing, and the full impact on Europe's capital markets would be hard to predict and harder still to control. The fallout would have implications for the creditworthiness of issuers across Europe. These factors represent an incentive for Greece's supporters to continue to support the country, at least for a few more years.
Further funding does not make it easier for the government to comply with the fiscal and structural reform programs, but it does buy the government time to implement these plans and allow positive domestic dynamics to build. While it is not Moody's base case assumption, the large volume of structural economic reform in the Memorandum of Understanding (MoU) has the potential to reinvigorate the economy and generate substantially higher economic growth over the medium term. Moreover, the Greek state has substantial assets in excess of the €50 billion privatization target that could in principle be mobilized to reduce debt. Of course, this would require the Greek government to be willing to sell these assets and willing buyers to be found for them.
What Could Change The Rating Up/Down
Greece's Caa1 rating incorporates Moody's assumption that further official support will be available to the Greek government over the short term, and that additional austerity and structural reform measures will be announced over the next month.
Moody's would downgrade Greece's rating further if it transpired that the Greek government's compliance with the conditions stipulated in the MoU is materially weakening, and that, as a result, there is a rising risk that additional funding will not be forthcoming. Any announcement of a program that includes conditions that satisfy Moody's definition of default would also lead to further downgrades.
Moody's would upgrade Greece's rating if the pace of fiscal consolidation and/or structural reform implementation were to proceed much more rapidly than Moody's currently expects. An upgrade could also follow if key drivers of the debt dynamics -- such as economic growth, interest rates, privatization revenues or the ability to generate large primary surpluses -- were seen to be evolving in a way that would significantly accelerate the pace of debt reduction. (Moody's 01.06)
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11.13 BULGARIA: Fitch Revises Bulgaria's Outlook to Positive; Affirms at 'BBB-'
On 24 May, Fitch Ratings (http://www.fitchratings.com) revised the Outlook on Bulgaria's Long-term foreign and local currency Issuer Default Ratings (IDR) to Positive from Negative and affirmed them at 'BBB-' and 'BBB', respectively. The agency has also affirmed Bulgaria's Short-term IDR at 'F3' and Country Ceiling at 'BBB+'.
"The reduction in Bulgaria's current account deficit, declining external debt ratios and strong fiscal consolidation has significantly reduced risks to macroeconomic and financial stability," says Ed Parker, Managing Director in Fitch's Sovereign Group.
The Bulgarian economy is recovering, with GDP up 2.5% in Q1/11 (y-o-y), but it remains 4.9% below its pre-crisis peak. Exports, which grew 22.2% in Q1/11 (y-o-y), are driving the recovery, while domestic demand is still declining, down 2.1% in Q1/11 (y-o-y). Fitch forecasts GDP growth to increase from 0.2% in 2010 to 3.0% in 2011 and 3.8% in 2012.
The strong trade performance has facilitated an impressive reduction in the current account deficit to just 1% of GDP in 2010, from 8.9% in 2009 and 23% in 2008. This external rebalancing has been achieved at lower output cost than many other countries in emerging Europe and without a nominal exchange rate devaluation or IMF program. The macroeconomic adjustment speaks to the flexibility and resilience of the economy and has corrected a significant prior vulnerability.
Moreover, the macroeconomic adjustment allowed Bulgaria to reduce its net external debt to 41% of GDP at end-2010, from 49% at end-2009. However, this remains well above the ten-year 'BBB' range median of 8%, though the majority is to foreign parent companies and banks. Despite substantial official foreign exchange reserves, which were €12.2b at end-March 2011, Bulgaria's external liquidity position is somewhat weaker than rating peers.
However, weak domestic demand, which has declined by some 16% since its Q2/08 peak, is continuing to exert pressure on bank asset quality. Non-performing loans are still increasing, reaching 11.9% of total loans at end-2010. However, banks are well capitalized, with a capital adequacy ratio of 17.4%, and liquid, leaving them with a substantial buffer against shocks. Some 28% of the banking system (as a percentage of assets) is owned by Greek parent banks, though Fitch understands that these banks do not have any significant holdings of Greek sovereign debt and only low exposures to Greek companies.
The public finances are back on an improving track. The general government budget deficit declined to 3.2% of GDP in 2010 (ESA 95 basis) from 4.7% in 2009, when it suffered a sharp deterioration from a surplus of 1.7% in 2008 caused by the recession, lax expenditure control and the disclosure of some off-budget expenditure. Fitch views the 2011 budget deficit target of 2.5% of GDP as realistic and the medium-term targets of 1.5% in 2013, 1% in 2013 and 0.5% in 2014 as prudent. Government debt at 16.2% of GDP at end-2010 is low and a key rating strength.
Bulgaria's ratings are also supported by its relatively favorable business climate, high human development and political stability underpinned by EU membership. However, GDP per capita is below the 'BBB' median measured at market exchange rates. In addition, GDP and CPI inflation have been more volatile than in 'BBB' range peers, while in the five-years to 2010, GDP growth has been lower and inflation higher than peers.
A robust and sustainable recovery in GDP would put upward pressure on the rating. Clearer evidence of a stabilization in asset quality in the banking sector and a further reduction in the budget deficit would also be important steps in completing the exit from the effects of the crisis and could lead to an upgrade. A further reduction in external debt ratios could lead to an upgrade. In contrast, persistent de-leveraging, net capital outflows and weak domestic demand could lead to negative rating action. A severe spill-over from negative external shocks, for example problems at Greek parent banks could also lead to negative rating action. (Fitch 24.05)
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11.14 BULGARIA: Nuclear Questions
The future of Bulgaria's proposed Belene nuclear power plant (NPP) once again hangs in the balance after the decision formally to suspend the project while reassessment takes place. The 2000-MW station is seen as central to meeting Bulgaria's energy needs and has strong government backing, yet questions of financing and safety remain. A new plant should also help boost the economy as Bulgaria is south-eastern Europe's biggest electricity exporter, doubling its power exports last year, according to the international press.
In early April, the government announced that the construction at Belene would be halted for three months as an assessment of outstanding cost and safety issues is undertaken. The decision was taken with the agreement of the major contractor, Atomstroyexport, Russia's state-owned monopoly nuclear energy construction and services exporter, majority-owned by state nuclear power firm Rosatom.
On April 13 Bulgaria signed a €2m contract with British bank HSBC for the execution of a cost-feasibility study on the plant, due to be submitted on June 1, giving the government a month to ponder its findings before a decision must be reached on whether to push ahead with construction. Controversially, HSBC will also be awarded 0.95% commission on any external funding it sources for Belene.
Belene, on the Danube in northern Bulgaria, would be the country's second NPP, the first being upstream at Kozloduy, which currently operates two 1000-MW reactors. The plant has been mooted since the 1970s, but has been subject to a series of cancellations and delays. Having been abandoned part-complete in 1990, Belene came back onto the agenda in 2002, with a process of planning, approval and selection of contractors and consultants following. Bulgaria's position in an energy-hungry region combined with its capacity made it a power exporter with significant potential for growth.
The closure of four ageing 440-MW reactors at Kozloduy between 2002 and 2006 as a precondition for Bulgaria's EU accession (a deeply unpopular move at the time in Bulgaria) made the case for the construction of a new NPP and Belene all the more strongly. Following the Kozloduy shutdowns in 2006 in particular, Bulgaria's energy export capacity was reduced, allegedly leading to regional power shortages.
In 2008, the then Socialist-led government contracted Atomstroyexport to construct the plant for a reported €4bn, with first ground being broken that year. German energy firm RWE, meanwhile, became the government's strategic funding partner, taking a 49% stake in the plant in return for capital investment.
However, in October 2009, RWE announced that it was withdrawing from the project following several months of speculation about its involvement and the future of the NPP. While this was partly due to RWE's strategy of withdrawing from its non-core markets in the wake of the international economic crisis, it also brought nagging questions surrounding Belene sharply into focus.
First and most important of these was whether Bulgaria could afford the big-ticket project at a time of serious fiscal cutbacks, as the forecast cost of the project spiraled, with some estimates going as high as €10bn, more than twice the original sum. Furthermore, concerns were being raised about whether Belene would be able to pay for itself, even given regional demand. There are also long-standing worries raised by environmentalists about the safety of the proposed plant given its location in a seismically active region.
It is ostensibly for these reasons the Belene project is also rather unpopular in neighboring Romania, which has its own NPP at Cernavoda. Finally, the active involvement of Rosatom – and the possibility that it might take RWE's stake in Belene – has sat awkwardly with Bulgaria's supposed aim of reducing its energy dependence on Russia, which provides almost all the country's gas.
The Belene project has been de facto frozen after RWE's pull-out, at which time Rosatom revised its estimate of the cost to €6.3bn. This price was affirmed in November 2010 in a non-binding agreement by Bulgaria's state-owned National Electricity Company, much to the consternation of the current government (now led by the right-wing GERB party of Prime Minister Boyko Borisov), which has stuck to its own valuation of €5bn. Rosatom has said that, in the absence of a new agreement, it may take the case to arbitration.
Meanwhile, the serious concerns surrounding the fate of the Fukushima NPP in Japan following the devastating earthquake and tsunami there in March has fuelled the debate about Belene's safety. The EU has called for further examination of the site, despite having given the green light some time ago, while a small but vocal minority of Bulgarians, including environmentalists and the Blue Coalition, a right-of-center opposition political alliance that previously backed GERB, have renewed calls for Belene to be scrapped.
While it might be expected that the project be mothballed again, Borisov – previously an ardent advocate of the reopening of the Kozloduy reactors – seems determined to get the process moving again. Bulgaria, which has substantial coal powered generation centered in the Maritsa Valley and a growing wind sector, has the potential to achieve an enviable energy mix, but some industry leaders are concerned that the concentration on Belene is proving unnecessarily detrimental to other segments.
"It is sad to see that the prime minister and parts of the nuclear lobby seem eager to create a completely unnecessary fight over ‘either nuclear or renewable' instead of seeing how both can co-exist and complement each other," Sebastian Noethlichs, executive director of the Bulgarian Wind Energy Association, told OBG. "The government says the project will be evaluated objectively. At the same time the financial analysts evaluating the viability of the project, HSBC, will be paid a commission on the financing should the project go ahead."
There is little doubt that Bulgaria's energy potential is substantial, and that it can have a role as an exporter. A new NPP would play a central role in the future, and could prove an economic boon to the country, particularly as it looks to build export-oriented businesses. While the exact outcome is still uncertain, we have not heard the last of Belene. (OBG 31.05)
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